<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
For the transition period from to
Commission File Number: 0-19606
AMERICAN BIOMED, INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0136574
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
10077 Grogan's Mill Road, Suite 100, The Woodlands, Texas 77380
- --------------------------------------------------------------------------------
(address of principal executive offices) (Zip Code)
(281) 367-3895
--------------
(Registrant's telephone number, including area code)
N.A.
----
(Former name, former address and former fiscal year
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X Yes No
--- ---
The total number of shares outstanding of common stock, $.001 par value as of
May 7, 1998 is 26,295,500.
<PAGE> 2
AMERICAN BIOMED, INC. AND SUBSIDIARY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Page
<S> <C>
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of Operations 4
Consolidated Condensed Statements of Cash Flows 5
Notes to Consolidated Condensed Financial Statements 6
Item 2 - Management's Discussion and
Analysis of Financial Condition
and Results of Operations 9
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 11
Item 6 Exhibits and Reports on Form 8-K 12
SIGNATURES 13
INDEX TO EXHIBITS 14
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION> March 31, December 31,
ASSETS 1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................................................. $ 100,352 $ 82,789
Accounts receivable, trade, net of Allowance for doubtful accounts of
$57,167 for March 31, 1998 and December 31, 1997.... ................................ 91,696 158,724
Accounts receivable, other ............................................................ 28,786 13,716
Inventories ........................................................................... 648,557 648,957
Other current assets .................................................................. 112,716 144,713
------------ ------------
Total current assets ........................................................... 982,107 1,048,899
Property and equipment, net ............................................................. 165,337 167,991
Patents, net of accumulated amortization of $929,439 and $920,330 on March 31, 1998
and December 31, 1997, respectively ................................................... 153,582 158,695
Goodwill, net of accumulated amortization of $728,246 and $697,475 on March 31, 1998
and December 31, 1997, respectively ................................................... 502,590 533,361
Other assets ............................................................................ 35,439 36,110
------------ ------------
Total assets ................................................................... $ 1,839,055 $ 1,945,056
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable to stockholders and others .............................................. $ 272,961 $ 300,976
Current maturities of long-term debt .................................................. 42,560 41,694
Current maturities of capital lease obligations ....................................... 421,626 416,901
Accounts payable ...................................................................... 398,260 254,234
Accrued liabilities ................................................................... 664,372 662,245
------------ ------------
Total current liabilities ...................................................... 1,799,779 1,676,050
Long-term debt, net of current maturities ............................................... 61,694 71,855
Capital lease obligations, net of current maturities .................................... 3,795 --
Deferred revenue ........................................................................ 85,000 100,000
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $.001 par value, 2,000,000 shares authorized,
Series A: Convertible preferred stock, 1,390 shares authorized, 1,290 and 1,390 shares
issued and outstanding at March 31, 1998 and December 31, 1997, $1,000 per share or
$1,290,000 and $1,390,000 aggregate liquidation preference, respectively............. 1 1
Series B: Convertible preferred stock, 2,500 shares authorized, 300 and 500 shares
issued and outstanding at March 31, 1998 and December 31, 1997, $1,000 per share or
$300,000 and $500,000 aggregate liquidation preference, respectively, plus an
additional 10% per year from the date of issuance ................................... 1 1
Series C: Convertible preferred stock, 125 shares authorized, 83 and 112 shares
issued and outstanding at March 31, 1998 and December 31, 1997, respectively, $20,000
per share or $1,660,000 and $2,240,000 aggregate liquidation preference,
respectively, plus an additional 7% per year from the date of issuance............... -- --
Common stock, $.001 par value, 50,000,000 shares authorized, 22,376,889 and 18,457,426
shares issued at March 31, 1998 and December 31, 1997, respectively, of which 68,323
shares are held in treasury ........................................................... 22,377 18,457
Additional paid-in capital .............................................................. 27,826,067 27,479,517
Deficit accumulated during the Development stage ........................................ (27,708,059) (27,149,225)
Less treasury stock at cost, 68,323 shares .............................................. (251,600) (251,600)
------------ ------------
Total stockholders' equity (deficit)............................................ (111,213) 97,151
------------ ------------
Total liabilities and stockholders' equity (deficit)............................ $ 1,839,055 $ 1,945,056
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Inception,
Three Months Ended September 4, 1984,
March 31, To
1998 1997 March 31, 1998
-------------------------------- --------------
<S> <C> <C> <C>
Revenues, net $ 162,085 $ 117,346 $ 4,022,205
Cost of Sales (152,619) (124,734) (3,867,885)
------------ ------------ ------------
Gross profit (loss) 9,466 (7,388) 154,320
------------ ------------ ------------
Operating expenses:
Selling, general and administrative (483,820) (468,050) (18,016,450)
Research and development (91,309) (146,287) (7,989,351)
Distributor settlement (1,080,915)
------------ ------------ ------------
(575,129) (614,337) (27,086,716)
------------ ------------ ------------
Loss from operations (565,663) (621,725) (26,932,396)
------------ ------------ ------------
Other income (expense):
Interest income 595 5,041 154,529
Interest expense (32,288) (42,609) (2,911,264)
Other income 38,522 15,000 1,981,072
------------ ------------ ------------
Other income (expense), net 6,829 (22,568) (775,663)
------------ ------------ ------------
Net loss (558,834) (644,293) (27,708,059)
Less preferred stock dividends (1,183,413)
------------ ------------ ------------
Net loss attributable to common shareholders $ (558,834) $ (644,293) $(28,891,472)
============ ============ ============
Net loss per common share $ (.03) $ (.05)
============ ============
Weighted average number of common shares
outstanding 19,436,936 13,986,312
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
AMERICAN BIOMED, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Inception,
Three Months Ended September 4, 1984,
March 31, To
1998 1997 March 31, 1998
------------------------------- ------------------
<S> <C> <C> <C>
Net cash used by operating activities $ (307,030) $ (419,759) $(19,928,341)
Cash flows from investing activities:
Capital expenditures (16,623) (10,080) (594,055)
Investment in patents (3,995) (10,902) (485,339)
Other investing activities 26,000 272,596
----------- ----------- ------------
Net cash used by investing activities 5,382 (20,982) (806,798)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from notes payable to banks 2,333,880
Proceeds from notes payable to stockholders 1,225,921
Proceeds from notes payable to others 5,858,587
Repayments of notes payable to banks (2,070,000)
Repayments of notes payable to stockholders (822,992)
Repayments of notes payable to others (37,310) (1,015,835) (5,941,413)
Proceeds of capital lease obligations 8,521 8,521
Principal payments under capital lease obligations (24,770) (782,110)
Proceeds from patent assignment and leaseback 500,000
Proceeds from equipment assignment and leaseback 305,000
Proceeds from sale of debentures 640,000
Proceeds from sale of preferred stock 2,500,000 8,436,502
Proceeds from sale of common stock and exercise of
unregistered warrants 348,000 310,034 9,402,350
Proceeds from exercise of stock options 339,917
Proceeds from issuance of registered stock purchase warrants 100,000
Proceeds from exercise of registered stock purchase warrants 2,801,018
Treasury stock acquired (500,000)
Offering costs (287,590) (940,243)
Other financing activities (59,447)
----------- ----------- ------------
Net cash provided by financing activities 319,211 1,481,839 20,835,491
----------- ----------- ------------
Net increase in cash and cash equivalents 17,563 1,041,098 100,352
Cash and cash equivalents at beginning of period 82,789 1,183,613
----------- ----------- ------------
Cash and cash equivalents at end of period $ 100,352 $ 2,224,711 $ 100,352
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements
5
<PAGE> 6
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the requirements of Form 10-Q and therefore do
not include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. In the opinion of management, the
unaudited consolidated condensed financial statements reflect all adjustments
that are necessary for a fair statement of the results of the periods presented,
and all such adjustments are of a normal recurring nature.
The unaudited consolidated condensed financial statements include the
accounts of American BioMed, Inc. and its wholly-owned subsidiary, Cathlab
Corporation, (jointly referred to as the "Company") after elimination of all
intercompany transactions and accounts.
These unaudited consolidated condensed financial statements should be read
in connection with the financial statements for the year ended December 31, 1997
included in the Company's Annual Report filed on Form 10-K. Results for the
first quarter are not necessarily indicative of year-end results.
2. CAPITAL STOCK
During the first quarter of 1998, the Company issued 970,696 shares of
common stock through private placements and warrants to purchase 317,000 shares
of common stock with an exercise price ranging from $0.34 - $0.69 exercisable
for two years to accredited investors for $348,000. An additional 34,000 shares
were issued in payment of debt. During the first quarter of 1998, 100 shares of
Series A convertible preferred stock, 200 shares of Series B convertible
preferred stock and 29 shares of Series C convertible preferred stock were
converted into 416,666 shares, 745,349 and 1,752,752 shares respectively.
In connection with the restructuring of lease obligations due Aberlyn
Capital Management Limited Partnership, on February 10, 1998 the Company issued
warrants to purchase 125,000 shares of common stock at a purchase price of
$0.44, exercisable for five years.
6
<PAGE> 7
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - Continued
(Unaudited)
3. SUPPLEMENTAL INFORMATION FOR STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Inception,
Three Months Ended September 4, 1984,
March 31, To
1998 1997 March 31, 1998
----------------------------- --------------
<S> <C> <C> <C>
Interest Paid $ 63,862 $ 38,180 $ 1,319,400
Noncash investing and financing activities:
Equipment acquired through capital lease
agreements 266,539
Equipment and leasehold improvements
acquired through notes payable 35,775
Conversion of accrued interest
payable to principal on notes payable to
stockholders 105,170
Conversion of Series A and Series B
preferred stock to common stock 444
Conversion of 1996 Series A and B and 1997
Series C preferred stock to common stock 880,000 2,140,000
Conversion of debentures to common stock 640,000
Deferred offering costs incurred in prior
year charged against offering proceeds 41,000
Issuance of common stock in connection
with purchase of assets of VMS, Inc. 124,999
Issuance of common stock in connection
with purchase of assets of Superstat, Inc. 81,819
Conversion of notes payable to common stock 538,671
Common stock and warrants issued in lieu of
interest expense 1,387,300
Patent assignment and leaseback 500,000
Issuance of common stock in connection with
Therex settlement 77
Transfer of note receivable from officer 25,000
Writeup of property and equipment on Cathlab
due to sale and leaseback agreement 221,616
Issuance of common stock and warrants
for services 1,035,707
Issuance of common stock for certain liabilities 17,304 48,236 1,741,927
</TABLE>
7
<PAGE> 8
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - Continued
(Unaudited)
4. INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is
determined using the first-in, first-out (FIFO) method.
Inventories consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------- ----------
<S> <C> <C>
Raw materials.................. $ 226,635 $ 225,340
Work in process................ 233,757 169,657
Finished goods................. 188,165 253,960
---------- ----------
$ 648,557 $ 648,957
========== ==========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
On December 8, 1994, a vendor commenced a lawsuit against the Company
regarding unpaid invoices. On June 15, 1995, the parties to the lawsuit executed
a Stipulation of Settlement Agreement, a Consent Judgment and a Stipulation of
Dismissal to be held in escrow. The Company agreed to pay $125,000 to the vendor
under the settlement agreement; $25,000 was paid upon execution of this
stipulation and the balance was included in accounts payable at December 31,
1995. The balance was paid through the issuance of 116,145 shares of the
Company's common stock in 1996. The vendor sold the shares for less than the
amount owing under the settlement agreement including applicable interest and
legal fees. In February 1998, the Company reached an agreement with the vendor
for the final resolution on the additional balance due.
In May 1997, a former officer and director of the Company filed a
lawsuit alleging oppressive action toward a minority shareholder, breach of
contract, wrongful termination and unpaid debts and advances. The February 1998
mediation conference, which was mandated by the Court, did not result in a
settlement agreement and the case is scheduled for trial in 1998. The financial
statements properly account for notes payable to the plaintiff in the amount of
$242,450, related accrued interest and accrued salary. The Company is vigorously
contesting this lawsuit and is pursuing counterclaims against the plaintiff;
however, an adverse resolution of this matter may have a material adverse impact
on the Company's financial position, results of operations, and cash flows.
In August 1997, a former officer and director of the Company filed a
lawsuit alleging breach of contract and is seeking specific performance and
monetary damages. The Company is vigorously contesting this lawsuit. The Company
has accrued $125,000, which is management's best estimate of the ultimate
liability, if any. The resolution of this matter may have a material adverse
impact on the Company's financial position, results of operations and cash
flows.
In September 1997, a former distributor filed a lawsuit alleging the
letter agreement terminating their distribution agreement was breached by the
Company due to the non-issuance of options to purchase 437,500 shares of common
stock at $0.40 per share. On May 1,1998 the Company reached an agreement to
settle this lawsuit with the issuance of options to purchase 225,000 shares for
an exercise price of $0.40, exercisable for six months.
The Company is occasionally a party to litigation (other than that
specifically noted) arising in the ordinary course of business. Management
regularly analyzes current information and, as necessary, provides accrual for
probable liabilities for the eventual disposition of these matters. In the
opinion of management, the ultimate outcome of these matters will not materially
affect the Company's financial position, results of operations or cash flows.
8
<PAGE> 9
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company is in the development stage and has had limited operating
revenues since its inception on September 4, 1984. From September 4, 1984
through March 31, 1998, the Company had an accumulated deficit of $27,708,059.
During the first quarter 1998 the Company focused on CE Mark certification,
product development and continuing the addition of North American distributors
to achieve full sales coverage for North America for the first time in the
Company's existence.
During the three months ended March 31, 1998, the Company's sales
increased 38.1% to $162,085 compared with sales of $117,346 for the same period
in 1997. Foreign export net sales decreased 5.4% to $78,232 from $82,674 while
domestic net sales increased 175.3% to $53,333 from $19,372. Revenues for other
services and projects increased to $30,520 from $15,300 or 99.5% compared to the
same period in 1997. The domestic sales increase in the first quarter 1998 is
attributable to the addition of four domestic distributors during the fourth
quarter 1997 and four domestic and one Canadian distributor in the first quarter
1998. The domestic distributors added this quarter will service the northeast,
southeast, mid-west and mid-Atlantic states. The increase in revenues for other
services and projects is primarily attributable to the Original Equipment
Manufacturing ("OEM") contract, set up fees and CE Mark registration costs
related to the project.
Cost of sales represented 94.2% and 106.3% of sales for the three
months ended March 31, 1998 and 1997, respectively. The decreased percentage of
sales is due to improved plant efficiencies that were partially offset by the
cost of implementing ISO 9001 and CE Marking procedures as well as start-up
costs associated with the initial OEM contract secured in February 1998.
Selling, general and administrative expenses increased 3.4% to $483,820
during the first three months of 1998, compared to $468,050 for the same period
in 1997 primarily due to increased legal fees, additional insurance coverage and
increased sales and marketing expenses associated with the addition of new
distributors and attendance at trade shows. These costs were offset by an
$18,000 savings in investor relations. Product liability insurance was added
during the third quarter 1997, as the Company became more proactive in risk
management.
Research and development expenses totaled $91,309 during the first
quarter of 1998, a decrease of 37.6% from the 1997 first quarter total of
$146,287. These expenses are being slowed until the Company receives funding to
ensure that, once initiated, projects can be completed as scheduled. (See
Subsequent Events.) It is anticipated that research and development expenses
will increase in the second quarter as the Company focuses on development of its
OmniFilter and expanded Phase II OmniCath(R) clinical trials.
Interest expense decreased 24.2% to $32,288 for the first quarter of
1998, compared to $42,609 for the first quarter of 1997 due to the decrease in
notes payable and capital lease obligations.
Other income for the quarter includes $367 for royalty income,
approximately $24,000 from gain on sale of machine shop equipment and $15,000
amortization of the license fee received from Wright Medical Technologies, Inc.
for the spinal dissector transaction in 1994.
9
<PAGE> 10
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
SUBSEQUENT EVENTS
The Company authorized 60,000 shares of Series D Preferred Convertible
Stock (the "Series D") and 500,000 shares of Series E Preferred Convertible
Stock (the "Series E") on April 29, 1998. Both Series D and Series E have a
stated value of $10 per share and 8% cumulative dividends payable in either cash
or stock at the option of the Company. At present 60,000 shares of Series D and
none of Series E are issued and outstanding. Each share of the Series D is
convertible at any time after the earlier of (i) the date on which the
registration statement covering the resale of the common stock received upon
conversion is declared effective or (ii) the date which is 90 days from the date
of issuance of the Series D based upon a conversion price that is equal to the
lesser of (a) 110% of the closing bid price five day average preceding the date
of purchase of the Series D by the holder; or (b) 80% of the closing bid price
five day average preceding the date such conversion is made.
Each share of the Series E are convertible any time after issuance at
82.5% of the five day average of the closing bid prices for the five trading
days preceding the date such conversion is made. The conversion ratio for Series
D and Series E is subject to adjustment from time to time upon the occurrence of
stock splits, reverse stock splits, and similar events. The Series E may be
issued and sold to the investor at the request of the Company from time to time
on or before April 29, 2000 assuming, among other conditions, that the average
daily trading volume for the Common Stock for the previous 60 trading days is at
least 150,000 shares per day and the average daily trading price for the prior
10 trading days is at least $0.45 per share. In connection with the sale of the
Series D and Series E, the Company will also issue three year warrants to the
investor for each share of Series D and Series E purchased with an exercise
price of 125% of the closing bid price for the Common Stock on the date of
purchase.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter 1998, the Company raised additional equity
capital via private placements and continues to convert trade debt to common
stock to improve the Company's financial position and cash flows. The Company
had a working capital deficiency as of March 31, 1998 of $817,672, and cash and
cash equivalents of $100,352 compared to a deficiency of $627,151 and cash and
cash equivalents of $82,789 as of December 31, 1997.
The net cash used by operating activities of $307,030 was approximately
$113,000 less than during the same period in 1997. During the first quarter of
1998 the cash flow was favorably impacted by the negotiations of debt to equity
conversions of approximately $17,300. In addition, the sale of machine shop
equipment provided total cash of $26,000. Financing activities, consisting of
note proceeds and repayments, capital lease obligations and repayments and
proceeds from sale of common stock and warrants, provided cash of $319,211.
The Company requires significant additional funds to enable it to
complete development and, subject to obtaining required regulatory approvals,
commercialization of the OmniCath(R) for peripheral and A-V fistula use, to
enter into marketing and distribution arrangements for the OmniCath(R), to
commence and continue the development of other products which include the
OmniStent(TM), Evert-O-Cath(TM), and other products as well as product
enhancements to its existing 100%-silicone balloon catheters, the OmniCath(R),
Evert-O-Cath(TM) and OmniStent(TM) and to expand its manufacturing and
distribution abilities with respect to the Cathlab products. The Company is
actively seeking additional financing through possible collaborative
arrangements, public or private financings, including equity financings, and
other arrangements. (See "Subsequent Events".)
Although the Company has a commitment for a $5 million equity credit
line (See "Subsequent Events"), certain conditions must be met prior to closing.
If said conditions are not met and the Company is unable to draw down additional
funds, the Company may require additional sources of funding. There can be no
assurance that the Company will be able to obtain additional funding on
acceptable terms or in time to fund any necessary or desirable expenditures. In
the event such funding is not obtained, the Company's research and development
projects will be delayed or scaled back. Failure to receive funds from the
equity credit line or additional financing will have a material adverse effect
on the Company's operations. In order to continue as a going concern, the
Company must raise additional funds as noted above and ultimately must achieve
profitable operations.
10
<PAGE> 11
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 8, 1994, a vendor commenced a lawsuit against the Company
regarding unpaid invoices. On June 15, 1995, the parties to the lawsuit executed
a Stipulation of Settlement Agreement, a Consent Judgment and a Stipulation of
Dismissal to be held in escrow. The Company agreed to pay $125,000 to the vendor
under the settlement agreement; $25,000 was paid upon execution of this
stipulation and the balance was included in accounts payable at December 31,
1995. The balance was paid through the issuance of 116,145 shares of the
Company's common stock in 1996. The vendor sold the shares for less than the
amount owing under the settlement agreement including applicable interest and
legal fees. In February 1998, the Company reached an agreement with the vendor
for the final resolution on the additional balance due.
In May 1997, a former officer and director of the Company filed a
lawsuit alleging oppressive action toward a minority shareholder, breach of
contract, wrongful termination and unpaid debts and advances. The February 1998
mediation conference, which was mandated by the Court, did not result in a
settlement agreement and the case is scheduled for trial in 1998. The financial
statements properly account for notes payable to the plaintiff in the amount of
$242,450, related accrued interest and accrued salary. The Company is vigorously
contesting this lawsuit and is pursuing counterclaims against the plaintiff;
however, an adverse resolution of this matter may have a material adverse impact
on the Company's financial position, results of operations and cash flows.
In August 1997, a former officer and director of the Company filed a
lawsuit alleging breach of contract and is seeking specific performance and
monetary damages. The Company is vigorously contesting this lawsuit. The Company
has accrued $125,000, which is management's best estimate of the ultimate
liability, if any. The resolution of this matter may have a material adverse
impact on the Company's financial position, results of operations and cash
flows.
In September 1997, a former distributor filed a lawsuit alleging the
letter agreement terminating their distribution agreement was breached by the
Company due to the non-issuance of options to purchase 437,500 shares of common
stock at $0.40 per share. On May 1,1998 the Company reached an agreement to
settle this lawsuit with the issuance of options to purchase 225,000 shares for
an exercise price of $0.40 per share, exercisable for six months.
The Company is occasionally a party to litigation (other than that
specifically noted) arising in the ordinary course of business. Management
regularly analyzes current information and, as necessary, provides accrual for
probable liabilities for the eventual disposition of these matters. In the
opinion of management, the ultimate outcome of these matters will not materially
affect the Company's financial position, results of operations or cash flows.
11
<PAGE> 12
AMERICAN BIOMED, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following documents are filed as exhibits to this Report.
<TABLE>
<S> <C>
10.93 Securities Purchase Agreement, dated April 29, 1998, Series D Preferred
and Series E Preferred Stock
10.94 Certificate of Designations, Preferences, Limitations and Relative
Rights of 1998 Series D Convertible Preferred Stock
10.95 Certificate of Designations, Preferences, Limitations and Relative
Rights of 1998 Series E Convertible Preferred Stock
10.96 Registration Rights Agreement of Series D Preferred and Series E
Preferred
10.97 Augustine Fund, L.P. Warrant dated April 29, 1998 to purchase 60,000
shares Common Stock
11.1 Computation of Loss Per Common Share
27.1 Financial Data Schedule
</TABLE>
REPORTS ON FORM 8-K
None
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN BIOMED, INC.
Date: May 14, 1998 /s/ Steven B. Rash
----------------------------
Steven B. Rash
President and
Chief Executive Officer
Date: May 14, 1998 /s/ Colene F. Blankinship
--------------------------------
Colene F. Blankinship, CPA
Controller
Chief Accounting Officer
13
<PAGE> 14
INDEX TO EXHIBITS
The following documents are filed as part of this Report:
Exhibit
No. Description
- ------- -----------
<TABLE>
<S> <C>
10.93 Securities Purchase Agreement, dated April 29, 1998, Series D Preferred
and Series E Preferred Stock
10.94 Certificate of Designations, Preferences, Limitations and Relative
Rights of 1998 Series D Convertible Preferred Stock
10.95 Certificate of Designations, Preferences, Limitations and Relative
Rights of 1998 Series E Convertible Preferred Stock
10.96 Registration Rights Agreement of Series D Preferred and Series E
Preferred
10.97 Augustine Fund, L.P. Warrant dated April 29, 1998 to purchase 60,000
shares Common Stock
11.1 Computation of Loss Per Common Share
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.93
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), is made as of
April 29, 1998, by and between American Biomed, Inc., a corporation organized
under the laws of the State of Delaware, U.S.A., with headquarters located at
10077 Grogan's Mill Road, Suite 100, The Woodlands, Texas 77380 (the "Company")
and the buyer set forth on the execution page hereof (the "Buyer").
RECITALS
A. The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");
B. The Buyer desires to purchase from the Company, and the Company
desires to sell to the Buyer, for the amounts and upon the terms and conditions
stated in this Agreement, in a closing or closings (each a "Closing") as herein
described, certain shares of the Company's preferred stock as listed in Recitals
B(i) and B(ii) immediately below, along with certain warrants of the Company as
listed in Recital B(iii) below.
(i) At the first Closing (the "First Closing"), shares of
the Company's Series D Convertible Preferred Stock
(the "Series D Shares"), which may be converted into
common stock of the Company, $.001 par value per
share ("Common Stock"), upon the terms hereof and
upon the terms of the Articles of Amendment to
Articles of Incorporation - Certificate of
Designations, Preferences, Limitations and Relative
Rights of 1998 Series D Convertible Preferred Stock
of American Biomed, Inc., attached hereto as Exhibit
A (the "Series D Articles"). The price per Series D
Share is US$10.00. The aggregate number of Series D
Shares to be issued and sold by the Company is sixty
thousand Series D Shares, for an aggregate purchase
price of six hundred thousand United States dollars.
(ii) At each additional Closing (if any) (each, an
"Additional Closing") as further described in Section
4(1) below, shares of the Company's Series E
Convertible Preferred Stock (the "Series E Shares"),
which may be converted into Common Stock upon the
terms hereof and upon the terms of the Articles of
Amendment to Articles of Incorporation - Certificate
of Designations, Preferences, Limitations and
Relative Rights of 1998 Series E Convertible
Preferred Stock of American Biomed, Inc., attached
hereto as Exhibit B (the "Series E Articles"). The
price per Series E Share is US$10.00. The minimum
number of Series E Shares to be issued and sold by
the Company is two hundred thousand Series E Shares,
and the maximum number of Series
<PAGE> 2
E Shares to be issued and sold by the Company is five
hundred thousand Series E Shares, all in accordance
with the terms hereof.
(iii) At each Closing, as additional consideration for
Buyer's purchase of the Preferred Shares (defined
below) a warrant (each a "Warrant" and collectively
the "Warrants") to purchase Common Stock at a
purchase price equal to one hundred twenty-five
percent (125%) of the closing bid price for the
Common Stock on the date of such Closing, which
Warrants must be exercised if at all within three (3)
years after the date of issuance. The Warrants shall
be substantially in the form attached hereto as
Exhibit E. The number of shares into which each
Warrant shall be exercisable shall be equal to the
number of Preferred Shares purchased at such Closing.
The Common Stock into which the Series D Shares and the Series E Shares
may (in accordance with the terms of the Series D Articles and the Series E
Articles, respectively) be convertible shall be collectively referred to herein
as the "Conversion Shares." The Common Stock received upon exercise of the
Warrants shall be referred to as the "Warrant Shares." Certain shares of Common
Stock may (at the Company's option as described in the Series D Articles or the
Series E Articles, as applicable) be issued to the Buyer in payment of dividends
(the "Dividend Shares"). Together the Series D Shares and the Series E Shares
may be referred to herein as the "Preferred Shares." The Preferred Shares, the
Conversion Shares, the Warrant Shares and the Dividend Shares (if any) may be
collectively referred to herein as the "Securities." Together the Series D
Articles and the Series E Articles may be referred to herein as the "Articles of
Amendment."
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") substantially in the form of Exhibit C
attached hereto pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the parties, the Company and the Buyer hereby
agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
a. Purchase. The Buyer hereby agrees to purchase from the Company, and
the Company agrees to sell to the Buyer, 60,000 Series D Shares at the First
Closing, and at each Additional Closing, the number of Series E Shares described
in Section 4(1) below. The purchase price for the Preferred Shares purchased at
each Closing shall be as specified in Recitals B(i) and B(ii) above (with
respect to each Closing, the "Purchase Price").
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<PAGE> 3
b. The Closings. The date of the First Closing shall be April 29, 1998,
and the date of each Additional Closing (if any) shall be as specified in
Section 4(l) below, or, in each case on such earlier or later date as is
mutually agreed to in writing by the Company and the Buyer. The Purchase Price
for the Securities being purchased at each Closing shall be delivered to the
Escrow Agent (as defined in the Escrow Agreement substantially in the form of
Exhibit D attached hereto (the "Escrow Agreement")) on behalf of the Company on
or before the date specified herein for such Closing. At each Closing, the
Company shall deliver certificates representing the Preferred Shares and the
Warrants being sold at such Closing, duly issued and executed by the authorized
officers on behalf of the Company, to the Escrow Agent (as defined in the Escrow
Agreement) on behalf of the Buyer.
c. Form of Payment. The Buyer shall pay the Purchase Price for the
Preferred Shares and Warrants purchased at each Closing by wire transfer of
immediately available funds in United States Dollars, to be deposited into the
Escrow Account as defined in the Escrow Agreement, against delivery to the
Escrow Agent of duly executed Preferred Shares and Warrants being purchased by
the Buyer hereunder at such Closing. The Escrow Agent shall be responsible for
delivery of the Purchase Price to the Company and the Preferred Shares to the
Buyer in accordance with the terms of the Escrow Agreement and with the
instructions of the said parties.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer understands, agrees with, and represents and warrants to the
Company with respect to its purchase hereunder, that:
a. Investment Purposes; Compliance With 1933 Act. The Buyer is
purchasing the Securities for its own account for investment only and not with a
view towards, or in connection with, the public sale or distribution thereof,
except pursuant to sales registered under or exempt from the 1933 Act. The Buyer
is not purchasing the Securities for the purpose of covering short sale
positions in the Common Stock established on or prior to the date of the
relevant Closing. The Buyer agrees to offer, sell or otherwise transfer the
Securities only (i) in accordance with the terms of this Agreement and the
Articles of Amendment, as applicable, and (ii) pursuant to registration under
the 1933 Act or to an exemption from registration under the 1933 Act and any
other applicable securities laws. The Buyer does not by its representations
contained in this Section 2(a) agree to hold the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any
time pursuant to a registration statement or in accordance with an exemption
from registration under the 1933 Act, in all cases in accordance with applicable
state and federal securities laws. The Buyer understands that it shall be a
condition to the issuance of the Conversion Shares, the Warrant Shares and the
Dividend Shares (if any) that the Conversion Shares, the Warrant Shares and the
Dividend Shares (if any) be and are subject to the representations set forth in
this Section 2(a).
b. Accredited Investor Status. The Buyer is an "accredited investor" as
that term is defined in Rule 501 (a) of Regulation D. The Buyer has such
knowledge and experience in financial
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<PAGE> 4
and business matters that it is capable of evaluating the merits and risks of an
investment made pursuant to this Agreement. The Buyer is aware that it may be
required to bear the economic risk of an investment made pursuant to this
Agreement for an indefinite period of time, and is able to bear such risk for an
indefinite period.
c. Reliance on Exemptions. The Buyer understands the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of the applicable United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties,
acknowledgments, understandings, agreements and covenants of the Buyer set forth
herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Securities.
d. Information. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been requested by the Buyer, and specifically (but without limitation) the
Company's 1997 Form 10-K as filed with the SEC for the fiscal year ended
December 31, 1997 (the "1997 10-K"). The Buyer and its advisors, if any, have
been afforded the opportunity to ask all such questions of the Company as they
have in their discretion deemed advisable. The Buyer understands that its
investment in the Securities involves a high degree of risk. The Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
an informed investment decision with respect to the investment made pursuant to
this Agreement.
e. No Government Review. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities, nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. The Buyer understands that: (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the 1933 Act or any state securities laws, and
may not be offered for sale, sold, assigned or transferred unless either (a)
subsequently registered thereunder or (b) the Buyer shall have delivered to the
Company an opinion by counsel reasonably satisfactory to the Company, in form,
scope and substance reasonably satisfactory to the Company, to the effect that
the securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, (ii) any sale of
such securities made in reliance on Rule 144 (as hereafter defined) may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person though whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder, and (iii) neither the Company nor any other person is under any
obligation to register such securities under the 1933 Act or any state
securities laws or to comply with the terms and
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<PAGE> 5
conditions of any exemption thereunder (in each case, other than pursuant to
this Agreement or the Registration Rights Agreement).
g. Legend. The Buyer understands that the Preferred Shares, and until
such time as the Conversion Shares, the Warrant Shares and the Dividend Shares
(if any) (collectively, the "Registrable Securities"), have been registered
under the 1933 Act as contemplated by the Registration Rights Agreement or
otherwise may be sold by the Buyer pursuant to Rule 144 (as amended, or any
applicable rule which operates to replace said Rule) promulgated under the 1933
Act ("Rule 144"), the stock certificates representing the Registrable Securities
will bear a restrictive legend (the "Legend") in substantially the following
form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
The Legend shall be removed and the Company will issue certificates
without the Legend to the holder of the applicable Preferred Shares or any
Registrable Securities upon which the Legend is stamped, in accordance with
Section 5(b).
h. Authorization; Enforcement. This Agreement, the Registration Rights
Agreement and the Escrow Agreement have been duly and validly authorized,
executed and delivered by the Buyer and are each and collectively valid and
binding agreements of the Buyer enforceable in accordance with their terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally. Buyer (and Buyer's counsel) has examined this
Agreement and is satisfied in its sole discretion that this Agreement and the
accompanying Exhibits, Schedules and the Addenda, if any, are in accordance with
Regulation D and are effective to accomplish the purposes set forth herein and
therein.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company understands, agrees with, and represents and warrants to
the Buyer that:
a. Organization and Qualification: Reporting Company Status. The
Company and its subsidiaries are corporations duly organized and existing in
good standing under the laws of the respective jurisdictions in which they are
incorporated, except as would not have a Material Adverse
5
<PAGE> 6
Effect (as defined below), and have the requisite corporate power to own their
properties and to carry on their business as now being conducted. Each of the
Company and its subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary and where the
failure so to qualify would have a Material Adverse Effect. "Material Adverse
Effect" means any material adverse effect on the operations, properties or
financial condition of the Company and its subsidiaries taken as a whole. The
Company has registered its Common Stock pursuant to Section 12 of the 1934 Act,
and the Common Stock is eligible for trading on the OTC Bulletin Board Market.
The Company has received no notice, either written or oral, with respect to the
continued eligibility of the Common Stock for such eligibility for trading, and
the Company has maintained all applicable requirements for the continuation of
such eligibility for trading, and the Company does not reasonably anticipate
that the Common Stock will be declared ineligible to trade on the OTC Bulletin
Board Market for the foreseeable future. Seller shall use its best efforts to
continue to keep its stock eligible for trading on the OTC Bulletin Board Market
or a comparable stock market or exchange. The Company has complied with all
applicable requirements (if any) of the National Association of Securities
Dealers and the OTC Bulletin Board Market with respect to the issuance of the
Securities.
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement and the Escrow Agreement, to issue and sell the
Preferred Shares and the Registrable Securities in accordance with the terms
hereof, and to perform its obligations under the Series D Articles and the
Series E Articles in accordance with the requirements of the same, (ii) the
execution, delivery and performance of this Agreement, the Registration Rights
Agreement and the Escrow Agreement by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by
the Company's Board of Directors and no further consent or authorization of the
Company, its Board of Directors, or its stockholders is required, (iii) this
Agreement, the Registration Rights Agreement, the Escrow Agreement and, on the
date of the applicable Closing, the Preferred Shares and Warrants sold at such
Closing, have been duly and validly authorized, executed and delivered by the
Company, (iv) the Series D Articles and the Series E Articles have been duly
authorized by the Company's Board of Directors to be filed with the Secretary of
State for the State of Delaware, and the Series D Articles and the Series E
Articles will be filed with the Secretary of State for the State of Delaware
prior to the date of the First Closing, and (v) this Agreement, the Registration
Rights Agreement and the Escrow Agreement constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting, generally, the enforcement of creditors'
rights and remedies or by other equitable principles of general application. The
Company (and its legal counsel) has examined this Agreement and is satisfied in
its sole discretion that this Agreement and the accompanying Exhibits, Schedules
and the Addenda, if any, are in accordance with Regulation D and are effective
to accomplish the purposes set forth herein and therein.
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<PAGE> 7
c. Capitalization. As of March 31, 1998, the authorized capital stock
of the Company consists of 50,000,000 shares of Common Stock of which 22,308,566
shares were issued and outstanding; as of March 31, 1998, the authorized
preferred stock of the Company consists of 2,000,000 shares, of which 1,290
shares of Series A, 300 shares of Series B, and 83 shares of Series C preferred
stock were issued and outstanding. All of such outstanding shares have been
validly issued and are fully paid and nonassessable. Except as disclosed in
Schedule 3(c), no shares of Common Stock or Preferred Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances.
Except as disclosed in Schedule 3(c) attached and in the 1997 10-K, as of the
effective date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or arrangements by
which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries,
(ii) there are no outstanding debt securities, and (iii) there are no agreements
or arrangements under which the Company or any of its subsidiaries is obligated
to register the sale of any of its or their securities under the 1933 Act
(except as provided herein and in the Registration Rights Agreement). If
requested by the Buyer, the Company has furnished to the Buyer, and the Buyer
acknowledges receipt of same by its signature hereafter, true and correct copies
of the Company's Certificate of Incorporation, as amended, as in effect on the
date hereof ("Certificate of Incorporation"), and the Company's Bylaws, as in
effect on the date hereof (the "Bylaws").
d. Issuance of Securities. The Series D Shares, the Series E Shares and
the Registrable Securities are all duly authorized and reserved for issuance,
and in all cases upon issuance shall be validly issued, fully paid and
non-assessable, free from all taxes, liens and charges with respect to the issue
thereof, and will not be subject to preemptive rights or other similar rights of
stockholders of the Company.
e. Acknowledgment Regarding Buyer's Purchase of the Securities. The
Company acknowledges and agrees that the Buyer is not acting as financial
advisor to or fiduciary of the Company (or in any similar capacity with respect
to this Agreement or the transactions contemplated hereby), that this Agreement
and the transactions contemplated hereby, and the relationship between the Buyer
and the Company, are and will be considered "arms-length" notwithstanding any
other or prior agreements or nexus between the Buyer and the Company, whether or
not disclosed, and that any statement made by the Buyer, or any of its
representatives or agents, in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation, is merely
incidental to the Buyer's purchase of the Securities and has not been relied
upon in any way by the Company, its officers or directors. The Company further
represents to the Buyer that the Company's decision to enter into this Agreement
and the transactions contemplated hereby have been based solely upon an
independent evaluation by the Company, its officers and directors.
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<PAGE> 8
f. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances which would prevent the parties hereto from
consummating the transactions contemplated hereby pursuant to an exemption from
registration under the 1933 Act and specifically in accordance with the
provisions of Regulation D. The transactions contemplated hereby are exempt from
the registration requirements of the 1933 Act, assuming the accuracy of the
representations and warranties contained herein of the Buyer.
g. No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Certificate of
Incorporation or Bylaws or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation or other
organizational documents, and neither the Company nor any of its/subsidiaries is
in default (and no event has occurred which, with notice or lapse of time or
both, would put the Company or any of its subsidiaries in default) under, nor
has there occurred any event giving others (with notice or lapse of time or
both) any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, except for possible defaults or rights as would not, in
the aggregate or individually, have a Material Adverse Effect. The business of
the Company and its subsidiaries is not being conducted, and shall not be
conducted so long as the Buyer owns any of the Securities, in violation of any
law, ordinance or regulation of any governmental entity, except for possible
violations which neither singly or in the aggregate would have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement, the Registration Rights Agreement or the Escrow Agreement in
accordance with the terms hereof and thereof, or to perform its obligations with
respect to the Preferred Shares exactly as described in the applicable Articles
of Amendment.
h. SEC Documents; Financial Statements. Since at least April 1, 1997,
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules hereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to as
the "SEC Documents"). The Company has
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<PAGE> 9
delivered to the Buyer as requested by the Buyer true and complete copies of the
SEC Documents, except for such exhibits, schedules and incorporated documents.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyer (including the
information referred to in Section 2(d) of this Agreement) contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading. Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to the date of such financial
statements and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in such financial statements, in each case of clause
(i) and (ii) next above which, individually or in the aggregate, are not
material to the financial condition, business, operations, properties, operating
results or prospects of the Company. The SEC Documents contain a complete and
accurate list of all material undischarged written and oral contracts,
agreements, leases or other instruments to which the Company or any subsidiary
is a party or by which the Company or any subsidiary is subject (each a
"Contract"). None of the Company, its subsidiaries or, to the best of the
Company's knowledge, any of the other parties thereto, is in breach or violation
of any Contract, which breach or violation would have a Material Adverse Effect.
No event, occurrence or condition exists which, with the lapse of time, the
giving of notice, or both, or the happening of any further event or condition,
would become a default by the Company or its subsidiaries thereunder which would
have a Material Adverse Effect.
i. Absence of Certain Changes. Except as disclosed in the Company's
1997 10-K, since December 31, 1997, there has been no material adverse change
and no material adverse development in the business, properties, operation,
financial condition, results of operations or prospects of the Company. The
Company has not taken any steps, and does not currently have any reasonable
expectation of taking any steps, to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge that its creditors intend to
initiate involuntary bankruptcy
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proceedings. The Company shall, at least until Buyer no longer holds any of the
Securities, maintain its corporate existence in good standing and shall pay all
taxes when due except for taxes it reasonably disputes.
j. Absence of Litigation. Except as set forth in the 1997 10-K, there
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, wherein an unfavorable decision, ruling or
finding would have a Material Adverse Effect or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of the documents
contemplated herein.
k. Foreign Corrupt Practices. Neither the Company nor any of its
subsidiaries, nor any officer, director or other person acting on behalf of the
Company or any subsidiary has, in the course of his actions for or on behalf of
the Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity, made any
direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any foreign or domestic government official or employee.
l. Acknowledgment of Dilution. The number of Conversion Shares issuable
upon conversion of the Preferred Shares may increase substantially in certain
circumstances, including the circumstance wherein the trading price of the
Common Stock declines. The Company's executive officers and directors have
studied and fully understand the nature of the securities being sold hereunder
and recognize they have a potential dilutive effect. The board of directors of
the Company has concluded in its good faith business judgment that such issuance
is in the best interests of the Company. The Company acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Shares
and Warrant Shares upon exercise of the Warrants is binding upon it and
enforceable regardless of the dilution that such issuance may have on the
ownership interests of other stockholders.
m. Eligibility to File Registration Statement. The Company is currently
eligible to file a registration statement with the SEC on Form S-3 under the
1933 Act.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. Securities Laws. The Company agrees to timely file a Form D (and any
equivalent form required by applicable state law) with respect to the Securities
if and as required under Regulation D and applicable state securities laws and
to provide a copy thereof to the Buyer promptly after such filing. The Company
shall, on or
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before the date of the First Closing and on or before the date of each
Additional Closing, as applicable, take such action as is necessary to sell the
Securities being sold to the Buyer on each such date under applicable securities
laws of the United States, and shall if specifically so requested provide
evidence of any such action so taken to the Buyer on or prior to the First
Closing Date or each Additional Closing date, as applicable.
c. Reporting Status. So long as the Buyer beneficially owns any of the
Securities, the Company shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations hereunder would permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the sale of
the Securities to pay off certain outstanding obligations of the Company and for
the Company's internal working capital purposes, including costs and expenses of
the Company's business operations, and to the extent deemed advisable by the
Company, for the purchase of new technologies for use by the Company and its
subsidiaries, and for the purchase of additional subsidiaries and the
development and marketing of their technologies.
e. Financial Information. At the request of the Buyer, until such time
as the Buyer no longer beneficially owns or is entitled to purchase Preferred
Shares, the Company agrees to send the following reports to the Buyer: (i) after
filing with the SEC, a copy of each of its Annual Reports on Form 10-K, its
quarterly Reports on Form 10-Q, and any reports filed on Form 8-K; and (ii) as
soon as practicable after release thereof, copies of all press releases issued
by the Company or any of its subsidiaries.
f. Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the issuance of all of the Conversion
Shares and the Dividend Shares (if any). Prior to complete conversion of the
Preferred Shares, the Company shall not reduce the number of shares reserved for
issuance hereunder without the written consent of the Buyer except for a
reduction proportionate to a reverse stock split effected for a business purpose
other than affecting the requirements of this Section, which reverse stock split
affects all shares of Common Stock equally.
g. Listing. Upon the First Closing and upon each Additional Closing,
the Company shall promptly secure the listing of the Registrable Securities then
underlying the Preferred Shares purchased by the Buyer upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of shares of Registrable Securities from time to time issued under the
terms of this Agreement and the Registration Rights Agreement. If at the
relevant time the Company's Common Stock trades on the OTC Bulletin Board
Market, then the Company shall take any steps necessary to ensure that the
Registrable Securities are eligible to trade on the OTC Bulletin Board Market.
The Company shall at all times comply in all respects with the Company's
reporting, filing and other obligations under the by-laws or rules of the
National Association of Securities Dealers and the OTC Bulletin Board
11
<PAGE> 12
Market (and such other national exchange on which the Common Stock may be
listed, as applicable), if any.
h. Prospectus Delivery Requirement. The Buyer understands that the 1933
Act requires delivery of a prospectus relating to the Common Stock in connection
with any sale thereof pursuant to a registration statement under the 1933 Act
covering any resale by the Buyer of the Common Stock being sold, and the Buyer
shall comply with any applicable prospectus delivery requirements of the 1933
Act in connection with any such sale. The Company shall deliver a copy of the
required prospectus to the Buyer immediately upon registration of the
Registrable Securities.
i. (Intentionally Omitted).
j. Intentional Acts or Omissions. Neither party shall intentionally
perform any act which if performed, or omit to perform any act which if omitted
to be performed, would prevent or excuse the performance of this Agreement or
any of the transactions contemplated hereby.
k. No Shorting. As a material inducement for the Company to enter into
this Agreement, the Buyer represents that it has not as of the date hereof, and
covenants on behalf of itself and its affiliates that neither Buyer nor any
affiliate of Buyer will at any time in which the Buyer or any affiliate of the
Buyer beneficially owns any of the Securities, engage in any short sales of, or
hedging or arbitrage transactions with respect to, the Common Stock, or sell
"put" options or similar instruments with respect to the Common Stock.
1. Purchase of Series E Shares. Until the date which is twenty-four
(24) months from the date hereof, the Buyer agrees to purchase, and the Company
agrees to sell, in accordance with and subject to the terms of this Agreement
and the Series E Articles, a minimum of 200,000 Series E Shares and, at the
Company's option, up to a maximum of 500,000 Series E Shares, in each case in a
series of tranches, each of which tranches shall be for the purchase and sale of
a minimum of 12,500 Series E Shares and a maximum of 25,000 Series E Shares in
any given tranche.
No such tranche shall be closed before the date which is thirty (30)
days after the date on which the registration statement contemplated by the
Registration Rights Agreement and covering all of the Registrable Securities is
declared effective by the SEC and the Registrable Securities may thus be freely
sold by Buyer without restriction, and Buyer has been so informed in writing
(and any prospectus needed to sell such Registrable Securities has been
delivered to Buyer). The Series E Shares to be issued in each such tranche shall
be issued and sold upon the terms and conditions of this Agreement and the
Series E Articles. The obligations of the Company to sell and the Buyer to
purchase Series E Shares at each Additional Closing (each of which Additional
Closings (other than the first) shall occur no less than thirty (30) days after
the date of the previous Additional Closing), shall be contingent upon
satisfaction of the following conditions:
(i) The Company shall give the Buyer and the Escrow Agent ten (10)
days prior written notice of its intent to sell Series E
Shares;
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<PAGE> 13
(ii) On the date of each Additional Closing:
(a) The registration statement required to be filed under
the Registration Rights Agreement has been declared
effective by the SEC and is as of such date still
effective with respect to (i) all Conversion Shares
into which the Preferred Shares may be convertible,
(ii) all Warrant Shares receivable upon exercise of
the Warrants, and (iii) any Dividend Shares to be
issued in payment of dividends, such that all such
Conversion Shares, Warrant Shares and Dividend Shares
may be freely traded on the OTC Bulletin Board Market
by Buyer at any time after receipt thereof.
(b) Each of the representations and warranties of the
Company contained in this Agreement, the Registration
Rights Agreement and the Escrow Agreement (the
"Transaction Documents") shall be true and correct in
all material respects as if made on the date of such
Additional Closing, and the Company shall have
performed all of its obligations under the
Transaction Documents required to be performed by the
Company prior to the date of such Additional Closing.
(c) The average daily trading volume for the Common Stock
for the previous sixty (60) trading days must equal
or exceed 150,000 shares per trading day.
(d) The average daily share price for the Common Stock
for the ten (10) trading days prior thereto, must
equal or exceed $.45 per share.
(e) The number of shares issuable upon conversion of the
Series E Shares then being purchased, together with
the shares of Common Stock issued prior thereto
pursuant to the Transaction Documents and the
Articles of Amendment, shall not exceed twenty
percent (20%) of the outstanding shares of the
Company's Common Stock. This condition shall be
waived by the Buyer should the Company obtain any
required shareholder or other consent to the issuance
of more than twenty percent (20%) of the outstanding
shares of the Company's Common Stock prior to such
Additional Closing.
(f) No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction or
any self-regulatory organization having authority
over the matters contemplated hereby which restricts
or prohibits the consummation of any of the
transactions contemplated by the Transaction
Documents or the Articles of Amendment.
13
<PAGE> 14
If the Company does not sell to the Buyer, within the twenty-four (24)
month period specified in this Section 4(l), at least the minimum number of
Series E Shares and the corresponding number of Warrants to have been sold
pursuant to this Section 4(l), other than as a result of a breach of this
Agreement by the Buyer, then unless the Buyer agrees in writing to extend the
time in which the Company may sell Series E Shares to the Buyer, the Company
shall issue to the Buyer a warrant (a "Penalty Warrant") to purchase a number of
shares of Common Stock equal to the minimum number of Series E Shares to have
been sold less the number of Series E Shares actually sold to the Buyer. The
Penalty Warrant shall be exercisable if at all within three (3) years after
issuance at a price per share of Common Stock equal to the closing bid price of
the Common Stock on the date of the First Closing. The Penalty Warrant shall
contain both demand and "piggyback" registration rights. Thus, for example, if
the Buyer purchased 25,000 Series D Shares (fifty percent (50%) of the total
number of Series D Shares sold), and if the closing bid price for the Common
Stock on the date of the First Closing were US$1.00, and if the Company at the
end of the period which is twenty-four (24) months after the date of the First
Closing shall have sold the Buyer only 50,000 Series E Shares, then the Company
shall issue a Penalty Warrant with an exercise price per share of US$1.00 for
50,000 shares of Common Stock (the minimum number of Series E Shares to have
been sold to the Buyer would have been 100,000, or fifty percent (50%) of the
total 200,000 Series E Shares to have been sold).
Conversely, if the Buyer does not purchase all of its pro-rata portion
of the Series E Shares offered for sale by the Company (other than for a breach
of this Agreement by the Company or failure of the Company to meet the
conditions stated in Section 4(l)) when such Series E Shares are so offered for
sale in accordance with the terms of this Agreement, then at such time as the
Buyer refuses to purchase such Series E Shares being offered for sale, unless
waived by the Company, all Warrants previously issued to the Buyer, to the
extent not already exercised by the Buyer, shall be null and void.
m. Restriction on Below Market Issuance of Securities. Until the date
which is twenty-four (24) months from the date hereof, the Company shall not
issue or agree to issue {other than (i) to the Buyer or other buyers pursuant to
the transactions contemplated herein, (ii) pursuant to any employee stock option
plan or employee stock purchase plan of the Company in effect on March 31, 1998,
(iii) pursuant to any existing security, option, warrant, scrip, call or
commitment or right in each case as disclosed on Schedule 3(c) hereof, or (iv)
with the consent of the Buyer, not to be unreasonably withheld} any equity
securities of the Company (or any security convertible into or exercisable or
exchangeable, directly or indirectly, for equity securities of the Company) or
debt securities of the Company if such securities are issued at a price (or
provide for a conversion, exercise or exchange price) which may be less than the
current market price for the Common Stock on the date of issuance (in the case
of Common Stock) or the date of conversion, exercise or exchange (in the case of
securities convertible into or exercisable or exchangeable, directly or
indirectly, for Common Stock). Except as provided with respect to the
transactions contemplated herein and in subsections (i), (ii), (iii), or (iv)
above of this Section 4(m), the Company shall not grant any additional so-called
"registration rights."
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<PAGE> 15
5. LEGEND AND TRANSFER INSTRUCTIONS.
a. Transfer Agent Instructions. The Company shall instruct its transfer
agent to issue certificates, registered in the name of the Buyer or its nominee,
for the Conversion Shares, the Warrant Shares and the Dividend Shares (if any)
in accordance with the terms of the applicable Articles of Amendment and in such
amounts as specified from time to time by the Buyer to the Company, upon
conversion of the Preferred Shares and exercise of the Warrants. All such
certificates shall bear the restrictive legend specified in Section 2(g) of this
Agreement only to the extent required by applicable law and as specified in the
Transaction Documents. The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof in the case of the Conversion Shares and the
Dividend Shares (if any) prior to the registration of same under the 1933 Act,
will be given by the Company to its transfer agent and that the Conversion
Shares, the Warrant Shares and the Dividend Shares (if any) shall otherwise be
freely transferable on the books and records of the Company as and to the extent
permitted by applicable law and provided by this Agreement and the Registration
Rights Agreement. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Conversion Shares, the Warrant Shares and/or the Dividend Shares
(if any). If the Buyer (x) provides the Company with an opinion of counsel
reasonably satisfactory to Company, that is reasonably satisfactory in form,
substance and scope to the Company, that registration by the Buyer of the
Preferred Shares, the Conversion Shares, the Warrant Shares and/or the Dividend
Shares (if any) is not required under the 1933 Act, or (y) transfers Securities
to an affiliate which is an accredited investor (in accordance with the
provisions of this Agreement) or in compliance with Rule 144, then in either
instance the Company shall permit the said transfer, and if applicable promptly
(and in all events within two (2) trading days after receipt by the Company of
each of the original documents and things to be delivered by the Buyer to effect
a conversion of the applicable Preferred Shares) instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by the Buyer
b. Removal of Legends. The Legend shall be removed and the Company
shall issue a certificate without such Legend to the holder of any Security upon
which it is stamped, and a certificate for a security shall be originally issued
without the Legend, if, unless otherwise required by state securities laws, (x)
the sale of such Security is registered under the 1933 Act, or (y) such holder
provides the Company with an opinion by counsel reasonably satisfactory to the
Company, that is in form, substance and scope reasonably satisfactory to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the 1933 Act or (z) such holder provides the
Company with assurances reasonably satisfactory to the Company and its counsel,
that such Security can be sold pursuant to Rule 144. The Buyer agrees that its
sale of all Securities, including those represented by a certificate(s) from
which the Legend has been removed, or which were originally issued without the
Legend, shall be made only pursuant to an effective registration statement (and
to deliver a prospectus in connection with such sale) or in compliance with an
exemption from the registration requirements of the 1933 Act. In the event the
Legend is removed from any Security or any Security is issued without the Legend
and thereafter the
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<PAGE> 16
effectiveness of a registration statement covering the sales of such Security is
suspended or the Company determines that a supplement or amendment thereto is
required by applicable securities laws, then upon reasonable advance notice to
the holder of such Security, the Company shall be entitled to require that the
Legend be placed upon any such Security which cannot then be sold pursuant to an
effective registration statement or Rule 144 or with respect to which the
opinion referred to in clause (y) next above has not been rendered, which Legend
shall be removed when such Security may be sold pursuant to an effective
registration statement or Rule 144 (or such holder provides the opinion with
respect thereto described in clause (y) next above.
c. Conversion of Preferred Shares. The Buyer shall have the right to
convert the Preferred Shares sold hereunder by delivering via facsimile an
executed and completed Notice of Conversion (as defined in the Articles of
Amendment) to the Company and delivering within two (2) business days thereafter
the original Notice of Conversion and the certificate representing the Preferred
Shares being converted by express courier to the Company. Each date on which a
Notice of Conversion is telecopied to the Company in accordance with the
provisions hereof shall be deemed a "Conversion Date." The Company will transmit
a certificate or certificates (collectively the "Certificate") representing the
shares of Common Stock issuable upon conversion of any Preferred Shares
converted pursuant to such Notice of Conversion (along with a replacement
certificate representing the number of Preferred Shares not so converted) to the
Buyer via express courier, within three (3) business days after the relevant
Conversion Date (the third business day after the relevant Conversion Date shall
be referred to hereinafter as the "Deadline"). With the mutual agreement of the
Company and the Buyer, the Company or a third party may (until and unless the
Buyer in a particular instance requests otherwise) hold the Preferred Shares in
trust, such that, to effect a conversion of the Preferred Shares, the Buyer
shall deliver to the Company via courier only the original Notice of Conversion
as described in this Section and the Company and the Buyer shall keep a record
of the number of Preferred Shares so converted. If either the Company or a third
party holds the certificates representing the Preferred Shares in trust as
described in the preceding sentence, the Company will deliver the Certificates
directly to the Buyer via express courier on or before the Deadline.
d. Injunctive Relief for Breach. The Company acknowledges that the
remedy at law for a breach of its obligations under Sections 5(a), 5(b) and 5(c)
above will cause irreparable harm to the Buyer by vitiating the intent and
purpose of the transactions contemplated hereby. Accordingly the Company agrees
that the remedy at law for a breach of its obligations under such Sections would
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of such Sections, the Buyer shall be entitled, in
addition to all other remedies at law or in equity (including without limitation
those remedies specified in Section 5(e) below), to an injunction restraining
any breach and requiring immediate issuance and transfer, without the necessity
of showing economic loss and without any bond or other security being required.
e. Liquidated Damages for Non-Delivery of Certificates. In addition to
the provisions of Section 5(d) above, the Company understands and agrees that a
delay in the issuance of the Certificates beyond the Deadline could result in
economic loss and other damages to the Buyer. As
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<PAGE> 17
partial compensation to the Buyer for such loss, the Company agrees to pay
liquidated damages (and which the Company acknowledges is not a penalty) to the
Buyer for issuance and delivery of the Certificates after the Deadline, in
accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond seven (7) business days from the
date of delivery by the Buyer to the Company of a facsimile Notice of Conversion
(or, if later, from the date on which all other necessary documentation duly
executed and in proper form required for conversion of Preferred Shares as
described in this Agreement, including the original Notice of Conversion and the
original certificate representing the Preferred Shares to be converted, all in
accordance with this Agreement only if such necessary documentation has not been
delivered to the Company within the three (3) business day period after the
facsimile delivery to the Company of the Notice of Conversion required in this
Agreement)):
<TABLE>
<CAPTION>
No. Business Days Late Liquidated Damages
---------------------- ------------------
(in US$)
<S> <C>
1 $300
2 $400
3 $500
4 $600
5 $700
6 $800
7 $900
8 $1,000
9 $1,000
10 $1,500
11+ $1,500 + $500 for
each Business Day Late
beyond 11 days
</TABLE>
The Company shall pay the Buyer any liquidated damages incurred as
called for under this Section 5(e) by certified or cashier's check upon the
earlier of (i) issuance of the Certificates to the Buyer or (ii) each monthly
anniversary of the receipt by the Company of the Buyer's Notice of Conversion.
Nothing herein shall limit the Buyer's right to pursue actual damages for the
Company's failure to issue and deliver the Certificates to the Buyer in
accordance with the terms of this Agreement or for breach by the Company of this
Agreement.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to sell Preferred Shares at the
applicable Closing is subject to the satisfaction, on or before the date of the
applicable Closing as described herein, of each of the following conditions,
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion:
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<PAGE> 18
a. The parties shall have executed this Agreement, the Registration
Rights Agreement and the Escrow Agreement, and the parties shall have delivered
the respective documents or signature pages thereof (via facsimile or otherwise
as permitted in the Escrow Agreement) to the Escrow Agent.
b. The Buyer shall have delivered to the Escrow Agent on behalf of the
Company the Purchase Price in full for the Series D Shares purchased at the
First Closing, or the Purchase Price in full for the Series E Shares being
purchased at each Additional Closing, as applicable, by wire transfer of
immediately available funds pursuant to the wiring instructions provided by the
Escrow Agent.
c. The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date made and as of the date of the
applicable Closing as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the date of the applicable Closing.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer to purchase Preferred Shares is subject to
the satisfaction, on or before the date of the applicable Closing, of each of
the following conditions, provided that these conditions are for the sole
benefit of the Buyer and may be waived by the Buyer at any time in its sole
discretion:
a. The Series D Articles and the Series E Articles shall have been duly
authorized and filed with the Secretary of State of the state of Delaware; the
parties shall have executed this Agreement, the Registration Rights Agreement
and the Escrow Agreement, and the parties shall have delivered the respective
documents or signature pages thereof (via facsimile or otherwise as permitted in
the Escrow Agreement), to the Escrow Agent on behalf of each other.
b. The representations and warranties of the Company shall be true and
correct in all material respects as of the date made and as of the date of the
applicable Closing as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the date of the applicable
Closing. The Buyer may require a certificate,
18
<PAGE> 19
executed by the Chief Executive Officer of the Company, dated as of the date of
such Closing, to the foregoing effect and as to such other matters as may be
reasonably requested by the Buyer.
c. With respect to each Closing called for herein, the Company shall
have issued and have duly executed by the authorized officers of the Company,
and delivered to the Escrow Agent on behalf of the Buyer, the original Preferred
Shares being sold at such Closing.
d. The Common Stock shall be authorized for quotation on the OTC
Bulletin Board Market and trading in the Common Stock on such market shall not
have been suspended by the SEC or other relevant regulatory agency.
e. The Company shall not have received, as of the date of the
applicable Closing, from the National Association of Securities Dealers or any
other relevant regulatory agency, any written or oral communication as to its
actual or potential ineligibility for the Common Stock to continue trading on
the OTC Bulletin Board Market.
f. With respect to each Additional Closing, the conditions for closing
listed in Section 4(1) above shall have been met by the Company, including
without limitation the condition that the Common Stock into which the Series E
Preferred then being sold is convertible, the Warrant Shares receivable upon
exercise of the Warrants then being sold, and the Common Stock representing any
Dividend Shares to be issued in payment of dividends (if any), have all been
registered with the SEC pursuant to the registration statement required under
the Registration Rights Agreement, and such registration statement is still
effective as of the date of such Additional Closing.
g. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
h. The Escrow Agent shall have received on behalf of the Buyer the
opinion of Company counsel, dated as of the date of the First Closing, in the
form attached hereto as Exhibit F.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws. In the event of any litigation regarding the
interpretation or application of this Agreement, the parties irrevocably consent
to jurisdiction in any of the state or federal courts located in the State of
Delaware and waive their respective rights to object to venue in any such court,
regardless of the convenience or inconvenience thereof to any party. Service of
process in any civil action relating to or arising out of this Agreement
(including also all Exhibits or Addenda hereto) or the transaction(s)
contemplated herein may be accomplished in any manner provided by law. The
19
<PAGE> 20
parties hereto agree that a final, non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and signature pages from such counterparts have been delivered to the
Escrow Agent on behalf of the other party. In the event any signature page is
delivered by facsimile transmission (which the parties agree is an acceptable
form of delivery), the party using such means of delivery shall cause three (3)
additional originally executed signature pages to be physically delivered to the
Escrow Agent on behalf of the other party within two (2) business days after the
execution and delivery hereof.
c. Headings; Gender, Etc. The headings of this Agreement are for
convenience of reference and shall not form a part of, or affect the
interpretation of this Agreement. As used herein, the masculine shall refer to
the feminine and neuter, the feminine to the masculine and neuter, and the
neuter to the masculine and feminine, as the context may require. As used
herein, unless the context clearly requires otherwise, the words "herein,"
"hereunder" and "hereby," shall refer to this entire Agreement and not only to
the Section or paragraph in which such word appears. If any date specified
herein falls upon a Saturday, Sunday or public or legal holidays, the date shall
be construed to mean the next business day following such Saturday, Sunday or
public or legal holiday. For purposes of this Agreement, a "business day" is any
day other than a Saturday, Sunday or public or legal holiday.
d. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by U. S. Mail or delivered personally or
by courier or via facsimile (if via facsimile, to be followed within three (3)
business days by an original of the notice document via U.S. Mail or courier)
and shall be effective five (5) days after being placed in the mail, if mailed,
certified or registered, return receipt requested, or upon receipt, if delivered
personally or by courier or by facsimile, in each case properly addressed to the
party to receive the same. The addresses for such communications shall be:
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<PAGE> 21
If to the Company: American Biomed, Inc.
10077 Grogan's Mill Road, Suite 101
The Woodlands, Texas 77380
Telephone: (281) 367-3895
Facsimile: (281) 367-3212
Attention: Mr. Steven B. Rash, President & CEO
If to the Buyer, at the address on the signature page of this Agreement. Each
party shall provide written notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other (which
consent shall not be unreasonably withheld), and in any event any assignee of
the Buyer shall be an accredited investor (as defined in Regulation D), in the
written opinion of counsel who is reasonably satisfactory to Seller and in form,
substance and scope reasonably satisfactory to the Seller. Notwithstanding the
foregoing, if applicable, any of the entities constituting the Buyer (if greater
than one (1) entity) may assign its rights hereunder to any of its "affiliates,"
as that term is defined under the 1934 Act, without the consent of the Company;
provided, however, that any such assignment shall not release such assigning
entity from its obligations hereunder unless such obligations are assumed by
such affiliate and the Company has prior to such assignment and assumption
consented in writing to the same; and no such assignment shall be made unless it
is made in accordance with any applicable securities laws of any applicable
jurisdiction. Any request for an assignment made hereunder by the Buyer shall be
accompanied by an opinion by counsel reasonably satisfactory to the Company,
that is in form, substance and scope reasonably satisfactory to the Company,
that such assignment is proper under applicable law.
h. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section 8(1),
the representations and warranties of the Company and the Buyer contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and
8 shall survive the final Closing of the purchase and sale of Securities
purchased and sold hereby for a period of twelve (12) months after such final
Closing.
j. Publicity. The Company and the Buyer shall have the right to review
before issuance by the other, any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without prior consultation with or approval of
the Buyer, to make any press release or other public disclosure with respect to
such transactions as is required by applicable law and regulations.
21
<PAGE> 22
k. Further Assurance. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the First Closing shall not have
occurred on or before ten (10) business days from the date hereof, this
Agreement shall terminate at the close of business on such date. Neither party
may unilaterally terminate this Agreement after the First Closing for any reason
other than a material breach of this Agreement by the non-terminating party.
Such termination shall not be the sole remedy for a breach of this Agreement by
the non-terminating party, and each party shall retain all of its rights
hereunder at law or in equity. Notwithstanding anything herein to the contrary,
a party whose breach of a covenant or representation and warranty or failure to
satisfy a condition prevented the First Closing or an Additional Closing shall
not be entitled to terminate this Agreement.
m. Remedies. No provision of this Agreement providing for any specific
remedy to a party shall be construed to limit such party to the specific remedy
described, and any other remedy that would otherwise be available to such party
at law or in equity shall be so available. Nothing in this Agreement shall limit
any rights a party may have with any applicable federal or state securities laws
with respect to the transactions contemplated hereby.
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
[SIGNATURE PAGE FOLLOWS]
22
<PAGE> 23
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT DATED
APRIL 29, 1998]
COMPANY:
AMERICAN BIOMED, INC.
By: /s/ STEVEN B. RASH
-----------------------------------------
Mr. Steven B. Rash, President and CEO
Attest: /s/ COLENE BLANKINSHIP
----------------------------
COLENE BLANKINSHIP Secretary
----------------------------
BUYER:
THE AUGUSTINE FUND, L.P.
By: Augustine Capital Management, Inc.,
its General Partner
By: /s/ TOM DUSZYNSKI
-----------------------------------------
Mr. Tom Duszynski, Vice President
BUYER'S ADDRESS: The Augustine Fund, LP
C/o Augustine Capital Management, Inc.
141 West Jackson Blvd., Suite 2182
Chicago, Illinois 60604
Telecopier Number: 312.427.5396
Attn: Mr. Tom Duszynski
23
<PAGE> 24
SECURITIES PURCHASE AGREEMENT
Exhibits
<TABLE>
<S> <C>
Exhibit A Series D Articles
Exhibit B Series E Articles
Exhibit C Registration Rights Agreement
Exhibit D Escrow Agreement
Exhibit E Warrant to Purchase Common Stock
Exhibit F Opinion of Counsel for American Biomed, Inc.
</TABLE>
24
<PAGE> 1
EXHIBIT 10.94
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES, LIMITATIONS
AND RELATIVE RIGHTS OF 1998 SERIES D CONVERTIBLE PREFERRED STOCK
OF
AMERICAN BIOMED, INC.
AMERICAN BIOMED, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that the following resolutions were adopted by the Board of
Directors of the Corporation (the "Board of Directors") pursuant to authority of
the Board of Directors as required by Section 151 of the Delaware General
Corporation Law:
RESOLVED, that, pursuant to the authority granted to and vested in the
Board of Directors, in accordance with the provisions of its Certificate of
Incorporation (as amended from time to time) of the Corporation, the Board of
Directors hereby creates out of the Corporation's previously authorized
preferred stock, $.001 par value per share, of the Corporation a series of
preferred stock to consist of not more than 60,000 shares, and the Board of
Directors hereby fixes the designation and the powers, preferences and rights,
and the qualifications, limitations or restrictions of the shares of such series
as follows:
1. DESIGNATION. This resolution shall provide for a single series
of convertible preferred stock, the designation of which shall be the 1998
Series D Convertible Preferred Stock (hereinafter the "Series D Preferred
Stock") and the number of authorized shares constituting the Series D Preferred
Stock is 60,000. The stated value of each share of Series D Preferred Stock is
ten dollars (US$10.00). The number of authorized shares of Series D Preferred
Stock may be reduced or increased by a further resolution duly adopted by the
Board of Directors of the Corporation and by the filing of an amendment to the
Corporation's Articles of Incorporation pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that such reduction or
increase has been so authorized.
2. VOTING. Except as expressly required by the laws of the State
of Delaware, the holders of the Series D Preferred Stock shall have no voting
rights and shall not be entitled to notice of meetings of shareholders, and the
exclusive voting power shall be vested in the holders of the shares of the
Corporation's Common Stock, $.001 par value per share (the "Common Stock"),
and/or in any other series of the Corporation's preferred stock now or at any
time hereafter issued and outstanding having voting rights. Any corporate action
that may require a vote of the holders of the Series D Preferred Stock as a
class shall be deemed to have been approved by that class upon the affirmative
vote by the holders of a majority of the issued and outstanding Series D
Preferred Stock unless a higher voting requirement is imposed by the
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<PAGE> 2
Delaware General Corporation Law. If any corporate action shall require a vote
of the holders of the Series D Preferred Stock other than as a class, the Series
D Preferred Stock shall vote as a group with the Common Stock as if the Series D
Preferred Stock had been fully converted three (3) business days prior to the
date of the vote.
3. DIVIDENDS.
3.1 RATE. Holders of Series D Preferred Stock shall be
entitled to receive, out of any funds of the Corporation legally available for
that purpose, cumulative dividends from the date of issuance at the rate of $.80
per year per Preferred Share, payable quarterly (pro-rated for partial quarters)
in arrears in cash, or, at the option of the Corporation, in shares of its
Free-Trading Common Stock (as defined herein) at the applicable Conversion Rate
(as defined in Section 5.2 below), on the first day of April, July, October and
January of each year commencing July 1, 1998 (each such date being hereinafter
individually referred to as the "Dividend Payment Date" and collectively as the
"Dividend Payment Dates"). Notwithstanding the preceding sentence, should the
Corporation in its discretion determine to pay said dividends in shares of Free
Trading Common Stock, then all accumulated and unpaid dividends shall be paid at
the time of each conversion of the Series D Preferred Stock, such that upon each
conversion of the Series D Preferred Stock by the holder thereof, the
Corporation shall pay all accumulated and unpaid dividends owed as of the date
of such conversion. Each such dividend shall be paid to the holders of record of
the Series D Preferred Stock as they appear on the books of the Corporation on
the record date which shall be not less than 30 days prior to the related
Dividend Payment Date. Dividends on the Series D Preferred Stock shall be
declared and paid to the extent the Corporation is legally able to do so and
shall be cumulative to the extent not declared and paid. Holders of Series D
Preferred Stock shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of full dividends as herein provided on the Series
D Preferred Stock. "Free-Trading Common Stock" shall mean shares of Common Stock
that are "restricted securities" as defined in Rule 144 under the Securities Act
of 1933 (the "Securities Act"), but the resales of such shares have been
registered under a registration statement filed with respect to the Common Stock
underlying and receivable upon conversion of the Series D Preferred Stock.
3.2 DIVIDENDS ON COMMON STOCK. No dividends (other than those
payable solely in Common Stock) shall be paid with respect to the Common Stock
during any fiscal year of the Corporation unless all accumulated and unpaid
dividends and the quarterly dividend on the shares of Preferred Stock for the
then current dividend period shall have been declared and a sum sufficient for
the payment thereof set apart. No shares of Common Stock shall be purchased,
redeemed or acquired by the Corporation, and no funds shall be paid into or set
aside or made available for a sinking fund for the purchase, redemption or
acquisition thereof except (A) in transactions aggregating not more than
$100,000.00 per year, (B) in transactions resulting from a legal obligation of
the Corporation to redeem, purchase or otherwise acquire its securities arising
prior to the date hereof, or (C) pursuant to Section 5.1 herein.
4. REDEMPTION. Except as provided in Section 3.2 herein, the
Series D Preferred Stock shall not be redeemable at any time prior to September
30, 1999. Thereafter, the Corporation, on the sole authority of its Board of
Directors, may, at its option and at any time
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<PAGE> 3
prior to notice of conversion of the Series D Preferred Stock by the holder
thereof as hereinafter provided, redeem all or any part of the Series D
Preferred Stock at the time issued and outstanding for an amount in cash equal
to $11.75 per share plus any accumulated and unpaid dividends. Except as
provided in Section 3.2 herein, if less than all the Series D Preferred Stock
are to be redeemed, then such redemption shall be pro rata based on the number
of Series D Preferred Stock owned of record by each Preferred Shareholder.
Written notice of redemption stating the date and place of redemption and the
amount of the redemption price shall be mailed by the Corporation not less than
30 days nor more than 60 days prior to the redemption date to the record holders
of the shares to be redeemed directed to their last known address as shown by
the Corporation records. If notice of redemption is given as provided above and
if on the redemption date the Corporation has set apart in trust for the purpose
sufficient funds for such redemption, then from and after the redemption date,
notwithstanding that any certificate for such shares has not been surrendered
for cancellation, the Series D Preferred Stock called for redemption shall no
longer be deemed to be outstanding and all rights with respect to such shares
shall forthwith cease and terminate, except only the right of the holders
thereof to receive the redemption price without interest upon surrender of
certificates representing the shares called for redemption. Any monies remaining
in trust after one year from the redemption date shall be returned to the
Corporation and thereafter holders of certificates for such shares shall look
only to the Corporation for the redemption price thereof. Upon conversion of any
Series D Preferred Stock called for redemption into Common Stock, then the
portion of the monies held in trust for redemption of such shares shall
forthwith be returned to the Corporation.
5. CONVERSION.
5.1 PROHIBITION AGAINST SHORT SALES. No holder of Series D
Preferred Stock shall directly or indirectly effect a short sale of the
Corporation's Common Stock for the holder's own account or for the account of a
Related Person. "Short sale" shall mean any sale of a security which the seller
does not beneficially own or any sale which is consummated by the delivery of a
security borrowed by, or for the account of, the seller, in either case whether
or not the seller is the owner of Common Stock at the time of such sale.
"Related Person" shall mean (A) any member of the holder's immediate family; (B)
any entity of which the holder is an officer, director, or holder of a position
having comparable duties or responsibilities; (C) any entity in which the holder
is the owner of an equity interest; and (D) any person which would be deemed to
be an "affiliate" of the holder as that term is defined in the Securities Act of
1933 or the rules and regulations promulgated thereunder.
5.2 CONVERSION RATE. So long as a holder of Series D Preferred
Stock is not in breach of Section 5 herein and subject to Section 5.8 herein,
such holder shall have the right, exercisable at any time after the earlier of
(i) the date on which a registration statement filed with the U.S. Securities
and Exchange Commission (the "SEC"), which registration statement covers the
Common Stock into which the Series D Preferred Stock is convertible, is declared
effective by the SEC, or (ii) the date which is 90 days from the date of
issuance of the Series D Preferred Stock being converted (the "Hold Period"),
and on or before the close of business on the second full business day preceding
the date, if any, fixed for the redemption of such shares as provided herein, to
surrender the certificate or certificates evidencing such shares and receive in
lieu and
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<PAGE> 4
in conversion thereof, and in lieu of accumulated and unpaid dividends thereon,
that number of shares of the Corporation's Common Stock as equals $10.00 per
share of Preferred Stock tendered for conversion, plus accumulated and unpaid
dividends thereon, divided by the lesser of (A) 110% of the average of the
closing bid prices per share of the Corporation's Common Stock on the Nasdaq
Stock Market, any national securities exchange, the OTC Bulletin Board or any
other market on which the Common Stock is listed or eligible for trading for the
five trading days preceding the date of purchase of the Series D Preferred Stock
by the holder (which shall be deemed to be the date of execution by the holder
of a securities purchase agreement between the holder and the Corporation for
the purchase of Series D Preferred Stock); or (B) 80% of the average of the
closing bid prices per share similarly determined for the five trading days
preceding the date such conversion is deemed to have been made, as subsequently
defined herein.
5.3 MECHANICS OF CONVERSION.
(a) HOLDER'S DELIVERY REQUIREMENTS. To convert
Series D Preferred Stock into full shares of Common Stock, the holder thereof
shall (A) deliver or transmit by facsimile, for receipt on or prior to 5:00
p.m., New York time (the "Conversion Notice Deadline") on the date of
conversion, a copy of the fully executed notice of conversion ("Notice of
Conversion") to the Corporation at the office of the Corporation or its
designated transfer agent (the "Transfer Agent"), and (B) surrender to a common
carrier for delivery to the office of the Corporation or the Transfer Agent, the
original certificates representing the Series D Preferred Stock being converted
(the "Preferred Stock Certificates"), duly endorsed for cancellation. The holder
of the Series D Preferred Stock shall have the right to convert fewer than the
full number of Series D Preferred Stock held at any given time.
(b) CORPORATION'S RESPONSE. Upon receipt by the
Corporation of a facsimile copy of such Notice of Conversion, the Corporation
shall send, via facsimile, a confirmation of receipt of such Notice of
Conversion to such holder, which shall specify that the Notice of Conversion has
been received and the name and telephone number of a contact person at the
Corporation whom the holder should contact regarding information related to such
conversion. Upon receipt by the Corporation or the Transfer Agent of the
Preferred Stock Certificates to be converted pursuant to a Notice of Conversion
(or an indemnification undertaking reasonably satisfactory to the Corporation
with respect to such shares in the case of their loss, theft or destruction)
together with the originally executed Notice of Conversion, the Corporation
shall, within two business days after the date of receipt (the "Deadline"),
instruct the Transfer Agent to issue and surrender to a common carrier for
either overnight or (if delivery is outside the United States) two (2) day
delivery to the address as specified in the Notice of Conversion, a certificate
for the number of shares of Common Stock to which the holder shall be entitled
as aforesaid, and the Corporation shall take all reasonable steps to ensure that
the Transfer Agent has complied with such instructions. In the case of a dispute
as to the calculation of the conversion rate, the Corporation shall promptly
issue to the holder the number of shares of Common Stock that is not disputed
and shall submit the disputed calculations to its outside accountant via
facsimile within one (1) day of receipt of such holder's Notice of Conversion.
The Corporation shall cause the accountant to perform the calculations and
notify the Corporation and the holder of the results no later than twenty-four
(24) hours from the time it receives the disputed
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<PAGE> 5
calculations. Such accountant's calculation shall be deemed conclusive absent
manifest error. Should the Notice of Conversion specify a smaller number of
Series D Preferred Stock to be converted than are represented by the Preferred
Stock Certificate surrendered to the Corporation, then the Corporation shall
immediately issue a new Preferred Stock Certificate representing the number of
Series D Preferred Stock not yet converted, and deliver the same to the holder
thereof along with the Common Stock as stated above.
(c) DATE OF CONVERSION. The date on which
conversion occurs (the "Date of Conversion") shall be deemed to be the date set
forth in such Notice of Conversion, provided (A) that the advance copy of the
Notice of Conversion is faxed to the Corporation before 5:00 p.m., New York
time, on the Date of Conversion, and (B) that the original Preferred Stock
Certificates representing the Series D Preferred Stock to be converted, together
with the originally executed Notice of Conversion, are surrendered by depositing
such certificates and Notice with a common carrier, as provided above, and
received by the Transfer Agent or the Corporation on or prior to the second
(2nd) business day following the Date of Conversion. In the event the Preferred
Stock Certificates and the originally executed Notice of Conversion are not
received within three (3) business days after the date of the Notice of
Conversion, the Notice of Conversion shall be deemed null and void and no
conversion of Series D Preferred Stock shall be effected thereby. The person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated, as of three (3) business days after the Date of
Conversion, for all purposes as the record holder or holders of such shares of
Common Stock on the Date of Conversion.
(d) Notwithstanding anything contained herein to
the contrary, if any action is required herein to be taken by the Corporation or
the Transfer Agent on a day which is not a business day, then such action shall
be deemed to be timely if taken on the next following business day.
5.4 OPTIONAL CONVERSION. At the option of the
Corporation, if any Series D Preferred Stock remain outstanding on April 30,
2000, then all or any part of such Series D Preferred Stock as the Corporation
elects shall be converted in accordance with Section 5.3 as if the holders of
such Series D Preferred Stock had given the Notice of Conversion effective as of
that date, and the Date of Conversion had been fixed as of April 30, 2000 for
all purposes of Paragraph 5.3. Following notice by the Corporation to the
holders, all holders of Preferred Stock certificates shall within five (5)
business days after receipt of such notice surrender all Preferred Stock
certificates, duly endorsed for cancellation, to the Corporation or the Transfer
Agent, as the Corporation may direct. No person shall thereafter have any rights
in respect of Series D Preferred Stock, except the right to receive shares of
Common Stock on conversion thereof as provided in this Section 5.
5.5 ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE OR
SUBSTITUTION. If the Common Stock issuable upon the conversion of Series D
Preferred Stock shall be changed into the same or a different number of shares
of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a reorganization, merger,
consolidation or sale of assets provided for below), then and in each such
event, the holder of each Preferred
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<PAGE> 6
Share shall have the right thereafter to convert such share into the kind and
amount of shares of stock and other securities and property receivable upon such
reorganization, reclassification or other change by holders of the number of
shares of Common Stock into which such Series D Preferred Stock might have been
converted immediately prior to such reorganization, reclassification or change,
all subject to further adjustment as provided herein.
5.6 MERGER OR OTHER TRANSACTIONS. In the event the
Corporation, at any time while any of the Series D Preferred Stock are
outstanding, shall be consolidated with or merged into any other corporation or
corporations or shall sell or lease all or substantially all of its property and
business as an entirety, then lawful provisions shall be made as part of the
terms of such consolidation, merger, sale or lease so that the holder of any
Series D Preferred Stock may thereafter receive in lieu of such Common Stock
otherwise issuable to him upon conversion of his Series D Preferred Stock, but
at the conversion rate which would otherwise be in effect at the time of
conversion, as hereinbefore provided, the same kind and amount of securities or
assets as may be issuable, distributable or payable upon such consolidation,
merger, sale or lease with respect to Common Stock of the Corporation.
5.7 FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares shall be issued upon conversion of Series D
Preferred Stock; rather, the number of shares issuable upon conversion shall be
rounded up to the nearest whole share.
5.8 RESERVATION OF COMMON SHARES. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
Common Stock the number of shares of Common Stock deliverable upon conversion of
all the issued and outstanding Series D Preferred Stock and shall take such
action to obtain such permits or orders as may be necessary to enable the
Corporation lawfully to issue such Common Stock upon the conversion of the
Series D Preferred Stock.
6. RIGHTS ON LIQUIDATION. In the event of the liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
resulting in any distribution of its assets to its shareholders, the holders of
the Series D Preferred Stock then issued and outstanding shall be entitled to
receive an amount equal to $10.00 per Preferred Share plus any accumulated but
unpaid dividends, and no more, before any payment or distribution of the assets
of the Corporation is made to or set apart for the holders of Common Stock. If
the assets of the Corporation distributable to the holders of Series D Preferred
Stock are insufficient for the payment to them of the full preferential amount
described above, such assets shall be distributed ratably among the holders of
the Series D Preferred Stock. The holders of the Common Stock shall be entitled
to the exclusion of the holders of the Series D Preferred Stock to share in all
remaining assets of the Corporation in accordance with their respective
interests. For purposes of this paragraph, a consolidation or merger of the
Corporation with any other corporation or corporations shall not be deemed to be
a liquidation, dissolution or winding up of the Corporation. Notwithstanding in
these Articles of Amendment to the contrary, all shares of Series D Preferred
Stock shall (i) rank pari passu with the Series E Preferred Stock of the
Corporation to be issued pursuant to that certain Securities Purchase Agreement
dated April 29, 1998 (the "Purchase Agreement"), (ii) shall rank senior to any
class or series of capital stock of the Corporation hereafter created (unless
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<PAGE> 7
otherwise agreed to by the holders of the Series D Preferred Stock), and (iii)
shall rank junior to all of the preferred stock of the Corporation issued and
outstanding as of the date of execution of the Purchase Agreement.
7. NOTICE. Any notice required to be given to the holders of
Series D Preferred Stock or any securities issued upon conversion thereof shall
be deemed to have been given upon the earlier of personal delivery or three days
after deposit in the United States mails by registered or certified mail, return
receipt requested, with postage fully prepaid, and addressed to each holder of
record at his address as it appears on the stock transfer records of the
Corporation. Any notice to the Corporation shall be in writing and shall be
deemed to have been given only upon actual receipt thereof.
8. LEGEND. All certificates representing the Series D Preferred
Stock, all shares of Common Stock issued upon conversion thereof and any and all
securities issued in replacement thereof or in exchange therefor shall bear such
legends (or not) as shall be required by law or contract.
IN WITNESS WHEREOF, AMERICAN BIOMED, INC. has caused its corporate seal
to be affixed hereto and this certificate to be signed by its President and
Secretary this 29th day of April, 1998.
AMERICAN BIOMED, INC.
[S E A L] By: /s/ STEVEN B. RASH
----------------------------------
Steven B. Rash, President
ATTEST:
/s/ COLENE BLANKINSHIP
- -------------------------------
Colene Blankinship, Secretary
-7-
<PAGE> 1
EXHIBIT 10.95
EXHIBIT B
CERTIFICATE OF DESIGNATIONS, PREFERENCES, LIMITATIONS
AND RELATIVE RIGHTS OF 1998 SERIES E CONVERTIBLE PREFERRED STOCK
OF
AMERICAN BIOMED, INC.
AMERICAN BIOMED, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that the following resolutions were adopted by the Board of
Directors of the Corporation (the "Board of Directors") pursuant to authority of
the Board of Directors as required by Section 151 of the Delaware General
Corporation Law:
RESOLVED, that, pursuant to the authority granted to and vested in the
Board of Directors, in accordance with the provisions of its Certificate of
Incorporation (as amended from time to time) of the Corporation, the Board of
Directors hereby creates out of the Corporation's previously authorized
preferred stock, $.001 par value per share, of the Corporation a series of
preferred stock to consist of not more than 500,000 shares, and the Board of
Directors hereby fixes the designation and the powers, preferences and rights,
and the qualifications, limitations or restrictions of the shares of such series
as follows:
1. DESIGNATION. This resolution shall provide for a single series
of convertible preferred stock, the designation of which shall be the 1998
Series E Convertible Preferred Stock (hereinafter the "Series E Preferred
Stock") and the number of authorized shares constituting the Series E Preferred
Stock is 500,000. The stated value of each share of Series E Preferred Stock is
ten dollars (US$10.00). The number of authorized shares of Series E Preferred
Stock may be reduced or increased by a further resolution duly adopted by the
Board of Directors of the Corporation and by the filing of an amendment to the
Corporation's Articles of Incorporation pursuant to the provisions of the
Delaware General Corporation Law stating that such reduction or increase has
been so authorized.
2. VOTING. Except as expressly required by the laws of the State
of Delaware, the holders of the Series E Preferred Stock shall have no voting
rights and shall not be entitled to notice of meetings of shareholders, and the
exclusive voting power shall be vested in the holders of the shares of the
Corporation's Common Stock, $.001 par value per share (the "Common Stock"),
and/or in any other series of the Corporation's preferred stock now or at any
time hereafter issued and outstanding having voting rights. Any corporate action
that may require a vote of the holders of the Series E Preferred Stock as a
class shall be deemed to have been approved by that class upon the affirmative
vote by the holders of a majority of the issued and outstanding Series E
Preferred Stock unless a higher voting requirement is imposed by the
-1-
<PAGE> 2
Delaware General Corporation Law. If any corporate action shall require a vote
of the holders of the Series E Preferred Stock other than as a class, the Series
E Preferred Stock shall vote as a group with the Common Stock as if the Series E
Preferred Stock had been fully converted three (3) business days prior to the
date of the vote.
3. DIVIDENDS.
3.1 RATE. Holders of Series E Preferred Stock shall be
entitled to receive, out of any funds of the Corporation legally available for
that purpose, cumulative dividends from the date of issuance at the rate of $.80
per year per Preferred Share, payable quarterly (pro-rated for partial quarters)
in arrears in cash, or, at the option of the Corporation, in shares of its
Free-Trading Common Stock (as defined herein) at the applicable Conversion Rate
(as defined in Section 5.2 below), on the first day of April, July, October and
January of each year commencing July 1, 1998 (each such date being hereinafter
individually referred to as the "Dividend Payment Date" and collectively as the
"Dividend Payment Dates"). Notwithstanding the preceding sentence, should the
Corporation in its discretion determine to pay said dividends in shares of Free
Trading Common Stock, then all accumulated and unpaid dividends shall be paid at
the time of each conversion of the Series E Preferred Stock, such that upon each
conversion of the Series E Preferred Stock by the holder thereof, the
Corporation shall pay all accumulated and unpaid dividends owed as of the date
of such conversion. Each such dividend shall be paid to the holders of record of
the Series E Preferred Stock as they appear on the books of the Corporation on
the record date, which shall be not less than 30 days prior to the related
Dividend Payment Date. Dividends on the Series E Preferred Stock shall be
declared and paid to the extent the Corporation is legally able to do so and
shall be cumulative to the extent not declared and paid. Holders of Series E
Preferred Stock shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of full dividends as herein provided on the Series
E Preferred Stock. "Free-Trading Common Stock" shall mean shares of Common Stock
that are "restricted securities" as defined in Rule 144 under the Securities Act
of 1933 (the "Securities Act"), but the resales of such shares have been
registered under a registration statement filed with respect to the Common Stock
underlying and receivable upon conversion of the Series E Preferred Stock.
3.2 DIVIDENDS ON COMMON STOCK. No dividends (other than those
payable solely in Common Stock) shall be paid with respect to the Common Stock
during any fiscal year of the Corporation unless all accumulated and unpaid
dividends and the quarterly dividend on the shares of Preferred Stock for the
then current dividend period shall have been declared and a sum sufficient for
the payment thereof set apart. No shares of Common Stock shall be purchased,
redeemed or acquired by the Corporation, and no funds shall be paid into or set
aside or made available for a sinking fund for the purchase, redemption or
acquisition thereof except (A) in transactions aggregating not more than
$100,000.00 per year, (B) in transactions resulting from a legal obligation of
the Corporation to redeem, purchase or otherwise acquire its securities arising
prior to the date hereof, or (C) pursuant to Section 5.1 herein.
4. REDEMPTION. Except as provided in Section 3.2 herein, the
Series E Preferred Stock shall not be redeemable at any time prior to September
30, 2001. Thereafter, the Corporation, on the sole authority of its Board of
Directors, may, at its option and at any time
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<PAGE> 3
prior to notice of conversion of the Series E Preferred Stock by the holder
thereof as hereinafter provided, redeem all or any part of the Series E
Preferred Stock at the time issued and outstanding for an amount in cash equal
to $11.75 per share plus any accumulated and unpaid dividends. Except as
provided in Section 3.2 herein, if less than all the Series E Preferred Stock
are to be redeemed, then such redemption shall be pro rata based on the number
of Series E Preferred Stock owned of record by each Preferred Shareholder.
Written notice of redemption stating the date and place of redemption and the
amount of the redemption price shall be mailed by the Corporation not less than
30 days nor more than 60 days prior to the redemption date to the record holders
of the shares to be redeemed directed to their last known address as shown by
the Corporation records. If notice of redemption is given as provided above and
if on the redemption date the Corporation has set apart in trust for the purpose
sufficient funds for such redemption, then from and after the redemption date,
notwithstanding that any certificate for such shares has not been surrendered
for cancellation, the Series E Preferred Stock called for redemption shall no
longer be deemed to be outstanding and all rights with respect to such shares
shall forthwith cease and terminate, except only the right of the holders
thereof to receive the redemption price without interest upon surrender of
certificates representing the shares called for redemption. Any monies remaining
in trust after one year from the redemption date shall be returned to the
Corporation and thereafter holders of certificates for such shares shall look
only to the Corporation for the redemption price thereof. Upon conversion of any
Series E Preferred Stock called for redemption into Common Stock, then the
portion of the monies held in trust for redemption of such shares shall
forthwith be returned to the Corporation.
5. CONVERSION.
5.1 PROHIBITION AGAINST SHORT SALES. No holder of Series E
Preferred Stock shall directly or indirectly effect a short sale of the
Corporation's Common Stock for the holder's own account or for the account of a
Related Person. "Short sale" shall mean any sale of a security which the seller
does not beneficially own or any sale which is consummated by the delivery of a
security borrowed by, or for the account of, the seller, in either case whether
or not the seller is the owner of Common Stock at the time of such sale.
"Related Person" shall mean (A) any member of the holder's immediate family; (B)
any entity of which the holder is an officer, director, or holder of a position
having comparable duties or responsibilities; (C) any entity in which the holder
is the owner of an equity interest; and (D) any person which would be deemed to
be an "affiliate" of the holder as that term is defined in the Securities Act of
1933 or the rules and regulations promulgated thereunder.
5.2 CONVERSION RATE. So long as a holder of Series E Preferred
Stock is not in breach of Section 5 herein and subject to Section 5.8 herein,
such holder shall have the right, exercisable at any time after issuance of the
certificate representing all or a portion of the shares of Series E Preferred
Stock to be converted, and on or before the close of business on the second full
business day preceding the date, if any, fixed for the redemption of such shares
as provided herein, to surrender the certificate or certificates evidencing such
shares and receive in lieu and in conversion thereof, and in lieu of accumulated
and unpaid dividends thereon, that number of shares of the Corporation's Common
Stock as equals $10.00 per share of Preferred Stock tendered for conversion,
plus accumulated and unpaid dividends thereon, divided by 82.5% of the average
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of the closing bid prices per share of the Corporation's Common Stock on the
Nasdaq Stock Market, any national securities exchange, the OTC Bulletin Board or
any other market on which the Common Stock is listed or eligible for trading for
the five trading days preceding the date such conversion is deemed to have been
made, as subsequently defined herein.
5.3 MECHANICS OF CONVERSION.
(a) HOLDER'S DELIVERY REQUIREMENTS. To convert
Series E Preferred Stock into full shares of Common Stock, the holder thereof
shall (A) deliver or transmit by facsimile, for receipt on or prior to 5:00
p.m., New York time (the "Conversion Notice Deadline") on the date of
conversion, a copy of the fully executed notice of conversion ("Notice of
Conversion") to the Corporation at the office of the Corporation or its
designated transfer agent (the "Transfer Agent"), and (B) surrender to a common
carrier for delivery to the office of the Corporation or the Transfer Agent, the
original certificates representing the Series E Preferred Stock being converted
(the "Preferred Stock Certificates"), duly endorsed for cancellation. The holder
of the Series E Preferred Stock shall have the right to convert fewer than the
full number of Series E Preferred Stock held at any given time.
(b) CORPORATION'S RESPONSE. Upon receipt by the
Corporation of a facsimile copy of such Notice of Conversion, the Corporation
shall send, via facsimile, a confirmation of receipt of such Notice of
Conversion to such holder, which shall specify that the Notice of Conversion has
been received and the name and telephone number of a contact person at the
Corporation whom the holder should contact regarding information related to such
conversion. Upon receipt by the Corporation or the Transfer Agent of the
Preferred Stock Certificates to be converted pursuant to a Notice of Conversion
(or an indemnification undertaking reasonably satisfactory to the Corporation
with respect to such shares in the case of their loss, theft or destruction)
together with the originally executed Notice of Conversion, the Corporation
shall, within two business days after the date of receipt (the "Deadline"),
instruct the Transfer Agent to issue and surrender to a common carrier for
either overnight or (if delivery is outside the United States) two (2) day
delivery to the address as specified in the Notice of Conversion, a certificate
for the number of shares of Common Stock to which the holder shall be entitled
as aforesaid, and the Corporation shall take all reasonable steps to ensure that
the Transfer Agent has complied with such instructions. In the case of a dispute
as to the calculation of the conversion rate, the Corporation shall promptly
issue to the holder the number of shares of Common Stock that is not disputed
and shall submit the disputed calculations to its outside accountant via
facsimile within one (1) day of receipt of such holder's Notice of Conversion.
The Corporation shall cause the accountant to perform the calculations and
notify the Corporation and the holder of the results no later than twenty-four
(24) hours from the time it receives the disputed calculations. Such
accountant's calculation shall be deemed conclusive absent manifest error.
Should the Notice of Conversion specify a smaller number of Series E Preferred
Stock to be converted than are represented by the Preferred Stock Certificate
surrendered to the Corporation, then the Corporation shall immediately issue a
new Preferred Stock Certificate representing the number of Series E Preferred
Stock not yet converted, and deliver the same to the holder thereof along with
the Common Stock as stated above.
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(c) DATE OF CONVERSION. The date on which conversion
occurs (the "Date of Conversion") shall be deemed to be the date set forth in
such Notice of Conversion, provided (A) that the advance copy of the Notice of
Conversion is faxed to the Corporation before 5:00 p.m., New York time, on the
Date of Conversion, and (B) that the original Preferred Stock Certificates
representing the Series E Preferred Stock to be converted, together with the
originally executed Notice of Conversion, are surrendered by depositing such
certificates and Notice with a common carrier, as provided above, and received
by the Transfer Agent or the Corporation on or prior to the second (2nd)
business day following the Date of Conversion. In the event the Preferred Stock
Certificates and the originally executed Notice of Conversion are not received
within three (3) business days after the date of the Notice of Conversion, the
Notice of Conversion shall be deemed null and void and no conversion of Series E
Preferred Stock shall be effected thereby. The person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated, as of three (3) business days after the Date of Conversion, for all
purposes as the record holder or holders of such shares of Common Stock on the
Date of Conversion.
(d) Notwithstanding anything contained herein to the
contrary, if any action is required herein to be taken by the Corporation or the
Transfer Agent on a day which is not a business day, then such action shall be
deemed to be timely if taken on the next following business day.
5.4 OPTIONAL CONVERSION. At the option of the
Corporation, if any Series E Preferred Stock remain outstanding on April 30,
2002, then all or any part of such Series E Preferred Stock as the Corporation
elects shall be converted in accordance with Section 5.3 as if the holders of
such Series E Preferred Stock had given the Notice of Conversion effective as of
that date, and the Date of Conversion had been fixed as of April 30, 2002 for
all purposes of Paragraph 5.3. Following notice by the Corporation to the
holders, all holders of Preferred Stock certificates shall within five (5)
business days after receipt of such notice surrender all Preferred Stock
certificates, duly endorsed for cancellation, to the Corporation or the Transfer
Agent, as the Corporation may direct. No person shall thereafter have any rights
in respect of Series E Preferred Stock, except the right to receive shares of
Common Stock on conversion thereof as provided in this Section 5.
5.5 ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE OR
SUBSTITUTION. If the Common Stock issuable upon the conversion of Series E
Preferred Stock shall be changed into the same or a different number of shares
of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a reorganization, merger,
consolidation or sale of assets provided for below), then and in each such
event, the holder of each Preferred Share shall have the right thereafter to
convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification or
other change by holders of the number of shares of Common Stock into which such
Series E Preferred Stock might have been converted immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein.
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5.6 MERGER OR OTHER TRANSACTIONS. In the event the
Corporation, at any time while any of the Series E Preferred Stock are
outstanding, shall be consolidated with or merged into any other corporation or
corporations or shall sell or lease all or substantially all of its property and
business as an entirety, then lawful provisions shall be made as part of the
terms of such consolidation, merger, sale or lease so that the holder of any
Series E Preferred Stock may thereafter receive in lieu of such Common Stock
otherwise issuable to him upon conversion of his Series E Preferred Stock, but
at the conversion rate which would otherwise be in effect at the time of
conversion, as hereinbefore provided, the same kind and amount of securities or
assets as may be issuable, distributable or payable upon such consolidation,
merger, sale or lease with respect to Common Stock of the Corporation.
5.7 FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares shall be issued upon conversion of Series E
Preferred Stock; rather, the number of shares issuable upon conversion shall be
rounded up to the nearest whole share.
5.8 RESERVATION OF COMMON SHARES. The Corporation shall at all
times reserve and keep available out of its authorized but unissued Common Stock
the number of shares of Common Stock deliverable upon conversion of all the
issued and outstanding Series E Preferred Stock and shall take such action to
obtain such permits or orders as may be necessary to enable the Corporation
lawfully to issue such Common Stock upon the conversion of the Series E
Preferred Stock.
6. RIGHTS ON LIQUIDATION. In the event of the liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
resulting in any distribution of its assets to its shareholders, the holders of
the Series E Preferred Stock then issued and outstanding shall be entitled to
receive an amount equal to $10.00 per Preferred Share plus any accumulated but
unpaid dividends, and no more, before any payment or distribution of the assets
of the Corporation is made to or set apart for the holders of Common Stock. If
the assets of the Corporation distributable to the holders of Series E Preferred
Stock are insufficient for the payment to them of the full preferential amount
described above, such assets shall be distributed ratably among the holders of
the Series E Preferred Stock. The holders of the Common Stock shall be entitled
to the exclusion of the holders of the Series E Preferred Stock to share in all
remaining assets of the Corporation in accordance with their respective
interests. For purposes of this paragraph, a consolidation or merger of the
Corporation with any other corporation or corporations shall not be deemed to be
a liquidation, dissolution or winding up of the Corporation. Notwithstanding in
these Articles of Amendment to the contrary, all shares of Series E Preferred
Stock shall (i) rank pari passu with the Series D Preferred Stock of the
Corporation to be issued pursuant to that certain Securities Purchase Agreement
dated April 29, 1998 (the "Purchase Agreement"), (ii) shall rank senior to any
class or series of capital stock of the Corporation hereafter created (unless
otherwise agreed to by the holders of the Series E Preferred Stock), and (iii)
shall rank junior to all of the preferred stock of the Corporation issued and
outstanding as of the date of execution of the Purchase Agreement.
7. NOTICE. Any notice required to be given to the holders of
Series E Preferred Stock or any securities issued upon conversion thereof shall
be deemed to have been given upon the
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earlier of personal delivery or three days after deposit in the United States
mails by registered or certified mail, return receipt requested, with postage
fully prepaid, and addressed to each holder of record at his address as it
appears on the stock transfer records of the Corporation. Any notice to the
Corporation shall be in writing and shall be deemed to have been given only upon
actual receipt thereof.
8. LEGEND. All certificates representing the Series E Preferred
Stock, all shares of Common Stock issued upon conversion thereof and any and all
securities issued in replacement thereof or in exchange therefor shall bear such
legends (or not) as shall be required by law or contract.
IN WITNESS WHEREOF, AMERICAN BIOMED, INC. has caused its corporate seal
to be affixed hereto and this certificate to be signed by its President and
Secretary this 29th day of April, 1998.
AMERICAN BIOMED, INC.
[S E A L] By: /s/ STEVEN B. RASH
-----------------------------------
Steven B. Rash, President
ATTEST:
/s/ COLENE BLANKINSHIP
- -------------------------------
Colene Blankinship, Secretary
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<PAGE> 1
EXHIBIT 10.96
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
April 29, 1998, by and between American Biomed, Inc., a corporation organized
under the laws of the State of Delaware, U.S.A., with headquarters located at
10077 Grogan's Mill Road, Suite 100, The Woodlands, Texas 77380 (the "Company"),
and the buyer set forth on the execution page hereof (the "Buyer").
RECITALS
A. In connection with the Securities Purchase Agreement by and between
the parties of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyer (i) a number of
shares of the Company's Series D Convertible Preferred Stock of American Biomed,
Inc. (the "Series D Shares"); (ii) a number of shares of the Company's Series E
Convertible Preferred Stock of American Biomed, Inc. (the "Series E Shares") and
(iii) a number of warrants (each a "Warrant" and collectively the "Warrants") to
purchase a number of shares of the Company's common stock, $.001 par value per
share ("Common Stock"). The Series D Shares and the Series E Shares
(collectively, the "Preferred Shares") are each convertible in accordance with
the terms of the Articles of Amendment (as defined in the Securities Purchase
Agreement) into Common Stock. The Common Stock into which the Preferred Shares
are convertible may be referred to herein as the "Conversion Shares." In
accordance with the terms of the Articles of Amendment, shares of Common Stock
may be issued in payment of dividends on the Preferred Shares ("Dividend
Shares").
B. The Buyer has agreed to purchase and pay for the Series D Shares,
the Series E Shares and the Warrants as provided in the Securities Purchase
Agreement. Upon each Closing (as defined in the Securities Purchase Agreement),
the Company will issue its certificate representing the Preferred Shares, along
with the Warrants, purchased at such Closing by the Buyer.
C. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
AGREEMENTS
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by all parties hereto,
the Company and the Buyer hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
<PAGE> 2
i. "Investor" or "Investors" means the Buyer and any permitted
transferee(s) or assignee(s) thereof to whom the Buyer assigns this Agreement
and who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
ii. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
iii. "Registrable Securities" means the Conversion Shares, the Warrant
Shares and the Dividend Shares (if any), underlying the certificate representing
the Series D Shares and the Series E Shares and any shares of capital stock
issued or issuable, from time to time (with any adjustments) on or in exchange
for or otherwise with respect to either of the foregoing (including without
limitation any shares issued pursuant to Section 2(b) hereinafter).
iv. "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. (i) The Company shall use its best efforts
to prepare, and, on or before the date that is ten (10) business days after the
date of the First Closing, file with the SEC a Registration Statement or
Registration Statements (as necessary) on Form S-3 (or, if such form is
unavailable for such a registration, on such other form as is available for such
a registration of all of the Registrable Securities) (any of which may contain a
combined prospectus with other registrations by the Company), covering the
resale of all of the Registrable Securities, which Registration Statement(s), to
the extent allowable under the 1933 Act and the rules promulgated thereunder
(including without limitation Rule 416), shall state that such Registration
Statement(s) also covers such indeterminate number of additional shares (the
"Indeterminate Shares") of Common Stock as may become issuable upon conversion
of the Preferred Shares to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
(ii) To the extent the Indeterminate Shares for any reason can not be
registered under the Registration Statement(s) required under Section 2(a)(i)
above, then with respect to such Indeterminate Shares, the Company shall use its
best efforts to prepare, and, on or before the date that is fifteen (15) days
after the Indeterminate Shares become issuable, file with the SEC a Registration
Statement or Registration Statements (as necessary) on Form S-3 (or, if such
form is unavailable for such a registration, on such other form as is available
for such a registration of all of the Indeterminate Shares) (any of which may
contain a combined prospectus with other registrations by the Company), covering
the resale of all of the Indeterminate Shares.
A copy of the Registration Statement(s) (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to (and subject to the approval of the Buyer, which approval
shall not be unreasonably withheld or denied) the Buyer and its counsel prior to
its filing or other submission.
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b. Liquidated Damages. The Company shall use its best efforts to obtain
effectiveness of the Registration Statement as soon as practicable. If (i) the
Registration Statement(s) covering the Registrable Securities required to be
filed by the Company pursuant to Section 2(a) hereof is not declared effective
by the SEC within one hundred twenty (120) days after the date of the First
Closing (other than by reason of any act or failure to act in a timely manner by
the Investor or its counsel) (the "Registration Deadline") or if, after the
Registration Statement has been declared effective by the SEC, sales cannot be
made pursuant to the Registration Statement (by reason of a suspension, a stop
order, the Company's failure to update the Registration Statement, or any other
reason outside the control of the Investor), or (ii) the Common Stock is not
listed or included for quotation on either the OTC Bulletin Board Market or the
National Association of Securities Dealers Automated Quotation system Small Cap
Market ("NASDAQ Small Cap"), or another United States national exchange; then in
either case (in either case, a "Delay") the Company will make payments to the
Investors, as liquidated damages and in such amounts and at such times as shall
be determined pursuant to this Section 2(b) as relief and as the sole remedy for
the damages to the Investor by reason of any such delay in or reduction of its
ability to sell the Registrable Securities (which remedy shall be exclusive of
any other remedies available at law or in equity), an amount to be determined as
follows. The Company shall pay to the Investor an amount equal to the purchase
price for the Series D Shares purchased at the First Closing (including, without
limitation, any Preferred Shares that have been converted into Conversion Shares
then held by such Investors) (the "Aggregate Share Price") multiplied by: one
and one-half hundredths (.015) times the sum of: (i) the number of months
(prorated for partial months) beginning the day after the Registration Deadline
and ending on the date the Registration Statement is declared effective by the
SEC, provided, however, that there shall be excluded from such period any delays
which are solely attributable to changes required by the Investor in the
Registration Statement with respect to information relating to the Investor,
including, without limitation, changes to the plan of distribution, or to the
failure of the Investor to conduct its review of the registration statement
pursuant to Section 2(a) above in a reasonably prompt manner; (ii) the number of
months (prorated for partial months) that sales cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective; and (iii) the number of months (prorated for partial months) that the
Common Stock is not listed or included for quotation on the OTC Bulletin Board
Market, the NASDAQ Small Cap or another United States national exchange after
the Registration Statement has been declared effective.
For example, if the Registration Statement becomes effective two months
after the end of the Registration Deadline, the Company would pay US$3,750 for
each month for each US$250,000 of Aggregate Share Price until the Registration
Statement becomes effective.
Such amounts shall be paid in cash or, at the Investor's option such
amounts may be convertible into Common Stock at the "Conversion Price" for the
Series D Shares, as defined in the Series D Articles. Any shares of Common Stock
issued upon conversion of such amounts shall be Registrable Securities. If the
Investor desires to convert the amounts due hereunder into Registrable
Securities it shall so notify the Company in writing within two (2) business
days of the date on which such amounts are first payable in cash and such
amounts shall be so convertible (pursuant to the mechanics set forth in the
Articles of Amendment), beginning on the last day upon which the cash amount
would otherwise be due in accordance with the following sentence. Payments of
cash pursuant hereto shall be made within five (5) days after the end of each
period that gives rise to such
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obligation, provided that, if any such period extends for more than thirty (30)
days, interim payments shall be made for the full amount owed up to the date of
such interim payment at the end of each thirty (30) day period. At any time
after one (1) year from the date of the First Closing, upon delivery by legal
counsel for the Company to the Buyer and the Company's transfer agent a legal
opinion to the effect that the Conversion Shares may be sold without restriction
pursuant to Rule 144, and so long as the Company permits the conversion of the
Preferred Shares into Common Stock in accordance with the terms of the
Securities Purchase Agreement and the Series D Articles, liquidated damages as
called for in this paragraph shall cease and the Investor may rely upon Rule 144
for conversion of the Series D Preferred into Common Stock and subsequent sales
thereof.
c. Piggy-Back Registrations. If at any time prior to the expiration of
the Registration Period (as hereinafter defined) the Company shall file with the
SEC a Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee
benefit plans) the Company shall send to the Investor written notice of such
determination and, if within twenty (20) days after receipt of such notice, such
Investor shall so request in writing, the Company, to the extent permitted by
law, shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' reasonable good faith judgment,
marketing or other factors dictate such limitation is necessary to facilitate
public distribution, then only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion hereunder
will be included in the Registration Statement; provided that no portion of the
equity securities which the Company is offering for its own account shall be
excluded; provided, further that the Company shall be entitled to exclude
Registrable Securities to the extent necessary to avoid breaching obligations
existing prior to the date hereof to other stockholders of the Company.
Any exclusion of Registrable Securities shall be made pro rata among
the Investors seeking to include Registrable Securities, in proportion to the
number of Registrable Securities sought to be included by such Investors;
provided, however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of
which are not entitled to inclusion of such securities in such Registration
Statement or are not entitled to pro rata inclusion with the Registrable
Securities; and provided, further, however, that, after giving effect to the
immediately preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights or whose registration rights existed prior
to the date hereof. No right of the Investor to registration of Registrable
Securities under this Section 2(c) shall be construed to limit any registration
required under Section 2(a) hereof. If an offering in connection with which an
Investor is entitled to registration under this Section 2(c) is an underwritten
offering, then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering.
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d. Eligibility for Form S-3. The Company represents and warrants that
it meets the requirements for the use of Form S-3 for registration of the sale
by the Buyer of the Registrable Securities and the Company shall file all
reports required to be filed by the Company with the SEC in a timely manner so
as to maintain such eligibility for the use of Form S-3. In the event that Form
S-3 is not available for registration of the Registrable Securities, the Company
shall register the securities on another appropriate form.
3. RELATED OBLIGATIONS. In connection with the registration of the
Registrable Securities, the Company shall have the following obligations:
a. The Company shall use its best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing, but in no event later than the Registration
Deadline, and keep the Registration Statement(s) effective pursuant to Rule 415
at all times until the earlier of (i) the date on which all of the Registrable
Securities have been sold (and no further Registrable Securities may be issued
in the future), (ii) the date as of which the Investors may immediately sell all
of the Registrable Securities without restriction pursuant to Rule 144
promulgated under the 1933 Act (or successor thereto) or otherwise, or (iii) the
date on which none of the Preferred Shares or Warrant Shares is outstanding (the
"Registration Period"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement. In the event
the number of shares available under a Registration Statement filed pursuant to
this Agreement is insufficient to cover all of the Registrable Securities issued
or issuable upon conversion of the Preferred Shares, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in any event
within fifteen (15) days after the need therefor arises (based on the market
price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) promptly after the same
is prepared and publicly distributed, filed with the SEC, or received by the
Company, (i) one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto in each case relating to such Registration Statement (other than any
portion thereof which contains information for which the Company has sought
confidential treatment) and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement; and (ii)
such number of copies of a prospectus, including a preliminary prospectus, and
all amendments and supplements thereto and such other documents as such Investor
may reasonably
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request in order to facilitate the disposition of the Registrable Securities
owned (or to be owned) by such Investor.
d. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statement(s) under such
other securities or "blue sky" laws of such jurisdictions in the United States
as each Investor who holds (or has the right to hold) Registrable Securities
being offered reasonably requests, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause more than nominal expense
or burden to the Company, or (e) make any change in its charter or bylaws, which
in each case the Board of Directors of the Company determines to be contrary to
the best interests of the Company and its stockholders.
e. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
f. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
g. [Intentionally omitted.]
h. At the request of the Investor, but no more than three (3) times in
any one ninety (90) day period, the Company shall furnish, on the date of
effectiveness of the Registration Statement and thereafter from time to time on
such dates as the Investor may reasonably request an opinion, dated as of such
requested date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the Company's transfer agent
and/or to the Investors. Such opinion shall be substantially as set forth in
Exhibit I attached hereto.
i. The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to a Registration
Statement, (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Investors, and (iv) one firm of
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<PAGE> 7
attorneys retained by all such underwriters (collectively, the "Inspectors") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
deemed necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance reasonably satisfactory to the
Company) with the Company with respect thereto, substantially in the form of
this Section 3(i). Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.
j. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
k. The Company shall cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable
Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, the
Investors may reasonably request and registered in such names as the Investors
may request. Not later than the date on which any Registration Statement
registering the resale of Registrable Securities is declared effective, the
Company shall deliver (at its expense) to its transfer agent instructions,
accompanied by any required opinion of counsel, that permit sales of unlegended
securities in a timely fashion that complies with then mandated securities
settlement procedures for regular way market transactions.
l. Upon the First Closing and upon each Additional Closing, the Company
shall promptly secure the listing of the Registrable Securities then underlying
the Preferred Shares and
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<PAGE> 8
the Warrants purchased by the Buyer (or, if at such time the Common Stock trades
on the OTC Bulletin Board Market, make such Registrable Securities eligible to
trade) upon each national securities exchange or automated quotation system, if
any, upon which shares of Common Stock are then listed or eligible to trade
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed or eligible to trade, such
listing or eligibility of shares of Registrable Securities from time to time
issued under the terms of this Agreement and the Registration Rights Agreement.
As applicable, the Company shall at all times comply in all respects with the
Company's reporting, filing and other obligations under the by-laws or rules of
the OTC Bulletin Board Market, National Association of Securities Dealers and if
applicable the NASDAQ SmallCap Market (and such other national exchange on which
the Common Stock may be listed or elibible to trade, as applicable).
m The Company shall provide a transfer agent and registrar, which may
be a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement.
n. The Company shall comply with all applicable laws relating to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the 1933 Act and the Securities Exchange Act of
1934, as amended, and all the rules and regulations promulgated by the SEC).
o. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
4. OTHER OBLIGATIONS. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
a. At least fifteen (15) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each Investor of
the information the Company requires from each such Investor if such Investor
elects to have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement(s) hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a majority of the Registrable
Securities being registered determine to engage the services of an underwriter,
each Investor agrees to enter into and perform such Investor's obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in
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<PAGE> 9
order to expedite or facilitate the disposition of the Registrable Securities,
unless such Investor notifies the Company in writing of such Investor's election
to exclude all of such Investor's Registrable Securities from the Registration
Statement(s).
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(e) or
3(f), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement(s) covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(e) or 3(f) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses incurred by the Company
pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION. The Company agrees to pay all reasonable
expenses, other than underwriting discounts and commissions, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company. If Investors who hold a majority of Registrable
Securities undertake to resell the Registrable Securities in an underwritten
public offering, the Company will reasonably cooperate as is customarily
required in an underwritten public offering. The Investors who participate in
such a public offering shall pay all expenses incurred in connection with such
registration, whether incurred by them or the Company, including without
limitation, underwriting discounts and commissions, all registration, listing
and qualification fees, printing charges, and fees and disbursements of
accountants and counsel for the Company.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend each Investor who holds such Registrable Securities, the
directors, officers and each person who controls any Investor within the meaning
of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), if any, and any underwriter (as defined in the 1933 Act) for the
Investors, and the directors and the officers of, and each person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, together with actions,
proceedings or inquiries by any regulatory or self regulatory organization,
whether commenced or threatened, in respect thereof, "Claims") to which any of
them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact in
a Registration Statement or the omission or alleged omission to state a material
fact therein required to be stated or necessary to make the statements therein
not misleading, (ii) any
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<PAGE> 10
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(d) with respect to the number of legal
counsel, the Company shall reimburse the Investors and each such underwriter or
controlling person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other expenses reasonably incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) with respect to any preliminary
prospectus, shall not inure to the benefit of any such person from whom the
person asserting any such Claim purchased the Registrable Securities that are
the subject thereof (or to the benefit of any person controlling such person) if
the untrue statement or omission of the material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (iii) shall not be available to the extent such
Claim is based on a failure of the Investor to deliver or to cause to be
delivered the prospectus made available by the Company or the failure of the
Investor to comply with federal or state law relating to the offering or sale of
the Registrable Securities; and (iv) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to indemnify, hold harmless and
defend, to the same extent and in the same manner as is set forth in Section
6(a), the Company, each of its directors, each of its officers who signs the
Registration Statement, each person, if any, who controls the Company within the
meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement or to the extent such Claim is based upon any violation or alleged
violation by the Investor of the 1933 Act, 1934 Act or any other law; and such
Investor will reimburse any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Claim;
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<PAGE> 11
provided, however, that the indemnity agreement contained in this Section 6(b)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent shall
not be unreasonably withheld; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that amount of a Claim as does
not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates; provided, that the
Company shall have the right to approve the selection of counsel and legal fees
and expenses of such firm shall be reasonable. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6, (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the
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<PAGE> 12
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any seller of Registrable Securities who was not guilty of fraudulent
misrepresentation, and (iii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit the investors
to sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investor to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assignable by the Investors to any transferee of all or any
portion of Registrable Securities if: (i) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws,
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein, (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement, (vi) such transferee shall submit evidence
reasonably satisfactory to the Company that the Transferee is an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated under
the 1933 Act; and (vii) in the event the assignment occurs subsequent to the
date of effectiveness of the Registration Statement required to be filed
pursuant to Section 2(a), the transferee agrees to pay all reasonable expenses
of amending or supplementing such Registration Statement to reflect such
assignment. Notwithstanding anything herein to the contrary, no assignment of
the rights represented by this Agreement shall be effective unless in compliance
with any applicable securities laws of any applicable jurisdiction.
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10. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a majority of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier or facsimile, in each case properly addressed to the
party to receive such notice. The addresses for such communications shall be:
If to the Company: American Biomed, Inc.
10077 Grogan's Mill Road, Suite 100
The Woodlands, Texas 77380
Telephone: 281.367.3895
Facsimile: 281.367.3212
Attention: Mr. Steven B. Rash, President & CFO
If to the Buyer, at the address on the signature page of the Securities
Purchase Agreement. Each party shall provide written notice to the other party
of any change in address.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in accordance
with the laws of the state of Delaware without regard to the principles of
conflict of laws. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. The Company irrevocably consents to the
jurisdiction of the state and federal courts of the state of Delaware in any
suit or proceeding arising out of or based on this Agreement and irrevocably
agrees that all claims in respect of such suit or proceeding may be determined
in such courts. The Company irrevocably waives the defense of inconvenient forum
to the maintenance of such suit or proceeding. Service of process in any civil
action relating to or arising out of this Agreement (including also all Exhibits
or Addenda hereto) or the transaction(s) contemplated herein may be accomplished
in any manner provided by law.
e. This Agreement, the Escrow Agreement, the Articles of Amendment,
the Warrants, and the Securities Purchase Agreement (including all exhibits and
addenda thereto) constitute the
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<PAGE> 14
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the other agreements previously identified supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of the
signature page of this Agreement bearing the signature of the party so
delivering this Agreement to the Escrow Agent, with the original executed
Agreement to be delivered to the Escrow Agent via overnight delivery.
i. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
[SIGNATURE PAGE FOLLOWS]
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[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT DATED
APRIL 29, 1998]
COMPANY:
AMERICAN BIOMED, INC.
By: /s/ STEVEN B. RASH
----------------------------------------
Mr. Steven B.Rash, President and CEO
Attest: /s/ COLENE BALNKINSHIP
------------------------------
Colene Blankinship, Secretary
BUYER:
THE AUGUSTINE FUND, L.P.
By: Augustine Capital Management, Inc.,
a General Partner
By: /s/ THOMAS F. DUSZYNSKI
----------------------------------------
Thomas F. Duszynski, Vice President
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EXHIBIT I TO REGISTRATION RIGHTS AGREEMENT
[DATE]
[NAME AND ADDRESS OF BUYER]
[NAME AND ADDRESS OF COMPANY'S TRANSFER AGENT]
Re: Registration of Certain Securities of American Biomed, Inc.
Ladies and Gentlemen:
We are counsel to American Biomed, Inc., a Delaware Corporation (the
"Company"), whose stock is eligible for trading on the OTC Bulletin Board Market
utilizing the symbol "ABMI." We understand that [NAME OF BUYER] (the "Holder")
has purchased from the Company (a) a number of shares of the Company's Series D
Convertible Preferred Stock of American Biomed, Inc. (the "Series D Shares"),
(b) a number of shares of the Company's Series E Convertible Preferred Stock of
American Biomed, Inc. (the "Series E Shares"), and (c) a number of warrants (the
"Warrants") to purchase common stock of the Company, $.01 par value per share
("Common Stock"). The Series D Shares and the Series E Shares (collectively, the
"Preferred Shares") are each convertible in accordance with the terms of the
Articles of Amendment (as defined in the Securities Purchase Agreement, as
defined below) into Common Stock. The Warrants are exercisable into Common
Stock. The Series D Shares, Series E Shares and the Warrants were purchased
pursuant to a Securities Purchase Agreement between the Company and the Holder
dated as of April 29, 1998 (including all Exhibits and Addenda thereto, the
"Securities Purchase Agreement").
Pursuant to a Registration Rights Agreement between the Company and the
Holder dated as of April 29, 1998, the Company agreed with the Holder, among
other things, to register the Common Stock into which the Series D Shares and
the Series E Shares (and, as applicable, Common Stock issued (i) in payment of
dividends on the Preferred Shares and/or (ii) in payment of certain penalties
for late or non-registration of the said Common Stock) are convertible and the
Common Stock into which the Warrants are exercisable (collectively, the
"Registrable Securities") under the Securities Act of 1933, as amended (the
"1933 Act"), upon the terms provided in the Registration Rights Agreement. In
connection with the Company's obligations under the Registration Rights
Agreement, the Company filed a registration statement on Form S-3, No.
333-_________, on [DATE S-3 WAS FILED] (the "Registration Statement") with the
United States Securities and Exchange Commission relating to the Registrable
Securities, which names the Holder as a selling stockholder thereunder.
[OTHER INTRODUCTORY AND SCOPE OF EXAMINATION LANGUAGE TO BE INSERTED,
AS IS USUAL AND CUSTOMARY FOR SUCH OPINION LETTERS.]
Based upon the foregoing, we are of the opinion that the Registrable
Securities have been registered under the 1933 Act.
Very truly yours,
------------------------------------
16
<PAGE> 1
EXHIBIT 10.97
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
AMERICAN BIOMED, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.1 Number of Shares: 60,000
Date of Issuance: April 29, 1998
American Biomed, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, The Augustine Fund, L.P., and permitted
assigns, the registered holder hereof ("Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time after the date hereof, but not after 5:00 P.M. New York
time on the Expiration Date (as defined herein) Sixty Thousand (60,000) fully
paid and nonassessable shares of Common Stock (as defined herein) of the Company
(each a "Warrant Share" and collectively the "Warrant Shares") at a purchase
price of U.S.$.85 per share (the "Exercise Price") in lawful money of the United
States. The number of Warrant Shares purchasable hereunder and the Exercise
Price are subject to adjustment as provided in Section 9 below.
Section 1.
(a) Definitions. The following words and terms used in this Warrant shall
have the following meanings:
"Common Stock" means (a) the Company's common stock and (b) any capital
stock into which such Common Stock shall have been changed or any capital stock
resulting from a reclassification of such Common Stock.
"Convertible Securities" mean any securities issued by the Company which
are convertible into or exchangeable for, directly or indirectly, shares of
Common Stock.
<PAGE> 2
"Expiration Date" means the date which is three (3) years from the date
of this Warrant or, if such date falls on a Saturday, Sunday or other day on
which banks are required or authorized to be closed in the City of New York or
the State of New York (a "Holiday"), the next preceding date that is not a
Holiday.
"Market Price" means the closing bid price on the day prior to the date
on which the Exercise Form is delivered to the Company, as quoted on the
National Association of Securities Dealers' OTC Bulletin Board Market.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement between the holder hereof (or its predecessor in interest) and the
Company for the purchase of this Warrant and the other Securities (as defined in
the Securities Purchase Agreement).
"Transfer" shall include any disposition of this Warrant or any Warrant
Shares, or of any interest in either thereof which would constitute a sale
thereof within the meaning of the Securities Act of 1933, as amended, or
applicable state securities laws.
"Warrant" shall mean this Warrant and all Warrants issued in exchange,
transfer or replacement of any thereof.
"Warrant Exercise Price" shall be U.S.$.85 per share.
(b) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references herein (A) to
the Company shall be deemed to include the Company's successors; and (B) to any
applicable law defined or referred to herein, shall be deemed references to such
applicable law as the same may have been or may be amended or supplemented from
time to time.
(ii) When used in this Warrant, unless the otherwise specified in a
particular instance, the words "herein," "hereof," and "hereunder," and words of
similar import, shall refer to this Warrant as a whole and not to any provision
of this Warrant, and the words "Section," "Schedule," and "Exhibit" shall refer
to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise
specified.
(iii) Whenever the context so requires the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the Holder, as a whole or in part, at any time prior to 5:00 P.M.
New York Time on the Expiration Date. The rights represented by this Warrant may
be exercised by the Holder, as a whole or from time to time in part (except that
this Warrant shall not be exercisable as to a fractional share) by (i) delivery
of a written notice, in the form of the exercise form attached as Exhibit I
hereto (an "Exercise Form"), of the
2
<PAGE> 3
Holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) payment to the Company of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares as to which the Warrant is being exercised (plus any applicable issue or
transfer taxes) in immediately available funds (either by wire transfer or a
certified or cashier's check drawn on a United States bank), for the number of
Warrant Shares as to which this Warrant shall have been exercised, and (iii) the
surrender of this Warrant, properly endorsed, at the principal office of the
Company (or at such other agency or office of the Company as the Company may
designate by notice to the Holder).
In addition, and notwithstanding anything to the contrary contained in
this Warrant, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company in a cashless exercise, including a written
calculation of the number of Warrant Shares to be issued upon such exercise in
accordance with the terms hereof (a "Cashless Exercise"). In the event of a
Cashless Exercise, in lieu of paying the Exercise Price, the Holder shall
surrender this Warrant for, and the Company shall issue in respect thereof, the
number of Warrant Shares determined by multiplying the number of Warrant Shares
to which the Holder would otherwise be entitled by a fraction, the numerator of
which shall be the difference between the then current Market Price per share of
the Common Stock and the Exercise Price, and the denominator of which shall be
the then current Market Price per share of Common Stock.
The Warrant Shares so purchased shall be deemed to be issued to the
Holder or Holder's designees, as the record owner of such Warrant Shares, as of
the date on which this Warrant shall have been surrendered, the completed
Exercise Agreement shall have been delivered, and payment (or notice of an
election to effect a Cashless Exercise) shall have been made for such Warrant
Shares as set forth above.
In the event of any exercise of the rights represented by this Warrant
in compliance with this Section 2(a), a certificate or certificates for the
Warrant Shares so purchased, registered in the name of, or as directed by, the
Holder, shall be delivered to, or as directed by, the Holder within three (3)
business days after such rights shall have been so exercised.
(b) Unless this Warrant shall have expired or shall have been fully
exercised, the Company shall issue a new Warrant identical in all respects to
the Warrant exercised except (i) it shall represent rights to purchase the
number of Warrant Shares purchasable immediately prior to such exercise under
the Warrant exercised, less the number of Warrant Shares with respect to which
such Warrant is exercised, and (ii) the holder thereof shall be deemed to have
become the holder of record of such Warrant Shares immediately prior to the
close of business on the date on which the Warrant is surrendered and payment of
the amount due in respect of such exercise and any applicable taxes is made,
irrespective of the date of delivery of such share certificate, except that, if
the date of such surrender and payment is a date when the stock transfer books
of the Company are properly closed, such person shall be deemed to have become
the holder of such Warrant Shares at the opening of business on the next
succeeding date on which the stock transfer books are open.
(c) In the case of any dispute with respect to an exercise, the Company
shall promptly issue such number of Warrant Shares as are not disputed in
accordance with this Section. If such dispute only involves the number of
Warrant Shares receivable by the Holder under a Cashless Exercise, the
3
<PAGE> 4
Company shall submit the disputed calculations to an independent accounting firm
of national standing via facsimile within two (2) business days of receipt of
the Exercise Form. The accountant shall audit the calculations and notify the
Company and the Holder of the results no later than two (2) business days from
the date it receives the disputed calculations. The accountant's calculation
shall be deemed conclusive absent manifest error. The Company shall then issue
the appropriate number of shares of Common Stock in accordance with this
Section.
Section 3. Covenants as to Common Stock. The Company covenants and agrees
that all Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable. The Company further covenants and agrees that during the
period within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock to provide for the exercise of the rights then
represented by this Warrant and that the par value of said shares will at all
times be less than or equal to the applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to pay any tax or
taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. No holder, as such,
of this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant. Notwithstanding the foregoing, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section 6. No Limitation on Corporate Action. No provisions of this
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Certificate of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this Warrant, by the
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment and not with a view to, or for sale in
connection with, any distribution hereof or of any of the shares of Common Stock
or other securities issuable upon the exercise thereof, and not with any present
intention of distributing any of the same. Upon exercise of this Warrant, the
holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the Warrant Shares so purchased are being
acquired solely for the holder's own account and not as a nominee for any other
party, for investment, and not with a view toward distribution or resale. If
such holder cannot make
4
<PAGE> 5
such representations because they would be factually incorrect, it shall be a
condition to such holder's exercise of the Warrant that the Company receive such
other representations as the Company considers reasonably necessary to assure
the Company that the issuance of its securities upon exercise of the Warrant
shall not violate any United States or state securities laws.
Section 8. Transfer; Opinions of Counsel; Restrictive Legends.
(a) The holder of this Warrant understands that (i) this Warrant and the
Warrant Shares have not been and are not being registered under the Securities
Act or any state securities laws (other than as described in the Securities
Purchase Agreement and the Registration Rights Agreement), and may not be
offered for sale, sold, assigned or transferred unless (a) subsequently
registered thereunder, or (b) pursuant to an exemption from such registration;
(ii) any sale of such securities made in reliance on Rule 144 promulgated under
the Securities Act may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the Securities and Exchange Commission
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities (other than as described in the
Securities Purchase Agreement and the Registration Rights Agreement) under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
Section 9. Adjustments.
(a) Reclassification and Reorganization. In case of any reclassification,
capital reorganization or other change of outstanding shares of the Common
Stock, or in case of any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock),
the Company shall cause effective provision to be made so that the Holder shall
have the right thereafter, by exercising this Warrant, to purchase the kind and
number of shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that
could have been purchased upon exercise of the Warrant immediately prior to such
reclassification, capital reorganization or other change, consolidation or
merger. Any such provision shall include provision for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 9. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and other changes of outstanding
shares of Common Stock and to successive consolidations or mergers. If the
consideration received by the holders of Common Stock is other than cash, the
value shall be as determined by the Board of Directors of the Company acting in
good faith.
(b) Dividends and Stock Splits. If and whenever the Company shall effect
a stock dividend, a stock split, a stock combination, or a reverse stock split
of the Common Stock, the number of Warrant Shares purchasable hereunder and the
Warrant Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith. The number
of shares,
5
<PAGE> 6
as so adjusted, shall be rounded down to the nearest whole number and the
Warrant Exercise Price shall be rounded to the nearest cent.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant
is lost, stolen or destroyed, the Company shall, on receipt of an
indemnification undertaking reasonably satisfactory to the Company, issue a new
Warrant of like denomination and tenor as the Warrant so lost, stolen or
destroyed. In the event the holder hereof asserts such loss, theft or
destruction of this Warrant, the Company may require such holder to post a bond
issued by a surety reasonably satisfactory to the Company with respect to the
issuance of such new Warrant.
Section 11. Notice. Any notices required or permitted to be given under
the terms of this Warrant shall be sent by mail or delivered personally or by
courier and shall be effective five days after being placed in the mail, if
mailed, certified or registered, return receipt requested, or upon receipt, if
delivered personally or by courier or by facsimile, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be:
If to the Company: American Biomed, Inc.
10077 Grogan's Mill Road, Suite 100
The Woodlands, Texas 77380
Telephone: 281.367.3895
Facsimile: 281.367.3212
Attention: Mr. Steven B. Rash, President & CEO
If to Holder, to it at the address set forth below Holder's signature on the
signature page of the Securities Purchase Agreement (Holder is defined therein
as the "Buyer"). Each party shall provide notice to the other party of any
change in address.
Section 12. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the laws
of the State of Delaware. Headings are for convenience only and shall not affect
the meaning or construction of any of the provisions hereof. This Warrant shall
be binding upon the Company and its successors and assigns and shall inure to
the benefit of the Holder and its successors and assigns. The Holder may not
assign this Warrant except in accordance with applicable federal and state
securities laws. The Holder shall immediately notify the Company with respect to
any permitted assignment of this Warrant.
Section 13. Date. The date of this Warrant is April 29, 1998. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
[SIGNATURE PAGE FOLLOWS]
6
<PAGE> 7
[SIGNATURE PAGE TO WARRANT #1 DATED APRIL 29, 1998]
AMERICAN BIOMED, INC.
By: /s/ STEVEN B. RASH
-------------------------------------------
Mr. Steven B. Rash, President & CEO
7
<PAGE> 8
EXHIBIT I TO WARRANT
EXERCISE FORM TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
AMERICAN BIOMED, INC.
The undersigned hereby exercises the right to purchase the number of
Warrant Shares covered by the Warrant attached hereto as specified below
according to the conditions thereof and herewith makes payment of U.S.
$______________ (unless effected by a Cashless Exercise in accordance with the
terms of the Warrant), the aggregate Warrant Exercise Price of such Warrant
Shares in full pursuant to the terms and conditions of the Warrant.
(i) The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained upon exercise of the Warrant, except under
circumstances that will not result in a violation of the 1933 Act or applicable
state securities laws.
(ii) The undersigned requests that the stock certificates for the Warrant
Shares be issued, and a Warrant representing any unexercised portion hereof be
issued, pursuant to the terms of the Warrant in the name of the Holder (or such
other person(s) indicated below) and delivered to the undersigned (or
designee(s)) at the address or addresses set forth below.
Dated: _____________, 199_.
HOLDER: _____________________________________________________
By: _________________________________________________________
Name: _______________________________________________________
Title: ______________________________________________________
Address: ____________________________________________________
____________________________________________________
____________________________________________________
Number of Warrant Shares
Being Purchased: ________________________
8
<PAGE> 1
EXHIBIT 11.1
AMERICAN BIOMED, INC. AND SUBSIDIARY
COMPUTATION OF LOSS PER COMMON SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1998 1997
------------------------------
<S> <C> <C>
Basic loss per common share:
Net loss $ (558,834) $ (644,293)
Less preferred stock dividends
------------ -------------
Net loss available to common shareholders $ (558,834) $ (644,293)
============ =============
Weighted average number of common shares outstanding 19,436,936 13,986,312
============ =============
Loss per common share $ (.03) $ (.05)
============ =============
Diluted loss per common share:
Weighted average number of shares outstanding 19,436,936 13,986,312
============ ==============
Loss per common share assuming full dilution $ (.03) $ (.05)
============ ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 100,352
<SECURITIES> 0
<RECEIVABLES> 148,863
<ALLOWANCES> 57,167
<INVENTORY> 648,557
<CURRENT-ASSETS> 982,107
<PP&E> 804,173
<DEPRECIATION> 638,836
<TOTAL-ASSETS> 1,839,055
<CURRENT-LIABILITIES> 1,799,779
<BONDS> 0
0
2
<COMMON> 22,377
<OTHER-SE> (133,592)
<TOTAL-LIABILITY-AND-EQUITY> (111,213)
<SALES> 131,565
<TOTAL-REVENUES> 162,085
<CGS> 128,834
<TOTAL-COSTS> 152,619
<OTHER-EXPENSES> 575,129
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,288
<INCOME-PRETAX> (558,834)
<INCOME-TAX> 0
<INCOME-CONTINUING> (558,834)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (558,834)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
