-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AtZeSUhVw/pll9NMoFEqOahsSjFeTYmdOBgFr17LTYrfntfSEsxiIL/+JV/N39YR 8+jz+uSAqG91QYTln4u/Ug== 0000912057-00-008910.txt : 20000302 0000912057-00-008910.hdr.sgml : 20000302 ACCESSION NUMBER: 0000912057-00-008910 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20000229 GROUP MEMBERS: BIOTECHNOLOGY VALUE FUND II, L.P. GROUP MEMBERS: BIOTECHNOLOGY VALUE FUND L P GROUP MEMBERS: BVF INC. GROUP MEMBERS: BVF PARTNERS L.P. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BIOGENETIC SCIENCES INC CENTRAL INDEX KEY: 0000856984 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 112655906 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-45379 FILM NUMBER: 556675 BUSINESS ADDRESS: STREET 1: 1375 AKRON STREET STREET 2: P O BOX 1001 CITY: COPIAGUE STATE: NY ZIP: 11726 BUSINESS PHONE: 5167892600 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BIOTECHNOLOGY VALUE FUND L P CENTRAL INDEX KEY: 0000918923 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 363924731 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 227 W MONROE STREET, SUITE 4800 STREET 2: 227 W MONROE STREET, SUITE 4800 CITY: CHICAGO STATE: IL ZIP: 60606 MAIL ADDRESS: STREET 1: 227 W MONROE STREET, SUITE 4800 STREET 2: 227 W MONROE STREET, SUITE 4800 CITY: CHICAGO STATE: IL ZIP: 60606 SC 13D 1 SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 -------------------- SCHEDULE 13D (RULE 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO 13d-2(a) (AMENDMENT NO. __)(1) AMERICAN BIOGENETIC SCIENCES, INC. ---------------------------------- (Name of Issuer) COMMON STOCK ------------ (Title of Class of Securities) 024611 10 5 ----------- (CUSIP Number) Hope Flack BVF Partners L.P 227 West Monroe Street, Suite 4800 Chicago, Illinois 60606 (312) 263-7777 --------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) February 7, 2000 ------------------ (Date of Event Which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box / / NOTE: Six copies of this statement, including all exhibits, should be filed with the Commission. SEE Rule 13d-1(a) for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 9 Pages) - --------------------------- (1) The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, SEE the NOTES). - ----------------------------- ----------------------------- CUSIP NO. 024611 10 5 13D Page 2 of 9 Pages - ----------------------------- -----------------------------
- --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: BIOTECHNOLOGY VALUE FUND, L.P. I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY): - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /x/ (b) / / - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- 4 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - --------- ---------------------------------------------------------------------- NUMBER 5 SOLE VOTING POWER OF 0 SHARES ----------------------------------------------- BENEFICIALLY 6 SHARED VOTING POWER OWNED BY EACH 4,200,000 REPORTING ---------------------------------------------- PERSON 7 SOLE DISPOSITIVE POWER WITH 0 ---------------------------------------------- 8 SHARED DISPOSITIVE POWER 4,200,000 - --------- ---------------------------------------------------------------------- 9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,200,000 - --------- ---------------------------------------------------------------------- 10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES* / / - --------- ---------------------------------------------------------------------- 11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9 7.7% - --------- ---------------------------------------------------------------------- 12 TYPE OF REPORTING PERSON* PN - --------- ----------------------------------------------------------------------
* SEE INSTRUCTIONS BEFORE FILLING OUT! - ----------------------------- ----------------------------- CUSIP NO. 024611 10 5 13D Page 3 of 9 Pages - ----------------------------- -----------------------------
- --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: BIOTECHNOLOGY VALUE FUND II, L.P. I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY): - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/ (b) / / - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- 4 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - --------- ---------------------------------------------------------------------- NUMBER 5 SOLE VOTING POWER OF 0 SHARES ----------------------------------------------- BENEFICIALLY 6 SHARED VOTING POWER OWNED BY EACH 7,200,000 REPORTING ---------------------------------------------- PERSON 7 SOLE DISPOSITIVE POWER WITH 0 ---------------------------------------------- 8 SHARED DISPOSITIVE POWER 7,200,000 - --------- ---------------------------------------------------------------------- 9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,200,000 - --------- ---------------------------------------------------------------------- 10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES* / / - --------- ---------------------------------------------------------------------- 11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9 13.2% - --------- ---------------------------------------------------------------------- 12 TYPE OF REPORTING PERSON* PN - --------- ----------------------------------------------------------------------
* SEE INSTRUCTIONS BEFORE FILLING OUT! - ----------------------------- ----------------------------- CUSIP NO. 024611 10 5 13D Page 4 of 9 Pages - ----------------------------- -----------------------------
- --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: BVF PARTNERS L.P. I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY): - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/ (b) / / - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- 4 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - --------- ---------------------------------------------------------------------- NUMBER 5 SOLE VOTING POWER OF 0 SHARES ----------------------------------------------- BENEFICIALLY 6 SHARED VOTING POWER OWNED BY EACH 12,000,000 REPORTING ---------------------------------------------- PERSON 7 SOLE DISPOSITIVE POWER WITH 0 ---------------------------------------------- 8 SHARED DISPOSITIVE POWER 12,000,000 - -------------------------------------------------------------------------------- 9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 12,000,000 - --------- ---------------------------------------------------------------------- 10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES* / / - --------- ---------------------------------------------------------------------- 11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9 21.9% - --------- ---------------------------------------------------------------------- 12 TYPE OF REPORTING PERSON* PN - --------- ----------------------------------------------------------------------
* SEE INSTRUCTIONS BEFORE FILLING OUT! - ----------------------------- ----------------------------- CUSIP NO. 024611 10 5 13D Page 5 of 9 Pages - ----------------------------- -----------------------------
- --------- ---------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: BVF INC. I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY): - --------- ---------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /X/ (b) / / - --------- ---------------------------------------------------------------------- 3 SEC USE ONLY - --------- ---------------------------------------------------------------------- 4 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------- ----- ----------------------------------------------- NUMBER 5 SOLE VOTING POWER OF 0 SHARES ----------------------------------------------- BENEFICIALLY 6 SHARED VOTING POWER OWNED BY EACH 12,000,000 REPORTING ---------------------------------------------- PERSON 7 SOLE DISPOSITIVE POWER WITH 0 ---------------------------------------------- 8 SHARED DISPOSITIVE POWER 12,000,000 - -------------------------------------------------------------------------------- 9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 12,000,000 - --------- ---------------------------------------------------------------------- 10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES* / / - --------- ---------------------------------------------------------------------- 11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9 21.9% - --------- ---------------------------------------------------------------------- 12 TYPE OF REPORTING PERSON* IA, CO - --------- ----------------------------------------------------------------------
* SEE INSTRUCTIONS BEFORE FILLING OUT! - ----------------------------- ----------------------------- CUSIP NO. 024611 10 5 13D Page 6 of 9 Pages - ----------------------------- ----------------------------- ITEM 1. SECURITY AND ISSUER. This Statement on Schedule 13D (this "Statement") relates to Series A Convertible Preferred Stock (the "Preferred Stock) and Warrants (the "Warrants") of American Biogenetic Sciences, Inc., a Delaware corporation ("American Biogenetic"). Class A Common Stock, par value $0.001 per share, (the "Common Stock," and collectively with the Preferred Stock and the Warrants, the "Securities") underlies both the Preferred Stock and Warrants. The principal executive office of American Biogenetic is located at 1375 Akron Street, Copiague, New York 11726. ITEM 2. IDENTITY AND BACKGROUND. The persons filing this Statement, the persons enumerated in Instruction C of Schedule 13D and, where applicable, their respective places of organization, general partners, directors, executive officers and controlling persons, and certain information regarding each of them, are as follows: (a) Biotechnology Value Fund, L.P., a Delaware limited partnership ("BVF"), Biotechnology Value Fund II, L.P., a Delaware limited partnership ("BVF2"), BVF Partners L.P., a Delaware limited partnership ("Partners"), BVF Inc., a Delaware corporation ("BVF Inc."), and Mark N. Lampert, an individual ("Lampert") (collectively, the "Reporting Persons"). (b) The business address of BVF, BVF2 and Partners is 227 West Monroe Street, Suite 4800, Chicago, Illinois 60606. The business address of BVF Inc. and Lampert is One Sansome Street, 39th Floor, San Francisco, California 94104. (c) Partners is the general partner of BVF and BVF2, which are investment limited partnerships. BVF Inc. is an investment advisor to and general partner of Partners. Lampert is the sole shareholder, sole director and an officer of BVF Inc. (d) During the last five years, none of such persons has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors). (e) During the last five years, none of such persons was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Lampert is a citizen of the United States of America. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. On February 7, 2000, Partners, in its capacity as general partner of BVF and BVF2 and using funds provided by BVF's working capital and BVF2's working capital pursuant to the terms of their respective limited partnership agreements, and in its - ----------------------------- ----------------------------- CUSIP NO. 024611 10 5 13D Page 7 of 9 Pages - ----------------------------- ----------------------------- capacity as investment advisor for Investment 10 L.L.C., an Illinois limited liability company ("ILL10") and using funds under management by Partners pursuant to its investment management agreements with ILL10, purchased Promissory Notes (the "Notes," attached hereto as EXHIBIT C) that mature upon the closing of the transaction reported in this Statement, which will occur no later than March 15, 2000 ("the Closing Date"). The Notes are payable in Warrants and either a new class of preferred stock or Common Stock, as detailed below. The creation of a new class of preferred stock must be approved by the shareholders of American Biogenetic, who will vote on or before the Closing Date. The number of shareholder votes approving the creation must represent a majority of all then-outstanding shares of all classes of Common Stock. If such a majority approves the creation of the Preferred Stock, the Notes will be payable in Warrants and Preferred Stock. If shareholder approval is not obtained, the Notes are payable instead in Warrants and Common Stock. The number of shares of Common Stock that will be issued will equal the number of shares of Common Stock that underlie the Preferred Stock. ITEM 4. PURPOSE OF TRANSACTIONS. The sole purpose of the acquisitions of the Securities reported herein is and was for investment. The Reporting Persons did not at the time of such acquisitions of the Securities, and do not presently, have any plan to acquire control of American Biogenetic. The Reporting Persons may acquire or dispose of additional Securities from time to time. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) BVF beneficially owns 4,200,000 shares of Common Stock, which represents approximately 7.7% of the aggregate number of shares of common stock outstanding as of February 7, 2000 (as represented to the Reporting Persons by American Biogenetic pursuant to the transaction reported in this Statement, the "Outstanding Shares"). BVF2 beneficially owns 7,200,000 shares of Common Stock, which represents approximately 13.2% of the Outstanding Shares. Partners beneficially owns 12,000,000 shares of Common Stock, which represents approximately 21.9% of the Outstanding Shares. BVF Inc. beneficially owns 12,000,000 shares of Common Stock, which represents approximately 21.9% of the Outstanding Shares. The number of shares for each Reporting Person as referred to in this ITEM 5(a) is based upon the beneficial ownership of Warrants that are first exercisable on the Closing Date and the beneficial ownership of Preferred Stock that is also first convertible on the Closing Date (or Common Stock as provided in lieu thereof, see ITEM 3). Neither ILL10 nor any of the other managed accounts that are managed by Partners (together with ILL10, the "Accounts") individually owns more than 5% of the Outstanding Shares. (b) BVF shares voting and dispositive power over the 4,200,000 shares of Common Stock it beneficially owns with Partners. BVF2 shares voting and dispositive power over the 7,200,000 shares of Common Stock it beneficially owns with Partners. Partners and BVF Inc. share voting and dispositive power over the 12,000,000 shares of Common Stock they beneficially own with, in addition to BVF and BVF2, the managed account on whose behalf Partners, as investment advisor, purchased such shares. The managed account on whose behalf Partners owns shares of the Stock is ILL10. The Accounts specialize in holding biotechnology stocks for investment purposes and the business address of each is BVF Partners L.P., 227 West Monroe Street, Suite 4800, Chicago, Illinois 60606. - ----------------------------- ----------------------------- CUSIP NO. 024611 10 5 13D Page 8 of 9 Pages - ----------------------------- ----------------------------- (c) The only transaction in the Securities by the Reporting Persons during the past 60 days is the February 7, 2000 purchase by Partners, on behalf of BVF, BVF2 and ILL10, of Promissory Notes for an aggregate amount of $3,000,000, to be paid by the issuance of an aggregate number of: (i) 6,000,000 Warrants (exercisable into 6,000,000 share of Common Stock) and (ii) 6,000 shares of Preferred Stock (convertible into 6,000,000 share of Common Stock) or, depending upon the outcome of the American Biogenetic shareholder vote, 6,000,000 shares of Common Stock (see ITEM 3). No other transaction in the Securities has been effected by the Reporting Persons during the past 60 days. (d) The Accounts are entitled to receive dividends and any sale proceeds with respect to the Securities in proportion to their respective ownership interests therein. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Partners is the general partner of both BVF and BVF2 pursuant to limited partnership agreements which authorize Partners, among other things, to invest the funds of BVF and BVF2 in the Securities and to vote, exercise or convert and dispose of the Securities. Pursuant to such limited partnership agreements, Partners is entitled to allocations based on assets under management and realized and unrealized gains thereon. Pursuant to investment management agreements with the Accounts, Partners and BVF Inc. have the authority, among other things, to invest funds of the Accounts in the Securities and to vote, exercise or convert and dispose of the Securities. Pursuant to such agreements, Partners and BVF Inc. receive fees based on assets under management and realized and unrealized gains thereon. BVF Inc. is the general partner of Partners and may be deemed to own beneficially securities over which Partners exercises voting and dispositive power. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 99A - Agreement Regarding Joint Filing Exhibit 99B - Securities Purchase Agreement Exhibit 99C - Promissory Notes Exhibit 99D - Warrant Certificate Exhibit 99E - Certificate of Designation - ----------------------------- ----------------------------- CUSIP NO. 024611 10 5 13D Page 9 of 9 Pages - ----------------------------- ----------------------------- After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. Dated: February 28, 2000 BIOTECHNOLOGY VALUE FUND, L.P. By: BVF Partners L.P., its general partner By: BVF Inc., its general partner By: /s/ Mark N. Lampert --------------------- Mark N. Lampert President BIOTECHNOLOGY VALUE FUND II, L.P. By: BVF Partners L.P., its general partner By: BVF Inc., its general partner By: /s/ Mark N. Lampert --------------------- Mark N. Lampert President BVF PARTNERS L.P. By: BVF Inc., its general partner By: /s/ Mark N. Lampert --------------------- Mark N. Lampert President BVF INC. By: /s/ Mark N. Lampert --------------------- Mark N. Lampert President EX-99.A 2 EXHIBIT 99.A EXHIBIT 99A AGREEMENT REGARDING JOINT FILING The undersigned, Biotechnology Value Fund, L.P., a Delaware limited partnership, Biotechnology Value Fund II, L.P., a Delaware limited partnership, BVF Partners L.P., a Delaware limited partnership, and BVF Inc., a Delaware corporation, hereby agree and acknowledge that the statement containing the information required by Schedule 13D, to which this Agreement is attached as an exhibit, is filed on behalf of each of them. The undersigned further agree that any amendments or supplements thereto shall also be filed on behalf of each of them. Dated: February 28, 2000 BIOTECHNOLOGY VALUE FUND, L.P. By: BVF Partners L.P., its general partner By: BVF Inc., its general partner By: /s/ Mark N. Lampert --------------------- Mark N. Lampert President BIOTECHNOLOGY VALUE FUND II, L.P. By: BVF Partners L.P., its general partner By: BVF Inc., its general partner By: /s/ Mark N. Lampert --------------------- Mark N. Lampert President BVF PARTNERS L.P. By: BVF Inc., its general partner By: /s/ Mark N. Lampert --------------------- Mark N. Lampert President BVF INC. By: /s/ Mark N. Lampert --------------------- Mark N. Lampert President EX-99.B 3 EXHIBIT 99.B ============================================================================= SECURITIES PURCHASE AGREEMENT 7,000 SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK WARRANTS TO PURCHASE 7,000,000 SHARES OF CLASS A COMMON STOCK OF AMERICAN BIOGENETIC SCIENCES, INC. AS OF FEBRUARY 3, 2000 ============================================================================= TABLE OF CONTENTS
PAGE ARTICLE I - ISSUANCE AND TERMS OF WARRANTS AND PREFERRED SHARES............1 1.1 AUTHORIZATION OF SECURITIES.......................................1 1.2 PURCHASE AND SALE OF PREFERRED SHARES.............................2 1.4 PAYMENT...........................................................2 1.4 AGREEMENT REGARDING WARRANTS......................................3 ARTICLE II - CLOSING.......................................................3 2.1 CLOSING...........................................................3 2.2 LEGEND............................................................3 ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY................4 3.1 ORGANIZATION AND STANDING OF THE COMPANY..........................4 3.2 CAPITALIZATION....................................................4 3.3 VALIDITY OF THIS AGREEMENT........................................4 3.4 GOVERNMENTAL CONSENT, ETC.........................................5 3.5 VALID ISSUANCE OF SECURITIES......................................5 3.6 FINANCIAL STATEMENTS..............................................6 3.7 ACCURACY AND COMPLETENESS OF INFORMATION..........................6 3.8 ADVERSE CHANGES...................................................6 3.9 NO VIOLATION......................................................6 3.10 ALL NECESSARY PERMITS.............................................7 3.11 TITLE TO PROPERTIES...............................................7 3.10 SECURITIES LAWS...................................................7 ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE INVESTORS...............7 4.1 AUTHORITY OF INVESTORS, VALIDITY OF THIS AGREEMENT................7 4.2 INVESTMENT REPRESENTATIONS........................................8 ARTICLE V - CONDITIONS TO INVESTORS' OBLIGATIONS...........................8 5.1 CONDITIONS TO CLOSING ON CLOSING DATE.............................8 ARTICLE VI - CONDITIONS TO THE COMPANY'S OBLIGATIONS.......................10 6.1 CONDITIONS TO CLOSING.............................................10 ARTICLE VII - COVENANTS OF THE COMPANY.....................................11 7.1 FURNISHING OF INFORMATION.........................................11 7.2 INFORMATION WITH RESPECT TO THE SECURITIES........................11 7.3 SHAREHOLDER APPROVAL..............................................11 7.4 LICENSE AGREEMENT.................................................11 7.5 INVESTOR'S RIGHTS.................................................11 ARTICLE VIII - SURVIVAL AND INDEMNIFICATION................................11 8.1 SURVIVAL..........................................................11 8.2 INDEMNIFICATION...................................................12 ARTICLE IX - MISCELLANEOUS.................................................13 9.1 NOTICES...........................................................13 - ------------------------------------------------------------------------------- Securities Purchase Agreement ii 9.2 ENTIRE AGREEMENT..................................................14 9.3 AMENDMENTS........................................................14 9.4 ASSIGNMENT........................................................14 9.5 BENEFIT...........................................................14 9.6 GOVERNING LAW.....................................................15 9.7 SEVERABILITY......................................................15 9.8 HEADINGS AND CAPTIONS.............................................15 9.9 NO WAIVER OF RIGHTS, POWERS AND REMEDIES..........................15 9.10 EXPENSES..........................................................15 9.11 BROKERS...........................................................15 9.12 CONFIDENTIALITY...................................................16 9.13 COUNTERPARTS......................................................16 9.14 FURTHER ASSURANCES................................................16
- ------------------------------------------------------------------------------- Securities Purchase Agreement iii SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), is made as of this 3rd day of February, 2000, by and among AMERICAN BIOGENETIC SCIENCES, INC., a Delaware corporation (the "Company") and the investors listed on EXHIBIT A hereto (collectively, the "Investors", and the Investors, excluding Alfred J. Roach, his heirs and assigns, the "BVF Investors"). W I T N E S S E T H: WHEREAS, the Company intends to amend its Certificate of Incorporation to authorize a class of Preferred Stock, par value $.001 per share (the "Preferred Stock"), and to thereafter designate 7,000 shares of the Preferred Stock as the Series A Convertible Preferred Stock, convertible into shares of the Company's Class A Common Stock, par value $.001 per share (the "Common Stock"), and otherwise having the designations, powers, preferences, and other terms set forth on EXHIBIT B hereto (the "Preferred Shares"); WHEREAS, the Investors desire to invest $3,500,000 in the Company in exchange for the Preferred Shares and the Company's common stock purchase warrants substantially in the form of EXHIBIT C hereto (each, a "Warrant" and collectively, the "Warrants") entitling the holders to purchase 7,000,000 shares of the Common Stock (the "Warrant Shares"); WHEREAS, in connection with the transactions contemplated by this Agreement, each of the BVF Investors has made a loan to the Company in a principal amount equal to the purchase price of the Preferred Shares and Warrants to be purchased by such BVF Investor hereunder and evidenced by Promissory Notes, dated February 7, 2000, made by the Company and payable to the order of (i) Biotechnology Value Fund, L.P. in the principal amount of $1,050,000 (the "First Note"); (ii) Biotechnology Value Fund II, L.P. in the principal amount of $1,800,000 (the "Second Note"); and (iii) to Investment 10 L.L.C. in the principal amount of $150,000 (the "Third Note", and collectively with the First Note and the Second Note, the "Notes"); and WHEREAS, the Company and the Investors desire to set forth certain matters to which they have agreed relating to the Warrants and the Preferred Shares. NOW THEREFORE, in consideration of the premises and the mutual covenants contained in this Agreement, the parties agree as follows: ARTICLE I. ISSUANCE AND TERMS OF WARRANTS AND PREFERRED SHARES 1.1 AUTHORIZATION OF SECURITIES. Subject to the terms and conditions of this Agreement, the Company has authorized, or prior to the Closing (as hereinafter defined) will have authorized, the issuance of the Preferred Shares, the Common Stock and the Warrants pursuant to this Agreement. 1.2 PURCHASE AND SALE OF PREFERRED SHARES, WARRANTS AND COMMON STOCK. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Company contained herein, the Investors agree to purchase from the Company and the Company agrees to sell to the Investors on the Closing Date (as hereinafter defined) for an aggregate purchase price of three million five hundred thousand dollars ($3,500,000) (i) the number of Preferred Shares set forth opposite each Investor's name on EXHIBIT A attached hereto, aggregating 7,000 Preferred Shares, or, upon the occurrence of the event described in Section 1.3(b) or (d) hereof, the number of shares of Common Stock described in such Sections, respectively; and (ii) the number of Warrants set forth opposite each Investor's name on EXHIBIT A attached hereto, aggregating Warrants to purchase 7,000,000 Warrant Shares. 1.3 PAYMENT. (a) On the Closing Date, (i) the entire principal amount of the Notes plus accrued interest shall become due and payable; (ii) the BVF Investors shall accept the number of Preferred Shares and Warrants set forth opposite the BVF Investors' names in EXHIBIT A attached hereto as payment in full of all the Company's obligations under the Notes; (iii) the Company shall pay the entire principal amount plus accrued interest under the Notes to the BVF Investors in the form of such Preferred Shares and Warrants; and (iv) thereupon, the BVF Investors shall have satisfied their obligations under Section 1.2 hereof and the Company shall have satisfied all of its obligations under the Notes. (b) In the event that the Closing Date shall not have occurred on or prior to March 15, 2000 due to the Company's failure to satisfy any of the conditions set forth in Article V hereof, then (i) the entire principal amount of the Notes plus accrued interest shall become due and payable; (ii) the BVF Investors shall accept the number of shares of Common Stock into which the number of Preferred Shares set forth opposite the BVF Investors' names in EXHIBIT A attached hereto would otherwise have been convertible and the number of Warrants set forth opposite the BVF Investors' names in EXHIBIT A attached hereto as payment in full of all the Company's obligations under the Notes; (iii) the Company shall pay the entire principal amount plus accrued interest under the Notes to the BVF Investors in the form of such Common Stock and Warrants; and (iv) thereupon, the BVF Investors shall have satisfied their obligations under Section 1.2 hereof and the Company shall have satisfied all of its obligations under the Notes. (c) On the Closing Date, (i) Alfred J. Roach shall accept the number of Preferred Shares and Warrants set forth opposite his name on EXHIBIT A attached hereto as payment of $500,000 of the Company's indebtedness to him; (ii) the Company shall pay such indebtedness in the form of such Preferred Shares and Warrants; and (iii) thereupon, Alfred J. Roach shall have satisfied his obligations under Section 1.2 hereof and the Company shall have satisfied $500,000 of such indebtedness. (d) In the event that the Closing Date shall not have occurred on or prior to March 15, 2000, then (i) Alfred J. Roach shall accept the number of shares of Common Stock equal to the number of Preferred Shares set forth opposite his name on EXHIBIT A attached hereto and the number of Warrants set forth opposite his name in EXHIBIT A attached hereto as payment of - ------------------------------------------------------------------------------- Securities Purchase Agreement 2 $500,000 of the Company's indebtedness to him; (ii) the Company shall pay such indebtedness in the form of such Common Stock and Warrants; and (iii) thereupon, Alfred J. Roach shall have satisfied his obligations under Section 1.2 hereof and the Company shall have satisfied $500,000 of such indebtedness. 1.4 AGREEMENT REGARDING WARRANTS. After the Closing, upon the request of the BVF Investors, the Company and the BVF Investors agree to negotiate in good faith commercially reasonable provisions permitting the "cashless exercise" of the Warrants, provided, that, at such time each of such parties determines in good faith that the addition of such provisions would be in such party's best interests. ARTICLE II. CLOSING 2.1 CLOSING. Subject to the satisfaction of the conditions set forth in Articles VI and VII hereof, the closing (the "Closing") shall take place at a place and time (the "Closing Date") mutually agreed by the Company and the Investors, but in any event no later than March 15, 2000. At the Closing, (a) the Company shall deliver to the Investors one or more stock certificates registered in their names for an aggregate of 7,000 Preferred Shares, or the applicable number of shares of Common Stock, as the case may be, against payment to the Company of the purchase price therefor pursuant to Section 1.3, and (b) the Company shall deliver to the Investors one or more Warrants registered in their names to purchase the number of shares indicated therein. 2.2 LEGEND. The certificates representing the Warrants and the Preferred Shares, or the Common Stock, as the case may be, shall be subject to a legend restricting transfer under the Securities Act of 1933, as amended (the "Securities Act"), such legend to be substantially as follows: "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON UNLESS (1) EITHER (A) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933 ("ACT"), OR (B) THE COMPANY SHALL HAVE REASONABLY REQUESTED AND RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS THEN AVAILABLE, AND (2) THERE SHALL HAVE BEEN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS." - ------------------------------------------------------------------------------- Securities Purchase Agreement 3 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to the Investors that, as of the date of this Agreement, the following are true and correct: 3.1 ORGANIZATION AND STANDING OF THE COMPANY. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has full corporate power and authority to enter into, deliver, and perform its obligations and undertakings under this Agreement. The Company is duly authorized to conduct its business and is in good standing under the laws of each jurisdiction where such qualification is required, except where the lack of such qualification would not have a material adverse effect on the business, financial condition, operations, results of operations, or future prospects of the Company. The Company has full corporate power and authority to carry on the business in which it is engaged and to own and use the properties owned and as used by it. 3.2 CAPITALIZATION. The Company's entire authorized capital stock consists of: (i) 100,000,000 shares of Class A Common Stock. par value $.001 per share, of which 39,708,907 shares are validly issued and outstanding; and (ii) 3,000,000 shares of Class B Common Stock, par value $.001 per share (the "Class B Common Stock"), all of which are validly issued and outstanding on the date hereof. On or before the Closing, the Company's Restated Certificate of Incorporation will have been amended to authorize 10,000,000 shares of the Preferred Stock and to designate 7,000 shares of the Preferred Stock as Series A Convertible Preferred Stock having the preferences, voting powers, qualifications and special or relative rights or privileges set forth in EXHIBIT B. The issuance of all presently issued and outstanding shares was duly authorized and all such shares are fully paid and non-assessable. All such issued and outstanding shares have the preferences, voting powers, qualifications and special or relative rights or privileges set forth in the Company's Restated Certificate of Incorporation, as amended as in effect on the date hereof, and as of the Closing Date the Preferred Stock will have the preferences, voting powers, qualifications and special or relative rights or privileges set forth in EXHIBIT B. The Preferred Shares will be senior in liquidation preference to all outstanding shares of the Common Stock and the Class B Common Stock. Other than as indicated on SCHEDULE 3.2 hereto or in the SEC Reports (as hereinafter defined), the Company does not have outstanding any option, warrant, purchase right, subscription right, stock appreciation right, phantom stock right, profit participation right, agreement or other commitment to issue or to acquire any shares of its capital stock, or any securities or obligations convertible into or exchangeable for its capital stock, and the Company has not given any person any right to acquire from the Company or sell to the Company any shares of its capital stock. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the capital stock of the Company. 3.3 VALIDITY OF THIS AGREEMENT. Subject to shareholder approval, the execution and delivery by the Company of this Agreement and the performance by the Company of its obligations under this Agreement, and - ------------------------------------------------------------------------------- Securities Purchase Agreement 4 the issuance, sale and delivery of the Preferred Shares, the Common Stock issuable upon conversion of the Preferred Shares, the Warrants, the Warrant Shares, and the Common Stock, if any, issuable pursuant to Section 1.3, have been duly authorized and approved by all necessary corporate action. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms. The execution and delivery by the Company of this Agreement and the performance by the Company of its obligations under this Agreement and the issuance, sale and delivery of the Preferred Shares, the Common Stock issuable upon conversion of the Preferred Shares, the Warrants, the Warrant Shares and the Common Stock, if any, issuable pursuant to Section 1.3, will not (i) conflict with, or result in any breach of any of the terms of, or constitute a default under, the Restated Certificate of Incorporation when the same will have been amended to designate the Preferred Shares, or By-laws of the Company, (ii) conflict with, result in a breach of or violation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under, any agreement, instrument, covenant or other restriction or arrangement to which the Company is a party or by which it or any of its properties or assets is bound or any statute law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its subsidiaries or any of its or their properties. 3.4 GOVERNMENTAL CONSENT, ETC. Except for filings, consents, permits, approvals and authorizations which will be obtained by the Company prior to the Closing and which are set forth in SCHEDULE 3.4, no consent, approval, authorization or other order of, action by, filing with, or notification to any governmental authority is required under existing law or regulation in connection with the execution, delivery and performance of the Agreement or the offer, issuance, sale or delivery of the Preferred Shares, the Common Stock issuable upon conversion of the Preferred Shares, the Warrants, the Warrant Shares and the Common Stock issuable pursuant to Section 1.3 pursuant to the Agreement or the consummation of any other transactions contemplated thereby. 3.5 VALID ISSUANCE OF SECURITIES. When issued and delivered against payment therefor in accordance with the terms and conditions of this Agreement and EXHIBIT B hereto, the Preferred Shares, the Common Stock issuable upon conversion of the Preferred Shares, the Warrants, the Warrant Shares and the Common Stock, if any, issuable pursuant to Section 1.3, shall be (i) duly authorized and validly issued, fully paid and non-assessable and (ii) not subject to any preemptive rights, liens, claims or encumbrances, or other restrictions on transfer or other agreements or understandings with respect to the voting of the Common Stock or the Warrant Shares, except as set forth in this Agreement or EXHIBIT B hereto. - ------------------------------------------------------------------------------- Securities Purchase Agreement 5 3.6 FINANCIAL STATEMENTS. The audited financial statements of the Company contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, including the notes relating thereto, and the unaudited financial statements of the Company contained in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999, June 30, 1999 and September 30, 1999, including the notes thereto, disclose all material liabilities of the Company as of such dates, except as set forth on SCHEDULE 3.6 hereto. Such financial statements, including the notes relating thereto, have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved. Said financial statements and related notes fairly present the financial position and the results of operations and cash flow of Company as of the respective dates thereof and for the periods indicated. 3.7 ACCURACY AND COMPLETENESS OF INFORMATION. The Common Stock is registered pursuant to Section 12(g) of Exchange Act. Copies of all reports filed by the Company with the United States Securities and Exchange Commission (the "Commission") pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act") during the period from December 31, 1998 to the date of this Agreement (the "Furnished SEC Reports") have been furnished to the Investors. Since January 1, 1997, the Company has filed each statement, annual, quarterly, and other report, registration statement and definitive proxy statement required to be filed (other than preliminary material) by the Company with the Commission (the "SEC Reports"). As of their respective filing dates, the SEC Reports complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and none of the SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. 3.8 ADVERSE CHANGES. Since September 30, 1999, except as set forth on SCHEDULE 3.8 hereto, there has not been any Material Adverse Change. For purposes of this Agreement, a "Material Adverse Change" means a material adverse change in the business, earnings, financial condition, results of operations, assets, employee relations, or customer or supplier relations (in each case whether or not arising in the ordinary course of business) or presently foreseeable prospects of the Company and its subsidiaries on an aggregate basis. 3.9 NO VIOLATION. Neither the execution and delivery by the Company of this Agreement, nor the consummation of the transactions contemplated hereby will violate any constitution, statute, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any government, governmental agency, or court known to the Company to which the Company is subject, or, after obtaining shareholder approval and amending the Restated Certificate of Incorporation to designate the Preferred Shares, any provision of its Restated Certificate of Incorporation or By-Laws. - ------------------------------------------------------------------------------- Securities Purchase Agreement 6 3.10 ALL NECESSARY PERMITS, ETC. The Company and each subsidiary possesses such valid and current certificates, authorizations or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies as are necessary to conduct their respective businesses, and neither the Company nor any subsidiary has received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such certificate authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Change. 3.11 TITLE TO PROPERTIES. The Company and each of its subsidiaries has good and marketable title to all the properties and assets reflected as owned by it in the financial statements referred to in Section 3.6 in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects, except (i) as set forth on SCHEDULE 3.11, or (ii) such as do not materially and adversely affect the value of such property and do not materially interfere with the use made or proposed to be made of such property by the Company or such subsidiary. The real property, improvements, equipment and personal property held under lease by the Company or any subsidiary are held under valid and enforceable leases, with such exceptions as are not material and do not materially interfere with the use made or proposed to be made of such real property, improvements, equipment or personal property by the Company or such subsidiary. 3.12 SECURITIES LAWS. All notices, filings, registrations or qualifications under state securities or "blue sky" laws which are required in connection with the offer, issue and delivery of the Preferred Shares, the Warrants, the Common Stock into which such Preferred Shares and Warrants are convertible pursuant to this Agreement and the Common Stock issuable pursuant to Section 1.3, if any, have been or will be timely completed by the Company. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS Each of the Investors hereby acknowledges, represents, warrants and agrees as follows: 4.1 AUTHORITY OF INVESTORS, VALIDITY OF THIS AGREEMENT. Each of the Investors has all requisite power and authority to enter into this Agreement and perform its obligations hereunder. The execution, delivery and performance by each of the Investors of this Agreement, and the purchase of the Warrants and the Preferred Shares pursuant hereto have been duly authorized and approved by all necessary corporate action. This Agreement has been duly executed and delivered and constitutes a valid and binding obligation of each of the Investors, enforceable in accordance with its terms. The execution, delivery and performance of this Agreement and the purchase of the Warrants and the Preferred Shares will not conflict with, or result in a material breach of any of the terms of, or constitute a material default under, any charter, by-law, agreement, instrument, covenant or other restriction to which any of the Investors is a party or by which it or any of its properties or assets is bound. - ------------------------------------------------------------------------------- Securities Purchase Agreement 7 4.2 INVESTMENT REPRESENTATIONS. Each of the Investors hereby acknowledges, represents, warrants and agrees as follows: (a) Each of the Investors has had the opportunity to review the Furnished SEC Reports and the financial statements contained therein. Each of the Investors acknowledges that the Company has made available to the Investors documents and information that it has requested relating to the Company and has provided answers to the Investors' questions concerning the Company, the Preferred Shares and the Warrants. (b) Each of the Investors is an "accredited investor" as defined in Rule 501(a)(3) of the Securities Act. (c) Each of the Investors understands that the offering of the Warrants and the Preferred Shares has not been registered under the Securities Act or the securities laws of any state or other jurisdiction and that such Warrants and the Preferred Shares must be held indefinitely unless an exemption from registration is available. Each of the Investors understands that the offering and sale of the Warrants and the Preferred Shares is intended to be exempt from registration under the Securities Act based, in part, upon the representations, warranties and agreements of the Investors contained in this Section 4.2, and the Company may rely on such representations, warranties and agreements in connection therewith. Each of the Investors covenants that it will not transfer the Warrants or the Preferred Shares in violation of the provisions of any applicable Federal or state securities statute. (d) Subject to the Investors' registration rights relating to the Common Stock underlying the Warrants and Preferred Shares and the Common Stock issuable pursuant to Section 1.3, in each case, pursuant to the terms of the Registration Agreement referred to in Section 5.1(j) hereof, each of the Investors is acquiring the Warrants and the Preferred Shares for investment, and not with a view to the resale or distribution thereof; it has no present intention of selling, negotiating, or otherwise disposing of the Warrants and the Preferred Shares. Each of the Investors' financial condition and investments are such that it is in a financial position to hold the Warrants and the Preferred Shares for an indefinite period of time and to bear the economic risk of, and withstand a complete loss of, such Warrants and the Preferred Shares. In addition, by virtue of its expertise, the advice available to it, and its previous investment experience, each of the Investors has sufficient knowledge and experience in financial and business matters, investments, securities, and private placements and the capability to evaluate the merits and risks of the transactions contemplated by this Agreement. ARTICLE V. CONDITIONS TO BVF INVESTORS' OBLIGATIONS 5.1 CONDITIONS TO CLOSING ON CLOSING DATE. The obligation of the BVF Investors to purchase and pay for the Warrants and the Preferred Shares and the Common Stock, if any, issuable pursuant to Section 1.3, on the Closing Date is subject to the following: - ------------------------------------------------------------------------------- Securities Purchase Agreement 8 (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company made herein shall be true, correct and complete on and as of the Closing Date with the same force and effect as if they had been made on and as of the Closing Date. (b) PERFORMANCE. All covenants, agreements and conditions contained in this Agreement to be performed or complied with by the Company on or prior to the Closing Date shall have been performed or complied with. (c) OPINION OF COMPANY'S COUNSEL. The BVF Investors shall have received an opinion of Brown, Rudnick, Freed & Gesmer, counsel for the Company, in form and substance reasonably satisfactory to the BVF Investors. (d) CORPORATE PROCEEDINGS, CONSENTS, ETC. All corporate and other proceedings to be taken and all waivers and consents to be obtained in connection with the transactions contemplated by this Agreement shall have been taken or obtained and all documents incident thereto shall be reasonably satisfactory in form and substance to the BVF Investors and their counsel, each of whom shall have received all such originals or certified or other copies of such documents as each may reasonably request. (e) SHAREHOLDER APPROVAL. The Company shall have obtained the approval of shareholders representing at least a majority of the votes by all then outstanding shares of the Common Stock and the Class B Common Stock, voting together as one class, to the authorization of the Preferred Stock. (f) NO PROCEEDING. No action, suit, investigation or proceeding shall be pending or threatened before any court or governmental agency to restrain, prohibit, collect damages as a result of or otherwise challenge this Agreement or any transaction contemplated hereby or thereby. (g) NO LAW PROHIBITING OR RESTRICTING SUCH SALE. There shall not be in effect any law, rule or regulation prohibiting or restricting such sale, or requiring any consent or approval of any person which shall not have been obtained to issue the Warrants, the Preferred Shares, the Common Stock into which the Warrants and Preferred Shares are convertible and the Common Stock issuable pursuant to Section 1.3. (h) OFFICER'S CERTIFICATE DELIVERED BY COMPANY. The Company shall have delivered to the Investors a certificate, dated the Closing Date and signed by the Chief Executive Officer or the President of the Company, to the effect that each of the conditions to be satisfied by the Company pursuant to this Section 5.1 on or before the Closing Date has been duly satisfied. (i) AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION. The Company's Restated Certificate of Incorporation shall have been amended to authorize the issuance of Preferred Stock, and either that amendment or a separate Certificate of Designation establishing the Preferred Shares having the terms set forth on EXHIBIT B hereto shall have been filed with the Secretary of State of the State of Delaware. - ------------------------------------------------------------------------------- Securities Purchase Agreement 9 (j) REGISTRATION AGREEMENT. The Company and the Investors shall have executed and delivered a Registration Agreement in the form of EXHIBIT D hereto. (k) ABBOTT LICENSE AND INVESTMENT. The Company shall have entered into the Exclusive License Agreement, dated as of January 27, 2000 (the "License Agreement"), with Abbott Laboratories related to the marketing of the Company's ABS-103 Compound and a Stock Purchase Agreement, dated as of January 27, 2000 (the "Stock Purchase Agreement), with Abbott Laboratories pursuant to which Abbott Laboratories shall have purchased 2,782,931 shares of Class A Common Stock of the Company for $1.5 million in cash in accordance with the terms thereof. The License Agreement and the Stock Purchase Agreement are attached hereto as EXHIBITS E and F, respectively. (l) NO MATERIAL ADVERSE CHANGE. There shall have been no Material Adverse Change in the Company since the date of signing of this Agreement. (m) LEGAL MATTERS. All material matters of a legal nature which pertain to this Agreement and the transactions contemplated hereby shall have been reasonably approved by counsel to the BVF Investors. ARTICLE VI. CONDITIONS TO THE COMPANY'S OBLIGATIONS 6.1 CONDITIONS TO CLOSING. The obligation of the Company to issue the Warrants and the Preferred Shares, respectively, to the Investors on the Closing Date is subject to the following: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Investors made herein shall be true, correct and complete in all respects on and as of the Closing Date with the same force and effect as if they had been made on and as of the Closing Date. (b) NO PROCEEDING. No action, suit, investigation or proceeding shall be pending or threatened before any court or governmental agency to restrain, prohibit, collect damages as a result of or otherwise challenge this Agreement or any transaction contemplated hereby or thereby. (c) NO LAW PROHIBITING OR RESTRICTING SUCH SALE. There shall not be in effect any law, rule or regulation prohibiting or restricting such sale, or requiring any consent or approval of any person which shall not have been obtained to issue the Warrants and the Preferred Shares. - ------------------------------------------------------------------------------- Securities Purchase Agreement 10 ARTICLE VII. COVENANTS OF THE COMPANY For so long as the BVF Investors continue to hold not less than 50% of the Preferred Shares held by such Investors on the Closing Date, the Company hereby covenants to such Investors as follows: 7.1 FURNISHING OF INFORMATION. The Company covenants to timely file (or obtain extensions in respect thereof) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act and to promptly furnish the Investors with true and complete copies of all such filings. If the Company is not at the time required to file reports pursuant to such sections, it will prepare and furnish to the Investors annual and quarterly reports comparable to those required by Section 13(a) or 15(d) of the Exchange Act in the time period that such filings would have been required to have been made under the Exchange Act. 7.2 INFORMATION WITH RESPECT TO THE SECURITIES. The Company covenants to provide such information as is reasonably requested by any of the Investors related to the terms of the Preferred Shares, the Common Stock, Warrants or Warrant Shares. 7.3 SHAREHOLDER APPROVAL. The Company shall use its best efforts to obtain the shareholder approval described in Section 5.1(e) hereof prior to the Closing Date. 7.4 LICENSE AGREEMENT. The Company covenants that it will not reduce, assign, transfer or otherwise convey all or any portion of the royalties under the License Agreement without the consent of the BVF Investors; provided, that nothing in the foregoing shall prohibit the Company from causing or permitting liens or security interests upon such royalties in connection with a financing for borrowed money from a financial institution. 7.5 INVESTOR'S RIGHTS. Notwithstanding anything to the contrary in the foregoing, the Investors shall be entitled to such information, privileges, rights and benefits accorded to them as holders of the Preferred Shares under applicable law and under the Company's Restated Articles of Incorporation, as amended, and By-laws. ARTICLE VIII. SURVIVAL AND INDEMNIFICATION 8.1 SURVIVAL. Notwithstanding any examination made by or on behalf of any party hereto, the knowledge of any party or the acceptance by any party of any certificate or opinion, each - ------------------------------------------------------------------------------- Securities Purchase Agreement 11 representation, warranty contained herein shall survive the Closing for a period of two years, and each covenant shall survive for the period indicated therein. 8.2 INDEMNIFICATION. (a) The Company shall indemnify and hold harmless each Investor, its shareholders, officers, directors, employees, agents and representatives against any damage, claim, loss, liability and expense (including reasonable counsel fees and expenses) which may be suffered or incurred by any of them as a result of a breach of any representation or warranty or covenant made by the Company in this Agreement, provided that, solely with respect to such representation or warranty, a claim is asserted within the time provided in Section 8.1. (b) The Investors, jointly and severally, agree to indemnify the Company and its shareholders, officers, directors, employees, agents and representatives against any damages, claims, losses, liabilities and expenses (including reasonable counsel fees and other expenses) which may be suffered or incurred by it as a result of any breach of any representation, warranty, or covenant made by the Investors in this Agreement, provided that a claim is asserted within the time provided in Section 8.1. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to this Section, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing of the occurrence of the facts and circumstances giving rise to such claim. The failure of any person to deliver the notice required by this Section 8.2(c) shall not in any way affect the indemnifying party's indemnification obligation hereunder except and only to the extent that the indemnifying party is actually prejudiced thereby. In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel or pay its own expenses. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceedings (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment and the indemnifying party shall obtain a full release of the indemnified party. - ------------------------------------------------------------------------------- Securities Purchase Agreement 12 ARTICLE IX. MISCELLANEOUS 9.1 NOTICES. All notices, requests, consents and other communications hereunder shall be in writing, shall be addressed to the receiving party's address set forth below or to such other address as a party may designate by notice hereunder, and shall be either (i) delivered by hand, (ii) made by telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv) sent by registered mail, return receipt requested, postage prepaid. If to the BVF Investors: c/o BVF Partners, L.P. One Sansome Street, 39th Floor San Francisco, CA 94104 Attn: Mr. Mark Lampert Fax: (415) 288-2394 With a copy to: Sidley & Austin 875 Third Avenue New York, NY 10022 Attn: Paul K. Risko, Esq. Fax: (212) 906-2021 If to Alfred J. Roach: c/o American Biogenetic Sciences, Inc. 1375 Akron Street Copiague, New York 11726 Attn: Chief Executive Officer Fax: (516) 789-1661 With a copy to Brown, Rudnick, Freed & Gesmer One Financial Center Boston, Massachusetts 02111 Attn: David H. Murphree, Esq. Fax: (617) 856-8201 If to the Company: American Biogenetic Sciences, Inc. 1375 Akron Street Copiague, New York 11726 Attn: Chief Executive Officer Fax: (516) 789-1661 With a copy to Brown, Rudnick, Freed & Gesmer One Financial Center Boston, Massachusetts 02111 Attn: David H. Murphree, Esq. Fax: (617) 856-8201 - ------------------------------------------------------------------------------- Securities Purchase Agreement 13 All notices, requests, consents and other communications hereunder shall be deemed to have been given either (i) if by hand, at the time of the delivery thereof to the receiving party at the address of such party set forth above, (ii) if made by telecopy or facsimile transmission, one (1) day after the time that receipt thereof has been acknowledged by electronic confirmation or otherwise, (iii) if sent by overnight courier, on the next business day following the day such notice is delivered to the courier service, or (iv) if sent by registered mail, on the 5th business day following the day such mailing is made. 9.2 ENTIRE AGREEMENT. This Agreement, including exhibits, or other documents referred to herein, embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof. No statement, representation, warranty, covenant or agreement of any kind not expressly set forth in this Agreement shall affect, or be used to interpret, change or restrict, the express terms and provisions of this Agreement. 9.3 AMENDMENTS. The terms and provisions of the Agreement may be modified, amended or waived, or consent for the departure therefrom granted, only by written consent of the Company and Investors holding at least 50% of the Preferred Shares or 50% of the shares of Common Stock issuable upon conversion of the Preferred Shares or pursuant to Section 1.3(b) hereof. No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent. 9.4 ASSIGNMENT. Neither this Agreement nor any or all of the rights and obligations of a party hereunder shall be assigned, delegated, sold, transferred or otherwise disposed of by operation of law or otherwise, to any third person without the prior written consent of the other party, and any attempted assignment, delegation, sale, transfer, or other disposition, by operation of law or otherwise, of this Agreement or of any rights or obligations hereunder contrary to this Section 9.4 shall be void and without force or effect. Each party shall be responsible for the compliance by its Affiliates with the terms and conditions of this Agreement. 9.5 BENEFIT. All statements, representations, warranties, covenants and agreements in this Agreement shall be binding on the parties hereto and shall inure to the benefit of the respective successors and permitted assigns of each party hereto. Nothing in this Agreement shall be construed to create any rights or obligations except among the parties hereto, and no person or entity shall be regarded as a third-party beneficiary of this Agreement. - ------------------------------------------------------------------------------- Securities Purchase Agreement 14 9.6 GOVERNING LAW. This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the law of the State of New York. 9.7 SEVERABILITY. In the event that any court of competent jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement shall be unreasonable or unenforceable in any respect, then such provision shall be deemed limited to the extent that such court deems it reasonable and enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any such provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall be interpreted as if such provision were so excluded and shall nevertheless remain in full force and effect. 9.8 HEADINGS AND CAPTIONS. The headings and captions of the various subdivisions of this Agreement are for convenience of reference only and shall in no way modify, or affect the meaning or construction of any of the terms or provisions hereof. 9.9 NO WAIVER OF RIGHTS, POWERS AND REMEDIES. No failure or delay by a party hereto in exercising any right, power or remedy under this Agreement, and no course of dealing between the parties hereto, shall operate as a waiver of any such right, power or remedy of the party. No single or partial exercise of any right, power or remedy under this Agreement by a party hereto, nor any abandonment or discontinuance of steps to enforce any such right, power or remedy, shall preclude such party from any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The election of any remedy by a party hereto shall not constitute a waiver of the right of such party to pursue other available remedies. No notice to or demand on a party not expressly required under this Agreement shall entitle the party receiving such notice or demand to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the party giving such notice or demand to any other or further action in any circumstances without such notice or demand. 9.10 EXPENSES. Except as provided in Section 8.2, each of the parties shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby whether or not the transactions contemplated hereby are consummated; provided, that, the Company shall pay such fees and expenses (including attorney's fees) of the BVF Investors up to $5,000. 9.11 BROKERS. Each of the parties hereto represents and warrants to the other that no broker, finder or financial consultant has acted on its behalf in connection with this Agreement or the transactions - ------------------------------------------------------------------------------- Securities Purchase Agreement 15 contemplated hereby in such a way as to create any liability on the other. Each of the parties hereto agrees to indemnify and save the other harmless from any claim or demand for commission or other compensation by any other broker, finder, financial consultant or similar agent claiming to have been employed by or on behalf of such party and to bear the cost of legal expenses incurred in defending against any such claim. 9.12 CONFIDENTIALITY. The Investors acknowledge and agree that any information or data they have acquired from the Company, which is clearly designated in writing as confidential and is not otherwise properly in the public domain, was received in confidence. Each of the Investors agrees not to divulge, communicate or disclose, except as may be required by law or upon the advice of its accountants or for the performance of this Agreement, or use to the detriment of the Company or for the benefit of any other person or persons, or misuse in any way, any confidential information of the Company. 9.13 COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by different parties hereto on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.14 FURTHER ASSURANCES. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, the Company and the Investors will take such further action as the other party may reasonably request, all at the sole cost and expense of the requesting party (unless the requesting party is entitled to indemnification therefor under Article VIII). [REMAINDER OF PAGE IS INTENTIONALLY BLANK] - ------------------------------------------------------------------------------- Securities Purchase Agreement 16 IN WITNESS WHEREOF, the undersigned have executed this Stock Purchase Agreement as of this 3rd day of February, 2000. EXHIBIT A TO SECURITIES PURCHASE AGREEMENT INVESTORS:
NAME PREFERRED SHARES WARRANTS - ---------------------------------- ------------------ ------------------- ALFRED J. ROACH 1,000 1,000,000 BIOTECHNOLOGY VALUE FUND, L.P. 2,100 2,100,000 BIOTECHNOLOGY VALUE FUND II, L.P. 3,600 3,600,000 INVESTMENT 10 L.L.C. 300 300,000
- ------------------------------------------------------------------------------- Securities Purchase Agreement EX-99.C 4 EXHIBIT 99.C EXHIBIT 99C PROMISSORY NOTES PROMISSORY NOTE $1,050,000 Copiague, New York February 7, 2000 FOR VALUE RECEIVED, the undersigned ("Maker"), hereby promises to pay to the order of Biotechnology Value Fund, L.P. ("Holder") the sum of ONE MILLION FIFTY THOUSAND DOLLARS ($1,050,000), together with interest on the unpaid principal amount from time to time outstanding at a fluctuating rate per annum equal to the Prime Rate. Interest and fees shall be calculated on the basis of a 360-day year for the actual days elapsed. The "Prime Rate" as used herein, shall mean the prime rate of interest as published from time to time by THE WALL STREET JOURNAL. Any change in rate resulting from a change in the Prime Rate shall become effective as of the day on which such change in the Prime Rate becomes effective. Maker, Holder, Biotechnology Value Fund II, L.P., Investment 10 L.L.C. and Alfred J. Roach are parties to that certain Securities Purchase Agreement, dated as of February 3, 2000 (the "Purchase Agreement"). The principal amount of this note, plus accrued interest, shall be due and payable as set forth in Sections 1.3(a) and (b) of the Purchase Agreement. Maker hereby waives presentment, demand, notice, protest, and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this note, and assent to extensions of the time of payment or forbearance or other indulgence without notice. No delay or omission of Holder in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. Acceptance by Holder of any payment after demand shall not be deemed a waiver of such demand. A waiver on one occasion shall not operate as a bar to or waiver of any such right or remedy on any future occasion. This instrument shall be governed by the laws of the State of New York. Executed as an instrument under seal as of the date first above written. MAKER: AMERICAN BIOGENETIC SCIENCES, INC. By: ------------------------------- Name: Title: PROMISSORY NOTE $1,800,000 Copiague, New York February 7, 2000 FOR VALUE RECEIVED, the undersigned ("Maker"), hereby promises to pay to the order of Biotechnology Value Fund II, L.P. ("Holder") the sum of ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS ($1,800,000), together with interest on the unpaid principal amount from time to time outstanding at a fluctuating rate per annum equal to the Prime Rate. Interest and fees shall be calculated on the basis of a 360-day year for the actual days elapsed. The "Prime Rate" as used herein, shall mean the prime rate of interest as published from time to time by THE WALL STREET JOURNAL. Any change in rate resulting from a change in the Prime Rate shall become effective as of the day on which such change in the Prime Rate becomes effective. Maker, Holder, Biotechnology Value Fund L.P., Investment 10 L.L.C. and Alfred J. Roach are parties to that certain Securities Purchase Agreement, dated as of February 3, 2000 (the "Purchase Agreement"). The principal amount of this note, plus accrued interest, shall be due and payable as set forth in Sections 1.3(a) and (b) of the Purchase Agreement. Maker hereby waives presentment, demand, notice, protest, and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this note, and assent to extensions of the time of payment or forbearance or other indulgence without notice. No delay or omission of Holder in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. Acceptance by Holder of any payment after demand shall not be deemed a waiver of such demand. A waiver on one occasion shall not operate as a bar to or waiver of any such right or remedy on any future occasion. This instrument shall be governed by the laws of the State of New York. Executed as an instrument under seal as of the date first above written. MAKER: AMERICAN BIOGENETIC SCIENCES, INC. By: ------------------------------- Name: Title: 2 PROMISSORY NOTE $150,000 Copiague, New York February 7, 2000 FOR VALUE RECEIVED, the undersigned ("Maker"), hereby promises to pay to the order of Investment 10 L.L.C. ("Holder") the sum of ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000), together with interest on the unpaid principal amount from time to time outstanding at a fluctuating rate per annum equal to the Prime Rate. Interest and fees shall be calculated on the basis of a 360-day year for the actual days elapsed. The "Prime Rate" as used herein, shall mean the prime rate of interest as published from time to time by THE WALL STREET JOURNAL. Any change in rate resulting from a change in the Prime Rate shall become effective as of the day on which such change in the Prime Rate becomes effective. Maker, Holder, Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., and Alfred J. Roach are parties to that certain Securities Purchase Agreement, dated as of February 3, 2000 (the "Purchase Agreement"). The principal amount of this note, plus accrued interest, shall be due and payable as set forth in Sections 1.3(a) and (b) of the Purchase Agreement. Maker hereby waives presentment, demand, notice, protest, and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this note, and assent to extensions of the time of payment or forbearance or other indulgence without notice. No delay or omission of Holder in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. Acceptance by Holder of any payment after demand shall not be deemed a waiver of such demand. A waiver on one occasion shall not operate as a bar to or waiver of any such right or remedy on any future occasion. This instrument shall be governed by the laws of the State of New York. Executed as an instrument under seal as of the date first above written. MAKER: AMERICAN BIOGENETIC SCIENCES, INC. By: ------------------------------- Name: Title: 3 EX-99.D 5 EXHIBIT 99.D EXHIBIT 99D WARRANT CERTIFICATE THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON UNLESS (1) EITHER (A) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, OR (B) THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS THEN AVAILABLE, AND (2) THERE SHALL HAVE BEEN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS. WARRANT CERTIFICATE DATED FEBRUARY 29, 2000 WARRANT TO PURCHASE SHARES OF COMMON STOCK OF AMERICAN BIOGENETIC SCIENCES, INC. No. ________ For the Purchase of _______ Shares of Class A Common Stock AMERICAN BIOGENETIC SCIENCES, INC., a Delaware corporation (the "Company"), hereby certifies that, for value received, _________________________ ("Holder"), or its registered assigns, is the registered owner of a warrant (the "Warrant") to purchase from the Company ___________ shares of the Class A Common Stock, $.001 par value per share, of the Company (the "Common Stock"; each such share being a "Warrant Share" and all such shares being the "Warrant Shares") at a price of $1.00 per share (the "Exercise Price"), subject to adjustment from time to time as provided in Section 6. Except as specified in Section 3(e) hereof, this Warrant may be exercised at any time or from time to time until and including the earliest to occur of (i) the date of the filing of a New Drug Application with the United States Food and Drug Administration for the Company's ABS-103 compound, (ii) February 28, 2005, and (iii) the 30th day after the Company shall send notice of redemption pursuant to Section 8 hereof (the "Expiration Date"), all subject to the following terms and conditions: 1. REGISTRATION OF WARRANTS. The Company shall register each Warrant, upon records to be maintained by the Company for that purpose, in the name of the record Holder of such Warrant from time to time. The Company may deem and treat the registered Holder of each Warrant as the absolute owner thereof for the purpose of any exercise thereof or any distribution to the Holder thereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. 2. REGISTRATION OF TRANSFERS AND EXCHANGES. (a) Subject to Section 2(c) below, the Company shall register the transfer of any Warrants upon records to be maintained by the Company for that purpose, upon surrender of this Warrant Certificate, with the Form of Assignment attached hereto duly completed and signed, to the Company at the office specified in or pursuant to Section 3(c). Upon any such registration of - ------------------------------------------------------------------------------- Warrant Certificate transfer, a new Warrant Certificate, in substantially the form of this Warrant Certificate, evidencing the Warrants so transferred shall be issued to the transferee and a new Warrant Certificate, in similar form, evidencing the remaining Warrants not so transferred, if any, shall be issued to the then registered Holder thereof. (b) This Warrant Certificate is exchangeable, upon the surrender hereof by the Holder hereof at the office of the Company specified in or pursuant to Section 3(c), for new Warrant Certificates, in substantially the form of this Warrant Certificate, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder, each of such new Warrant Certificates to be dated the date of such exchange and to represent the right to purchase such number of Warrant Shares as shall be designated by said Holder hereof at the time of such surrender. (c) Each Holder of this Warrant acknowledges that this Warrant is subject to restrictions on transfer set forth in the Securities Purchase Agreement, dated as of January __, 2000 (the "Securities Purchase Agreement"), among the Company and the investors listed on Exhibit A thereto, and agrees to be bound by the restrictions on the sale, pledge, assignment and transfer of the Warrant contained therein. Each Holder of this Warrant acknowledges that this Warrant and the Warrant Shares have not been registered under the Securities Act of 1933, as now in force or hereafter amended, or any successor legislation (the "Act"), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise in the absence of (a) an effective registration statement under the Act as to such Warrant Shares and registration or qualification of such Warrant Shares under any applicable Blue Sky or state securities law then in effect, or (b) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required. Without limiting the generality of the foregoing, the Company shall be under no obligation to issue the shares covered by such exercise unless and until the Holder shall have executed an investment letter in form and substance satisfactory to the Company, including a warranty at the time of such exercise that it is acquiring such shares for its own account, for investment and not with a view to, or for sale in connection with, the distribution of any such shares, in which event the Holder shall be bound by the provisions of the following legend or a legend in substantially similar form which shall be endorsed upon the certificate(s) evidencing the Warrant Shares issued pursuant to such exercise: "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED BY ANY PERSON UNLESS (1) EITHER (A) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933, OR (B) THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS THEN AVAILABLE, AND (2) THERE SHALL HAVE BEEN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS." - ------------------------------------------------------------------------------- Warrant Certificate 2 In addition, without limiting the generality of the foregoing, the Company may delay issuance of the Warrant Shares until completion of any action or obtaining of any consent, which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws). 3. DURATION AND EXERCISE OF WARRANTS. (a) Warrants shall be exercisable by the registered Holder thereof on any business day before 5:00 P.M., New York time, at any time and from time to time to and including the Expiration Date. At 5:00 P.M., New York time, on the Expiration Date each Warrant not exercised prior thereto shall be and become void and of no value. (b) Subject to the limitations set forth in Section 3(c) and to the other provisions of this Warrant Certificate, including adjustments to the number of Warrant Shares issuable upon the exercise of each Warrant and to the Exercise Price pursuant to Section 6, the Holder of each Warrant shall have the right to purchase from the Company (and the Company shall be obligated to issue and sell to such Holder of a Warrant) at the Exercise Price one fully paid Warrant Share which is non-assessable. (c) Subject to Sections 2(b), 2(c), 4 and 7, upon surrender of this Warrant Certificate (with the Form of Election to Purchase attached hereto duly completed and signed) to the Company at its office at 1375 Akron Street, Copiague, New York 11726 Attention: Chief Financial Officer, or at such other address as the Company may specify in writing to the then registered Holder of the Warrants, and upon payment of the Exercise Price multiplied by the number of Warrant Shares then issuable upon exercise of the Warrants being exercised in lawful money of the United States of America, all as specified by the Holder of this Warrant Certificate in the Form of Election to Purchase, the Company shall promptly issue and cause to be delivered to or upon the written order of the registered Holder of such Warrants, and in such name or names as such registered Holder may designate, a certificate for the Warrant Shares issued upon such exercise of such Warrants. Any person so designated to be named therein shall be deemed have become Holder of record of such Warrant Shares as of the Date of Exercise of such Warrants. The "Date of Exercise" of any Warrant means the date on which the Company shall have received (i) this Warrant Certificate, with the Form of Election to Purchase attached hereto appropriately completed and duly signed, and (ii) payment of the Exercise Price for such Warrant. (d) The Warrants evidenced by this Warrant Certificate shall be exercisable, either as an entirety or, from time to time, for part of the number of Warrants evidenced by this Warrant Certificate. If less than all of the Warrants evidenced by this Warrant Certificate are exercised at any time, the Company shall issue, at its expense, a new Warrant Certificate, in substantially the form of this Warrant Certificate, for the remaining number of Warrants evidenced by this Warrant Certificate. - ------------------------------------------------------------------------------- Warrant Certificate 3 4. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes attributable to the issuance of Warrant Shares upon the exercise of the Warrants represented by this Certificate; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares in a name other than that of the Holder, and the Company shall not be required to issue or deliver the certificates for Warrant Shares unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Warrants represented by this Certificate or receiving the Warrant Shares under this Warrant Certificate. 5. REPLACEMENT OF WARRANT. If this Warrant is mutilated, lost, stolen or destroyed, the Company may in its discretion issue in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a new Warrant of like tenor, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and indemnity, if requested, satisfactory to it. Applicants for a substitute Warrant certificate also shall comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 6. ADJUSTMENT TO THE NUMBER OF WARRANT SHARES ISSUABLE. The number of Warrant Shares issuable upon the exercise of this Warrant is subject to adjustment from time to time as set forth in this Section 6. Upon each such adjustment of the Exercise Price pursuant to this Section 6, the Holder shall thereafter prior to the Expiration Date be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of Warrant Shares obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. In the event the Company and the Holders of Warrants disagree as to any adjustment to the Exercise Price hereunder, an Appraiser (as defined below) selected by the Holders of a majority in interest of the Warrants shall give its opinion as to the adjustment, if any (not inconsistent with the standards established in this Section 6), of the Exercise Price; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to promptly select an additional Appraiser, in which case the adjustment shall be equal to the average of the adjustments recommended by each such Appraiser. The Board of Directors shall make the adjustment recommended forthwith upon the receipt of such opinion or opinions; provided, however, that no such adjustment of the Exercise Price shall be made which in the opinion of the Appraiser(s) giving the aforesaid opinion or opinions would result in an increase of the Exercise Price to more than the Exercise Price then in effect. (a) If the Company, at any time while this Warrant is outstanding, (i) shall pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock payable in shares of its Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger number of shares, (iii) combine outstanding shares of Common Stock into a smaller - ------------------------------------------------------------------------------- Warrant Certificate 4 number of shares, or (iv) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 6(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (b) If the Company, at any time while this Warrant is outstanding, shall issue rights or warrants to all holders of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the lesser of the Average Market Price or the Exercise Price ("Minimum Price") at the record date mentioned below, the Exercise Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such Minimum Price. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. However, upon the expiration of any right or warrant to purchase Common Stock the issuance of which resulted in an adjustment in the Exercise Price pursuant to this Section 6(b), if any such right or warrant shall expire and shall not have been exercised, the Exercise Price shall immediately upon such expiration be recomputed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Exercise Price made pursuant to the provisions of this Section 6 after the issuance of such rights or warrants) had the adjustment of the Exercise Price made upon the issuance of such rights or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights or warrants actually exercised. (c) If the Company, at any time while this Warrant is outstanding, shall distribute to all Holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets, then in each such case the Exercise Price for which the Warrant Shares shall be purchased shall be determined by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Exercise Price determined as of such record date, and of which the numerator shall be the Exercise Price on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors of the Company (the "Board of Directors") in good faith; provided, however, that in the event of a distribution exceeding 10% of the net assets of the Company, such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) (an "Appraiser") selected in good faith by the Holders of a majority of the Warrants that are then outstanding; and further provided, - ------------------------------------------------------------------------------- Warrant Certificate 5 however, that the Company, after receipt of the determination by such Appraiser shall have the right to select an additional Appraiser, in which case the fair market value shall be equal to the average of the determinations by each such Appraiser. In either case the adjustments shall be described in a statement provided to the Holder and all other Holders of Warrants of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. (d) In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, the sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property, then the Holder shall have the right thereafter to exercise this Warrant only for the shares of stock and other securities and property receivable upon or deemed to be held by Holders of Common Stock following such reclassification, consolidation, merger, sale, transfer or share exchange, and the Holder shall be entitled upon such event to receive such amount of securities or property as the shares of the Common Stock into which this Warrant could have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange would have been entitled. The terms of any such consolidation, merger, sale, transfer or share exchange shall include such terms so as to continue to give to the Holder the right to receive the securities or property set forth in this Section 6(d) upon any exercise following such consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges. (e) If: (i) the Company shall declare a dividend (or any other distribution) on its Common Stock; or (ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or (iii) the Company shall authorize the granting to all Holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or (iv) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company (other than a subdivision or combination of the outstanding shares of Common Stock), any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (v) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding-up of the affairs of the Company; - ------------------------------------------------------------------------------- Warrant Certificate 6 then the Company shall cause to be filed at each office or agency maintained for the purpose of exercise of this Warrant, and shall cause to be mailed to the Holder in accordance with Section 10 hereof, at least thirty (30) days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the Holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that Holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding-up; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. (f) In any case in which this Section 6 shall require that an adjustment be made effective as of the record date for a specified event, the Company may elect to defer until occurrence of such event (A) if this Warrant is exercised after such record date, issuing to the Holder, the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise until such time as it has issued the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise on the basis of the Exercise Price prior to adjustment and (B) paying to the Holder any amount in cash in lieu of a fractional share pursuant to Section 8 hereof; provided, however, that the Company shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional Warrant Shares, other capital stock and/or cash upon the occurrence of the event requiring such adjustment. (g) Any determination that the Company or the Board of Directors must make pursuant to this Section 6 shall be conclusive if made in good faith. 7. REDEMPTION. In the event that at any time while this Warrant is outstanding the Average Market Price at any time exceeds $5.00, the Company may, at its option, redeem this Warrant upon 30 days written notice to the Holder. The redemption price for this Warrant shall be $.01 per Warrant Share for which this Warrant may be exercised, subject to adjustment as would be applied to the Exercise Price as set forth in Section 6 hereof (the "Redemption Price"). The Company shall pay the Redemption Price of this Warrant to registered holder hereof. Unless previously exercised, on or prior to the thirtieth day following receipt of written notice of the Company's intent to redeem this Warrant, the Holder shall surrender this Warrant certificate to the Company and this Warrant shall be cancelled and retired. Regardless of the surrender of this Warrant certificate, upon payment of the Redemption Price this Warrant will be void and of no value. - ------------------------------------------------------------------------------- Warrant Certificate 7 8. FRACTIONAL SHARES. The Company shall not be required to issue fractional Warrant Shares on the exercise of this Warrant. The number of full Warrant Shares which shall be issuable upon the exercise of this Warrant shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of this Warrant so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 8, be issuable on the exercise of this Warrant, the Company shall pay an amount in cash equal to the Exercise Price multiplied by such fraction. 9. WARRANT AGENT. (a) The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days' notice to the Holder, the Company and the Holder may appoint a new warrant agent. After acceptance in writing of such appointment by the new warrant agent, it shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as the warrant agent, without any further assurance, conveyance, act or deed, but if for any reason it shall be necessary or expedient to execute and deliver any further assurance, conveyance, act or deed, the same shall be done at the expense of the Company and shall be legally and validly executed and delivered by the Company. (b) Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the register maintained the warrant agent pursuant to this Warrant. 10. NOTICES. All notices or other communications hereunder shall be given, and shall be deemed duly given and received if given, by facsimile and by mail, postage prepaid: (1) if to the Company, addressed as follows: AMERICAN BIOGENETIC SCIENCES, INC 1375 Akron Street Copiague, N.Y. 11726, Attention: Chief Financial Officer, or to facsimile no. (516) 789-1661; or (ii) if to the Holder, addressed to the Holder at the facsimile telephone number and address of the Holder appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section 11. Any such notice shall be deemed given and effective upon the earliest to occur of (i) receipt of such facsimile at the facsimile telephone number specified in this Section 11, (ii) five (5) Business Days after deposit in the United States mails or (iii) upon actual receipt by the party to whom such notice is required to be given. 11. MARKET PRICE. (a) As used in this Warrant, the term "Market Price" means on any particular date (a) if the Common Stock is then principally traded on any national securities exchange or the Nasdaq National Market, the closing sale price per share of the Common Stock on such date on - ------------------------------------------------------------------------------- Warrant Certificate 8 the principal market on which the Common Stock is then traded, or if there is no such sale price on such date then the closing sale price on the date nearest preceding such date, or (b) if the Common Stock is not listed on a national securities exchange or the Nasdaq National Market, the average of the bid and asked price for a share of Common Stock on the Nasdaq SmallCap Market or in the over-the-counter market as reported by the Nasdaq Bulletin Board or National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), or (c) if the Common Stock is not publicly traded, the fair market value of a share of Common Stock as determined by an Appraiser (which shall conduct a good faith appraisal) selected by the Holders of a majority in interest of the shares of the Series A Preferred Stock; provided, however, that the Company, after receipt of the determination by such Appraiser, shall have the right to select an additional Appraiser (which shall conduct a good faith appraisal), in which case, the fair market value shall be equal to the average of the determinations by each such Appraiser. (b) As used in this Warrant, the term "Average Market Price" means the arithmetic average (rounded to the nearest cent) of the Market Price per share of the Class A Common Stock for the twenty (20) consecutive trading days ending on the second trading day prior to the date of determination. 12. MISCELLANEOUS. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. (b) Nothing in this Warrant shall be construed to give to any person or corporation other than the Company, the Holder and any registered Holder of Warrant Shares any legal or equitable right, remedy or cause under this Warrant; this Warrant shall be for the sole and exclusive benefit of the Company, the Holder and any other registered Holder of Warrant Shares. (c) This Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. (d) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. (e) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. - ------------------------------------------------------------------------------- Warrant Certificate 9 EX-99.E 6 EXHIBIT 99.E EXHIBIT 99E CERTIFICATE OF DESIGNATION CERTIFICATE OF DESIGNATION Of the 10,000,000 shares of Preferred Stock authorized under the Certificate of Incorporation, 7,000 shares are hereby designated as Series A Convertible Preferred Stock (the "Series A Preferred Stock") with the voting powers, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions as set forth below: SECTION 1. DEFINITIONS. For the purposes hereof, the following definitions shall apply: "Average Market Price" means the arithmetic average (rounded to the nearest cent) of the Market Price per share of the Class A Common Stock for the twenty (20) consecutive trading days ending on the second trading day prior to the date of determination. "Board of Directors" means the Board of Directors of the Corporation. "Common Stock" means the Class A Common Stock or the Class B Common Stock of the Corporation. "Conversion Price" means the amount set forth in Section 4(a), as adjusted pursuant to Section 4. "Convertible Securities" means any evidences of indebtedness, stock (other than Common Stock or the Series A Preferred Stock) or other securities convertible into or exchangeable for Common Stock. "Corporation" means American Biogenetic Sciences, Inc., a Delaware corporation. "Junior Shares" means all shares of Common Stock of the Corporation or any other stock ranking junior to the Series A Preferred Stock in dividends or liquidation rights. "Market Price" means on any particular date (a) if the Common Stock is then principally traded on any national securities exchange or the Nasdaq National Market, the closing sale price per share of the Common Stock on such date on the principal market on which the Common Stock is then traded, or if there is no such sale price on such date then the closing sale price on the date nearest preceding such date, or (b) if the Common Stock is not then listed on a national securities exchange or the Nasdaq National Market, the average of the bid and asked price for a share of Common Stock on the Nasdaq SmallCap Market or in the over-the-counter market as reported by the Nasdaq Bulletin Board or National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), or (c) if the Common Stock is not publicly traded, the fair market value of a share of Common Stock as determined by an appraiser (which shall conduct a good faith appraisal) selected by the holders of a majority in interest of the shares of the Series A Preferred Stock; provided, however, that the Corporation, after receipt of the determination by such appraiser, shall have the right to select an additional appraiser (which shall conduct a good faith appraisal), in which case, the fair market value shall be equal to the average of the determinations by each such appraiser. - -------------------------------------------------------------------------------- Certificate of Designations "Options" means rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities. "Original Issue Date" means the date on which a share of Series A Preferred Stock is first issued. "Subsidiary" means any corporation at least 50% of whose outstanding voting shares shall at the time be owned directly or indirectly by the Corporation or by one or more subsidiaries, or by the Corporation and one or more subsidiaries. SECTION 2. DIVIDEND RIGHTS. In each fiscal year of the Corporation, the holders of shares of Series A Preferred Stock shall be entitled to receive, before any cash dividends shall be declared and paid upon or set aside for the Junior Shares in such fiscal year, when and as declared by the Board of Directors of the Corporation out of the funds legally available for that purpose, dividends payable in cash in an amount per share for such fiscal year at least equal to the product of (i) the per share amount, if any, of the cash dividend declared, paid or set aside for the Class A Common Stock during such fiscal year, multiplied by (ii) the number of whole shares of Class A Common Stock into which each such share of Series A Preferred Stock is then convertible. SECTION 3. LIQUIDATION PREFERENCE. (a) PREFERENCE. In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, voluntarily or involuntarily, the holders of each share of Series A Preferred Stock, prior to any distribution to the holders of Junior Shares, shall be entitled to receive PRO RATA a preferential amount equal to $500 per share (adjusted to reflect any stock split, stock dividend, combination, recapitalization or reorganization) of Series A Preferred Stock held by them (the "Series A Preferred Stock Liquidation Preference") plus any declared and unpaid dividends. After payment or setting apart for payment of the Series A Preferred Stock Liquidation Preference, the remaining assets of the Corporation, if any, shall be distributed among the holders of the Junior Shares. If, upon such liquidation, dissolution or winding up, the assets of the Corporation are insufficient (after payment of the liquidation preference of any class of preferred stock ranking senior on liquidation to the Series A Preferred Stock) to provide for the payment of the Series A Preferred Stock Liquidation Preference for each share of Series A Preferred Stock outstanding, such assets as are available shall be paid out PRO RATA among the shares of Series A Preferred Stock. (b) MERGER OR ACQUISITION. A merger or consolidation of the Corporation with or into another corporation or entity (whether or not the Corporation is the surviving entity if, after the merger or consolidation, more than 50% of the voting stock of the surviving corporation is owned by persons who were not holders of voting stock of the Corporation prior to the merger or consolidation), or the sale of all or substantially all the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up the Corporation for purposes of this Section 3 if the holders of at least a majority of the then outstanding shares of Series A Preferred Stock so elect by giving written notice thereof to the Corporation at least three days before the effective date of such event. If no such notice is given, the provisions of Section 4(c) shall apply. The amount deemed distributed to the holders of Series A Preferred Stock upon any such merger or - -------------------------------------------------------------------------------- Certificate of Designations 2 consolidation shall be the cash or the value of the property, rights or other securities received in the merger or consolidation which shall be determined in good faith by the Board of Directors of the Corporation. SECTION 4. CONVERSION OF SERIES A PREFERRED STOCK. The holders of the Series A Preferred Stock shall have conversion rights in accordance with the following provisions: (a) RIGHT TO CONVERT AND CONVERSION PRICE. If the holders of at least a majority of Series A Preferred Stock so elect at any time after the Original Issue Date, all shares Series A Preferred Stock shall be converted, at the office of the Corporation or any transfer agent for the Series A Preferred Stock, into such number of fully paid and non-assessable shares of Class A Common Stock as is determined by dividing $500 by the Conversion Price, determined and adjusted as hereafter provided, in effect at the time of conversion. The initial Conversion Price shall be $0.50 per share, and it shall be subject to adjustment upon certain events as provided in this Section 4. (b) MANDATORY CONVERSION. The Corporation at its option may elect to have all the shares of Series A Preferred Stock automatically converted into shares of Class A Common Stock at the then effective Conversion Price if the Average Market Price at any time exceeds $5.00. All holders of record of shares of Series A Preferred Stock will be given at least 20 days' prior written notice of the date fixed and place designated for such mandatory conversion of the Series A Preferred Stock. Such notice shall be sent by certified mail, postage prepaid, to each record holder of Series A Preferred Stock at such holder's address appearing on the stock register of the Corporation. On or before the date so fixed for conversion, each holder of shares of Series A Preferred Stock shall surrender such holder's certificate or certificates for all such shares to the Corporation at the place designated in exchange for the number of shares of Class A Common Stock to which such holder is entitled. The mechanics for conversion and other provisions relating to conversion of Series A Preferred Stock into Class A Common Stock and payments in lieu of fractions set forth elsewhere in this Section 4 shall apply to the mandatory conversion of the Series A Preferred Stock. (c) EFFECT OF ACQUISITION ON SERIES A PREFERRED STOCK. In the event of a merger or consolidation of the Corporation with or into another corporation or entity or a sale by the Corporation of all or substantially all of its assets, and in the case of successive such mergers, consolidations or sales except for any such transactions as are treated as a liquidation under Section 3(b) hereof, thereafter the shares of Series A Preferred Stock then outstanding shall be convertible into the number and kind of securities of the acquiring or surviving corporation (or such other entity whose securities are delivered in exchange for the Class A Common Stock of the Corporation) to which the holders of the Series A Preferred Stock would have been entitled if such holders had converted their Series A Preferred Stock into Class A Common Stock or the common stock of any successor to the Corporation upon the consummation of such sale, merger or consolidation; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section 4 and Section 5 with respect to the rights and interest thereafter of the holders of the Series A Preferred Stock, - -------------------------------------------------------------------------------- Certificate of Designations 3 to the end that the provisions set forth in this Section 4 and Section 5 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series A Preferred Stock. (d) MECHANICS OF CONVERSION. No fractional shares of Class A Common Stock shall be issued upon conversion of Series A Preferred Stock. In lieu of any fractional share to which a holder of Series A Preferred Stock would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price. Before any holder of Series A Preferred Stock shall be entitled to convert the same into full shares of Class A Common Stock, the holder shall surrender the certificate or certificates therefor, duly endorsed for transfer, at the office of the Corporation or of any transfer agent for the Series A Preferred Stock, and shall give written notice to the Corporation at such office that he elects to convert the same. The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Preferred Stock a certificate or certificates for the number of shares of Class A Common Stock to which such holder shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable in order to avoid a conversion into fractional shares of Class A Common Stock. Except as provided in paragraphs (b) and (c), such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Preferred Stock to be converted, and the person or persons entitled to receive the shares of Class A Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Class A Common Stock on such date. (e) NO IMPAIRMENT. The Corporation will not, by amendment of its Restated Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Series A Preferred Stock against impairment. (f) NOTICES OF RECORD DATE, ETC. In the event that the Corporation shall propose at any time: (i) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus; (ii) to offer for subscription pro rata to the holders of any class of its stock any additional shares of stock of any class or other rights; (iii) to subdivide or combine its outstanding Common Stock; (iv) to effect any reclassification or recapitalization of its Common Stock outstanding involving a change in the Common Stock; or - -------------------------------------------------------------------------------- Certificate of Designations 4 (v) to merge or consolidate with or into any other entity, or sell, lease or convey all or substantially all its property or business, or to liquidate, dissolve or wind up; then, in connection with each such event, the Corporation shall send to the holders of the Series A Preferred Stock: (A) at least 20 days' prior written notice of the date on which a record shall be taken for such dividend, distribution, subscription rights, subdivision or combination (and specifying the date on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote in respect of the matters referred to in clauses (iv) and (v) above; and (B) in the case of the matters referred to in clauses (iv) and (v) above, at least 20 days' prior written notice of the date when the same shall take place (specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event). Each such written notice shall be given by certified mail, postage prepaid, addressed to the holders of Series A Preferred Stock at the address for each such holder as shown on the books of the Corporation. (g) ADJUSTMENT FOR COMBINATION OR CONSOLIDATION OF COMMON STOCK. In the event the outstanding shares of Class A Common Stock shall be combined or consolidated, by reclassification, reverse stock split or otherwise, into a lesser number of shares of Class A Common Stock, the Conversion Price in effect immediately prior to such combination or consolidation shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. (h) ADJUSTMENT FOR STOCK DIVIDEND OR SUBDIVISION. In the event the Corporation at any time or from time to time after the Original Issue Date shall declare or pay any dividend on the Common Stock payable in Class A Common Stock, or effect a subdivision of the outstanding shares of Class A Common Stock into a greater number of shares of Class A Common Stock by reclassification, stock split or otherwise than by payment of a dividend in Class A Common Stock, then and in any such event, the Conversion Price in effect immediately prior to such subdivision or stock dividend shall forthwith be proportionately reduced. (i) RESERVATION OF COMMON STOCK. The Corporation shall, at all times when the Series A Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Series A Preferred Stock, such number of its duly authorized shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series A Preferred Stock. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value - -------------------------------------------------------------------------------- Certificate of Designations 5 of the shares of Class A Common Stock issuable upon conversion of the Series A Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of such Class A Common Stock at such adjusted Conversion Price. (j) CANCELLATION OF SERIES A PREFERRED STOCK. All shares of Series A Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall forthwith cease and terminate except only the right of the holders thereof to receive shares of Class A Common Stock in exchange therefor and payment of any accrued and unpaid dividends thereon. Any shares of Series A Preferred Stock so converted shall be retired and cancelled, and shall not be reissued, and the Corporation may from time to time take such appropriate action as may be necessary to reduce the authorized Series A Preferred Stock accordingly. SECTION 5. VOTING RIGHTS OF SERIES A PREFERRED STOCK. (a) GENERAL. Except as expressly set forth in this Section and except as otherwise required by law, the Series A Preferred Stock shall have no voting rights. (b) MATTERS AFFECTING SERIES A PREFERRED STOCK. So long as any Series A Preferred Stock shall be outstanding, the Corporation shall not, without first obtaining the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of Series A Preferred Stock, take any of the following actions: (i) amend or repeal any provision of, or add any provision to, the Corporation's Restated Certificate of Incorporation or By-laws if such action would alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, such Series A Preferred Stock; or (ii) authorize or issue shares of any class of stock having any preference or priority as to dividends or assets superior to or on a parity with any such preference or priority of the Series A Preferred Stock; or (iii) reclassify any Junior Shares into shares having any preference or priority as to dividends or assets superior to or on a parity with any such preference or priority of the Series A Preferred Stock. (iv) declare any dividend or distribution upon any class of its stock (other than a stock split or reverse stock split of the Series A Common Stock into a greater or lesser number of shares of the same class), whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus; or (v) repurchase or redeem any class of its stock. - -------------------------------------------------------------------------------- Certificate of Designations 6 (c) SPECIAL VOTE FOR LIQUIDATIONS. The Corporation may not liquidate, dissolve or wind up if the assets of the Corporation then available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled upon such liquidation, dissolution or winding up under Section 3(a) without the prior written approval of the holders of a majority of the then outstanding shares of Series A Preferred Stock. In the event such approval has been obtained, and the amount distributed to holders of Series A Preferred Stock shall be less than the full amount provided under Section 3(a), the holders of Series A Preferred Stock shall share ratably in any distribution of assets according to the respective amounts which would be payable with respect to the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. - -------------------------------------------------------------------------------- Certificate of Designations 7 -----END PRIVACY-ENHANCED MESSAGE-----