FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30,
1997; or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ____________________
Commission File Number 1-11352
DynaGen, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3029787
-------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
840 Memorial Drive
Cambridge, MA 02139
-----------------------------------------------------------
(Address of principal executive offices, including zip code)
(617) 491-2527
---------------------------------------------------
(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
------- -----
As of November 12, 1997, there were outstanding 33,685,664 shares of common
stock, $.01 par value per share.
DYNAGEN, INC.
FORM 10-Q
QUARTERLY REPORT
----------
TABLE OF CONTENTS
Facing Page 1
Table of Contents 2
PART I. FINANCIAL INFORMATION (*)
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Loss 5
Condensed Consolidated Statements of Changes
in Stockholders' Equity 7
Condensed Consolidated Statements of Cash Flows 9
Notes to Unaudited Consolidated Financial Statements 11
Item 2. Management's Discussion and Analysis 16
of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities 18
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 22
(*) The financial information at December 31, 1996 has been derived from
the audited financial statements at that date and should be read in
conjunction therewith. All other financial statements are unaudited.
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DYNAGEN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents
(including interest-bearing
deposits of $1,835,000 at December 31, 1996) $ 32,145 $ 2,112,300
Investment securities available for sale at fair value -- 3,004,700
Accounts receivable, net of allowance for
doubtful accounts of $71,429 at September 30, 1997 3,207,355 261,932
Rebates 627,180 --
Inventory (Note 3) 8,201,045 451,883
Notes receivable 185,000 185,000
Prepaid expenses and other current assets 215,290 295,613
----------- -----------
Total current assets 12,468,015 6,311,428
----------- -----------
Property and equipment, net of accumulated depreciation
and amortization of $488,640 and $337,813 1,676,506 673,969
----------- -----------
Other assets:
Goodwill, net of accumulated amortization of $277,949 14,016,585 --
Patents and trademarks, net of accumulated amortization
of $83,907 and $65,639 247,572 265,840
Deferred debt financing costs, net of accumulated
amortization of $81,046 and $119,039 411,439 119,039
Deposits 292,873 92,873
----------- -----------
Total other assets 14,968,469 477,752
----------- -----------
$29,112,990 $ 7,463,149
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
DYNAGEN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Current liabilities:
Bank overdraft $ 844,509 $ -
Current maturities of long term debt 2,701,669 -
Loan payable - bank 5,270,890 -
Accounts payable 3,929,707 712,239
Accrued payroll and payroll taxes 349,389 96,894
----------- --------------
Total current liabilities 13,096,164 809,133
Warrant put liability 725,821 -
Long term debt 5,245,627 1,600,000
----------- --------------
Total liabilities 19,067,612 2,409,133
------------ --------------
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized:
Series A convertible, 50,000 shares authorized, 45,150 shares
issued and outstanding, (liquidation value - $4,515,000) 452 -
Series B convertible, 7,500 shares authorized, issued
and outstanding, (liquidation value - $747,750) 75 -
Series C convertible, 7,500 shares authorized, issued
and outstanding, (liquidation value - $750,000) 75 -
Series D convertible, 60,000 shares authorized, none issued and
outstanding - -
Common stock, $.01 par value, 75,000,000 shares authorized,
33,510,114 and 29,106,231 shares issued and outstanding 335,101 291,062
Additional paid-in capital 41,637,570 29,076,838
Accumulated deficit (31,927,895) (24,315,191)
---------- -------------
10,045,378 5,052,709
Unrealized gain on investment securities - 1,307
---------- -------------
Total stockholders' equity 10,045,378 5,054,016
----------- -------------
$ 29,112,990 $ 7,463,149
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------
September 30, September 30,
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Product sales $ 5,571,779 $ 58,693
Fees and royalties 38,086 --
------------ ------------
Total revenues 5,609,865 58,693
------------ ------------
Costs and expenses:
Cost of sales 4,644,546 25,313
Research and development 723,143 760,062
Selling, general and administrative 2,546,360 1,072,573
------------ ------------
Total costs and expenses 7,914,049 1,857,948
------------ ------------
Operating loss (2,304,184) (1,799,255)
------------ ------------
Other income (expense):
Investment income, net 3,136 95,547
Interest expense (488,359) (40,000)
Amortization of debt financing costs (28,995) (34,338)
------------ ------------
Other income (expense), net (514,218) 21,209
------------ ------------
Net loss $ (2,818,402) $ (1,778,046)
============ ============
Net loss per share $ (.09) $ (.06)
============ ============
Weighted average shares outstanding (Note 2) 32,463,119 28,616,450
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
September 30, September 30,
1997 1996
----------------- -----------
<S> <C> <C>
Revenues:
Product sales $ 7,355,636 $ 221,583
Fees and royalties 88,744 60,000
------------ ------------
Total revenues 7,444,380 281,583
------------ ------------
Costs and expenses:
Cost of sales 7,352,213 93,155
Research and development 2,369,821 2,841,586
Selling, general and administrative 4,795,008 2,568,665
------------ ------------
Total costs and expenses 14,517,042 5,503,406
------------ ------------
Operating loss (7,072,662) (5,221,823)
------------ ------------
Other income (expense):
Investment income, net 112,170 351,741
Interest expense (604,846) (103,999)
Amortization of debt financing costs (47,366) (91,568)
------------ ------------
Other income (expense), net (540,042) 156,174
------------ ------------
Net loss $ (7,612,704) $ (5,065,649)
============ ============
Net loss per share $ (.25) $ (.19)
============ ============
Weighted average shares outstanding (Note 2) 30,959,820 27,364,110
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Convertible Preferred Stock
---------------------------------------------
Common Stock Series A Series B Series C
------------ -------- -------- --------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
Balance at
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1996 29,106,231 $291,062 - $ - - $ - - $ -
Decrease in unrealized
gain on investment
securities - - - - - - - -
Shares issued in private
placements 1,475,000 14,750 45,950 460 7,500 75 7,500 75
Stock issued for Superior
acquisition 1,666,667 16,667 - - - - - -
Exercise of stock options 1,500 15 - - - - - -
Issuance of common stock
purchase warrants - - - - - - - -
Stock options and warrants
issued for services - - - - - - - -
Stock issued for
interest obligation 38,633 386 - - - - - -
Conversion of note
payable 989,594 9,896 - - - - - -
Conversion of
Preferred stock
and stock dividend 232,489 2,325 (800) (8) - - - -
Net loss - - - - - - - -
---------- -------- ------ ---- ----- --- ---- ---
Balance at
September 30, 1997 33,510,114 $335,101 45,150 $452 7,500 $75 7,500 $75
========== ======== ====== ==== ===== === ==== ===
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Additional Gain on
Paid-in Accumulated Investment
Capital Deficit Securities Total
----------- ------------- ---------- -----
<S> <C> <C> <C> <C>
Balance at $29,076,838 $(24,315,191) $ 1,307 $5,054,016
December 31, 1996
Decrease in unrealized
gain on investment - - (1,307) (1,307)
securities
Shares issued in private 5,825,390 - - 5,840,750
placements
Stock issued for Superior 4,983,333 - - 5,000,000
acquisition 1,110 - - 1,125
Exercise of stock options
Issuance of common stock 450 - - 450
purchase warrants
Stock options and warrants 728,145 - - 728,145
issued for services
Stock issued for 48,752 - - 49,138
interest obligation
Conversion of note 975,869 - - 985,765
payable
Conversion of
Preferred stock (2,317) - - -
and stock dividend - - - -
Net loss - (7,612,704) - (7,612,704)
---------- -------- ------ -----------
Balance at $41,637,570 $(31,927,895) $ - $10,045,378
September 30, 1997 =========== ============ ====== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
7
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Convertible
Preferred Stock
---------------- Unrealized
Common Stock Series A Additional Gain on
------------------- ------------------ Paid-in Accumulated Investment
Shares Amount Shares Amount Capital Deficit Securities Total
------ ------ ------ ------ ----------- -------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 25,196,963 $251,970 - $ - $23,094,903 $(16,721,448) $ 1,142 $6,626,567
Increase in unrealized
gain on investment
securities - - - - - - 1,287 1,287
Shares issued in private
placements 1,520,686 15,207 1,178,264 3,461,150 1,376,204 - - 4,852,561
Conversion of preferred
stock 1,612,834 16,128 (1,178,264) (3,461,150) 3,445,022 - - -
Costs related to exercise of
public warrants - - - - (3,756) - - (3,756)
Exercise of stock options 176,672 1,767 - - 19,558 - - 21,325
Employee stock and stock
option grants 117,250 1,172 - - 557,685 - - 558,857
Stock options issued for
services - - - - 78,875 - - 78,875
Stock issued for
interest obligation 37,057 370 - - 76,963 - - 77,333
Net loss - - - - - (5,065,649) - (5,065,649)
---------- -------- ------- --- ------------ ------------ ------ ----------
Balance at September 30,
1996 28,661,412 $286,614 - $ - $ 28,645,454 $(21,787,097) $2,429 $7,147,400
========== ======== ======= === ============ ============ ====== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
8
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
September 30, September 30,
1997 1996
-------------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (7,612,704) $ (5,065,649)
Adjustments to reconcile net loss to net cash used for
operating activities:
Stock option and warrants issued for services 728,145 23,650
Employee stock and stock option grants -- 558,857
Depreciation and amortization 494,411 147,263
Amortization and accretion of (discounts) premiums
on investment securities (10,152) (134,196)
Amortization and accretion of loan discount and
Warrant put liability 54,784 --
Stock issued for interest obligation 49,138 77,333
Write-off of patent costs -- 41,852
(Increase) decrease in operating assets:
Accounts receivable (390,132) 24,974
Prepaid expenses and other current assets 112,982 (502,496)
Inventory (358,105) (66,818)
Rebates (128,876) --
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses 2,315,208 399,100
Deferred revenue -- (68,228)
------------ ------------
Net cash used for operating activities (4,745,301) (4,564,358)
------------ ------------
Cash flows from investing activities:
Acquisition of Superior (6,878,463) --
Acquisition of Able -- (700,000)
Purchase of investment securities (1,186,455) (26,543,490)
Proceeds from sales and maturities of investment securities 4,200,000 24,175,257
Purchase of property and equipment (783,268) (37,420)
Patent and trademark costs -- (39,744)
Increase in deposits (200,000) (65,895)
Increase in notes receivable -- (75,000)
------------ ------------
Net cash used for investing activities (4,848,186) (3,286,292)
------------ ------------
Cash flows from financing activities:
Net proceeds from exercise of
stock warrants and options 1,125 17,569
Net proceeds from issuance of common
stock and warrants 854,250 4,852,561
Net proceeds from preferred stock 5,790,052 1,725,295
Net proceeds from private debt placement 2,696,898 --
Increase in deferred financing costs (419,002) --
Net repayments, notes payable-bank (1,837,833) --
Repayments of long-term debt (416,667) --
Bank overdraft 844,509 --
------------ ------------
Net cash provided by financing activities 7,513,332 6,595,425
------------ ------------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
9
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
September 30, September 30,
1997 1996
--------------- ------------
<S> <C> <C>
Net change in cash and cash equivalents (2,080,155) (1,255,225)
Cash and cash equivalents at beginning of year 2,112,300 1,765,604
------------- -------------
Cash and cash equivalents, end of period $ 32,145 $ 510,379
============== =============
Supplemental cash flow information:
Conversion of preferred stock to common stock $ 2,325 $ 3,461,150
Conversion of convertible notes into common stock $ 1,065,000 $ -
Interest paid $ 549,527 $ 77,332
Schedule of non cash investing and financing activities: On June 18, 1997, the
Company purchased all of the common stock of Superior Pharmaceutical Company,
Inc. for $16,250,000. In connection with the acquisition, non cash financing
activities, liabilities assumed and goodwill were as follows:
Fair value of assets acquired $10,913,834
Cash paid for common stock (6,250,000)
Fair value of common stock issued (5,000,000)
Note payable issued (5,000,000)
Liabilities assumed (8,263,478)
-----------
Goodwill (exclusive of other acquisition costs
of $694,890) $13,599,644
===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
10
DYNAGEN, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of the
Company have been prepared in accordance with generally accepted accounting
principles for interim financial information and in accordance with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X and include the
accounts of DynaGen, Inc. and its wholly-owned subsidiaries, Superior
Pharmaceutical Company and Able Laboratories, Inc. Accordingly, they do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statement presentation. Significant
intercompany balances and transactions have been eliminated in consolidation.
As of December 31, 1996, the Company changed from a fiscal year ending
June 30 to a fiscal year ending December 31.
The results of operations for the interim periods reported are not
necessarily indicative of expected results for any future interim period or for
a full fiscal year. In the opinion of management, all adjustments have been made
(consisting only of normal recurring adjustments) which are necessary for a fair
presentation of operating results for the interim periods presented.
The financial information included in this report has been prepared in
conformity with the accounting policies reflected in the financial statements
included in the Company's Transition Report on Form 10-K as of December 31, 1996
filed with the Securities and Exchange Commission.
2. NET LOSS PER SHARE
Net loss per common share has been computed by dividing the net loss by
the weighted average number of shares of common stock outstanding during the
periods indicated. The effect of all common stock equivalents have been excluded
from the calculation of the weighted average number of common shares outstanding
since their inclusion would be anti-dilutive.
3. INVENTORY
Inventory at September 30, 1997 consists of the following:
Raw material $ 412,126
Work in-process 221,059
Finished goods 7,567,860
----------
$8,201,045
11
DYNAGEN, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Continued)
4. BUSINESS ACQUISITIONS
On August 19, 1996, the Company acquired certain assets of Able
Laboratories, Inc. ("Able"). The purchase price consisted of $550,000 in cash
and acquisition costs of $150,000. The acquisition has been accounted for as a
purchase. The results of operations related to Able have been included with
those of the Company since August 19, 1996.
On June 18, 1997, the Company acquired all of the outstanding stock of
Superior Pharmaceutical Company ("Superior"), a distributor of generic
pharmaceutical products. The Company paid the shareholders of Superior
$6,250,000 in cash, $5,000,000 in three year notes and 1,666,667 shares of
DynaGen's common stock with a guaranteed value of $5,000,000. DynaGen is
obligated to issue to the shareholders up to an additional 1,666,667 shares of
its common stock after twelve months if its common stock is not trading at an
average of at least $3.00 per share for 10 consecutive trading days. If,
immediately following the issuance of the additional 1,666,667 shares, DynaGen's
common stock is not trading for at least $1.50 per share, DynaGen shall pay to
the shareholders the difference between $1.50 and the then current trading price
of its common stock for each of the 3,333,334 shares. DynaGen is obligated to
register the shares within eleven months after the closing of the acquisition.
The former shareholders of Superior, who remain as senior management at
Superior, may also receive certain incentive payments based on Superior's
performance during the three years following the close of the acquisition.
Immediately following the closing of the acquisition, DynaGen contributed
additional capital of $1,750,000 to Superior.
The Superior acquisition has been accounted for as a purchase.
Accordingly, the results of operations of Superior have been included in the
Company's consolidated financial statements since the date of acquisition. The
preliminary purchase price allocation was based on the estimated fair values at
the date of acquisition which resulted in an excess of purchase price over net
assets acquired of $14,294,534, which is being amortized on a straight-line
basis over 15 years. The preliminary allocation is subject to change because of
the incentive payments that may be made to certain shareholders and deferred
income taxes. The Company capitalized costs of $694,890 related to the
acquisition.
Unaudited proforma consolidated operating results for the Company,
assuming the acquisitions of Able and Superior had been made as of the beginning
of the fiscal year for each of the periods presented, are as follows:
Nine Months Ended Three Months Ended
September 30, September 30,
1997 1996 1997 1996
------ -------- -------- ---------
Revenues $ 19,557,291 $ 24,825,713 $ 5,609,865 $ 8,280,819
Net loss $ (8,517,250) $ (5,698,709) $ (2,818,402) $(1,682,102)
Net loss
per share $ (.25) $ (.19) $ (.09) $ (.05)
The unaudited proforma information is not necessarily indicative either of the
actual results of operations that would have occurred had the purchases been
made as of the beginning of each of the fiscal periods presented or of future
results of operations of the combined companies.
12
DYNAGEN, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Continued)
5. NOTES PAYABLE - SUPERIOR ACQUISITION
In connection with the acquisition of Superior, the Company issued
$5,000,000 in notes payable to the former Superior stockholders. The notes are
payable in quarterly installments of principal and interest over three years at
an interest rate of 9.5% and are secured by a pledge of Superior Common Stock.
As of September 30, 1997, amounts payable on the notes over the next
three fiscal years are as follows:
Year Ended
December 31, Amount
------------ ------
1997 $ 833,333
1998 1,666,667
1999 1,666,667
2000 416,666
------------
$4,583,333
============
6. FINANCING OF SUPERIOR ACQUISITION
The following debt and equity financings were arranged to fund the
acquisition of Superior:
(A) DynaGen obtained senior subordinated debt financing of $3,000,000
from two private investors bearing interest at 13.5% payable in monthly
installments. The principal is paid upon maturity at the end of five years. The
loan is secured by a first-lien security interest on the assets of DynaGen, a
second-lien security interest on the assets of Superior and a second-lien
interest in the pledge of the Superior stock. DynaGen also issued to the
investors warrants to purchase 400,000 shares of Common Stock of DynaGen at an
exercise price per share of $.01 exercisable for five years. Under certain
circumstances, the two investors may exchange the warrants to buy DynaGen common
stock for warrants to purchase 15% of Superior's common stock at an exercise
price per share of $.01. In addition, these warrants are subject to put features
under certain circumstances.
Proceeds of $702,000 from this financing were allocated to the DynaGen
stock warrants, based on their estimated fair value. This amount is reflected in
the accompanying financial statements as a warrant put liability because the
warrants are subject to a put which gives the holders the choice of a cash
settlement under certain conditions. The put allows the holders to sell
two-thirds of the warrants to the company after three years for $667,000, and
all of the warrants after five years for $1,500,000, unless the market value of
the shares issuable pursuant to the warrant is equal to or greater than the put
value.
The remaining proceeds from this offering $2,298,000 were allocated to
the subordinated debt. The debt discount of $702,000 is being amortized, using
the interest method, over the term of the debt.
(B) DynaGen obtained debt financing in the form of a bridge loan of
$500,000, from a private investor at an interest rate of 7% per annum and due
September 30, 1997, to be used for the maintenance of net worth requirements for
Superior's credit facility, working capital for operations of DynaGen and the
acquisition. This loan is a non-recourse obligation of DynaGen. Two founders of
DynaGen have pledged 1 million shares of DynaGen's Common Stock in order
13
DYNAGEN, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Continued)
to secure the obligations represented by this bridge loan. In connection with
this bridge loan, the Company has issued 150,000 shares of its unregistered
Common Stock to the investor. On October 10, 1997, the bridge loan and all
accrued interest was converted into 5,015 shares of Series B Preferred Stock in
full satisfaction of the debt. An additional 150,000 shares of common stock was
issued to the investor in connection with the conversion.
Proceeds of $150,000 from the debt financing were allocated to the
common stock based on the fair value of the common stock at June 18, 1997. The
balance of the proceeds was allocated to the bridge loan. The debt discount of
$150,000 on the bridge loan was fully amortized through September 30, 1997.
(C) The Company sold 41,000 shares of Series A Preferred Stock and
warrants to purchase 328,000 shares of Common Stock for $4,100,000. The Series A
Preferred Stock has a stated dividend of $5.00 per share per annum. DynaGen is
obligated to register the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock and exercise of the warrants within 90 days after the
closing of the Acquisition. The exercise price of the warrants will be 120% of
the average closing bid price of DynaGen's Common Stock for the five trading
days immediately preceding the date on which the registration statement is
declared effective. The holders of Series A Preferred Stock have certain rights
of first refusal on future equity financings.
The Series A preferred stock may be converted into common stock at a
conversion price equal to the lesser of 120% of the average closing bid price,
as defined (the Series A Effective Price) or discounted percentages of the
Series A Effective Price decreasing from 80% to 74% over time. In September
1997, 800 shares of Series A Preferred Stock with accumulated dividends was
converted into 232,489 shares of common stock. Any outstanding shares of the
Series A Preferred Stock will be automatically converted to common stock two
years from the issue date.
(D) The Company sold 7,500 shares of Series B Preferred Stock and
225,000 shares of Common Stock for $750,000 to a private investor. The Series B
Preferred Stock has a stated dividend of $7.00 per share per annum. Upon
liquidation, the Series B Preferred Stock ranks junior to the Series A Preferred
Stock. DynaGen is obligated to register the 225,000 shares of Common Stock
issued and the shares of Common Stock issuable upon conversion of the Series B
Preferred Stock within 150 days after the closing of the acquisition.
The Series B preferred stock may be converted into Common Stock at a
conversion price equal to the lesser of 125% of the average closing bid price,
as defined (the "Series B Effective Price") or discounted percentages of the
Series B Effective Price decreasing from 80% to 75% over time. Any outstanding
shares of the Series B Preferred Stock will be automatically converted to common
stock two years from the issue date.
7. NOTES PAYABLE - BANK
Superior obtained a secured revolving line of credit of up to
$9,000,000 from a bank to provide working capital for its general operations.
Advances under the line of credit are subject to a borrowing base consisting of
the sum of (1) 80% of Superior's eligible accounts receivable, plus (2) 60% of
Superior's eligible inventory.
14
DYNAGEN, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Continued)
The advances under the line are secured by a first-lien security
interest in all of the assets of Superior and are guaranteed by DynaGen.
Superior may draw on the line of credit until April 5, 1998. Interest on the
line of credit is based on the lower of the prime lending rate or LIBOR plus 2%
(7.66% at September 30, 1997).
8. LONG-TERM DEBT
Long-term debt consists of the following:
Notes payable - Superior acquisition $4,583,333
Senior subordinated debt 2,328,963
Bridge loan 500,000
Convertible note payable 535,000
-------
7,947,296
Less: current maturities (2,701,669)
----------
Long-term debt $5,245,627
==========
9. RECENT FINANCING ACTIVITIES
On August 7, August 15 and August 22, 1997, the Company issued an
aggregate of 4,950 shares of its Series A Preferred Stock, .01 par value per
share and Common Stock Purchase Warrants to purchase 39,600 shares of Common
Stock for a purchase price of $495,000.
On August 21, 1997, DynaGen issued 7,500 shares of Series C Preferred
Stock and a Common Stock Purchase Warrant to purchase 250,000 shares of its
Common Stock to a private investor for a purchase price of $750,000.
On August 21 and September 11, 1997, the Company issued 1,100,000
shares of its common stock to investment bankers as consideration for investment
banking and placement agent services rendered to the Company in connection with
its debt and equity financings.
On August 28, 1997, the Company issued a warrant to purchase 1,000,000
shares of Common Stock at an exercise price of $0.15 per share as consideration
of investment banking services rendered to the Company by an investment banker.
The Company recognized compensation expense of $452,000 in the third quarter of
Fiscal 1997 based on the fair value of the warrant.
Additional information on financing activities is presented in Part II,
Item 2c, Changes in Securities.
15
DYNAGEN, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
----------------------------------------------------------
The Private Securities Litigation Reform Act of 1995 contains safe
harbor provisions regarding forward-looking statements. Except for historical
information contained herein, the matters discussed in the Liquidity and Capital
Resources section below contain potential risks and uncertainties, including,
without limitation, risks related to the Company's ability to raise capital for
future operations and commercialization of its products; successfully develop,
test, produce and market its proposed products; obtain governmental approvals in
a timely manner; identify and attract marketing partners to help commercialize
the Company's products; attract and retain key employees; obtain meaningful
patent protection or otherwise over the Company's proprietary technology;
protect itself from product liability risks or limitations imposed due to
potential health care reform; integrate the products and personnel the Company
acquired in the acquisition of Able Laboratories, Inc. ("Able"), Superior
Pharmaceutical Company ("Superior") and any future acquisitions; and
successfully respond to technological changes in the marketplace. Specifically,
regulatory approvals of the Company's products are subject to factors beyond the
Company's control, and there can be no assurance that such approvals will not be
delayed or ultimately denied. The Company will need to attract marketing
partners in order to exploit its products, and there can be no assurance that
the Company will be successful in attracting such partners. Additional
information on potential factors which could affect the Company's financial
results are included in the Company's public filings with the Securities and
Exchange Commission, including without limitation its transition report on Form
10-K for the period ended December 31, 1996.
RESULTS OF OPERATIONS
RECENT AND PROPOSED ACQUISITIONS
On August 19, 1996, the Company acquired the tablet manufacturing
business of Able, a generic pharmaceutical product subsidiary of ALPHARMA, Inc.
On June 18, 1997, the Company acquired all of the outstanding shares of
Superior, a distributor of generic pharmaceutical products. These acquisitions
have been accounted for using the "purchase" method of accounting. As a result,
the results of operations for the three and nine month periods ended September
30, 1997 reflect a full three and nine months of operations, respectively, for
Able, and for Superior, reflect a full three months of operations for the three
months ended September 30, 1997 and three and one-half months of operations for
the nine months ended September 30, 1997. The results of operations for the
three and nine months ended September 30, 1996 do not reflect any operations of
Superior and includes 42 days of operations for Able.
On September 18, 1997, the Company signed a letter of intent to acquire
assets and liabilities of Generic Distributors Limited Partnership ("GDI"). GDI
distributes generic pharmaceutical products primarily in Louisiana and the
southern United States. In 1996, GDI reported revenues of $6.0 million and
earnings before taxes of $325,000. The proposed acquisition price of $2.25
million consists of $1.2 million in cash and $1.05 million in convertible
preferred stock. The preferred stock would not be convertible for at least one
year from the closing of the transaction. The Company intends to finance the
cash portion of the purchase price through bank debt.
Finalization of the GDI acquisition by the Company will depend on the
Company's ability to obtain adequate financing and the negotiation of a
definitive acquisition agreement. There can be no assurance that the GDI
acquisition will occur and if the acquisition does occur that any anticipated
benefits from this acquisition will be realized.
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
AS COMPARED WITH THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1996
Revenues for the third quarter of the year ending December 31, 1997
("Fiscal 1997") were $5,610,000 versus $59,000 for the third quarter of the year
ended December 31, 1996 ("Fiscal 1996"). This increase of $5,551,000 is
primarily the result of generic pharmaceutical product sales by the Company's
wholly-owned subsidiaries, Able and Superior.
16
DYNAGEN, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cost of product sales was 83% of product sales for the third quarter of
Fiscal 1997 as compared to 43% for the same period as Fiscal 1996. This is
primarily due to low production and sales levels at Able which did not support
the fixed manufacturing costs at the Able facility. Gross profit on product
sales increased from $33,000 in the third quarter of Fiscal 1996 to $927,000 in
the third quarter of Fiscal 1997 primarily due to Superior's product sales and
gross profit.
Research and development expenses for the third quarter of Fiscal 1997
were $723,000 versus $760,000 for the same period as Fiscal 1996, a decrease of
$37,000. Research and development expenses primarily decreased due to the
completion of NicErase-SL Phase 3 clinical trials and discontinuance of the
NicErase-SL development program. This was partially offset by research and
development expenses for the Company's breast biopsy and ImmuDynTM technologies,
both in early stages of development. In addition, the Company is also conducting
research and development on generic pharmaceuticals and expects research and
development expenses to increase in the future. Continuance of the Company's
research and development programs is dependent upon its ability to obtain
sufficient capital. See Liquidity and Capital Resources.
Selling, general and administrative expenses for the third quarter of
Fiscal 1997 were $2,546,000 versus $1,072,000 for the same period as Fiscal
1996, an increase of $1,474,000. This increase is primarily attributable to
operating expenses of the Company's generic pharmaceutical business at Superior
and Able and compensation expense recognized from the issuance of stock options
and warrants.
Investment income decreased by $92,000 from $96,000 to $3,000 for the
third quarter of Fiscal 1997 as compared to the third quarter of Fiscal 1996,
respectively, as the Company had less funds available for investment. For the
third quarter of Fiscal 1997, the increase in interest expense is primarily due
to private debt financing for the Superior acquisition.
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
AS COMPARED WITH THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1996
Revenues for the nine months of Fiscal 1997 were $7,444,000 versus
$281,000 for the nine months of Fiscal 1996. This increase of $7,193,000 is
primarily the result of product sales by the Company's wholly-owned generic
pharmaceutical subsidiaries, Able and Superior.
Cost of product sales was approximately 100% of product sales for the
nine months of Fiscal 1997 due to low production and sales levels at Able which
did not support the fixed manufacturing costs of the Able facility. The
Company's management recently initiated cost reduction measures at Able to
eliminate or reduce costs, including staff reductions and elimination of
discretionary spending.
Research and development expenses for the nine months of Fiscal 1997
were $2,370,000 versus $2,842,000 for the same period as Fiscal 1996, a decrease
of $472,000. This decrease is primarily the result of the completion of
NicErase-SL Phase 3 clinical trials and the discontinuance of the NicErase-SL
development program. The Company is continuing its development efforts on the
breast biopsy and ImmuDynTM, technologies, both in early stages of development.
The Company is also developing several generic versions of branded
pharmaceuticals to support its generic drug business.
Selling, general and administrative expenses for the nine months of
Fiscal 1997 were $4,795,000 versus $2,569,000 for the same period as Fiscal
1996, an increase of $2,226,000. This increase is primarily attributable to
acquisition and business development costs, and compensation expense of $728,000
recognized from the issuance of stock options and warrants, and the inclusion,
in Fiscal 1997, of selling, general and administrative expenses of the Company's
subsidiary operations at Able and Superior.
Investment income decreased by $240,000 from $352,000 to $112,000 for
the nine months of Fiscal 1997 as compared to the same period as Fiscal 1996,
respectively, as the Company had less funds available for investment. Interest
expense and amortized debt financing costs relate primarily to private debt
financing for the Superior acquisition.
17
DYNAGEN, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
----------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had a deficit working capital of
$628,000 versus working capital of $5,502,000 at December 31, 1996. Cash and
investment securities were $32,000 at September 30, 1997 as compared to
$5,117,000 at December 31, 1996. Working capital was used primarily for research
and development and to fund Able and its operations during Fiscal 1997.
The Company's current working capital is insufficient to fund its
current level of operations. In addition, the Company has incurred significant
losses since inception. To date, the Company has financed current operations and
acquisitions primarily through private and public sale of equity as well as the
private sale of debt. In the third quarter of Fiscal 1997, the Company raised
gross proceeds of $1,245,000 through the private sale of its equity. In August
1997, the Company negotiated the sale to a third party of between $2.4 million
and $4.8 million of its equity subject to certain restrictions based upon
trading volume, share price and other factors. If the Company is able to draw
upon this financing, management anticipates that the available working capital
will be sufficient to fund the current level of operations, including the Able
and Superior businesses, through June 1998. There can be no assurance, however,
that the Company will be able to draw upon this financing. The Company also
intends to spin off its breast biopsy and ImmuDynTM technologies into two
separate majority-owned operating entities and to pursue separate financing for
each. There can be no assurance, however, that the Company will be able to
secure this financing. The survival of the Company is dependent on its ability
to obtain additional financing and to generate revenue and profits from sale of
its products. If the Company is unable to obtain additional financing, the
Company will be unable to maintain its current level of operations and will be
required to reduce or eliminate its expenditures relating to its business.
While the acquisition of Able has increased the Company's revenues, the
acquisition has also increased costs and expenses, capital expenditures and net
cash used for operating activities. In recent months, the Company has initiated
certain cost reduction programs to reduce the net cash required to support
Able's operation. The Company intends to fund Able's operations until it becomes
self-supporting. The Company continues to pursue additional sources of capital
in order to fund the growth and operations of the Able generic drug business and
its product development efforts. There can be no assurance that the Company will
be able to secure additional financing for the Able business or its continued
product development efforts or that financing will be available on favorable
terms. If the Company is unable to obtain such additional financing, the
Company's ability to maintain its current level of operations would be
materially and adversely affected and the Company will be required to reduce or
eliminate certain expenditures, including its research and development activity
with respect to certain proposed products.
Superior's operations are funded from its internally generated cash
flow and financed with a line of credit to fund short term cash requirements.
The Company believes that Superior will fund its own operations for the
foreseeable future.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
a. Not applicable.
b. Not applicable.
c. On August 7, August 15 and August 22, 1997, the Company issued
an aggregate of 4,950 shares of its Series A Preferred Stock,
$.01 par value per share, and Common Stock Purchase Warrants
to purchase an aggregate of 39,600 shares of Common Stock to
ten accredited investors for an aggregate purchase price of
$495,000. The Company is obligated to register under the
Securities Act the shares of Common Stock issuable upon
conversion of the Series A Preferred Stock and exercise of the
warrants within 90 days after the date of the sale of such
Series A Preferred Stock and warrants. The Series A Preferred
Stock is convertible into Common Stock at the lesser of (i)
120% of the average
18
DYNAGEN, INC.
PART II. OTHER INFORMATION
closing bid price of the Company's Common Stock as reported by
the Nasdaq SmallCap Market (or such other exchange on which
the Common Stock is then traded) for the five trading days
immediately preceding the date on which the Securities and
Exchange Commission (the "Commission") declares effective the
registration statement to be filed registering the shares of
Common Stock issuable upon conversion of the Series A
Preferred Stock and exercise of the warrants or (ii) a
discount on the average closing bid price of the Company's
Common Stock as reported by the Nasdaq SmallCap market (or
such other exchange on which the Common Stock is then traded)
for the five trading days immediately preceding the date on
which the Series A Preferred Stock is converted. The exercise
price of the warrants will be 120% of the average closing bid
price of the Company's Common Stock as reported by the Nasdaq
SmallCap Market (or such other exchange on which the Common
Stock is then traded) for the five trading days immediately
preceding the date on which the Commission declares effective
the registration statement to be filed registering the shares
of Common Stock issuable upon conversion of the Series A
Preferred Stock and exercise of the warrants. The warrants are
exercisable for two years. The Series A Preferred Stock and
warrants were issued pursuant to Regulation D under the
Securities Act of 1933, as amended (the "Securities Act").
On August 21, 1997, the Company issued 7,500 shares of its
Series C Preferred Stock, $.01 par value per share, and a
Common Stock Purchase Warrant to purchase 250,000 shares of
its Common Stock to Endeavour Capital Fund S.A. for an
aggregate purchase price of $750,000. The Company is obligated
to register under the Securities Act the shares of Common
Stock issuable upon conversion of the Series C Preferred Stock
and exercise of the warrant within 90 days after the date of
the sale of such Series C Preferred Stock and warrant. The
Series C Preferred Stock is convertible into Common Stock at
the lesser of (i) 125% of the average closing bid price of the
Company's Common Stock as reported by the Nasdaq SmallCap
Market (or such other exchange on which the Common Stock is
then traded) for the five trading days immediately preceding
August 21, 1997 or (ii) a discount on the average closing bid
price of the Company's Common Stock as reported by the Nasdaq
SmallCap Market (or such other exchange on which the Common
Stock is then traded) for the five trading days immediately
preceding the date on which the Series C Preferred Stock is
converted. The exercise price of the warrants is 125% of the
average closing bid price of the Company's Common Stock as
reported by the Nasdaq SmallCap Market (or such other exchange
on which the Common Stock is then traded) for the 10 trading
days immediately preceding August 21, 1997. The warrant is
exercisable for three years. In connection with the sale of
the Series C Preferred Stock and the warrant, the Company also
entered into a binding obligation to sell to Endeavour Capital
Fund S.A. no less than 24,000 shares and up to 48,000 shares
of its Series D Preferred Stock, at a purchase price of $100
per share, in a series of tranches of between 2,000 and 4,000
shares not less than 30 days apart. The Series C Preferred
Stock and the warrant were issued pursuant to Regulation D
under the Securities Act.
On August 21, 1997, the Company issued 100,000 shares of its
Common Stock to Jesup & Lamont as consideration for investment
banking and placement agent services rendered to the Company.
The shares of Common Stock were issued in a private
transaction not involving a public offering, pursuant to
Section 4(2) of the Securities Act.
On August 28, 1997, the Company issued to H.J. Myers & Co.,
Inc. a warrant to purchase 1,000,000 shares of Common Stock at
an exercise price of $0.15 per share, as consideration for
investment banking services rendered to the Company. The
warrant was immediately exercisable on the date of issuance
with respect to 700,000 of the shares of Common Stock subject
thereto, and the remaining 300,000 shares shall become
exercisable, in such installments as shall be determined by
the Board of Directors of the Company, upon the satisfactory
performance by H.J. Meyers & Co., Inc. of the investment
banking services. The warrant was issued in a private
transaction not involving a public offering, pursuant to
Section 4(2) of the Securities Act.
19
DYNAGEN, INC.
PART II. OTHER INFORMATION
On August 1, 1997, the Company issued 13,481 shares of its
Common Stock to GFL Performance Fund Limited in payment of
$10,700 in interest due on the Company's Convertible Note
dated February 7, 1996. The shares were issued in a private
transaction not involving a public offering, pursuant to
Section 4(2) of the Securities Act.
On September 11, 1997, the Company issued 1,000,000 shares of
its Common Stock to Curzon Management Limited as consideration
for investment banking and placement agent services rendered
to the Company. The shares of Common Stock were issued in a
private transaction not involving a public offering, pursuant
to Section 4(2) of the Securities Act.
Item 5. Other Information.
On August 29, 1997, the Company issued a press release
regarding its decision to discontinue its NicErase7-SL
(sublingual tablet) program as a result of clinical trials
which did not show statistically significant efficacy with
respect to this technology. The press release is filed as
Exhibit 99a to this report.
Under applicable law, the Company's current or future
licensees will not be permitted to sell NicErase, and thus
generate any revenue from their development of NicErase,
unless they obtain the necessary regulatory approvals from the
U.S. Food and Drug Administration (the "FDA") for the
commercial sale of that product. To obtain such regulatory
approvals, the Company's current or future licensees must
demonstrate to the satisfaction of the FDA, through
preclinical studies and clinical trials, that NicErase is safe
and effective. In light of the Company's recently completed
pivotal Phase 3 clinical trial of NicErase-SL, which did not
show statistically significant efficacy, the Company is unable
to predict whether delivery formulations of lobeline other
than sublingual will demonstrate acceptable safety and
efficacy to obtain FDA approval. There can be no assurance
that the Company's current or future licensees will be able to
successfully formulate new delivery systems for lobeline, that
such licensees will have sufficient technological or financial
resources to initiate and complete the required clinical
trials, or that such trials will demonstrate sufficient safety
and efficacy to obtain the required regulatory approvals or
develop marketable products. A number of companies in the
pharmaceutical industry have suffered significant setbacks in
advanced clinical trials, even after promising results in
earlier trials. If any future clinical trials do not show
NicErase to be safe and effective in any alternative delivery
format, and if the Company's licensees are thus unable to
commercialize NicErase, the Company will not realize any
revenues from the NicErase product.
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits:
The following exhibits, required by Item 601 of Regulation
S-K, are filed as part of this Quarterly Report on Form 10-Q.
Exhibit numbers, where applicable, in the left column
correspond to those of Item 601 of Regulation S-K.
20
DYNAGEN, INC.
PART II. OTHER INFORMATION
Exhibit
No. Description of Exhibit
--- ----------------------
3a Certificate of Designations, Preferences and Rights of Series A
Preferred Stock of the Company (filed as Exhibit 4.13 to the Company's
Current Report on Form 8-K dated June 18, 1997).
3b Certificate of Designations, Preferences and Rights of Series C
Preferred Stock of the Company (filed herewith).
3c Certificate of Designations, Preferences and Rights of Series D
Preferred Stock of the Company (filed herewith).
4a Form of Securities Purchase Agreement among the Company and the
purchasers of Series A Preferred Stock (filed herewith).
4b Master Registration Rights Agreement dated August 6, 1997 among the
Company and the purchasers of Series A Preferred Stock (filed
herewith).
4c Form of Common Stock Purchase Warrant issued by the Company to the
purchasers of Series A Preferred Stock (filed as Exhibit 4.16 to the
Company's Current Report on Form 8-K dated June 18, 1997).
4d Stock Purchase Agreement dated August 21, 1997 between the Company and
Endeavour Capital Fund S.A. (filed herewith).
4e Registration Rights Agreement dated August 21, 1997 between the Company
and Endeavour Capital Fund S.A. (filed herewith).
4f Common Stock Purchase Warrant dated August 21, 1997 issued by the
Company to Endeavour Capital Fund S.A. (filed herewith).
4g Common Stock Purchase Warrant dated August 28, 1997 issued by the
Company to H.J. Meyers & Co., Inc. (filed herewith).
10a Indenture of Lease dated July 1, 1997 between Rivertech Associates LLC
and the Company (filed herewith).
27 Financial Data Schedule (filed herewith in electronic format only).
99a Press Release of the Company dated August 29, 1997 (filed herewith).
(b) Reports on Form 8-K:
During the quarter ended September 30, 1997, the Company filed on July
3, 1997 a Current Report on Form 8-K dated June 18, 1997 reporting the
Company's acquisition of the outstanding stock of Superior
Pharmaceutical Company. On July 11 and August 29, 1997, the Company
filed Current Reports on Form 8-K/A amending the Current Report on Form
8-K dated June 18, 1997.
21
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.
DYNAGEN, INC.
By: /s/ Indu A. Muni
------------------------------------------
Indu A. Muni, Ph.D.
President, Chief Executive Officer, and
Treasurer (Principal Executive, Financial,
and Accounting Officer)
Date: November 14, 1997
22
Exhibit 3b
DYNAGEN, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES C PREFERRED STOCK
The undersigned officer of DynaGen, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred by the Certificate of
Incorporation, as amended to date, and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, the Board of Directors
of DynaGen, Inc., on August 13, 1997, adopted a resolution providing for certain
powers, designations, preferences and relative, participating, optional or other
rights, and the qualifications, limitations or restrictions thereof, of certain
shares of Series C Preferred Stock, $.01 par value, of the Corporation, which
resolution is as follows:
RESOLVED: That, pursuant to the authority vested in the Board of
Directors of the Corporation and in accordance with the General Corporation Law
of the State of Delaware and the provisions of the Corporation's Certificate of
Incorporation, a series of 7,500 shares of the class of authorized Preferred
Stock, par value $.01 per share, of the Corporation is hereby created as the
Series C Preferred Stock, and that the designation and number of shares thereof
and the voting powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof, are as set forth on Exhibit A attached
hereto.
EXECUTED as of this 14th day of August, 1997.
DYNAGEN, INC.
By: /s/ Indu A. Muni
-------------------------------
Indu A. Muni
President
EXHIBIT A
---------
A. DESCRIPTION AND DESIGNATION OF SERIES C PREFERRED STOCK
1. DESIGNATION AND DEFINITIONS.
(A) DESIGNATION. A total of 7,500 shares of the Corporation's
previously undesignated Preferred Stock, $.01 par value, shall be designated as
the "Series C Preferred Stock." The original issue price per share of the Series
C Preferred Stock shall be $100.00 (the "ORIGINAL ISSUE PRICE").
(B) CERTAIN DEFINITIONS. As used herein, the following terms,
unless the context otherwise requires, have the following respective meanings:
(i) "AVERAGE QUOTED PRICE" means the average of the
closing bid price of the Common Stock of the Corporation as reported by the
Nasdaq SmallCap Market or Nasdaq National Market or, if the Corporation's Common
Stock is no longer traded on a Nasdaq market, such other exchange on which the
Corporation's Common Stock is then traded, for the five (5) Trading Days
immediately preceding any holder's Conversion Date, the Mandatory Conversion
Date (as defined in Section 5(c) below) or the date of the consummation or
closing of a Fundamental Change, as the case may be.
(ii) "COMMON STOCK" means the common stock, par value
$.01 per share, of the
Corporation.
(iii) "CONVERSION DATE" means each date on which the
Corporation receives by
telecopy written notice in accordance with Section 5(i) hereof from a holder of
Series C Preferred Stock that such holder elects to convert shares of its Series
C Preferred Stock.
(iv) "FUNDAMENTAL CHANGE" means: (i) any sale, lease,
exchange or other transfer of all or substantially all of the assets of the
Corporation; or (ii) any merger or consolidation to which the Corporation is a
party. Notwithstanding the foregoing, the following shall not be a Fundamental
Change: A merger or consolidation (a) to which the Corporation is a party; (b)
in which it is the surviving corporation and there is no resulting
reclassification of the outstanding Common Stock; and (c) after giving effect to
which, persons who were, immediately before the consummation or closing of such
merger or consolidation, holders of outstanding Common Stock will be the direct
or indirect owners of securities of the Corporation possessing, on a fully
diluted basis, at least seventy-five percent (75%) of the voting power of all
voting securities of the Corporation (excluding, for purposes of such
computation, any such person who also is a party to such merger or
consolidation).
(v) "ISSUE DATE" means, with respect to each share of
Series C Preferred Stock held by any holder, the date on which the Corporation
originally issued such share to such holder (regardless of the number of times
transfer of such share is made on the stock transfer books maintained by or for
the Corporation, and regardless of the number of
-2-
certificates which may be issued to evidence such share, and irrespective of any
subsequent transfer or other disposition of such share to any other holder).
(vi) "TRADING DAY" means a day on which the principal
national securities exchange on which the Common Stock is listed or admitted to
trading is open for the transaction of business; or, if the Common Stock is not
listed or admitted to trading on any national securities exchange but is listed
on the Nasdaq system (or such other trading system then in use by the National
Association of Securities Dealers, Inc.), a day on which such system is open for
the transaction of business; or, if the foregoing does not apply, any Business
Day.
2. DIVIDENDS.
(A) PREFERRED DIVIDEND - CASH AND/OR IN-KIND. When and as
declared by the Board of Directors and to the extent permitted by the General
Corporation Law of the State of Delaware, the Corporation shall pay preferential
dividends to the holders of the Series C Preferred Stock as provided in this
Section 2(a).
(I) PREFERRED DIVIDEND. Except as otherwise provided
herein, dividends on each share of Series C Preferred Stock shall accrue,
cumulatively, at the rate of seven percent (7.0%) per annum of the Original
Issue Price, from and including the Issue Date of such share to and including
the date on which the Liquidation Value of such share is paid or such share is
converted in accordance with the provisions hereof (the "PREFERRED DIVIDEND").
Such Preferred Dividend will accrue whether or not it has been declared and
whether or not there are profits, surplus or other funds of the Corporation
legally available for its payment.
(II) SEMI-ANNUAL PAYMENTS. Commencing on July 31,
1998, the Preferred Dividend shall be payable in cash (subject to Section
2(a)(v) below) semi-annually, for the actual number of days elapsed, on each
July 31 and January 31, to the holders of record of shares of Series C Preferred
Stock as of the tenth (10th) trading day preceding the applicable dividend
payment date.
(III) NO INTEREST. Accrued but unpaid Preferred
Dividends shall not bear interest. Preferred Dividends paid in cash in an amount
less than the total amount of such dividends at the time accrued and payable
shall be allocated on a share-by-share basis among all shares of Series C
Preferred Stock at the time outstanding.
(IV) PAYMENT UPON CONVERSION. On the date on which
any holder's shares of Series C Preferred Stock are converted into Common Stock
pursuant to Section 5 hereof, the accrued Preferred Dividend with respect to the
shares so converted shall be paid to such holder. All accrued Preferred
Dividends also shall be payable upon the liquidation, dissolution or winding up
of the Corporation.
(V) PAYMENT IN COMMON STOCK. The Corporation, at its
sole discretion, may pay the Preferred Dividends in cash or in shares of Common
Stock at the then fair market value per share of Common Stock as of the date on
which the Preferred Dividend is payable. For purposes of this Section 2(a)(v),
fair market value shall be the average of the closing bid price of the Common
Stock of the Corporation as reported by the Nasdaq SmallCap
-3-
Market or Nasdaq National Market or, if the Corporation's Common Stock is no
longer traded on a Nasdaq market, such other exchange on which the Corporation's
Common Stock is then traded, for the ten (10) Trading Days immediately preceding
the date on which the Preferred Dividend is payable.
(VI) FRACTIONAL SHARES. Notwithstanding anything
herein to the contrary, no fractional shares shall be issued pursuant to this
Section 2, and the number of shares of Common Stock issued upon the payment of
the Preferred Dividend shall be rounded up or down to the nearest whole share.
(B) DECLARED DIVIDENDS ON COMMON STOCK. If the Board of
Directors shall declare a cash dividend payable upon the then outstanding shares
of Common Stock (other than a stock dividend on the Common Stock distributed
solely in the form of additional shares of Common Stock), the holders of the
Series C Preferred Stock shall be entitled to the amount of dividends on the
Series C Preferred Stock as would be declared payable on the largest number of
whole shares of Common Stock into which the shares of Series C Preferred Stock
held by each holder thereof could be converted pursuant to the provisions of
Section 5 hereof, such number determined as of the record date for the
determination of holders of Common Stock entitled to receive such dividend. Such
determination of "whole shares" shall be based upon the aggregate number of
shares of Series C Preferred Stock held by each holder, and not upon each share
of Series C Preferred Stock so held by the holder.
(C) DIVIDENDS ON OTHER SECURITIES. Subject to the foregoing
provisions of this Section 2, the Board of Directors may declare and the
Corporation may pay or set apart for payment, or cause the accrual of, stated or
cumulative dividends and other distributions on the Series A Preferred Stock or
the Series B Preferred Stock of the Corporation, or any other series of
preferred stock hereafter designated, and may purchase or otherwise redeem any
of the same (or any warrants, rights, options or other securities exercisable
therefor or convertible or exchangeable thereinto), and the holders of Series C
Preferred Stock shall not be entitled to share therein.
3. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) TREATMENT AT LIQUIDATION, DISSOLUTION OR WINDING UP. In
the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, or in the event of its insolvency, before any
distribution or payment is made to any holders of Common Stock or any other
class or series of capital stock of the Corporation designated to be junior to
the Series C Preferred Stock, and subject to the liquidation rights and
preferences of any class or series of Preferred Stock designated by the Board of
Directors in the future to be senior to or on a parity with the Series C
Preferred Stock with respect to liquidation preferences, the holder of each
share of Series C Preferred Stock shall be entitled to be paid first out of the
assets of the Corporation available for distribution to holders of the
Corporation's capital stock of all classes, whether such assets are capital,
surplus or earnings, an amount equal to the Original Issue Price per share of
Series C Preferred Stock held by any holder, plus the Preferred Dividend
accruing to the Series C Preferred Stock pursuant to Section 2 above (the
"LIQUIDATION VALUE").
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For purposes hereof, the Series C Preferred Stock shall rank on liquidation
junior to the Series A Preferred Stock and on parity with the Series B Preferred
Stock.
If, upon liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of the Series C Preferred
Stock the full amount to which they otherwise would be entitled, the holders of
Series C Preferred Stock shall share ratably in any distribution of available
assets pro rata in proportion to the respective liquidation preference amounts
which would otherwise be payable upon liquidation with respect to the
outstanding shares of the Series C Preferred Stock if all liquidation preference
amounts with respect to such shares were paid in full, based upon the aggregate
Liquidation Value payable upon all shares of Series C Preferred Stock then
outstanding.
After such payment shall have been made in full to the holders
of the Series C Preferred Stock, or funds necessary for such payment shall have
been set aside by the Corporation in trust for the account of holders of the
Series C Preferred Stock so as to be available for such payment, the remaining
assets available for distribution shall be distributed ratably among the holders
of the Common Stock and any class or series of capital stock designated to be
junior to the Series C Preferred Stock (if any) in right of payment upon any
liquidation, dissolution or winding up of the Corporation.
The amounts set forth above shall be subject to equitable
adjustment by the Board of Directors whenever there shall occur a stock
dividend, stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the capital
structure of the Series C Preferred Stock.
(B) DISTRIBUTIONS OTHER THAN CASH. Whenever the distributions
provided for in this Section shall be payable in property other than cash, the
value of such distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors. All distributions (including
distributions other than cash) made hereunder shall be made pro rata to the
holders of Series C Preferred Stock.
(C) EVENTS NOT DEEMED A LIQUIDATION. Neither the merger or
consolidation of the Corporation into or with any other corporation(s), nor the
sale or transfer by the Corporation of all or any part of its assets, nor the
reduction of the capital stock of the Corporation, will be deemed to be a
liquidation, dissolution or winding up of the Corporation under this Section 3.
4. VOTING POWER.
(A) GENERAL. Except as otherwise expressly provided in this
Section 4 or as otherwise required by the General Corporation Law of the State
of Delaware, each holder of Series C Preferred Stock shall be entitled to vote
on all matters and shall be entitled to that number of votes equal to the
largest number of whole shares of Common Stock into which such holder's shares
of Series C Preferred Stock could be converted, pursuant to the provisions of
Section 5 hereof, at the record date for the determination of stockholders
entitled to vote on any
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matter or, if no such record date is established, at the date such vote is taken
or any written consent of stockholders is solicited. Except as otherwise
expressly required by law, the holders of shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Common Stock shall vote
together (or render written consents in lieu of a vote) as a single class on all
matters submitted to the stockholders of the Corporation.
Such determination of "whole shares" shall be based upon the
aggregate number of shares of Series C Preferred Stock held by each holder, and
not upon each share of Series C Preferred Stock so held by the holder.
(B) AMENDMENTS TO CHARTER. For so long as there are any shares
of Series C Preferred Stock outstanding, the Corporation shall not amend its
Certificate of Incorporation or this Certificate of Designation without the
approval, by vote or written consent, of the holders of at least a majority of
the then outstanding shares of Series C Preferred Stock, voting together as a
class, each share of Series C Preferred Stock to be entitled to one vote in each
instance, if such amendment would adversely affect the rights of the holders of
Series C Preferred Stock. Without limiting the generality of the foregoing, the
creation, or increase in the authorized number of shares, of any class or series
of stock ranking prior to or on a parity with the Series C Preferred Stock
either as to dividends or upon liquidation shall be deemed to adversely affect
the rights of the holders of Series C Preferred Stock for purposes of this
Section 4(b).
5. CONVERSION RIGHTS.
(A) CONVERSION AT THE OPTION OF HOLDERS. Each holder of Series
C Preferred Stock shall have the right, at such holder's option, to convert at
any time any of the shares of Series C Preferred Stock held by such holder into
such number of fully paid and nonassessable shares of Common Stock as shall be
determined by multiplying the number of shares of Series C Preferred Stock to be
converted by a fraction, the numerator of which is the Original Issue Price, and
the denominator of which is the applicable Conversion Price (as defined below).
(B) CONVERSION PRICE. The conversion price per share (the
"CONVERSION PRICE") shall be equal to the lesser of subsections (i) and (ii)
below.
(i) One hundred twenty-five percent (125%) of the
average of the closing bid price of the Common Stock of the Corporation as
reported by the Nasdaq SmallCap Market or Nasdaq National Market or, if the
Corporation's Common Stock is no longer traded on a Nasdaq market, such other
exchange on which the Corporation's Common Stock is then traded, for the five
(5) Trading Days immediately preceding the Issue Date.
(ii) (A) Beginning on the 60th day after the Issue
Date and ending on the 150th day after the Issue Date, eighty percent (80%) of
the Average Quoted Price;
(B) Beginning on the 151st day after the Issue
Date and ending on the 210th day after the Issue Date, seventy-eight percent
(78%) of the Average Quoted Price;
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(C) Beginning on the 211th day after the Issue
Date and ending on the 365th day after the Issue Date, seventy-six percent (76%)
of the Average Quoted Price; and
(D) Beginning on the 366th day after the Issue
Date, seventy-four (74%) of the Average Quoted Price.
(C) CONVERSION AT OPTION OF CORPORATION. At any time after the
close of business on the one (1) year anniversary of the date on which the
Securities and Exchange Commission declares effective the registration statement
registering the shares of Common Stock issuable upon conversion of the Series C
Preferred Stock, all of the shares of Series C Preferred Stock shall be
convertible, at the option of the Corporation, into such number of fully paid
and nonassessable shares of Common Stock as shall be determined by multiplying
the number of shares of Series C Preferred Stock outstanding on the Mandatory
Conversion Date (as defined below) by a fraction, the numerator of which is the
Original Issue Price, and the denominator of which is the applicable Conversion
Price.
The Corporation shall give notice of its exercise of such
conversion option to all holders of Series C Preferred Stock no later than five
(5) Trading Days before the date as of which the Corporation has elected to make
such conversion effective (such effective date of the conversion, the "MANDATORY
CONVERSION Date"). Each holder of Series C Preferred Stock as of the Mandatory
Conversion Date shall, promptly after such date, surrender for conversion to the
Corporation at its principal office or to any transfer agent for the Series C
Preferred Stock or the Common Stock all certificates representing all shares of
Series C Preferred Stock held by such holder, accompanied by a written notice
specifying the name or names in which such holder wishes the certificate(s) for
shares of Common Stock to be issued.
Effective as of the close of business on the Mandatory
Conversion Date, each share of Series C Preferred Stock then outstanding shall
be (and be deemed to have been) converted automatically, without any further
action by the holders thereof, into shares of Common Stock. Such conversion
shall be deemed to have occurred whether or not the certificates representing
such shares are surrendered to the Corporation or its transfer agent.
(D) LIMITATION ON NUMBER OF SHARES. Additionally,
notwithstanding anything set forth in this Section 5 to the contrary, in no
event shall any holder of Series C Preferred Stock, prior to earlier to occur of
the Mandatory Conversion Date or the date of the consummation or closing of a
Fundamental Change, be entitled to convert Series C Preferred Stock into shares
of Common Stock to the extent that (x) the number of shares of the Corporation's
Common Stock beneficially owned by such holder and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the shares of Series C Preferred Stock
held by such holder) plus (y) the number of shares of Common Stock issuable upon
such conversion would result in beneficial ownership by the holder and its
affiliates of more than 4.9% of the shares of Common Stock then outstanding. For
purposes of this Section 5(d), beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D and 13G promulgated thereunder, except as otherwise
provided in clause (x) of
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this Section 5(d). Each holder shall, upon delivering to the Corporation a
notice of election to convert shares of Series C Preferred Stock in accordance
with Section 5(i) hereof, be required to provide the Corporation with a
certification in form and substance reasonably satisfactory to the Corporation,
that the conversion of the Series C Preferred Stock being converted will not
result in such holder and its affiliates beneficially holding more than 4.9%,
determined as heretofore provided, of the outstanding shares of Common Stock on
such Conversion Date. If the holder cannot make such certification, the shares
of Series C Preferred Stock to be converted shall not be convertible.
Notwithstanding the foregoing, upon the Mandatory Conversion Date or upon the
consummation or closing of a Fundamental Change, all such shares of Series C
Preferred Stock then outstanding shall be converted into Common Stock in
accordance with Section 5(c) or 5(g), as applicable.
(E) DIVIDENDS OTHER THAN COMMON STOCK DIVIDENDS. In the event
the Corporation shall make or issue, or shall fix a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution (other than a distribution in liquidation or other distribution
otherwise provided for herein) with respect to the Common Stock payable in (i)
securities of the Corporation other than shares of Common Stock, or (ii) other
assets (excluding cash dividends or distributions), then and in each such event
provision shall be made so that the holders of the Series C Preferred Stock
shall receive upon conversion thereof in addition to the number of shares of
Common Stock receivable thereupon, the number of securities or such other assets
of the Corporation which they would have received had their Series C Preferred
Stock been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
Conversion Date, retained such securities or such other assets receivable by
them during such period, giving application to all other adjustments called for
during such period under this Section 5 with respect to the rights of the
holders of the Series C Preferred Stock.
(F) CAPITAL REORGANIZATION OR RECLASSIFICATION. If the Common
Stock issuable upon the conversion of the Series C Preferred Stock shall be
changed into the same or different number of shares of any class or classes of
capital stock, whether by capital reorganization, recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for elsewhere in this Section 5, or the sale of all
or substantially all of the Corporation's capital stock or assets to any other
person), then and in each such event the holders of Series C Preferred Stock
shall have the right thereafter to convert such shares into the kind and amount
of shares of capital stock and other securities and property receivable upon
such reorganization, recapitalization, reclassification or other change by the
holders of the number of shares of Common Stock into which such shares of Series
C Preferred Stock might have been converted immediately prior to such
reorganization, recapitalization, reclassification or change, all subject to
further adjustment as provided herein.
(G) MANDATORY CONVERSION - FUNDAMENTAL CHANGE. If any
Fundamental Change shall occur, then each share of Series C Preferred Stock
outstanding as of the date of the consummation or closing thereof shall be (and
be deemed to have been) converted automatically, without any further action by
the holders thereof, into such number of fully paid and nonassessable shares of
Common Stock as shall be determined by multiplying the number of
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shares of Series C Preferred Stock outstanding on the on the date of such
consummation or closing date by a fraction, the numerator of which is the
Original Issue Price, and the denominator of which is the applicable Conversion
Price. Such conversion shall be deemed to have occurred whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent.
The Corporation shall give notice of a proposed or anticipated
Fundamental Change to all holders of the Series C Preferred Stock not later than
thirty (30) days before the expected closing or consummation of such Fundamental
Change, provided that at all times during such thirty-day period a registration
statement shall be in effect to permit the registration of the Common Stock
issuable upon conversion of the Series C Preferred Stock under the Securities
Act of 1933, as amended. The Corporation also shall give prompt notice of the
closing or consummation of such Fundamental Change to all holders of record of
the Series C Preferred Stock as of the date of such closing or consummation.
Each holder of Series C Preferred Stock shall thereupon promptly surrender for
conversion, to the Corporation at its principal office or to any transfer agent
for the Series C Preferred Stock or the Common Stock, all certificates
representing all shares of Series C Preferred Stock held by such holder,
accompanied by a written notice specifying the name or names in which such
holder wishes the certificate(s) for shares of Common Stock to be issued.
(H) CERTIFICATE AS TO ADJUSTMENTS; NOTICE BY CORPORATION. In
each case of an adjustment or readjustment of the Original Issue Price, the
Corporation at its expense will furnish each holder of Series C Preferred Stock
so affected with a certificate prepared by an officer of the Corporation,
showing such adjustment or readjustment, and stating in detail the facts upon
which such adjustment or readjustment is based.
(I) EXERCISE OF CONVERSION PRIVILEGE. To exercise its
conversion privilege, a holder of Series C Preferred Stock shall give written
notice by telecopy to the Corporation at its principal office that such holder
elects to convert shares of its Series C Preferred Stock and shall thereafter
surrender the original certificate(s) representing the shares being converted to
the Corporation at its principal office together with an originally executed
copy of such notice. Such notice shall also state the name or names (with its
address or addresses, as well as the address(es) for delivery) in which the
certificate(s) for shares of Common Stock issuable upon such conversion shall be
issued. The certificate(s) for the shares of Series C Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Corporation or in blank. As promptly as practicable after the Corporation
receives the original certificate(s) for the shares of Series C Preferred Stock
surrendered for conversion, the proper assignment thereof to the Corporation or
in blank and the original notice of conversion (collectively, the "ORIGINAL
DOCUMENTATION"), but in no event more than three (3) Trading Days after the
Corporation's receipt of the Original Documentation, the Corporation shall issue
and shall deliver to the holder of the shares of Series C Preferred Stock being
converted, at the addresses set forth therefor by the holder, such
certificate(s) as it may request for the number of whole shares of Common Stock
issuable upon the conversion of such shares of Series C Preferred Stock in
accordance with the provisions of this Section 5, and cash, as provided in
Section 5(j), in respect of any fraction of a share of Common Stock issuable
upon such conversion. Such conversion shall be deemed to have been effected
immediately prior to the
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close of business on the Conversion Date, and at such time the rights of the
holder as holder of the converted shares of Series C Preferred Stock shall cease
and the person(s) in whose name(s) any certificate(s) for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the
holder(s) of record of the shares of Common Stock represented thereby. If the
Corporation fails to issue and deliver to such holder such certificate(s) for
shares of Common Stock within three (3) Trading Days after the Corporation's
receipt of the Original Documentation, the Corporation shall pay the liquidated
damages set forth in the Stock Purchase Agreement between the Corporation and
the initial purchasers of the Series C Preferred Stock.
(J) CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series C Preferred Stock. Instead of any fractional
shares of Common Stock that would otherwise be issuable upon conversion of
Series C Preferred Stock, the Corporation shall pay to the holder of the shares
of Series C Preferred Stock being converted a cash adjustment in respect of such
fractional shares in an amount equal to the same fraction of the market price
per share of the Common Stock (as determined in a reasonable manner prescribed
by the Board of Directors) at the close of business on the Conversion Date. The
determination as to whether or not any fractional shares are issuable shall be
based upon the aggregate number of shares of Series C Preferred Stock being
converted at any one time by any holder thereof, not upon each share of Series C
Preferred Stock being converted.
(K) PARTIAL CONVERSION. In the event some but not all of the
shares of Series C Preferred Stock represented by a certificate(s) surrendered
by a holder are converted, the Corporation shall execute and deliver to or on
the order of the holder, at the expense of the Corporation, a new certificate
representing the number of shares of Series C Preferred Stock which were not
converted. Such new certificate shall be so delivered on or prior to the date
set forth in Section 5(i) for the delivery of certificates for shares of Common
Stock.
(L) RESERVATION OF COMMON STOCK. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series C Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series C Preferred Stock (including any shares of
Series C Preferred Stock represented by any warrants, options, subscription or
purchase rights for the Series C Preferred Stock), and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series C Preferred
Stock (including any shares of Series C Preferred Stock represented by any
warrants, options, subscriptions or purchase rights for the Series C Preferred
Stock), then the Corporation shall be deemed to be in breach and default of its
obligations hereunder, and in addition to all charges, claims and rights at law
or in equity that each holder shall be entitled to, the Corporation shall use
all means reasonably available to it, and promptly take any and all actions as
may be necessary, to increase its authorized but unissued shares of Common Stock
to such number of shares as shall be sufficient for such purpose.
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6. REDEMPTION AND REPURCHASE RIGHTS. The Corporation shall have no
right to redeem, and holders of shares of Series C Preferred Stock shall have no
right to cause the Corporation to redeem, any or all of the outstanding shares
of Series C Preferred Stock.
7. NOTICES OF RECORD DATE. In the event of any:
(A) taking by the Corporation of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of capital stock of any
class or any other securities or property, or to receive any other right, or
(B) capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other Corporation, or
any other entity or person, or
(C) voluntary or involuntary dissolution, liquidation or
winding up of the Corporation,
then and in each such event the Corporation shall telecopy and thereafter mail
or cause to be mailed to each holder of Series C Preferred Stock a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and a description of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up is expected to become effective, and
(iii) the time, if any, that is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other property deliverable
upon such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up. Such notice shall
be telecopied and thereafter mailed by first class mail, postage prepaid, or by
express overnight courier service, at least ten (10) days prior to the date
specified in such notice on which such action is to be taken.
8. GENERAL.
(a) REPLACEMENT OF CERTIFICATES. Upon the Corporation's
receipt, from the holder of any certificate evidencing shares of Series C
Preferred Stock, of evidence reasonably satisfactory to the Corporation (an
affidavit of such holder will be satisfactory) of the ownership and the loss,
theft, destruction or mutilation of such certificate, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation, and in the case of any such mutilation, upon
surrender of such certificate, the Corporation (at its expense) shall execute
and deliver to such holder, in lieu of such certificate, a new certificate that
represents the number of shares represented by, is dated the date of, is issued
in the name of the holder of, and is substantially identical in form of, such
lost, stolen, destroyed or mutilated certificate.
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(B) PAYMENT OF TAXES. The Corporation shall pay all taxes
(other than taxes based upon income) and other governmental charges that may be
imposed in connection with the issuance or delivery of any shares of Common
Stock (or other of the Corporation's securities) that results from (i) the
conversion of shares of Series C Preferred Stock pursuant to this Certificate of
Designations or (ii) the application of Section 2(a)(v) hereof. Notwithstanding
the foregoing, if the Corporation, pursuant to a notice from a holder of any
shares of Series C Preferred Stock, effects the issuance or delivery of any
shares of Common Stock (or other of the Corporation's securities) in any name(s)
other than such holder's name, then such holder shall deliver to the Corporation
with the aforesaid notice (A) all transfer taxes and other governmental charges
payable upon the issuance or delivery of securities in such other name(s) or (B)
evidence satisfactory to the Corporation that such taxes and charges have been
or shall be paid in full.
(C) STATUS OF REDEEMED OR CONVERTED SHARES. Shares of Series C
Preferred Stock that are redeemed, converted or otherwise acquired by the
Corporation in any manner (including by purchase or exchange) shall be canceled
and upon cancellation (i) shall no longer be deemed to be outstanding, (ii)
shall become authorized but unissued shares of preferred stock undesignated as
to series and (iii) may be reissued as part of another series of preferred
stock.
Exhibit 3c
DYNAGEN, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES D PREFERRED STOCK
The undersigned officer of DynaGen, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred by the Certificate of
Incorporation, as amended to date, and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, the Board of Directors
of DynaGen, Inc., on August 13, 1997, adopted a resolution providing for certain
powers, designations, preferences and relative, participating, optional or other
rights, and the qualifications, limitations or restrictions thereof, of certain
shares of Series D Preferred Stock, $.01 par value, of the Corporation, which
resolution is as follows:
RESOLVED: That, pursuant to the authority vested in the Board of
Directors of the Corporation and in accordance with the General Corporation Law
of the State of Delaware and the provisions of the Corporation's Certificate of
Incorporation, a series of 60,000 shares of the class of authorized Preferred
Stock, par value $.01 per share, of the Corporation is hereby created as the
Series D Preferred Stock, and that the designation and number of shares thereof
and the voting powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof, are as set forth on Exhibit A attached
hereto.
EXECUTED as of this 14th day of August, 1997.
DYNAGEN, INC.
By: /s/ Indu A. Muni
----------------------------
Indu A. Muni
President
EXHIBIT A
A. DESCRIPTION AND DESIGNATION OF SERIES D PREFERRED STOCK
1. DESIGNATION AND DEFINITIONS.
(A) DESIGNATION. A total of 60,000 shares of the Corporation's
previously undesignated Preferred Stock, $.01 par value, shall be designated as
the "Series D Preferred Stock." The original issue price per share of the Series
D Preferred Stock shall be $100.00 (the "ORIGINAL ISSUE PRICE").
(B) CERTAIN DEFINITIONS. As used herein, the following terms,
unless the context otherwise requires, have the following respective meanings:
"CLOSING DATE" means the original issue date of the Series C
Preferred Stock pursuant to a certain Stock Purchase Agreement in which the
Corporation agreed to issue, and the purchasers named therein agreed to
purchase, shares of Series C Preferred Stock and Series D Preferred Stock.
"COMMON STOCK" means the common stock, par value $.01 per
share, of the Corporation.
"CONVERSION DATE" means each date on which the Corporation
receives by telecopy written notice in accordance with Section 4(i) hereof from
a holder of Series D Preferred Stock that such holder elects to convert shares
of its Series D Preferred Stock.
"EFFECTIVE DATE" means the date as of which the Securities and
Exchange Commission has issued a declaration or order of effectiveness relating
to a registration statement filed, in compliance with the Securities Act of
1933, as amended, and Rule 415 thereunder, with respect to shares of Common
Stock issued or issuable on conversion of the Series D Preferred Stock pursuant
to Section 4 below.
"FUNDAMENTAL CHANGE" means: (i) any sale, lease, exchange or
other transfer of all or substantially all of the assets or capital stock of the
Corporation; or (ii) any merger or consolidation to which the Corporation is a
party. Notwithstanding the foregoing, the following shall not be a Fundamental
Change: A merger or consolidation to which the Corporation is a party and in
which it is the surviving corporation and there is no resulting reclassification
of the outstanding Common Stock; and after giving effect to which, persons who
were, immediately before the consummation or closing of such merger or
consolidation, holders of outstanding Common Stock will be the direct or
indirect owners of securities of the Corporation possessing, on a fully diluted
basis, at least seventy-five percent (75%) of the voting power of all voting
securities of the Corporation (excluding, for purposes of such computation, any
such person who also is a party to such merger or consolidation).
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"ISSUE DATE" means, with respect to each share of Series D
Preferred Stock held by any holder, the date on which the Corporation originally
issued such share to such holder (regardless of the number of times transfer of
such share is made on the stock transfer books maintained by or for the
Corporation, and regardless of the number of certificates which may be issued to
evidence such share, and irrespective of any subsequent transfer or other
disposition of such share to any other holder), pursuant to a periodic issuance
of the Series D Preferred Stock (not less than thirty (30) days apart) under the
Stock Purchase Agreement in which the Corporation has the right to request a
purchase of the Series D Preferred Stock during any thirty-day period.
"MARKET PRICE" means the average of the closing bid price of
the Common Stock of the Corporation as reported by the Nasdaq SmallCap Market or
Nasdaq National Market or, if the Corporation's Common Stock is no longer traded
on a Nasdaq market, such other exchange on which the Corporation's Common Stock
is then traded, for the five (5) Trading Days prior to the Closing Date,
Effective Date, any Issue Date, or any date of conversion of the series D
Preferred Stock..
"TRADING DAY" means a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for the transaction of business; or, if the Common Stock is not listed
or admitted to trading on any national securities exchange but is listed on the
Nasdaq system (or such other trading system then in use by the National
Association of Securities Dealers, Inc.), a day on which such system is open for
the transaction of business; or, if the foregoing does not apply, any business
day.
2. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) TREATMENT AT LIQUIDATION, DISSOLUTION OR WINDING UP. In
the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, or in the event of its insolvency, before any
distribution or payment is made to any holders of Common Stock or any other
class or series of capital stock of the Corporation designated to be junior to
the Series D Preferred Stock, and subject to the liquidation rights and
preferences of any class or series of Preferred Stock designated by the Board of
Directors in the future to be senior to or on a parity with the Series D
Preferred Stock with respect to liquidation preferences, the holder of each
share of Series D Preferred Stock shall be entitled to be paid first out of the
assets of the Corporation available for distribution to holders of the
Corporation's capital stock of all classes, whether such assets are capital,
surplus or earnings, an amount equal to the Original Issue Price per share of
Series D Preferred Stock held by any holder (the "LIQUIDATION VALUE"). For
purposes hereof, the Series D Preferred Stock shall rank on liquidation junior
to the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock.
If, upon liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of the Series D Preferred
Stock the full amount to which they otherwise would be entitled, the holders of
Series D Preferred Stock shall share ratably in any distribution of available
assets pro rata in proportion to the respective liquidation preference amounts
which would otherwise be payable upon liquidation with respect to the
outstanding shares of the Series D Preferred Stock if
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all liquidation preference amounts with respect to such shares were paid in
full, based upon the aggregate Liquidation Value payable upon all shares of
Series D Preferred Stock then outstanding.
After such payment shall have been made in full to the holders
of the Series D Preferred Stock, or funds necessary for such payment shall have
been set aside by the Corporation in trust for the account of holders of the
Series D Preferred Stock so as to be available for such payment, the remaining
assets available for distribution shall be distributed ratably among the holders
of the Common Stock and any class or series of capital stock designated to be
junior to the Series D Preferred Stock (if any) in right of payment upon any
liquidation, dissolution or winding up of the Corporation.
The amounts set forth above shall be subject to equitable
adjustment by the Board of Directors whenever there shall occur a stock
dividend, stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the capital
structure of the Series D Preferred Stock.
(B) DISTRIBUTIONS OTHER THAN CASH. Whenever the distributions
provided for in this Section shall be payable in property other than cash, the
value of such distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors. All distributions (including
distributions other than cash) made hereunder shall be made pro rata to the
holders of Series D Preferred Stock.
(C) EVENTS NOT DEEMED A LIQUIDATION. Neither the merger or
consolidation of the Corporation into or with any other corporation(s), nor the
sale or transfer by the Corporation of all or any part of its assets, nor the
reduction of the capital stock of the Corporation, will be deemed to be a
liquidation, dissolution or winding up of the Corporation under this Section 2.
3. VOTING POWER.
(A) GENERAL. Except as otherwise expressly provided in this
Section 3 or as otherwise required by the General Corporation Law of the State
of Delaware, each holder of Series D Preferred Stock shall be entitled to vote
on all matters and shall be entitled to that number of votes equal to the
largest number of whole shares of Common Stock into which such holder's shares
of Series D Preferred Stock could be converted, pursuant to the provisions of
Section 4 hereof, at the record date for the determination of stockholders
entitled to vote on any matter or, if no such record date is established, at the
date such vote is taken or any written consent of stockholders is solicited.
Except as otherwise expressly required by law, the holders of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Common Stock shall vote together (or render written consents
in lieu of a vote) as a single class on all matters submitted to the
stockholders of the Corporation.
Such determination of "whole shares" shall be based upon the
aggregate number of shares of Series D Preferred Stock held by each holder, and
not upon each share of Series D Preferred Stock so held by the holder.
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(B) AMENDMENTS TO CHARTER. For so long as there are any shares
of Series D Preferred Stock outstanding, the Corporation shall not amend its
Certificate of Incorporation or this Certificate of Designation without the
approval, by vote or written consent, of the holders of at least a majority of
the then outstanding shares of Series D Preferred Stock, voting together as a
class, each share of Series D Preferred Stock to be entitled to one vote in each
instance, if such amendment would adversely affect the rights of the holders of
Series D Preferred Stock. Without limiting the generality of the foregoing, the
creation, or increase in the authorized number of shares, of any class or series
of stock ranking prior to or on a parity with the Series D Preferred Stock
either as to dividends or upon liquidation shall be deemed to adversely affect
the rights of the holders of Series D Preferred Stock for purposes of this
Section 3(b).
4. CONVERSION RIGHTS.
(A) CONVERSION AT THE OPTION OF HOLDERS. Each holder of Series
D Preferred Stock shall have the right at any time, at such holder's option, to
convert the shares of Series D Preferred Stock held by such holder into such
number of fully paid and nonassessable shares of Common Stock as shall be
determined by multiplying the number of shares of Series D Preferred Stock to be
converted by a fraction, the numerator of which is the Original Issue Price, and
the denominator of which is the applicable Conversion Price (as defined below).
(B) CONVERSION PRICE. The conversion price per share (the
"CONVERSION PRICE") shall be equal to the lesser of subsections (i) and (ii)
below:
(i) Eighty-five percent (85%) of the Market Price
prior to any conversion of the Series D Preferred Stock; or
(ii) one hundred twenty-five percent (125%) of the
Market Price on the Closing Date.
(C) CONVERSION AT OPTION OF CORPORATION. At any time after the
close of business on the two-year anniversary of the Effective Date, all of the
shares of Series D Preferred Stock shall be convertible, at the option of the
Corporation, into such number of fully paid and nonassessable shares of Common
Stock as shall be determined by multiplying the number of shares of Series D
Preferred Stock outstanding on the Mandatory Conversion Date (as defined below)
by a fraction, the numerator of which is the Original Issue Price, and the
denominator of which is the applicable Conversion Price.
The Corporation shall give notice of its exercise of such
conversion option to all holders of Series D Preferred Stock no later than five
(5) Trading Days before the date as of which the Corporation has elected to make
such conversion effective (such effective date of the conversion, the "MANDATORY
CONVERSION Date"). Each holder of Series D Preferred Stock as of the Mandatory
Conversion Date shall, promptly after such date, surrender for conversion to the
Corporation at its principal office or to any transfer agent for the Series D
Preferred Stock or the Common Stock all certificates representing all shares of
Series D Preferred Stock held by such holder, accompanied by a written notice
specifying the name or names in which such holder wishes the certificate(s) for
shares of Common Stock to be issued.
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Effective as of the close of business on the Mandatory
Conversion Date, each share of Series D Preferred Stock then outstanding shall
be (and be deemed to have been) converted automatically, without any further
action by the holders thereof, into shares of Common Stock. Such conversion
shall be deemed to have occurred whether or not the certificates representing
such shares are surrendered to the Corporation or its transfer agent.
(D) LIMITATION ON NUMBER OF SHARES. Additionally,
notwithstanding anything set forth in this Section 4 to the contrary, in no
event shall any holder of Series D Preferred Stock, prior to earlier to occur of
the Mandatory Conversion Date or the date of the consummation or closing of a
Fundamental Change, be entitled to convert Series D Preferred Stock into shares
of Common Stock to the extent that (x) the number of shares of the Corporation's
Common Stock beneficially owned by such holder and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the shares of Series D Preferred Stock
held by such holder) plus (y) the number of shares of Common Stock issuable upon
such conversion would result in beneficial ownership by the holder and its
affiliates of more than 4.9% of the shares of Common Stock then outstanding. For
purposes of this Section 4(d), beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D and 13G promulgated thereunder, except as otherwise
provided in clause (x) of this Section 4(d). Each holder shall, upon delivering
to the Corporation a notice of election to convert shares of Series D Preferred
Stock in accordance with Section 4(i) hereof, be required to provide the
Corporation with a certification in form and substance reasonably satisfactory
to the Corporation, that the conversion of the Series D Preferred Stock being
converted will not result in such holder and its affiliates beneficially holding
more than 4.9%, determined as heretofore provided, of the outstanding shares of
Common Stock on such Conversion Date. If the holder cannot make such
certification, the shares of Series D Preferred Stock to be converted shall not
be convertible. Notwithstanding the foregoing, upon the Mandatory Conversion
Date or upon the consummation or closing of a Fundamental Change, all such
shares of Series D Preferred Stock then outstanding shall be converted into
Common Stock in accordance with Section 4(c) or 4(g), as applicable.
(E) DIVIDENDS OTHER THAN COMMON STOCK DIVIDENDS. In the event
the Corporation shall make or issue, or shall fix a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution (other than a distribution in liquidation or other distribution
otherwise provided for herein) with respect to the Common Stock payable in (i)
securities of the Corporation other than shares of Common Stock, or (ii) other
assets (excluding cash dividends or distributions), then and in each such event
provision shall be made so that the holders of the Series D Preferred Stock
shall receive upon conversion thereof in addition to the number of shares of
Common Stock receivable thereupon, the number of securities or such other assets
of the Corporation which they would have received had their Series D Preferred
Stock been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
Conversion Date, retained such securities or such other assets receivable by
them during such period, giving application to all other adjustments called for
during such period under this Section 4 with respect to the rights of the
holders of the Series D Preferred Stock.
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(F) CAPITAL REORGANIZATION OR RECLASSIFICATION. If the Common
Stock issuable upon the conversion of the Series D Preferred Stock shall be
changed into the same or different number of shares of any class or classes of
capital stock, whether by capital reorganization, recapitalization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for elsewhere in this Section 4, or the sale of all
or substantially all of the Corporation's capital stock or assets to any other
person), then and in each such event the holders of Series D Preferred Stock
shall have the right thereafter to convert such shares into the kind and amount
of shares of capital stock and other securities and property receivable upon
such reorganization, recapitalization, reclassification or other change by the
holders of the number of shares of Common Stock into which such shares of Series
D Preferred Stock might have been converted immediately prior to such
reorganization, recapitalization, reclassification or change, all subject to
further adjustment as provided herein.
(G) MANDATORY CONVERSION - FUNDAMENTAL CHANGE. If any
Fundamental Change shall occur, then each share of Series D Preferred Stock
outstanding as of the date of the consummation or closing thereof shall be (and
be deemed to have been) converted automatically, without any further action by
the holders thereof, into such number of fully paid and nonassessable shares of
Common Stock as shall be determined by multiplying the number of shares of
Series D Preferred Stock outstanding on the on the date of such consummation or
closing date by a fraction, the numerator of which is the Original Issue Price,
and the denominator of which is the applicable Conversion Price. Such conversion
shall be deemed to have occurred whether or not the certificates representing
such shares are surrendered to the Corporation or its transfer agent.
The Corporation shall give notice of a proposed or anticipated
Fundamental Change to all holders of the Series D Preferred Stock not later than
thirty (30) days before the expected closing or consummation of such Fundamental
Change, provided that at all times during such thirty-day period a registration
statement shall be in effect to permit the registration of the Common Stock
issuable upon conversion of the Series D Preferred Stock under the Securities
Act of 1933, as amended. The Corporation also shall give prompt notice of the
closing or consummation of such Fundamental Change to all holders of record of
the Series D Preferred Stock as of the date of such closing or consummation.
Each holder of Series D Preferred Stock shall thereupon promptly surrender for
conversion, to the Corporation at its principal office or to any transfer agent
for the Series D Preferred Stock or the Common Stock, all certificates
representing all shares of Series D Preferred Stock held by such holder,
accompanied by a written notice specifying the name or names in which such
holder wishes the certificate(s) for shares of Common Stock to be issued.
(H) CERTIFICATE AS TO ADJUSTMENTS; NOTICE BY CORPORATION. In
each case of an adjustment or readjustment of the Original Issue Price, the
Corporation at its expense will furnish each holder of Series D Preferred Stock
so affected with a certificate prepared by an officer of the Corporation,
showing such adjustment or readjustment, and stating in detail the facts upon
which such adjustment or readjustment is based.
(I) EXERCISE OF CONVERSION PRIVILEGE. To exercise its
conversion privilege, a holder of Series D Preferred Stock shall give written
notice by telecopy to the Corporation at its
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principal office that such holder elects to convert shares of its Series D
Preferred Stock and shall thereafter surrender the original certificate(s)
representing the shares being converted to the Corporation at its principal
office together with an originally executed copy of such notice. Such notice
shall also state the name or names (with its address or addresses, as well as
the address(es) for delivery) in which the certificate(s) for shares of Common
Stock issuable upon such conversion shall be issued. The certificate(s) for the
shares of Series D Preferred Stock surrendered for conversion shall be
accompanied by proper assignment thereof to the Corporation or in blank. As
promptly as practicable after the Corporation receives the original
certificate(s) for the shares of Series D Preferred Stock surrendered for
conversion, the proper assignment thereof to the Corporation or in blank and the
original notice of conversion (collectively, the "ORIGINAL DOCUMENTATION"), but
in no event more than three (3) Trading Days after the Corporation's receipt of
the Original Documentation, the Corporation shall issue and shall deliver to the
holder of the shares of Series D Preferred Stock being converted, at the
addresses set forth therefor by the holder, such certificate(s) as it may
request for the number of whole shares of Common Stock issuable upon the
conversion of such shares of Series D Preferred Stock in accordance with the
provisions of this Section 4, and cash, as provided in Section 4(j), in respect
of any fraction of a share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been effected immediately prior to the close
of business on the Conversion Date, and at such time the rights of the holder as
holder of the converted shares of Series D Preferred Stock shall cease and the
person(s) in whose name(s) any certificate(s) for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder(s) of
record of the shares of Common Stock represented thereby. If the Corporation
fails to issue and deliver to such holder such certificate(s) for shares of
Common Stock within three (3) Trading Days after the Corporation's receipt of
the Original Documentation, the Corporation shall pay the liquidated damages set
forth in the Stock Purchase Agreement between the Corporation and the initial
purchasers of the Series D Preferred Stock.
(J) CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series D Preferred Stock. Instead of any fractional
shares of Common Stock that would otherwise be issuable upon conversion of
Series D Preferred Stock, the Corporation shall pay to the holder of the shares
of Series D Preferred Stock being converted a cash adjustment in respect of such
fractional shares in an amount equal to the same fraction of the market price
per share of the Common Stock (as determined in a reasonable manner prescribed
by the Board of Directors) at the close of business on the Conversion Date. The
determination as to whether or not any fractional shares are issuable shall be
based upon the aggregate number of shares of Series D Preferred Stock being
converted at any one time by any holder thereof, not upon each share of Series D
Preferred Stock being converted.
(K) PARTIAL CONVERSION. In the event some but not all of the
shares of Series D Preferred Stock represented by a certificate(s) surrendered
by a holder are converted, the Corporation shall execute and deliver to or on
the order of the holder, at the expense of the Corporation, a new certificate
representing the number of shares of Series D Preferred Stock which were not
converted. Such new certificate shall be so delivered on or prior to the date
set forth in Section 4(i) for the delivery of certificates for shares of Common
Stock.
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(L) RESERVATION OF COMMON STOCK. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series D Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series D Preferred Stock (including any shares of
Series D Preferred Stock represented by any warrants, options, subscription or
purchase rights for the Series D Preferred Stock), and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series D Preferred
Stock (including any shares of Series D Preferred Stock represented by any
warrants, options, subscriptions or purchase rights for the Series D Preferred
Stock), then the Corporation shall be deemed to be in breach and default of its
obligations hereunder, and in addition to all charges, claims and rights at law
or in equity that each holder shall be entitled to, the Corporation shall use
all means reasonably available to it, and promptly take any and all actions as
may be necessary, to increase its authorized but unissued shares of Common Stock
to such number of shares as shall be sufficient for such purpose.
5. REDEMPTION AND REPURCHASE RIGHTS. The Corporation shall have no
right to redeem, and holders of shares of Series D Preferred Stock shall have no
right to cause the Corporation to redeem, any or all of the outstanding shares
of Series D Preferred Stock.
6. NOTICES OF RECORD DATE. In the event of any:
(A) taking by the Corporation of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of capital stock of any
class or any other securities or property, or to receive any other right, or
(B) capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other Corporation, or
any other entity or person, or
(C) voluntary or involuntary dissolution, liquidation or
winding up of the Corporation,
then and in each such event the Corporation shall telecopy and thereafter mail
or cause to be mailed to each holder of Series D Preferred Stock a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and a description of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up is expected to become effective, and
(iii) the time, if any, that is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other property deliverable
upon such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up. Such notice shall
be telecopied and thereafter mailed by
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first class mail, postage prepaid, or by express overnight courier service, at
least ten (10) days prior to the date specified in such notice on which such
action is to be taken.
7. GENERAL.
(A) REPLACEMENT OF CERTIFICATES. Upon the Corporation's
receipt, from the holder of any certificate evidencing shares of Series D
Preferred Stock, of evidence reasonably satisfactory to the Corporation (an
affidavit of such holder will be satisfactory) of the ownership and the loss,
theft, destruction or mutilation of such certificate, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation, and in the case of any such mutilation, upon
surrender of such certificate, the Corporation (at its expense) shall execute
and deliver to such holder, in lieu of such certificate, a new certificate that
represents the number of shares represented by, is dated the date of, is issued
in the name of the holder of, and is substantially identical in form of, such
lost, stolen, destroyed or mutilated certificate.
(B) PAYMENT OF TAXES. The Corporation shall pay all taxes
(other than taxes based upon income) and other governmental charges that may be
imposed in connection with the issuance or delivery of any shares of Common
Stock (or other of the Corporation's securities) that results from the
conversion of shares of Series D Preferred Stock pursuant to this Certificate of
Designations. Notwithstanding the foregoing, if the Corporation, pursuant to a
notice from a holder of any shares of Series D Preferred Stock, effects the
issuance or delivery of any shares of Common Stock (or other of the
Corporation's securities) in any name(s) other than such holder's name, then
such holder shall deliver to the Corporation with the aforesaid notice (A) all
transfer taxes and other governmental charges payable upon the issuance or
delivery of securities in such other name(s) or (B) evidence satisfactory to the
Corporation that such taxes and charges have been or shall be paid in full.
(C) STATUS OF REDEEMED OR CONVERTED SHARES. Shares of Series D
Preferred Stock that are redeemed, converted or otherwise acquired by the
Corporation in any manner (including by purchase or exchange) shall be canceled
and upon cancellation (i) shall no longer be deemed to be outstanding, (ii)
shall become authorized but unissued shares of preferred stock undesignated as
to series and (iii) may be reissued as part of another series of preferred
stock.
Exhibit 4a
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "AGREEMENT"), dated as of
______________, 1997, is entered into by and between the parties listed on
Schedule I hereto (individually, a "PURCHASER" and collectively, the
"PURCHASERS") and DYNAGEN, INC., a Delaware corporation (the "COMPANY").
The parties hereto agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS. Upon the basis
of the representations and warranties, and subject to the terms and conditions
set forth in this Agreement, the Company covenants and agrees to sell to each
Purchaser on the Closing Date (as hereinafter defined) (i) the number of shares
(the "PREFERRED SHARES") of its Series A Preferred Stock (the "PREFERRED STOCK")
set forth opposite the name of such Purchaser under the heading "The Number of
Preferred Shares to be Purchased," each such Preferred Share convertible in
accordance with the terms and conditions of the Company's Certificate of
Designation for the Preferred Stock filed with the Secretary of State of
Delaware on June 16, 1997, attached hereto as EXHIBIT A (the "CERTIFICATE OF
DESIGNATION"), on the dates set forth in the Certificate of Designation (any
such date of conversion, the "CONVERSION DATE") into shares of the Company's
Common Stock (the "CONVERSION SHARES") and (ii) a warrant in substantially the
form of EXHIBIT B hereto (the "WARRANT") to purchase the number of shares of the
Company's Common Stock (the "WARRANT SHARES") set forth opposite the name of
such Purchaser under the heading "Number of Warrant Shares." The Preferred
Shares (together with the Warrant Shares, the "SHARES"), and the Warrants shall
be purchased at the aggregate purchase price (the "PURCHASE PRICE") set forth
opposite the name of such Purchaser under the heading "Aggregate Purchase
Price." The Preferred Shares and Warrants are sometimes hereinafter collectively
referred to as the "SECURITIES."
2. CLOSING. The closing of the purchase and sale of the Preferred
Shares and the Warrants pursuant to Section 1 hereof shall take place at the
offices of Morse, Zelnick, Rose & Lander LLP, located at 450 Park Avenue, Suite
902, New York, New York 10022 on such date as the Purchasers and the Company may
agree upon, or at such other time at which the Escrow Agent (as hereinafter
defined) shall have received all documents and instructions as it shall in its
sole judgment deem necessary and appropriate to consummate the transactions
contemplated hereby (such time and date for the closing, the "CLOSING DATE").
The certificates representing the Preferred Shares and the executed Warrants to
be purchased by the Purchasers shall be delivered by, or on behalf of, the
Company at the closing against payment of the Purchase Price therefor in
immediately available funds by, or on behalf of, the Purchasers to the attorney
trust account of Morse, Zelnick, Rose & Lander, LLP, (the "ESCROW AGENT") (Chase
Manhattan Bank, Account No. 967086639, ABA Routing Number 021000021). The Escrow
Agent shall receive from the Purchasers and the Company written instructions of
the Purchasers and the Company in substantially the form of EXHIBIT C hereto
instructing the Escrow Agent with respect to the closing and settlement
procedures, subject, however, to the terms and conditions of this
Agreement on the date the Purchasers deliver the Purchase Price to the Escrow
Agent. Commencing on the fifth business day after delivery to the Escrow Agent
of the Purchase Price, the Purchasers, if the purchase and sale transaction
contemplated hereby has not been consummated in accordance with the terms of
this Agreement, may terminate the proposed transaction by notice to the Company
and the Escrow Agent, whereupon the Escrow Agent shall promptly redeliver the
Purchase Price to the Purchasers in accordance with the written instructions of
the Purchasers.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS. Each
Purchaser understands, and represents and warrants to, and agrees with, the
Company, that:
(a) The Preferred Shares (including the Conversion Shares) and
the Warrants (including the Warrant Shares) have not been and, unless registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), in
accordance with the Registration Rights Agreement (as defined in Section 6(b)),
will not be registered under the Securities Act, or any other applicable
securities law, and, accordingly, may not be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of ("TRANSFERRED") unless registered
under the Securities Act or Transferred in a transaction exempt from
registration under the Securities Act and any other applicable securities law
(in which event, each Purchaser shall be required to provide the Company with an
opinion of counsel that registration is not required, in form and substance
reasonably satisfactory to the Company and its counsel).
Each Purchaser acknowledges and agrees that the certificates
representing the Preferred Shares and the Warrants and, prior to the effective
date of the registration thereof under the Securities Act pursuant to the
Registration Rights Agreement, the Conversion Shares and the Warrant Shares,
will bear a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR,
UNLESS, IN THE OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER, SUCH OFFER, SALE, OR TRANSFER IS EXEMPT FROM
REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH LAWS.
(b) Each Purchaser is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act, was not organized for the
specific purpose of acquiring the Securities, and is acquiring or will acquire
the Securities for its own account. The Purchaser has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Securities. The Purchaser is aware
that it may be
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required to bear the economic risk (including the possible loss of the entire
investment) of an investment in the Securities for an indefinite period, and it
is able to bear such risk for an indefinite period.
(c) Each Purchaser is acquiring or will acquire the Preferred
Shares and the Warrant for its own account for investment purposes and not with
a view to, or for offer or sale in connection with, any distribution thereof,
except in compliance with applicable securities laws (including exemptions
thereunder) or pursuant to an effective registration statement under the
Securities Act. Each Purchaser agrees to Transfer the Preferred Shares
(including the Conversion Shares) and the Warrant (including the Warrant Shares)
only (i) in accordance with the terms of this Agreement and the Warrant, as
applicable, and (ii) pursuant to registration under the Securities Act or an
exemption from registration under the Securities Act and any other applicable
securities law.
(d) The Company has furnished or made available to each
Purchaser all material information relating to the business, finances and
operations of the Company and material information relating to the offer and
sale of the Securities and which have been requested by each Purchaser. Each
Purchaser and/or its advisors, if any, in each case, have been afforded the
opportunity to ask questions of the Company and have received satisfactory
answers to any such inquiries. Without limiting the generality of the foregoing,
each Purchaser has had the opportunity to obtain and to review the Company's (1)
Transition Report on Form 10-K for the six-month period ended December 31, 1996,
as amended by Amendment No. 1 to Transition Report on Form 10-K/A, as filed with
the Securities and Exchange Commission (the "SEC"), (2) Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1997 and June 30, 1997, (3)
definitive Proxy Statement of the Company dated December 27, 1996 for its Annual
Meeting of Stockholders held on January 30, 1997, (4) Current Report on Form 8-K
filed with the SEC on July 3, 1997, as amended by Amendment No. 1 to Current
Report on Form 8-K/A filed with the SEC on July 11, 1997 and Amendment No. 2 to
Current Report on Form 8-K/A filed with the SEC on August 29, 1997, and (5) the
Company's Registration Statement on Form S-3 filed with the SEC on August 11,
1997, as amended by Amendment No. 1 to Registration Statement on Form S-3 filed
with the SEC on September 11, 1997 (collectively, the "SEC DOCUMENTS"), which
the Company has filed pursuant to the Securities Act or the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"). Each Purchaser has had an
opportunity to discuss in depth the Company's business, management and financial
affairs with the Company's management, and has been provided access to material
contracts and other documents it has requested and various informational
brochures regarding the Company.
(e) Each Purchaser, in electing to subscribe for the
Securities hereunder, has relied upon an independent investigation made by it
and its representative, if any. Each Purchaser has been given no oral or written
representations or assurances from the Company or any representative of the
Company other than as set forth in this Agreement or in a document executed by a
duly authorized representative of the Company making reference to this
Agreement.
-3-
(f) Each Purchaser has no existing short position with respect
to the Common Stock.
(g) Each Purchaser acknowledges that, except for the
historical material contained herein or in the SEC Documents, the matters
disclosed herein and therein are forward-looking statements under the federal
securities laws that involve risks and uncertainties, including, but not limited
to, the Company's ability to obtain future financing, the management and
integration of acquired businesses and possible future acquisitions, product
demand and market acceptance risks, the effect of economic conditions, the
impact of competitive products and pricing, product development,
commercialization and technological difficulties, capacity and supply
constraints or difficulties, the results of financing efforts, actual purchases
under agreements, and other risks detailed in the Company's SEC Documents.
Actual results could differ materially from those estimated or anticipated in
these forward-looking statements.
(h) Each Purchaser is a resident of the state or country set
forth under its name on the signature page hereto.
(i) The foregoing representations and warranties are true and
accurate as of the date hereof and unless otherwise informed in writing may be
relied upon by the Company as being true and correct as of the Closing Date and
the date of each Purchaser's purchase of the Securities subscribed for herein,
and such representations and warranties shall survive such purchase.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Purchasers that, except as
disclosed in the Disclosure Schedule attached hereto:
(a) The Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations under the laws of their
respective states of incorporation and have the requisite corporate powers to
own their properties and to carry on their businesses as now being conducted.
(b) This Agreement, the Certificate of Designation, the
Warrants and the Registration Rights Agreement (as defined in Section 6(b)) have
been duly authorized, executed and delivered by the Company and constitute valid
and binding agreements, enforceable in accordance with their respective terms
(except to the extent that enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights generally), and the
Company has full corporate power and authority necessary to enter into such
agreements and to perform its obligations thereunder.
(c) No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company
or any of its affiliates or of any third party or of the stockholders of the
Company is required for execution of this Agreement, the Warrants or the
Registration Rights Agreement or the performance of its obligations under such
-4-
agreements, including, without limitation, the issuance and sale of the
Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares
(except for the registration of the Conversion Shares and Warrant Shares under
the Securities Act pursuant to the Registration Rights Agreement, the listing of
the Conversion Shares and the Warrant Shares on the NASDAQ SmallCap Market and
any notices of sale required to be filed with the SEC pursuant to Regulation D
promulgated under the Securities Act or any state securities law authority
pursuant to applicable blue sky laws may be filed within the applicable periods
therefor).
(d) Neither the sale of the Preferred Shares and Warrants
pursuant to this Agreement, nor the performance of its obligations under this
Agreement, the Certificate of Designation (including the issuance of the
Conversion Shares thereunder), the Warrants (including the issuance of the
Warrant Shares thereunder) or the Registration Rights Agreement by the Company
will:
(i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default) under (A)
the Certificate of Incorporation or By-laws of the Company, (B) any decree,
judgment, order, law, treaty, rule, regulation or determination applicable to
the Company of any court, governmental agency or body, or arbitrator having
jurisdiction over the Company or over the properties or assets of the Company,
the violation, conflict, breach or default of which would have a material
adverse effect on the Company and its subsidiaries considered as a whole, (C)
the terms of any bond, debenture, or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease, mortgage, deed
of trust or other instrument to which the Company is a party, by which the
Company is bound, or to which any of the properties of the Company is subject,
the violation, conflict, breach or default of which would have a material
adverse effect on the Company and its subsidiaries considered as a whole, or (D)
the terms of any "lockup" or similar provision of any underwriting or similar
agreement to which the Company is a party; or
(ii) result in the creation or imposition of any
lien, claim or other encumbrance upon any of the assets of the Company.
(e) As of the Closing Date, the Preferred Shares will be duly
and validly authorized and (i) will be free and clear of any security interests,
liens, claims or other encumbrances, (ii) will be duly and validly issued, (iii)
will be fully paid and nonassessable, (iv) will not be issued or sold in
violation of any preemptive or other similar rights of the holders of any
securities of the Company, and (v) will not subject the holders thereof to
personal liability by reason of being such holders. The Warrants have been duly
and validly authorized and when issued and delivered pursuant to this Agreement
will have been duly executed, issued and delivered and will constitute a legal,
valid, binding and enforceable obligation of the Company (except to the extent
that enforceability thereof may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights generally).
-5-
(f) As of the Closing Date, the Conversion Shares and Warrant
Shares will be duly and validly authorized and when issued in accordance with
the terms of this Agreement, the Certificate of Designation (as to the
Conversion Shares) and the Warrants (as to the Warrant Shares) (i) will be free
and clear of any security interests, liens, claims or other encumbrances, (ii)
will be duly and validly issued, (iii) will be fully paid and nonassessable,
(iv) will not have been issued or sold in violation of any preemptive or other
similar rights of the holders of any securities of the Company, and (v) will not
subject the holders thereof to personal liability solely by reason of being such
holders.
(g) Except as set forth in the SEC Documents, there is no
pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or any of its affiliates that
would materially adversely affect the results of operations of the Company or
adversely affect the execution by the Company of, or materially adversely affect
the performance by the Company of its obligations under, this Agreement, the
Certificate of Designation, the Warrants or the Registration Rights Agreement,
or the transactions contemplated hereby or thereby.
(h) Neither the Company, nor any authorized representative of
the Company, has made any written or oral communication in connection with the
offer or sale of the securities offered hereby which contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements, in the light of the circumstances under which they
were made, not misleading.
(i) None of the Company, any affiliate of the Company, or any
person acting on behalf of the Company or any such affiliate has engaged, or
will engage, in any general solicitation or general advertising with respect to
the Preferred Shares or the Warrants.
(j) The Company is duly organized, validly existing and in
good standing under the laws of the state of Delaware and is duly qualified as a
foreign corporation in all jurisdictions in which the failure to so qualify
would have a material adverse effect on the Company and its subsidiaries taken
as a whole. The Company has registered its Common Stock pursuant to the Exchange
Act, and the Common Stock is listed and currently trades on the NASDAQ SmallCap
Market. The Company is not in violation of the applicable listing agreement
between the Company and any securities exchange or market on which the Company's
securities are listed. The Company has timely filed all materials required to be
filed pursuant to all reporting obligations under either Section 13(a) or 15(d)
of the Exchange Act for at least twelve (12) months immediately preceding the
date hereof, and has received no notice, either oral or written, with respect to
the continued eligibility for such listing. The Company has timely made all
filings required under the Exchange Act during the twelve month period preceding
the date hereof and is eligible to use Form S-3 to register the Conversion
Shares and Warrant Shares. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have
-6-
been prepared in accordance with generally accepted accounting principles,
consistently applied during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). Prior to the
date hereof, the Company has corrected all statements in the SEC Documents which
have required correction and has filed all necessary amendments to the SEC
Documents, in each case as required by applicable law.
(k) As of the date hereof and as of the Closing Date, the
authorized capital stock of the Company consists of (i) 75,000,000 shares of
Common Stock $.01 par value per share, of which _____________ shares are issued
and outstanding, and (ii) 10,000,000 shares of preferred stock, $.01 par value
per share, of which (A) 50,000 shares have been designated Series A Preferred
Stock, of which __________ shares are issued and outstanding and ____ have been
converted into Common Stock, (B) 12,515 shares have been designated as Series B
Preferred Stock, all of which are issued and outstanding, (C) 7,500 shares have
been designated Series C Preferred Stock, $.01 par value per share, all of which
are issued and outstanding and (D) 60,000 shares have been designated Series D
Preferred Stock, $.01 par value per share, _______ of which are issued and
outstanding, and (iii) the Company has reserved for issuance no more than
_____________ shares of Common Stock with respect to the Derivative Securities.
All outstanding shares of Common Stock, Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock have been validly issued and are fully paid
and nonassessable. No shares of Common Stock, Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company. Except as disclosed in the SEC Documents, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of capital stock of the Company
or any of its subsidiaries, or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries (all such securities and rights
contained in this subsection (i) are hereinafter collectively referred to as
"DERIVATIVE SECURITIES"), and (ii) there are no outstanding debt securities of
the Company. The Company has made available to the Purchaser true and correct
copies of the Company's Certificate of Incorporation, as amended, as in effect
on the date hereof, and the Company's By-laws.
(l) The Company undertakes and agrees to make all necessary
filings in connection with the sale of the securities offered hereby as required
by the United States laws and the regulations or any domestic securities
exchange or trading market.
(m) Except as set forth in the SEC Documents, since December
31, 1996, there has been no material adverse development in the assets,
liabilities, business properties, operations, financial condition or results of
operations of the Company and its subsidiaries taken as a whole, other than
continued losses.
-7-
(n) None of the filings of the Company with the SEC since
December 31, 1996 contained, at the time they were filed, any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company has since
December 31, 1996 timely filed all requisite forms, reports and exhibits thereto
with the SEC. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents.
Prior to the date hereof, the Company has corrected all statements in the SEC
Documents which have required correction and has filed all necessary amendments
to the SEC Documents, in each case as required by applicable law.
(o) Except as set forth in the SEC Documents, there is no
known fact to the Company or any subsidiary (other than general economic
conditions generally known to the public) that has not been disclosed in writing
to the Purchasers that (i) could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise) or in the earnings,
business affairs, properties or assets of the Company or any subsidiary, or (ii)
could reasonably be expected to adversely affect the ability of the Company or
any subsidiary to perform its obligations pursuant to this Agreement, the
Certificate of Designation, the Registration Rights Agreement or the Warrants.
(p) The Company acknowledges and agrees that Purchasers are
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the Registration Rights Agreement and the transactions
contemplated hereby and thereby. The Company further acknowledges that
Purchasers are not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the Registration
Rights Agreement and the transactions contemplated hereby and thereby and any
advice given by the Purchasers or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereby and
thereby is merely incidental to the Purchasers' purchase of the Securities. The
Company further represents to the Purchasers that the Company's decision to
enter into this Agreement and the Registration Rights Agreement has been based
solely on the independent evaluation by the Company and its representatives.
(q) Neither the Company, nor any of its affiliates, has,
directly or indirectly, made any offers or sales of any securities or solicited
any offers to buy any security, under circumstances that would require
registration of the Preferred Shares or the Warrants under the Securities Act.
(r) Except as set forth within this Agreement or in the SEC
Documents, the Company and its subsidiaries own, have obtained or possess rights
to use the trademarks, trade names, service marks, service mark registrations,
patents, copyrights, licenses, approvals, governmental authorizations, trade
secrets and other rights necessary to conduct their respective businesses as now
conducted, the Company does not have any knowledge of any material infringement
by the Company or its subsidiaries of any trademark, trade name rights, patent
rights,
-8-
copyrights, licenses, service marks, service mark registrations, trade secrets
or other similar rights of others, and there is no claim being made against the
Company or its subsidiaries regarding trademark, trade name, patent, copyright,
license, service marks, service mark registrations, trade secret or other
infringement which could have a material adverse effect on the Company. The
Company and its subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties.
(s) The Company understands and acknowledges the potentially
dilutive effect to the Common Stock of the issuance of the Conversion Shares and
the Warrant Shares.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Purchaser:
(a) To comply with all requirements of Section 4(2) and
Section 3(a)(9), as applicable, and to the extent applicable Regulation D under
the Securities Act, with respect to the sale of the Preferred Shares, the
Conversion Shares, the Warrants and the Warrant Shares, respectively.
(b) To notify the Purchasers promptly if at any time during
the period beginning on the date of this Agreement and ending on the Closing
Date any event shall have occurred as a result of which any written or oral
communication made by the Company or any authorized person representing the
Company, would include an untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(c) To cause the Conversion Shares and Warrant Shares to be,
upon delivery, fully paid, nonassessable, free of preemptive rights and free
from all taxes, liens, charges, security interests or other encumbrances.
(d) To have at all times authorized and reserved for issuance,
free from preemptive rights, a sufficient number of shares of Common Stock
solely for the purpose of satisfying the conversion rights of the Purchasers
pursuant to the terms and conditions of the Certificate of Designation and the
Warrants and to satisfy the issuance of any other shares of Common Stock which
are reserved for issuance or which are issuable upon the exercise, conversion,
exchange or satisfaction of any outstanding securities or obligations or rights
of the Company. The Company shall not issue any shares of Common Stock, or any
securities convertible into, or warrants, options and the like exercisable for,
shares of Common Stock, if as a result thereof the Company may reasonably not
have sufficient shares of authorized but unissued Common Stock sufficient to
satisfy in full the conversion rights of the Purchasers pursuant to the terms
and conditions of the Certificate of Designation and the Warrants.
(e) Each party shall use its best efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
including without limitation, timely to satisfy
-9-
the conditions to be satisfied as provided in Section 6 and 7 of this Agreement,
to consummate the transactions contemplated hereby.
(f) Until the earlier of (i) the date which is one year after
the date as of which the Holders (as that term is defined in Section 8(b)) may
sell all of the Conversion Shares without restriction pursuant to Rule 144(k)
promulgated under the Securities Act (or successor thereto) or (ii) the date on
which (a) the Holders shall have sold all the Conversion Shares and Warrant
Shares and (b) none of the Preferred Shares or Warrants are outstanding, the
Company shall file all reports required to be filed with the SEC pursuant to the
Exchange Act, and the Company shall not voluntarily terminate its status as a
Company required to file reports under the Exchange Act even if the Exchange Act
or the rules and regulations thereunder would permit such termination.
(g) The Company will use the proceeds from the sale of the
Securities for working capital and general corporate purposes.
(h) The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed or quoted (subject to official notice of issuance) and shall maintain the
listing of all such shares from time to time issuable under the terms of this
Agreement, the Certificate of Designation and the Registration Rights Agreement.
During the period that the Company is required to maintain effective a
registration statement covering the Conversion Shares and Warrant Shares, the
Company shall maintain the Common Stock's authorization for listing on the
NASDAQ SmallCap Market and any such other national securities exchange.
6. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS. The obligations
of the Purchasers hereunder are subject to the performance by the Company of its
obligations hereunder and to the satisfaction of the following additional
conditions precedent:
(a) The representations and warranties made by the Company in
this Agreement shall, unless waived by the Purchasers, be true and correct in
all material respects as of the date hereof and at the Closing Date, with the
same force and effect as if they had been made on and as of the Closing Date.
The Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date.
(b) The Company and the Purchasers shall have entered into the
Master Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT"), in
substantially the form annexed hereto as EXHIBIT D.
(c) The Company will provide to the Purchasers an opinion or
opinions of counsel in substantially the form annexed hereto as EXHIBIT E.
-10-
(d) The Company shall have filed the Certificate of
Designation with the Secretary of the State of Delaware.
(e) None of the following shall have occurred: (i) any general
suspension of trading in, or limitation on prices listed for, the Common Stock
on the NASDAQ, (ii) a declaration of a banking moratorium or any suspension of
payments in respect to banks in the United States, (iii) a commencement of a
war, armed hostilities or other international or national calamity directly or
indirectly involving the United States, (iv) in the case of the foregoing
existing at the date of this Agreement, a material acceleration or worsening
thereof, or (v) any limitation by the federal or state authorities on the
extension of credit by lending institutions that materially and adversely
affects the Purchasers.
(f) The Company shall have executed and delivered to the
Escrow Agent the certificates representing the Preferred Shares and the
Warrants.
(g) No action, suit, investigation or proceeding before or by
any governmental authority shall have been commenced or threatened against the
Company or any of the officers, directors or affiliates of the Company, which
seeks to restrain, prevent or challenge the transactions contemplated by this
Agreement or the Registration Rights Agreement or which seeks damages in
connection with such transactions.
7. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS.
(a) The obligations of the Company hereunder are subject to
the performance by the Purchasers of their obligations hereunder and to the
satisfaction of the condition precedent that the representations and warranties
made by the Purchasers in this Agreement shall, unless waived by the Company, be
true and correct in all material respects as of the date hereof and at the
Closing Date, with the same force and effect as if they had been made on and as
of the Closing Date.
(b) The Purchasers shall have delivered to the Escrow Agent by
wire transfer the Purchase Price for the Securities.
8. TRANSFER OF SECURITIES.
(a) Securities Act Legend. Each certificate evidencing the
Preferred Shares and the Warrants, and, prior to the effective date of the
registration thereof pursuant to the Registration Rights Agreement, the
Conversion Shares and the Warrant Shares, and any certificates issued upon
transfer or exchange of the foregoing, shall be stamped or imprinted with the
legend substantially as set forth in Section 3(a). The legend set forth in
Section 3(a) shall be removed and the Company shall issue a certificate without
such legend to the holder of the Preferred Shares, the Conversion Shares, the
Warrant and the Warrant Shares as applicable upon which it is stamped, if,
unless otherwise required by state securities laws, (a) with respect to the
Conversion Shares and the Warrant Shares, the sale of the Conversion Shares or
the Warrant
-11-
Shares, as the case may be, is registered under the Securities Act, or (b) in
connection with a Transfer, such holder provides the Company with an opinion of
counsel, in form, substance and scope reasonably acceptable to the Company, to
the effect that a Transfer thereof may be made without registration under the
Securities Act, or (c) such holder provides the Company with reasonable
assurances that the Preferred Shares, the Conversion Shares, the Warrant and the
Warrant Shares, as applicable, can be sold pursuant to Rule 144 under the
Securities Act (or a successor rule thereto). Notwithstanding the removal of any
such legend, each Purchaser agrees to Transfer the Preferred Shares, the
Conversion Shares, its Warrant and the Warrant Shares, including those
represented by certificate(s) from which the legend has been removed, in
compliance with all applicable securities laws and, if, in connection with any
Transfer, a legend would be appropriate under applicable securities laws, each
Purchaser shall, in connection with any such Transfer ensure that the
certificates representing shares so Transferred shall bear the foregoing legend.
(b) Securities Act Compliance. Each holder (a "HOLDER") of a
certificate evidencing the Preferred Shares, the Conversion Shares, the Warrants
and the Warrant Shares which bears the restrictive legend set forth in Section
8(a) above (the "RESTRICTED SECURITIES"), and who proposes to Transfer any
Restricted Securities (other than pursuant to an effective registration
statement under the Securities Act or pursuant to Rule 144 under the Securities
Act), shall give written notice to the Company of such Holder's intention to
effect such Transfer. Each such notice shall describe the manner and
circumstances of the proposed sale or other disposition in sufficient detail and
shall be accompanied by an opinion of legal counsel to the Holder. Promptly upon
receipt of such notice, the Company shall present a copy thereof (together with
any accompanying opinion of legal counsel to the Holder) to its legal counsel,
and the following provisions shall apply:
(i) If, in the opinion of legal counsel to such
Holder, reasonably satisfactory in form and substance to the Company and its
legal counsel, or if such notice was not accompanied by an opinion of legal
counsel to the Holder, then, if, in the opinion of legal counsel to the Company,
the proposed sale or other disposition may be effected without registering the
Restricted Securities involved under the Securities Act or under state
securities laws, such Holder shall be entitled to so Transfer such Restricted
Securities in accordance with the terms of such notice delivered to the Company
pursuant to this paragraph (b). The Company will advise the Holder, within three
(3) business days after submission of such notice, whether the Company believes
such Holder is entitled to so Transfer the Restricted Securities in accordance
with the foregoing. If the Holder is entitled to so Transfer, he shall submit
the stock certificate or certificates evidencing the Restricted Securities to be
Transferred to the Company in proper form for Transfer and accompanied by
appropriate instruments of Transfer and the Company shall promptly issue new
certificates giving effect to such Transfer. Certificates for Restricted
Securities thus Transferred (and each of the certificates evidencing any
untransferred balance of the Conversion Shares or the Warrant Shares not so
transferred) shall bear the restrictive legend set forth in Section 8(a),
unless, in the opinion of such Holder's legal counsel, which opinion shall be
reasonably satisfactory in form and substance to counsel for the Company (or
legal counsel to
-12-
the Company if the Holder did not present an opinion of its legal counsel), such
legend is not required by the applicable provisions of the Securities Act or
state securities laws; and
(ii) If in the reasonable opinion of either of such
legal counsel (or legal counsel to the Company if the Holder did not present an
opinion of its legal counsel), the proposed Transfer cannot be effected without
registering the Restricted Securities involved under the Securities Act or state
securities laws, such Holder shall not offer to Transfer or Transfer such
Restricted Securities unless and until such Restricted Securities have been
registered under the Securities Act or state securities laws for such purpose or
an exemption from such registration becomes available. Upon the consummation of
the transactions contemplated by this Agreement, the Company shall have agreed
to register the Conversion Shares and the Warrant Shares pursuant to the terms
of the Registration Rights Agreement.
(c) Subject to the restrictions set forth in Sections 8(a) and
(b) above, upon the valid conversion of the Preferred Shares or exercise of the
Warrants, the Company shall instruct its transfer agent to issue certificates,
registered in the name of each Purchaser or its nominee, for the Conversion
Shares and the Warrant Shares in such amounts as specified from time to time by
the respective Purchasers to the Company. The Company shall provide instructions
and opinions of counsel to its transfer agent in accordance the Registration
Rights Agreement and this Section 8. Upon the effectiveness of the registration
of the Conversion Shares and the Warrant Shares pursuant to the Registration
Rights Agreement and thereafter, any Conversion Shares or Warrant Shares
theretofore issued bearing a restrictive legend of any kind may be submitted to
the Company for removal of such legend, and within three (3) business days of
receipt thereof the Company shall cause to be issued and delivered to the Holder
submitting the certificates for such shares new certificates representing the
same number of shares that bear no restrictive legend and that are freely
transferable on the books and records of the Company and its transfer agent,
subject to such Holder's compliance with applicable securities laws, including
but not limited to such Holder's obligation pursuant to the Securities Act to
provide a prospectus to buyers of such shares and further subject to Sections
3(e) and 4(c) of the Registration Rights Agreement. Nothing in this Section
shall affect in any way Purchasers' obligations and agreement to comply with all
applicable securities laws upon resale of the Conversion Shares and the Warrant
Shares.
9. FEES AND EXPENSES. Each of the Purchasers and the Company agrees to
pay its respective expenses incident to the performance of its obligations
hereunder, including, but not limited to, the fees, expenses, due diligence
costs and disbursements of such party's counsel.
10. SURVIVAL OF THE REPRESENTATIONS, WARRANTIES, ETC. The respective
agreements, representations, warranties, indemnities and other statements made
by or on behalf of the Company and the Purchaser, respectively, pursuant to this
Agreement, shall remain in full force and effect for a period of one year,
regardless of any investigation made by or on behalf of the other party to this
Agreement or any officer, director or employee of, or person controlling or
under common control with, such party and will survive delivery of any payment
for the Preferred Shares, the Conversion Shares, the Warrants and the Warrant
Shares.
-13-
11. NOTICES. All notices, requests and other communications hereunder
must be in writing and delivered to the parties at the following addresses or
facsimile numbers:
If to the Purchasers, to:
The addresses listed on Schedule I attached hereto.
If to the Company, to:
DynaGen, Inc.
99 Erie Street
Cambridge, MA 02139
Attention: President
Telephone: (617) 491-2527
Telecopy: (617) 354-3902
All such notices, requests and other communications will (i) if delivered
personally (including, without limitation, by reputable overnight courier
service) to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon telecopy generated confirmation
of receipt, and (iii) if delivered by mail in the manner described above to the
address as provided in this Section, be deemed given upon receipt (in each case
regardless of whether such notice, request or other communication is received by
any other Person to whom a copy of such notice is to be delivered pursuant to
this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other parties hereto.
12. THIRD PARTY BENEFICIARY. Any permitted transferee of any part of
the principal amount of the Preferred Shares, the Conversion Shares, the
Warrants and the Warrant Shares shall be a third party beneficiary of the
Company's obligations under this Agreement, the Warrants and the Registration
Rights Agreement. Such person shall have all the rights of a third party
beneficiary with respect to the enforcement against the Company of any provision
of this Agreement, the Warrants and the Registration Rights Agreement.
13. MISCELLANEOUS.
(a) This Agreement may be executed in one or more counterparts
and it is not necessary that signatures of all parties appear on the same
counterpart, but such counterparts together shall constitute but one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
-14-
(b) This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective successors and permitted
assigns.
(c) This agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without giving effect to
conflicts of laws principles). Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions.
(d) The headings of the sections of this document have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
(e) The provisions of this Agreement are severable, and if any
clause or provision shall be held invalid, illegal or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect in that jurisdiction only such clause or provision, or part thereof, and
shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
(f) This Agreement, including the schedules and exhibits
hereto, constitutes the sole and entire agreement of the parties with respect to
the subject matter hereof.
(g) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
(h) Notwithstanding any of the representations, warranties,
acknowledgments or agreements made herein by the Company and Purchaser, the
Company and Purchasers do not thereby or in any manner waive any rights granted
to it or him under U.S. Federal or state securities laws.
(i) The provisions of this Agreement, other than Sections
5(i), 8, 10 and 12, shall terminate when all Preferred Shares and Warrants have
been converted into shares of the Company's Common Stock that are unlegended,
unrestricted and are freely transferable on the books and records of the Company
and its transfer agent, subject to each Holder's compliance with applicable
securities laws, including but not limited to such Holder's obligation pursuant
to the Securities Act to provide a prospectus to buyers of such shares, and
further subject to Sections 3(e) and 4(c) of the Registration Rights Agreement.
14. TIME OF ESSENCE. Time shall be of the essence in this Agreement.
-15-
15. DELIVERY OF STOCK; DIVIDEND PAYMENTS.
(a) The Company will permit each Purchaser to exercise its
right to convert the Preferred Shares and exercise the Warrants by telecopying a
notice of conversion in accordance with the Certificate of Designation (a
"NOTICE OF CONVERSION") or Form of Subscription annexed to the Warrant,
respectively, to the Company and delivering thereafter, as the case may be, (i)
the original Notice of Conversion and certificate representing the Preferred
Shares being converted, or (ii) (A) Form of Subscription, (B) cash or certified
or official bank check payable to the Company and (C) Warrant (the "ORIGINAL
DOCUMENTATION"), by express courier. Each date on which a Notice of Conversion
or Form of Subscription is telecopied to and received by the Company in
accordance with the provisions hereof shall be deemed a Conversion Date or
Exercise Date, as the case may be. The Company will transmit the certificates
representing the Conversion Shares and the Warrant Shares and the newly issued
Preferred Stock certificate representing the number of Preferred Shares that
remain unconverted, or the newly issued Warrant representing the portion of the
Warrant that remains unexercised, to such Purchaser via express courier within
three (3) trading days after the date on which the Company receives the Original
Documentation or make such securities available to such Purchaser at the
Company's transfer agent within such time period (the "DELIVERY DATE").
(b) The Company and the Purchasers agree that the Company will comply
with its applicable federal or other tax withholding obligations.
16. LIQUIDATED DAMAGES FOR FAILURE TO DELIVER. The Company understands
that a delay beyond the deadline for delivery, specified in Section 15, could
result in economic loss to the Purchaser. As compensation to the Purchaser for
such loss, the Company agrees to pay late payments to the Purchaser for the late
issuance of shares issuable at conversion or exercise in accordance with the
following schedule (where "No. Business Days Late" is defined as the number of
business days beyond three business days after receipt by the Company of the
Original Documentation):
Late Payment for Each $5,000 of
No. Business Days Late Original Investment Being Converted
---------------------- -----------------------------------
2 $ 50.00
3 $ 100.00
4 $ 150.00
5 $ 200.00
6 $ 250.00
7 $ 300.00
8 $ 350.00
9 $ 400.00
9 $400.00 + $100.00 for each Business
Day Late Beyond 9 Days
The Company shall make any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit a
Purchaser's right to actual damages for the Company's failure to issue and
deliver the Conversion Shares and the Warrant Shares to the
-16-
Purchaser. Furthermore, in addition to any other remedy which may be available
to the Purchaser, in the event that the Company fails for any reason to effect
delivery of Conversion Shares or Warrant Shares within five (5) business days
after the date on which the Company has received the Original Documentation, the
Purchaser will be entitled to elect to be deemed to be treated as not having
exercised the relevant Notice of Conversion or Notice of Exercise by delivering
a notice to such effect to the Company whereupon the Company and the Purchaser
shall each be restored to their respective positions immediately prior to such
Notice of Conversion or Notice of Exercise; provided that no such election shall
constitute waiver of any right or remedy Purchaser may have and the Company
shall still be obligated notwithstanding any such election to make penalty
payments hereunder and for any actual damages.
17. NON-DELIVERY OF THE SHARES. If, within ten (10) business days of
the date after receipt by the Company of the Original Documentation, the Company
shall fail to (i) issue the Conversion Shares or the Warrant Shares, and (ii)
deliver to a Purchaser the Conversion Shares or the Warrant Shares as required
by the Warrant or Certificate of Designation, as the case may be, for any reason
other than failure by such Purchaser to comply with its obligations under this
Agreement, then the Company shall:
(a) hold such Purchaser harmless against any loss, claim or
damage arising from or as a result of such failure by the Company (including,
without limitation, any such loss, claim or damage resulting from an obligation
to resell the Conversion Shares or the Warrant Shares); and
(b) reimburse the Purchaser for all of its out-of-pocket
expenses reasonably incurred, including fees and disbursements of its counsel,
incurred by the Purchaser in connection with this Agreement and the transactions
contemplated herein; provided however, that the Company shall not have further
liability to the Purchaser except as provided for in this Section 17.
18. ESCROW AGENT. The Escrow Agent shall not be liable for any action
taken or omitted by it in good faith and its liability hereunder shall be
limited to liability for gross negligence or willful misconduct on its part. The
Company and the Purchasers agree to save harmless, and the Company agrees to
indemnify and defend, the Escrow Agent for, from and against their respective
share of any loss, damage, liability, judgment, cost and expense whatsoever, by
reason of, or on account of, any misrepresentation made to it or its status or
activities as Escrow Agent under this Agreement except for any loss, damage,
liability, judgment, cost or expense resulting from gross negligence or willful
misconduct on the part of the Escrow Agent.
The Escrow Agent shall not be responsible for any failure or
inability of any of the parties to perform or comply with the provisions of this
Agreement, or the agreements delivered in connection herewith.
In the performance of its duties hereunder, the Escrow Agent
shall be entitled to rely in good faith upon any document (including facsimile
transmitted copies of documents),
-17-
instrument or signature believed by it in good faith to be genuine and to be
signed by any party hereto or an authorized officer or agent thereof, and shall
not be required to investigate the truth or accuracy of any statement contained
in any such document or instrument. The Escrow Agent may assume in good faith
that any person purporting to give any notice in accordance with the provisions
hereof has been duly authorized to do so.
Each party hereto acknowledges that (a) the Escrow Agent is
not acting as legal counsel to such party in any manner or respect in connection
with the transactions contemplated by this Agreement, and (b) the Escrow Agent
is serving as an accommodation to the parties hereto.
It is understood and further agreed that the Escrow Agent
shall:
(a) be under no duty to enforce payment of any subscription
that is to be paid to and held by it hereunder;
(b) promptly notify the Purchasers and the Company of any
discrepancy between the amounts set forth on any statement delivered by the
Purchasers and/or the Company and the sum or sums delivered to it therewith;
(c) be under no duty to accept funds, checks, drafts or
instruments for the payment of money from anyone other than the Company or the
Purchasers, or to give any receipt therefor except to the Company or the
Purchasers, with a copy in each case to the Company;
(d) be protected in acting upon any notice, request,
certificate, approval, consent or other paper reasonably believed by it to be
genuine and to be signed by the proper party or parties (including, but not
limited to, copies of documents transmitted by facsimile);
(e) be permitted to consult with counsel of its choice, and
shall not be liable for any action taken, suffered, or omitted by it in
accordance with the advice of such counsel; provided, however, that nothing in
this subsection (e), nor any action taken by the Escrow Agent, or suffered or
omitted by it in accordance with the advice of any counsel, shall relieve the
Escrow Agent from liability for any claims that are occasioned by its gross
negligence or willful misconduct;
(f) not be bound by any modification, amendment, termination,
cancellation, or rescission of this Agreement, unless the same shall be in
writing and signed by it;
(g) be entitled to refrain from taking any action other than
to keep all property held in escrow if it (i) shall be uncertain concerning its
duties or rights hereunder, or (ii) shall have received claims or demands from
any party, or (iii) shall have received instructions from the Purchasers and/or
the Company that, in the Escrow Agent's opinion, are in conflict with any of the
provisions of this Agreement, until it shall have received a final judgment by a
court of competent jurisdiction;
-18-
(h) have no liability for following the instructions herein or
expressly provided for herein, or the written instructions given jointly by the
Purchasers and/or the Company; and/or
(i) have the right, at any time, to resign hereunder by giving
written notice of its resignation to all other parties hereto at least three (3)
business days prior to the date specified for such resignation to take effect,
and upon the effective date of such resignation all cash and other payments and
all other property then held by the Escrow Agent hereunder shall be delivered by
it to such person as may be designated in writing by the other parties executing
this Agreement, whereupon the Escrow Agent's obligations hereunder shall cease
and terminate. If no such person has been designated by such date, all
obligations of the Escrow Agent hereunder shall, nevertheless, cease and
terminate. The Escrow Agent's sole responsibility thereafter shall be to keep
safely all property then held by it and to deliver the same to a person
designated by the other parties executing this Agreement or in accordance with
the directions of a final order or judgment of a court of competent
jurisdiction.
[REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK.]
-19-
DYNAGEN, INC.
SECURITIES PURCHASE AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
DYNAGEN, INC.
By:______________________________________
Title: __________________________________
DYNAGEN, INC.
SECURITIES PURCHASE AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
_______________________________________
(exact name of Purchaser)
By:____________________________________
Print Name: ___________________________
Title:_________________________________
Address: ______________________________
_______________________________________
_______________________________________
Exhibit 4b
MASTER REGISTRATION RIGHTS AGREEMENT
MASTER REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
August 6, 1997 by and among DYNAGEN, INC., a Delaware corporation, with
headquarters located at 99 Erie Street, Cambridge, Massachusetts 02139 (the
"COMPANY"), and the undersigned parties who execute a counterpart signature of
this Agreement (together with affiliates, the "INITIAL INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investors (the "SECURITIES
PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors shares
of the Company's Series A Preferred Stock (the "PREFERRED SHARES") that are
convertible into shares (collectively, the "CONVERSION SHARES") of the Company's
common stock (the "COMMON STOCK") and Warrants (the "WARRANTS") that are
exercisable for shares of Common Stock (the "WARRANT SHARES"), all upon the
terms and subject to the limitations and conditions set forth in the Certificate
of Designation with respect to the Series A Preferred Stock or the Warrants, as
applicable; and
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have
the following meanings:
(i) "CLOSING DATE," with respect to each Investor,
means the date of the consummation of the financing in which such Investor
purchased debt or equity securities of the Company pursuant to which the Company
has granted registration rights.
(ii) "INVESTORS" means the Initial Investors, any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 9 hereof and any party that becomes a party
to this Agreement in accordance with Section 10(b) hereof.
(iii) "REGISTER," "REGISTERED," and "REGISTRATION"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the
1933 Act and pursuant to Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a continuous basis ("RULE 415"), and the
declaration or ordering of effectiveness of such Registration Statement by the
United States Securities and Exchange Commission (the "SEC").
(iv) "POTENTIAL MATERIAL EVENT" means any of the
following: (a) the possession by the Company of material information not ripe
for disclosure in a registration statement, which shall be evidenced by
determinations in good faith by the Board of Directors of the Company that
disclosure of such information in the registration statement would be
detrimental to the business and affairs of the Company; or (b) any material
engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information.
(v) "REGISTRABLE SECURITIES" means (i) the Conversion
Shares and the Warrant Shares issued or issuable, (ii) shares of Common Stock
issued on a Closing Date or issuable pursuant to securities of the Company
issued on a Closing Date to an Investor that has signed a counterpart signature
page to this Agreement pursuant to Section 10(b) hereof and (iii) any shares of
capital stock issued or issuable as a dividend on or in exchange for or
otherwise with respect to any of the foregoing.
(vi) "REGISTRATION STATEMENT" means a registration
statement of the Company under the 1933 Act or an amendment to an existing
registration statement to add Registrable Securities.
(b) Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
(a) Mandatory Registration. The Company shall, as soon as
practicable after each Closing Date but in no event more than 45 days following
such Closing Date, file with the SEC a Registration Statement on Form S-3 (or,
if Form S-3 is not then available, on such form of Registration Statement as is
then available to effect a registration of the Registrable Securities, subject
to the consent of the Investors (as determined pursuant to Section 10(a)
hereof), which consent will not be unreasonably withheld conditioned or delayed)
covering the resale of the Registrable Securities issued or issuable to such
Investors pursuant to securities of the Company issued on each such Closing
Date. The Registration Statement, to the extent allowable under the 1933 Act and
the Rules promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Preferred
Shares and/or exercise of the Warrants to prevent dilution resulting from stock
splits, stock dividends or similar transactions. The Company shall use its best
efforts to cause such registration to become and remain effective
-2-
(including the taking of such steps as are necessary to obtain the removal of
any stop orders); provided, that the Investors shall furnish the Company, within
five (5) business days of the Company's written request, with such appropriate
information in connection therewith (whether requested prior to or after the
filing of the Registration Statement with the SEC) as the Company shall
reasonably request in writing. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to (and subject to the approval of) the Investors and their
counsel prior to its filing or other submission. The number of shares of Common
Stock initially included in such Registration Statement shall be no less than
one hundred fifty percent (150%) of the shares of Common Stock issued to the
Investors on such Closing Date or issuable pursuant to the securities of the
Company issued to the Investors on such Closing Date (assuming the Conversion
Price set forth in Section 5(b)(ii)(A) of the Certificate of Designation). The
Company further undertakes to take all steps necessary to ensure that a
Registration Statement is, or Registration Statements are, effective at all
times during the Registration Period (as defined below) with respect to all
Registrable Securities and the resale thereof.
(b) Eligibility for Form S-3. The Company represents and
warrants that, as of the date hereof, it meets the requirements for the use of
Form S-3 for registration of the sale by the Investors of the Registrable
Securities and the Company shall file all reports required to be filed by the
Company with the SEC in a timely manner, and take any and all such other actions
as may be reasonably necessary or appropriate so as to maintain such eligibility
for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
(a) The Company shall, as soon as practicable after each
Closing Date but in no event more than 45 days following such Closing Date,
prepare and file promptly with the SEC a Registration Statement and thereafter
use its Best Efforts (as hereinafter defined) to cause such Registration
Statement relating to Registrable Securities to promptly become effective, but
in no event to become effective more than 90 days following such Closing Date,
and to keep the Registration Statement effective pursuant to Rule 415 at all
times until such date as is the earlier of (i) the date on which all of the
Registrable Securities registered under such Registration Statement have been
sold and no Preferred Shares, Warrants or other securities of the Company issued
on such Closing Date are outstanding or (ii) the date on which all of such
Registrable Securities (in the opinion of counsel to the Investors) may be
immediately publicly sold without registration and (iii) two years from such
Closing Date (the "REGISTRATION PERIOD"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein and all documents incorporated by reference therein) shall not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading. The Company shall furnish to the Investors copies of reasonably
complete drafts of all such documents proposed to be filed (including exhibits,
if any), and any such Investor shall have the opportunity to object, within
-3-
three (3) business days, to any information pertaining solely to such Investor
that is contained therein and the Company will make the corrections reasonably
requested by such Investor with respect to such information prior to filing any
such Registration Statement or amendment. Any period of review and revision
resulting from such review that extends beyond five (5) business days shall be
added to the time in which the Registration Statement is to be filed and no
penalty shall be assessed with respect to such period. If the Company fails to
cause such Registration Statement to become effective within 90 days following
the Closing Date due to a Corporation Failure, as defined in the Certificate of
Designation, the Conversion Price, as defined in the Certificate of Designation,
shall be adjusted as set forth in paragraph 5(b) of the Certificate of
Designation. As used in Section 3(a), (b), (d), (f), (i) and (m) hereof, "Best
Efforts" shall include the taking of any and all actions necessary or
appropriate with respect thereto, including timely response to all comments and
correspondence received (including from the SEC), the filing or providing of any
further drafts and other documents as may be required, and the like.
(b) The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period. Without limiting any of
the Company's obligations under this Agreement, in the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities issued or issuable
upon conversion of the Preferred Shares and/or exercise of the Warrants, the
Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefore, if applicable), or both, so as
to cover all of the Registrable Securities, in each case, as soon as
practicable, but in any event within twenty (20) days after the necessity
therefor arises (based on the market price of the Common Stock and other
relevant factors on which the Company reasonably elects to rely). The Company
shall use its Best Efforts to cause such amendment and/or new Registration
Statement to become effective as soon as possible following the filing thereof.
(c) The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC or received by the Company, one copy of the Registration Statement
and any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the Registration Statement
referred to in Section 2(a), each letter written by or on behalf of the Company
to the SEC or the staff of the SEC, and each material item of correspondence
from the SEC or the staff of the SEC, in each case relating to such Registration
Statement (other than any portion thereof that contains information for which
the Company has sought confidential treatment), and (ii) such number of copies
of a prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
(d) The Company shall use its Best Efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as the Investors who hold a majority in interest
-4-
of the Registrable Securities being offered reasonably request, (ii) prepare and
file in those jurisdictions such amendments (including post-effective
amendments) and supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary, appropriate or available to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection therewith or as a
condition thereto to (a) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d), (b)
subject itself to general taxation in any such jurisdiction, (c) file a general
consent to service of process in any such jurisdiction, (d) provide any
undertakings that cause the Company undue expense or burden, or (e) make any
change in its charter or bylaws, which in each case the Board of Directors of
the Company determines to be contrary to the best interests of the Company and
its stockholders. The Company shall promptly notify each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
(e) Notwithstanding the foregoing, if at any time or from time
to time after the date of effectiveness of the Registration Statement, the
Company notifies the Investors in writing of the existence of a Potential
Material Event, the Investors shall not offer or sell any Registrable Shares, or
engage in any other transaction involving or relating to the Registrable Shares,
from the time of the giving of notice with respect to a Potential Material Event
until the earlier of (i) twenty (20) days from the receipt of notice of such
Potential Material Event, or (ii) such Investor receives written notice from the
Company that such Potential Material Event either has been disclosed to the
public or no longer constitutes a Potential Material Event; provided, however,
that the Company shall use its best efforts to minimize any such suspension and
under all circumstances the Company may not so suspend the right to such holders
of Registrable Shares for more than two periods of twenty (20) days each in the
aggregate during any 12-month period during the period the Registration
Statement is required to be in effect; and provided, further, that there shall
be an interval of no less than 45 days between such two twenty (20) day periods.
(f) The Company shall use its Best Efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
(g) For a period of five (5) business days prior to filing
with the SEC, the Company shall permit a single firm of counsel designated by
the Investors representing a majority of the Registrable Securities held by the
Investors (on an as converted and as exercised basis) to review the Registration
Statement and all amendments and supplements thereto. Any period of review and
revision resulting from any such review that extends beyond five (5) business
days
-5-
shall be added to the time in which registration is required to be filed and
effective, as appropriate, and no penalty shall be assessed with respect to such
period.
(h) The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS") as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in confidence and shall not make any disclosure of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is determined to be necessary by the Investors and the Company
to avoid or correct a misstatement or omission in any Registration Statement,
(b) the release of such Records is ordered pursuant to a subpoena or other order
from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, containing terms substantially similar to
those contained in this Section 3(i). Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein shall be deemed to limit
the Investor's ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.
(i) The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, or other applicable law, (ii) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body of
competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that disclosure
of such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to such Investor prior to making such disclosure, and allow the Investor,
at its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
(j) The Company shall use its Best Efforts to secure the
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the NASDAQ
-6-
SmallCap Market, if the listing of such Registrable Securities is then permitted
under the rules and regulations of such market.
(k) The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than
sixty (60) days from the Closing Date.
(l) The Company shall promptly facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legends)
representing Registrable Securities to be sold pursuant to the Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the managing underwriter or underwriters, if any, or the
Investors may reasonably request and registered in such names as the managing
underwriter or underwriters, if any, or the Investors may request.
(m) The Company shall use its Best Efforts to cause all
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable each holder thereof to consummate disposition of Registrable
Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company, within five (5) business days of the Company's written
request, such information regarding itself, the Registrable Securities held by
it and the intended method of disposition of the Registrable Securities held by
it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute within five (5) business days of
receipt by such Investor such documents in connection with such registration as
the Company may reasonably request.
(b) Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of a Potential Material Event as set forth in
Section 3(e), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities in accordance with Section 3(e).
(d) Without limiting an Investor's rights under Section 2(a),
no Investor may participate in any underwritten distribution hereunder unless
such Investor (i) agrees to sell such
-7-
Investor's Registrable Securities on the basis provided in any underwriting
arrangements in usual and customary form entered into by the Company, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5 below.
(e) Each Investor whose Registrable Securities are included in
a Registration Statement understands that the 1933 Act may require delivery of a
prospectus relating thereto in connection with any sale thereof pursuant to such
Registration Statement and each such Investor shall use its reasonable best
efforts to comply with the applicable prospectus delivery requirements of the
1933 Act in connection with any such sale.
(f) Each Investor agrees to notify the Company promptly, but
in any event within seventy-two (72) hours after the date on which all
Registrable Securities owned by such Investor have been sold by such Investor,
so that the Company may comply with its obligation to terminate the Registration
Statement in accordance with Item 512 of Regulation S-K or Regulation S-B, as
the case may be.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including all registration, listing
and qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Company, shall be borne by the Company. All
fees and disbursements of counsel to the holders of Registrable Securities, any
expenses incurred as a result of any investigation pursuant to Section 3(h), any
underwriting discounts and commissions and all other expenses of such holders
not contained in the previous sentence shall be borne by the holders of
Registrable Securities.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) To the extent permitted by law, the Company will
indemnify, hold harmless and defend (i) each Investor who is a seller of
Registrable Securities under the Registration Statement, and (ii) the directors,
officers, partners, employees, agents and each person who controls any such
Investor within the meaning of the 1933 Act or the Securities Exchange Act of
1934, as amended (the "1934 ACT"), if any, (each, an "INDEMNIFIED PERSON"),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "CLAIMS") to which any of them may become subject under the 1933 Act,
the 1934 Act or otherwise, insofar as any such Claim arises out of or is based
upon: (i) any untrue statement or alleged untrue statement of a material fact in
a Registration Statement or
-8-
the omission or alleged omission to state therein a material fact required to be
stated or necessary to make the statements therein not misleading or (ii) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading (the matters in the foregoing
clauses (i) and (ii) being, collectively, "VIOLATIONS"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Investors and each such underwriter or
controlling person, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement, preliminary prospectus or final prospectus, or any amendment thereof
or supplement thereto; (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; and (iii) with
respect to any preliminary prospectus, shall not inure to the benefit of any
Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, if such corrected prospectus was
timely made available by the Company pursuant to Section 3(c) hereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, any Investor that
does not fulfill its obligations under Sections 2(a), 3(a) or 4(a) hereof within
the period of time specified in such Sections shall not be an Indemnified Person
and shall not be entitled to indemnification pursuant to this Section 6.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, and any
other stockholder selling securities pursuant to the Registration Statement or
any of its directors or officers or any person who controls such stockholder
within the meaning of the 1933 Act or the 1934 Act (collectively, an
"INDEMNIFIED PARTY"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement, preliminary prospectus or final
prospectus, or any amendment or supplement thereto; and subject to Section 6(c)
such Investor will reimburse any legal or other expenses (promptly as such
-9-
expenses are incurred and are due and payable) reasonably incurred by them in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Agreement (including this Section 6(b) and Section 7) for only
that amount as does not exceed the net proceeds to such Investor as a result of
the sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
(c) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates, if the Investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for
-10-
which it would otherwise be liable under Section 6 to the fullest extent
permitted by law; provided, however, that (i) no contribution shall be made
under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in Section 6, (ii) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation, and (iii)
contribution (together with any indemnification or other obligations under this
Agreement) by any seller of Registrable Securities shall be limited in amount to
the amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the filing of such reports and other documents is required for the sale of the
Registrable Securities pursuant to Rule 144; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of an Investor hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of at least 30% of
the Preferred Shares and/or Warrants, or Registrable Securities of such Investor
if (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of
-11-
this sentence, the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions contained herein, (v) such transfer shall have
been made in accordance with the applicable requirements of the Securities
Purchase Agreement, and (vi) such transferee shall be an "accredited investor"
as that term defined in Rule 501 of Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
(a) Provisions of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with written consent of the
Company and Investors who hold at least 80% of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
(b) Notwithstanding the foregoing, the Company may, without
the consent of the existing Investors, amend this Agreement at any time to
include additional parties so long as the Company and such additional parties
execute a counterpart signature page to this Agreement. When this Agreement is
so amended, such additional parties shall be "Investors" hereunder and shall be
entitled to all benefits and bound by all obligations hereunder.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission or
other means) or sent by facsimile or overnight courier,
If to the Company, to:
DynaGen, Inc.
99 Erie Street
Cambridge, MA 02139
Attention: President
Telephone: (617) 491-2527
Telecopy: (617) 354-3902
if to the Investors as set forth in the subscription agreements pursuant to
which the Investors purchased securities of the Company, or at such other
address as each such party furnishes by
-12-
notice given in accordance with this Section 11(b), and shall be effective, when
personally delivered, upon receipt and, when so sent by facsimile or overnight
courier.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof
(d) This Agreement shall be enforced, governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed entirely within such State. In the event
that any provision of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof. Each of the parties consents to
the jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
(e) This Agreement and the subscription agreements pursuant to
which the Investors purchased securities of the Company (including all schedules
and exhibits thereto) constitute the entire agreement among the parties hereto
with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement and such subscription
agreements supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
(i) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
-13-
(j) All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made by the Investors holding a
majority of the Registrable Securities (determined as if all Preferred Shares
and Warrants then outstanding had been converted or exercised, respectively,
into Registrable Securities).
[REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK.]
-14-
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
DYNAGEN, INC.
By: /s/ Indu A. Muni
------------------------
Title: President
---------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
Arab Commerce Bank, Ltd.
----------------------------------
(print exact name of Investor)
By: [illegible]
-------------------------------
Title: Co. Secretary
----------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
Swedbank Luxembourg
-------------------------------
(print exact name of Investor)
By: [illegible]
----------------------------
Title: Senior Account Manager
-------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
Paul Enquist
-------------------------------
(print exact name of Investor)
By: /s/ Paul Enquist
----------------------------
Title:
-------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
Leo Genecco & Sons Inc.
------------------------------
(print exact name of Investor)
By: /s/ David L. Genecco
---------------------------
Title: President
------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
William S. Kissel
-------------------------------
(print exact name of Investor)
By: /s/ William S. Kissel
----------------------------
Title:
-------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
Irving Schotz
-------------------------------
(print exact name of Investor)
By: /s/ Irving Schotz
----------------------------
Title:
-------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
Dick Alaimo, Jr.
-------------------------------
(print exact name of Investor)
By: /s/ Dick Alaimo, Jr.
----------------------------
Title:
-------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
Jon A. Travers
------------------------------
(print exact name of Investor)
By: /s/ Jon A. Travers
---------------------------
Title:
------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
C. Robert Cusick
-------------------------------
(print exact name of Investor)
By: /s/ C. Robert Cusick
-----------------------------
Title:
--------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
Robert C. Cohen
------------------------------
(print exact name of Investor)
By: /s/ Robert C. Cohen
---------------------------
Title:
------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
Christopher Grieco
-------------------------------
(print exact name of Investor)
By: /s/ Christopher Grieco
----------------------------
Title:
-------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
Richard and Ronda Tennis
-------------------------------
(print exact name of Investor)
By: /s/ Richard Tennis
----------------------------
Title:
-------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
Robert D. Frankel
--------------------------------
(print exact name of Investor)
By: /s/ Robert D. Frankel
-----------------------------
Title:
--------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
A. Ronald Jacobstein
-----------------------------------
(print exact name of Investor)
By: /s/ A. Ronald Jacobstein
-------------------------------
Title:
-----------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
J. Michael Nixon
-------------------------------
(print exact name of Investor)
By: /s/ J. Michael Nixon
----------------------------
Title:
-------------------------
DYNAGEN, INC.
MASTER REGISTRATION RIGHTS AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
Guarantee & Trust Co. FBO J. Thomas Chess
------------------------------------------
(print exact name of Investor)
By: /s/ J. Thomas Chess
---------------------------------------
Title:
------------------------------------
Exhibit 4d
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of the date of acceptance set
forth below, is entered into by and between DYNAGEN, INC., a Delaware
corporation, with headquarters located at 99 Erie Street, Cambridge,
Massachusetts 02139 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon exemptions from securities registration afforded
under Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act") and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, Series C Convertible Preferred Stock, $.01 par
value per share and Series D Convertible Preferred Stock $.01 par value
(collectively the "Preferred Stock"), of the Company which will be convertible
into shares of Common Stock, $.01 par value per share (the "Common Stock"), of
the Company upon the terms and subject to the conditions of such Preferred Stock
(the Common Stock and Preferred Stock sometimes referred to herein as
"Securities"), and a Warrant to purchase 250,000 shares of Common Stock (the
"Warrant") and subject to acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE. The undersigned hereby agrees to purchase from the Company
Series C Preferred Stock of the Company, in the amount set forth on the
signature page of this Agreement, and having the terms and conditions set forth
in the Certificate of Designations attached hereto as ANNEX I. The purchase
price for the Series C Preferred Stock shall be as set forth on the signature
page hereto and shall be payable in United States Dollars.
B. FORM OF PAYMENT. The Buyer shall pay the purchase price for the
Preferred Stock by delivering immediately available good funds in United States
Dollars to the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as ANNEX II (the "Joint Escrow Instructions") as
set forth below. Promptly following payment by the Buyer to the Escrow Agent of
the purchase price of the Preferred Stock, the Company shall deliver a
Certificate for the Preferred Stock duly executed on behalf of the Company, to
the Escrow Agent. By signing this Agreement, the Buyer and the Company, and
subject to acceptance by the Escrow Agent, each agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow
Instructions, all of the provisions of which are incorporated herein by this
reference as if set forth in full.
C. METHOD OF PAYMENT. Payment into escrow of the purchase price for the
Preferred Stock shall be made by wire transfer of funds to:
Bank of New York
350 Fifth Avenue
New York, New York 10001
ABA# 021000018
For credit to the account of Krieger & Prager, Esqs.
Account No. 105
Not later than 1:00 p.m., New York time, on the date which is two (2) NASD
trading days after the Company shall have accepted this Agreement and returned a
signed counterpart of this Agreement to the Escrow Agent by facsimile, the Buyer
shall deposit with the Escrow Agent the aggregate purchase price for the
Preferred Stock, in immediately available funds. Time is of the essence with
respect to such payment, and failure by the Buyer to make such payment shall
allow the Company to cancel this Agreement.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. Without limiting its right to resell the Common Stock under the
Registration Rights Agreement, the Buyer is purchasing the Preferred Stock and
will be acquiring the shares of Common Stock issuable upon conversion of the
Preferred Stock for its own account for investment only and not with a view
towards the resale, public sale or distribution thereof and not with a view to
or for sale in connection with any distribution thereof;
b. The Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
Preferred Stock:
c. All subsequent offers and sales of the Preferred Stock and the
shares of Common Stock issuable upon conversion of, or issued as dividends on,
the Preferred Stock by the Buyer shall be made pursuant to registration of the
Shares under the 1933 Act or with respect to the Preferred Stock pursuant to an
exemption from registration;
-2-
d. The Buyer understands that the Preferred Stock is being offered and
sold, and the Shares are being offered, to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, the and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Preferred Stock and to receive an offer of the Shares;
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Preferred Stock and the offer of
the Shares which have been requested by the Buyer, including ANNEX V hereto. The
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and have received complete and satisfactory answers to
any such inquiries. Without limiting the generality of the foregoing, the Buyer
has also had the opportunity to obtain and to review the Company's (1) Annual
Report on Form 10-K for the fiscal year ended June 30, 1996; (2) Transition
Report on Form 10-K for the six-month period from July 1, 1996 to December 31,
1996, as amended; (3) Quarterly Reports on Form 10-Q for the fiscal quarters
ended September 30, 1996, March 31, 1997 and June 30, 1997; (4) The Company's
Proxy Statement for its Annual Meeting of Stockholders held on January 30, 1997;
(5) The Company's Current Reports on Form 8-K filed on August 23, 1996,
September 23, 1996, January 15, 1997, February 3, 1997, March 24, 1997 and July
3, 1997, as amended, and (6) The Company's Form S-3 Registration Statement filed
with the Securities and Exchange Commission on August 11, 1997 (the "Company's
SEC Documents").
f. The Buyer understands that its investment in the Securities involves
a high degree of risk;
g. The Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities;
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. Notwithstanding the provisions hereof, in no event (except with
respect to an Event of Mandatory Conversion) shall the holder be entitled to
convert any preferred Stock in excess of that number of shares upon conversion
of which the sum of (1) the number of shares of Common Stock beneficially owned
by the Buyer and its affiliates (other than shares of common Stock which may be
deemed beneficially owned through the ownership of the unconverted portion of
the Preferred Stock), and (2) the number of shares of Common Stock issuable upon
the conversion of the Preferred Stock with respect to which the determination of
this proviso is being made, would result in beneficial ownership by the Buyer
and its affiliates of more than 4.9% of the outstanding shares of Common Stock.
For purposes of the proviso to the immediately preceding
-3-
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13 D-G
thereunder, except as otherwise provided in clause (1) of such proviso.
3. COMPANY REPRESENTATIONS, ETC.
Except as disclosed in Annex V, delivered in writing to the Buyer, the
Company represents and warrants to the Buyer that:
A. CONCERNING THE SHARES. The Common Shares have been duly authorized
and, when issued upon conversion of, or as dividends on, the Preferred Stock,
will be duly and validly issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of being such holder.
There are no preemptive rights except that the holders of the Company's Series A
Preferred Stock have the right to acquire a portion of the Common Shares which
rights have been waived or otherwise provided for.
B. REPORTING COMPANY STATUS. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified as a foreign corporation in all jurisdictions in
which the failure to so qualify would have a material adverse effect on the
Company and its subsidiaries taken as a whole. The Company has registered its
Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Common Stock is listed and traded on the
NASDAQ/Small Cap Market. The Company has timely filed all material required to
be filed pursuant to all reporting obligations under either Section 13(a) or
15(d) of the Exchange Act for a period of at least twelve (12) months
immediately preceding the offer or sale of the Preferred Stock, and has received
no notice, either oral or written, with respect to the continued eligibility of
the Common Stock for such listing.
C. AUTHORIZED SHARES. The Company has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the conversion of the
Preferred Stock. The Common Shares have been duly authorized and, when issued
upon conversion of, or as interest on, the Preferred Stock, will be duly and
validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder.
D. STOCK PURCHASE AGREEMENT; REGISTRATION RIGHTS AGREEMENT AND STOCK.
This Agreement and the Registration Rights Agreement, the form of which is
attached hereto as ANNEX IV (the "Registration Rights Agreement"), have been
duly and validly authorized by the Company, this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the
Registration Rights Agreement, when executed and delivered by the Company, will
be, valid and binding agreements of the Company enforceable in accordance with
their respective terms, subject as to enforceability to general principles of
equity, the indemnification provisions of the Registration Rights Agreement, and
to bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally; and the Preferred Stock will be duly
and validly issued, fully paid and non-assessable when delivered on behalf of
the Company upon payment therefor in accordance with this Agreement, subject to
-4-
general principles of equity and to bankruptcy, insolvency, moratorium, or other
similar laws affecting the enforcement of creditors' rights generally.
E. NON-CONTRAVENTION. The execution and delivery of this Agreement and
the Registration Rights Agreement by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Preferred Stock do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under, the
(i) certificate of incorporation or by-laws of the Company, (ii) any indenture,
mortgage, deed of trust, or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
(iii) any material existing applicable law, rule, or regulation or any
applicable decree, judgment, or (iv) order of any court, United States federal
or state regulatory body, administrative agency, or other governmental body
having jurisdiction over the Company or any of its properties or assets, except
such conflict, breach or default which would not have a material adverse effect
on the transactions contemplated herein.
F. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the Stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
G. SEC FILINGS. None of the SEC Filings with the Securities and
Exchange Commission at the time they were filed, contained any untrue statement
of a material fact or omitted to any state material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Except as set forth on
ANNEX V hereto, the Company has timely filed all requisite forms, reports and
exhibits thereto with the Securities and Exchange Commission.
H. ABSENCE OF CERTAIN CHANGES. Since January 1, 1997, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, or results of operations of the
Company, except as disclosed in ANNEX V or in the Company's SEC Documents.
I. FULL DISCLOSURE. There is no fact known to the Company (other than
general economic conditions known to the public generally), and other than facts
disclosed in the Company's SEC Documents, that has not been disclosed in writing
to the Buyer that (i) could reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), earnings, business affairs,
properties or assets of the Company or (ii) could reasonably be expected to
materially and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement.
J. ABSENCE OF LITIGATION. Except as set forth in ANNEX V hereto, and in
the Company's SEC Documents, which the Buyer has reviewed, there is no action,
suit, proceeding, inquiry or investigation before or by any court, public board
or body pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company
-5-
or any of its subsidiaries, wherein an unfavorable decision, ruling or finding
would have a material adverse effect on the properties, business, condition
(financial or otherwise), results of operations or prospects of the Company and
its subsidiaries taken as a whole or the transactions contemplated by this
Agreement or any of the documents contemplated hereby or which would adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of such other
documents.
K. ABSENCE OF EVENTS OR DEFAULT. Except as set forth in ANNEX V hereto
and Section 3(e), no Event of Default, as defined in the respective agreement to
which the Company is a party, and no event which, with the giving of notice or
the passage of time or both, would become an Event of Default (as so defined),
has occurred and is continuing, which would have a material adverse effect on
the Company's financial condition or results of operations.
L. NO DEFAULT. To its knowledge, the Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it or its property is
bound, and neither the execution of, nor the delivery by the Company of, nor the
performance by the Company of its obligations under, this Agreement or the
Preferred Stock, other than the conversion provision thereof, will conflict with
or result in the breach or violation of any of the terms or provisions of, or
constitute a default or result in the creation or imposition of any lien or
charge on any assets or properties of the Company under, (i) any material
indenture, mortgage deed of trust or other material agreement applicable to the
Company or instrument to which the Company is a party or by which it is bound,
(ii) any statute applicable to the Company or its property, (iii) the
Certificate of Incorporation or By-Laws of the Company, (iv) any decree,
judgment, order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or its properties, or (v) the Company's
listing agreement for its Common Stock.
M. PRIOR ISSUES. During the twelve (12) months preceding the date
hereof, the Company has not issued any securities other than (i) as reflected in
the Company's SEC Documents, of which 44,700 shares of Series A Preferred Stock
and 7,500 shares of Series B Preferred Stock, remain unconverted, and (ii)
options and warrants to purchase shares of Common Stock which have been granted
to directors, employees, consultants and advisers of the Company, as further set
forth on Annex 3(m).
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) Preferred
Stock has not been and is not being registered under the provisions of the 1933
Act and, except as provided in the Registration Rights Agreement, the Shares
have not been and are not being registered under the 1933 Act, and may no be
transferred unless (A) subsequently registered thereunder or (B) the Buyer shall
have delivered to the Company an opinion of counsel, reasonably satisfactory in
form, scope and substance to the Company, to the effect that the Securities to
be sold or transferred may be sold or transferred pursuant to an exemption from
such registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of
-6-
such Securities under circumstances in which the seller, or the person through
whom the sale is made, may be deemed to be an underwriter, as that term is used
in the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that the
Preferred Stock, and, until such time as the Common Stock has been registered
under the 1933 Act as contemplated by the Registration Rights Agreement and sold
in accordance with such Registration Statement, the shares of Common Stock
issued to the Buyer upon conversion of the Preferred Stock shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the Preferred Stock and such shares of
Common Stock):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
C. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter
into the Registration Rights Agreement, in substantially the form attached
hereto as ANNEX IV, on or before the Closing Date (as defined in Section 7).
D. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Preferred Stock to the Buyer under
any United States laws and regulations, or by any domestic securities exchange
or trading market, and to provide a copy thereof to the Buyer promptly after
such filing.
E. REPORTING STATUS. So long as the Buyer beneficially owns any of the
Preferred Stock, the Company shall file all reports required to be filed with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and the Company
shall no terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
F. USE OF PROCEEDS. The Company will use the proceeds from the sale of
the Preferred Stock (excluding amounts paid by the Company for legal fees and
finder's fees in connection with the sale of the Preferred stock) for internal
working capital purposes, and shall not, directly or indirectly, use such
proceeds for any loan to or investment in any other corporation, partnership
enterprise or other person.
-7-
G. CERTAIN AGREEMENTS. (i) Except as provided herein with respect to
Acquisition Financing or in 4(g)(ii)(d) hereof, and the sale of up to 5,300
additional shares of Series A Preferred Stock, the Company covenants and agrees
that it will not, without the prior written consent of the Buyer, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock with any third party until the expiration of thirteen (13)
months after the effective date of the Registration Statement (the "Effective
Date").
(II) SPECIAL PROVISION RELATING TO ACQUISITION FINANCING.
(a) Following the issuance of the Series C Preferred
Stock to the Buyer, and until the expiration of the thirteen (13) month period
following the Expiration Date, the Company shall provide the Buyer with the
following rights to participate in any private placement financing of equity
securities (or securities convertible into Equity Securities of the Company) by
the Company (exempt from the registration requirements of the Securities Act of
1993) where at least 90% of the proceeds of such financing are intended to be
used by the Company to acquire the capital stock or assets of another business
enterprise (including, within the context of such Acquisition Financing, the
working capital requirements of the acquired entity) (an "Acquisition
Financing"). This right of first refusal is granted to the Buyer subject to, and
subordinate to, the prior rights of first refusal of the holders of the Series A
Preferred Stock with respect to private placement of securities by the Company,
and is granted to Buyer after the holders of Series A Preferred Stock either
waive or decline to exercise their rights of first refusal, or if such rights of
first refusal of the holders of Series A Preferred Stock are otherwise
terminated. If the Company obtains Acquisition Financing from a third party
during the thirteen-month period following the first issuance of shares of
Series D Preferred Stock, then the Buyer's obligations under Section 4(i) below
to purchase additional tranches of Series D Preferred Stock shall be suspended
until the earlier of (x) such time that the Company provides written notice that
all equity securities issued by the Company in such Acquisition Financing have
been converted to Common Stock, or (y) the conclusion of the thirteen (13) month
period.
(b) Notice to Participate. Subject to the prior
exercise or waiver of the rights of the holders of the Series A Preferred Stock,
the Company shall, prior to any issuance by the Company of any of its securities
to be issued in an Acquisition Financing, offer to the Buyer by written notice
the right, for a period of five (5) business days, to purchase all of such
securities for cash at an amount equal to the price or other consideration for
which such securities proposed to be issued. The Company's written notice to the
Buyer shall describe the securities proposed to be issued by the Company and
specify the number, price and payment terms. Except as may be necessary with
respect to potential designees, the Buyer agrees to keep the terms and existence
of such securities issuance confidential. The Buyer, or its designee, may accept
the company's offer as to the full number of securities offered to it, by
written notice thereof given by it to the Company prior to the expiration of the
aforesaid five (5) day period, in which event the Company shall promptly sell
and such Buyer shall buy, upon the terms specified, the number of securities
agreed to be purchased by such Buyer, or its designee. The rights contained in
this Section are not transferable by the Buyer except as provided herein.
-8-
(c) Options of Buyer. Following the exercise or
waiver of the rights of first refusal of the Series A Preferred Stock, the Buyer
shall have the following rights: (i) to participate, or have its designee
participate, or decline to participate in the Acquisition Financing by
delivering notice (or fail to deliver notice) during the five-day period; (ii)
continue to exercise its rights to purchase shares of Series D Preferred Stock
as provided in Section 4i; or (iii) accelerate its right to purchase shares of
Series D Preferred Stock up to an aggregate of 48,000 shares of Series D
Preferred Stock.
(d) Exceptions to Right to Participate. The first
refusal rights of the Buyer pursuant to this Section shall not apply to
securities issued by the Company (i) upon conversion of any of the shares of any
series of Preferred Stock or the exercise of Warrants to purchase Common Stock,
(ii) as a stock dividend or upon any subdivision of shares of Common Stock,
provided that the securities issued pursuant to such stock dividend or
subdivision are limited to additional shares of Common Stock, (iii) pursuant to
subscriptions, warrants, options, convertible securities, or other rights which
are outstanding on the date of this Agreement, (iv) as non-cash consideration
for the acquisition (whether by merger or otherwise) by the Company or any of
its subsidiaries of all or substantially all of the stock or assets of any other
entity, (v) pursuant to exercise or warrants or options to purchase Common Stock
granted to directors, officers, employees, investment bankers, advisers or
consultants of the Company in connection with their service to the Company, (vi)
pursuant to any other transaction by the Company in connection with the
financing of the acquisition of Superior Pharmaceutical, (vii) pursuant to the
licensing of technology by the Company or from the Company, or pursuant to any
corporate partnership, strategic alliance or joint venture entered into by the
Company, and (viii) upon the exercise of any right which was not itself in
violation of the terms of this Section.
(e) Offering of Securities to Third Parties. The
Company shall be free at any time prior to sixty (60) days after the expiration
of its notice to offer to the Buyer, to offer and sell to any third party or
parties the number of such securities not agreed by the Buyer, or its designee,
to be purchased by it, at a price and on payment terms no less favorable to the
Company than those specified in such notice of offer to the Buyer. However, if
such third party sale or sales are not consummated within such sixty (60) day
period, the Company shall not sell such securities as shall not have been
purchased within such period without again complying with this Section 5. No
Registration Statement with respect to any Acquisition Financing with any third
party shall be made effective until 45 days after the Effective Date as defined
above.
H. WARRANTS. The Company agrees to issue to the Buyer at the Closing,
transferable divisible warrants (the "Warrants") for 250,000 shares of Common
Stock. Such Warrants shall bear an exercise price per share of Common Stock as
follows: 125% of the Market Price, as defined in the Certificate of Designation,
on the Closing Date, and shall be exercisable immediately upon issuance, and for
a period of three (3) years after issuance, in the form annexed hereto as
Exhibit VI, together with piggy-back registration rights, and demand
registration rights.
I. SERIES D PREFERRED STOCK. The Buyer irrevocably agrees to purchase
up to $4,800,000, and the Company irrevocably agrees to sell the Buyer up to
$2,400,000 of Series D Preferred Stock (the "Series D Preferred Stock") in a
series of tranches, commencing thirty (30)
-9-
days after the Effective Date of the Registration Statement contemplated by the
Registration Rights Agreement attached hereto as ANNEX IV (the "Effective
Date"). Buyer's obligation to purchase the Series D Preferred Stock on each
Additional Closing Date (which shall occur not less than thirty (30 ) calendar
days apart), shall be contingent upon the satisfaction of the following
conditions:
(a) The Company shall give the Buyer five (5) days prior
written notice;
(b) The Series D Preferred Stock issued in each tranche shall
be not less than $200,000 nor in excess of $400,000 principal amount;
(c) On each Additional Closing Date;
(i) the Registration Statement required to be filed
under the Registration Rights Agreement, is effective;
(ii) The representations and warranties contained in
Section 3 shall be true and
correct in all material respects;
(iii) The average daily trading volume for the
previous thirty (30) trading days
must exceed $100,000;
(iv) The average daily share price of the common
stock for the ten trading days
prior thereto, must exceed 60% of the price per share on the Closing Date of the
Series C Preferred Stock, or on the immediately preceding Additional Closing
Date as applicable; and
(d) In the event that (x) the Company does not exercise its
option to require the Buyer to purchase at least $2,400,000 of Series D
Preferred Stock, or (y) the Buyer does not purchase at least $2,400,000 of
Series D Preferred Stock because (A) the Buyer in its discretion, refuses to
purchase such amount because of the failure to satisfy the conditions set forth
in Paragraph 4i(c)(iii) or Paragraph 4i(c)(iv) hereof, or (B) the Buyer's
obligation to purchase is suspended under Paragraph 4g(i)(a), the Company will,
not later than thirteen (13) months after the Effective Date issue to the Buyer
an additional 300,000 Warrants upon the terms and conditions of Paragraph 4(h)
hereof.
(e) Notwithstanding anything to the contrary contained herein,
in the event the Buyer does not purchase a tranche, or at least $200,000 of a
tranche, of Series D Preferred Stock because the conditions preceded in
Paragraph 4(i)(c)(iii) or (c)(iv) have not been met, the Company may offer to
sell a tranche not exceeding $400,000 of such Series D Preferred Stock to a
third party, free of any other restrictions, provided however, that such refusal
by Buyer shall not be deemed a waiver of the right by Buyer to purchase
subsequent tranches, or its entitlement to the Warrants in Paragraph 4(i)(d).
-10-
J. AVAILABLE SHARES. The Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield the number of Common Stock issuable at conversion as may be
required to satisfy the conversion rights of the Buyer pursuant to the terms and
conditions of the Preferred Stock.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the aggregate
purchase price for the Preferred Stock in accordance with Section 1(c) hereof,
the Company will irrevocably instruct its transfer agent to issue Common Stock
from time to time upon conversion of the Preferred Stock in such amounts as
specified from time to time by the Company to the transfer agent, bearing the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Buyer in
connection with each conversion of the Preferred Stock. The Company warrants
that no instruction other than such instructions referred to in this Section 5.
The Registration Rights Agreement, and stop transfer instructions to give effect
to Section 4(a) hereof prior to registration and sale of the Shares under the
1933 Act will be given by the Company to the transfer agent and that the Shares
shall otherwise be freely transferable on the books and records of the Company
as to the extent provided in the Agreement, the Registration Rights Agreement,
and applicable law. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Securities. If the Buyer provides the Company with an opinion of
counsel reasonably satisfactory to the Company that registration of a resale by
the Buyer of any of the Securities in accordance with clause (1)(B) of Section
4(a) of this Agreement is not required under the 1933 Act, the Company shall
(except as provided in clause (2) of Section 4(a) of this Agreement) permit the
transfer of the Securities and, in the case of the Shares, promptly instruct the
Company's transfer agent to issue one or more certificates for Common Stock in
such name and in such denominations as specified by the Buyer.
b. The Company will permit the Buyer to exercise its right to convert
the Preferred Stock and exercise the Warrants by telecopying an executed and
completed Notice of Conversion or Notice of Exercise to the Company and
delivering within three business days thereafter, the original Notice of
Conversion or Notice of Exercise and the certificate for the Preferred Stock
representing the Shares or the Warrant to the Company by express courier. Each
date on which a Notice of Conversion or Notice of Exercise is telecopied to and
received by the Company in accordance with the provisions hereof shall be deemed
a Conversion Date. The company will immediately confirm receipt of such notice
by telecopy and transmit the certificates representing the Shares of Common
Stock issuable upon conversion of any Preferred Stock (together with the
Preferred Stock representing the Shares not so converted) to the Buyer via
express courier, within three business days after receipt by the company of the
original Notice of Conversion and the certificate for the Preferred Stock
representing the Shares to be converted (the "Delivery Date").
c. The Company understands that a delay in the issuance of the Shares
of Common Stock beyond the Delivery Date could result in economic loss to the
Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments, [not exceeding $200,000 per
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tranche], to the Buyer for late issuance of Shares upon Conversion in accordance
with the following schedule (where "No. Business Days Late" is defined as the
number of business days beyond three (3) business days from Delivery Date:
Late Payment for Each $10,000 of Preferred Stock
No. Business Days Late Principal Amount Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
10 $1,000 +$200 for each
Business Day Late beyond
10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit a Buyer's right to
pursue actual damages for the Company's failure to issue and deliver Common
Stock to the Buyer. Furthermore, in addition to any other remedies which may be
available to the Buyer, in the event that the Company fails for any reason to
effect delivery of such shares of Common Stock within five business days after
the Delivery Date, the Buyer will be entitled to revoke the relevant Notice of
Conversion by delivering a notice to such effect to the Company whereupon the
Company and the Buyer shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion (and in such event,
the late payments described above shall not be due and payable).
6. DELIVERY INSTRUCTIONS.
The Series C Preferred Stock shall be delivered by the Company to the
Escrow Agent pursuant to Section 1(b) hereof on a delivery against payment basis
at the closing.
7. CLOSING DATE
The date and time of the issuance and sale of the Series C Preferred
Stock (the "Closing Date") and the date and time of the issuance and sale of the
Additional Preferred Stock (an "Additional Closing Date") shall occur no later
than 12:00 Noon, New York time on the second NYSE trading day after the
fulfillment or waiver of all Closing conditions pursuant to Sections 8 and 9, or
such other mutually agreed to time. The closing shall occur on such date at the
offices of the Escrow Agent. Notwithstanding anything to the contrary contained
herein, the Escrow Agent will be authorized to release the funds representing
the Purchase Price for the Preferred Stock or
-12-
Additional Preferred Stock (as the case may be), and to release the Preferred
Stock or Additional Preferred Stock (as the case may be) only upon satisfaction
of the conditions set forth in Section 8 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The Buyer understands that the Company's obligation to sell the
Preferred Stock on the Closing Date and any Series D Preferred Stock on an
Additional Closing Date pursuant to this Agreement is conditioned upon:
A. The receipt and acceptance by the Company of Buyer's agreement, as
evidenced by its execution of this Agreement, to purchase at least Seven Hundred
Fifty Thousand ($750,000.00) Dollars in liquidation value of Series C Preferred
Stock (or such lesser amount as the Company, in its sole discretion, shall
determine);
B. Delivery by the Buyer to the Escrow Agent of good funds as payment
in full of an amount equal to the purchase price for the Series C Preferred
Stock or Series D Preferred Stock (as the case may be) in accordance with
Section 1(c) hereof;
C. The accuracy on the Closing Date or Additional Closing Date (as the
case may be) of the representations and warranties of the Buyer contained in
this Agreement as if made on such date, and the performance by the Buyer on or
before such date of all covenants and agreements of the Buyer required to be
performed on or before such date;
D. There shall not be in effect any law, rule or regulation prohibiting
or restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Stock on the Closing Date and any Series D Preferred Stock on an
Additional Closing Date is conditioned upon:
A. Acceptance by Buyer of an Agreement for the sale of Preferred Stock,
as indicated by execution of this Agreement, and Buyer's and Company's execution
of the Registration Rights Agreement;
B. Delivery by the Company to the Escrow Agent of the Preferred Stock,
the Warrants, and the Series D Preferred Stock (as the case may be) in
accordance with this Agreement;
C. The accuracy in all material respects on the Closing Date or
Additional Closing Date (as the case may be) of the representations and
warranties of the Company contained in this Agreement as if made on such date,
and the performance by the Company on or before such date (as the case may be)
of all covenants and agreements of the Company required to be performed on or
before such date; and
-13-
D. On the Closing Date or Additional Closing Date the Buyer having
received an opinion of counsel for the Company, dated such date, in form, scope
and substance reasonably satisfactory to the Buyer, to the effect set forth in
ANNEX III attached hereto.
10. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance with
laws of the State of Delaware. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non convenients, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
11. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given upon, (a) personal delivery, or (b) if advance copy is given by fax, upon
(i) seven business days after deposit in the United states Postal Service by
regular or certified mail, or (ii) three business days mailing by international
express courier, with postage and fees prepaid, addressed to each of the other
parties thereunto entitled at the following addresses, or at such other
addresses as a party may designate by ten days advance written notice to each of
the other parties hereto.
COMPANY: DynaGen, Inc.
99 Erie Street
Cambridge, Massachusetts 02139
Telecopier No. (617) 354-3902
with a copy to:
John M. Hession, Esq.
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
Telecopier No. (617) 248-7100
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PURCHASER: At the address set forth on the signature page
of this Agreement.
ESCROW AGENT: Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Purchaser's
representations and warranties shall survive the execution and delivery hereof
of this Agreement and the delivery of the preferred Stock.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
NUMBER OF SHARES OF PREFERRED STOCK TO BE PURCHASED:
AGGREGATE PURCHASE PRICE OF SUCH PREFERRED STOCK: $750,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Stock Purchase
Agreement to be duly executed on its behalf this 21st day of August, 1997
_________________________________ ENDEAVOUR CAPITAL FUND S. A.
Address Printed Name of Subscriber
By: [illegible]
___________________________________ _______________________________
(Signature of Authorized Person)
Telecopier No. ____________________
_________________________________
Printed Name and Title
British Virgin Islands
_____________________________
Jurisdiction of Incorporation
or Organization.
This Agreement has been accepted as of the date set forth below.
DYNAGEN, INC.
By: /s/ Indu A. Muni
_______________________________
Indu A. Muni
Title: President
Date: August 21, 1997
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Exhibit 4e
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 21,
1997 (this "Agreement") is made by and between DYNAGEN, INC., a Delaware
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Stock Purchase Agreement, dated as of August 21, 1997, between the Initial
Investor and the Company (the "Stock Purchase Agreement"), the Company has
agreed to issue and sell to the initial investor Shares of Series C Preferred
Stock and Series D Preferred Stock of the Company (collectively the "Preferred
Stock"), and warrants to purchase up to 250,000 shares of Common Stock (the
"Warrants") (which may be increased by an additional 300,000 warrants upon
certain circumstances (the "Additional Warrants") which Preferred Stock will be
convertible into shares of the common stock, $.01 par value (the "Common
Stock"), of the Company (the "Conversion Shares") upon the terms and subject to
the conditions of such Preferred Stock, and the Warrants will be exercisable for
shares of Common Stock (the "Warrant Shares"); and
WHEREAS, to induce the Initial Investor to execute and deliver
the Stock Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares and Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agrees as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have
the following meanings:
(i) "Additional Warrant Shares" means the shares of Common
Stock issuable upon exercise of the Additional Warrants.
(ii) "Investor" means the Initial Investor and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(iii) "Potential Material Event" means any of the following:
(a) the possession by the Company of material information not ripe for
disclosure in a registration statement, which shall be evidenced by
determinations in good faith by the Board of
-2-
Directors of the company that disclosure of such information in the registration
statement would be detrimental to the business and affirms of the Company; or
(b) any material engagement or activity by the Company which would, in the good
faith determination of the Board of Directors of the Company, be adversely
affected by disclosure in a registration statement at such time, which
determination shall be accompanied by a good faith determination by the Board of
Directors of the Company that the registration statement would be materially
misleading absent the inclusion of such information.
(iv) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(v) "Registerable Securities" means the Conversion Shares and
the Warrant Shares.
(vi) "Registration Statement" means a registration statement
of the Company under the Securities Act.
(b) Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Stock Purchase
Agreement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare and file
with the SEC, no later than forty-five (45) days following the initial Closing
Date under the Stock Purchase Agreement, and the issuance of the Additional
Warrants, if issued, either a Registration Statement on Form S-3 registering for
resale by the Investor a sufficient number of shares of Common Stock for the
Initial Investors (or such lesser number as may be required by the SEC, but in
no event less than the number of shares into which the Preferred Stock would be
convertible and the Warrants exercisable at the time of filing of the Form S-3,
or an amendment to any pending Company Registration Statement on Form S-3, and
such Registration Statement or amended Registration Statement shall state that,
in accordance with Rule 416 and 457 under the Securities Act, it also covers
such indeterminate number of additional shares of Common Stock as may become
issuable upon conversion of the Preferred Stock and the Exercise of the Warrants
resulting from adjustment in the Conversion Price, or to prevent dilution
resulting from stock splits, or stock dividends). If at any time the number of
shares of Common Stock into which the Preferred Stock may be converted or the
Warrants or Additional Warrants, if issued, are exercisable, exceeds the
aggregate number of shares of Common Stock then registered, the Company shall,
within fifteen (15) business days after receipt of a written notice from any
Investor, either (i) amend the Registration Statement filed by the Company
pursuant to the preceding sentence, if such Registration Statement has not been
declared effective by the SEC at that time, to register all shares of Common
Stock into
-3-
which the Preferred Stock may be converted, or the Warrants or Additional
Warrants if issued are exercisable, or (ii) if such Registration Statement has
been declared effective by the SEC at that time, file with the SEC an additional
Registration Statement on Form S-3 to register the shares of Common Stock into
which the preferred Stock may be converted, or the Warrants or Additional
Warrants, if issued, are exercisable, that exceed the aggregate number of shares
of Common Stock already registered. If the state of the SEC determines that all
of the Conversion Shares cannot be registered by the Company for resale by the
Investor because, in the view of the staff, such registration would constitute a
primary offering the Company, then the Company shall have an additional sixty
(60) days in which to amend such registration statement to another available
form.
(B) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the
Registrable Securities is not filed in proper form with the Securities and
Exchange Commission with forty-five (45) days after the Closing, the Company
will make payment to the Initial Investor in the amount of $500 per day for each
$10,000 in principal amount of Preferred Stock outstanding for each day
thereafter until such Registration Statement, in proper form, is filed with the
Securities and Exchange Commission.
(ii) If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not effective (x) on the earlier of (i) five days after notice
from the Securities and Exchange Commission that the Registration Statement may
be declared effective, or (ii) ninety (90) days following the initial Closing
Date (the "Initial Date"), (except as provided by the last sentence of Section
2a), or (y) on the conclusion of a Suspension Period as defined in P. 3f, then
the Company will make payments to the Initial Investor in such amounts and at
such times as shall be determined pursuant to this Section 2(b). The amount to
be paid by the Company to the Initial Investor shall be determined as of each
Computation Date, and such amount shall be equal to two and one-half (2 1/2%)
percent of the purchase price paid by the Initial Investor for all Preferred
Stock then purchased and outstanding pursuant to the Stock Purchase Agreement
for any period fro the Initial Date to the first Computation Date, and to each
Computation date thereafter, to the date the Registration Statement is declared
effective by the SEC (pro rated for partial periods) (the "Periodic Amount").
The full Periodic Amount shall be paid by the Company in immediately available
funds within three business days after each Computation Date. Notwithstanding
the foregoing, the amounts payable by the Company pursuant to this provision
shall not be payable to the extent any delay in the effectiveness of the
Registration Statement occurs because of an act of, or a failure to act or to
act timely by the Initial Investor or its counsel, or in the event all of the
Registrable Securities may be sold pursuant to Rule 144 or another available
exemption under the Act.
-4-
As used in this Section 2(b), the following terms shall have
the follow meanings:
"Computation Date" means the date which is the earlier of (i)
five days after notice from the Securities and Exchange Commission that the
Registration Statement may be declared effective, or (ii) ninety (90) days after
the initial Closing Date (except as provided by the last sentence of Section
2(a)), and, if the Registration Statement required to be filed by the Company
pursuant to Section 2(a) has not theretofore been declared effective by the SEC
or a Suspension Period is in effect, each date which is thirty (30) days after
the previous Computation Date (pro rated for partial periods) until such
Registration Statement is so declared effective.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following.
(a) Prepare promptly, and file with the SEC by forty-five (45)
days after the initial Closing Date, a Registration Statement with respect to
not less than the number of Registrable Securities provided in Section 2(a),
above, and thereafter used its best efforts to cause each Registration Statement
relating to Registrable Securities to become effective on the earlier of (i)
five days after notice from the Securities and Exchange Commission that the
Registration Statement may be declared effective, or (b) ninety (90) days after
the Closing Date, and keep the Registration Statements effective at all times
until the earliest (the "Registration Period") of (i) the date that is two years
after the Closing Date (ii) the date when the Investors may sell all Registrable
Securities under Rule 144 or (iii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a materiel fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) The Company shall permit a single firm of counsel
designated by the Initial Investors to review the Registration Statement and all
amendments and supplements thereto as reasonable period of time prior to their
filing with the SEC, and not file any document in a form to which such counsel
reasonably objects;
-5-
(d) Furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to the
Company (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one (1) copy of the Registration
Statement, each preliminary prospectus and prospectus, and each amendment or
supplement thereto, and (ii) such number of copies of a prospectus, and all
amendments and supplements thereto and such other documents, as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;
(e) As promptly as practicable after becoming aware of such
event, notify each investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) Notwithstanding the foregoing, if at any time or from time
to time after the date of effectiveness of the Registration Statement, the
Company notifies the Investors in writing of the existence of a Potential
Material Event, the Investors shall not offer or sell any Registerable Shares,
or engage in any other transaction involving or relating to the Registrable
Shares, from the time of the giving of notice with respect to a Potential
Material Event until such Investor receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Registrable Shares for
more than two (2) twenty (20) day periods in the aggregate during any 12-month
period with at least a ten (10) business day interval between such periods,
during the period the Registration Statement is required to be in effect;
(g) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of a Notice of Effectiveness or any stop order or other
suspension of the effectiveness of the Registration Statement at the earliest
possible time;
(h) Use its commercially reasonable efforts to secure
designation of all the Registrable Securities covered by the Registration
Statement as a National Association of Securities Dealers Automated Quotations
System ("NASDAQ") "Small Capitalization" within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of
-6-
1934, as amended (the "Exchange Act"), and the quotation of the Registrable
Securities of the NASDAQ Small Cap Market; or if, despite the Company's
commercially reasonable efforts to satisfy the preceding clause, the Company is
unsuccessful in doing so, to secure NASDAQ/OTC Bulletin Board authorization and
quotation for such Registrable Securities and, without limiting the generality
of the foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Securities;
(i) Provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(j) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel; and
(k) Take all other reasonable actions necessary to expedite
and facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration the Registrable Securities, the Investors shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the company may reasonably request. At
least five (5) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Investment") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the company may
file the Registration Statement without including Registrable Securities of such
Non-Responsive Investor;
-7-
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the company as reasonably
requested by the company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(e)
or 3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. EXPENSES OF REGISTRATION. All reasonable expenses (other
that underwriting discounts and commissions incurred in connection with
registrations, filings or qualification pursuant to Section 3, and fees and
expenses of counsel for the Investors), but including, without limitation, all
registration, listing, and qualifications fees, printers and accounting fees,
the fees and disbursements of counsel for the Company, shall be borne by the
Company.
6. INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein
-8-
were made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). The Company shall reimburse the Investors, promptly
as such expenses are incurred and are due and payable, for any legal fees or
other reasonable expenses incurred by them in connection with investigation or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a) shall not
(I) apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(b) hereof; (II) be available to
the extent such Claim is based on a failure of the Investor to deliver or cause
to be delivered the prospectus made available by the Company; or (III) apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld. Each Investor will indemnify the Company and its
officers, directors and agents against any claims arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company, by or on behalf of such Investor, expressly
for use in connection with the preparation of the Registration Statement,
subject to such limitations and conditions as are applicable to the
Indemnification provided by the Company to this Section 6. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
(b) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for the Investors; such legal counsel shall be selected
by the Investors holding a majority in interest of the Registrable Securities
included in the
-9-
Registration Statement to which the Claim relates. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available
to the Investors the benefits of Rule 144 promulgated under the Securities Act
or any other similar rule or regulation of the SEC that may at any time permit
the Investors to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange act;
and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of at least 30% of the
Registrable Securities (excluding the Additional Warrant Shares) only if: (a)
the Investor agrees in writing with
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the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (b)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the Securities act and applicable state securities
laws, and (d) at or before the time the Company received the written notice
contemplated by clause (b) of this sentence the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein.
In the event of any delay in filing or effectiveness of the Registration
Statement as a result of such assignment, the Company shall not be liable for
any damages arising from such delay, or the payments set forth in Section 2(c)
hereof.
10. (A) AMENDMENT OF REGISTRATION RIGHTS. Any provision of
this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold an eighty (80%) percent interest of the Registrable Securities. Any
amendment or waiver effective in accordance with this Section 10 shall be
binding upon each Investor and the Company.
(B) ADDITIONAL WARRANT SHARES. The obligation of the
Company hereunder including the time period set forth herein shall apply, mutis
mutandis, to the Additional Warrant Shares upon issuance of the Additional
Warrants.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission,
receipt confirmed, or other means) or sent by certified mail, return receipt
requested, properly addressed and with proper postage pre-paid (i) if to the
Company, DYNAGEN, INC., 99 Eric Street, Cambridge, Massachusetts 02139, with a
copy to John M. Hession, Esq., Testa, Hurwitz & Thibeault, LLP, High Street
Tower, 125 High Street, Boston, Massachusetts 02110; (ii) if to the Initial
Investor, at the address set forth under its name in the Stock Purchase
Agreement, with a coy to Samuel Krieger, Esq., Krieger & Prager, 319 Fifth
Avenue, Third Floor, New York, NY 10016 and (iii) if to any other Investor, at
such address as such Investor shall have provided in writing to the Company, or
at such other address as each such party
-11-
furnishes by notice given in accordance with this Section 11(b), and shall be
effective, when personally delivered, upon receipt and, when so sent by
certified mail, four (4) calendar days after deposit with the United States
Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other
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party hereto by telephone line facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
(j) The Company acknowledges that any failure by the Company
to perform its obligations under Section 3(a), or any delay in such performance
could result in to the Investors and the Company agrees that, in addition to any
other liability of the Company may have by reason of any such failure or delay,
the Company shall be liable for all direct damages caused by any such failure or
delay, unless same is the result of force majeure. Neither party shall be liable
for consequential damages.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
DYNAGEN, INC.
By: /s/ Indu A. Muni
_______________________
Name: Indu A. Muni
Title: President
ENDEAVOUR CAPITAL FUND S.A.
By: [illegible]
_________________________
Name:
Title:
Exhibit 4f
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS
SECURITY MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITY UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, UNLESS THE COMPANY HAS RECEIVED
THE WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE,
ASSIGNMENT OR TRANSFER DOES NOT INVOLVE A TRANSACTION REQUIRING REGISTRATION OF
SUCH SECURITY UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.
WARRANT NO.: W-CS-26 RIGHT TO PURCHASE 250,000
AUGUST 21, 1997 SHARES OF COMMON STOCK OF DYNAGEN, INC.
VOID UNLESS EXERCISED BEFORE AUGUST 21, 2000
DYNAGEN, INC.
COMMON STOCK PURCHASE WARRANT
DYNAGEN, INC., a Delaware corporation (the "COMPANY"), hereby certifies
that, in consideration of the investment by Endeavour Capital Fund S.A. (the
"HOLDER") pursuant to the Stock Purchase Agreement dated the date hereof, the
Holder is entitled, subject to and in accordance with the terms set forth below,
to purchase from the Company, commencing on the date hereof, at any time or from
time to time before 5:00 P.M. Eastern Standard Time on August 21, 2000, 250,000
fully paid and non-assessable shares of Common Stock, $.01 par value, of the
Company, at an exercise price per share of $0.74609 (the "EXERCISE PRICE") (one
hundred twenty-five percent (125%) of the average of the closing bid price of
the Common Stock of the Company as reported by the Nasdaq SmallCap Market for
the ten (10) trading days immediately preceding the date hereof). The number and
character of such shares of Common Stock and the Exercise Price are subject to
adjustment as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "COMPANY" means DynaGen, Inc., a Delaware corporation, and
any corporation that succeeds or assumes the obligations of the Company
hereunder.
(b) The term "COMMON STOCK" means (a) the Company's Common Stock, $.01
par value per share, as authorized, (b) any other capital stock of any class or
classes (however designated) of the Company, authorized on or after such date,
the holders of which shall have the right, without limitation as to amount,
either to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to
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vote for the election of a majority of directors of the Company (even though the
right so to vote has been suspended by the happening of such a contingency), (c)
any other securities into which or for which any of the securities described in
(a) or (b) may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise, or the conversion of
promissory notes or other obligations of the Company.
(c) The term "OTHER SECURITIES" means any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of this Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Sections 3 or 4 or otherwise.
1. EXERCISE OF WARRANT.
1.1. FULL EXERCISE. This Warrant may be exercised in full by
the holder hereof by surrender of this Warrant, with the form of subscription
attached hereto duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company, in the amount obtained by multiplying the
number of shares of Common Stock for which this Warrant is then exercisable by
the Exercise Price then in effect.
1.2. PARTIAL EXERCISE. This Warrant may be exercised in part
by surrender of this Warrant in the manner and at the place provided in Section
1.1 except that the amount payable by the holder on such partial exercise shall
be the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription at the end hereof by (b) the
Exercise Price then in effect. On any such partial exercise, the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3 CASHLESS EXERCISE FEATURE -- RIGHT TO CONVERT WARRANT INTO
COMMON STOCK. (a) In addition to and without limiting the rights of the holder
hereof under the terms of this Warrant, the holder shall have the right (the
"CONVERSION RIGHT") to convert this Warrant or any portion thereof into shares
of Common Stock as provided in this Section at any time or from time to time
prior to its expiration, subject to the restrictions set forth in paragraph (c)
hereof. In lieu of exercising this warrant for cash, the holder may elect to
surrender this warrant for conversion and to receive shares of Common Stock
equal to the value of this Warrant (or the portion being cancelled, surrendered
and converted) by surrender of this Warrant to the Company together with notice
of such election. Upon such event, the Company shall issue to the holder a
number of shares of the Company's Common Stock computed by using the following
formula:
X EQUALS Y (A MINUS B)
-------------
A
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Where: X = The number of shares of Common Stock to be issued to the
holder;
Y = The number of shares of Common Stock exercisable
under this Warrant
A = The "Fair Market Value" of one share
of the Common Stock on the Conversion Date (as defined
below); and
B = The Exercise Price of the Warrant (as adjusted to the date
of the calculation).
Upon exercise of the Conversion Right with respect to a particular
number of shares subject to this Warrant, the Company shall deliver to the
holder, without payment by the holder of any exercise price or any cash or other
consideration, that number of shares of Common Stock equal to the number
computed using the above formula. Notwithstanding anything in this Section to
the contrary, the Conversion Right cannot be exercised with respect to a number
of Converted Warrant Shares having a value below $1,000. No fractional shares
shall be issuable upon exercised of the Conversion Right, and if the number of
shares to be issued in accordance with the foregoing formula is other than a
whole number, the Company shall pay to the holder an amount in cash equal to the
Fair Market Value of the resulting fractional share.
(b) The Conversion Right may be exercised by the holder by the
surrender of this Warrant at the principal office of the Company together with a
written statement specifying that the holder thereby intends to exercise the
Conversion Right and indicating the number of shares of Common Stock or
authorized Common Stock subject to this Warrant which are being surrendered in
exercise of the Conversion Right. Such conversion shall be effective upon
receipt by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the "CONVERSION
DATE"), but not later than the expiration date of this Warrant.
(c) In the event the Conversion Right would, at any time this Warrant
remains outstanding, be deemed by the Company's independent certified public
accountants to give rise to a charge to the Company's earnings for financial
reporting purposes, then the Conversion Right shall automatically terminate upon
the Company's written notice to the holder of such adverse accounting treatment.
(d) For purposes of this Section, the "FAIR MARKET VALUE" of a share of
Common Stock or authorized Common Stock as of a particular Conversion Date shall
mean:
(i) if the Company's Common Stock is then traded on any
nationally-recognized stock exchange or quoted on the Nasdaq National Market
System or SmallCap Market, the average of the closing bid prices for the 25
trading days preceding the Conversion Date, as reported by such exchange or
system, as reported in The Wall Street Journal or any other publication,
including the NASD;
(ii) if the Company's Common Stock is then traded on the
over-the-counter market, the average of the closing bid and closing asked prices
for the 30 trading days preceding the Conversion Date, as reported in The Wall
Street Journal or by any market maker; or
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(iii) if quotations for the Company's Common Stock or
authorized Common Stock are not readily available as set forth in (i) or (ii)
above, then as determined in good faith by the Company's Board of Directors upon
a review of all relevant factors, including, without limitation, the price at
which shares of the Company's Common Stock or authorized Common Stock could
reasonably be expected to be sold in an arms-length transaction, for cash, other
than on an installment basis, to a person not employed by, controlled by, in
control of or under common control with the Company, which determination by the
Board of Directors shall give due consideration to recent transactions involving
shares of the Common Stock or authorized Common Stock, if any, revenues and
earnings of the Company to the date of such determination (if any), projected
revenues and earnings of the Company, the effect of the transfer restrictions to
which the shares are subject under law, the absence of a public market for the
Common Stock or authorized Common Stock, and such other matters as the Board of
Directors deems pertinent. Such determination by the Board of Directors shall be
conclusive and binding.
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
three (3) trading days after each Conversion Date or after the Company receives
(i) the original Form of Subscription properly completed, (ii) the original
Warrant and (iii) payment pursuant to Section 1.1 above, as the case may be, the
Company at its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and delivered to the holder
hereof, or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, a certificate or certificates for the number of
fully paid and non-assessable shares of Common Stock (or Other Securities) to
which such holder shall be entitled on such exercise, plus, in lieu of any
fractional share to which such holder would otherwise be entitled, cash equal to
such fraction multiplied by the then current market value of one full share. The
exercise date of this Warrant shall be the date on which the Company receives
the properly completed Form of Subscription attached hereto by telecopier or
otherwise.
3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION OR MERGER.
3.1. REORGANIZATION, CONSOLIDATION OR MERGER. In case at any
time or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or entity, or (c) transfer all
or substantially all of its capital stock, properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, upon the proper and rightful
exercise of this Warrant, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 4 and 5.
3.2. CONTINUATION OF TERMS. Upon any corporate event referred
to in this Section 3, this Warrant shall continue in full force and effect and
the terms hereof shall be
-5-
applicable to the shares of stock and Other Securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger, as the case may be, and shall be binding upon the
issuer of any such stock or other securities.
4. ADJUSTMENTS FOR STOCK DIVIDENDS AND STOCK SPLITS. In the event that
the Company shall (i) issue additional shares of the Common Stock as a dividend
or other distribution on outstanding Common Stock, (ii) subdivide its
outstanding shares of Common Stock, or (iii) combine its outstanding shares of
the Common Stock into a smaller number of shares of the Common Stock, then, in
each such event, the Exercise Price shall, simultaneously with the happening of
such event, be adjusted by multiplying the then prevailing Exercise Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event (calculated assuming the conversion
or exchange of all outstanding shares of convertible or exchangeable securities
of the Company which are convertible or exchangeable into, or exercisable for,
shares of Common Stock) and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such event (calculated
assuming the conversion or exchange of all outstanding shares of convertible or
exchangeable securities of the Company which are convertible or exchangeable
into, or exercisable for, shares of Common Stock) and the product so obtained
shall thereafter be the Exercise Price then in effect. The Exercise Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 4. The holder of
this Warrant shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock which would otherwise (but for
the provisions of this Section 4) be issuable on such exercise, by a fraction of
which (i) the numerator is the Exercise Price which would otherwise (but for the
provisions of this Section 4) be in effect, and (ii) the denominator is the
Exercise Price in effect on the date of such exercise.
5. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY AND
RECLASSIFICATIONS. In case at any time or from time to time, the holders of
Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which, in the case
of Common Stock, are provided for in Section 4), then and in each such case the
holder of this Warrant, on the exercise hereof as provided in Section 1, shall
be entitled to receive the amount of other or additional stock and other
securities and property (including cash in the cases referred to in subdivision
(b) of this Section 5) which such holder would hold on the date of such exercise
if on the date of distribution of such other or
-6-
additional stock or other securities and property, or on the record date fixed
for determining the shareholders entitled to receive such other or additional
stock or other securities and property, such holder had been the holder of
record of the number of shares of Common Stock called for on the face of this
Warrant and had thereafter, during the period from the date thereof to and
including the date of such exercise, retained such shares and all such other or
additional stock and other securities and property (including cash in the cases
referred to in subdivision (b) of this Section 5) receivable by such holder as
aforesaid during such period, giving effect to all adjustments called for during
such period by Sections 3 and 4.
6. NOTICES OF RECORD DATE. In the event of
(a) any taking by the Company of a record of the holders of
any class or securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
holder of this Warrant a notice specifying (i) the date on which any such record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, and
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for securities or
other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be mailed at least twenty (20) days prior to the
date specified in such notice on which any such action is to be taken.
7. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, all shares of Common Stock from time to time
issuable on the exercise of all of the then outstanding Warrants, and the shares
of Common Stock which the holder of this Warrant shall receive upon exercise of
the Warrant will be duly authorized, validly issued, fully paid and
non-assessable.
8. EXCHANGE OF WARRANT. On surrender for exchange of this Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of
-7-
the holder thereof a new Warrant or Warrants of like tenor, in the name of such
holder or as such holder (on payment by such holder of any applicable transfer
taxes) may direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
or Warrants so surrendered.
9. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
10. WARRANTHOLDER NOT DEEMED STOCKHOLDER; RESTRICTIONS ON TRANSFER.
This Warrant is issued upon the following terms, to all of which each holder or
owner hereof by the taking hereof consents and agrees:
(a) Except as otherwise expressly set forth in Sections 3, 4
and 5 with respect to computing adjustments with respect hereto, no holder of
this Warrant shall, as such, be deemed the holder of Common Stock that may at
any time be issuable upon exercise of this Warrant for any purpose whatsoever,
nor shall anything contained herein be construed to confer upon such holder, as
such, any of the rights of a stockholder of the Company until such holder shall
have delivered formal notice to the Company of an intention to exercise this
Warrant, tendered promptly the consideration required for exercise (whether cash
or securities), exercised the Warrant, and been issued shares of Common Stock in
accordance with the provisions hereof.
(b) This Warrant is not transferable or assignable to any
party other than an affiliate of the Holder without the prior written consent of
the Company. A holder that wishes to transfer or assign this Warrant shall
provide to the Company an opinion of counsel satisfactory to the Company that
such transfer is permissible under applicable law.
11. REGISTRATION RIGHTS. The Company shall register the shares of
Common Stock issuable upon exercise of this Warrant in accordance with the terms
of the Registration Rights Agreement dated as of the date hereof.
12. NOTICES. All notices and other communications from the Company to
the holder of this Warrant shall be sent by (i) first class mail, postage
prepaid, (ii) electronic facsimile transmission, or (iii) express overnight
courier service, at such address or facsimile number as may have been furnished
to the Company in writing by such holder or, until any such holder furnishes to
the Company an address or facsimile number, then to, and at the address or
facsimile number of, the last holder of this Warrant who has so furnished an
address to the Company.
13. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant and the shares of Common Stock underlying this Warrant
shall be construed and enforced in accordance
-8-
with and governed by the laws of the State of Delaware. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
[REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK.]
-9-
Dated: August 21, 1997 DYNAGEN, INC.
ATTEST:
By: /s/ Dennis R. Bilodeau By: /s/ Dhananjay G. Wadekar
---------------------------- ---------------------------------
Title: Controller Title: Executive Vice President
------------------------- ------------------------------
FORM OF SUBSCRIPTION
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO DynaGen, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, ........ shares
of Common Stock of DynaGen, Inc., a Delaware corporation, and herewith makes
payment of $........ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to .............., whose address
is ................................
Dated:
(Signature must conform to
name of holder as specified
on the face of the Warrant)
(Address)
--------------------
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and
transfers unto .................. the right represented by the within Warrant to
purchase ............. shares of Common Stock of DynaGen, Inc., a Delaware
corporation, to which the within Warrant relates, and appoints
.......................... Attorney to transfer such right on the books of
DynaGen, Inc., a Delaware corporation, with full power of substitution in the
premises.
Dated:
(Signature must conform to
name of holder as specified
on the face of the Warrant)
(Address)
Signed in the presence of:
Exhibit 4g
50JMH2661/1. #435254
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS
SECURITY MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITY UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, UNLESS THE COMPANY HAS RECEIVED
THE WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE,
ASSIGNMENT OR TRANSFER DOES NOT INVOLVE A TRANSACTION REQUIRING REGISTRATION OF
SUCH SECURITY UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.
WARRANT NO. : W-CS- 31 RIGHT TO PURCHASE 1,000,000
SHARES OF COMMON STOCK OF
AUGUST 28, 1997 DYNAGEN, INC.
VOID UNLESS EXERCISED BEFORE 5:00 P.M., EASTERN DAYLIGHT SAVING
TIME ON JULY 31, 2004.
DYNAGEN, INC.
COMMON STOCK PURCHASE WARRANT
DYNAGEN, INC., a Delaware corporation (the "COMPANY"), hereby certifies
that, H. J. MEYERS, INC. is entitled, subject to the terms set forth below, to
purchase from the Company, at any time or from time to time before 5:00 p.m.,
Eastern Daylight Saving Time, on or before July 31, 2004, 1,000,000 fully paid
and non-assessable shares of Common Stock, $.01 par value, of the Company, at an
exercise price per share equal to $0.15. Such exercise price per share as
adjusted from time to time as herein provided is referred to herein as the
"EXERCISE PRICE". The number and character of such shares of Common Stock and
the Exercise Price are subject to adjustment as provided herein. THIS WARRANT IS
EXERCISABLE IN INSTALLMENTS, SUBJECT TO THE SATISFACTION OF CERTAIN CONDITIONS
AS SET FORTH IN SECTION 1.3 BELOW. NO PORTION OF THIS WARRANT MAY BE EXERCISED
UNLESS SUCH CONDITIONS HAVE BEEN SATISFIED WITH RESPECT TO THE CONDITIONS
REGARDING EXERCISABILITY.
THIS WARRANT IS EXERCISABLE FOR 700,000 OF THE 1,000,000 SHARES OF
COMMON STOCK SUBJECT TO THIS WARRANT FOR SERVICES PREVIOUSLY RENDERED BY THE
HOLDER OF THIS WARRANT.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "COMPANY" shall include DynaGen, Inc., a Delaware
corporation, and any corporation which shall succeed or assume the obligations
of the Company hereunder.
-2-
(b) The term "COMMON STOCK" includes (a) the Company's Common Stock,
$.01 par value per share, as authorized, (b) any other capital stock of any
class or classes (however designated) of the Company, authorized on or after
such date, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been suspended by
the happening of such a contingency), (c) any other securities into which or for
which any of the securities described in (a) or (b) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise, or the conversion of promissory notes or other
obligations of the Company.
(c) The term "OTHER SECURITIES" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of this Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Sections 3 or 4 or otherwise.
1. EXERCISE OF WARRANT.
1.1. FULL EXERCISE. This Warrant may be exercised in full by
the holder hereof by surrender of this Warrant, with the form of subscription at
the end hereof duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company, in the amount obtained by multiplying the
number of shares of Common Stock for which this Warrant is then exercisable by
the Exercise Price then in effect.
1.2. PARTIAL EXERCISE. This Warrant may be exercised in part
by surrender of this Warrant in the manner and at the place provided in Section
1.1 except that the amount payable by the holder on such partial exercise shall
be the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription at the end hereof by (b) the
Exercise Price then in effect. On any such partial exercise the Company at its
expense will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant or Warrants of like tenor, in the name of the holder hereof
or as such holder (upon payment by such holder of any applicable transfer taxes)
may request, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock for which such Warrant or Warrants may still be
exercised.
1.3 CONDITIONS REGARDING EXERCISABILITY. Portions of this
Warrant are exercisable only upon the satisfaction of certain conditions, and
unless such conditions are satisfied, only that portion of this Warrant for
which the conditions have been previously satisfied may be exercised at any
time. THE EXACT NUMBER OF SHARES OF COMMON STOCK FOR WHICH THIS WARRANT MAY BE
EXERCISED AT ANY TIME SHALL BE DETERMINED BY THE BOARD OF DIRECTORS OF THE
COMPANY AND SET FORTH IN A NOTICE FROM THE COMPANY TO H.J. MEYERS, INC. THE
NUMBER OF SHARES FOR WHICH THIS WARRANT EXERCISABLE AT ANY TIME IS SUBJECT TO
THE SATISFACTORY PERFORMANCE OF
-3-
SERVICES PURSUANT TO A CERTAIN INVESTMENT BANKING AGREEMENT BETWEEN THE COMPANY
AND H.J. MEYERS, INC. NO PORTION OF THIS WARRANT MAY BE EXERCISED ABSENT THE
AFORESAID NOTICE FROM THE COMPANY, SIGNED BY AN AUTHORIZED OFFICER OF THE
COMPANY.
THIS WARRANT IS EXERCISABLE FOR 700,000 OF THE 1,000,000
SHARES OF COMMON STOCK SUBJECT TO THIS WARRANT FOR SERVICES PREVIOUSLY RENDERED
BY THE HOLDER OF THIS WARRANT.
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
thirty (30) days thereafter, the Company at its expense (including the payment
by it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and non-assessable shares of Common Stock (or Other
Securities) to which such holder shall be entitled on such exercise, plus, in
lieu of any fractional share to which such holder would otherwise be entitled,
cash equal to such fraction multiplied by the then current market value of one
full share.
3. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION OR MERGER.
3.1. REORGANIZATION, CONSOLIDATION OR MERGER. In case at any
time or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or entity, or (c) transfer all
or substantially all of its capital stock, properties or assets to any other
person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, upon the proper and rightful
exercise of this Warrant, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 4 and 5. The holder of this Warrant must exercise this
Warrant prior to the consummation of any of the foregoing events in order to
obtain the benefits of this Section.
3.2. CONTINUATION OF TERMS. Upon any corporate event referred
to in this Section 3, this Warrant shall continue in full force and effect and
the terms hereof shall be applicable to the shares of stock and Other Securities
and property receivable on the exercise of this Warrant after the consummation
of such reorganization, consolidation or merger, as the case may be, and shall
be binding upon the issuer of any such stock or other securities.
4. ADJUSTMENTS FOR STOCK DIVIDENDS AND STOCK SPLITS. In the event that
the Company shall (i) issue additional shares of the Common Stock as a dividend
or other distribution on outstanding Common Stock, (ii) subdivide its
outstanding shares of Common Stock, or (iii) combine its outstanding shares of
the Common Stock into a smaller number of shares of the
-4-
Common Stock, then, in each such event, the Exercise Price shall, simultaneously
with the happening of such event, be adjusted by multiplying the then prevailing
Exercise Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event (calculated
assuming the conversion or exchange of all outstanding shares of convertible or
exchangeable securities of the Company which are convertible or exchangeable
into, or exercisable for, shares of Common Stock) and the denominator of which
shall be the number of shares of Common Stock outstanding immediately after such
event (calculated assuming the conversion or exchange of all outstanding shares
of convertible or exchangeable securities of the Company which are convertible
or exchangeable into, or exercisable for, shares of Common Stock), and the
product so obtained shall thereafter be the Exercise Price then in effect. The
Exercise Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The holder of this Warrant shall thereafter, on the exercise hereof as provided
in Section 1, be entitled to receive that number of shares of Common Stock
determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this Section 4) be issuable on such
exercise, by a fraction of which (i) the numerator is the Exercise Price which
would otherwise (but for the provisions of this Section 4) be in effect, and
(ii) the denominator is the Exercise Price in effect on the date of such
exercise.
5. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY AND
RECLASSIFICATIONS. In case at any time or from time to time, the holders of
Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of stockholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which, in the case
of Common Stock, are provided for in Section 4), then and in each such case the
holder of this Warrant, on the exercise hereof as provided in Section 1, shall
be entitled to receive the amount of other or additional stock and other
securities and property (including cash in the cases referred to in subdivision
(b) of this Section 5) which such holder would hold on the date of such exercise
if on the date of distribution of such other or additional stock or other
securities and property, or on the record date fixed for determining the
shareholders entitled to receive such other or additional stock or other
securities and property, such holder had been the holder of record of the number
of shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the date thereof to and including the date of
such exercise, retained such shares and all such other or additional stock and
other securities and property (including cash in the cases referred to in
subdivision (b) of this Section 5) receivable by such holder as aforesaid during
such period, giving effect to all adjustments called for during such period by
Sections 3 and 4.
-5-
6. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of the Warrant, all shares of Common Stock from time to time
issuable on the exercise of the Warrant; the shares of Common Stock which the
holder of this Warrant shall receive upon exercise of the Warrant will be duly
authorized, validly issued, fully paid and non-assessable.
7. EXCHANGE OF WARRANT. On surrender for exchange of this Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
8. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. WARRANTHOLDER NOT DEEMED STOCKHOLDER; RESTRICTIONS ON TRANSFER. This
Warrant is issued upon the following terms, to all of which each holder or owner
hereof by the taking hereof consents and agrees:
(a) No holder of this Warrant shall, as such, be deemed the holder of
Common Stock that may at any time be issuable upon exercise of this
Warrant for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon such holder, as such, any of the rights of a
stockholder of the Company until such holder shall have delivered formal
notice to the Company of an intention to exercise this Warrant, tendered
promptly the consideration required for exercise (whether cash or
securities), exercised the Warrant, and been issued shares of Common Stock
in accordance with the provisions hereof.
(b) Neither this Warrant nor any shares of Common Stock purchased
pursuant to this Warrant shall be registered under the Securities Act of
1933 (the "SECURITIES ACT") and applicable state securities laws.
Therefore, the Company may require, as a condition of allowing the
transfer or exchange of this Warrant or such shares, that the holder or
transferee of this Warrant or such shares, as the case may be, furnish to
the Company an opinion of counsel acceptable to the Company to the effect
that such transfer or exchange may be made without registration under the
Securities Act and applicable state securities laws. The certificates
evidencing the shares of Common Stock issued on the exercise of the
Warrant shall bear a legend to the effect that the shares evidenced by
such certificates have not been registered under the Securities Act and
applicable state securities laws.
-6-
(c) This Warrant is not transferable or assignable to any party without
the prior written consent of the Company, and accompanied by an opinion of
counsel satisfactory to the Company that such transfer is permissible
under applicable law.
10. NOTICES. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by (i) first class mail, postage
prepaid, (ii) electronic facsimile transmission, or (iii) express overnight
courier service, at such address as may have been furnished to the Company in
writing by such holder or, until any such holder furnishes to the Company an
address, then to, and at the address of, the last holder of this Warrant who has
so furnished an address to the Company.
11. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant and the shares of Common Stock underlying this Warrant
shall be construed and enforced in accordance with and governed by the laws of
the State of Delaware. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
12. REGISTRATION RIGHTS.
12.1 SHORT-FORM REGISTRATIONS ON FORM S-3. At the request of
H.J. Meyers, Inc., the Company shall use its best efforts to file a registration
statement on Form S-3 (to the extent such form is available to the Company)
covering the resale of the Shares underlying this Warrant (the "REGISTRABLE
SHARES"). In addition, the Company shall, subject to the conditions listed
below, grant "piggy back" registration rights to include the Registrable Shares
in any registration statement filed by the Company solely for the account of the
Company under the Securities Act of 1933 as amended (the "Act") relating to an
underwriting of the sale of shares of Common Stock. These registration rights do
not apply to securities issued in connection with any acquisition of any entity
or business, shares issuable solely upon the exercise of stock options, or
pursuant to other employee benefit plans. In connection with any offering, the
holders of the Registrable Shares shall be subject to any limitation the
underwriter or the Company shall impose on the number of shares of such Common
Stock which may be included in any such registration statement. At its
discretion, the Company may also include the Registrable Shares in any
registration statement filed on behalf of selling security holders.
The Company shall not be required to effect more than two (2)
registrations on Form S-3. The Company's obligations under this Section shall
expire three (3) years after the issuance date of this Warrant. The Company
shall not be required to effect more than one demand registration during any
18-month period. Notwithstanding the foregoing, the Company shall have no
obligation to register the Registrable Shares under this Section if such
Registrable Shares are eligible for resale under Rule 144, as so opined by the
Company's outside legal counsel.
-7-
12.2 EXPENSES. In the case of a registration under Section
12.1, the Company shall bear the expenses of any filing of any registration,
including but not limited to printing legal and accounting expenses, Securities
and Exchange Commission and NASD filing fees and all related "Blue Sky" fees and
expenses. The Company shall have no obligation to pay or otherwise bear (i) the
cost and expenses of procuring underwriters' insurance in connection with the
sale of Registrable Shares, (ii) any portion of the fees or disbursements of
counsel for the selling holders of Registrable Shares or (iii) any portion of
the underwriters' commission or discounts attributable to the Registrable
Shares. The Company shall only be obligated to bear the expenses of one filing
for a registration initiated under Section 12.1.
12.3 EXPIRATION OF REGISTRATION RIGHTS. The obligations of the
Company under this Section 12 to register the securities shall expire and
terminate on the earlier of the expiration date of the warrant or at such time
as the holder of this Warrant shall be entitled or eligible to sell the shares
of Common Stock underlying this Warrant without restriction and without a need
for the filing of a registration statement under the Securities Act of 1933,
including without limitation, for any resales of restricted securities made
pursuant to Rule 144 as promulgated by the Securities and Exchange Commission.
12.4 DELAY OF REGISTRATION. For a period not to exceed 180
days, the Company shall not be obligated to prepare and file, or be prevented
from delaying or abandoning, a registration statement pursuant to this Section
at any time when the Company, in its good faith judgment by the management of
the Company, with the advice of counsel, reasonably believes: (I) that the
filing thereof at the time requested, or the offering of Registrable Shares
pursuant thereto, would materially and adversely affect (a) a pending or
scheduled public offering or private placement of the Company's securities, (b)
an acquisition, merger, consolidation or similar transaction by or of the
Company, (c) pre-existing and continuing negotiations, discussions or pending
proposals with respect to any of the foregoing transactions, or (d) the
financial condition of the Company in view of the disclosure of any pending or
threatened litigation, claim, assessment or governmental investigation which may
be required thereby; and (II) that the failure to disclose any material
information with respect to the foregoing would cause a violation of the
Securities Act or the Securities Exchange Act of 1934.
13. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
p.m., Eastern Daylight Saving Time, on July 31, 2004.
DATED: AUGUST 28, 1997 DYNAGEN, INC.
ATTEST:
By: /s/ Dennis R. Bilodeau By: /s/ Dhananjay G. Wadekar
---------------------------- ------------------------------
Title: Controller Title: Executive Vice President
------------------------- ---------------------------
FORM OF SUBSCRIPTION
(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)
TO DynaGen, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, ........ shares
of Common Stock of DynaGen, Inc., a Delaware corporation, and herewith makes
payment of $........ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to .............., whose address
is ................................
Dated:
(Signature must conform to
name of holder as specified
on the face of the Warrant)
(Address)
--------------------
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)
For value received, the undersigned hereby sells, assigns, and
transfers unto .................. the right represented by the within Warrant to
purchase ............. shares of Common Stock of DynaGen, Inc., a Delaware
corporation, to which the within Warrant relates, and appoints
.......................... Attorney to transfer such right on the books of
DynaGen, Inc., a Delaware corporation, with full power of substitution in the
premises.
Dated:
(Signature must conform to
name of holder as specified
on the face of the Warrant)
(Address)
Signed in the presence of:
Exhibit 10a
INDENTURE OF LEASE
BY AND BETWEEN
RIVERTECH ASSOCIATES LLC
("LESSOR")
AND
DYNAGEN, INC.
("LESSEE")
- --------------------------------------------------------------------------------
RIVERSIDE TECHNOLOGY CENTER
840 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS
- --------------------------------------------------------------------------------
Lease Dated July 1, 1997
RIVERSIDE TECHNOLOGY CENTER
COMMERCIAL LEASE
BETWEEN
RIVERTECH ASSOCIATES, LLC
AND
DYNAGEN, INC.
Agreement entered into this 1st day of July, 1997 in consideration of
the covenants and other benefits herein contained, the receipt and sufficiency
of said consideration being hereby acknowledged.
Rivertech Associates LLC, a Massachusetts limited liability company,
c/o The Abbey Group 575 Boylston Street Boston, MA 02116 (herein "LESSOR"), does
hereby lease to DynaGen, Inc., a Delaware corporation having its principal place
of business at 99 Erie Street Cambridge, Massachusetts 02139, (herein "Lessee"),
and LESSEE does hereby lease from said LESSOR, certain space located at 840
Memorial Drive, Cambridge, Massachusetts (herein "Building"), being that portion
of the forth floor of the Building shown on Exhibit A attached hereto (herein,
"Lease Plan') consisting of approximately 12,262 rentable square feet as
appearing on said Lease Plan, (the "Leased or Premises" or "Premises"); with the
right in common with others in the Building to use (a) the parking areas on the
parcel of land on which the Building is located or otherwise serving the
Building (as said parking areas are expressly contemplated herein); (b) the
driveways and walkways necessary for access to the Building or such parking
areas; (c ) the entrances, lobbies, stairs, passenger elevators and corridors
necessary for access to the Premises; (d) the loading docks and freight
elevators in the Building or such parking areas; (c) Premises; (d) the loading
docks and freight elevators in the Building, subject to LESSOR's reasonable
rules and regulations promulgated according to section 24 of this Lease; (e) the
lavatories on the fourth floor of the Building; (f) the heating, ventilation,
air conditioning, plumbing, electrical, emergency and other mechanical systems
and equipment serving the Premises in common with other portions of the Building
(as more specifically set forth herein); and (g) such other common areas and
facilities as LESSOR may designate from time to time (collectively, the "Common
Areas").
1. TERM. LESSEE leases the Leased Premises for an original Term of five
(5) years (herein, "Lease Term"). The Term of the Lease shall begin on the
Commencement Date (as hereinafter defined), and shall end on the last day of the
calendar month which is sixty (60) full calendar months therefrom (the
"Termination Date").
The first full twelve (12) month period following the Commencement Date
(or, if the Commencement Date occurs on a date other than the first day of a
calendar month, the first day of the first calendar month after the Commencement
Date occurs) and each subsequent twelve month period during the Lease Term shall
be called "Lease Years". To
-2-
the extent the Commencement Date occurs on any date other than the first of any
month, the first Lease Year shall be enlarged to include the period between the
Commencement Date and the beginning of the first full month of the Lease Term.
The Commencement Date shall be that date upon which the LESSOR delivers
the Office Space (as hereinafter defined) to LESSEE, as evidenced by LESSOR's
tender of its Phase I Delivery Notice as contemplated by paragraph 33 hereof, in
broom clean condition, and free of all tenants and occupants, and with Phase I
substantially complete (as those terms are hereinafter defined).
For example, if the Commencement Date is September 15, 1997, the first
Lease year begins on October 1, 1997 and ends September 30, 1998; the second
Lease Year begins on October 1, 1998 and ends September 30, 1999; and so on up
to the Termination Date of September 30, 2002.
2. RENT. Beginning as of the Commencement Date, LESSEE shall pay to
LESSOR rent at an annual rate pursuant to the schedule below during each Lease
Year (or portion thereof as the case may be) of the Lease Term hereof, (herein,
"Annual Base Rent"). Annual Base Rent shall be payable, in advance, in equal
monthly installments, due on the first day of each calendar month, pursuant to
the schedule below.
Notwithstanding any other provision of this Lease, because Annual Base
Rent is to be paid on the basis of a "Lease Year" which is defined above as the
first consecutive twelve (12) months after the Commencement Date, and because
the Commencement Date may be a date other than the first day of a calendar
month, there shall be an incremental installment (or installments) of rent (the
"Interim Rent'), which is based on Annual Base Rent for the first Lease Year as
set forth in the schedule below and reflective of the delivery of the Demised
Premises in two phases; determined as follows:
The monthly installment of Interim Rent shall consist of Phase I Rent
and Phase II Rent. Rent due for each applicable month from the Commencement Date
(i.e. the "Phase I Delivery Date") until the Phase II Delivery Date shall be
$26,142.53 (the "Phase I Rent"); and accordingly, that monthly rate equals a per
diem rate of $871.42. The "Phase II Delivery Date" shall be that date upon which
the LESSOR delivers the balance of the Leased Premises other than the Office
Space, to LESSEE, as evidenced by LESSOR's tender of its Phase II Delivery
Notice as contemplated by paragraph 33 hereof, in broom clean condition, and
free of all tenants and occupants, and with Phase II substantially complete (as
those terms are hereinafter defined). LESSEE shall pay to LESSOR Phase I Rent
based on the above stated per diem rate, for each day between the Commencement
Date and the Phase II Delivery Date. (Payment shall be made in advance, by the
first of each calendar month, in the full amount of the Phase I Rent, (for each
month starting September 1, 1997 where the Phase II Delivery Date has not yet
occurred) with there to be an appropriate adjustment made by any portions of
that month where Interim Rent consists of Phase I Rent and Phase II Rent, said
adjustment to be added to or subtracted from the first installment of Annual
Base Rent due the next full calendar month,
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and promptly credited or paid as the case may be). Additionally, for the balance
of any calendar month in which the Phase II Delivery Date occurs, through the
end of said calendar month, LESSEE's payment of Interim Rent shall be based on
the full Annual Base Rent for the first Lease Year pursuant to the schedule
below, in a monthly amount of $34,231.42 (the "Phase II Rent"), and accordingly,
that monthly rate equals a per diem rate of $1,141.05. LESSEE shall pay to
LESSOR Phase II Rent based on the above stated per diem rate, for each day
between the Phase II Delivery Date through the last day of the calendar month.
The next payment then due shall be the first monthly installment of Annual Base
Rent on or before the first of the calendar month.
Any and all charges for Additional Operating Expense Rent and other
Additional Rent as hereinafter defined and due after the Commencement Date shall
also be prorated on a daily basis reflective of the space delivered.
All payments of Interim Rent (i.e. Phase I Rent and Phase II Rent) and
Annual Base Rent; and also Additional Operating Expense Rent, Additional Tax
Escalation Rent, and any and all other sums and may be due from LESSEE to LESSOR
under this Lease, all of which shall be deemed "Additional Rent'; (the foregoing
to be singularly as to any item or collectively referred to herein as "Rent")
shall be made to LESSOR's agent, the Abbey Corporation, 575 Boylston Street,
Boston, Massachusetts 02116 or to such other agent or at such other place as
LESSOR may designate in writing.
LESSEE shall pay interest from the date due, at an annual rate of
fifteen (15%) percent for any installments of Annual Base Rent, or Additional
Rent or other payments due from LESSEE to LESSOR which are not received by
LESSOR within ten days after written notice from LESSOR that Annual Base Rent,
or Additional Rent or other payments were not received
SCHEDULE OF ANNUAL BASE RENT
Lease Year Annual Base Rent Monthly Installment
Lease Year 1 $410,777.00 $34,231.42
Lease Year 2 $416,908.00 $34,742.33
Lease Year 3 $423,039.00 $35,253.25
Lease Year 4 $429,170.00 $35,764.17
Lease Year 5 $435,301.00 $36,275.08
3. ADDITIONAL RENT. (Operating Expenses). Commencing as of the
Commencement Date, LESSEE, in addition to the sums payable to LESSOR as Annual
Base Rent as determined in Section 2 hereof, shall pay to LESSOR for each
calendar year (or portion thereof, as applicable) of the Lease Term, as
additional rent, LESSEE's Allocable percentage (as hereinafter defined) of any
and all increases in operating expenses
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attributable to the Building for said year of the Lease Term (herein,
"Additional Operating Expense Rent').
The base from which the amount of any increases in operating expenses
shall be determined is the operating expense schedule compiled and calculated by
LESSOR, representing actual operating expenses for calendar year 1996, as set
forth as Exhibit B attached hereto and incorporated herein, which LESSOR
represents a complete and correct summary of said operating expense amounts.
LESSEE's payment shall be prorated if the Lease commences or is terminated
(without breach) during any fiscal year.
Solely for the purpose of calculating LESSEE's Allocable Percentage of
increases in operating expenses over those shown in Exhibit B hereto, operating
expense increases shall not include the following: The costs of LESSEE's
improvements performed by LESSOR (if any), or as they may be approved by LESSOR
in the future; all items and services for which LESSEE or any tenant
specifically and directly reimburses LESSOR, or pays third persons at LESSOR's
directions; income or franchise taxes of the LESSOR; the costs incurred in any
rehabilitation, reconstruction, or other work occasioned by any insured
casualty, or by the exercise of the right of eminent domain, except to the
extent of any so-called "deductible" amount under policies of insurance (not to
exceed $25,000.00) or any costs actually incurred for which any insurance
company does not reimburse or compensate LESSOR (unless LESSOR was required
under this Lease to maintain insurance covering such costs); and those other
items listed in Exhibit B-1 hereto Notwithstanding the foregoing, LESSOR
reserves the right to claim as against LESSEE as provided under this Lease, or
any other tenant or individual or entity for any and all costs and expenses
caused directly or occasioned by their willful misconduct or other negligent or
wrongful acts or omissions.
Operating expense escalation is ordinarily invoiced to LESSEE by LESSOR
in January of each calendar year. LESSEE shall not be responsible for payment of
any increase in operating expense escalations for calendar year 1997 greater
than five (5%) percent over said operating expenses for calendar year 1996. If
the Lease Term includes any partial calendar year, the Additional Operating
Expense Rent for such calendar year shall be prorated according to the fraction
of the total days in such calendar year that are included in the Lease Term.
LESSOR shall have the option to require LESSEE to pay the Additional Operating
Expense Rent in any Lease year in equal monthly installments on the first day of
each calendar month during the Lease Term; provided LESSOR first delivers to
LESSEE its statement of the monthly amount due for the LEASE Year in question
based on LESSOR's reasonable estimates. Within ninety (90) days after the end of
each calendar year included within the Lease Term, LESSOR shall deliver to
LESSEE a written statement of the actual operating expenses and the actual
Additional Operating Expense Rent for such year. If such statement indicates
that the actual Additional Operating Expense Rent for such calendar year
exceeded LESSEE's estimated payments on account of Additional Operating Expense
Rent for such calendar year, then LESSEE shall pay such excess to LESSOR within
thirty (30) days of its receipt of such statement from LESSOR. If such statement
indicates that LESSEE's estimated payments on account of
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Additional Operating Expense Rent for such calendar year exceeded the actual
Additional Operating Expense Rent for such calendar year, LESSOR shall credit
the excess against the next installment(s) of Additional Operating Expense Rent
due from LESSEE, or at the end of the Lease Term pay such excess to LESSEE when
delivering such statement to LESSEE.
LESSEE's Allocable Percentage for the purpose of this Lease is 9.73%;
provided however, for periods up to the Phase II Delivery Date, the Allocable
Percentage to be applied shall be 7.75%.
4. ADDITIONAL RENT (Tax Escalation). Commencing as of the Commencement
Date, LESSEE, in addition to the sums payable to LESSOR as Annual Base Rent as
determined in Section 2 hereof, and in addition to the sums payable to LESSOR as
determined in Section 3 hereof, shall also pay to LESSOR as additional rent,
LESSEE's Allocable Percentage of any increase in the real estate taxes levied
against the Building and the land on which it is situated, above such real
estate taxes for fiscal tax year 1997 whether such increase is caused by an
increase in the tax rate, an increase in assessed value, or a change in the
method of determining real estate taxes, ("Additional Tax Escalation Rent").
The base from which the amount of any increase in taxes shall be
determined from the rate and the assessment for fiscal tax year 1997, or, in the
event LESSOR seeks and its granted an abatement of taxes (administratively or by
appeal to the Appellate Tax Board and/or the courts) for FY 1997, the tax rate
and assessment as abated, whichever results in a lower base year amount. The
Additional Tax Escalation Rent shall be prorated if the Lease Term commences or
terminates (without breach) during any fiscal year, accordingly to the fraction
of the total days in such tax year that are included in the Lease Term.
Notwithstanding the foregoing, LESSOR shall be under no obligation to
file for any abatement of taxes for FY 1997 or any other fiscal year, and LESSEE
shall pay the entire amount of Additional Tax Escalation Rent for any fiscal tax
year as invoiced by LESSOR, receiving a rebate of such payments made by its
based on its Allocable Percentage of any abated real estate taxes only if an
abatement is sought and received by LESSOR for such fiscal tax year.
LESSEE shall make payment within thirty (30) days of written notice
from LESSOR that Additional Tax Escalation Rent sums are payable, which notice
shall be accompanied by a copy of the tax bill.
5. SECURITY DEPOSIT. Upon execution hereof, LESSEE shall post with
LESSOR in the manner described below (and maintain at all times during the Lease
Term and any Extended Term as hereinafter defined), a Security Deposit in the
amount of Two Hundred Thousand ($200,000.00) Dollars, which shall be held as
security for LESSEE's performance as herein provided, subject to reductions
described below, with the balance to be returned to LESSEE at the end of this
Lease Term (as may be extended); said
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reductions and return of any balance subject to LESSEE's satisfactory compliance
with the terms and conditions hereof. The Security Deposit shall be posted at
the option of the LESSEE from time to time (but not changed as to form more
frequently than each Lease Year) as follows:
(a) Two Hundred Thousand ($200,000.00) Dollars by certified or bank
check (the "Cash Deposit"); or
(b) Two Hundred Thousand ($200,000.00) Dollars by irrevocable stand-by
Letter of Credit, drawn on Fleet Bank or another commercial bank having branches
in Massachusetts, reasonably acceptable to LESSOR, (the "Letter of Credit"). If
Lessee elects to post a Letter of Credit, the Letter of Credit shall: (i) name
LESSOR as beneficiary; (ii) be for a term equal to the Lease Term (or any
extended term, as and when appropriate); (iii) be cancelable only with a minimum
30 days prior notice to LESSOR; and (iv) substantially in the form attached
hereto as Exhibit G and in all respects in form and substance reasonably
satisfactory to LESSOR, which at LESSEE's election may provide therein for
automatic direct reduction on the basis of the schedule set forth in subsection
(c) below.
If LESSOR so draws upon the Letter of Credit or if LESSEE elects to
post the Cash Deposit, LESSOR shall deposit the Cash Deposit in a separate
account for such deposits, with no administrative costs or expenses thereof
passed on to LESSEE, but interest thereon to inure to the benefit of LESSOR. If
LESSEE has elected to post the Cash Deposit or LESSOR is holding any portion of
the Security Deposit in a form other than a Letter of Credit, and if LESSEE
thereafter delivers to LESSOR a Letter of Credit in the amount and otherwise
then conforming to the requirements of this Section 5, LESSOR shall promptly pay
over to LESSEE the entire balance of the Cash Deposit or such portion of the
Security Deposit being held by LESSOR, absent any uncured default under the
Lease. If LESSEE has elected to post the Letter of Credit and thereafter
delivers to LESSOR the Cash Deposit, LESSOR shall promptly return the original
Letter of Credit to LESSEE. If LESSEE defaults in the payment or performance of
its obligations under this Lease, and such default continues after any
applicable notice and the expiration of any applicable grace period, LESSOR
shall have the right to draw upon and apply the Security Deposit to the extent
necessary to cure such default. Within ten (10) days after the expiration of the
Lease Term, as it may be extended, LESSOR shall give written notice to LESSEE of
any defaults by LESSEE in the payment or performance of its obligations under
this Lease. Within thirty (30) days after the expiration of the Lease Term, as
it may be extended, LESSOR shall return the Security Deposit to LESSEE, less
such amounts necessary to cure any then outstanding defaults claimed in the
notice to LESSEE. If LESSEE thereafter within a reasonable time under the
circumstances, cures said default, the Security Deposit shall be released to
LESSEE.
(c) Provided there is not then any material default by LESSEE in the
payment or performance of its obligations under this Lease which continues after
notice and the
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expiration of the applicable cure period, LESSEE at LESSEE's option may reduce
the Security Deposit according to the following schedule:
Amount of Reduction Balance
- ------------------- -------
End of Lease Year 1 $35,000.00 $165,000.00
End of Lease Year 2 $35,000.00 $130,000.00
End of Lease Year 3 $35,000.00 $ 95,000.00
End of Lease Year 4 $35,000.00 $ 60,000.00
End of Lease Year 5 N/A $ 60,000.00
6. USE OF PREMISES. LESSEE shall use the Lease Premises for general
office, research and laboratory space only, which uses LESSOR warrants and
represents are currently allowed under local zoning regulations (subject to
compliance with federal, state and municipal safety, healthy, building, and
sanitary codes and submission of confirming plans and specifications suitable
for issuance of a building permit from the City of Cambridge and an appropriate
occupancy permit upon completion of construction). LESSEE will use the Leased
Premises in a careful, and safe and proper manner and will not do or permit any
act or thing in the Leased Premises or do any act or thing in or affecting the
Common Areas which is contrary to any legal or insurance requirement referred to
in Section 17 hereof or which might impair the value of the Leased Premises or
the Building or any part thereof or which constitutes a risk to the safety,
health or well-being of other tenants in the Building or on the site, or creates
a public or private nuisance or waste.
7. UTILITIES. LESSOR shall provide at LESSOR's expense the building
standard facilities for heat, ventilation, and air conditioning for the Leased
Premises, and the common areas and facilities which LESSEE enjoys the right to
use, as required for comfortable occupancy, during 8 AM to 6 PM each weekday,
other than national or state holidays (herein "Normal Business Hours"). Any
change in such hours by LESSOR for the Building generally shall inure as well to
the benefit of the LESSEE. LESSOR shall provide electrical connections to the
Leased Premises for general office, research, and laboratory purposes, pursuant
to its build-out obligations set forth on Exhibit C hereto. If any operations or
activities in the Leased Premises use electricity in excess of amounts
customarily required for office purposes, LESSOR, in its discretion and at its
expense, may install submeters to measure such usage separately. Notwithstanding
any separate direct metering or general allocation, LESSEE shall pay all such
charges for electricity used on the Leased Premises as it may be separately
metered, or absent separate meters to the whole or part of the Leased Premises
(for whatever reason) based on tenant's Allocable Percentage of the total
electric bill, whichever or both as may be applicable, at the determination of
the LESSOR. LESSOR shall determine said electrical charges in a uniform and
non-discriminatory manner relative to other lessees in the Building similarly
situated; and LESSEE shall pay its proportional share of said charges relative
to all occupied space which is not billed to tenants on a separately metered
basis. All such charges shall be based on the rates at which LESSOR is charged
for electricity supplied to
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the Building by the utility company. LESSOR shall maintain an average
temperature in the Building between 60 degrees Fahrenheit and 80 degrees
Fahrenheit at all times and an average temperature in the Leased Premises
generally between 68 degrees Fahrenheit and 76 degrees Fahrenheit during Normal
Business Hours. LESSOR shall make available heat, ventilation, and
air-conditioning as may be requested by LESSEE for the Leased Premises during
hours other than Normal Business Hours ("Overtime HVAC"), and (subject to
increase by the same percentage amount by which the standard electric rates are
increased from time to time by the utility company), as billed by LESSOR and to
be paid by LESSEE within thirty (30) days of said invoice. LESSEE shall give
LESSOR 24 hours prior notice of any requirements for specialized overtime
heating and air conditioning. LESSOR shall not be liable to LESSEE for any
interruption, interference, damage or loss to LESSEE's business, research or
experimentation occasioned as a result of any failure or interruption in the
heating, ventilation, air conditioning, or electrical services or other
utilities servicing the Building or the Leased Premises; unless caused by the
willful misconduct or negligence of LESSOR; in which case all installments of
Annual Base Rent and Additional Rent shall be abated based on the amount of
space within the Leased premises which is not available to LESSEE for its
business activities, if the failure or interruption continues for more than
three (3) days after notice to LESSOR; and in which case LESSEE shall have a
right to terminate this Lease if said failure resulting from LESSOR's willful
misconduct or negligence continues for more than sixty (60) days after notice to
LESSOR). No plumbing or electrical work of any type shall be done without
LESSOR's approval which approval shall not be unreasonably withheld or delayed
and the appropriate municipal permit and inspector's approval. Hot and cold
water for domestic type sanitary purposes (only) shall be supplied by LESSOR at
LESSOR's expense. LESSOR shall also supply working connections for non-potable
laboratory water and water for other particularized uses in the Demised
Premises; usage to be separately metered and paid for by LESSEE; and all charges
for such separately metered water used by LESSEE to be based on the rate at
which water/sewer charges are billed to the Building by the City of Cambridge.
8. COMPLIANCE WITH LAWS. LESSEE acknowledges that no trade, occupation,
or activity shall be conducted in the Leased Premises or use made thereof which
will be unlawful, noisy or offensive, or contrary to any federal or state law or
administrative regulations, or any municipal ordinance or regulations in force
at any time in Cambridge. LESSEE shall keep all employees working in the Leased
Premises covered with Worker's Compensation Insurance, as applicable. LESSEE
shall be responsible for complying with the Occupational Safety and Health Act
of 1970 and any amendments thereto, in connection with LESSEE's use of the
Leased Premises. LESSEE shall strictly adhere to any and all federal, state, and
municipal laws, ordinances, and regulations governing LESSEE's laboratory
scientific experimentation. LESSEE shall be solely responsible for procuring and
complying at all times with any and all necessary permits directly relating or
incident to: the conduct of its office and research activities on the Premises;
its scientific experimentation; and LESSEE's transportation, storage, handling,
use and disposal of any low level radioactive or bacteriological or pathological
substances or organisms or other hazardous wastes or environmentally dangerous
substances or
-9-
materials to, from or at the Leased Premises. LESSEE shall immediately give
notice to LESSOR of any warnings or violations relative to the above received
from any federal, state, or municipal agency or by any court of law, and shall
immediately begin and diligently proceed to cure the conditions causing any such
violations; and LESSOR shall permit LESSEE to cure said harm or hazard prior to
any active intervention by LESSOR (except where such intervention is
necessitated by the emergency nature or the harm or hazard; or where the harm or
hazard impairs the value of the Building, (directly or as collateral on any
debt); interferes with any other tenant's rights; or is required by any
governmental agency or authority.
LESSEE shall fully indemnify and hold harmless in al respects LESSOR
from any and all claims, demands, losses, liabilities, and damages (including
all necessary and reasonable expenses for contractors, consultants,
environmental engineers, attorneys, and other professionals utilized by LESSOR
to evaluate and remediate any hazard or harm which LESSEE has failed to cure
after written notice from LESSOR; and further including any and all fines or
fees assessed by any governmental agency relative to any hazard or harm to the
extent directly arising from the conduct of LESSEE's research on the Leased
Premises (especially relating to research involving hazardous substances),)
resulting from LESSEE's obligations and responsibilities with respect to
compliance with environmental laws and regulations and LESSEE'S obligations to
cure, as set forth above and herein, except for any claims, demands, losses,
liabilities and damages resulting from the acts or negligence of LESSOR or its
agents or employees or independent contractors.
LESSOR hereby represents and warrants to LESSEE that the Building and
its heating, ventilation, air conditioning, plumbing, electrical, life safety
and other mechanical systems and equipment comply with all applicable federal
state and municipal laws, ordinances, and regulations. LESSOR shall maintain the
Building and such systems and equipment in compliance with all such laws,
ordinances and regulations, except to the extent governing the use of areas or
premises controlled by LESSEE or any other tenants in the Building.
LESSOR hereby represents and warrants to LESSEE that the Leased
Premises and the building of which they are a part, (inclusive of the Common
Areas) are, to the best of LESSOR's knowledge, in compliance with all applicable
building, sanitary and zoning laws, ordinances and regulations, (including
current applicable provisions of the Americans with Disabilities Act); and
LESSOR has not been cited with any current and outstanding violations thereof.
Additionally, LESSOR hereby represents and warrants relative to the Leased
Premises and the building of which they are a part, (inclusive of Common Areas)
that it has received no remediation notices pertaining to, nor are there any
outstanding violations to the best of its knowledge of, the provisions of G.L.
c.21E or the Massachusetts Contingency Plan; or any other environmental
remediation statutes or regulations.
9. FIRE AND OTHER INSURANCE. LESSEE shall not permit any use of the
Leased Premises which will make voidable, increase any premium, or decrease any
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insurance on the Building and property of which the Leased Premises are a part,
or on the contents of said Building, or which shall be contrary to any law,
regulation, or order from time to time established or issued by the local Fire
Department, or any similar body, or any restriction contained in any of LESSOR'S
insurance policies as to the Building and property; provided however, LESSOR
represents and warrants that LESSOR's insurance policies shall not contain any
restrictions or LESSEE's use of the Premises for office, research and laboratory
purposes and such use, per se,, shall not render such insurance voidable,
increase any premium, or decrease any of LESSOR's coverages. LESSEE shall, on
demand, reimburse LESSOR all extra insurance premiums caused by LESSEE's use of
the Leased Premises other than for the office, research and laboratory purposes
contemplated herein. LESSEE shall not vacate the Leased Premises or permit same
to be unoccupied for more than thirty (30) days other than during LESSEE's
customary non-business days or hours.
10. MAINTENANCE OBLIGATIONS. LESSOR shall perform all normal
maintenance, repairs and replacements necessary to keep in good condition and
working order (a) the roof, foundation, structural columns and other structural
elements of the Building, (b) the heating, ventilation, air conditioning,
plumbing, electrical, life safety and other mechanical systems and equipment
servicing the Building or the Common Areas, (c) the parking areas, (d) the
driveways and walkways necessary for access to the Building and parking areas,
(e) the entrances, lobbies, stairs, passenger elevators and corridors necessary
for access to the Leased Premises, (f) the loading docks and freight elevators
in the Building, (g) the lavatories on the fourth floor, and (h) the Common
Areas, generally. Notwithstanding the foregoing, any damage caused to the
building or any of the aforesaid components caused by the careless, malicious,
willful, or negligent acts of LESSEE; and chemical, water or corrosion damage on
or emanating from the Leased Premises from any source within the control of
LESSEE; shall be repaired by LESSOR and specifically and separately assessed as
against LESSEE. LESSEE agrees to maintain at its expense all other elements and
components to the Leased Premises in the same condition as they are at the
commencement of the Term or as they may be put in during the Term of this lease,
normal wear and tear and damage by fire or casualty or eminent domain only
excepted, and whenever necessary, to replace light bulbs (after the first six
months of the term), plate glass and other glass therein, acknowledging by
acceptance of the delivered Leased Premises as of the Phase I Delivery Date and
Phase II Delivery Date that the Leased Premises upon delivery are in good order
(except for punchlist items, which are to be completed by LESSOR as contemplated
in paragraph 33 hereof), and the light bulbs and glass whole. LESSEE will
properly control or vent all solvents, degreasers, and the like and shall not
cause the area surrounding the Leased Premises to be in anything other than a
neat and clean condition, depositing all waste in appropriate receptacles.
LESSEE shall not permit the Leased Premises to be overloaded, damaged, stripped
or defaced, suffer any waste of the Leased Premises. Any maintenance which is
the responsibility of LESSOR and which is necessitated by some specific aspect
of LESSEE's negligent or reckless use of the Leased Premises shall be at
LESSEE's expense, except to the extent LESSOR receives reimbursement for any
such costs or expenses from an insurer. All maintenance provided by LESSOR shall
be performed as reasonably required at
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LESSOR's reasonable discretion and except for emergencies, during LESSOR's
normal business hours. LESSEE may not keep any animals on the Leased Premises
without prior written notice to the approval from LESSOR in each instance, which
approval may be denied or conditioned in LESSOR's reasonable discretion. LESSEE
shall be solely responsible for maintenance and operation of any and all of its
systems installed by or for the LESSEE or servicing the Leased Premises
exclusively, and shall waive any and all claims against LESSOR for any damage,
impairment, or loss relative to these systems unless caused by the negligence or
willful misconduct of LESSOR, its agents, employees and independent contractors.
Specifically, LESSEE shall maintain, at its sole expense, and pay all charges
for electrical service (according to section 7 of this Lease) and use of, the
following: (a) LESSEE's customized "cold room" or "warm room" (if any) and all
equipment associated with its operation, and (b) additional HVAC system (to the
extent of the customization of the LESSOR's building standard HVAC system; (c)
backflow preventers (other than the Building's standard equipment incorporated
in the Building's general plumbing and life safety systems); (d) acid
neutralization chip tanks; and (e) any other specialized equipment or mechanical
systems serving the Leased Premises exclusively.
11. ALTERATIONS. LESSEE shall not make structural alterations or
additions of any kind to the Leased Premises, but may make nonstructural
alterations provided LESSOR consents thereto in writing, said consent not to be
unreasonably withheld or delayed. Notwithstanding the foregoing, LESSOR's
consent shall not be required for any non-structural alterations or additions to
the Leased Premises which (a) do not affect the structural elements of the
Building, or the Building's heating, ventilation, or air conditioning, plumbing,
mechanical, electrical, elevator, life safety or other common systems or Common
Areas of the Building, and (b) do not cost more than $10,000.00 in any single
instance. Plans and specifications shall be submitted by LESSEE to LESSOR in
each instance where consent is required, in advance of any proposed work, in
sufficient detail and scope to enable LESSOR to make a reasonable determination
thereon. All such allowed alterations shall be at LESSEE's expense and shall be
in quality at least equal to the present construction. If LESSOR performs any
services for LESSEE in connection with such alterations or otherwise, any
invoice therefore will be promptly paid. LESSEE shall not permit any mechanics
liens, or similar liens, to remain upon the Leased Premises in connection with
work of any character performed or claimed to have been performed at the
direction of LESSEE and shall cause any such lien to be released, removed or
bonded without cost to LESSOR, within twenty (20) days after completion of the
work giving rise to such lien. LESSEE shall not permit any changes for labor or
materials secured by any such liens to remain unpaid for more than thirty (30)
days after receiving notice of such charges unless LESSEE protects LESSOR from
any such liens by bond or other assurances reasonably satisfactory to LESSOR.
Any alterations completed by LESSEE, including, without limitation, window
blinds or other window treatment, shall be building standard unless LESSOR
expressly agrees otherwise, which agreement shall not be unreasonably withheld
or delayed. LESSOR shall have the right at any time to change the arrangement of
parking areas, stairs, walkways or other common areas of the
-12-
Building of which the Leased Premises are a part, provided such changes do not
interfere with LESSEE's use or access to such areas and facilities.
Notwithstanding the foregoing, prior to the commencement of the Term
hereof, and pursuant to Section 33, LESSOR shall, at its sole cost and expense,
deliver the Leased Premises "as is" but nevertheless such that they conform to
LESSOR'S standard Building specifications, except that LESSOR specifically
agrees that prior to its delivery of the Premises to the LESSEE, LESSOR shall at
its sole cost and expense: Repaint the Premises; repair/replace carpeting as and
where necessary based on extraordinary current wear; and prepare LESSOR's basic
and standard infrastructure for LESSEE's laboratory space, and otherwise to
construct and install the alterations contained within LESSOR's Work as set
forth more specifically in section 33 of this Lease. The space delivered to
LESSEE shall be as set forth on the space plan and specifications attached
hereto as Exhibit C. All laboratory equipment, (not specifically included in
LESSOR's Work as contemplated by paragraph 33 hereof), including but not limited
to hoods, vacuum pumps and RODI water system(s) shall be provided and installed
at LESSEE's sole cost and expense.
12. ASSIGNMENT, SUBLETTING. LESSEE covenants and agrees that neither
this Lease, nor the estate hereby granted, nor any interest therein will be
assigned, mortgaged, pledged, encumbered or otherwise transferred, and that
neither the Leased Premises, nor any part thereof, will be encumbered in any
manner by reason or by act or omission (where LESSEE has a legal duty to act) of
LESSEE, or used or occupied, or permitted to be used or occupied, by anyone
other than LESSEE, its servants, agents and employees, or for any use or purpose
other than as above stated, or be sublet, without in each case LESSOR's prior
written consent, which shall not be unreasonably withheld. Notwithstanding the
foregoing, LESSEE shall have the right, without the prior consent of the LESSOR,
to assign this Lease and to sublet any portion of the Leased Premises to any
person or entity (a) controlling, controlled by, or under common control with
LESSEE, (b) acquiring all or substantially all of the assets of the LESSEE, or
(c) with or into which LESSEE merges or consolidates; provided in each instance
the LESSEE shall remain at all times directly, primarily and severally liable
for the performance of all terms and conditions of this Lease, in conjunction
with any other such entity.
The grounds upon which LESSOR may reasonably withhold its consent are
as follows:
(i) The prospective assignee's or sublessee's intended use of the
Premises is not identical to the permitted uses set forth in the Lease; or,
(ii) The nature, character, class and standards of the prospective
assignee's or sublessee's business will not be consistent with those of other
lessees in the Building or will not conform to the mix of other lessees in the
Building at that time; or,
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(iii) The financial net worth, and reliability of the prospective
assignee or sublessee, including any additional written and direct personal or
corporate guarantees, is not in Landlord's reasonable judgment at least
equivalent to that of DynaGen, Inc. as measured at the point of execution of
this Lease; (provided however that if the proposed assignment or sublet occurs
during the Extended Term (i.e. after the original five (5) years), then the
financial net worth of the prospective assignee or sublessee shall be equivalent
to that of DynaGen, Inc. as measured at the point of execution of this Lease,
but said net worth standard to be adjusted by increasing by the cumulative
increases in the Consumer Price Index, All Items, All Urban, occurring from the
date of this Lease to the date of the proposed assignment or subletting). The
prospective assignee or sub-lessee must produce to LESSOR if available, a
verified and current audited financial statement prepared within the then past
three years, (or if non has been prepared by said prospective assignee within
the then past three years, a CPA certified current financial statement); and
such other reasonable documentation as is material in making such a
determination; or,
(iv) The operations of the prospective assignee or sub-lessee will
violate any exclusive or other rights given any other lessees in the Building;
or,
(v) The failure of LESSOR's mortgage lender(s) to consent.
LESSOR, in addition to Annual Base Rent and Additional Rent, shall be
entitled to the full amount of any and all sums assessed or collected by LESSEE
in whatever form, attributable to the assignment or sublease or other transfer
of LESSEE's interest in this Lease or the Leased Premises (except for a sublease
under clause (ii) below), which exceed said Annual Base Rent or Additional Rent
hereunder, (therein, "Rent Mark-Up"), after deduction of LESSEE's reasonable
costs and expenses to procure said assignment or sublet, including brokers' fees
and commissions, attorneys' fees, and any build-out costs (approved by Landlord
in advance, said approval not to be unreasonably withheld or delayed), which
costs and expenses shall in no event be deducted from any payments to LESSOR due
in the form of Annual Base Rent, Additional Operating Expense Rent, Additional
Tax Escalation Rent, or other sums payable to LESSOR under this Lease other than
the aforesaid excess amount on assignment or subletting.
Notwithstanding any LESSOR's consent to any assignment or subletting,
as contemplated above, or in any circumstances other than a LESSOR's recapture
of the entire premises as contemplated below, LESSEE shall remain primarily
liable to LESSOR for the payment of all Annual Base Rent and all other Rent
hereunder, and for the full performance of the covenants and conditions of this
Lease to be performed by LESSEE; and after a default by LESSEE in such payment
or performance which continues after any applicable notice and cure period,
LESSOR may collect all sums due as Annual Base Rent or other Rent directly from
the assignee or subtenant.
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Notwithstanding the foregoing, in the event that LESSEE desires to
sublet any portion of the Leased Premises, then the following shall apply:
(i) if the proposed sublet is on the basis where a demising wall is to
be erected by LESSEE or the subtenant, separating their spaces in whole or in
part, pursuant to an agreement with a bona fide third party subtenant, at any
time during the sublet, then LESSOR shall be granted its Recapture Rights as set
forth below as the portion of the Leased Premises to be so sublet; or,
(ii) if the proposed sublet is on the basis where there will be no
demising wall erected, separating their spaces in whole or in part, and the
subtenant is reasonably expected to utilize up to (but not more than) fifty
(50%) percent of the facilities comprising the Leased Premises, then LESSOR's
Recapture Rights shall not apply; or,
(iii) if the proposed sublet is on the basis where there will be no
demising wall erected, separating their spaces in whole or in part, and the
subtenant is reasonably expected to utilize more than fifty (50%) percent of the
facilities comprising the Leased Premises, then LESSOR's Recapture rights shall
apply as to the entire Leased Premises.
In all instances set forth above where reference is made to LESSOR's
Recapture Rights, those rights shall consist of the following: LESSEE, in each
instance where Landlord's Recapture Rights apply, shall notify the LESSOR in
writing, stating its intention to sublet and the target date of the proposed
sublet (which shall not be less than one hundred twenty (120) days from the date
of said notice to LESSOR). LESSOR shall have a period of ninety (90) days from
the date it receives such notice to exercise an election to recapture that
portion of the Leased Premises to be sublet, in LESSOR's sole discretion and
without any obligation to so elect, whatsoever, notwithstanding the
circumstances, and without prejudice to or waiver of any of LESSOR's rights or
LESSEE's continuing obligations hereunder. LESSEE shall provide LESSOR with all
material information relative to LESSOR making an informed decision concerning
said sublet, immediately upon LESSOR's request. If LESSOR elects to recapture
the Leased Premises (or applicable portion thereof), it shall send written
notice thereof to LESSEE; and LESSEE shall be irrevocably bound to surrender and
vacate the Leased Premises (or applicable portion thereof) as if the Lease Term
had expired on the date set forth in the LESSEE's initial notice to LESSOR; and
provided LESSEE vacates and surrenders on said date, without being in default of
any provision hereof as of said date, this Lease shall be null and void and
without recourse to either party hereto (but for terms and conditions
contemplated herein to survive termination of this Lease). LESSEE shall not be
entitled to any payments, commissions, credits, offsets, or any kind or nature
arising from said sublet, nor shall any individual or entity acting by, through,
or under LESSEE be so entitled. Once an election to recapture is made by LESSOR,
LESSEE shall be subject to the penalties for holding over set forth in this
Lease, if it fails to vacate and surrender the Leased Premises (or applicable
portion thereof) by the date stated in the notice, or if it fails to discharge
(or cause its lenders or others with which LESSEE has dealt to discharge) any
and all liens or other encumbrances, notices, or restrictions on its leasehold
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or contractual interest in and to the Leased Premises as of said date. Nothing
in this section or paragraph shall require LESSOR to make an election to
recapture the Leased Premises (or applicable portion thereof), and nothing in
the aforesaid process shall relieve LESSEE of its inability under this Lease
should LESSOR elect not to take back the Leased Premises (or applicable portion
thereof). Notwithstanding the foregoing, LESSEE shall have ten (10) days from
LESSOR's notice of its election to recapture, to withdraw its proposal to sublet
in writing delivered to LESSOR, whereupon the LESSOR's election shall be deemed
rescinded and LESSEE shall remain in the Leased Premises, without sublet. LESSEE
may only exercise this withdrawal right a maximum of once within each Lease
Year. Should LESSOR elect not to recapture the Leased Premises, then LESSEE
shall have a period of one hundred twenty (120) days from the date of LESSOR's
notice of such election (or if LESSOR delivers no notice of any election, then
one hundred twenty (120) days from the expiration of LESSOR's ninety (90) day
response period) to execute its sublease agreement and commence the subtenancy,
without the necessity for any additional notices to LESSOR under this section.
New notice by LESSEE to LESSOR shall be required after expiration of said
one-hundred twenty (120) day period. Time is of the essence in all notices and
elections made hereunder.
13. SUBORDINATION. This Lease shall be subject and subordinate to any
and all instruments of record, mortgages, and other instruments in the nature of
a mortgage, extant or coming into existence at any time hereafter, and LESSEE
shall, when requested, promptly within fifteen (15) days of request, execute and
deliver such written instruments (on LESSOR's lender's form) as shall be
necessary to show the subordination of this Lease to said instruments of record,
mortgages, or other such instruments in the nature of a mortgage. LESSOR, prior
to the Phase I Delivery Date and within 21 days of any refinancing or additional
financing of the building and/or property, shall provide LESSEE with a
Non-Disturbance, Attornment and Subordination Agreement, recognizing the rights
of LESSEE under this Lease. LESSEE acknowledges that an agreement substantially
in the form attached hereto as Exhibit G, shall satisfy the foregoing
requirements.
14. LESSOR'S ACCESS. LESSOR or agents of LESSOR may at reasonable times
and upon advance reasonable notice (except in emergency situations) enter to
view the Leased Premises and may remove any signs not approved and affixed as
herein provided, and may make repairs and alterations as LESSOR should elect to
do and repairs which LESSEE is required but has failed to do (but only after
notice and an opportunity to repair being provided to LESSEE within the
applicable cure period under this Lease), and may show the Leased Premises to
prospective mortgagees, appraisers, brokers, prospective purchasers, and within
twelve months of the expiration of the Term or on any default other prospective
tenants. Additionally, to the extent necessary to service other portions the
Premises or the Common Areas or other tenant spaces in the Building; LESSOR may
add, relocate, or maintain a chase, pipes, conduits, or ducts, within the
Premises provided the aforesaid do not materially interfere with LESSEE's use of
the Premises or its aesthetics. Any entry by LESSOR, its agents, employees or
independent contractors onto the Premises under this section 14 shall be done in
such manner as to
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minimally interfere with the business conducted thereon by LESSEE, and
undertaken with reasonable steps to protect LESSEE's property.
15. SNOW REMOVAL. LESSOR, at its sole expense, shall keep the walkways,
sidewalks, entry ways and parking areas reasonably clear of snow and ice.
Notwithstanding the foregoing, however, LESSEE shall hold LESSOR harmless from
any and all claims by LESSEE's agents, representatives, employees or business
invitees for damage or personal injury resulting in any way from snow or ice on
any area servicing the Building, unless such claims arise from the negligence or
willful misconduct of LESSOR or its agents, employees or independent
contractors.
16. ACCESS AND PARKING. LESSEE shall be granted the right, at current
rates (which may be increased form time to time to reflect market increases, to
park twelve (12) cars in the building's on-site indoor parking lot or facility
in single or tandem spaces, or on a valet basis, which LESSOR in its sole
discretion shall designate from time to time; (at all times hereunder LESSEE to
be entitled to four single spaces from among those twelve). LESSOR initially
designates an appropriate proportion of the same single and tandem area as is
used by the lessee presently vacating the Building, as the LESSEE's initial
parking area. The initial parking rate therefore shall be $100.00 per month, per
car, which monthly rate shall be subject to and reflective of periodic market
changes. Additionally, LESSEE shall be entitled to twelve (12) additional
parking spaces in the garage (not owned by LESSOR) at 808 Memorial Drive
Cambridge, so long as they are available to LESSOR during the Term of this
Lease, at an initial parking rate of $90.00 per month, per car, which monthly
rate shall be subject to and reflective of periodic market changes and upon
thirty (30) days prior written notice to LESSEE. Said garage, lot, or facility,
as the case may be, plus any stairs, walkways or other means of ingress or
egress controlled by the Lessor shall not in any case be considered extensions
on the Leased Premises. LESSEE will not obstruct in any manner any portion of
the Building or the walkways or approaches to the Building, and will conform to
all reasonable and non-discriminatory rules now or hereafter made by LESSOR for
parking, (but which rules shall in no event limit LESSEE's right to its twelve
(12) indoor parking spaces), and for the access and egress, security, care, use,
or alteration of the Building, its facilities and approaches. LESSEE further
warrants that LESSEE will not permit any employee or visitor to violate this or
any other covenant or obligation of LESSEE. No vehicles shall be stored or left
in any parking area for more than three nights without LESSOR's written
approval. Unregistered or disabled vehicles, or storage trailers of any type,
may not be parked overnight any time. LESSEE agrees to assume all expense and
risk for the towing of any misparked vehicle belonging to LESSEE or LESSEE's
agents, employees, business invitees, or callers, at any time. For the purpose
of this section the term "space" shall mean general access for one motor
vehicle. All vehicles shall be parked and left on the premises at their owners'
sole risk and LESSOR shall not be liable for any damages caused to said vehicles
while they are parked or left on the premises.
Additionally, both parties acknowledging that the garage is currently
full, LESSOR shall make reasonable efforts to provide an additional number of
parking spaces within the
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Building's garage, as such spaces may become available in the future; however,
LESSOR shall not be obligated to violate any other exclusive rights granted in
existing or future leases.
17. LESSEE'S AND LESSOR'S LIABILITY INSURANCE. LESSEE shall be solely
responsible as between LESSOR and LESSEE for deaths or personal injuries to all
persons whomsoever caused or occurring in or on the Leased Premises from
whatever cause arising, (unless caused by the negligent acts or omissions or
willful misconduct of LESSOR or its employees, agents or independent
contractors), and damage to property to whomsoever belonging caused or occurring
in or on the Leased Premises to the extent arising out of the use, control,
condition or occupation of the Leased Premises by LESSEE (except to the extent
such damage arises out of the negligence or willful misconduct of LESSOR or its
employees, agents, or independent contractors); and LESSEE agrees to indemnify
and save harmless LESSOR from any and all liability, reasonable expenses,
damage, causes of action, suits, claims or judgments caused by any such deaths,
personal injuries or damages to property, except to extent caused by the
negligence or willful misconduct of LESSOR, its employees, agents or independent
contractors. During the Lease Term LESSEE will secure and carry at its own
expense a comprehensive general liability policy insuring LESSEE against any
claims based on bodily injury (including death) arising out of the condition of
the Leased Premises or their use by LESSEE, such policy to insure LESSEE against
any claim up to One Million ($1,000,000.) Dollars for personal injury or damage
to property. LESSOR and its lenders (of which LESSEE is given written notice)
shall be included in such policy as additional insureds, as their interests may
appear, from time to time. LESSEE will promptly file with LESSOR certificates
showing that such insurance is in force, and thereafter will file renewal
certificates prior to the expiration of any such policies. All such insurance
certificates shall provide that such policies shall not be canceled without at
least thirty (30) days prior written notice to each insured named therein.
During the Lease Term LESSOR shall secure and maintain a policy of
commercial general liability insurance covering LESSOR on an occurrence basis in
an amount not less than $1,000,000.00 for claims based on bodily injury
(including death), personal injury, and property damage relating to the Building
and the property on which the building is located; and a policy of insurance
covering the building and other improvements on the property on which the
building is located for direct risk of physical loss on an occurrence basis, in
an amount equal to the replacement costs of the Building and such other
improvements (exclusive of tenant improvements owned by such tenants) in at
least the minimums required by LESSOR's lendors.
LESSOR and LESSEE covenant that with respect to any insurance policy
required hereunder to be carried by either, such insurance shall provide for the
waiver by the insurance carrier of any subrogation rights against the other;
where such waiver of subrogation rights does not require the payment of an
additional premium or, if an additional premium is required, the other party
pays such premium within a reasonable time after written notice thereof if it
elects to have the benefits of such protection.
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18. FIRE, CASUALTY, EMINENT DOMAIN. Should a substantial portion of the
Leased Premises, or of the property of which they are a part, be substantially
damaged by fire or other casualty, or be taken by eminent domain, LESSOR may
elect to terminate this Lease by written notice to LESSEE within ninety (90)
days after such damage occurs, provided LESSOR terminates the leases for other
tenants in the Building, similarly affected by such damage. When such fire,
casualty, or taking renders the Leased Premises substantially unsuitable for
their intended use and no termination has been elected by LESSOR, a just and
proportionate abatement of rent shall be made from the date of such damage until
repairs have been substantially completed, and LESSEE may elect to terminate
this Lease if: (a) LESSOR fails to give written notice within ninety (90) days
of intention to restore Leased Premises, or (b) LESSOR fails to restore the
Leased Premises to a condition substantially suitable for their intended use
within one hundred eighty (180) days of said fire, casualty or taking. LESSOR
reserves all rights for all damages or injury to the Leased Premises for any
taking by eminent domain; except for damage to LESSEE's moveable fixtures,
property or equipment, or moving expenses, which are specifically allocated to
LESSEE by the taking authority or arbitrators.
19. BROKERAGE. LESSEE and LESSOR each warrants and represents to the
other that they have dealt with no broker or third person with respect to this
Lease or the Leased Premises or Building entitled to a commission as a result of
this Lease other than The Abbey Corp and Fallen Hines & O'Connor, whose fee
shall be paid by LESSOR; and LESSOR and LESSEE each agree to indemnify and hold
harmless the other from any fees, expenses, or damages arising from breach of
the above warranty.
20. SIGNS. LESSEE shall have the right to have its name included on any
central directory maintained by LESSOR listing the building's other tenants.
LESSOR authorizes LESSEE, if desired, to display one sign (which may bear
LESSEE's logo) on LESSEE's office entrance door consistent with similar signs of
other tenants. LESSEE shall obtain the written consent of LESSOR before erecting
any sign on the Leased Premises, which consent may be conditioned on compliance
with LESSOR's requests as to size, wording, and location of such signs, but
which shall not be unreasonably withheld or delayed.
21. DEFAULT, BANKRUPTCY AND ACCELERATION OF RENT. In the event that:
(a) LESSEE shall default in the payment of the security deposit or any
installment of Annual Base Rent or any Additional Operating Expense Rent or
Additional Tax Escalation Rent or other Rent or other payments due LESSOR
hereunder, and such default shall continue for ten (10) days after written
notice thereof; or (b) LESSEE shall default in the observance or performance of
any other of LESSEE's covenants, agreements, or obligations hereunder and such
default shall not be corrected within thirty (30) days after written notice
thereof, or such longer period as is necessary to effectuate a cure provided
LESSEE promptly proceeds to cure and diligently pursues such resolution to
completion, but not longer than ninety (90) days; (c) LESSEE shall be declared
bankrupt or insolvent according to law, or if any voluntary or involuntary
petition
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for bankruptcy is filed against LESSEE and not discharged within 60 days from
filing; or if any assignment shall be made of LESSEE's property for the benefit
of creditors; then, while such default continues, and without demand or further
notice, LESSOR shall have the right to re-enter and take complete possession of
the Leased Premises, to declare the term of this Lease ended, and to remove
LESSEE's effects, without being guilty of any manner of trespass and without
prejudice to any remedies which might be otherwise used for arrears of rent or
other default or breach of covenant. LESSEE shall indemnify LESSOR against all
loss of Annual Base Rent, Additional Operating Expense Rent, and Additional Tax
Escalation Rent and all other payments which LESSOR may incur by reason of such
termination during the remainder of the Lease Term, it being expressly
understood that LESSOR shall use reasonable efforts to relet the Leased Premises
and collect all rents from such reletting. If LESSEE shall default, after
reasonable notice thereof, in the observance or performance of any conditions or
covenants on LESSEE's part to be observed or performed under or by virtue of any
one of the provisions in any section of this Lease, LESSOR, without being under
any obligation to do so and without thereby waiving such default, may after
notice to LESSEE and the expiration of any applicable cure period, remedy same
for the account and at the expense of LESSEE (including but not limited to
application of any or all of the Security Deposit held by LESSOR in accordance
with section 5 of this Lease). If LESSOR pays or incurs any obligations for the
payment of money in connection therewith, including but not limited to
reasonable attorney's fees in instituting, prosecuting or defending any action
or proceeding, such sums paid or obligations incurred, with interest at the rate
of fifteen percent per annum and costs, shall be paid to LESSOR by LESSEE as
additional rent. Upon default of this Lease by LESSEE, and because the payment
of Rent in monthly installments is for the sole convenience of LESSEE, the
entire balance of Rent which would accrue hereunder shall at the option of
LESSOR become immediately due and payable. LESSOR hereby acknowledges its
obligation to mitigate its damages in the event of a default by LESSEE.
Notwithstanding the foregoing, LESSEE agrees to pay reasonable attorney's fees
incurred by LESSOR in enforcing any or all obligations of LESSEE under this
Lease at any time.
22. NOTICE. Any notice from LESSOR to LESSEE relating to the Leased
Premises or to the occupancy thereof shall be deemed duly served if left at the
Leased Premises addressed to LESSEE, or if sent to the Leased Premises by
certified mail, return receipt requested, postage prepaid, addressed to LESSEE;
with a copy to Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston,
Massachusetts 02110. Any notice from LESSEE to LESSOR relating to the Leased
Premises or to the occupancy thereof shall be deemed duly served if delivered to
LESSOR by certified mail, return receipt requested, postage prepaid, addressed
to: The Abbey Corp., 575 Boylston Street, Boston, Massachusetts 02116 or at
LESSOR's last address designated by written notice to LESSEE. Notice shall be
deemed given at the earlier of the date of actual delivery or if by certified
mail, three (3) business days after posting with the U.S. Postal Service. Time
is of the essence in delivery of any notice, and the performance of any
obligations relating thereto.
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23. OCCUPANCY. In the event that LESSEE remains on the Premises after
the agreed termination date of this Lease without the written permission of
LESSOR, then all other terms of this Lease shall continue to apply, except that
LESSEE shall be liable to LESSOR for any loss, damages or expenses incurred by
LESSOR, and all Annual Base Rent and other Rent shall be due in full monthly
installments at a rate of three hundred (300%) percent of that which would
otherwise be due under this lease, it being understood between the parties that
such extended occupancy as a tenant at sufferance is solely for the benefit and
convenience of LESSEE.
24. RULES AND REGULATIONS. LESSEE and LESSEE's servants, employees,
agents, invitees and licensees shall observe faithfully and comply strictly with
such reasonable and non-discriminatory rules and regulations governing the use
of the Building and site and all common areas as LESSOR may from time to time,
adopt, provided LESSEE receives reasonable advance notice of such rules and
regulations and such rules and regulations do not conflict with the express
provisions of this Lease or unreasonably interfere with LESSEE's use of the
Leased Premises for its permitted purposes hereunder.
25. OUTSIDE AREA. No goods or things of any type or description shall
be held or stored outside the Leased Premises at any time without the express
written approval of LESSOR, except bicycles which shall be stored only in the
bicycle rack to be provided by LESSOR.
26. ENVIRONMENT. LESSEE will so conduct and operate the Leased Premises
as not to interfere in any way with the use and enjoyment of other portions of
the same or neighboring buildings by others, by reason of offensive odors,
smells, noise, accumulation of garbage or trash, vermin or other pests or
otherwise and will, at its expense, employ a professional pest control service
if necessary as a result of LESSEE's operations. LESSEE agrees to maintain
efficient and effective device for preventing damage to heating equipment from
harmful solvents, degreasers, cutting oils, and the like, which may be used
within the Leased Premises. No hazardous wastes, radioactive materials or
chemical or harmful biological agents or materials of any sort shall be stored
or allowed to remain within the Leased Premises at any time, except after
written notice to LESSOR, with LESSEE providing a general list of all such
substances inclusive of approximate quantities and "MSDS" sheets; LESSEE to
comply at all times with all applicable federal, state, and local laws,
ordinances, regulations and administrative orders governing the use, handling,
storage, transportation and disposal of all such materials, as well as LESSOR's
rules and regulations governing the handling, storage, transportation and
disposal of all such materials within the Building and Common Areas, said
LESSOR's rules and regulations to be administered in a uniform and
non-discriminatory manner as to all tenants similarly situated.
Prior to vacating the Leased Premises at the end of the Term (or any
applicable extension), or sooner in the event of a default hereunder, LESSEE at
its sole cost and expense shall provide LESSOR and Owner with an environmental
audit by a qualified
-21-
environmental engineering firm satisfactory to LESSOR. The aforesaid
environmental audits shall duly recognize the substances and materials used by
the LESSEE in its laboratory and office operations on the Leased Premises during
the Lease Term (the "Known Substances"), and shall confirm to LESSOR's
reasonable satisfaction that the Leased Premises are free from any and all
contaminants, pollutants, radioactive materials, hazardous wastes or materials,
bacteriological agents or organisms which would render the Leased Premises in
violation of G.L. c. 21E, CERCLA, or SARA, or any regulations of the NRC, as
they may be amended, or supplemented by administrative regulations, from time to
time; arising from and based on the Known Substances. LESSEE shall be
responsible to LESSOR (and any Lenders to the Building) for any and all
environmental hazards or conditions which preclude or condition the foregoing
confirmation due from LESSEE as contemplated above, to the extent said hazards
or conditions are reasonably attributable to the Known Substances and LESSEE's
activities and use of their space.
27. RESPONSIBILITY. LESSOR shall not be held liable to anyone for loss
or damage caused in any way by the use, leakage or escape of water or for
cessation of any service rendered customarily to said Leased Premises or
buildings or agreed to by the terms of this Lease, due to any accident, to the
making of repairs, alterations or improvements, to labor difficulties, weather
conditions, or mechanical breakdowns, to trouble or scarcity in obtaining fuel,
electricity, service or supplies from the sources from which they are usually
obtained for said building, or to any cause beyond the LESSOR's reasonable
immediate control, except to the extent that such loss or damage is caused by
the negligence or willful misconduct of LESSOR or its agents, employees, or
independent contractors.
28. SURRENDER. LESSEE shall at the expiration or other termination of
this Lease remove all of LESSEE's personal property, goods and effects from the
Leased Premises. LESSEE shall deliver to LESSOR the Leased Premises and all
keys, locks, thereto, and other fixtures and equipment connected therewith
(excluding LESSEE's trade fixtures and equipment) and all alterations, additions
and improvements made to or upon the Leased Premises, including but not limited
to any plumbing and plumbing fixtures, air conditioning equipment and ductwork
of any type, exhaust fans or heaters, water coolers, burglar alarms, telephone
wiring, telephone equipment, wooden or metal shelving which has been bolted,
welded or otherwise attached to any concrete or steel member of the Building,
compressors, air or gas distribution piping, and all electrical work, including
but not limited to lighting fixtures of any type, wiring, conduit, EMT,
distribution panels, bus ducts, raceways, outlets and disconnects to the extent
that LESSOR constructs or installs such fixtures, alterations, additions and
improvements at LESSOR's expense. Notwithstanding any contrary provision of this
Lease, at the end of the Lease Term, and absent any default, LESSEE shall have
the right to remove from the Leased Premises its trade fixtures and personal
property and any fixtures, alterations, additions and improvements installed by
LESSEE or at LESSEE's cost and expense subsequent to the Commencement Date,
including without limitation the fixtures and equipment listed on Exhibit F
hereto, provided that LESSEE shall repair any damage to the Leased Premises
caused thereby. LESSEE shall deliver the Leased Premises in as good condition as
-22-
existed on the Commencement Date, reasonable wear and tear and damage by fire,
eminent domain, or other casualty only excepted. In the event of LESSEE's
failure to remove any of LESSEE's property from the premises, LESSOR is hereby
authorized, without liability to LESSEE for loss or damages thereto and at the
sole risk of LESSEE to remove and store any such property at LESSEE's expense,
or to retain same under LESSOR's control or to sell at public or private sale,
any or all of the property not so removed and to apply the net proceeds of such
sale to the payment of any sum due hereunder, or to destroy such property which
shall be conclusively deemed to have been abandoned.
29. QUIET ENJOYMENT. So long as LESSEE keeps, observes and performs
each of the terms herein contained on the part of LESSEE to be kept, observed
and performed, LESSEE shall quietly enjoy the Leased Premises without hindrance
or molestation by LESSOR, or any party claiming any interest in the Building
under or through the LESSOR.
30. LESSOR'S SERVICES. LESSOR will provide elevator facilities serving
the Leased Premises at all times, subject to reasonable security regulations for
use at times other than Normal Business Hours. LESSOR shall, at LESSOR's
expense, furnish LESSEE such cleaning service as is described in Exhibit D
hereto. Except as set forth on Exhibit D, LESSOR shall not be responsible for
cleaning LESSEE's research laboratories.
31. GENERAL. The invalidity or unenforceability of any provision of
this Lease shall not affect or render invalid or unenforceable any other
provision hereof. The obligations of this Lease shall run with the land, and
this Lease shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that LESSOR shall be liable
only for obligations during LESSOR's ownership of the Building or Landlord's
interest under this Lease, occurring as of the beginning of the term of this
Lease, or thereafter while LESSOR of the entire Property. The obligations of
LESSOR shall not be binding upon any director, officer, shareholder, partner,
trustee or beneficiary of LESSOR. Notwithstanding the definition herein of
"Commencement Date," "Termination Date," or "Term," or LESSOR's obligations to
deliver the Premises, this Lease shall be binding and enforceable as against the
parties hereto as of the date of its execution.
32. WAIVERS, ETC. No consent or waiver, express or implied, by LESSOR
or LESSEE, to or of any other breach of the other party of any covenant,
condition or duty of that party shall be construed as a consent or waiver to or
of any other breach of the same or any other covenant, condition or duty. If
LESSEE is several persons or a partnership, LESSEE's obligations are joint or
partnership and also several. Unless repugnant to the context, "LESSOR" and
"LESSEE" mean the person or persons, natural or corporate, named above as LESSOR
and as LESSEE respectively, and their respective heirs, executors,
administrators, successors and assigns.
-23-
33. LESSOR'S OBLIGATION TO "BUILD OUT" AND DELIVER LEASED PREMISES. The
Leased Premises shall be delivered in an "as is" condition without
representation or warranty as to the suitability of the Leased Premises for
LESSEE's particular uses and activities (but for the representations and
warranties set forth in paragraph 8 hereof); except that the LESSOR, at LESSOR's
expense, shall: Repaint the Premises; repair/replace carpeting as and where
necessary based on its current wear to put the carpeting in the Leased Premises
in good condition; prepare LESSOR's basic and standard infrastructure for
LESSEE's laboratory space; and provide lighting and electrical distribution in
the Premises in accordance with the building standards; as further set forth in
paragraph 11 hereof; and otherwise construct and install the alterations,
improvements, fixtures and equipment shown and or described on Exhibit C (in its
component parts, inclusive of "Addendum to Exhibit C"), attached to this Lease
(collectively, the "LESSOR's Work"). Any specialized construction required to
satisfy LESSEE's laboratory needs shall be LESSEE's sole responsibility (and may
be provided by LESSOR based on separate agreement as to cost and timing), (See,
separate schedule of additional costs dated June 18, 1997 and attached at end of
Exhibit C).
LESSOR shall perform its LESSOR's Work on the Premises, and shall
deliver said Premises subsequent to completion of LESSOR's Work, in two phases:
"Phase I" shall consist of LESSOR's Work on the portions of the Premises
dedicated to office and general use (i.e., the "Office Space" consisting of
approximately 9,759 square feet as shown on Exhibit A - 1 attached to this
Lease) and other portions of the Building common areas needed for LESSEE to use
and occupy the Office Space; and "Phase II" shall consist of LESSOR's Work other
than as included in Phase I (i.e., approximately 2,503 square feet mostly
dedicated to laboratory use). Upon substantial completion of LESSOR's Work in
Phase I, it shall notify LESSEE in writing, in the form attached hereto as
Exhibit E - 1, of the completion of said LESSOR's Work and the delivery of that
portion of the Premises to LESSEE. The date of completion of LESSOR's Work as
stated on said notice to LESSEE is referred to as the "Phase I Delivery Date."
Upon substantial completion of LESSOR's Work in Phase II, it shall notify LESSEE
in writing, in the form attached hereto as Exhibit E - 2, of the completion of
said LESSOR's Work and the delivery of that portion of the Premises to LESSEE.
The date of completion of LESSOR's Work as stated on said notice to LESSEE is
referred to as the "Phase II Delivery Date."
LESSOR shall deliver its Phase I Delivery Date notice upon its
completion of LESSOR's Work on Phase I, on or about September 1, 1997 but no
later than September 15, 1997; and LESSOR shall deliver its Phase II Delivery
Date notice upon LESSOR's completion of LESSOR's Work on Phase II on or about
October 1, 1997, but no later than November 1, 1997. LESSOR's obligations to
complete as stated above shall be extended on a day to day basis by its
inability to complete due to governmental restrictions; strikes; lockouts;
shortage or labor or materials; civil commotion; extreme weather or
environmental conditions; or acts of God.
-24-
LESSOR shall complete LESSOR's Work in a good and workmanlike manner,
according to the plans and specifications attached hereto as Exhibit C, in
compliance with applicable laws, codes, ordinances and regulations. The term
"substantial completion" as used herein shall mean the completion of all work in
that respective Phase I or Phase II as the case may be, in accordance with the
plans and specifications; but for commonly accepted "punchlist items," which
shall be in the process of being completed (or which need to be completed at the
end of all the Work) and which do not materially interfere with LESSEE's ability
to use the space being delivered for its intended purpose (e.g. office space for
office use; laboratory space for laboratory use). LESSOR shall complete its
punchlist work within thirty (30) days after the Phase II Delivery Date. Upon
completion of LESSOR's Phase I Work and by its delivery notice attached hereto
as Exhibit E - 1. LESSOR shall have certified that portion of the Leased
Premises is valid for occupancy as office space; and subsequent to completion of
LESSOR's Phase II Work, it shall deliver to LESSEE a certificate of occupancy
for the laboratory space.
If any change in the scope or timing of LESSOR's Phase I or Phase II
Work is necessitated by any changes in the plans and specifications for LESSOR's
work requested by LESSEE, or any additions thereto, then LESSOR in each
instance, as soon as practicable under the circumstances, obtain an estimate of
the increase in the cost of such change and/or any anticipated delay resulting
therefrom. LESSEE must decide whether to proceed with such requested change as
soon as practicable under the circumstances after receipt of LESSOR's estimate
of cost and/or delay (but if occasioned by a change requested by LESSEE after
commencement of the actual construction of the Phase I or Phase II Work, within
forty-eight (48) hours). LESSOR's statement shall set forth the additional costs
for any changes that result in additional work, and the credits against the
original cost of the work for any changes that result in deletion from the
original scope of work. If LESSEE decides to proceed, then it shall notify
LESSOR in writing within said timeframes. Upon an affirmative decision by LESSEE
to proceed, the cost of the change shall be paid to LESSOR immediately and in
advance and the work shall be performed as part of the applicable Phase.
Additionally, if LESSEE decides to proceed, any delay occasioned by the change
shall extend, day for day, LESSOR's delivery obligations and deadlines hereunder
accordingly (but shall not change the date on which the Interim Rent or the full
Annual Base Rent would have commenced under LESSOR's construction schedule but
for the change invoked by LESSEE; and each of those respective Rents shall be
paid to LESSOR as of the dates they would have become due absent the LESSEE's
changes, notwithstanding the provisions of the second paragraph of section 2
hereof to the contrary).
LESSEE shall pay its pro rata share of Annual Base Rent and Additional
Rent for any portion of the initial calendar month in which LESSOR makes
delivery of the Leased Premises, on delivery, as contemplated in section 2
hereof.
34. OPTION TO EXTEND. LESSEE, provided it is not then in default in
each instance hereunder beyond any applicable cure periods shall have an option
to extend the Lease Term, on the terms and conditions herein, for one (1)
additional period of five
-25-
(5) years, with the Annual Base Rent to be the then current "Market Rent"
(including annual escalations thereon for each year of the extended term, based
on increases in the Consumer Price Index or fixed increases, as he case may be
as determined by then prevailing market forces), (herein, the "Extended Term").
Said Extended Term shall commence, subject to proper exercise in each instance
of LESSEE's option hereunder, on the Termination Date of the original Term, and
shall terminate on that date which is the fifth anniversary of the Termination
Date. For example, should the Termination Date be September 30, 2002, the
Extended Term terminates on September 30, 2007.
LESSEE shall exercise its option by delivering to LESSOR its written
notice not later than August 30, 2001. "Market Rent" (which term shall include
annual escalations) shall be that fair market rent charged for comparable first
class research laboratory and office space in Cambridge as of the end of the
original Term. If, after good faith attempts for thirty (30) days after LESSEE
delivers notice to LESSOR, the LESSOR and LESSEE cannot agree on a figure
representing Market Rent, then either party, upon written notice to the other,
may request arbitration of the issue as provided in this section. Within
fourteen (14) days of the request for arbitration, each party shall submit to
the other the name of one unrelated individual or entity with proven expertise
in the leasing of commercial real estate in greater Boston to serve as that
party's appraiser. Each appraiser shall be paid by the party selecting him or
it. The two appraisers shall meet within fourteen (14) days of their selection
and collaboratively determine the Market Rent. They shall make their
determination in writing, including a statement if such is the case, that they
are at an impasse. Such a statement of impasse shall be submitted to the parties
along with the Market Rent figure which each appraiser has selected and his
reasons and substantiation therefor. The appraisers, in case of an impasse,
shall also agree on one unrelated individual or entity with expertise in
commercial real estate in greater Boston with at least seven (7) years
experience dealing with real estate appraisals who shall evaluate the reports of
the two original appraisers and within fourteen (14) days of submission of the
issue to him, make his own determination as to a figure representing Market
Rent. The determination of this individual or entity (i.e., arbitrator) absent,
fraud, bias or undue prejudice shall be binding upon the parties. In no event
shall "Market Rent" for the Extended Term be less than that figure payable by
LESSEE during the last year of the Lease Term increased by the cumulative
increase in the greater Boston Consumer Price Index All Urban, all items, since
the last increase in Annual Base Rent.
Annual Base Rent and Additional Rent during any Extended Term shall be
payable in advance, in equal monthly installments on the first day of each
calendar month.
35. EXTENDED TERM ADDITIONAL RENT. LESSEE in addition to the sums
payable annually to LESSOR as Annual Base Rent, shall pay to LESSOR for each
year of any Extended Term, as Additional Operating Expense Rent, and Additional
Tax Escalation Rent, LESSEE's Allocable Percentage (as determined by the
approximate total rentable space leased), of any and all increases in operating
expenses and taxes, as contemplated in Section 3 and 4 of this Lease, over
Exhibit B attached hereto.
-26-
36 ESTOPPEL CERTIFICATE. Upon not less than fifteen days prior written
request by LESSOR, LESSEE shall execute, acknowledge and deliver to LESSOR a
statement in writing certifying if true that this Lease is unmodified and in
full force and effect and that LESSEE has at the time of such statement no
defenses, offsets or counterclaims against its obligations to pay Annual Base
Rent and Additional Operating Expense Rent and Additional Tax Escalation Rent
and any other charges and to perform its other covenants under this Lease (or,
if there have been any modifications that the same is in full force and effect
as modified and stating the modifications and, if there are any defenses,
offsets or counterclaims, setting them forth in reasonable detail), and the
dates to which the Annual Base Rent and any Additional Rent and other charges
have been paid. Any such statement delivered pursuant to this Section may be
relied upon by any prospective purchaser or mortgagee of the Premises, or any
prospective assignee of any such mortgagee or the LESSOR.
37. PRIOR NOTICE AS TO ADJACENT SPACE. LESSEE, provided it is not then
in default hereunder, beyond any applicable notice and cure periods, shall be
provided at least fifteen (15) days written notice prior to LESSOR's remarketing
of the space adjacent to the Leased Premises hereunder on the fourth floor of
the Building; subject to any existing exclusive rights to said space conferred
on any other lessees in the Building. During said fifteen (15) day period,
LESSOR shall entertain offers from and negotiate in good faith with LESSEE as to
the market terms and conditions of any prospective occupancy of said adjacent
space by LESSEE. Once said fifteen (15) day period has lapsed, LESSOR shall be
free to actively market and negotiate with any party and, if discussions were
initiated by LESSEE within said fifteen (15) day period, shall also negotiate
with LESSEE in good faith as to said space. Notwithstanding the foregoing,
LESSOR shall not be bound to consummate any transaction for said space with
LESSEE.
38. LESSEE'S LENDER. LESSEE intends to procure financing which will be
secured by various articles of personal property, including inventory and
equipment to be located in and upon the Leased Premises (the "Secured
Personalty"), which Secured Personalty is to be covered by or described in one
or more security agreements made and entered into by LESSEE. LESSOR agrees that
none of the aforesaid collateral which is the subject of any security agreements
granting a security interest to any of such lenders shall be subject to a claim
for Rent or liable for any lien, right or claim of LESSOR that is senior to the
claim of the lender. Furthermore, in the event the lender, its successors or
assigns shall at any time exercise its or their right or power under said
security agreements to take possession of or to remove the Secured Personalty;
and if LESSOR receives at least ten (10) days prior written notice of the
exercise of said rights with respect to any of the Secured Personalty, other
than LESSEE's books and records (for which no advance notice shall be required),
said notice to provide the name, address, phone number and contact persons in
charge of the exercise of said lender's rights; LESSOR will not hinder the same
or object thereto or interfere therewith, and LESSOR hereby consents to such
taking of possession and removal of said Secured Personalty, regardless of the
manner or degree of their attachment to the realty of the improvements thereon,
and consents to the entry upon said Leased Premises for such purposes; provided
that the secured lender shall
-27-
observe LESSOR's reasonable rules and regulations governing the manner of
removal of the Secured Personalty from the Leased Premises and the building, and
further provided the secured lender will repair any and all damage occasioned by
said removal, properly capping all pipes and repairing all holes and
protrusions, and will pay LESSOR Rent at the daily rate set forth in this Lease
for the Leased Premises if it occupies the Leased Premises for longer than one
(1) day. At LESSEE's request, LESSOR shall execute an instrument in favor of the
secured lender confirming the terms of this section.
39. GOVERNING LAW. This Lease constitutes the full and complete
agreement between the LESSOR and LESSEE and shall be construed under and
according to the laws of the Commonwealth of Mass. Any provision of this Lease
which is deemed void or unenforceable shall not invalidate or render void or
unenforceable the entire Lease. This Lease may only be modified by instrument in
writing signed by both parties hereto (or their permitted successors and
assigns).
IN WITNESS WHEREOF, LESSOR AND LESSEE have hereunto set their hands and
seals this 3rd day of July, 1997.
LESSOR:
RIVERTECH ASSOCIATES, LLC
By: /s/ Robert Epstein
--------------------------------------
Robert Epstein, Member/Manager
LESSEE:
DYNAGEN, INC.
By: /s/ Indu A. Muni
--------------------------
its duly authorized President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 32,145
<SECURITIES> 0
<RECEIVABLES> 3,207,355
<ALLOWANCES> 71,429
<INVENTORY> 8,201,045
<CURRENT-ASSETS> 12,468,015
<PP&E> 1,676,506
<DEPRECIATION> 488,640
<TOTAL-ASSETS> 29,112,990
<CURRENT-LIABILITIES> 13,096,164
<BONDS> 0
0
602
<COMMON> 335,101
<OTHER-SE> 9,709,675
<TOTAL-LIABILITY-AND-EQUITY> 29,112,990
<SALES> 7,355,636
<TOTAL-REVENUES> 7,444,380
<CGS> 7,352,213
<TOTAL-COSTS> 14,517,042
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 652,212
<INCOME-PRETAX> (7,612,704)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,612,704)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,612,704)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
Exhibit 99a
-----------
PRESS RELEASE
DynaGen's NicErase-SL Multi-Center Phase 3 Trial Shows Efficacy in One of Three
Sites
CAMBRIDGE, Massachusetts, August 29, 1997 -- DynaGen, Inc. (Nasdaq:DYGN;BSE:DYG)
today announced that the combined results of its 750-subject multi-center
clinical trial did not yield a statistically significant difference between the
placebo and NicErase(R)-SL groups. However, one center, the Tobacco Research
Center at the West Virginia University School of Medicine, was able to
demonstrate efficacy and achieve statistical significance. This site, under the
direction of Elbert D. Glover, Ph.D., demonstrated 23% (p = 0.033) abstinence
rate in subjects who received NicErase(R)-SL compared to 13% rate in subjects
who received placebo treatment.
Dr. Glover was able to repeat his earlier success with NicErase(R)-SL in the
Company's prior pilot Phase 3 trial in which the data from his site showed the
highest trend toward efficacy. The Company believes that his previous experience
with NicErase(R)-SL may have contributed to the higher therapeutic compliance
observed in this pivotal trial, which resulted in the clinical efficacy achieved
at the West Virginia site. The Company also believes that the overall low
therapeutic compliance reported in the pivotal trial at the other two centers
may have contributed to an overall lack of statistically significant efficacy.
"While we are disappointed with the overall results of this trial, the Company
has to-date shown that lobeline is a safe and potentially effective non-nicotine
alternative smoking cessation therapy for some smokers wanting to quit," said
Dr. Indu A. Muni, President and Chief Executive Officer. "The results from Dr.
Glover's site, together with the pilot Phase 3 results, should be encouraging
for our alliance partners to proceed with their delivery systems for lobeline."
DynaGen has licensed NicErase(R) to Nastech Pharmaceutical Company, Inc.
(Nasdaq:NSTK) for development of a nasally administered lobeline formulation.
Furthermore, DynaGen has signed a memorandum of understanding with Lohmann
Therapie Systeme GmbH (LTS) intended to allow LTS to develop transdermal and
transbuccal patch formulations of NicErase(R).
In light of these results, management intends to discontinue the NicErase(R)-SL
(sublingual tablet) program at the present time and to focus its resources on
the multisource drug business and other programs now underway at DynaGen.
Any statements which are not historical facts contained in this press release
are forward-looking statements that involve risks and uncertainties. Please
refer to the risk factors identified in the Company's recent report on Form
10-K, including those relating to commercialization of products and the
Company's limited manufacturing and marketing experience.
Contacts:
Roger Moore Investor Relations
L.G. Zangani, Inc. DynaGen, Inc.
(908) 788-9660 (617) 491-2527
