SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1997 Commission File No. 0-12957
-------------- -------
ENZON, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2372868
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
20 Kingsbridge Road, Piscataway, New Jersey 08854
(Address of principal executive offices) (Zip Code)
(908) 980-4500
(Registrant's telephone number, including area code:)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares of common stock, $.01 par value, outstanding as of May 7,
1997 was 30,796,174 shares.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
ENZON, INC AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, 1997 and June 30, 1996
March 31, June 30,
ASSETS 1997 1996
------------------------------------------------------------
(unaudited) *
Current assets:
Cash and cash equivalents $9,596,973 $12,666,050
Accounts receivable 2,326,397 2,123,691
Inventories 891,275 985,378
Other current assets 123,048 434,318
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Total current assets 12,937,693 16,209,437
------------ ------------
Property and equipment 15,671,729 15,640,823
Less accumulated depreciation and amortization 12,643,514 11,617,690
------------ ------------
3,028,215 4,023,133
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Other assets:
Investments 78,293 78,293
Other assets, net 63,805 55,945
Patents, net 1,481,188 1,597,048
------------ ------------
1,623,286 1,731,286
------------ ------------
Total assets $17,589,194 $21,963,856
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,910,902 $2,078,924
Accrued expenses 3,714,457 4,387,052
----------- ------------
Total current liabilities 5,625,359 6,465,976
------------ -------------
Accrued rent 901,672 980,908
Royalty advance - RPR 1,404,505 1,600,786
Other liabilities - 1,728
----------------- --------------
2,306,177 2,583,422
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock-$.01 par value, authorized 3,000,000 shares: issued and
outstanding 109,000 shares at March 31, 1997 and 169,000 shares at June 30,
1996 (liquidating preference aggregating $2,725,000 at March 31, 1997 and
$8,725,000 at June 30, 1996) 1,090 1,690
Common stock-$.01 par value, authorized 40,000,000 shares;
issued and outstanding 30,789,930 shares at March
31, 1997 and 27,706,396 shares at June 30, 1996 307,899 277,064
Additional paid-in capital 121,406,237 121,272,024
Accumulated deficit (112,057,568) (108,636,320)
------------- -------------
Total stockholders' equity 9,657,658 12,914,458
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Total liabilities and stockholders' equity $17,589,194 $21,963,856
============ ============
*Condensed from audited financial statements.
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
- 2 -
ENZON, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months and Nine Months Ended March 31, 1997 and 1996
(Unaudited)
Three months ended Nine months ended
March 31, March 31, March 31, March 31,
1997 1996 1997 1996
------------------------------------------------------------------------------------
Revenues
Sales $2,350,113 $2,729,647 $8,624,679 $8,080,671
Contract revenue 31,758 5,710 1,131,067 910,446
-------------- ---------- ---------- -----------
Total revenues 2,381,871 2,735,357 9,755,746 8,991,117
------------ ------------ ---------- ----------
Costs and expenses
Cost of sales 1,070,822 903,985 3,051,136 3,092,562
Research and development expenses 2,073,030 2,469,605 6,482,864 7,551,075
Selling, general and administrative expenses 1,356,249 1,536,058 4,085,861 4,212,378
---------- ---------- ---------- ----------
Total costs and expenses 4,500,101 4,909,648 13,619,861 14,856,015
---------- ---------- ----------- -----------
Operating loss (2,118,230) (2,174,291) (3,864,115) (5,864,898)
------------- ------------ ------------ ------------
Other income (expense)
Interest and dividend income 113,641 116,259 433,552 300,338
Interest expense (2,613) (1,801) (14,213) (12,753)
Other 15,413 65,369 23,528 1,386,691
------------ ----------- ------------- ----------
126,441 179,827 442,867 1,674,276
---------- ---------- ----------- ----------
Net loss ($1,991,789) ($1,994,464) ($3,421,248) ($4,190,622)
============ ============ ============ ============
Net loss per common share ($0.07) ($0.08) ($0.13) ($0.16)
======= ======= ======= =======
Weighted average number of common
shares outstanding during the period 29,798,374 26,929,341 28,462,602 26,529,030
=========== ========== =========== ==========
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
- 3 -
ENZON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 1997 and 1996
(Unaudited)
Nine Months Ended
March 31, March 31,
1997 1996
-------------------------------------------------
Cash flows from operating activities:
Net loss ($3,421,248) ($4,190,622)
Adjustment for decrease in liability recognized pursuant
to Sanofi Winthrop Agreement - (1,312,829)
Adjustment for depreciation and amortization 1,282,515 1,565,134
Non-cash expense for issuance of common stock and stock options 137,841 -
Gain on sale of equipment (15,413) -
Decrease in accrued rent (79,236) (15,379)
Decrease in royalty advance - RPR (602,455) (323,038)
Changes in assets and liabilities (239,630) (448,401)
-------------- -------------
Net cash used in operating activities (2,937,626) (4,725,135)
------------- ------------
Cash flows from investing activities:
Capital expenditures (817,050) (93,732)
Proceeds from sale of equipment 660,726 -
------------ ------
Net cash used in investing activities (156,324) (93,732)
------------- ------------
Cash flows from financing activities:
Proceeds from issuance of common and preferred stock 26,607 9,478,591
Principal payments of obligation under capital leases (1,734) (1,539)
--------------- --------------
Net cash provided by financing activities 24,873 9,477,052
--------------- ------------
Net (decrease) increase in cash and cash equivalents (3,069,077) 4,658,185
Cash and cash equivalents at beginning of period 12,666,050 8,102,989
------------ ----------
Cash and cash equivalents at end of period $9,596,973 $12,761,174
========== ===========
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
- 4 -
ENZON, INC. AND SUBSIDIARIES
Notes To Consolidated Condensed Financial Statements
(Unaudited)
(1) Organization and Basis of Presentation
The unaudited consolidated condensed financial statements have been
prepared from the books and records of Enzon, Inc. and subsidiaries in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal and recurring adjustments) considered necessary for a fair
presentation have been included. Certain prior year balances were reclassified
to conform to the 1997 presentation. Interim results are not necessarily
indicative of the results that may be expected for the year.
(2) Net Loss Per Common Share
Net loss per common share is based on the net loss for the relevant
period, adjusted for cumulative undeclared preferred stock dividends of $164,000
for each of the nine months ended March 31, 1997 and 1996, and $55,000 for each
of the three months ended March 31, 1997 and 1996, divided by the weighted
average number of shares issued and outstanding during the period. Stock
options, warrants and common stock issuable upon conversion of the preferred
stock are not reflected as their effect would be antidilutive for both primary
and fully diluted earnings per share computations.
(3) Inventories
The composition of inventories at March 31, 1997 and June 30, 1996 is
as follows:
March 31, June 30,
1997 1996
Raw materials $336,000 $206,000
Work in process 198,000 383,000
Finished goods 357,000 396,000
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$891,000 $985,000
======== ========
(4) Cash Flow Information
The Company considers all highly liquid securities with original
maturities of three months or less to be cash equivalents. Cash payments for
interest were approximately $14,000 and $13,000 for the nine months ended March
31, 1997 and 1996, respectively. There were no income tax payments made for the
nine months ended March 31, 1997 and 1996.
During the nine months ended March 31, 1997, 40,000 shares of Series B
Convertible Preferred Stock ("Series B Preferred Stock") were converted into
2,038,989 shares of Common Stock. A cash payment of $3.00 was made for
fractional shares related to the conversions. During the quarter ended March 31,
1997, the Company's Series C Convertible Preferred Stock ("Series C Preferred
Stock") was exchanged for 20,000 shares of newly issued Series D Convertible
Preferred Stock ("Series D Preferred Stock"). The 20,000 shares of Series D
Preferred Stock were converted into 1,015,228 shares of Common Stock during the
quarter ended March 31, 1997. A cash payment of $1.00 was made for fractional
shares related to the conversion of the Series D Preferred Stock. During the
nine months ended March 31, 1996, the Company issued 150,000 five-year warrants
to purchase the Company's common stock at $2.50 per share as part of the
commission due to the real estate broker in connection with the termination of
the lease at 40 Kingsbridge Road. These transactions are non-cash financing
activities.
- 5 -
ENZON, INC. AND SUBSIDIARIES
Notes To Consolidated Condensed Financial Statements, Continued
(Unaudited)
(5) Significant Agreements
During October 1996, the Company entered into a marketing agreement
with Medac GmbH ("MEDAC") to sell ONCASPAR(R) in Europe and Russia. MEDAC will
purchase ONCASPAR from Enzon at a set price which will increase over the term of
the agreement. The agreement also contains certain minimum annual purchase
requirements.
(6) Non-Qualified Stock Option Plan
During the nine months ended March 31, 1997, the Company issued
1,167,625 stock options at an average exercise price of $2.80 per share under
the Company's Non-Qualified Stock Option Plan, as amended (the "Plan"), of which
290,000 were granted to executive officers of the Company. The stock options
issued include 310,000 options which were granted to independent directors of
the Company, under the Plan's automatic grant provisions to independent
directors. None of the options granted during the period are exercisable as of
March 31, 1997. All options were granted with exercise prices that equaled or
exceeded the fair market value of the underlying stock on the date of grant.
(7) Stockholders' Equity
During the nine months ended March 31, 1997, all of the outstanding
shares of Series B Preferred Stock were converted into Common Stock. The 40,000
shares of Series B Preferred Stock which were converted resulted in the issuance
of 2,038,989 shares of Common Stock.
During the quarter ended March 31, 1997, all of the outstanding Series
C Preferred Stock was exchanged for newly issued Series D Preferred Stock. The
Series D Preferred Stock contains the same provisions as the Series C Preferred
Stock, with the exception of the elimination of a restriction on the maximum
number of shares held by the holding institution. During March 1997, all of the
outstanding Series D Preferred Stock was converted into Common Stock. The 20,000
shares of Series D Preferred Stock which were converted resulted in the issuance
of 1,015,228 shares of Common Stock. The sole institutional owner of the Common
Stock issued in conjunction with the conversion of the Series D Preferred Stock
has agreed not to sell the 1,015,228 common shares issued for a period of one
year without the Company's consent.
During the nine months ended March 31, 1997, the Company issued 18,098
shares of Enzon common stock to non-executive directors, pursuant to the
Company's Independent Directors' Stock Plan. The shares issued represent payment
for services rendered for the period from January 16, 1996 through December 31,
1996.
- 6 -
ENZON, INC. AND SUBSIDIARIES
Notes To Consolidated Condensed Financial Statements, Continued
(Unaudited)
(8) Operating Lease
During March 1997, the Company entered into a sale-leaseback agreement to
fund up to $800,000 in research and development equipment and related leasehold
improvements. As of March 31, 1997, the Company had utilized approximately
$644,000 of the funding available under the agreement. The $644,000 of equipment
financed during the quarter ended March 31, 1997, was sold at a price which
exceeded book value and the corresponding lease is being accounted for as an
operating lease. The lease expires during September, 2000. The remaining
$156,000 under the agreement can be used to finance future purchases of research
and development equipment through December 31, 1997. As of March 31, 1997, the
future minimum lease payments under the agreement are as follows:
Year ending
June 30,
--------
1997 $ 36,000
1998 217,000
1999 217,000
2001 36,000
723,000
-------
(9) Other Income
During the quarter ended December 31, 1995, the Company recognized as
other income approximately $1,313,000, representing the unused portion of an
advance received under a development and license agreement with Sanofi Winthrop,
Inc. ("Sanofi"). During October 1995, the Company learned that Sanofi intended
to cease development of PEG-SOD (Dismutec(TM)) due to the product's failure to
show a statistically significant difference between the treatment group and the
control group in a pivotal Phase III trial. Due, in part, to this product
failure, the Company believes it has no further obligations under its agreement
with Sanofi with respect to the $1,313,000 advance and therefore, the Company
reversed the amount due Sanofi previously recorded as a current liability.
- 7 -
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information contained herein contains "forward-looking statements" which can be
identified by the use of forward- looking terminology such as
"believes,"expects","may ", "will", "should", or "anticipates" or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy. No assurance can be given that the future results covered by the
forward-looking statements will be achieved. The matters set forth in Exhibit
99.0 to the Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1996, which is incorporated herein by reference, constitute cautionary
statements identifying important factors with respect to such forward- looking
statements, including certain risks and uncertainties, that could cause actual
results to vary materially from the future results indicated in such
forward-looking statements. Other factors could also cause actual results to
vary materially from the future results indicated in such forward-looking
statements.
Results of Operations
Three months ended March 31, 1997 vs. Three months ended March 31, 1996
Revenues. Revenues for the three months ended March 31, 1997 decreased by 13% to
$2,382,000 as compared to $2,735,000 for the same period in 1996. The components
of revenues are sales and contract revenues. Sales decreased by 14% to
$2,350,000 for the three months ended March 31, 1997 as compared to $2,730,000
for the same period in the prior year, due to a decrease in ADAGEN(R) sales and
a decrease in revenues from ONCASPAR. The decrease in ADAGEN sales to
$2,069,000, compared to $2,217,000 for the same period in 1996, was due
primarily to the timing of reimbursement approvals. The Company recognizes
revenues for the sale of ADAGEN when reimbursement from third-party payors is
determined to be likely. The Company anticipates that reimbursement delays
experienced during the quarter ended March 31, 1997 will be substantially
corrected during subsequent quarters. Sales of ADAGEN for the nine months ended
March 31, 1997 have remained at levels slightly above the previous year.
ONCASPAR, the Company's second approved product, is marketed in the U.S. by
Rhone-Poulenc Rorer Pharmaceuticals, Inc. ("RPR") and in Europe and Russia by
MEDAC GmbH ("MEDAC"). ONCASPAR revenues are comprised of manufacturing revenues
received from RPR and MEDAC, as well as royalties on sales of ONCASPAR by RPR.
The decrease in ONCASPAR revenues was due to the timing of shipments to RPR.
During the quarter ended December 31, 1996, shipments made to RPR were
approximately twice those made during the same period in the previous year,
resulting in reduced RPR requirements for ONCASPAR during the quarter ended
March 31, 1997. Reductions in RPR shipments were partially offset by the
commencement of shipments of ONCASPAR to MEDAC for the European market. Contract
revenue for the three months ended March 31, 1997 increased to $32,000, as
compared to $6,000 for the same period in 1996. During the three months ended
March 31, 1997 and 1996, the Company had export sales of $661,000 and $419,000,
respectively. Sales in Europe were $556,000 and $356,000 for the three months
ended March 31, 1997 and 1996, respectively. The increase in export as well as
European sales was due to the commencement of shipments of ONCASPAR for the
European market.
Cost of Sales. Cost of sales, as a percentage of sales, increased to 46% for the
three months ended March 31, 1997 as compared to 33% for the same period in
1996. The increase was due primarily to the write-off of approximately $402,000
in excess ONCASPAR raw material. The Company has a minimum purchase requirement
under a long-term supply agreement for this material. While it is possible that
the Company may incur similar losses on its remaining purchase commitments under
the supply agreement, the Company does not consider such losses probable, nor
can the amount of any loss which may be incurred in the future presently be
estimated due to a number of factors, including, but not limited to, potential
increased demand for ONCASPAR from RPR, expansion into additional markets
outside the U.S. and the possibility that the Company could renegotiate the
level of required purchases. If the Company does not achieve increases in sales
of ONCASPAR beyond current levels or cannot renegotiate its commitment, a loss
would be incurred on the remaining purchase commitment. During the quarter ended
March 31, 1997, the Company utilized approximately 19% of its manufacturing
capacity for the production of its approved products.
- 8 -
Research and Development. Research and development expenses for the three months
ended March 31, 1997 decreased by 16% to $2,073,000 from $2,470,000 for the same
period in 1996. This decrease was primarily due to reductions in personnel and
related costs, such as payroll taxes and benefits, totaling approximately
$368,000, due to cost containment measures implemented by the Company as part of
a continued focus on key development programs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended March 31, 1997 decreased by
12% to $1,356,000, as compared to $1,536,000 for the same period in 1996. This
decrease was primarily due to reductions in personnel and related costs, such as
payroll taxes and benefits, totaling approximately $252,000.
Other Income/Expense. Other income/expense decreased by $54,000 to $126,000 for
the three months ended March 31, 1997 as compared to $180,000 for the same
period last year. The decrease was due principally to the one-time recognition
as other income of approximately $65,000 during the quarter ended March 31,
1996, representing an insurance settlement.
Nine months ended March 31, 1997 vs. Nine months ended March 31, 1996
Revenues. Revenues for the nine months ended March 31, 1997 increased by 9% to
$9,756,000 as compared to $8,991,000 for the same period in 1996. The components
of revenues are sales and contract revenues. Sales increased by 7% to $8,625,000
for the nine months ended March 31, 1997 as compared to $8,081,000 for the same
period in the prior year, primarily due to increased ONCASPAR revenues. ONCASPAR
revenues are comprised of manufacturing revenues received from the Company's
marketing partners, RPR and MEDAC, as well as royalties on sales of ONCASPAR by
RPR. ONCASPAR revenues increased due to the commencement of shipments of
ONCASPAR to MEDAC for the European market, as well as an increase in royalties
from RPR. ADAGEN sales for the nine months ended March 31, 1997 and 1996 were
$6,523,000 and $6,431,000, respectively. Contract revenue for the nine months
ended March 31, 1997 increased by 24% to $1,131,000, as compared to $910,000 for
the same period in 1996. Contract revenues for the nine months ended March 31,
1997 were principally comprised of a one-time $1,000,000 payment received from
Schering Corporation ("Schering") related to the transfer of know-how for the
manufacturing of PEG-Intron A under the Company's June 1995 amended Schering
agreement. Contract revenues for the prior year's period reflected a one-time
payment received in connection with a worldwide non-exclusive license for the
Company's SCA protein technology signed with RPR. During the nine months ended
March 31, 1997 and 1996, the Company had export sales of $1,832,000 and
$1,550,000, respectively. Sales in Europe were $1,547,000 and $1,339,000 for the
nine months ended March 31, 1997 and 1996, respectively. The increase in export
and European sales was due to the commencement of shipments of ONCASPAR for the
European market.
Cost of Sales. Cost of sales, as a percentage of sales, remained relatively
consistent at 35% for the nine months ended March 31, 1997, as compared to 38%
for the same period in 1996.
Research and Development. Research and development expenses for the nine months
ended March 31, 1997 decreased by 14% to $6,483,000 from $7,551,000 for the same
period in 1996. This decrease was primarily due to reductions in personnel,
principally in the clinical and scientific administration areas, and related
costs, such as payroll taxes, totaling approximately $911,000 and other cost
containment measures implemented by the Company as part of a continued focus on
key development programs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the nine months ended March 31, 1997 remained
relatively consistent at $4,086,000, as compared to $4,212,000 for the same
period in 1996.
- 9 -
Other Income/Expense. Other income/expense decreased by $1,231,000 to $443,000
for the nine months ended March 31, 1997 as compared to $1,674,000 for the same
period last year. The decrease was due principally to the one-time recognition
as other income of approximately $1,313,000 during the quarter ended December
31, 1995, representing the unused portion of an advance received under a
development and license agreement with Sanofi.
In February 1997, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 128 (SFAS 128),"Earnings Per
Share". SFAS 128 establishes standards for computing and presenting earnings per
share. In accordance with the effective date of SFAS 128, the Company will adopt
SFAS 128 as of December 31, 1997. This statement is not expected to have a
material impact on the Company's consolidated financial statements.
Liquidity and Capital Resources
Enzon had $9,597,000 in cash and cash equivalents as of March 31, 1997.
The Company invests its excess cash in a portfolio of high-grade marketable
securities and United States government-backed securities.
The Company's cash reserves as of March 31, 1997 decreased by
$3,069,000 from June 30, 1996. The decrease in cash reserves was caused by the
funding of operations as well as capital expenditures of $817,000, related to
the upgrade of the Company's pilot manufacturing facility for PEG-hemoglobin,
which were partially offset by the sale-leaseback of certain research and
development equipment purchased during the period.
The Company's exclusive U.S. marketing rights license with RPR for
ONCASPAR provides for a payment of $3,500,000 in advance royalties which was
received in January 1995. Under the agreement, as amended, royalties will be
offset against a credit of $5,970,000, which represents the royalty advance plus
reimbursement of certain amounts due RPR under the previous agreement and
interest expense, before cash payments will be made under the agreement. The
royalty advance is shown as a long term liability with the corresponding current
portion included in accrued expenses on the consolidated condensed balance
sheets and will be reduced as royalties are recognized under the agreement.
Through March 31, 1997, an aggregate of $2,073,000 in royalties payable by RPR
have been offset against the original credit.
As of March 31, 1997, 940,808 shares of Series A Cumulative Convertible
Preferred Stock ("Series A Preferred Stock") have been converted into 3,093,411
shares of the Company's common stock (the "Common Stock"). Accrued dividends on
the converted Series A Preferred Stock in the aggregate of $1,792,000 were
settled by the issuance of 232,383 shares of Common Stock. The Company does not
presently intend to pay cash dividends on the Series A Preferred Stock. As of
March 31, 1997, there were $1,531,000 of accrued and unpaid dividends on the
Series A Preferred Stock. These dividends are payable in cash or Common Stock at
the Company's option and accrue on the outstanding Series A Preferred Stock at
the rate of $218,000 per year. During the nine months ended March 31, 1997,
40,000 shares of the Company's Series B Preferred Stock were converted into
2,038,989 shares of Common Stock. During the nine months ended March 31, 1997,
20,000 shares of the Company's Series C Preferred Stock were converted into
20,000 shares of Series D Preferred Stock which were subsequently converted into
1,015,228 shares of Common Stock.
To date, the Company's sources of cash have been the proceeds from the
sale of its stock through public and private placements, sales of ADAGEN, sales
of ONCASPAR, sales of its products for research purposes, contract research and
development fees, technology transfer and license fees and royalty advances. The
Company's current sources of liquidity are its cash, cash equivalents and
interest earned on such cash reserves, sales of ADAGEN, sales of ONCASPAR, sales
of its products for research purposes and license fees. Management believes that
its current sources of liquidity will be sufficient to meet its anticipated cash
requirements, based on current spending levels, for approximately the next two
years.
- 10 -
Upon exhaustion of the Company's current cash reserves, the Company's
continued operations will depend on its ability to realize significant revenues
from the commercial sale of its products, raise additional funds through equity
or debt financing, or obtain significant licensing, technology transfer or
contract research and development fees. There can be no assurance that these
sales, financings or revenue generating activities will be successful.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
- 11 -
PART II OTHER INFORMATION
Item 2. Changes in Securities
During the period from November 19, 1996 through March 31, 1997, the
purchaser of 40,000 shares of the Company's Series B Convertible Preferred Stock
converted an aggregate of 40,000 shares of such Series B Convertible Preferred
Stock into an aggregate of 2,038,989 shares of Common Stock at per share
conversion prices ranging from $1.83 to $2.44.
On February 28, 1997, the purchaser of 20,000 shares of the Company's
Series C Convertible Preferred Stock exchanged such shares for 20,000 shares of
newly issued Series D Convertible Preferred Stock. The shares of Series C
Convertible Preferred Stock were retired. The Series D Convertible Preferred
Stock contains the same provisions as the Series C Convertible Preferred Stock,
except that the restriction on the maximum number of shares that can be held by
the converting institution was eliminated. On February 28, 1997, all of the
Series D Convertible Preferred Stock issued was converted into 1,015,228 shares
of Common Stock at a per share conversion price of $1.97 per share. The
conversion prices for the Series B Convertible Preferred Stock and the Series D
Convertible Preferred Stock were equal to 80% of the average of the closing bid
prices of the Common Stock for the five consecutive trading days ending one
trading day prior to the date of such conversion. The Company relied upon the
exemption from registration under the Securities Act of 1933, as amended,
contained in (i) Section 4(2) thereof with respect to the issuance of the Series
D Convertible Preferred Stock in exchange for the Series C Convertible Preferred
Stock and (ii) Section 3(a)(9) thereof with respect to the issuance of such
shares of Common Stock upon conversion of the Series B Convertible Preferred
Stock and the Series D Convertible Preferred Stock.
- 12 -
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K).
Exhibit Page Number
Number Description or
Incorporation
By Reference
3(i) Certificate of Incorporation, as amended ^
3(ii) By-laws, as amended *(4.2)
3(iii) Certificate of Designations, Preferences and Rights of Series D
Convertible Preferred Stock o
10.0 Employment Agreement dated March 25, 1994 with Peter G. Tombros #(10.17)
10.1 Form of Change of Control Agreements dated as of January 20, 1995 entered
into with the Company's Executive Officers ~(10.2)
10.2 Lease - 300-C Corporate Court, South
Plainfield, New Jersey ***(10.3)
10.3 Modification of Lease - 300-C Corporate Court, South Plainfield
New Jersey ++(10.3)
10.4 Lease Termination Agreement dated March 31, 1995 for
20 Kingsbridge Road and 40 Kingsbridge Road, Piscataway, New Jersey ~(10.6)
10.5 Option Agreement dated April 1, 1995 regarding 20 Kingsbridge Road,
Piscataway, New Jersey ~(10.7)
10.6 Form of Lease - 40 Cragwood Road, South
Plainfield, New Jersey ****(10.9)
10.7 Lease 300A-B Corporate Court, South Plainfield, New Jersey +++(10.10)
10.8 Stock Purchase Agreement dated March 5, 1987
between the Company and Eastman Kodak Company ****(10.7)
10.9 Amendment dated June 19, 1989 to Stock Purchase
Agreement between the Company and
Eastman Kodak Company **(10.10)
10.10 Form of Stock Purchase Agreement between the Company
and the purchasers of the Series A Cumulative
Convertible Preferred Stock +(10.11)
10.11 Amendment to License Agreement and Revised License Agreement
between the Company and RCT dated
April 25, 1985 ++++(10.5)
10.12 Amendment dated as of May 3, 1989 to Revised License Agreement
dated April 25, 1985 between the Company and Research
Corporation **(10.14)
10.13 License Agreement dated September 7, 1989 between the Company and
Research Corporation Technologies, Inc. **(10.15)
10.14 Master Lease Agreement and Purchase Leaseback Agreement dated
October 28, 1994 between the Company and Comdisco, Inc. ##(10.16)
10.15 Amendment dated as of May 15, 1995 to Employment Agreement with
Peter G. Tombros ~~(10.17)
10.16 Stock Purchase Agreement dated as of June 30, 1995 ~~~(10.16)
10.17 Securities Purchase Agreement dated as of January 31, 1996 ~~~(10.17)
10.18 Registration Rights Agreements dated as of January 31, 1996 ~~~(10.18)
10.19 Warrants dated as of February 7, 1996 and issued pursuant to the Securities
Purchase Agreement dated as of January 31, 1996 ~~~(10.19)
10.20 Securities Purchase Agreement dated as of March 15, 1996 ^(10.20)
- 13 -
10.21 Registration Rights Agreement dated as of March 15, 1996 ^(10.21)
10.22 Warrant dated as of March 15, 1996 and issued pursuant to the Securities
Purchase Agreement dated as of March 15, 1996 ^(10.22)
10.23 Amendment dated March 25, 1994 to License Agreement dated
September 7, 1989 between the Company and Research Corporation
Technologies, Inc. ^^^(10.23)
10.24 Independent Directors' Stock Plan ^^^(10.24)
10.25 Stock Exchange Agreement dated February 28, 1997, by and between
the Company and GFL Performance Fund Ltd. o
10.26 Agreement Regarding Registration Rights Under Registration Rights
Agreement dated March 10, 1997, by and between the Company and
Clearwater Fund IV LLC o
27.0 Financial Data Schedule o
99.0 Factors to Consider in Connection with Forward-Looking Statements ^^(99.0)
o Filed herewith.
* Previously filed as an exhibit to the Company's Registration Statement on
Form S-2 (File No. 33- 34874) and incorporated herein by reference thereto.
** Previously filed as exhibits to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1989 and incorporated herein by
reference thereto.
*** Previously filed as an exhibit to the Company's Registration Statement on
Form S-18 (File No. 2-88240-NY) and incorporated herein by reference
thereto.
**** Previously filed as exhibits to the Company's Registration Statement on
Form S-1 (File No. 2- 96279) filed with the Commission and incorporated
herein by reference thereto.
+ Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (File No. 33- 39391) filed with the Commission and incorporated
herein by reference thereto.
++ Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1992 and incorporated herein by
reference thereto.
+++ Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference thereto.
++++ Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1985 and incorporated herein by
reference thereto.
# Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated April 5, 1994 and incorporated herein by reference thereto.
## Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1994 and incorporated herein by
reference thereto.
~ Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1995 and incorporated herein by
reference thereto.
~~ Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1995 and incorporated herein by
reference thereto.
- 14 -
~~~ Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1995 and incorporated herein by
reference thereto.
^ Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996 and incorporated herein by
reference thereto.
^^ Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated herein by
reference thereto.
^^^ Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1996 and incorporated herein by
reference thereto.
(b) Reports on Form 8-K
On January 16, 1997, the Company filed with the Commission a Current Report
on Form 8-K dated January 2, 1997 relating to (i) the appointment of Rolf A.
Classon to the Company's Board of Directors and (ii) a complaint filed by LBC
Capital Resources, Inc.("LBC") on December 17, 1996.
On January 27, 1997, the Company filed with the Commission a Current Report
on Form 8-K dated January 22, 1997 relating to (i) the appointment of Dr.
Jeffrey McGuire to the newly created position of vice president, research and
development and chief scientific officer and (ii) Dr. Robert Shorr assuming the
position of vice president, science and technology, reporting to Dr. McGuire.
On February 28, 1997, the Company filed with the Commission a Current
Report on Form 8-K dated February 20, 1997 relating to the conversion of all of
the outstanding shares of Series B Convertible Preferred Stock issued in January
1996. The conversions, which took place between November 12, 1996 and February
19, 1997 resulted in the issuance of 2,038,989 shares of Common Stock.
On March 10, 1997, the Company filed with the Commission a Current Report
on Form 8-K dated March 3, 1997 relating to the exchange of 20,000 shares of
Series C Convertible Preferred Stock into 20,000 shares of newly issued Series D
Convertible Preferred Stock. The 20,000 shares of Series D Convertible Preferred
Stock were subsequently converted into 1,015,228 shares of Common Stock.
- 15 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENZON, INC.
(Registrant)
Date: May 13, 1997 By: /S/PETER G. TOMBROS
--------------------
Peter G. Tombros
President and Chief Executive
Officer
By: /S/KENNETH J. ZUERBLIS
Kenneth J. Zuerblis
Vice President, Finance and
Chief Financial Officer
- 16 -
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES D CONVERTIBLE
PREFERRED STOCK
OF
ENZON, INC.
ENZON, Inc. (the "Company"), a corporation organized and existing under
the General Corporation Law of the State of Delaware, does hereby certify that,
pursuant to authority conferred upon the Board of Directors of the Company by
the Certificate of Incorporation, as amended, of the Company, and pursuant to
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Company at a meeting duly held on February 27, 1997, adopted
resolutions providing for the designations, preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions thereof, of twenty thousand (20,000) shares of Series D Convertible
Preferred Stock (the "Series D Preferred Shares") of the Company, as follows:
RESOLVED, that the Company is authorized to issue 20,000 shares
of Series D Convertible Preferred Stock (the "Series D Preferred
Shares") which shall have the following powers, designations,
preferences and other special rights:
(1) Dividends. The holders of the Series D Preferred Shares
shall not be entitled to dividends.
(2) Conversion of Series D Preferred Shares. The holders of
the Series D Preferred Shares shall have the right, at their
option, to convert the
1
Series D Preferred Shares into shares of Common Stock on the
following terms and conditions:
(a) Each Series D Preferred Share shall be convertible at any
time after the date of issuance (or, if such Series D Preferred Share
is called for redemption, at any time up to and including, but not
after, the close of business on the fifth full business day prior to
the date fixed for such redemption, unless default shall be made by
the Company in providing the funds for the payment of the redemption
price), into fully paid and nonassessable shares (calculated to the
nearest whole share) of Common Stock of the Company as constituted at
the time of such conversion, at the conversion price (the "Conversion
Price") in effect at the time of conversion determined as hereinafter
provided. Each Series D Preferred Share shall have a value of $100
(the "Stated Value") for the purpose of such conversion and the number
of shares of Common Stock issuable upon conversion of each of the
Series D Preferred Shares shall be determined by dividing the Stated
Value thereof by the Conversion Price then in effect. Every reference
herein to the Common Stock of the Company (unless a different
intention is expressed) shall be to the shares of the Common Stock of
the Company, $.01 par value, as such stock exists immediately after
the issuance of the Series D Preferred Shares provided for hereunder,
or to stock into which such Common Stock may be changed from time to
time thereafter.
(b) The Conversion Price shall be eighty percent (80%) (the
"Conversion Percentage") of $2.4625, subject to adjustment as provided
herein. If the registration statement (the "Registration Statement")
covering the shares of Common Stock issuable upon conversion of the
Series D Preferred Shares (the "Registration Rights Agreement") has
not been declared effective by the U.S. Securities and Exchange
Commission ("SEC") within two hundred ten (210) days after the date of
issuance of the Series D Preferred Shares, or if, after the
Registration Statement has been declared effective by the SEC, sales
cannot be made pursuant to the Registration Statement by reason of
stop order, the Company's failure to update the Registration Statement
in accordance with the rules and regulations of the SEC or otherwise,
or if the Common Stock is not listed or included for quotation on the
National Association of Securities Dealers Automated Quotation
("NASDAQ") National Market System (the "NASDAQ-NMS"), the New York
Stock Exchange (the "NYSE"), the American Stock Exchange (the "AMEX"),
or the NASDAQ SmallCap Market (the "NASDAQ SmallCap") then, as partial
relief for the damages to the holder by reason of any such delay in or
reduction of its ability to sell the shares of Common Stock (which
remedy shall not be exclusive of any other remedies available at law
or in equity, except that such remedy shall be the exclusive remedy
for any delay in the effectiveness of the Registration Statement
provided the Registration Statement
- 2 -
is declared effective by the SEC within 210 days after the date
of issuance of the Series D Preferred Shares), the Conversion
Percentage shall be reduced by a number of percentage points equal to
three (3) times the sum of: (i) the number of months (prorated for
partial months) after the end of such 210 day period and prior to the
date the Registration Statement is declared effective by the SEC,
provided, however, that there shall be excluded from such period (and
from any period under clause (ii) immediately below) delays which are
attributable to changes in the Registration Statement required by the
holders of Series D Preferred Stock, including, without limitation,
changes in the plan of distribution; (ii) the number of months
(prorated for partial months) that sales cannot be made pursuant to
the Registration Statement (by reason of stop order, the Company's
failure to update the Registration or otherwise) after the
Registration Statement has been declared effective; and (iii) the
number of months (prorated for partial months) that the Common Stock
is not listed or included for quotation on the NASDAQ-NMS, NYSE, AMEX,
or NASDAQ SmallCap after the Registration Statement has been declared
effective; provided that the aggregate number of months that are the
basis of a reduction in the Conversion Percentage pursuant to the
foregoing clauses (i), (ii) and (iii) shall not exceed twelve (12).
(For example, if the Registration Statement becomes effective one and
one-half (1 1/2) months after the end of such 210 day period, the
Conversion Percentage would be 75.5% until any subsequent adjustment;
if thereafter sales could not be made pursuant to the Registration
Statement for a period of two (2) months, the Conversion Percentage
would then be 69.5%.) If the holder converts Series D Preferred Shares
into Common Stock and an adjustment to the Conversion Percentage is
required subsequent to such conversion, but prior to the sale of such
Common Stock by such holder, the Company shall pay to such holder,
within five (5) days after receipt of a notice of the sale of such
Common Stock from such holder, an amount equal to $1.97 multiplied by
three-hundredths (.03) times the number of months (prorated for
partial months) for which an adjustment was required; provided that
the aggregate number of months for which such an adjustment is
required (when added to the number of months for which an adjustment
is made pursuant to clauses (i), (ii) and (iii) above) shall not
exceed twelve (12). Such amount may be paid at the Company's option in
cash or Common Stock valued based on the Average Market Price (as
hereinafter defined) of the Common Stock for the period of five (5)
consecutive trading days ending on the date of the sale of such Common
Stock; provided, however, that any amounts due as to that period
during which the shares are not traded or included for quotation on
the NASDAQ-NMS, NYSE, AMEX or NASDAQ SmallCap shall be paid in cash
only. (For example, if the Conversion Percentage was 75.5% at the time
of conversion of $1,000,000 in Stated Value of Series D Preferred
Shares (such that the Series D Preferred Shares were converted into
Common Stock having an Average Market Price for the applicable period
in aggregate of $1,324,503) and subsequent to conversion
- 3 -
there was a further two (2) month delay in the Registration
Statement's being declared effective, and such Common Stock was sold
at the end of such two (2) month period, the Company would pay to the
holder $79,470.20 in cash or Common Stock.)
"Average Market Price" of any security for any period shall be
computed as the arithmetic average of the closing bid prices for such
security for each trading day in such period on the NASDAQ-NMS, or, if
the NASDAQ-NMS is not the principal trading market for such security,
on the principal trading market for such security, or, if market value
cannot be calculated for such period on any of the foregoing bases,
the average fair market value during such period as reasonably
determined in good faith by the Board of Directors of the Company.
(c) If the Company shall consolidate with or merge into any
corporation or reclassify its outstanding shares of Common Stock
(other than by way of subdivision or reduction of such shares) (each a
"Major Transaction"), then each Series D Preferred Share shall
thereafter be convertible into the number of shares of stock or
securities (the "Resulting Securities") or property of the Company, or
of the entity resulting from such consolidation or merger, to which a
holder of the number of shares of Common Stock delivered upon
conversion of such Series D Preferred Share would have been entitled
upon such Major Transaction had the holder of such Series D Preferred
Share exercised its right of conversion and had such Common Stock been
issued and outstanding and had such holder been the holder of record
of such Common Stock at the time of such Major Transaction, and the
Company shall make lawful provision therefor as a part of such
consolidation, merger or reclassification; provided, however, that the
Company shall give the holders of the Series D Preferred Shares
written notice of any Major Transaction promptly upon the execution of
any agreement whether or not binding in connection therewith
(including without limitation a letter of intent or agreement in
principle) and in no event shall a Major Transaction be consummated
prior to ninety (90) days after such notice.
(d) The Company shall not issue any fraction of a share of Common
Stock upon any conversion, but shall pay in cash therefor at the
Conversion Price then in effect multiplied by such fraction.
(e) On presentation and surrender to the Company (or at any
office or agency maintained for the transfer of the Series D Preferred
Shares) of the certificates of Series D Preferred Shares so to be
converted, duly endorsed in blank for transfer or accompanied by
proper instruments of assignment or transfer in blank (a "Conversion
Notice"), with signatures guaranteed, the holder of such Series D
Preferred Shares shall be entitled,
- 4 -
subject to the limitations herein contained, to receive in
exchange therefor a certificate or certificates for fully paid and
nonassessable shares, which certificates shall be delivered by the
second trading day after the date of delivery of the Conversion
Notice, and cash for fractional shares, of Common Stock on the
foregoing basis. The Series D Preferred Shares shall be deemed to have
been converted, and the person converting the same to have become the
holder of record of Common Stock, for all purposes as of the date of
delivery of the Conversion Notice.
(f) The Company shall, so long as any of the Series D Preferred
Shares are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Series D Preferred Shares, such number
of shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Series D Preferred Shares then
outstanding.
(g) The Company shall pay any and all taxes which may be imposed
upon it with respect to the issuance and delivery of Common Stock upon
the conversion of the Series D Preferred Shares as herein provided.
The Company shall not be required in any event to pay any transfer or
other taxes by reason of the issuance of such Common Stock in names
other than those in which the Series D Preferred Shares surrendered
for conversion are registered on the Company's records, and no such
conversion or issuance of Common Stock shall be made unless and until
the person requesting such issuance has paid to the Company the amount
of any such tax, or has established to the satisfaction of the Company
and its transfer agent, if any, that such tax has been paid.
(3) Voting Rights. Holders of Series D Preferred Shares shall have no
voting rights, except as required by law and by Section 7 hereof.
(4) Redemption. The Company may, but shall not be obligated to, at any time
subsequent to ninety (90) days after the issuance of the Series D Preferred
Shares, redeem the whole or any part of the Series D Preferred Shares then
outstanding at a redemption price of $127 per Preferred Share, in accordance
with the following redemption procedures:
(a) In case of redemption of only part of the Series D Preferred
Shares at any time outstanding, the Company shall designate the amount of
Series D Preferred Shares so to be redeemed and shall redeem such Series D
Preferred Shares on a pro rata basis. Subject to the limitations and
provisions herein contained, the Board of Directors shall have the power
and authority to prescribe the terms and conditions upon which the Series D
Preferred Shares shall be redeemed from time to time.
- 5 -
(b) Notice of every redemption shall be given by mail to every holder
of record of any Series D Preferred Shares then to be redeemed, at least
thirty (30), but no more than ninety (90), days prior to the date fixed as
the date for the redemption thereof, at the respective addresses of such
holders as the same shall appear on the stock transfer books of the
Company. The notice shall state that the Series D Preferred Shares shall be
redeemed by the Company at the redemption price specified above, upon the
surrender for cancellation, at the time and place designated in such
notice, of the certificates representing the Series D Preferred Shares to
be redeemed, properly endorsed in blank for transfer, or accompanied by
proper instruments of assignment and transfer in blank, with signatures
guaranteed, and bearing all necessary transfer tax stamps thereto affixed
and cancelled. On and after the date specified in the notice described
above, each holder of Series D Preferred Shares called for redemption shall
be entitled to receive therefor the specified redemption price upon
presentation and surrender at the place designated in such notice of the
certificates for Series D Preferred Shares called for redemption, properly
endorsed in blank for transfer or accompanied by proper instruments of
assignment or transfer in blank, with signatures guaranteed, and bearing
all necessary transfer tax stamps thereto affixed and cancelled.
(c) If the Company shall give notice of redemption as aforesaid (and
unless the Company shall fail to pay the redemption price of the Series D
Preferred Shares presented for redemption in accordance with such notice),
all Series D Preferred Shares called for redemption shall be deemed to have
been redeemed on the date specified in such notice, whether or not the
certificates for such Series D Preferred Shares shall be surrendered for
redemption, and such Series D Preferred Shares so called for redemption
shall from and after such date cease to represent any interest whatsoever
in the Company or its property, and the holders thereof shall have no
rights other than the right to receive such redemption price without any
interest thereof from and after such date.
(5) Liquidation, Dissolution, Winding Up. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the holders
of the Series D Preferred Shares shall be entitled to receive in cash out of the
assets of the Company, whether from capital or from earnings, available for
distribution to its stockholders (the "Preferred Funds"), before any amount
shall be paid to the holders of the Common Stock, an amount equal to the Stated
Value per Series D Preferred Share, provided that, if the Preferred Funds are
insufficient to pay the full amount due to the holders of Series D Preferred
Shares and holders of shares of other classes or series of preferred stock of
the Company that are of equal rank with the Series D Preferred Shares as to
payments of Preferred Funds (the "Pari Passu Shares"), then each holder of
Series D Preferred Shares and Pari Passu
- 6 -
Shares shall receive a percentage of the Preferred Funds equal to the full
amount of Preferred Funds payable to such holder as a percentage of the full
amount of Preferred Funds payable to all holders of Series D Preferred Shares
and Pari Passu Shares. The purchase or redemption by the Company of stock of any
class, in any manner permitted by law, shall not, for the purposes hereof, be
regarded as a liquidation, dissolution or winding up of the Company. Neither the
consolidation nor merger of the Company with or into any other corporation or
corporations, nor the sale or transfer by the Company of less than substantially
all of its assets, shall, for the purposes hereof, be deemed to be a
liquidation, dissolution or winding up of the Company. No holder of Series D
Preferred Shares shall be entitled to receive any amounts with respect thereto
upon any liquidation, dissolution or winding up of the Company other than the
amounts provided for herein.
(6) Preferred Rank. All shares of Common Stock shall be of junior rank to
all Series D Preferred Shares in respect to the preferences as to distributions
and payments upon the liquidation, dissolution or winding up of the Company. The
rights of the shares of Common Stock shall be subject to the preferences and
relative rights of the Series D Preferred Shares. The Series D Preferred Shares
shall be of equal rank with the Company's Series A Cumulative Convertible
Preferred Stock and the Series B Preferred Shares in respect of distributions
and payments upon the liquidation, dissolution or winding up of the Company.
Notwithstanding the foregoing, the Company may authorize and issue additional or
other preferred stock which is of equal or junior rank with the Series D
Preferred Shares in respect of the preferences as to distributions and payments
upon the liquidation, dissolution or winding up of the Company; provided,
however, that for so long as the Series D Preferred Shares remain outstanding
the Company shall not issue any capital stock which is more senior in rank than
the Series D Preferred Shares in respect of the foregoing preferences. In the
event of the merger or consolidation of the Company with or into another
corporation, the Series D Preferred Shares shall maintain their relative powers,
designations and preferences provided for herein.
(7) Vote to Change the Terms of Series D Preferred Shares. The affirmative
vote at a meeting duly called for such purpose or the written consent without a
meeting of the holders of not less than two-thirds (2/3) of the then outstanding
Series D Preferred Shares shall be required to amend, alter, change or repeal
any of the powers, designations, preferences and rights of the Series D
Preferred Shares.
- 7 -
IN WITNESS WHEREOF, the Company has caused this certificate to be
signed by Peter G. Tombros, its President, and John A. Caruso, its Secretary,
this 28th day of February 1997.
ENZON, INC.
By: /S/PETER G. TOMBROS
-----------------------
President
Attest: /S/JOHN A. CARUSO
-------------------------
Secretary
- 8 -
STOCK EXCHANGE AGREEMENT
This STOCK EXCHANGE AGREEMENT is made and entered into as of February
28, 1997 by and among Enzon, Inc., a Delaware corporation (the "Company"), and
the GFL Performance Fund Ltd., a corporation organized under the laws of the
British Virgin Islands, the holder (the "Series C Stockholder") of the Company's
Series C Convertible Preferred Stock, $0.01 par value per share (the "Series C
Preferred Stock").
R E C I T A L S:
WHEREAS, the Company desires to induce the Series C Stockholder, and
the Series C Stockholder is willing, to (i) exchange its shares of Series C
Preferred Stock for an equal number of shares of the Company's newly designated
Series D Convertible Preferred Stock, $0.01 par value share (the "Series D
Convertible Preferred Stock"), (ii) immediately convert its shares of Series D
Convertible Preferred Stock into the Company's Common Stock, $0.01 par value per
Share (the "Common Stock"), and (iii) agree not to sell or otherwise transfer
the shares of Common Stock issued upon conversion of the Series D Preferred
Stock for a period of twelve (12) months from the date of this agreement without
the prior written consent of the Company.
NOW THEREFORE, in consideration of the foregoing, the representations,
warranties and agreements of the parties contained herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. SHARE EXCHANGE
1.1 Exchange. The Series C Stockholder does hereby transfer,
assign, convey and deliver to the Company the number of shares of Series C
Preferred Stock set forth opposite that Stockholder's name on Schedule 1.1, in
exchange for an equal number of Shares of Series D Preferred Stock. The Series C
Stockholder has delivered to the Company the certificate or certificates
representing such shares of Series C Preferred Stock, with duly executed stock
powers endorsed in blank, and the shares of Series C Preferred Stock delivered
hereunder shall be cancelled and a new certificate or certificates shall be
issued and delivered promptly to the Series C Stockholder evidencing that number
of shares of Series D Preferred Stock equal to the number of shares of Series C
Preferred Stock set forth opposite such Series C Stockholder's name on Schedule
1.1.
1.2 Registration Rights Agreement. The parties hereto acknowledge and agree
that the Common Stock issuable upon conversion of the Series D Preferred Stock
shall be treated as "Conversion Shares" pursuant to that certain Registration
Rights Agreement (the
"Registration Rights Agreement"), dated as of March 15, 1996, by and between the
Company and the Buyer (as defined therein) and that the rights and obligations
of the parties under the Registration Rights Agreement with respect to
Conversion Shares (as defined in the Registration Rights Agreement) will attach
to the shares of Common Stock issuable upon conversion of the Series D Preferred
Stock, provided, however, that the obligation of the Company to file a
registration statement with respect to the shares of Common Stock issuable upon
exercise of the Series D Preferred Stock shall not commence until two hundred
ten (210) days from the date hereof.
1.3 Securities Purchase Agreement. Sections 2(d), (e), (f) and
(g); 4(b), (c), (h) and (j); and 5 (the "Surviving Sections") of the Securities
Purchase Agreement (the "Securities Purchase Agreement"), dated as of March 15,
1996, by and between the Company and the Buyer (as defined therein) and the
definitions of defined terms used in the Surviving Sections but defined
elsewhere in the Securities Purchase Agreement shall remain in full force and
effect as if the shares of Series D Preferred Stock issued to the Series C
Stockholder hereunder were issued and sold to the Series C Stockholder pursuant
to the Securities Purchase Agreement at the time the shares of Series C
Preferred Stock purchased by the Series C Stockholder thereunder were issued.
Except as provided in the preceding sentence, the Securities Purchase Agreement
shall be deemed to be terminated and the provisions thereof to be null and void
and the rights of the Series C Stockholder with respect to the Series D
Preferred Stock and Warrants (as defined in the Securities Purchase Agreement)
issued to the Series C Stockholder shall be governed by and subject to (A) the
Certificate of Designations (the "Certificate of Designations") relating to the
Series D Preferred Stock, a copy of which is attached hereto as Exhibit A and
made a part hereof, (B) the Registration Rights Agreement, a copy of which is
attached hereto as Exhibit B and made a part hereof, and (C) the Amended and
Restated Warrant, of even date herewith, by the Company in favor of GFL
Performance Fund Ltd., a copy of which is attached hereto as Exhibit C.
1.4 Lock-up. The Series C Stockholder agrees that from the
date hereof and continuing for a period of twelve (12) months, it will not,
without the Company's prior written consent, offer, sell or contract to sell,
directly or indirectly, any shares of the Company's Common Stock received by it
upon conversion of the Series D Preferred Stock.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Series C
Stockholder as follows:
2.1 Existence and Power. The Company is validly existing and in good
standing under the laws of its state of incorporation. The Company has the full
corporate power and authority to enter into and perform this Agreement and each
other instrument it is executing and delivering in connection with this
Agreement (collectively, the "Transaction Documents"). The Company has the full
corporate power and authority to carry on its business as now conducted, and to
own, lease and operate its properties as it now does. The
- 2 -
Company is qualified to do business as a foreign corporation in each
jurisdiction in which it is required to be qualified.
2.2 Authorization. The execution, delivery and performance of
each of the Transaction Documents have been duly authorized by all necessary
action, and each of the Transaction Documents constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
2.3 Consents of Third Parties. The execution, delivery and
performance of each of the Transaction Documents by the Company will not (a)
violate or conflict with the certificate of incorporation or by-laws of the
Company; (b) conflict with, or result in the breach, termination or acceleration
of, or constitute a default under, any lease, mortgage, license, agreement,
commitment or other instrument to which the Company is a party or by which it or
any of its properties are bound; (c) constitute a violation of any law,
regulation, order, writ, judgment, injunction or decree applicable to the
Company or any of the Company's properties or require any governmental consent,
registration or approval; or (d) result in the creation of any lien upon the
properties or assets of the Company.
2.4 Litigation. There is no judicial or administrative action
or proceeding pending or, to the best knowledge of the Company, threatened, nor,
to the best knowledge of the Company, is there any governmental investigation
pending or threatened, that questions the validity of any of the Transaction
Documents or any action taken or to be taken by the Company in connection with
any of the Transaction Documents.
2.5 Validity of Shares. The shares of Series D Preferred Stock
issued by the Company in exchange for Series C Preferred Stock, are validly
issued, fully paid and non-assessable.
3. REPRESENTATIONS AND WARRANTIES OF THE Series C Stockholder.
The Series C Stockholder hereby represents and warrants to the
Company as follows:
3.1 Existence and Power. That the Series C Stockholder is
validly existing and in good standing under the law of the jurisdiction of its
organization and has the full power and authority to enter into and perform this
Agreement.
3.2 Authorization. The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action, and this
Agreement constitutes the valid and binding obligation of the Series C
Stockholder enforceable against it in
- 3 -
accordance with its terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
3.3 Consents of Third Parties. The execution, delivery and
performance this Agreement will not: (a) violate or conflict with its
partnership agreement, certificate of incorporation or by-laws or other similar
organizational documents of the Series C Stockholder; (b) conflict with, or
result in the breach, termination or acceleration of, or constitute a default
under, any lease, mortgage, license, agreement, commitment or other instrument
to which it is a party or by which it or any of its properties are bound; or (c)
constitute a violation of any law, regulation, order, writ, judgment, injunction
or decree applicable to it or any of its properties or require any governmental
consent, registration or approval.
3.4 Litigation. There is no judicial or administrative action
or proceeding pending or, to the best knowledge of the Series C Stockholder,
threatened, nor, to the best knowledge of the Series C Stockholder, is there any
governmental investigation pending or threatened, that questions the validity of
this Agreement or any action taken or to be taken by it in connection with this
Agreement.
3.5 Investment. The Series C Stockholder is an accredited
investor (within the meaning of the rules and regulations under the Securities
Act of 1933, as amended) and will be acquiring Series D Preferred Stock for
investment and not with a view to distribution in violation of the Securities
Act.
3.6 Brokers. No agreement, arrangement or understanding with
any broker or finder in connection with the transactions contemplated by this
Agreement has been entered into by that Series C Stockholder.
3.7 Ownership. That each Series C Stockholder is the record
and beneficial owner of the shares of Series C Preferred Stock set forth
opposite that Series C Stockholder's name on Schedule 1.1, free and clear of all
liens, claims and encumbrances of any kind.
4. ADDITIONAL AGREEMENTS.
4.1 Indemnification. The Company, on one hand, and the Series
C Stockholder, on the other hand, agree to indemnify and hold harmless the other
party from and against any and all damage, loss, liability, claim, or expense
(including reasonable attorney's fees) incurred by such other party resulting
from, or which exists or arises due to (i) any inaccuracy, breach or omission
of, from, or in, the representations and warranties of such party contained in
this Agreement, or (ii) the nonfulfillment of any agreement or obligation of
such party under this Agreement.
- 4 -
4.2 Further Acknowledgement. The Series C Stockholder hereby
authorizes the cancellation of the Series C Preferred Stock and the issuance of
Series D Preferred Stock to such holder. The Series C Stockholder acknowledges
and agrees that, except as provided herein, upon the consummation of the
transactions contemplated by this Agreement such Series C Stockholder shall have
no rights as a Series C Stockholder and further, that this Agreement constitutes
a settlement and relinquishment of its rights as a holder of the Series C
Preferred Stock, including but not limited to, the conversion rights with
respect to the Series C Preferred Stock. Accordingly, in consideration of the
agreements made by the Company hereunder, the Series C Stockholder hereby
releases and discharges the Company, and its successors and assigns, from any
and all claims, demands, rights or liabilities which the Series C Stockholder
ever had, now has or may have in the future, by reason of, arising out of, or in
any way connected with the Series C Stockholder's status as a holder of the
Series C Preferred Stock.
5. GENERAL PROVISIONS.
The parties further covenant and agree as follows:
5.1 Amendments. This Agreement may be amended, supplemented or
interpreted only by written instrument duly executed by each of the parties
hereto.
5.2 Contents of Agreement, Parties in Interest, Assignment.
This Agreement sets forth the entire understanding of the parties with respect
to the subject matter hereof. Any previous agreements or understandings between
the parties regarding the subject matter hereof are merged into and superseded
by this Agreement in accordance with its terms. All representations, warranties,
terms and conditions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective heirs, legal representatives,
successors and permitted assigns of the parties hereto.
5.3 Severability. In the event that any one or more of the
provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions of this Agreement shall not be in any way impaired.
5.4 Headings. The headings of the Sections and the subsections of this
Agreement are inserted for convenience of reference only and shall not
constitute a part hereof.
5.5 Instruments of Further Assurance. Each of the parties
hereto agrees, upon the request of any of the other party hereto, from time to
time to executive and deliver to such other party or parties all such
instruments and documents of further assurance or otherwise as shall be
reasonable under the circumstances, and to do any and all such acts and things
as may reasonably be required to carry out the obligations of such requested
party hereunder.
- 5 -
5.6 Specific Performance, Etc. Each of the parties hereto will
be entitled to specific performance of its rights under this Agreement. Each of
the parties hereto agrees that a breach of any of the provisions of this
Agreement will cause irreparable injury to the nonbreaching party, that such
nonbreaching party have no adequate remedy at law in respect of such breach and,
as a consequence, that each and every provision contained in this Agreement
shall be specifically enforceable against all parties hereto.
5.7 Governing Law; Jurisdiction. This Agreement shall be
governed, construed and enforced in accordance with the internal laws of the
State of Delaware, excluding any choice of law rules which may direct the
application of the laws of another jurisdiction.
5.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above written.
ENZON, INC.
By: /S/KENNETH J. ZUERBLIS
---------------------------
Name: Kenneth J. Zuerblis
Its: Vice President, Finance and
Chief Financial Officer
GFL PERFORMANCE FUND LTD.
By: /S/HANS FREDERIC HEYE
--------------------------
Name: Hans Frederic Heye
Its: Director
Address: GFL Performance Fund Ltd.
c/o Clearwater Funds
611 Druid Road East
Suite 200
Clearwater, Florida 34616
Administrator
Curacao International Trust Co. N.V.
Kaya Flamboyan 9
P.O. Box 812
Curacao, Netherland Antilles
- 6 -
AGREEMENT REGARDING REGISTRATION RIGHTS UNDER
REGISTRATION RIGHTS AGREEMENT
Enzon, Inc.
20 Kingsbridge Road
Piscataway, NJ 08854
Dear Sir or Madam:
Reference is hereby made to the Registration Rights Agreement
(the "Registration Rights Agreement") dated March 15, 1996 by and among Enzon,
Inc. and the security holders named on the signature page thereto, including the
undersigned.
The undersigned understand that in arranging for (i) the
exchange of the Company's Series C Convertible Preferred Stock (the "Series C")
and warrants to purchase common stock, par value $.01 (the "Common Stock") of
the Company issued in connection with the issuance of the Series C, for shares
of Series D Convertible Preferred Stock (the "Series D") and warrants (the
"Series D Warrants") issued in connection with the issuance of the Series D and
(ii) the transfer from GFL Advantage Fund Ltd. to Clearwater Fund IV LLC of the
warrants (the "Series B Warrants") to purchase Common Stock issued in connection
with the private placement of the Company's Series B Convertible Preferred
Stock, the Company will be required to (i) file a new registration statement
(the "New Registration Statement") with respect to outstanding shares of Common
Stock, shares of Common Stock issuable on conversion of the Series D, shares of
Common Stock issuable on exercise of the Series D Warrants (the "Series D
Shares") and (ii) with respect to the shares of Common Stock underlying the
Series B Warrants (the "Warrant Shares") (A) include the Warrant Shares in the
New Registration Statement or (B) file a post-effective amendment or supplement
to the Prospectus dated May 7, 1996 relating to, inter alia, the Warrant Shares
(the "Amended Registration Statement"). The undersigned further acknowledge that
during the period prior to the determination of the effectiveness of the
Registration Statement by the Securities and Exchange Commission ("SEC"), the
SEC may comment on the Registration Statement or otherwise delay the
effectiveness of the Registration Statement for a period of time.
Pursuant to Section 10 of the Registration Rights Agreement, the
undersigned hereby agree (i) to the Company using its best efforts to file a
registration statement with respect to the Series D Shares within 210 days from
the date hereof, (ii) to the Company using its best efforts to include the
Warrant Shares on the Amended Registration Statement or the New Registration
Statement and to secure the effectiveness of such registration statements and
(iii) that during the period subsequent to the
filing of and prior to the SEC declaring the Amended Registration Statement or
New Registration Statement effective, the Company will be deemed in full
compliance with its obligations under the Registration Rights Agreement and the
undersigned hereby waives any penalties, remedies or any other rights available
under such agreement with respect to the matters covered in sections (i), (ii)
and (iii) of this paragraph and agrees that any such penalties, remedies or any
other rights will be unavailable.
This agreement is limited to the matters described herein.
This consent may be executed in counterparts, each of which
shall be considered an original, but all of which together shall constitute the
same instrument.
Dated: March 10, 1997
CLEARWATER FUND IV LLC
By: /S/HANS F. HEYE
-------------------
- 2 -
5
3-MOS 9-MOS
JUN-30-1996 JUN-30-1996
MAR-31-1997 MAR-31-1997
$9,596,973 $9,596,973
0 0
2,326,397 2,326,397
0 0
891,275 891,275
12,937,693 12,937,693
15,671,729 15,671,729
12,643,514 12,643,514
17,589,194 17,589,194
5,625,359 5,625,359
0 0
0 0
1,090 1,090
307,899 307,899
9,348,669 9,348,669
17,589,194 17,589,194
2,350,113 8,624,679
2,381,871 9,755,746
1,070,822 3,051,136
4,500,101 13,619,861
0 0
0 0
2,613 14,213
(1,991,789) (3,421,248)
0 0
(1,991,789) (3,421,248)
0 0
0 0
0 0
(1,991,789) (3,421,248)
(0.07) (0.13)
0 0
