SECURITIES SUBSCRIPTION AGREEMENT
This Securities Subscription Agreement (the "Agreement") dated as of
May 20, 1998 has been executed by the undersigned (the "Subscriber") in
connection with the offer and sale (the "Offering") of (i) an aggregate face
amount of $4,000,000 of 5% Convertible Debentures due May 20, 2001 (the
"Debentures"), of American Biogenetic Sciences, Inc., a Delaware corporation
(the "Company") and (ii) Warrants (as defined below) to be issued by the Company
in connection with the issuance of the Debentures. The Debentures are
convertible into and the Warrants are exercisable for shares of Class A common
stock, par value $.001 per share of the Company (the "Common Stock"). The form
of the Debentures, including the terms on which the Debentures may be converted
into Common Stock, is attached hereto as Exhibit A. The form of the Warrants,
including the terms on which the Warrants may be exercised for Common Stock, is
attached hereto as Exhibit B. The solicitation of this Agreement and, if
accepted by the Company, the offer and sale of the Debentures and Warrants, are
being made in reliance upon the provisions of Regulation D ("Regulation D")
promulgated by the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act"). The Debentures and
Warrants and the Common Stock issuable upon conversion of the Debentures or
exercise of the Warrants are sometimes collectively referred to in this
Agreement as the "Securities." The Common Stock issuable upon conversion of the
Debentures and upon the exercise of the Warrants is sometimes referred to in
this Agreement as the "Underlying Stock." Upon the terms and subject to the
conditions set forth herein, the Subscriber hereby agrees to purchase, and the
Company hereby agrees to issue and sell, the principal amount of Debentures and
Warrants as set forth in Section 1.1. In consideration of the mutual promises,
representations, warranties and conditions set forth hereto, and intending to be
legally bound hereby, the Company and the Subscriber agree as follows:
1. Agreement to Subscribe; the Subscriber
1.1 Purchase and Issuance of Securities. The undersigned hereby
subscribes for (i) [$___] principal amount of Debentures (the "Subscriber's
Debentures"); (ii) [_____] Warrants (the "Initial Warrants"); (iii) [_____]
Warrants (the "Second Warrants"); and (iv) [_____] Warrants (the "Third
Warrants"; and together with the Initial Warrants and Second Warrants, the
"Warrants").
1.2 Closing. The closing of the purchase of the Debentures and the
Warrants (the "Closing") shall occur on May 20, 1998 or such other date agreed
to by the subscriber and the Company (the "Closing Date"); provided that (i) the
purchase price has been delivered by the Subscriber to the Company, a mutually
acceptable escrow agent or as otherwise agreed between the parties (in same day
funds via a wire transfer pursuant to instructions previously delivered for such
purpose), (ii) the Debentures subscribed for hereby shall have been executed,
issued and delivered by the Company to Subscriber, a mutually acceptable escrow
agent or as otherwise agreed between the parties, (iii) the Warrants shall have
been executed, issued and delivered by the Company to Subscriber and (iv) the
other conditions precedent to the obligations of the Subscriber and the Company
set forth herein shall have been satisfied or waived by the other parties.
1.3 Certain Representations of the Subscriber. The Subscriber is
either purchasing the Securities for its own account or as an agent for a
principal (under a discretionary or similar account), in which case all of the
representations, warranties, covenants and agreements of the Subscriber herein
shall be deemed to apply to such principal and not the Subscriber and to have
been made by such principal and not by the Subscriber. In such case, the
Subscriber so acting as agent represents and warrants that (a) its principals
have confirmed to the Subscriber the accuracy of such representations and
warranties with respect to its principals, and (b) the Subscriber has full
authority to act on behalf of its principal in executing and delivering this
Agreement and consummating the transactions contemplated hereby.
1.4 Conditions Precedent to the Obligation of the Company to Issue
and Sell the Securities. The obligation hereunder of the Company to issue and/or
sell the Securities to the Subscriber is subject to the satisfaction, at or
before the Closing, of each of the conditions set forth below. These conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion.
(a) Accuracy of the Subscriber's Representations and
Warranties. The representations and warranties of the Subscriber shall be true
and correct as of the date when made and in all material respects as of the
Closing Date as though made at each such time.
(b) Performance by the Subscriber. The Subscriber shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Subscriber at or prior to the Closing.
(c) No Injunction. 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 which prohibits or adversely effects any of the transactions
contemplated by this Agreement, and no proceeding shall have been commenced
which may have the effect of prohibiting or adversely affecting any of the
transactions contemplated hereby.
1.5 Conditions Precedent to the Obligation of the Subscriber to
Purchase the Securities. The obligation of the Subscriber hereunder to acquire
and pay for the Securities is subject to the satisfaction, at or before the
Closing, of each of the following conditions. Each of these conditions is for
the Subscriber's sole benefit and may be waived by the Subscriber at any time in
its sole discretion.
(a) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company shall be true and
correct as of the date when made and in all material respects as of the Closing
Date as though made at each such time.
(b) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required
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by this Agreement to be performed, satisfied or complied with by the Company at
or prior to the Closing.
(c) No Injunction. 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 which prohibits or adversely effects any of the transactions
contemplated by this Agreement, and no proceeding shall have been commenced
which may have the effect of prohibiting or adversely affecting any of the
transactions contemplated hereby.
(d) Adverse Changes. For the period from December 31, 1997
until Closing except as publicly disclosed since such date in Company filings
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")
issued or made prior to or on the date hereof listed on Schedule 1.5(d), no
event shall have occurred or be threatened to occur which has had or is likely
to have a material adverse effect on the business, operations, properties,
prospects or condition (financial or otherwise) of the Company and its
subsidiaries taken as a whole and/or any condition or situation which would
prohibit or otherwise adversely interfere with the ability of the Company to
enter into and perform its obligations under this Agreement, the Registration
Rights Agreement (as hereinafter defined) and the Warrants (a "Material Adverse
Effect").
(e) No Suspension of Trading in or Delisting of Common
Stock. The trading in the Common Stock shall not have been suspended by the SEC
or the National Association of Securities Dealers, Inc. (the "NASD") and the
Company shall not have received any notice of or have any knowledge of pending
or threatened suspension; the Common Stock shall not have been delisted from the
NASDAQ National Market System ("NASDAQ") and the Company shall not have received
any notice of or have any knowledge of any pending or threatened delisting; and,
at the time of the Closing, trading in securities generally as reported by the
NASDAQ shall not have been suspended or limited or minimum prices shall not have
been established on securities whose trades are reported by the NASDAQ.
(f) Legal Opinion. The Company shall have delivered to the
Subscriber opinions of Xxxxxxx X. Xxxxxx, Corporate Counsel to the Company, and
Xxxxxx Xxxxxx Flattau & Klimpl, LLP, independent counsel to the Company, each in
form and substance reasonably satisfactory to the Subscriber.
(g) Officer's Certificate. The Company shall have delivered
to the Subscriber a certificate in form and substance reasonably satisfactory to
the Subscriber, executed by an executive officer of the Company, to the effect
that all the conditions to the Closing shall have been satisfied.
(h) Registration Rights Agreement. The Company and the
Subscriber shall have entered into the Registration Rights Agreement
contemplated by Section 5.1 below.
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(i) Reservation of Shares. The Company shall have reserved
such number of Shares of Common Stock as is required pursuant to Section 5.2
hereof and shall have delivered to the Subscriber a certificate of the Secretary
of the Company certifying as to (i) resolutions adopted by the Board of
Directors of the Company authorizing and approving this Agreement, the
Debentures, the Warrants, the Registration Rights Agreement and the transactions
contemplated hereby and thereby, (ii) a true, complete, and correct copy of its
Certificate of Incorporation, and (iii) a true, complete, and correct copy of
its Bylaws.
2. Representations and Warranties of Subscriber
The Subscriber represents and warrants to the Company that:
2.1 No Government Recommendation or Approval. The Subscriber
understands that no United States federal or state agency or similar agency of
any other country, has passed upon or made any recommendation or endorsement of
the Company or the Offering of the Securities.
2.2 Intent. The Subscriber is purchasing the Securities for
investment, for its own account and not with a view towards distribution and the
Subscriber has no present arrangement to sell the Securities to or through any
person or entity; provided, however, that by making the representation herein,
the Subscriber does not agree to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with federal and state securities laws applicable to such
disposition. The Subscriber understands that the Securities must be held
indefinitely unless such Securities are subsequently registered under the
Securities Act or an exemption from registration is available. The Subscriber
has been advised of, and is knowledgeable concerning, the provisions of Rule 144
promulgated under the Securities Act.
2.3. Sophisticated Investor. The Subscriber satisfies the
definition of an "accredited investor" as set forth in Rule 501(a) of Regulation
D and the Subscriber has such experience in business and financial matters that
it is capable of evaluating the merits and risks of an investment in the
Securities. The Subscriber acknowledges that the Securities are speculative and
involve a high degree of risk.
2.4. Independent Investigation. The Subscriber, in making the
decision to purchase the Securities subscribed for hereunder, has relied upon an
independent investigation made by it and/or its representatives and has not
relied on any information or representations made by third parties or on any
oral or written representations or assurances from the Company or any
representative or agent of the Company other than as set forth in this
Agreement, the Registration Rights Agreement, the Debentures, the Warrants, and
the Company's periodic reports filed by the Company to date under the Exchange
Act (the "Exchange Act Reports"). The Subscriber has had a reasonable
opportunity to ask questions of, and receive answers from, the Company
concerning the Company and the Offering. The Subscriber acknowledges that the
price and terms of the Securities offered hereby have been determined by
negotiation and does not necessarily bear any relationship
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to the assets, book value or potential performance of the Company or any other
recognized criteria of value.
2.5 Authority. This Agreement has been validly authorized,
executed and delivered by the Subscriber and is a valid and binding agreement
enforceable in accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement of creditors'
rights generally.
2.6 No Legal Advice from Company. The Subscriber acknowledges that
it has had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with its own legal counsel and investment and tax
advisors. Except for any statements or representations of the Company made in
this Agreement, the Registration Rights Agreement, the Debentures, the Warrants,
the Prior Public Disclosures and the legal opinion called for by Section 1.5(f)
hereof, the Subscriber is relying solely on such counsel and advisors and not on
any statements or representations of the Company or any of its representatives
or agents for legal, tax or investment advice with respect to this investment,
the transactions contemplated by this Agreement or the securities laws of any
jurisdiction.
2.7 No Brokers. The Subscriber has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company relating to this Agreement or the transactions
contemplated hereby.
2.8 Not an Affiliate. The Subscriber is not an officer, director
or "affiliate" (as that term is defined in Rule 405 of Securities Act) of the
Company.
2.9 Reliance on Representations and Warranties. The Subscriber
understands that the Securities are being offered and sold to it in reliance on
specific provisions of United States federal and state securities laws and that
the Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Subscriber set
forth in this Agreement in order to determine the applicability of such
provisions.
3. Representations and Warranties of Company
The Company represents and warrants to the Subscriber that:
3.1 Company Status. The Company has registered its Common Stock
pursuant to Section 12(g) of the Exchange Act, is in compliance with all
reporting requirements of the Exchange Act in all material respects, and has
filed all required Exchange Act Reports during the past twelve months. The
Company has maintained all requirements for the continued listing of its Common
Stock, and such Common Stock is currently listed, on the NASDAQ and the Company
is eligible to use Form S-3 under the Securities Act for resales of Common Stock
by selling securityholders.
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3.2 Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person or entity acting on its or their behalf has, directly
or indirectly, made any offers or sales of any security other than the
Securities or solicited any offers to buy any security other than the Securities
under circumstances that would require registration of any of the Securities
under the Securities Act or cause the offering of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes
of the Securities Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of NASDAQ, nor
will the Company or any of its subsidiaries take any action or steps that would
require registration of the Securities under the Securities Act or cause the
offering of the Securities to be integrated with other offerings.
3.3 No Directed Selling Efforts or General Solicitation in Regard
to this Transaction. Neither the Company nor any of its affiliates, nor any
person acting on its or their behalf, has conducted any general solicitation or
general advertising (as that term is used in Regulation D) with respect to any
of the Securities, nor has it made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would require
registration of the Securities under the Securities Act.
3.4 Valid Issuance of Debentures and Capital Stock. The Company
has an authorized capitalization consisting of 50,000,000 shares of Class A
Common Stock, 3,000,000 shares of Class B Common Stock, par value $.001 per
share and no preferred stock. The Company has issued and outstanding on the date
hereof (a) 20,117,455 shares of Common Stock, and (b) 1,775,000 shares of Class
B Common Stock. All of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable;
prior to the Closing Date, the authorized capitalization shall include the
Securities; upon issuance of the Securities, the Securities will be duly and
validly issued, fully paid and non-assessable; the shares of Underlying Stock
issuable upon conversion or exercise of the Debentures and the Warrants, when
issued and delivered in accordance with the terms of the Debentures and the
Warrants, will be duly and validly issued, fully paid and non-assessable; the
shares of Common Stock required to be reserved pursuant hereto have been duly
reserved for issuance upon conversion of the Debentures and exercise of the
Warrants; and the holders of outstanding capital stock of the Company are not
and shall not be entitled to preemptive or other rights afforded by the Company
to subscribe for the capital stock or other securities of the Company as a
result of the sale of the Securities or the issuance of Underlying Stock upon
the conversion or exercise thereof. Other than as set forth in this section,
there are no other classes or series of preferred stock authorized, issued or
reserved for issuance.
3.5 Organization and Qualification. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and assets
and to carry on its business as now being conducted. The Company does not have
any subsidiaries except as listed in Schedule 3.5 hereto. Each of the
subsidiaries of the Company is a corporation duly incorporated and validly
existing in good standing under the laws of the jurisdiction of its
incorporation, has the requisite power to own its properties and assets and to
carry on its respective business as now being conducted. The Company and each
such subsidiary, if any, is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the
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nature of the business conducted or property owned by it makes such
qualification necessary other than those in which the failure so to qualify
would not have a Material Adverse Effect.
3.6 Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Debentures and the Registration Rights Agreement and to
issue the Securities in accordance with the terms hereof and thereof, (ii) the
execution, issuance and delivery of this Agreement, the Registration Rights
Agreement, the Debentures and the Warrants by the Company and the consummation
by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required, (iii) this Agreement has been, and on the Closing Date the
Registration Rights Agreement, the Debentures and the Warrants will be, duly
executed and delivered by the Company and (iv) this Agreement constitutes, and
upon execution, issuance and delivery thereof the Registration Rights Agreement,
the Debentures and the Warrants shall constitute 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, fraudulent conveyance, moratorium, reorganization or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by equitable principles of general application and except
as enforcement of rights to indemnity and contribution may be limited by federal
and state securities laws or principles of public policy.
3.7 Corporate Documents. The Company has furnished or made
available to the Subscriber true, correct, and complete copies of (i) the
Company's Certificate of Incorporation as in effect on the date hereof (the
"Certificate of Incorporation"), and (ii) the Company's By-Laws, as in effect on
the date hereof (the "By-Laws"), certified in each case by the Secretary of the
Company.
3.8 No Conflicts. The execution, delivery and performance of this
Agreement, including the conversion of the Debentures into, and the exercise of
the Warrants for, Common Stock of the Company, the Registration Rights
Agreement, the Debentures and the Warrants by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby do not and
will not (i) result in a violation of the Company's Certificate of Incorporation
or By-Laws 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 federal, state, local
or foreign 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). The
business of the Company and its subsidiaries is not being conducted in violation
of any law, ordinance or regulations of any governmental or self-regulatory
individual/entity, except for possible violations which either singly or in the
aggregate do not and will not have a Material Adverse Effect. The Company is not
required under federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or self-regulatory entity in order for it to
execute,
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deliver or perform any of its obligations under this Agreement, the Debentures,
the Warrants or the Registration Rights Agreement or issue and sell the
Securities in accordance with the terms hereof and thereof (other than any SEC,
NASD or state securities filings which may be required to be made by the Company
subsequent to the Closing, and any registration statement which may be filed
pursuant hereto. The Company is in compliance and after issuing the Securities
will be in compliance with the NASDAQ listing requirements including, but not
limited to, Rule 4460(1) thereunder.
3.9 Exchange Act Reports. The Company has timely filed all
Exchange Act Reports required to be filed by it with the SEC during the past
twelve months pursuant to the reporting requirements of the Exchange Act. The
Company has delivered or made available to the Subscriber true and complete
copies of the Exchange Act Reports (including, without limitation, proxy
information and solicitation materials) filed for reporting periods on or after
December 31, 1996. The Company has not provided to the Subscriber any
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed. As
of their respective dates, the Exchange Act Reports covering periods on and
after December 31, 1997 complied (and as of its effective date, the Registration
Statement (as defined in Section 5.1 hereof) for the offer and sale of the
Underlying Stock will comply) in all material respects with the requirements of
the Exchange Act (or in the case of such Registration Statement, the Securities
Act) and the rules and regulations of the SEC promulgated thereunder and other
applicable federal, state and local laws, rules and regulations, and none of the
Exchange Act Reports covering periods on and after December 31, 1997 or
otherwise incorporated by reference in the Registration Statement contained
(and, as of its effective date, such Registration Statement will not contain)
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. The financial statements of the Company included (or to be included)
in the Exchange Act Reports referred to in the preceding sentence and
incorporated by reference in the Registration Statement, comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been (or will be) prepared in
accordance with generally accepted accounting principles applied on a consistent
basis 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 not include footnotes or may be
condensed or summary statements) and fairly present (or will fairly present) in
all material respects the consolidated financial position of the Company as of
the dates thereof and the consolidated results of 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 Subscriber which is not included in the Exchange Act Reports
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.10 No Material Adverse Change. Since December 31, 1997, the date
of the Company's Form 10-K for the year ended December 31, 1997, a copy of which
is included in the Exchange Act Reports, no Material Adverse Effect has occurred
or exists with respect to the Company and its subsidiaries taken as a whole.
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3.11 Credit Facilities. Except for a credit facility in an amount
that is less than $80,000 that Stellar Bio Systems, Inc. is a party to, neither
the Company nor any of its subsidiaries is party to any revolving credit
facilities or other financing arrangements.
3.12 No Undisclosed Liabilities. The Company and its subsidiaries
have no liabilities or obligations required to be disclosed in the Exchange Act
Reports but not so disclosed in the Exchange Act Reports, other than those
incurred in the ordinary course of the Company's or its subsidiaries' respective
businesses since December 31, 1997 and which, individually or in the aggregate,
do not or would not have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole.
3.13 No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective business, properties, prospects, operations or
financial condition, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed.
3.14 No Brokers. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Subscriber relating to this Agreement or the
transactions contemplated hereby other than with respect to Jesup & Xxxxxx, the
fees of which are the responsibility of and will entirely be paid by the
Company.
3.15 Effectiveness of SEC Filings. The SEC has not issued any stop
order or other order suspending the effectiveness of any registration involving
the Company or its subsidiaries.
3.16 No Material Litigation Proceedings. Except as disclosed in the
Exchange Act Reports, neither the Company nor any of its subsidiaries is a party
to or the subject of any litigation, arbitration or other proceeding which if
adversely determined would individually or in the aggregate have a Material
Adverse Effect.
3.17 Intellectual Property Rights. The Company and its subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service marks registrations, service names, patents, patent
rights, copyrights, inventions, licenses, trade secrets (collectively, the
"Intellectual Property Rights") and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of any
Intellectual Property Rights or other similar rights of others, and there is no
claim, action or proceeding being made or brought against, or being threatened
against, the Company or any of its subsidiaries regarding any Intellectual
Property Rights or other infringement; and the Company and its subsidiaries are
unaware of any facts or circumstances which might give rise to any of the
foregoing.
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4. Covenants of the Subscriber
4.1 Resales. The Subscriber shall not make any offers or sales of
the Securities other than pursuant to a registration statement under the
Securities Act or pursuant to an exemption from registration under the
Securities Act. The Subscriber will comply with applicable prospectus delivery
requirements.
4.2 Low Trades. The Subscriber covenants and agrees that it will
not during (x) the period commencing on the Closing Date and terminating on the
first anniversary of the Closing Date and (y) during any Common Stock Valuation
Period (as defined in the Debentures) enter into any transactions on NASDAQ in
connection with the Common Stock the effect of which is to hedge Subscriber's
risk in connection with the Debentures, including short sales, swaps and
purchases of puts (collectively, "Hedging Restrictions"); provided however that
the Hedging Restrictions shall not be applicable (i) in connection with
transactions relating to the Underlying Stock received in connection with the
conversion of the Debentures or exercise of the Warrants, (ii) to hedging
transactions at a price equal to or greater than $2.0672 per share (subject to
adjustment for stock splits, combinations, recapitalizations, reclassifications
or similar occurrences), (iii) if the Registration Statement is not declared
effective within 120 days after the Closing Date, (iv) if the Common Stock
trades at a level equal to or less than $1.00 per share (subject to adjustment
for stock splits, combinations, recapitalizations, reclassifications or similar
occurrences) or (v) if the Company completes any Further Issuances (as such term
is defined in Section 5.10 hereof) the terms of which do not contain any hedging
restrictions; provided further, however, that if the Company completes any
Further Issuances the terms of which contain hedging restrictions that in the
reasonable judgment of Subscriber are less restrictive to the holders than the
hedging restrictions contained herein the Subscriber shall have an option, to be
exercised by delivery of written notice to the Company within thirty (30) days
of the Company's notice, as set forth in the following sentence, of the closing
date of such Further Issuances, to have the terms of the hedging restrictions
set forth in such Further Issuances replace the hedging restrictions set forth
herein. The Company shall provide written notice of such Further Issuance to
Holder promptly after the Closing of such Further Issuance. Any short sales,
swaps, purchases of puts or other hedging activities that involve the direct or
indirect use of Common Stock shall be done in accordance with applicable law.
5. Covenants of the Company
5.1 Registration Rights. The Company will file within sixty (60)
days of the Closing Date and use its best efforts to cause to become effective,
as promptly as possible, but in no event later than one hundred twenty (120)
days after the Closing Date, a registration statement ("Registration Statement")
on Form S-3 under the Securities Act (or in the event that the Company is
ineligible to use such form, such other form, as consented to by a majority of
the outstanding Debentures (which consent shall not be unreasonably withheld),
available for use by the Company under the Securities Act) covering the offer
and resale of the Underlying Stock and shall take all action necessary to
qualify the Underlying Stock under all applicable state "blue sky" laws, in
accordance with terms of the Registration Rights Agreement (the "Registration
Rights Agreement")
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in the form of EXHIBIT C hereto, which the Company and the Subscriber shall
enter into at the Closing.
5.2 Reservation of Common Stock. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, (i) a number of shares of
Common Stock equal to (a) the Conversion Limit as defined in the Debenture for
the purpose of enabling the Company to satisfy its obligation to issue shares of
its Common Stock upon conversion of the Debentures or (b) if the stockholders of
the Company give their approval (the "Stockholder Approval") for issuances of
Common Stock in excess of the Conversion Limit, a number of shares of Common
Stock sufficient to enable the Company to satisfy its obligations to issue
shares of its Common Stock upon conversion of all outstanding Debentures, plus
(ii) a number of shares of Common Stock sufficient to enable the Company to
satisfy its obligations to issue shares of its Common Stock upon exercise of all
outstanding Warrants. The number of shares so reserved may be reduced, but only
if the Stockholder Approval is not received, by the number of shares actually
delivered pursuant to conversion of Debentures and exercise of Warrants and the
number of shares so reserved shall be adjusted to reflect stock splits and stock
dividends and distributions.
5.3 Listing of Underlying Stock. The Company hereby agrees,
promptly following the Closing of the transactions contemplated by this
Agreement, to take such action to cause the Underlying Stock to be listed on
NASDAQ as promptly as possible but no later than the effective date of the
Registration Statement referred to in Section 5.1. The Company further agrees,
if the Company applies to have the Common Stock traded on any other principal
stock exchange or market, that it will include in such application the
Underlying Stock and will take such other action as is necessary to cause the
Underlying Stock to be listed on such other exchange or market as promptly as
possible.
5.4 Exchange Act Registration. Until all Debentures and Warrants
are no longer outstanding (whether by reason of conversion, exercise,
redemption, repurchase or otherwise) and for a period of two years after the
last conversion of Debentures or exercise of Warrants the Company will cause its
Common Stock to continue to be registered under Section 12(g), or to be
registered under Section 12(b), of the Exchange Act, will comply in all respects
with its reporting and filing obligations under the Exchange Act and Securities
Act, and will not take any action or file any document (whether or not permitted
by said Acts or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under said Acts.
The Company will take all action necessary to continue the listing and trading
of its Common Stock on NASDAQ and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the NASD
and NASDAQ.
5.5 Corporate Existence. Except as otherwise specifically
contemplated in the Debentures, Warrants or this Agreement, until all Debentures
and Warrants are no longer outstanding (whether by reason of conversion,
exercise, redemption, repurchase or otherwise) and for a period
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of two years after the last conversion of Debentures or exercise of Warrants the
Company will take all steps necessary to preserve and continue the corporate
existence of the Company.
5.6 Form D. The Company agrees to file a Form D with respect to
the Securities as required under and in compliance with Regulation D of the
Exchange Act and provide a copy thereof to the Subscriber promptly after such
filing.
5.7 Dividends and Distributions. Until the delivery by the Company
to the Subscriber of all shares of Common Stock upon conversion of the
Debentures or all sums of cash upon redemption or repayment of the Debentures,
as applicable, such that after such delivery upon any such conversion,
redemption or repayment no more than 10% of the Initial Outstanding Principal
Amount (as defined in the Debentures) of the Debentures remain outstanding, the
Company shall not make or fix a record date for the determination of holders of
Common Stock or other securities entitled to receive a dividend or other
distribution (special or otherwise).
5.8 Certain Acquisitions. Until the delivery by the Company to the
Subscriber of all shares of Common Stock upon conversion of the Debentures or
all sums of cash upon redemption or repayment of the Debentures, as applicable,
such that after such delivery upon any such conversion, redemption or repayment
no more than 10% of the Initial Outstanding Principal Amount (as defined in the
Debentures) of the Debentures remain outstanding, the Company will not effect
any acquisition of any business, whether through acquisition of assets or
securities, unless either (i) the earnings before interest, taxes, depreciation
and amortization ("EBITDA") of such acquired business for such acquired
business's most recent four fiscal quarters completed prior to the date on which
the agreement for such acquisition is entered into is at least $1 or (ii) the
Company's projected net cash provided by or used for operating activities of the
Company and its subsidiaries on a consolidated basis (including such acquired
business) for the first six full calendar months following such acquisition
(based on the historical burn rate of the Company and its subsidiaries on a
consolidated basis (including such acquired business) for the six full calendar
months prior to such acquisition) evidences either that at least $1 will be
provided by operating activities or that the net amount of cash used in
operating activities will not exceed the Company's and such acquired business's
estimated cash position at the beginning of such six month period.
5.9 Lock-up and Right of First Refusal. (a) Until such time as the
Registration Statement is declared effective by the Securities and Exchange
Commission, the Company shall not issue or sell any shares of its Common Stock
or any of its securities which are convertible into or exchangeable for its
Common Stock or any convertible security, or any warrants or other rights to
subscribe for or to purchase or any options for the purchase of its Common Stock
(other than (w) shares or options issued or which may be issued pursuant to
Company employee, officer, director or consultant stock or option or similar
equity-based compensation plans now or hereafter in effect, (x) securities which
are convertible into or exchangeable for Common Stock, options, warrants or
rights outstanding on the Closing Date reflected in the Exchange Act Reports,
(y) shares issued to complete payment of the purchase price for Stellar Bio
Systems, Inc. as reflected in the Exchange Act Reports and (z) shares or other
securities, options, warrants and rights in connection with a business
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acquisition, joint venture, licensing arrangement or other non-capital raising
purpose which issuances are of Restricted Securities (as such term is defined in
Rule 144 of the Act)) whether singly or together with other securities (the
foregoing issuances are collectively referred to herein as "Further Issuances").
(b) In the event that at any time or from time to time
during the one hundred eighty (180) day period immediately following the Closing
Date, the Company proposes any Further Issuances at an effective purchase price
per Common Share which is at a discount to the Market Price for Shares of Common
Stock (as defined in the Debentures) on the trading day immediately preceding
the date the Company's Board of Directors authorizes such issuance, then the
Company shall give written notice (the "Proposal Notice") to the Subscriber of
such proposed issuance, specifying the terms thereof in reasonable detail, and
the Subscriber shall have the right, exercisable by written notice delivered
within 30 days of the date of receipt by the Subscriber of the Proposal Notice,
to subscribe for and purchase all (but not less than all) of the Common Stock or
other securities proposed to be issued, on terms and conditions no less
favorable to the Subscriber than as those specified in the Proposal Notice.
6. Legends; Subsequent Transfer of Securities; Denominations
6.1 Legend. The Company will issue one or more securities
purchased by the Subscriber in the name of the Subscriber and in such
denominations to be specified by the Subscriber prior to (or from time to time
subsequent to) Closing. The Debentures, and any shares of Common Stock issued
upon conversion thereof prior to the effectiveness of the Registration
Statement, will bear the following legend (the "Legend"), and appropriate "stop
transfer" instructions:
THE OFFER AND SALE OF THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND
THE SECURITIES EVIDENCED HEREBY MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
Following the effectiveness of the Registration Statement, the
Company will promptly instruct its transfer agent to remove the Legend and "stop
transfer" instructions from any of the Underlying Stock. In addition, and if
applicable, the Company shall reissue certificates representing the Securities
without the Legend and "stop transfer" instructions at such time as (i) the
Holder thereof is permitted to dispose of such Securities pursuant to Rule
144(k) under the Securities Act or (ii) the Securities are sold to a purchaser
or purchasers in a transaction registered under the Securities Act.
6.2 No Other Legend or Stock Transfer Instructions. No legend has
been or shall be placed on the certificates representing the Securities and no
stock transfer instructions have been
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or shall be given to the Company's transfer agent with respect thereto other
than as set forth in this Section 6.
6.3 Subscriber's Compliance. Nothing in this Section 6 shall
affect in any way the Subscriber's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities.
7. Governing Law; Jurisdiction; Waiver of Jury Trial
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law or choice of law (other than Section 5-1401 of the New York
General Obligations Law which section shall apply hereto), except to the extent
the law of Delaware regulates the Company's issuance of securities. The Company
and the Subscriber hereby agree that all actions or proceedings arising directly
or indirectly from or in connection with this Agreement shall be litigated only
in the Supreme Court of the State of New York or the United States District
Court for the Southern District of New York located in New York County, New
York. The Company and the Subscriber consent to the jurisdiction and venue of
the foregoing courts and consent that any process or notice of motion or other
application to either of said courts or a judge thereof may be served inside or
outside the State of New York or the Southern District of New York by registered
mail, return receipt requested, directed to the such party at its address set
forth herein (and service so made shall be deemed complete five (5) days after
the same has been posted as aforesaid) or by personal service or in such other
manner as may be permissible under the rules of said courts. The parties hereto
hereby waive any right to a jury trial in connection with any litigation
pursuant to this Agreement and the transactions contemplated hereby.
8. Assignment; Entire Agreement; Amendment
8.1 Assignment. Neither this Agreement nor any rights hereunder
may be assigned by any party to any other person other than by Subscriber to a
person agreeing to be bound by the terms hereof. The Debentures and the
Registration Rights Agreement shall inure to the benefit of, and be enforceable
by, any transferee of any of the Securities purchased by the Subscriber
hereunder with respect to the Securities held by such person.
8.2 Entire Agreement; Amendment. This Agreement, the Debentures,
the Registration Rights Agreement, the Warrants and the other documents
delivered pursuant hereto and thereto constitute the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth in this Agreement or therein. Except as expressly
provided in this Agreement, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.
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9. Publicity
The Company agrees that it will not disclose, and will not
include in any public announcement, the name or any information in respect of
the Subscriber without the Subscriber's prior expressed written consent, unless
and until such disclosure is required by law or applicable regulation, and then
only to the extent of such requirement. Except as may be required by law, the
Company and the Subscriber shall consult with each other before issuing any
press release or otherwise making any public statements with respect to this
Agreement and shall not issue any such press release or make any such public
statement prior to such consultation. The press release annexed hereto as
Exhibit "D" is acceptable to all parties.
10. Notices, Etc.; Expenses; Indemnity
10.1 Notices. Unless otherwise provided herein, any notice or other
communication to a party hereunder shall be sufficiently given if in writing and
personally delivered or sent by facsimile with copy sent in another manner
herein provided or sent by courier (which for all purposes of this Agreement
shall include Federal Express, UPS or other recognized overnight courier) or
mailed to said party by certified mail, return receipt requested, at its address
provided for herein or such other address as either may designate for itself in
such notice to the other and communications shall be deemed to have been
received when delivered personally on the scheduled arrival date when sent by
next day or 2-day courier service or if sent by facsimile upon receipt of
confirmation of transmittal or if sent by mail then three days after deposit in
the mail.
10.2 Costs and Expenses. The Company shall be responsible for the
Subscriber's actual and reasonable costs and expenses, due and payable at
Closing, (including legal fees and expenses) incurred in entering into this
Agreement and the transactions contemplated hereby but not to exceed $15,000 in
the aggregate for all Subscribers of all Debentures.
10.3 Indemnification. Each party shall indemnify the other against
any loss, cost or damages (including reasonable attorney's fees and expenses)
incurred as a result of such parties' breach of any representation, warranty,
covenant or agreement in this Agreement.
11. Counterparts
This Agreement may be executed in any number of counterparts,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
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12. Survival; Severability
The representations, warranties, covenants and agreements of
the parties hereto shall survive the Closing notwithstanding any due diligence
investigation conducted by or on behalf of the Subscriber. In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that no such
severability shall be effective if it materially changes the economic benefit of
this Agreement to any party.
13. Titles and Subtitles
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
[SIGNATURE PAGE FOLLOWS]
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Subscriber's Representative Name of the Subscriber:
[________________________________]
By: [____________________]
Its: [____________]
By: _______________________________
[_____________]
[_____________]
Date of Subscription: [____________________]
Place of Execution: [____________________]
Place of Organization or Citizenship: [____________________]
Place of Residency and/or Principal Place of Business
[____________________]
Telephone: [____________________]
Fax: [____________________]
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THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 20TH DAY OF MAY, 1998.
AMERICAN BIOGENETIC SCIENCES, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President Finance - CFO
Address: 0000 Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
-00-
XXXXXXX X
XXXX XX XXXXXXXXX
EXHIBIT B
FORM OF COMMON STOCK PURCHASE WARRANT
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT D
PRESS RELEASE
