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American Biogenetic Sciences - Revenue Participation Note
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.
REVENUE PARTICIPATION NOTE
WHEREAS, the Company has previously issued certain Series A Convertible Preferred Stock (the "Series A Preferred Stock") and related Warrants (the "Series A Warrants").
WHEREAS, each of the Holders is a party to that certain Securities Purchase Agreement, dated as of the date hereof (the "Series B Securities Purchase Agreement") with the Company, providing, INTER ALIA, for the purchase by certain of the Holders of the Company's Series B Convertible Preferred Stock (the "Series B Preferred Stock") and Series B Warrants and the amendment of the Company's Restated Certificate of Incorporation to amend the terms of the Series A Preferred Stock held by certain other of the Holders and to designate the Series B Preferred Stock out of the Company's undesignated Preferred Stock;
WHEREAS, in conjunction with the issuance of the Series B Preferred Shares and the Series B Warrants, the Company has further agreed to grant to the Holders certain revenue participation rights as evidenced by this Revenue Participation Note, pursuant to which a portion of any royalty payments received by the Company under a certain Exclusive License Agreement dated January 27, 2000, as it may be amended from time to time (the "Abbott License Agreement"), between the Company and Abbott Laboratories ("Abbott"), will be paid to the Holders, all as more fully described herein; now, therefore
FOR VALUE RECEIVED, the undersigned, AMERICAN BIOGENETIC SCIENCES, INC., a Delaware corporation (the "Company") hereby promises to pay to each investor listed on EXHIBIT A hereto, such investor's Fractional Percentage (as defined below) of the sum of $25,000,000 (the "Debt"), upon the terms and conditions set forth herein.
Section 1. CERTAIN DEFINITIONS. As used in this Revenue Participation Note, the following terms shall have the following respective meanings:
"Abbott Royalty Payment" means each royalty payment actually received from time to time by the Company pursuant to the Abbott License Agreement.
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"Aggregate Payment Limit" means, on any date of determination, $25,000,000; provided, however, that if the Company shall not have received any Abbott Royalty Payment on or prior to the sixth anniversary of the date hereof, such Aggregate Payment Limit shall be increased by 5% on such sixth anniversary date; and, on each successive anniversary date thereafter, the then-outstanding Aggregate Payment Limit shall be further increased by 5% unless and until the Company shall have received the initial Abbott Royalty Payment.
"Common Stock" means the Company's Class A Common Stock, par value $.001 per share.
"Fractional Amount" means, for each Holder, on any date of determination with respect to each Royalty Participation, the lesser of: (i) the product of (A) such Royalty Participation times (B) a Holder's Fractional Percentage; and (ii) that Holder's Payment Limit on such date.
"Fractional Percentage" means, with respect to a Holder, (i) the aggregate number of shares of Common Stock issuable to such Holder upon conversion of all shares of Preferred Stock held by such Holder on the date of determination, divided by (ii) the aggregate number of shares of Common Stock issuable to all Holders upon conversion of all shares of Preferred Stock outstanding on the date of determination.
"Holder" means each investor listed on Exhibit A hereto who is receiving a Revenue Participation Note or an assignee of such person.
"Payment Date" as defined in Section 2.
"Payment Limit" means, with respect to a Holder on any date, the product of the Aggregate Payment Limit times such Holder's Fractional Percentage, less any amounts of Royalty Participation or payments of Preferred Stock redemption price previously paid to such Holder or such Holder's predecessors in interest.
"Preferred Stock" means a collective reference to the Series A Preferred Stock and the Series B Preferred Stock.
"Royalty Participation" means, with respect to each Abbott Royalty Payment, the amount equal to an undivided 25% interest in such Abbott Royalty Payment.
"Security Agreement" means that certain Security Agreement entered into among the Company and the initial Holders on the date hereof granting a security interest in certain payment intangibles to secure payment of the Royalty Participation.
"Warrants" means a collective reference to the Series A Warrants and the Series B Warrants.
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Section 2. ABBOTT ROYALTY PARTICIPATION.
(a) The Company hereby promises to pay to each Holder, or order, such Holder's Fractional Percentage of the sum of $25,000,000 (the "Debt"), upon the terms and conditions set forth herein. Each Holder's claim shall not be dependent upon its continued ownership of its Preferred Stock or the related Warrant or shares of Common Stock issuable upon conversion or exercise thereof.
(b) The Debt shall be paid by the Company paying each Holder such Holder's Fractional Amount of each Royalty Participation on the Payment Date with respect thereto, subject to paragraphs (c), (d) and (e) hereof. None of the Holders shall have recourse to any assets of the Company other than the Abbott Royalty Payments for payment of the Debt. The Company's payment obligations hereunder shall arise solely when, if and to the extent the Company receives Abbott Royalty Payments.
(c) Within ten (10) business days after the Company receives an Abbott Royalty Payment, the Company shall give or cause any bank maintaining a trust account under the Security Agreement to give written notice to each Holder (each, a "Royalty Notice") of such Holder's Fractional Amount with respect thereto. The Company shall pay or direct such bank to pay each Holder the Fractional Amount set forth in such Royalty Notice not sooner than five (5) business days or later than ten (10) business days after the date such Royalty Notice is given to such Holder (a "Payment Date"), provided that the Company shall have no obligation to pay such Fractional Amount, if, prior to such Payment Date, there shall have been effected the conversion of all of the shares of Preferred Stock originally issued to such Holder or such Holder's predecessor in interest pursuant to Part A, Section 3(a) or Part B, Section 3(a), as the case may be, of the Certificate of Amendment to the Company's Restated Certificate of Incorporation being filed concurrently herewith (the "Charter Amendment").
(d) It shall not be a defense to payment hereunder that redemption of the Preferred Stock or cancellation of related Warrant may be rendered impossible, impracticable or valueless for any reason, including, without limitation, because the Preferred Stock and/or Warrants have been cancelled pursuant to any provision of title 11 of the United States Code (the "Bankruptcy Code"), or because the Company's capital is then impaired or would be rendered impaired by such redemption, or otherwise.
(e) The Company's obligations under this Article 2 shall terminate upon the earliest to occur of: (i) the delivery to the Company by a majority of the Holders in interest of the Preferred Stock of the written notice described in Part B, Section 2(b) and Part C, Section 2(b), as the case may be, of the Charter Amendment; (ii) the conversion or redemption, as applicable, of all outstanding shares of Preferred Stock; and (iii) the termination of the Abbott License Agreement by Abbott; provided, that, except to the extent of the conversion or redemption, of the Preferred Stock pursuant to and in accordance with the instruments governing such Preferred Stock and this Agreement, the Debt shall otherwise survive cancellation of any and all shares of the Preferred Stock, whether such cancellation occurs pursuant to any provision of the Bankruptcy Code, or otherwise.
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(f) The Company covenants that it will not (i) amend the Abbott License Agreement in any way or manner which would change the amount, timing or other provisions of such agreement regarding the royalties payable by Abbott Laboratories to or for the benefit of the Company under the Abbott License Agreement in any significant way, or (ii) other than as hereafter provided, agree to any assignment, transfer, conveyance or other disposition by the Company of any beneficial interest of any nature under the Abbott License Agreement, in either case without the consent of holders of two-thirds of the Fractional Percentage held by all Holders of Revenue Participation Notes in any significant way. However, nothing in the preceding sentence shall prohibit the Company from (i) granting to any other one or more persons participation interests in the royalties payable under Abbott License Agreement, provided that all such other participation interests cannot in the aggregate entitle such persons to more than 75% of the royalties payable under the Abbott License Agreement, or (ii) granting or permitting the creation of a security interest in any such other participation interest, provided that it is expressly subject to the prior security interest of the Holders in their Royalty Participation created by the Security Agreement.
Section 3. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants that:
(a) The Company has all requisite power and authority to execute, deliver and and to issue the Revenue Participation Notes without any further action or approval of any kind;
(b) The execution, delivery and performance of the Revenue Participation Notes has been duly authorized and approved by all necessar...
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