SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 18, 1997
DYNAGEN, INC.
-------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 1-11352
-------- -------
(State or other jurisdiction of (Commission file number)
incorporation or organization)
04-3029787
----------
(I.R.S. Employer
Identification No.)
99 Erie Street, Cambridge, MA 02139
----------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (617) 491-2527
No change since last report
-------------------------------------------------------------
(Former name or address, if changed since last report)
-2-
Item 2. Acquisition or Disposition of Assets.
On March 7, 1997, DynaGen, Inc. ("DynaGen"), and DynaGen Acquisition
Corp., a wholly-owned subsidiary of DynaGen (together with DynaGen, the
"Buyers"), entered into an Agreement and Plan of Merger (the "Merger Agreement")
with Superior Pharmaceutical Company ("Superior") and Eric C. Hagerstrand,
Dennis B. Smith and Thomas L. Canning, the shareholders of Superior
Pharmaceutical Company (the "Shareholders"). On June 18, 1997, the Buyers
acquired, pursuant to the Merger Agreement (the "Acquisition"), all of the
outstanding stock of Superior (the "Superior Stock") and paid the Shareholders
in exchange therefor $6.25 million in cash, $5 million in three-year notes (the
"Notes") and 1,666,667 shares of DynaGen's Common Stock (the "Shares"). The
Shareholders may also receive certain incentive payments based on Superior's
performance during the three years following the closing of the Acquisition. In
addition, DynaGen assumed the existing debt of Superior, consisting principally
of an asset-based line of credit and trade payables. Immediately following the
closing of the Acquisition, Dynagen contributed $1.75 million to the working
capital of Superior. The purchase price and terms for the Acquisition were
determined in arms-length negotiations between the parties.
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 the Superior Stock. DynaGen is also obligated to issue to the
Shareholders up to an additional 1,666,667 shares of its Common Stock after 12
months if its Common Stock is not trading at an average of at least $3.00 per
share for 10 consecutive trading days as reported by the Nasdaq SmallCap Market.
If, immediately following the issuance of the additional 1,666,667 shares,
DynaGen's Common Stock is not trading at least $1.50 per share, as reported by
the Nasdaq SmallCap Market, DynaGen shall pay to the Shareholders in immediately
available funds the difference between $1.50 and the then current trading price
of its Common Stock for each of the 3,333,334 shares held by the Shareholders.
DynaGen is obligated to register the Shares within 11 months after the
closing of the Acquisition.
Superior obtained a secured line of credit of up to $9 million from
Huntington National Bank to provide working capital for its general operations.
The loan is secured by a first-lien security interest in all assets of Superior
and is guaranteed by DynaGen as parent of Superior. Superior may draw upon the
line of credit until April 5, 1998.
The following debt and equity financings were arranged to fund the
Acquisition:
1. DynaGen obtained senior subordinated debt financing of $3.0 million
from Sirrom Capital Corporation, a Tennessee corporation ("Sirrom"), and Odyssey
Investment Partners, L.P., a Pennsylvania limited partnership ("Odyssey").
Interest on the senior subordinated debt financing is 13.5% annually with
interest payable in monthly installments. There is no amortization of the
principal amount on the note for the first five years of the note, and principal
is paid upon maturity at the end of five years. The loan is made available to
-3-
DynaGen (as parent) for the Acquisition and as working capital for Superior and
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 Sirrom and
Odyssey 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, Sirrom and Odyssey may exchange these warrants to buy DynaGen
Common Stock for warrants to purchase a 10% and 5% interest, respectively, of
Superior's Common Stock at an exercise price per share of $.01 exercisable until
August 31, 2002. In addition, these warrants are subject to certain put features
under certain circumstances.
2. DynaGen obtained debt financing in the form of a bridge loan of
$500,000, from Coutts & Co. AG, a Swiss corporation, at an interest rate of 7%
per annum 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 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 Coutts & Co., AG.
3. DynaGen obtained equity financing in the form of the sale to twelve
accredited investors of 41,000 shares of DynaGen's Series A Preferred Stock and
warrants to purchase 328,000 shares of Common Stock at an aggregate purchase
price of $4,100,000. The Series A Preferred Stock has a stated dividend of five
dollars ($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 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 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 holders of Series A Preferred Stock have
certain rights of first refusal on future equity financings.
4. DynaGen obtained equity financing in the form of the sale of 7,500
shares of DynaGen's Series B Preferred Stock and 225,000 shares of DynaGen's
Common Stock at an aggregate purchase price of $750,000 to Julius Baer
Securities Inc. as agent for certain non-U.S. persons. The Series B Preferred
Stock has a stated dividend of seven dollars ($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.
DynaGen is primarily engaged in the development and marketing of
proprietary and generic therapeutic and diagnostic products for the human health
care market. Superior is a pharmaceutical manufacturing firm that markets and
distributes generic pharmaceutical products to independent retail chains and
institutional pharmacies. DynaGen intends to continue to use
-4-
the assets purchased from the Seller, including 40,000 square feet of office,
warehouse and distribution space, for the purpose of marketing and distributing
generic pharmaceutical products.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
It is impracticable to provide the financial statements
required pursuant to Regulation S-X at the time this report is
filed. Such required financial information will be filed under
cover of Form 8-K as soon as practicable but not later than
September 1, 1997.
(b) Unaudited Pro Forma Combined Financial Information.
It is impracticable to provide the pro forma financial
information required pursuant to Article 11 of Regulation S-X
at the time this report is filed. Such required pro forma
financial information will be filed under cover of Form 8-K as
soon as practicable but not later than September 1, 1997.
(c) Exhibits.
2.1 Agreement and Plan of Merger dated March 7, 1997
among DynaGen, DynaGen Acquisition Corp., Superior
and the Shareholders (filed as Exhibit 2c to
DynaGen's Transition report on Form 10-K for the
transition period from July 1, 1996 to December 31,
1996, and incorporated by reference).
4.1 Registration Rights Agreement dated June 18, 1997
among DynaGen and the Shareholders.
4.2 Secured Promissory Note dated June 18, 1997 issued by
DynaGen to Eric C. Hagerstrand.
4.3 Secured Promissory Note dated June 18, 1997 issued by
DynaGen to Dennis B. Smith.
4.4 Secured Promissory Note dated June 18, 1997 issued by
DynaGen to Thomas L. Canning.
4.5 Pledge Agreement dated June 18, 1997 among DynaGen
and the Shareholders.
4.6 Secured Promissory Note dated June 18, 1997 issued by
DynaGen to Sirrom.
-5-
4.7 Secured Promissory Note dated June 18, 1997 issued by
DynaGen to Odyssey.
4.8 Stock Purchase Warrant dated June 18, 1997 issued by
DynaGen to Sirrom.
4.9 Stock Purchase Warrant dated June 18, 1997 issued by
DynaGen to Odyssey.
4.10 Pledge and Security Agreement dated June 18, 1997
between DynaGen and Sirrom.
4.11 Subordinated Note dated June 18, 1997 issued by
DynaGen to Coutts & Co. AG.
4.12 Bridge Financing Purchase Agreement dated June 16,
1997 between DynaGen and Coutts & Co. AG.
4.13 Certificate of Designations, Preferences and Rights
of Series A Preferred Stock of Dynagen.
4.14 Securities Purchase Agreement dated June 16, 1997
among DynaGen and the purchasers of Series A
Preferred Stock.
4.15 Registration Rights Agreement dated June 16, 1997
among DynaGen and the purchasers of Series A
Preferred Stock.
4.16 Form of Common Stock Purchase Warrant dated June 18,
1997 issued by DynaGen to the purchasers of Series A
Preferred Stock.
4.17 Certificate of Designations, Preferences and Rights
of Series B Preferred Stock of Dynagen.
4.18 Securities Purchase Agreement dated June 17, 1997
between DynaGen and Julius Baer Securities Inc. as
agent for certain non-U.S. persons.
4.19 Registration Rights Agreement dated June 17, 1997
between DynaGen and Julius Baer Securities Inc. as
agent for certain non-U.S. persons.
4.20 Stock Purchase Warrant dated June 18, 1997 issued by
Superior to Sirrom.
4.21 Stock Purchase Warrant dated June 18, 1997 issued by
Superior to Odyssey.
-6-
4.22 Revolving Note dated June 18, 1997 issued by Superior
to Huntington National Bank.
99.1 Loan Agreement dated June 18, 1997 among DynaGen,
Sirrom and Odyssey.
99.2 Security Agreement dated June 18, 1997 among DynaGen,
Sirrom and Odyssey.
99.3 Amended and Restated Loan and Security Agreement
dated June 18, 1997 among Huntington National Bank,
Superior and DynaGen.
99.4 Continuing Guaranty Unlimited dated June 18, 1997
from DynaGen to Huntington National Bank.
-7-
SIGNATURE
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/ Dhananjay G. Wadekar
-----------------------------------
Title: Executive Vice President
-----------------------------------
Dated: July 2, 1997
-8-
EXHIBIT INDEX
-------------
Exhibit
Numbers Exhibits
- ------- --------
2.1 Agreement and Plan of Merger dated March 7, 1997 among
DynaGen, DynaGen Acquisition Corp., Superior and the
Shareholders (filed as Exhibit 2c to DynaGen's Transition
report on Form 10-K for the transition period from July 1,
1996 to December 31, 1996, and incorporated by reference).
4.1 Registration Rights Agreement dated June 18, 1997 among
DynaGen and the Shareholders.
4.2 Secured Promissory Note dated June 18, 1997 issued by DynaGen
to Eric C. Hagerstrand.
4.3 Secured Promissory Note dated June 18, 1997 issued by DynaGen
to Dennis B. Smith.
4.4 Secured Promissory Note dated June 18, 1997 issued by DynaGen
to Thomas L. Canning.
4.5 Pledge Agreement dated June 18, 1997 among DynaGen and the
Shareholders.
4.6 Secured Promissory Note dated June 18, 1997 issued by DynaGen
to Sirrom.
4.7 Secured Promissory Note dated June 18, 1997 issued by DynaGen
to Odyssey.
4.8 Stock Purchase Warrant dated June 18, 1997 issued by DynaGen
to Sirrom.
4.9 Stock Purchase Warrant dated June 18, 1997 issued by DynaGen
to Odyssey.
4.10 Pledge and Security Agreement dated June 18, 1997 between
DynaGen and Sirrom.
4.11 Subordinated Note dated June 18, 1997 issued by DynaGen to
Coutts & Co. AG.
4.12 Bridge Financing Purchase Agreement dated June 16, 1997
between DynaGen and Coutts & Co. AG.
4.13 Certificate of Designations, Preferences and Rights of Series
A Preferred Stock of Dynagen.
4.14 Securities Purchase Agreement dated June 16, 1997 among
DynaGen and the purchasers of Series A Preferred Stock.
-9-
4.15 Registration Rights Agreement dated June 16, 1997 among
DynaGen and the purchasers of Series A Preferred Stock.
4.16 Form of Common Stock Purchase Warrant dated June 18, 1997
issued by DynaGen to the purchasers of Series A Preferred
Stock.
4.17 Certificate of Designations, Preferences and Rights of Series
B Preferred Stock of Dynagen.
4.18 Securities Purchase Agreement dated June 17, 1997 between
DynaGen and Julius Baer Securities Inc. as agent for certain
non-U.S. persons.
4.19 Registration Rights Agreement dated June 17, 1997 between
DynaGen and Julius Baer Securities Inc. as agent for certain
non-U.S. persons.
4.20 Stock Purchase Warrant dated June 18, 1997 issued by Superior
to Sirrom.
4.21 Stock Purchase Warrant dated June 18, 1997 issued by Superior
to Odyssey.
4.22 Revolving Note dated June 18, 1997 issued by Superior to
Huntington National Bank.
99.1 Loan Agreement dated June 18, 1997 among DynaGen, Sirrom and
Odyssey.
99.2 Security Agreement dated June 18, 1997 among DynaGen, Sirrom
and Odyssey.
99.3 Amended and Restated Loan and Security Agreement dated June
18, 1997 among Huntington National Bank, Superior and DynaGen.
99.4 Continuing Guaranty Unlimited dated June 18, 1997 from DynaGen
to Huntington National Bank
EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made and
entered into as of June 18, 1997 by and among DYNAGEN, INC., a Delaware
corporation ("DYNAGEN" or the "COMPANY"), and the former shareholders of
Superior Pharmaceutical Company, a corporation organized under the laws of Ohio
("SUPERIOR"), and each of Dennis Smith, Eric C. Hagerstrand and Thomas Canning
(collectively the "SHAREHOLDERS" and individually a "SHAREHOLDER").
RECITALS
A. The Company, Superior and the Shareholders are parties to a certain
Merger Agreement dated as of March 7, 1997, as amended (the "MERGER AGREEMENT"),
pursuant to which DynaGen will acquire Superior for cash consideration of
US$6,500,000, a promissory note in the principal amount of $5,000,000, and the
issuance of 1,666,667 shares of DynaGen's Common Stock, $.01 par value per share
(the "DYNAGEN COMMON STOCK"), as set forth in the Merger Agreement.
B. The execution and delivery of this Agreement by the parties hereto
is a condition precedent to the obligations of the parties to consummate the
transactions under the Merger Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties hereto agree as follows:
1. DEFINITIONS.
For the purposes of this Agreement, the following terms have the
meanings indicated below:
1933 ACT. The Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as in effect from time to time
1934 ACT. The Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder, as in effect from time to
time.
BUSINESS DAY. Each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
COMMISSION. The United States Securities and Exchange
Commission.
EFFECTIVE TIME. The "Effective Time" as defined in the Merger
Agreement.
-2-
HOLDER. Any person owning Registrable Securities who is a
party to this Agreement, and any transferee thereof in accordance with Sections
3 and 10 of this Agreement.
PROSPECTUS. The prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement (including,
without limitation, any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement), and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
REGISTER, REGISTRATION AND REGISTERED. A registration effected
by preparing and filing a registration statement or similar document with the
Commission in compliance with the 1933 Act, and the declaration or ordering of
effectiveness of such registration statement or document.
REGISTRABLE SECURITIES. The shares of DynaGen Common Stock
issued to and received by the Shareholders pursuant to the Merger Agreement,
including, without limitation, the Adjustment Shares, as defined in the Merger
Agreement, and any securities that may be issued by the Company or any successor
to the Company from time to time with respect to, in exchange for, or in
replacement of such shares of DynaGen Common Stock, including, without
limitation, securities issued as a stock dividend on or pursuant to a stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation, or other similar reorganization of DynaGen Common Stock;
provided, however, that those shares as to which the following apply shall cease
to be Registrable Securities: (a) a Registration Statement with respect to the
sale of such Registrable Securities shall have become effective under the 1933
Act and such Registrable Securities shall have been disposed of under such
Registration Statement; (b) such Registrable Securities shall have become
transferable (whether or not so transferred) in accordance with the resale
provisions of Rule 144 or any successor rule or provision, under the 1933 Act;
(c) such Registrable Securities shall have been transferred in a transaction in
which the Shareholder's rights and obligations under this Agreement were not
properly assigned in accordance with this Agreement; or (d) such Registrable
Securities shall have ceased to be outstanding.
REGISTRATION EXPENSES. All expenses incident to the Company's
performance of or compliance with Section 2 hereof, including, without
limitation: (i) all registration and filing fees (including filing fees with
respect to the Commission and to the National Association of Securities Dealers,
Inc. and listing fees of the Nasdaq SmallCap Market System), all fees and
expenses of complying with state securities or "blue sky" laws (including fees
and disbursements of underwriters' counsel in connection with any "blue sky"
memorandum or survey, but excluding any fees and expenses for foreign
qualification in such jurisdictions); (ii) all printing expenses, (including
expenses of printing certificates for Registrable Securities in a form eligible
for deposit with the DTC and of printing prospectuses included in any
Registration Statement and all registrars' and transfer agents' fees); (iii) all
fees and disbursements of the Company's counsel and independent public
accountants; (iv) liability insurance under the 1933 Act, if the Company so
desires such insurance; (v) fees and expenses of all attorneys, advisers,
appraisers and other persons retained by the Company or any subsidiary of the
Company; (vi) internal expenses of the Company and the subsidiaries of the
Company (including, without limitation, all salaries and expenses of officers
and employees of the Company and the subsidiaries of the Company
-3-
performing legal or accounting duties); (vii) the expense of any annual audit;
(viii) the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange; and (ix) the expenses
relating to printing, wordprocessing and distributing all Registration
Statements, underwriting agreements, securities sales agreements and any other
documents necessary in order to comply with this Agreement; provided, however,
that Registration Expenses shall not include the fees and expenses of counsel to
the holders of Registrable Securities, or underwriters' discounts or commissions
associated with the sale of the Registrable Securities.
REGISTRATION STATEMENT. A registration statement prepared and
filed with the Commission in compliance with the 1933 Act that covers any of the
Registrable Securities pursuant to the provisions of this Agreement, including
the Prospectus, amendments and supplements to such Registration Statement,
including post-effective amendments, all exhibits, and all material incorporated
by reference or deemed to be incorporated by reference in such Registration
Statement.
RULE 144. Rule 144 promulgated under the 1933 Act and the
rules, regulations and interpretations thereof issued by the Commission as may
be in effect from time to time.
SELLER. Any person, including any Holder, participating in an
offering of any Registrable Securities of the Company pursuant to this
Agreement.
SELLING EXPENSES. All applicable transfer taxes and any fees
and disbursements of any counsel, accountants or other advisors for any Seller
of the Registrable Securities being registered.
SHELF REGISTRATION. A registration effected pursuant to a
shelf Registration Statement of the Company, on an appropriate form under Rule
415 under the 1933 Act, or any similar rule that may be adopted by the
Commission, all amendments and supplements to such Registration Statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein. A Registration Statement relating to a Shelf Registration
shall be referred to herein as the "SHELF REGISTRATION STATEMENT." The Shelf
Registration Statement shall be effected on Form S-3 or any successor form
prescribed by the Commission.
2. SHELF REGISTRATION.
2.1 DEMAND REGISTRATION RIGHT. Subject to the limitations set forth
elsewhere in this Section 2, commencing on or after eleven (11) months from the
Effective Time, and subject to the resale restrictions and limitations set forth
in Section 3 hereof, upon the request of all of the Shareholders DynaGen will
use its best efforts to promptly effect qualification and registration of the
Registrable Securities under the Securities Act on a Form S-3 registration
statement (or any other registration statement form for which it is then
eligible, other than Form S-1) as a Shelf Registration as soon as practicable,
but in any event no later than twelve months from the Effective Time. DynaGen
shall not be required to effect more than one registration on Form S-3 pursuant
to the provisions of this Section 2. DynaGen and the Shareholders shall use
reasonable efforts to coordinate sales of the Registrable Securities pursuant to
a Form S-3 registration
-4-
statement with DynaGen's market makers in a manner to ensure stability in the
trading price of DynaGen Common Stock.
2.2 LIMITATION ON SHELF REGISTRATION OBLIGATION. Notwithstanding the
provisions of Section 2.1, and subject to the limitations described below in
this Section 2, if, prior to the filing or effective date of the Shelf
Registration Statement referred to in Section 2.1 above, the Company shall
furnish to the Holders a certificate issued by the Board of Directors upon the
advice of counsel and signed by the President of the Company stating that, in
their good faith judgment:
(a) the filing of the Shelf Registration Statement or the
offering of securities pursuant thereto would materially and adversely affect
(i) a pending or scheduled public offering of DynaGen's securities, (ii) a
pending or proposed acquisition, merger, consolidation, reorganization,
strategic alliance, corporate partnership, restructuring or similar transaction
involving DynaGen, which in each case is material to the business of DynaGen,
(iii) bona fide negotiations, discussions or proposals with respect to any of
the foregoing types of material transactions, or (iv) the financial condition,
prospects, stock price or strategy of DynaGen in connection with the proposed
disclosure of any pending transaction or pending or threatened litigation,
claim, assessment or government investigation which may be required thereby; and
(b) in the event the Shelf Registration Statement were then
effective and sales of Registrable Securities were being made or offered
thereunder, and disclosure of all material information with respect to the
transactions mentioned in the preceding paragraph had not been made, such
circumstances would cause a violation of the 1933 Act or the 1934 Act and result
in potential liability to DynaGen and/or the Shareholders;
then the Company shall have the right, subject to the limitations set forth in
Section 2.3(d) hereof, to defer the filing or effectiveness, as the case may be,
of such Shelf Registration Statement for such period of time as any of the above
circumstances shall continue, such period not to exceed 60 days following the
date of suspension, provided that the Company may not exercise such right to
defer the filing or effectiveness more than once in any six-month period.
2.3 SELLING PROCEDURES; SUSPENSION. Each Holder of Registrable
Securities agrees to give written notice to the general counsel and the chief
accounting officer of the Company at least two (2) Business Days prior to any
intended sale or distribution of Registrable Securities under the Shelf
Registration Statement, which notice shall specify the date on which such Holder
intends to begin such sale or distribution. As soon as practicable after the
date such notice is received by the Company, and in any event within two (2)
Business Days after such date, the Company shall comply with either paragraph
(a) or (b) below.
(a) Except in the event that paragraph (b) below applies, the
Company shall (i) if deemed necessary by the Company, prepare and file with the
Commission a post-effective amendment to the Shelf Registration Statement or a
supplement to the related Prospectus or a supplement or amendment to any
document incorporated therein by reference or file any other required document
so that such Registration Statement will not contain an 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, and so that, as
thereafter delivered to purchasers of the Registrable Securities being sold
thereunder, such Prospectus will not contain an untrue statement
-5-
of a material 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 under which they were made, not misleading; (ii) provide the
Holders of the Registrable Securities who gave such notice copies of any
documents filed pursuant to Section 2.3(a)(i); and (iii) inform each such Holder
that the Company has complied with its obligations in Section 2.3(a)(i) (or
that, if the Company has filed a post-effective amendment to the Shelf
Registration Statement which has not yet been declared effective, the Company
will notify each such Holder to that effect, will use its best efforts to secure
the effectiveness of such post-effective amendment and will immediately notify
each such Holder when the amendment has become effective). Each Holder who has
given notice of intention to distribute such Holder's Registrable Securities in
accordance with Section 2.3 hereof (a "NOTICE HOLDER") shall sell all or any of
such Registrable Securities pursuant to the Shelf Registration Statement and
related Prospectus only during the 90-day period commencing with the date on
which the Company gives notice, pursuant to Section 2.3(a)(iii), that the
Registration Statement and Prospectus may be used for such purpose, which notice
must be given no later than the close of business on the second Business Day
after the notice described in the first paragraph of this Section 2.3 is given
(such 90-day period is referred to as a "SELLING PERIOD"). The Notice Holders
will not sell any Registrable Securities pursuant to such Registration Statement
or Prospectus after such Selling Period without giving a new notice of intention
to sell pursuant to Section 2.3 hereof and receiving a further notice from the
Company pursuant to Section 2.3(a)(iii) hereof or paragraph (b) below.
(b) In the event (i) of any request by the Commission or any
other federal or state governmental authority during the period of effectiveness
of the Shelf Registration Statement for amendments or supplements to a Shelf
Registration Statement or related Prospectus or for additional information; (ii)
of the issuance by the Commission or any other federal or state governmental
authority of any stop order suspending the effectiveness of a Shelf Registration
Statement or the initiation of any proceedings for that purpose; (iii) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) of any event or circumstance which
necessitates the making of any changes in the Shelf Registration Statement or
Prospectus, or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of the Shelf Registration Statement, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; or (v) that, in the good faith judgment of the Company's Board of
Directors, upon the advice of counsel, in accordance with the provision of
Section 2.2, it is advisable to suspend use of the Prospectus for a discrete
period of time due to pending corporate developments, public filings with the
Commission or similar events; then, subject to paragraph (d) below, the Company
shall deliver a certificate in writing to the Notice Holders (the "SUSPENSION
NOTICE") to the effect of the foregoing and, upon receipt of such Suspension
Notice, each such Notice Holder's Selling Period will not commence (a
"SUSPENSION") until such Notice Holder's receipt of copies of the supplemented
or amended Prospectus provided for in Section 2.3(a)(i) hereof, or until it is
advised in writing by the Company that the Prospectus may be used and it has
-6-
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such Prospectus.
(c) In the event any of the events or circumstances listed in
the foregoing paragraph (b) occur or exist after a Selling Period has commenced,
subject to paragraph (d) below, the Company shall have the same right to suspend
such Selling Period by delivery of a Suspension Notice as the Company would have
had if the Selling Period had not yet commenced, and any such suspension of a
Selling Period shall be deemed included within the meaning of the term
"Suspension" for all purposes under this Agreement.
(d) In the event of any Suspension, or any delay in effecting
the Shelf Registration under Section 2.2 above, the Company will use its best
efforts to ensure that the use of the Prospectus so suspended or delayed may be
commenced or resumed, as the case may be, and that any Selling Period so
suspended will commence or resume, as the case may be, as soon as practicable
and, in the case of a pending development, filing or event referred to in
Section 2.3(b)(iv) or (v) hereof, as soon, in the judgment of the Company's
Board of Directors (in accordance with the provisions of Section 2.2), as
disclosure of the material relating to such pending development, filing or event
would not have an adverse effect on the Company's ability to consummate the
transaction, if any, to which such development, filing or event relates.
Notwithstanding any other provision of this Agreement, the Company shall have
the right to cause a maximum of two (2) Suspensions, neither of which may be
within 30 days of the other, as provided above (including for this purpose a
delay in effecting the Shelf Registration pursuant to Section 2.2 above) during
any 12-month period after the initial effective date of the Shelf Registration
Statement, and the total number of days in any 12-month period during which a
Suspension or Suspensions (including for this purpose a delay in effecting the
Shelf Registration Statement pursuant to Section 2.2 above) may be in effect
shall not exceed 120 days.
(e) Subject to the provisions of Sections 2.2 and 2.3, the
Company will use its best efforts to maintain the effectiveness of the Shelf
Registration Statement until the date that is twenty-four (24) months from the
initial effective date of the Shelf Registration Statement, except that this
date shall be extended by the aggregate number of days, beginning on the
effective date of the Shelf Registration Statement through twenty-four (24)
months from such initial effective date, during which the Shelf Registration
Statement is not available for sales of the Registrable Securities due to (i) a
Suspension of the Shelf Registration Statement under Section 2.3, or (ii) the
failure of the Company to qualify for the use of Form S-3 because of its failure
to file on a timely basis all reports required to be filed under the 1934 Act.
The Company from time to time will amend or supplement such Registration
Statement and the Prospectus to the extent necessary to comply with the 1933 Act
and any applicable state securities statue or regulation. The Company will also
provide each Holder of Registrable Securities with as many copies of the
Prospectus contained in such Registration Statement as it may reasonably
request.
3. RESTRICTIONS ON TRANSFER OF SHARES. Notwithstanding any other
provision in this Agreement, each Shareholder agrees not to sell, assign,
transfer, grant an option for, engage in any derivative security transaction
with respect to, or otherwise dispose of in any manner any of the Registrable
Securities, whether to the public in the open market or in privately-negotiated
transactions, except with respect to those shares for which the restrictions on
transfer set forth in this Section shall lapse in the increments set forth
below. The amount of Registrable Securities held by each Shareholder listed on
Exhibit A shall then become eligible for the registration rights
-7-
and be released from the restrictions on transfer set forth in this Agreement in
the following increments: (i) no sales, transfers or other dispositions of the
Registrable Securities may be made during the twelve (12) months commencing on
the Effective Time and ending at the end of the day on the one-year anniversary
of the Effective Time; (ii) commencing on the day immediately following the
one-year anniversary of the Effective Time the Shareholders, as amongst
themselves, may sell during any three-month period up to an aggregate of 350,000
shares of DynaGen Common Stock. The Shareholders may not cumulate such sales
beyond any three-month period, such that if any portion of the 350,000 shares is
not sold in such three-month period, the unsold shares may not be carried
forward to the next three-month period for purposes of determining the aggregate
amount of DynaGen Common Stock that may be sold in the next three-month period.
In the event of any attempted transfer of the Registrable Shares in
violation of the foregoing restrictions, the registration rights set forth in
this Agreement shall automatically expire with respect to each Shareholder who
transfers such Registrable Shares in violation of the foregoing restrictions. In
the event of any violation of these restrictions, the Company shall have to
right to issue stop transfer instructions to its transfer agent to prevent any
threatened or continuing violation of these transfer restrictions and to seek a
decree for specific performance of the provisions of this Agreement.
Notwithstanding the foregoing, a Shareholder may (i) transfer up to 30%
of his Registrable Securities by way of gift for estate planning purposes to any
member of his immediate family or to any trust for the benefit of any such
family member, provided that any transferee shall agree in writing with the
Company, as a condition precedent to such transfer, to be bound by all of the
provisions of this Agreement to the same extent as if such transferee were the
original Shareholder hereunder, or (ii) transfer any of his Registrable
Securities by will or the laws of descent and distribution to the heirs of the
Shareholder, or in the event of the disability of the Shareholder, to the legal
representatives of the Shareholder, in which event each such transferee shall
also be bound (and shall agree in writing to be bound) by all of the provisions
of this Agreement to the same extent as if such transferee were the original
Shareholder hereunder.
The provisions of this Section 3 shall not apply to a pledge, mortgage
or other encumbrance of the Registrable Securities pursuant to a bona fide loan
transaction in which the Registrable Securities are given as additional
collateral to secure the loan and the loan obligation is a full recourse
obligation with respect to collateral, with recourse to collateral other than
solely the Registrable Securities. Any pledgee, mortgagee or other permitted
transferee of the Registrable Securities must agree in writing to be bound by
all of the provisions of this Agreement, including the trading restrictions of
this Section 3.
4. EXPENSES. The Company will pay all Registration Expenses in
connection with the registration of Registrable Securities effected by the
Company pursuant to Section 2. Holders of Registrable Securities registered
pursuant to this Agreement shall pay all Selling Expenses associated with such
registration, with each Holder bearing a pro rata portion of the Selling
Expenses based upon the number of Registrable Securities registered by each
Holder.
5. EXPIRATION OF REGISTRATION RIGHTS. The obligations of the Company
under Sections 2 and 6 hereof shall expire on the date that is twenty-four (24)
months from the Effective Time, except that this date shall be extended by the
aggregate number of days, beginning on the Effective Time through twenty-four
(24) months from the Effective Time, during which a
-8-
Registration Statement by the Company is not available for sales of the
Registrable Securities due to (i) a delay in the filing or effectiveness of the
Shelf Registration Statement under Section 2.1 or 2.2, (ii) a Suspension of a
Registration Statement under Section 2.3, or (iii) the failure of the Company to
qualify for the use of Form S-3 because of its failure to file on a timely basis
all reports required to be filed under the 1934 Act. The obligations of the
Company under Sections 2 and 6 hereof shall expire with respect to any Holder
who is not an executive officer (as defined in Section 16 of the 1934 Act) or
director of Company and is able to sell the Registrable Securities pursuant to
Rule 144 of the 1933 Act.
6. REGISTRATION PROCEDURES. In connection with the registration of
Registrable Securities under this Agreement, and subject to the other provisions
of this Agreement, the Company shall:
(a) use its best efforts to cause the Registration Statement
filed in accordance with Section 2 to become effective as soon as practicable
after the date of filing thereof;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep such Registration Statement continuously
effective for the shorter of (i) the duration of its registration obligations,
or (ii) until there are no Registrable Securities outstanding, and to comply
with the provisions of the 1933 Act with respect to the disposition of the
Registrable Securities;
(c) furnish to each Seller of Registrable Securities such
number of copies of the Prospectus included in such Registration Statement as
such Seller may reasonably request in order to facilitate the sale or
disposition of such Registrable Securities;
(d) use its best efforts to register or qualify all securities
covered by such Registration Statement under such other securities or "blue sky"
laws of such jurisdictions as each Seller shall reasonably request, and do any
and all other acts and things that may be necessary to enable such Seller to
consummate the disposition in such jurisdictions of its Registrable Securities
covered by such Registration Statement, except that the Company shall not for
any such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, or to subject
itself to taxation in respect of doing business in any such jurisdiction, or to
consent to general service of process in any such jurisdiction;
(e) notify each Seller of Registrable Securities covered by
such Registration Statement, at any time when a Prospectus relating thereto is
required to be delivered under the 1933 Act, of the happening of any event as a
result of which the Prospectus included in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing or if it is
necessary to amend or supplement such Prospectus to comply with the law, and at
the request of any such Seller, prepare and furnish to such Seller a reasonable
number of copies of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities or securities, such Prospectus, as amended or supplemented, will
comply with the law;
-9-
(f) timely file with the Commission such information as the
Commission may prescribe under Section 13 or 15(d) of the 1934 Act and otherwise
use its best efforts to ensure that the public information requirements of Rule
144 under the 1933 Act are satisfied with respect to the Company. The Company
shall furnish to any Holder of Registrable Securities, upon request, copies of
the Company's most recent annual and quarterly reports and other publicly
available documents filed with the Commission as a Holder may reasonably request
in availing itself of any rule or regulation of the Commission allowing such
Holder to sell Registrable Securities without registration.
(g) use its best efforts to qualify such securities for
inclusion in the Nasdaq SmallCap Market, and provide a transfer agent and
registrar for such Registrable Securities not later than the effective date of
such Registration Statement; and
(h) issue to any person to which any Holder of Registrable
Securities may sell such Registrable Securities in connection with such
registration certificates evidencing such Registrable Securities without any
legend restricting the transferability of the Registrable Securities.
From time to time, the Company will amend or supplement such
Registration Statement and the Prospectus contained therein to the extent
necessary to comply with the 1933 Act and any applicable state securities
statute or regulation. The Company will also provide the holder of Registrable
Securities with as many copies of the Prospectus contained in any such
Registration Statement as it may reasonably request.
7. 1934 ACT REGISTRATION. The Company shall timely file with the
Commission such information as the Commission may require under Section 13 or
15(d) of the 1934 Act; and in such event, the Company shall use its best efforts
to take all action pursuant to Rule 144(c) as may be required as a condition to
the availability of Rule 144 under the 1933 Act (or any successor exemptive rule
hereinafter in effect) with respect to the DynaGen Common Stock. The Company
shall furnish to any holder of Registrable Securities forthwith upon request (i)
a written statement by the Company as to its compliance with the reporting
requirements of Rule 144(c), (ii) a copy of the most recent annual or quarterly
report of the Company as filed with the Commission, and (iii) such other
publicly-filed reports and documents as a holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a holder to
sell any such Registrable Securities without registration.
8. SHAREHOLDER INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
all Shareholders of Registrable Securities shall furnish to the Company such
information regarding themselves, the Registrable Securities held by them and
the intended method of disposition of such Registrable Securities as shall be
reasonably required to effect the registration of their Registrable Securities
and to execute such documents in connection with such registration as the
Company may reasonably request.
9. INDEMNIFICATION AND CONTRIBUTION. In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) The Company will indemnify and hold harmless each Seller,
the officers, directors, partners, agents and employees of each Seller, any
underwriter (as defined in the 1933
-10-
Act) for such Seller and each person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act or the 1934 Act, against any
losses, claims, damages or liabilities (joint or several) to which they may
become subject under the 1933 Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, a "VIOLATION"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such Registration
Statement, including any preliminary Prospectus or final Prospectus contained
therein or any amendments or supplements thereto; (ii) the omission or alleged
omission to state therein 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; or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any state securities law
or any rule or regulation promulgated under the 1933 Act, the 1934 Act or any
state securities law; and the Company will reimburse each such Seller, officer,
director, partner, agent, employee, underwriter or controlling person for any
reasonable legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
Section 9(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld or
delayed), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Seller, underwriter or controlling person.
(b) Each Seller will, severally and not jointly, indemnify and
hold harmless the Company, each of its officers, directors, partners, agents or
employees, each person, if any, who controls the Company within the meaning of
the 1933 Act, any underwriter and any other Seller or any of its directors,
officers, partners, agents or employees or any person who controls such Seller,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, partner, agent, employee, controlling
person or underwriter, or other such Seller or director, officer, partner,
agent, employee or controlling person may become subject, under the 1933 Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are 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 by such Seller expressly for use in connection with such
registration; and each such Seller will, severally and not jointly, reimburse
any reasonable legal or other expenses reasonably incurred by the Company or any
such director, officer, partner, agent, employee, controlling person or
underwriter, other Seller, officer, director, partner, agent, employee or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action. Notwithstanding anything contained in this
Agreement to the contrary, the indemnity agreement contained in this Section
9(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Seller, which consent shall not be unreasonably withheld or delayed;
provided further, that the liability of each Seller in connection with any sale
of Registrable Securities pursuant to a Registration Statement in which a
Violation occurred shall be limited to the percentage of the total liability of
the Sellers in connection with such sale that
-11-
corresponds to such Seller's percentage ownership of the outstanding DynaGen
Common Stock. All obligations of the Sellers for indemnification are several and
not joint.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 9, 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 the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing or conflicting interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, to the extent prejudicial to its ability to
defend such action, shall relieve such indemnifying party of liability to the
indemnified party under this Section 9 to the extent of such prejudice, but the
omission so to deliver written notice to the indemnifying party will not relieve
it of any liability that it may have to any indemnified party otherwise than
under this Section 9.
(d) If recovery is not available under the foregoing
indemnification provisions of this Section 9, for any reason other than as
specified therein, the parties entitled to indemnification by the terms thereof
shall be entitled to contribution to liabilities and expenses in such proportion
as is appropriate to reflect the relative fault of the indemnifying parties and
the indemnified parties, except to the extent that contribution is not permitted
under Section 11(f) of the 1933 Act. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, the parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to correct
and prevent any statement or omission and any other equitable considerations
appropriate under the circumstances, including, without limitation, whether any
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company, on the one hand, or by the Holder of Registrable Securities, on the
other hand. The Company and the Shareholders of the Registrable Securities
covered by such Registration Statement agree that it would not be equitable if
the amount of such contribution were determined by pro rata or per capita
allocation. No seller of Registrable Securities covered by such Registration
Statement or person controlling such Seller shall be obligated to make any
contribution hereunder which in the aggregate exceeds the net proceeds of the
securities sold by such seller, less the aggregate amount of any damages which
such seller and its controlling persons have otherwise been required to pay in
respect of the same claim or any substantially similar claim. The obligations of
such Shareholders to contribute are several in proportion to their respective
ownership of the Registrable Securities covered by such Registration Statement
and not joint.
10. TRANSFERABILITY. The registration rights set forth in this
Agreement are not transferable except to the persons permitted in Section 3, and
subject to the trading restrictions of Section 3. All transferees shall agree in
writing to be bound by all of the provisions of this
-12-
Agreement. The Company may issue stop transfer instructions to its transfer
agent to inform the transfer agent of the resale restrictions imposed by the
provisions of Section 3 hereof.
11. MISCELLANEOUS.
11.1 AMENDMENTS AND WAIVERS. Any provision of this Agreement may be
amended and the observance thereof may only be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the Holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this Section 11.1 shall be binding upon each Holder of Registrable Securities at
the time outstanding, each future Holder of Registrable Securities, and the
Company.
11.2 NOTICES. Any notice required or permitted to be given hereunder
shall be in writing and shall be deemed given at the opening of business on the
first Business Day following the time (a) delivery is made, if by hand delivery,
(b) the facsimile is successfully transmitted, if by telecopier or facsimile
machine, or (c) the Business Day after such notice is deposited with a reputable
overnight courier service, postage prepaid, for next-day delivery, addressed as
set forth below on the signature page or to such other address as any party
shall have previously designated by such a notice.
11.3 GOVERNING LAW. This Agreement shall for all purposes be governed
by and construed in accordance with the internal laws of the State of Delaware
with respect to the enforceability of contracts and in accordance with the
United States securities laws with respect to matters involving securities laws
regarding the registration of the Registrable Shares, both without regard to
conflicts-of-laws principles. The parties hereto agree to submit to the
jurisdiction of the federal and state courts of the State of Delaware with
respect to the breach or interpretation of this Agreement or the enforcement of
any and all rights, duties, liabilities, obligations, powers and other relations
between parties arising under this Agreement.
11.4 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excised from
this Agreement, and the remainder of this Agreement shall be interpreted as if
such provision were so excised and shall be enforceable in accordance with its
remaining terms.
11.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
-13-
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
DYNAGEN, INC.
By: /s/ Dhananjay G. Wadekar
----------------------------------
Title: Executive Vice President
-------------------------------
SHAREHOLDERS:
/s/ Dennis Smith
---------------------------------
Dennis Smith
/s/ Eric C. Hagerstrand
---------------------------------
Eric C. Hagerstrand
/s/ Thomas Canning
---------------------------------
Thomas Canning
-14-
SCHEDULE A
HOLDERS OF REGISTRABLE SECURITIES REGISTRABLE SECURITIES
- --------------------------------- ----------------------
DENNIS SMITH 716,667
ERIC C. HAGERSTRAND 600,000
THOMAS CANNING 350,000
EXHIBIT 4.2
SECURED PROMISSORY NOTE
$1,800,000 June 18, 1997
For value received, the undersigned, DynaGen, Inc., a Delaware
corporation ("Obligor"), hereby promises to pay to the order of Eric Hagerstrand
("Lender"), at his principal address at 11739 Grandstone Lane, Cincinnati, Ohio
45249 or at such other place as may be designated from time to time in writing
by Lender, the principal sum of One Million Eight Hundred Thousand Dollars
($1,800,000) together with interest in arrears from and including the date
hereof on the unpaid principal balance hereunder, at the rate of nine and one
half percent (9.5%) per annum. Interest shall be calculated on the basis of
actual number of days elapsed over a year of 360 days. Notwithstanding any other
provision of this Note, Lender does not intend to charge and Obligor shall not
be required to pay any interest or other fees or charges in excess of the
maximum permitted by applicable law; any payments in excess of such maximum
shall be refunded to Obligor or credited to reduce principal hereunder.
1. Payment of Principal and Interest; Prepayment. (a) Principal, and
interest due thereon, shall be paid as follows:
Date Principal Amount Due
---- --------------------
September 30, 1997 $150,000.00
December 31, 1997 $150,000.00
March 31, 1998 $150,000.00
June 30, 1998 $150,000.00
September 30, 1998 $150,000.00
December 31, 1998 $150,000.00
March 31, 1999 $150,000.00
June 30, 1999 $150,000.00
September 30, 1999 $150,000.00
December 31, 1999 $150,000.00
March 31, 2000 $150,000.00
June 30, 2000 $150,000.00
(b) If any day on which a payment is due pursuant to the terms of this
Note is not a day on which banks in the Commonwealth of Massachusetts are
generally open (a "Business Day"), such payment shall be due on the next
Business Day following. All payments received by Lender hereunder will be
applied first to costs of collection, if any, then to interest and the balance
to principal. Principal and interest shall be payable in lawful money of the
United States of America.
-2-
(c) This Note may be prepaid at any time, without premium or penalty,
in whole or in part, all such prepayments to be applied upon installments of
most remote maturity. Any prepayment of principal shall be accompanied by a
payment of accrued interest in respect of the principal being prepaid.
2. The Merger Agreement; Issuance of the Notes. This Note is one of a
limited number of Notes (individually a "Note" and collectively the "Notes") in
the aggregate principal amount of Five Million Dollars $5,000,000 issued by the
Obligor to the respective Lenders pursuant to the terms of that certain
Agreement and Plan of Merger dated as of March 7, 1997, as amended, by and among
Obligor, Superior Pharmaceutical Company ("Superior"), the Lender and the other
parties named therein (the "Merger Agreement"). Capitalized terms used herein
and not otherwise defined shall have the meaning assigned to them in the Merger
Agreement. The Obligor covenants and agrees to make payments (including
prepayments) on each Note pro-rata in accordance with the respective principal
amount of each such Note.
3. Events of Default. In the event that: (i) the Obligor fails to make
any payment of interest or principal within ten (10) business days following the
due date thereof; (ii) the Obligor makes or enters into an assignment,
reorganization or similar arrangement for the benefit of creditors; (iii) the
Obligor applies for, consents to or cooperates with any appointment of a
receiver, trustee, liquidator, custodian or similar official for it or any part
of the Obligor's assets; (iv) the Obligor commences or seeks relief, or has a
petition or other action commenced against it or seeking relief, under any
bankruptcy, insolvency, reorganization, arrangement, dissolution, custodianship,
conservatorship, liquidation or similar proceeding, and, if commenced against
it, is not discharged within sixty (60) days; (v) there shall have occurred and
be continuing beyond any applicable cure period any default by the Obligor of
any covenant or agreement of the Obligor under this Note or the Merger
Agreement; (vi) all or substantially all of the assets of the Obligor are sold
or the sale by the Obligor of eighty percent (80%) or more of the outstanding
capital stock of the Obligor (each of the preceding to be referred as an "Event
of Default"); then the Lenders holding a majority in principal amount
outstanding under the Notes may, during the continuance of any of the foregoing,
accelerate the entire principal balance outstanding hereunder by written notice
to the Obligor in which event the unpaid balance of this Note and the Notes
shall become immediately due and payable without notice or demand.
4. Covenants of Obligor. Obligor shall cause Superior to comply with
all covenants contained in that certain Amended and Restated Loan and Security
Agreement dated as of June 18, 1997 between The Huntington National Bank and
Superior, which covenants are incorporated herein by reference and shall survive
the termination of such Amended and Restated Loan and Security Agreement.
5. Rights under Merger Agreement. This Note is subject to the rights
and obligations under the Merger Agreement and the exercise by Obligor of any
right of indemnification pursuant to Article X of the Merger Agreement shall not
be deemed an Event of Default under Section 3 of this Note; provided, however,
that such right of indemnification shall not be exercised until the final
resolution or settlement of any claim pursuant to Section 10.6 of the Merger
Agreement.
6. Pledge Agreement. This Note is secured by and entitled to the
benefits of that certain Pledge Agreement of even date herewith by and among
Obligor, Lender and the other parties named therein (the "Pledge Agreement").
7. Costs of Collection. If this Note is not paid in accordance with its
terms, Obligor shall pay to Lender, in addition to principal and accrued
interest thereon, all costs of collection of the principal and
-3-
accrued interest, including, but not limited to, reasonable attorneys' fees,
court costs and other costs for the successful enforcement of payment of this
Note.
8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered mail, return receipt requested, postage prepaid. All notices,
requests, consents and other communications hereunder shall be deemed to have
been given either (i) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth above, (ii) if made by
telecopy or facsimile transmission, at the time that receipt thereof has been
acknowledged by electronic confirmation or otherwise, (iii) if sent by overnight
courier, on the next business day following the day such notice is delivered to
the courier service, or (iv) if sent by registered mail, on the fifth business
day following the date such mailing is made.
9. Governing Law. This Note shall be deemed delivered in and shall be
enforceable in accordance with the internal laws of the State of Ohio, without
reference to its conflicts of law provisions, and shall be construed in
accordance therewith, and shall have the effect of a sealed instrument.
10. Waiver of Presentment and Demand. Obligor hereby expressly waives
presentment, demand, and protest, notice of demand, dishonor and nonpayment of
this Note, and all other notices or demands of any kind in connection with the
delivery, acceptance, performance, default or enforcement hereof, and hereby
consents to any delays, extensions of time, renewals, waivers or modifications
that may be granted or consented to by the holder hereof with respect to the
time of payment or any other provision hereof.
11. Severability. In the event any one or more of the provisions of
this Note shall for any reason be held to be invalid, illegal or unenforceable,
in whole or in part or in any respect, or in the event that any one or more of
the provisions of this Note operate or would prospectively operate to invalidate
this Note, then and in any such event, such provision(s) only shall be deemed
null and void and shall not affect any other provision of this Note and the
remaining provisions of this Note shall remain operative and in full force and
effect and in no way shall be affected, prejudiced, or disturbed thereby.
12. Waiver; Amendment. None of the terms or provision of this Note may
be waived, amended, supplemented or otherwise modified except by a written
instrument executed by Obligor and the holders of a majority in principal amount
outstanding under the Notes. A waiver by such noteholders of any right or remedy
under this Note on any occasion shall not be a bar to exercise of the same right
or remedy on any subsequent occasion or of any other right or remedy at any
time.
[REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK.]
-4-
OBLIGOR:
[Corporate Seal] DynaGen, Inc.
By: /s/ Dhananjay G. Wadekar
---------------------------
Dhananjay G. Wadekar
Attested:
By: /s/ Kenneth J. Gordon
-------------------------
Name: Kenneth J. Gordon
-----------------------
Title: Asst. Secretary
----------------------
EXHIBIT 4.3
SECURED PROMISSORY NOTE
$2,150,000 June 18, 1997
For value received, the undersigned, DynaGen, Inc., a Delaware
corporation ("Obligor"), hereby promises to pay to the order of Dennis B. Smith
("Lender"), at his principal address at 6434 Hamilton-Mason Road, Hamilton, Ohio
45011 or at such other place as may be designated from time to time in writing
by Lender, the principal sum of Two Million One Hundred Fifty Thousand Dollars
($2,150,000) together with interest in arrears from and including the date
hereof on the unpaid principal balance hereunder, at the rate of nine and one
half percent (9.5%) per annum. Interest shall be calculated on the basis of
actual number of days elapsed over a year of 360 days. Notwithstanding any other
provision of this Note, Lender does not intend to charge and Obligor shall not
be required to pay any interest or other fees or charges in excess of the
maximum permitted by applicable law; any payments in excess of such maximum
shall be refunded to Obligor or credited to reduce principal hereunder.
1. Payment of Principal and Interest; Prepayment. (a) Principal, and
interest due thereon, shall be paid as follows:
Date Principal Amount Due
---- --------------------
September 30, 1997 $179,166.67
December 31, 1997 $179,166.67
March 31, 1998 $179,166.67
June 30, 1998 $179,166.67
September 30, 1998 $179,166.67
December 31, 1998 $179,166.67
March 31, 1999 $179,166.67
June 30, 1999 $179,166.67
September 30, 1999 $179,166.67
December 31, 1999 $179,166.67
March 31, 2000 $179,166.67
June 30, 2000 $179,166.67
(b) If any day on which a payment is due pursuant to the terms of this
Note is not a day on which banks in the Commonwealth of Massachusetts are
generally open (a "Business Day"), such payment shall be due on the next
Business Day following. All payments received by Lender hereunder will be
applied first to costs of collection, if any, then to interest and the balance
to principal. Principal and interest shall be payable in lawful money of the
United States of America.
-2-
(c) This Note may be prepaid at any time, without premium or penalty,
in whole or in part, all such prepayments to be applied upon installments of
most remote maturity. Any prepayment of principal shall be accompanied by a
payment of accrued interest in respect of the principal being prepaid.
2. The Merger Agreement; Issuance of the Notes. This Note is one of a
limited number of Notes (individually a "Note" and collectively the "Notes") in
the aggregate principal amount of Five Million Dollars $5,000,000 issued by the
Obligor to the respective Lenders pursuant to the terms of that certain
Agreement and Plan of Merger dated as of March 7, 1997, as amended, by and among
Obligor, Superior Pharmaceutical Company ("Superior"), the Lender and the other
parties named therein (the "Merger Agreement"). Capitalized terms used herein
and not otherwise defined shall have the meaning assigned to them in the Merger
Agreement. The Obligor covenants and agrees to make payments (including
prepayments) on each Note pro-rata in accordance with the respective principal
amount of each such Note.
3. Events of Default. In the event that: (i) the Obligor fails to make
any payment of interest or principal within ten (10) business days following the
due date thereof; (ii) the Obligor makes or enters into an assignment,
reorganization or similar arrangement for the benefit of creditors; (iii) the
Obligor applies for, consents to or cooperates with any appointment of a
receiver, trustee, liquidator, custodian or similar official for it or any part
of the Obligor's assets; (iv) the Obligor commences or seeks relief, or has a
petition or other action commenced against it or seeking relief, under any
bankruptcy, insolvency, reorganization, arrangement, dissolution, custodianship,
conservatorship, liquidation or similar proceeding, and, if commenced against
it, is not discharged within sixty (60) days; (v) there shall have occurred and
be continuing beyond any applicable cure period any default by the Obligor of
any covenant or agreement of the Obligor under this Note or the Merger
Agreement; (vi) all or substantially all of the assets of the Obligor are sold
or the sale by the Obligor of eighty percent (80%) or more of the outstanding
capital stock of the Obligor (each of the preceding to be referred as an "Event
of Default"); then the Lenders holding a majority in principal amount
outstanding under the Notes may, during the continuance of any of the foregoing,
accelerate the entire principal balance outstanding hereunder by written notice
to the Obligor in which event the unpaid balance of this Note and the Notes
shall become immediately due and payable without notice or demand.
4. Covenants of Obligor. Obligor shall cause Superior to comply with
all covenants contained in that certain Amended and Restated Loan and Security
Agreement dated as of June 18, 1997 between The Huntington National Bank and
Superior, which covenants are incorporated herein by reference and shall survive
the termination of such Amended and Restated Loan and Security Agreement.
5. Rights under Merger Agreement. This Note is subject to the rights
and obligations under the Merger Agreement and the exercise by Obligor of any
right of indemnification pursuant to Article X of the Merger Agreement shall not
be deemed an Event of Default under Section 3 of this Note; provided, however,
that such right of indemnification shall not be exercised until the final
resolution or settlement of any claim pursuant to Section 10.6 of the Merger
Agreement.
6. Pledge Agreement. This Note is secured by and entitled to the
benefits of that certain Pledge Agreement of even date herewith by and among
Obligor, Lender and the other parties named therein (the "Pledge Agreement").
7. Costs of Collection. If this Note is not paid in accordance with its
terms, Obligor shall pay to Lender, in addition to principal and accrued
interest thereon, all costs of collection of the principal and
-3-
accrued interest, including, but not limited to, reasonable attorneys' fees,
court costs and other costs for the successful enforcement of payment of this
Note.
8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered mail, return receipt requested, postage prepaid. All notices,
requests, consents and other communications hereunder shall be deemed to have
been given either (i) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth above, (ii) if made by
telecopy or facsimile transmission, at the time that receipt thereof has been
acknowledged by electronic confirmation or otherwise, (iii) if sent by overnight
courier, on the next business day following the day such notice is delivered to
the courier service, or (iv) if sent by registered mail, on the fifth business
day following the date such mailing is made.
9. Governing Law. This Note shall be deemed delivered in and shall be
enforceable in accordance with the internal laws of the State of Ohio, without
reference to its conflicts of law provisions, and shall be construed in
accordance therewith, and shall have the effect of a sealed instrument.
10. Waiver of Presentment and Demand. Obligor hereby expressly waives
presentment, demand, and protest, notice of demand, dishonor and nonpayment of
this Note, and all other notices or demands of any kind in connection with the
delivery, acceptance, performance, default or enforcement hereof, and hereby
consents to any delays, extensions of time, renewals, waivers or modifications
that may be granted or consented to by the holder hereof with respect to the
time of payment or any other provision hereof.
11. Severability. In the event any one or more of the provisions of
this Note shall for any reason be held to be invalid, illegal or unenforceable,
in whole or in part or in any respect, or in the event that any one or more of
the provisions of this Note operate or would prospectively operate to invalidate
this Note, then and in any such event, such provision(s) only shall be deemed
null and void and shall not affect any other provision of this Note and the
remaining provisions of this Note shall remain operative and in full force and
effect and in no way shall be affected, prejudiced, or disturbed thereby.
12. Waiver; Amendment. None of the terms or provision of this Note may
be waived, amended, supplemented or otherwise modified except by a written
instrument executed by Obligor and the holders of a majority in principal amount
outstanding under the Notes. A waiver by such noteholders of any right or remedy
under this Note on any occasion shall not be a bar to exercise of the same right
or remedy on any subsequent occasion or of any other right or remedy at any
time.
[REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK.]
-4-
OBLIGOR:
[Corporate Seal] DynaGen, Inc.
By: /s/ Dhananjay G. Wadekar
-------------------------------
Dhananjay G. Wadekar
Attested:
By: /s/ Kenneth J. Gordon
------------------------
Name: Kenneth J. Gordon
-----------------------
Title: Asst. Secretary
----------------------
EXHIBIT 4.4
SECURED PROMISSORY NOTE
$1,050,000 June 18, 1997
For value received, the undersigned, DynaGen, Inc., a Delaware
corporation ("Obligor"), hereby promises to pay to the order of Thomas L.
Canning ("Lender"), at his principal address at Bicentennial Place, Cincinnati,
Ohio 45249 or at such other place as may be designated from time to time in
writing by Lender, the principal sum of One Million Fifty Thousand Dollars
($1,050,000) together with interest in arrears from and including the date
hereof on the unpaid principal balance hereunder, at the rate of nine and one
half percent (9.5%) per annum. Interest shall be calculated on the basis of
actual number of days elapsed over a year of 360 days. Notwithstanding any other
provision of this Note, Lender does not intend to charge and Obligor shall not
be required to pay any interest or other fees or charges in excess of the
maximum permitted by applicable law; any payments in excess of such maximum
shall be refunded to Obligor or credited to reduce principal hereunder.
1. Payment of Principal and Interest; Prepayment. (a) Principal, and
interest due thereon, shall be paid as follows:
Date Principal Amount Due
---- --------------------
September 30, 1997 $87,500.00
December 31, 1997 $87,500.00
March 31, 1998 $87,500.00
June 30, 1998 $87,500.00
September 30, 1998 $87,500.00
December 31, 1998 $87,500.00
March 31, 1999 $87,500.00
June 30, 1999 $87,500.00
September 30, 1999 $87,500.00
December 31, 1999 $87,500.00
March 31, 2000 $87,500.00
June 30, 2000 $87,500.00
(b) If any day on which a payment is due pursuant to the terms of this
Note is not a day on which banks in the Commonwealth of Massachusetts are
generally open (a "Business Day"), such payment shall be due on the next
Business Day following. All payments received by Lender hereunder will be
applied first to costs of collection, if any, then to interest and the balance
to principal. Principal and interest shall be payable in lawful money of the
United States of America.
-2-
(c) This Note may be prepaid at any time, without premium or penalty,
in whole or in part, all such prepayments to be applied upon installments of
most remote maturity. Any prepayment of principal shall be accompanied by a
payment of accrued interest in respect of the principal being prepaid.
2. The Merger Agreement; Issuance of the Notes. This Note is one of a
limited number of Notes (individually a "Note" and collectively the "Notes") in
the aggregate principal amount of Five Million Dollars $5,000,000 issued by the
Obligor to the respective Lenders pursuant to the terms of that certain
Agreement and Plan of Merger dated as of March 7, 1997, as amended, by and among
Obligor, Superior Pharmaceutical Company ("Superior"), the Lender and the other
parties named therein (the "Merger Agreement"). Capitalized terms used herein
and not otherwise defined shall have the meaning assigned to them in the Merger
Agreement. The Obligor covenants and agrees to make payments (including
prepayments) on each Note pro-rata in accordance with the respective principal
amount of each such Note.
3. Events of Default. In the event that: (i) the Obligor fails to make
any payment of interest or principal within ten (10) business days following the
due date thereof; (ii) the Obligor makes or enters into an assignment,
reorganization or similar arrangement for the benefit of creditors; (iii) the
Obligor applies for, consents to or cooperates with any appointment of a
receiver, trustee, liquidator, custodian or similar official for it or any part
of the Obligor's assets; (iv) the Obligor commences or seeks relief, or has a
petition or other action commenced against it or seeking relief, under any
bankruptcy, insolvency, reorganization, arrangement, dissolution, custodianship,
conservatorship, liquidation or similar proceeding, and, if commenced against
it, is not discharged within sixty (60) days; (v) there shall have occurred and
be continuing beyond any applicable cure period any default by the Obligor of
any covenant or agreement of the Obligor under this Note or the Merger
Agreement; (vi) all or substantially all of the assets of the Obligor are sold
or the sale by the Obligor of eighty percent (80%) or more of the outstanding
capital stock of the Obligor (each of the preceding to be referred as an "Event
of Default"); then the Lenders holding a majority in principal amount
outstanding under the Notes may, during the continuance of any of the foregoing,
accelerate the entire principal balance outstanding hereunder by written notice
to the Obligor in which event the unpaid balance of this Note and the Notes
shall become immediately due and payable without notice or demand.
4. Covenants of Obligor. Obligor shall cause Superior to comply with
all covenants contained in that certain Amended and Restated Loan and Security
Agreement dated as of June 18, 1997 between The Huntington National Bank and
Superior, which covenants are incorporated herein by reference and shall survive
the termination of such Amended and Restated Loan and Security Agreement.
5. Rights under Merger Agreement. This Note is subject to the rights
and obligations under the Merger Agreement and the exercise by Obligor of any
right of indemnification pursuant to Article X of the Merger Agreement shall not
be deemed an Event of Default under Section 3 of this Note; provided, however,
that such right of indemnification shall not be exercised until the final
resolution or settlement of any claim pursuant to Section 10.6 of the Merger
Agreement.
6. Pledge Agreement. This Note is secured by and entitled to the
benefits of that certain Pledge Agreement of even date herewith by and among
Obligor, Lender and the other parties named therein (the "Pledge Agreement").
7. Costs of Collection. If this Note is not paid in accordance with its
terms, Obligor shall pay to Lender, in addition to principal and accrued
interest thereon, all costs of collection of the principal and
-3-
accrued interest, including, but not limited to, reasonable attorneys' fees,
court costs and other costs for the successful enforcement of payment of this
Note.
8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered mail, return receipt requested, postage prepaid. All notices,
requests, consents and other communications hereunder shall be deemed to have
been given either (i) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth above, (ii) if made by
telecopy or facsimile transmission, at the time that receipt thereof has been
acknowledged by electronic confirmation or otherwise, (iii) if sent by overnight
courier, on the next business day following the day such notice is delivered to
the courier service, or (iv) if sent by registered mail, on the fifth business
day following the date such mailing is made.
9. Governing Law. This Note shall be deemed delivered in and shall be
enforceable in accordance with the internal laws of the State of Ohio, without
reference to its conflicts of law provisions, and shall be construed in
accordance therewith, and shall have the effect of a sealed instrument.
10. Waiver of Presentment and Demand. Obligor hereby expressly waives
presentment, demand, and protest, notice of demand, dishonor and nonpayment of
this Note, and all other notices or demands of any kind in connection with the
delivery, acceptance, performance, default or enforcement hereof, and hereby
consents to any delays, extensions of time, renewals, waivers or modifications
that may be granted or consented to by the holder hereof with respect to the
time of payment or any other provision hereof.
11. Severability. In the event any one or more of the provisions of
this Note shall for any reason be held to be invalid, illegal or unenforceable,
in whole or in part or in any respect, or in the event that any one or more of
the provisions of this Note operate or would prospectively operate to invalidate
this Note, then and in any such event, such provision(s) only shall be deemed
null and void and shall not affect any other provision of this Note and the
remaining provisions of this Note shall remain operative and in full force and
effect and in no way shall be affected, prejudiced, or disturbed thereby.
12. Waiver; Amendment. None of the terms or provision of this Note may
be waived, amended, supplemented or otherwise modified except by a written
instrument executed by Obligor and the holders of a majority in principal amount
outstanding under the Notes. A waiver by such noteholders of any right or remedy
under this Note on any occasion shall not be a bar to exercise of the same right
or remedy on any subsequent occasion or of any other right or remedy at any
time.
[REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK.]
-4-
OBLIGOR:
[Corporate Seal] DynaGen, Inc.
By: /s/ Dhananjay G. Wadekar
---------------------------
Dhananjay G. Wadekar
Attested:
By: /s/ Kenneth J. Gordon
-------------------------
Name: Kenneth J. Gordon
-----------------------
Title: Asst. Secretary
----------------------
EXHIBIT 4.5
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of June 18, 1997, made by the undersigned
DynaGen, Inc., a Delaware corporation with its principal office at 99 Erie
Street, Cambridge, Massachusetts 02139 (the "Borrower"), in favor of Eric C.
Hagerstrand ("Hagerstrand"), Dennis Smith ("Smith") and Thomas Canning
("Canning") (individually a "Lender" and collectively the "Lenders").
RECITALS
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Merger by and among the Borrower, DynaGen Acquisition Corp., Superior
Pharmaceutical Company ("Superior") and the Lenders dated March 7, 1997, as
amended (the "Merger Agreement"), the Borrower has agreed to issue secured
promissory notes in the aggregate principal amount of $5,000,000 (individually a
"Note" and collectively the "Notes") to the Lenders, such notes to be secured by
a pledge of the Pledged Securities (as hereinafter defined) ;
WHEREAS, the Borrower is the legal and beneficial owner of the Pledged
Securities.
NOW, THEREFORE, in consideration of the premises, the Borrower hereby
agrees with the Lenders as follows:
1. Defined Terms. Unless otherwise defined herein, terms that are
defined in the Notes and used herein are so used as so defined, and the
following terms shall have the following meanings:
"Code" means the Uniform Commercial Code from time to time in effect in
the Commonwealth of Massachusetts.
"Collateral" means the Pledged Securities and all Proceeds.
"Event of Default" means an Event of Default as defined in Section 3 of
the Notes.
"Obligations" means the unpaid principal of and interest on the Notes
and all other obligations and liabilities of the Borrower to the Lenders,
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with the Notes or this Pledge Agreement and any other document made, delivered
or given in connection therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all reasonable fees and disbursements of counsel
to the Lenders) or otherwise.
"Pledge Agreement" means this Pledge Agreement, as amended,
supplemented or otherwise modified from time to time.
"Pledged Securities" means the shares of capital stock and other
securities listed on Schedule I hereto, together with all stock certificates,
instruments, options or rights of any nature whatsoever that may be issued or
granted to the Borrower in respect of the Pledged Securities, while this Pledge
Agreement is in effect.
Pledge Agreement -- Page 2
"Proceeds" means all "proceeds" as such term is defined in Section
9-306(1) of the Code and, in any event, shall include, without limitation, all
dividends or other income from the Pledged Securities, collections thereon or
distributions with respect thereto.
2. Pledge; Grant of Security Interest. The Borrower hereby delivers to
the Lenders all the Pledged Securities and hereby grants to the Lenders a first
security interest in the Collateral, as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations. The Lenders shall deposit 72, 86
and 42 of the Pledged Securities with Hagerstrand, Smith and Canning,
respectively, c/o Superior Pharmaceutical Company, 1385 Kemper Meadow Drive,
Cincinnati, OH 45240. The Borrower and Lenders acknowledge that the Lenders are
also holding the collateral for the benefit of Sirrom Capital Corporation
("Sirrom") and Odyssey Investment Partners, L.P. ("Odyssey") in accordance with
that certain Subordination Agreement of even date herewith by and among Sirrom
(as collateral agent), the Lenders, the Borrower and Superior.
3. Stock Powers. Concurrently with the delivery to the Lenders of each
certificate or instrument representing the Pledged Securities, the Borrower
shall deliver an undated stock power or other transfer document covering such
certificate or instrument, duly executed in blank.
4. Representations and Warranties. The Borrower represents and warrants
to the Lenders that:
(a) the Borrower is the record and beneficial owner of, and
has good and marketable title to, the Pledged Securities listed on Schedule I,
free of any and all security interests, liens or options in favor of, or claims
of, any other person or entity; and
(b) upon delivery to the Lenders of the certificates and
instruments evidencing the Pledged Securities, the lien granted pursuant to this
Pledge Agreement will constitute a valid, perfected first priority lien on the
Pledged Securities enforceable as such against all creditors of the Borrower and
any person or entities purporting to purchase any Collateral from the Borrower.
5. Covenants. The Borrower covenants and agrees with the Lenders that,
from and after the date of this Pledge Agreement until the Obligations are paid
in full:
(a) If the Borrower shall, as a result of its ownership of the
Pledged Securities, become entitled to receive or shall receive any stock
certificate or other certificate or instrument (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any certificate
or instrument issued in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion of, or in exchange
for any of the Pledged Securities or otherwise in respect thereof, the Borrower
shall accept the same as the Lenders' agent, hold the same in trust for the
Lenders and deliver the same forthwith to the Lenders in the exact form
received, together with an undated stock power or other transfer document
covering such certificate or instrument duly executed in blank to be held by the
Lenders hereunder as additional collateral security for the Obligations. Any
sums paid upon or in respect of the Pledged Securities upon the liquidation or
dissolution of the issuer thereof shall be paid over to the Lenders as
additional collateral security hereunder for the Obligations, and in case any
distribution of capital shall be made on or in respect of the Pledged Securities
or any property shall be distributed upon or with respect to the Pledged
Securities pursuant to the recapitalization or reclassification of the capital
of the issuer thereof or pursuant to the reorganization thereof, the property so
distributed shall be delivered to the Lenders, subject to the terms hereof, as
additional collateral security for the Obligations. If any sums of money or
Pledge Agreement -- Page 3
property so paid or distributed in respect of the Pledged Securities shall be
received by the Borrower, the Borrower shall, until such money or property is
paid or delivered to the Lenders, hold such money or property in trust for the
Lenders, segregated from other funds of the Borrower, as additional collateral
security for the Obligations.
(b) Without the prior written consent of the Lenders holding a
majority of the outstanding principal amount under the Notes, the Borrower shall
not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any
option with respect to, the Collateral, or (ii) create, incur or permit to exist
any lien or option in favor of, or any claim of any person or entity with
respect to, any of the Collateral, or any interest therein. The Borrower will
defend the right, title and interest of the Lenders in and to the Collateral
against the claims and demands of all persons and entities. The Lenders
acknowledge and agree that the Borrower has granted a second security interest
to Sirrom and Odyssey pursuant to the Pledge and Security Agreement of even date
herewith by and among Sirrom (as collateral agent for itself and Odyssey), the
Borrower and Superior.
(c) At any time and from time to time, upon the written
request of the Lenders holding a majority of the outstanding principal amount
under the Notes, and at the sole expense of the Borrower, the Borrower shall
promptly and duly execute and deliver such further instruments and documents and
take such further actions as such Lenders may reasonably request for the
purposes of obtaining or preserving the full benefits of this Pledge Agreement
and of the rights and powers herein granted. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note, other instrument or chattel paper, such note, instrument or
chattel paper shall be promptly delivered to the Lenders, duly endorsed in a
manner satisfactory to the Lenders holding a majority of principal amount under
the Notes, to be held as Collateral pursuant to this Pledge Agreement.
(d) The Borrower agrees to pay, and to save the Lenders
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying any and all stamp, excise, sales or other taxes (exclusive of
taxes based on income, gross receipts, franchise rights and related items) that
may be payable or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated by this Pledge
Agreement.
6. Cash Dividends; Voting Rights. Notwithstanding the provisions of
Section 5(a) hereof, unless an Event of Default shall have occurred, the
Borrower shall be permitted to receive all cash dividends and other cash
distributions paid by the issuer of any of the Pledged Securities in respect of
the Pledged Securities and to exercise all voting and corporate rights with
respect to the Pledged Securities.
7. Rights of the Lenders. (a) If an Event of Default occurs and is
continuing: (i) each Lender shall have the right to receive his pro rata share
of any and all cash dividends paid in respect of the Pledged Securities and make
application thereof to the Obligations in such order as he may determine, and
(ii) each Lender's pro rata share of the Pledged Securities shall be registered
in the name of such Lender or his nominee, and each Lender or his nominee may
thereafter exercise (A) all voting, corporate, and other rights pertaining to
such Pledged Securities at any meeting or otherwise and (B) any and all rights
of conversion, exchange, subscription and any other rights, privileges or
options pertaining to such Pledged Securities as if he were the absolute owner
thereof (including, without limitation, the right to exchange at his discretion
any and all of such Pledged Securities upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate or
partnership structure of the issuer thereof or upon the exercise by the Borrower
or such Lender of any right, privilege or option pertaining to such Pledged
Securities and in connection therewith, the right to deposit and deliver any and
all of such Pledged Securities with any committee, depository, transfer agent,
registrar or other designated agency upon such terms and conditions
Pledge Agreement -- Page 4
as he may determine), all without liability except to account for property
actually received by him, but the Lenders shall have no duty to exercise any
such right, privilege or option and shall not be responsible for any failure to
do so or delay in so doing.
(b) The rights of the Lenders hereunder shall not be
conditioned or contingent upon the pursuit by the Lenders or any of them of any
right or remedy against the Borrower or against any other person or entity that
may be or become liable in respect of all or any part of the Obligations or
against any other collateral security therefor, guarantee thereof or right of
offset with respect thereto. The Lenders shall not be liable for any failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so, nor shall they or any of them be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Borrower or any
other person or entity or to take any other action whatsoever with regard to the
Collateral or any part thereof.
(c) It is expressly acknowledged and agreed by the parties
hereto that the exercise of Buyer's rights contained in Article X of the Merger
Agreement is not an Event of Default under the Notes; provided, however, that
any right of indemnification shall not be exercised until the final resolution
or settlement of any claim pursuant to Section 10.6 of the Merger Agreement.
8. Remedies. If an Event of Default occurs and is continuing, each
Lender may exercise, in addition to all other rights and remedies granted in
this Pledge Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the Code. Without limiting the generality of the foregoing, each
Lender, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Borrower, any guarantor or any other person or entity
(all and each of which demands, defenses, advertisements and notices are hereby
expressly waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon his pro rata share of the Collateral, or any part
thereof, and/or may forthwith sell, assign, give option or options to purchase
or otherwise dispose of and deliver his pro rata share of the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of such Lender or elsewhere upon such terms
and conditions as he may deem advisable and at such prices as he may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Lenders shall have the right upon any such public sale or sales, and,
to the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Borrower, which right or equity is hereby expressly waived and
released. Each Lender shall apply any Proceeds from time to time held by him and
the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Lenders
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as each Lender may elect, and only after such application and after the
payment by such Lender of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need such Lender
account for the surplus, if any, to the Borrower. To the extent permitted by
applicable law, the Borrower waives all claims, damages and demands it may
acquire against the Lenders arising out of the exercise by the Lenders of any of
their rights hereunder. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed reasonable and
proper if given at least ten (10) days before such sale or other disposition.
Pledge Agreement -- Page 5
9. Limitation on Duties Regarding Collateral. The Lenders' sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in their possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Lenders deal with similar
securities, instruments and property for their own account. Neither the Lenders
nor any of their employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Borrower or otherwise.
10. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
11. Severability. Any provision of this Pledge Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. Section Headings. The paragraph headings used in this Pledge
Agreement are for convenience of reference only and are not to affect the
construction hereof or to be taken into consideration in the interpretation
hereof.
13. No Waiver; Cumulative Remedies. The Lenders shall not by any act
(except by a written instrument pursuant to paragraph 14 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Lenders or any of them, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Lenders or any of them of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy that the Lenders would otherwise have on any future occasion. The rights
and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
14. Waivers and Amendments; Successors and Assigns; Governing Law. None
of the terms or provisions of this Pledge Agreement, may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Borrower and the Lenders holding a majority of the outstanding principal
amount under the Notes, provided that any provision of this Pledge Agreement may
be waived in writing by the Lenders holding a majority of the outstanding
principal amount under the Notes in a letter or agreement executed by such
Lenders or by facsimile transmission from such Lenders. This Pledge Agreement
shall be binding upon the successors and assigns of the Borrower and shall inure
to the benefit of the Lenders and their respective successors and assigns. This
Pledge Agreement shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of Ohio without reference to the
conflict of law provisions, United States of America.
15. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered mail, return receipt requested, postage prepaid.
Pledge Agreement -- Page 6
If to the Obligor: DynaGen, Inc.
99 Erie Street
Cambridge, Massachusetts 02139
Attention: President
Telecopier: (617) 354-3902
With a copy to: Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
Attention: John Hession
If to the Lenders Superior Pharmaceutical Company
1385 Kemper Meadow Drive
Cincinnati, OH 45240-1635
Attention: Eric C. Hagerstrand
With a copy to: Taft, Stettinius & Hollister
1800 Star Bank Center
425 Walnut Street
Cincinnati, OH 45202-3957
Attention: Phil Schultz
All notices, requests, consents and other communications hereunder
shall be deemed to have been given either (i) if by hand, at the time of the
delivery thereof to the receiving party at the address of such party set forth
above, (ii) if made by telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (iv) if sent by registered
mail, on the fifth business day following such mailing is made.
16. Counterparts. This Pledge Agreement may be executed in several
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Pledge Agreement -- Page 7
IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to
be duly executed and delivered as of the date first above.
BORROWER:
DynaGen, Inc.
By: /s/ Dhananjay G. Wadekar
-------------------------------
Title: Executive Vice President
-------------------------------
LENDERS:
By: /s/ Eric C. Hagerstrand
-------------------------------
Name: Eric C. Hagerstrand
By: /s/ Dennis Smith
-------------------------------
Name: Dennis Smith
By: /s/ Thomas Canning
-------------------------------
Name: Thomas Canning
Pledge Agreement -- Page 8
Schedule I
----------
Pledged Securities
------------------
NAME OF ISSUER DESCRIPTION OF SECURITIES
- -------------- -------------------------
Superior Pharmaceutical Company 100 shares of Common Stock, no par value
EXHIBIT 4.6
THIS NOTE IS SUBJECT TO THE TERMS OF THAT CERTAIN INTERCREDITOR AGREEMENT OF
EVEN DATE HEREWITH BY AND AMONG MAKER, THE HUNTINGTON NATIONAL BANK, PAYEE,
ODYSSEY INVESTMENT PARTNERS, L.P. AND SUPERIOR PHARMACEUTICAL COMPANY
SECURED PROMISSORY NOTE
$2,000,000 June 18, 1997
FOR VALUE RECEIVED, the undersigned, DYNAGEN, INC., a Delaware
corporation ("Maker"), promises to pay to the order of SIRROM CAPITAL
CORPORATION, a Tennessee corporation ("Payee"; Payee and any subsequent
holder[s] hereof are hereinafter referred to collectively as "Holder"), at the
office of Payee at P. O. Box 30378, Nashville, Tennessee 37241-0378, or at such
other place as Holder may designate to Maker in writing from time to time, the
principal sum of TWO MILLION AND NO/100THS DOLLARS ($2,000,000.00), together
with interest on the outstanding principal balance hereof from the date hereof
at the rate of thirteen and one-half percent (13.5%) per annum (computed on the
basis of a 360-day year); provided, however, that Holder may charge and receive
interest upon any renewal or extension hereof at the greater of (i) the rate set
out above, or (ii) any rate agreed to by the undersigned that is not in excess
of the maximum rate of interest allowed to be charged under applicable law (the
"Maximum Rate") at the time of such renewal or extension.
Interest only on the outstanding principal balance hereof shall be due
and payable monthly, in arrears, with the first installment being payable on the
first (1st) day of August, 1997, and subsequent installments being payable on
the first (1st) day of each succeeding month thereafter until June 17, 2002 (the
"Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full.
The indebtedness evidenced hereby may be prepaid in whole or in part,
at any time and from time to time, without penalty. Any such prepayments shall
be credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
Time is of the essence of this Note. It is hereby expressly agreed that
in the event that any default be made in the payment of principal or interest as
stipulated above, which default is not cured within five (5) business days; or
in the event that any default or event of default shall occur under that certain
Loan Agreement of even date herewith, between Maker, Payee and Odyssey
Investment Partners, L.P. (as may be amended from time to time, the "Loan
Agreement"), which default or event of default is not cured following the giving
of any applicable notice and within any applicable cure period set forth in said
Loan Agreement; or should any default by Maker be made in the performance or
observance of any covenants or
conditions contained in any other instrument or document now or hereafter
evidencing, securing or otherwise relating to the indebtedness evidenced hereby
(subject to any applicable notice and cure period provisions that may be set
forth therein); then, and in such event, the entire outstanding principal
balance of the indebtedness evidenced hereby, together with any other sums
advanced hereunder, under the Loan Agreement and/or under any other instrument
or document now or hereafter evidencing, securing or in any way relating to the
indebtedness evidenced hereby, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without notice to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. Upon the occurrence of any default as set forth
herein, at the option of Holder and without notice to Maker, all accrued and
unpaid interest, if any, shall be added to the outstanding principal balance
hereof, and the entire outstanding principal balance, as so adjusted, shall bear
interest thereafter until paid at an annual rate (the "Default Rate") equal to
the lesser of (i) the rate that is seven percentage points (7.0%) in excess of
the above-specified interest rate, or (ii) the Maximum Rate in effect from time
to time, regardless of whether or not there has been an acceleration of the
payment of principal as set forth herein. All such interest shall be paid at the
time of and as a condition precedent to the curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
actual reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of default
hereunder, acceptance of a past-due installment or other indulgences granted
from time to time, shall be construed as a novation of this Note or as a waiver
of such right of acceleration or of the right of Holder thereafter to insist
upon strict compliance with the terms of this Note or to prevent the exercise of
such right of acceleration or any other right granted hereunder or by applicable
laws. No extension of the time for payment of the indebtedness evidenced hereby
or any installment due hereunder, made by agreement with any person now or
hereafter liable for payment of the indebtedness evidenced hereby, shall operate
to release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
The indebtedness and other obligations evidenced by this Note are
further evidenced by (i) the Loan Agreement and (ii) certain other instruments
and documents, as may be required to protect and preserve the rights of Maker
and Payee as more specifically described in the Loan Agreement.
2
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
MAKER:
DYNAGEN, INC., a Delaware corporation
By: /s/ Dhananjay G. Wadekar
-----------------------------
Title: Executive Vice President
-----------------------------
3
EXHIBIT 4.7
THIS NOTE IS SUBJECT TO THE TERMS OF THAT CERTAIN INTERCREDITOR AGREEMENT OF
EVEN DATE HEREOF BY AND AMONG MAKER, THE HUNTINGTON NATIONAL BANK, PAYEE, SIRROM
CAPITAL CORPORATION AND SUPERIOR PHARMACEUTICAL COMPANY.
SECURED PROMISSORY NOTE
$1,000,000 June 18, 1997
FOR VALUE RECEIVED, the undersigned, DYNAGEN, INC., a Delaware
corporation ("Maker"), promises to pay to the order of ODYSSEY INVESTMENT
PARTNERS, L.P., a Pennsylvania limited partnership ("Payee"; Payee and any
subsequent holder[s] hereof are hereinafter referred to collectively as
"Holder"), at the office of Payee at 950 West Valley Road, Suite 2902, Wayne,
Pennsylvania 19087, or at such other place as Holder may designate to Maker in
writing from time to time, the principal sum of ONE MILLION AND NO/100THS
DOLLARS ($1,000,000.00), together with interest on the outstanding principal
balance hereof from the date hereof at the rate of thirteen and one-half percent
(13.5%) per annum (computed on the basis of a 360-day year); provided, however,
that Holder may charge and receive interest upon any renewal or extension hereof
at the greater of (i) the rate set out above, or (ii) any rate agreed to by the
undersigned that is not in excess of the maximum rate of interest allowed to be
charged under applicable law (the "Maximum Rate") at the time of such renewal or
extension.
Interest only on the outstanding principal balance hereof shall be due
and payable monthly, in arrears, with the first installment being payable on the
first (1st) day of August, 1997, and subsequent installments being payable on
the first (1st) day of each succeeding month thereafter until June 17, 2002 (the
"Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full.
The indebtedness evidenced hereby may be prepaid in whole or in part,
at any time and from time to time, without penalty. Any such prepayments shall
be credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
Time is of the essence of this Note. It is hereby expressly agreed that
in the event that any default be made in the payment of principal or interest as
stipulated above, which default is not cured within five (5) business days; or
in the event that any default or event of default shall occur under that certain
Loan Agreement of even date herewith, between Maker, Payee and Sirrom Capital
Corporation (as may be amended from time to time, the "Loan Agreement"), which
default or event of default is not cured following the giving of any applicable
notice and within any applicable cure period set forth in said Loan Agreement;
or should any default by Maker be made in the performance or observance of any
covenants or
conditions contained in any other instrument or document now or hereafter
evidencing, securing or otherwise relating to the indebtedness evidenced hereby
(subject to any applicable notice and cure period provisions that may be set
forth therein); then, and in such event, the entire outstanding principal
balance of the indebtedness evidenced hereby, together with any other sums
advanced hereunder, under the Loan Agreement and/or under any other instrument
or document now or hereafter evidencing, securing or in any way relating to the
indebtedness evidenced hereby, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without notice to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. Upon the occurrence of any default as set forth
herein, at the option of Holder and without notice to Maker, all accrued and
unpaid interest, if any, shall be added to the outstanding principal balance
hereof, and the entire outstanding principal balance, as so adjusted, shall bear
interest thereafter until paid at an annual rate (the "Default Rate") equal to
the lesser of (i) the rate that is seven percentage points (7.0%) in excess of
the above-specified interest rate, or (ii) the Maximum Rate in effect from time
to time, regardless of whether or not there has been an acceleration of the
payment of principal as set forth herein. All such interest shall be paid at the
time of and as a condition precedent to the curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
actual reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of default
hereunder, acceptance of a past-due installment or other indulgences granted
from time to time, shall be construed as a novation of this Note or as a waiver
of such right of acceleration or of the right of Holder thereafter to insist
upon strict compliance with the terms of this Note or to prevent the exercise of
such right of acceleration or any other right granted hereunder or by applicable
laws. No extension of the time for payment of the indebtedness evidenced hereby
or any installment due hereunder, made by agreement with any person now or
hereafter liable for payment of the indebtedness evidenced hereby, shall operate
to release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
The indebtedness and other obligations evidenced by this Note are
further evidenced by (i) the Loan Agreement and (ii) certain other instruments
and documents, as may be required to protect and preserve the rights of Maker
and Payee as more specifically described in the Loan Agreement.
2
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
MAKER:
DYNAGEN, INC., a Delaware corporation
By: /s/ Dhananjay G. Wadekar
----------------------------
Title: Executive Vice President
----------------------------
3
EXHIBIT 4.8
STOCK PURCHASE WARRANT
This Warrant is issued this 18 day of June, 1997, by DYNAGEN, INC., a
Delaware corporation (the "Company"), to SIRROM CAPITAL CORPORATION, a Tennessee
corporation (SIRROM CAPITAL CORPORATION and any subsequent assignee or
transferee hereof are hereinafter referred to collectively as "Holder" or
"Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM. For and in consideration of SIRROM
CAPITAL CORPORATION making a loan to the Company in an amount of Two Million and
no/100ths Dollars ($2,000,000.00) pursuant to the terms of a secured promissory
note of even date herewith (the "Note") and related loan agreement of even date
herewith (the "Loan Agreement"), and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to Holder the right to purchase 266,700 shares of the Company's common
stock (the "Common Stock"). The shares of Common Stock issuable upon exercise of
this Warrant are hereinafter referred to as the "Shares." This Warrant shall be
exercisable at any time and from time to time from the date hereof until July
31, 2002.
2. EXERCISE PRICE. The exercise price (the "Exercise Price") per share
for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be One Cent ($.01).
3. EXERCISE.
(a) This Warrant may be exercised by the Holder hereof (but
only on the conditions hereinafter set forth) as to all or any
increment or increments of One Thousand (1,000) Shares (or the balance
of the Shares if less than such number), upon delivery of written
notice of intent to exercise to the Company at the following address:
99 Erie Street, Cambridge, Massachusetts 02139 or such other address as
the Company shall designate in a written notice to the Holder hereof,
together with this Warrant and payment to the Company of the aggregate
Exercise Price of the Shares so purchased. The Exercise Price shall be
payable, at the option of the Holder, (i) by certified or bank check,
or (ii) by the surrender of the Note or portion thereof having an
outstanding principal balance equal to the aggregate Exercise Price. In
addition to and without limiting the rights of the Holder 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. In lieu of exercising this Warrant for
cash, the Holder may elect to surrender a portion of 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 = Y (A - B)
---------
A
Where: X = the number of shares of Common Stock to be issued to the
Holder;
Y = the number of shares of Common Stock to otherwise be
purchased under this Warrant;
A = the Fair Market Value of one share of the Common Stock;
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, 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 equal to the number computed using the above formula. No
fractional shares shall be issuable upon exercise of the Conversion Right, and
the number of shares to be issued in accordance with the foregoing formula is
other than a whole number, the Company shall round down to the nearest whole
number the total number of shares to be issued. For purposes of this Section
3(a), the term "Fair Market Value" shall mean the average last sale price per
share of Common Stock during the five (5) trading days immediately preceding the
effective date of conversion. If the Common Stock is not publicly traded at such
time, Fair Market Value shall be determined as follows:
(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a
recognized professional association of business appraisers.
The two appraisers shall determine the value of the shares of
Common Stock which would be issued upon the exercise of the
Warrant, taking into consideration that such shares would
constitute a minority interest, and would lack liquidity, and
further assuming that the sale would be between a willing
buyer and a willing seller, both of whom have full knowledge
of the financial and other affairs of the Company, and neither
of whom is under any compulsion to sell or to buy.
(ii) If the highest of the two appraisals is not more
than 10% more than the lowest of the appraisals, the Fair
Market Value shall be the average of the two appraisals. If
the highest of the two appraisals is 10% or more than the
lowest of the two appraisals, then a third appraiser shall be
appointed by the two appraisers, and if they cannot agree on a
third appraiser, the American Arbitration Association shall
appoint the third appraiser. The third appraiser,
2
regardless of who appoints him or her, shall have the same
qualifications as the first two appraisers.
(iii) The Fair Market Value after the appointment of
the third appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be
paid one-half by the Company and one-half by the Holder.
(b) Upon exercise of this Warrant as aforesaid, the Company
shall as promptly as practicable, and in any event within fifteen (15)
days thereafter, execute and deliver to the Holder of this Warrant a
certificate or certificates for the total number of whole Shares for
which this Warrant is being exercised in such names and denominations
as are requested by such Holder. If this Warrant shall be exercised
with respect to less than all of the Shares, the Holder shall be
entitled to receive a new Warrant covering the number of Shares in
respect of which this Warrant shall not have been exercised, which new
Warrant shall in all other respects be identical to this Warrant. The
Company covenants and agrees that it will pay when due any and all
state and federal issue taxes which may be payable in respect of the
issuance of this Warrant or the issuance of any Shares upon exercise of
this Warrant.
4. COVENANTS AND CONDITIONS. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered
under the Securities Act of 1933, as amended ("Securities Act") or any
state securities laws ("Blue Sky Laws"). This Warrant has been acquired
for investment purposes and not with a view to distribution or resale
and may not be pledged, hypothecated, sold, made subject to a security
interest, or otherwise transferred without (i) an effective
registration statement for such Warrant under the Securities Act and
such applicable Blue Sky Laws, or (ii) an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to the Company and
its counsel, that registration is not required under the Securities Act
or under any applicable Blue Sky Laws (the Company hereby acknowledges
that Bass, Berry & Sims is acceptable counsel). Transfer of the shares
issued upon the exercise of this Warrant shall be restricted in the
same manner and to the same extent as the Warrant and the certificates
representing such Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW
AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT
UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO,
3
OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY,
REGISTRATION UNDER SUCH SECURITIES ACTS OR SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.
(b) The Company covenants and agrees that all Shares which may
be issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive
rights, if any, with respect thereto or to the issuance thereof. The
Company shall at all times reserve and keep available for issuance upon
the exercise of this Warrant such number of authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in
full of this Warrant.
(c) The Company covenants and agrees that it shall not sell
any shares of the Company's capital stock at a price below the fair
market value (as reasonably determined by the Company's board of
directors) of such shares, without the prior written consent of the
Holder hereof. In the event that the Company sells shares of the
Company's capital stock in violation of this Section 4(c), the number
of shares of Common Stock issuable upon exercise of this Warrant shall
be equal to the product obtained by multiplying the number of shares
then issuable pursuant to this Warrant prior to such sale by a
fraction, the numerator of which shall be the product of (x) the total
number of shares of Common Stock outstanding on a fully diluted basis
immediately after such issuance or sale, multiplied by (y) the fair
market value immediately prior to such issuance or sale and the
denominator of which shall be the sum of (i) the number of shares of
Common Stock outstanding on a fully diluted basis immediately prior to
such issuance or sale multiplied by the fair market value immediately
prior to such issuance or sale, plus (ii) the aggregate amount of the
consideration received by the Company upon such issuance or sale (as
illustrated on Schedule I hereto).
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4 hereof,
this Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the Warrant to the Company with written instructions
for such transfer. Upon such presentation for transfer, the Company shall
promptly execute and deliver a new Warrant or Warrants in the form hereof in the
name of the assignee or assignees and in the denominations specified in such
instructions. The Company shall pay all expenses incurred by it in connection
with the preparation, issuance and delivery of Warrants under this Section.
4
6. WARRANT HOLDER NOT SHAREHOLDER; RIGHTS OFFERING. Except as otherwise
provided herein, this Warrant does not confer upon the Holder, as such, any
right whatsoever as a shareholder of the Company. Notwithstanding the foregoing,
if the Company should offer to all of the Company's shareholders the right to
purchase any securities of the Company, then all shares of Common Stock that are
subject to this Warrant shall be deemed to be outstanding and owned by the
Holder and the Holder shall be entitled to participate in such rights offering.
7. [INTENTIONALLY OMITTED]
8. ADJUSTMENT UPON CHANGES IN STOCK.
(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization,
combination of shares of the Company, or other similar event, occurring
after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate price paid upon such exercise, the aggregate
number and class of shares which such Holder would have received if
this Warrant had been exercised immediately prior to such stock split,
stock dividend, recapitalization, combination of shares, or other
similar event. If any adjustment under this Section 8(a) would create a
fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and
the number of shares subject to this Warrant shall be the next higher
number of shares, rounding all fractions upward. Whenever there shall
be an adjustment pursuant to this Section 8(a), the Company shall
forthwith notify the Holder or Holders of this Warrant of such
adjustment, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares,
separation, reorganization or liquidation of the Company, or other
similar event, occurring after the date hereof, as a result of which
shares of Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes of securities
of the Company or another entity, then the Holder exercising this
Warrant shall receive, for the aggregate price paid upon such exercise,
the aggregate number and class of shares which such Holder would have
received if this Warrant had been exercised immediately prior to such
merger, consolidation, exchange of shares, separation, reorganization
or liquidation, or other similar event. If any adjustment under this
Section 8(b) would create a fractional share of Common Stock or a right
to acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares subject to this Warrant
shall be the next higher number of shares, rounding all fractions
upward. Whenever there shall be an adjustment pursuant to this Section
8(b), the Company shall forthwith notify the Holder or Holders of this
Warrant of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment
was calculated.
5
9. PUT AND SUBSTITUTION AGREEMENT.
(a) The Company hereby irrevocably grants and issues to Holder
the right and option to sell to the Company (the "First Put") this
Warrant for a period of 30 days immediately following three years from
the date hereof, at a purchase price (the "First Purchase Price") equal
to $667,000 or Holder may substitute this Warrant for that certain
Stock Purchase Warrant of even date herewith issued by Superior
Pharmaceutical Company, an Ohio corporation and wholly owned subsidiary
of the Company (the "Subsidiary Warrant") ("First Right of
Substitution").
(b) The Company shall pay to the Holder the First Purchase
Price, in cash or certified or cashier's check, in exchange for the
delivery to the Company of this Warrant within forty-five (45) days of
the receipt of written notice, addressed as set forth in Section 3
hereto, from the Holder of its intention to exercise the First Put and
stating the First Purchase Price in accordance with this Section 9.
(c) Neither the First Put nor the First Right of Substitution
may be exercised by Holder if the fair market value of all of the
Shares originally issuable pursuant to this Warrant is equal to or
greater than $667,000 on the date three years from the date hereof.
(d) The fair market value of each share of Common Stock of the
Company issuable pursuant to this Warrant shall be the average last
sale price per share of Common Stock during the five (5) trading days
preceding the date three (3) years from the date hereof or if the
Common Stock is not publicly traded at such time shall be determined as
follows:
(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a
recognized professional association of business appraisers.
The two appraisers shall determine the value of the shares of
Common Stock which would be issued upon the exercise of the
Warrant, taking into consideration that such shares would
constitute a minority interest, and would lack liquidity, and
further assuming that the sale would be between a willing
buyer and a willing seller, both of whom have full knowledge
of the financial and other affairs of the Company, and neither
of whom is under any compulsion to sell or to buy.
(ii) If the highest of the two appraisals is not more
than 10% more than the lowest of the appraisals, the fair
market value shall be the average of the two appraisals. If
the highest of the two appraisals is 10% or more than the
lowest of the two appraisals, then a third appraiser shall be
appointed by the two appraisers, and if they cannot agree on a
third appraiser, the American Arbitration Association shall
appoint the third appraiser. The third appraiser, regardless
of who appoints him or her, shall have the same qualifications
as the first two appraisers.
6
(iii) The fair market value after the appointment of
the third appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be
paid one-half by the Company and one-half by the Holder.
10. PUT AND SUBSTITUTION AGREEMENT.
(a) The Company hereby irrevocably grants and issues to Holder
the right and option to sell to the Company (the "Second Put") this
Warrant for a period of 30 days immediately following five years from
the date hereof, at a purchase price (the "Second Purchase Price")
equal to $1,000,000 or substitute this Warrant for the Subsidiary
Warrant ("Second Right of Substitution").
(b) The Company shall pay to the Holder the Second Purchase
Price, in cash or certified or cashier's check, in exchange for the
delivery to the Company of this Warrant within thirty (30) days of the
receipt of written notice, addressed as set forth in Section 3 hereto,
from the Holder of its intention to exercise the Second Put and stating
the Second Purchase Price in accordance with this Section 10.
(c) Neither the Second Put nor the Second Right of
Substitution may be exercised by Holder if the fair market value of all
of the Shares originally issuable pursuant to this Warrant is equal to
or greater than $1,000,000 on the date five years from the date hereof.
(d) The fair market value of each share of Common Stock of the
Company issuable pursuant to this Warrant shall be the average last
sale price per share of Common Stock during the five (5) trading days
preceding the date five years from the date hereof or if the Common
Stock is not publicly traded at such time shall be determined as
follows:
(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a
recognized professional association of business appraisers.
The two appraisers shall determine the value of the shares of
Common Stock which would be issued upon the exercise of the
Warrant, taking into consideration that such shares would
constitute a minority interest, and would lack liquidity, and
further assuming that the sale would be between a willing
buyer and a willing seller, both of whom have full knowledge
of the financial and other affairs of the Company, and neither
of whom is under any compulsion to sell or to buy.
(ii) If the highest of the two appraisals is not more
than 10% more than the lowest of the appraisals, the fair
market value shall be the average of the two appraisals. If
the highest of the two appraisals is 10% or more than the
lowest of the two appraisals, then a third appraiser shall be
appointed by the
7
two appraisers, and if they cannot agree on a third appraiser,
the American Arbitration Association shall appoint the third
appraiser. The third appraiser, regardless of who appoints him
or her, shall have the same qualifications as the first two
appraisers.
(iii) The fair market value after the appointment of
the third appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be
paid one-half by the Company and one-half by the Holder.
11. REGISTRATION.
(a) The Company and the holders of the Shares agree that if at
any time after the date hereof the Company shall propose to file a
registration statement with respect to the underwritten issuance and
sale by the Company of any of its Common Stock on a form suitable for a
secondary offering, it will give notice in writing to such effect to
the registered holder(s) of the Shares at least thirty (30) days prior
to such filing, and, at the written request of any such registered
holder, made within five (5) business after the receipt of such notice,
will include therein at the Company's cost and expense (including the
fees and expenses of counsel to such holder(s), but excluding
underwriting discounts, commissions and filing fees attributable to the
Shares included therein) such of the Shares as such holder(s) shall
request; provided, however, that if the offering being registered by
the Company is underwritten and if the representative of the
underwriters certifies in writing that the inclusion therein of the
Shares would materially and adversely affect the sale of the securities
to be sold by the Company thereunder, then the Company shall be
required to include in the offering only that number of securities,
including the Shares, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among all selling
shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder, but in no event
shall the total number of Shares included in the offering be less than
the number of securities included in the offering by any other single
selling shareholder).
(b) Whenever the Company undertakes to effect the registration
of any of the Shares, the Company shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement
covering such Shares and use its best efforts to cause such
registration statement to be declared effective by the
Commission as expeditiously as possible and to keep such
registration effective until the earlier of (A) the date when
all Shares covered by the registration statement have been
sold or (B) two hundred seventy (270) days from the effective
date of the registration statement; provided, that before
filing a
8
registration statement or prospectus or any amendment or
supplements thereto, the Company will furnish to each Holder
of Shares covered by such registration statement and the
underwriters, if any, copies of all such documents proposed to
be filed (excluding exhibits, unless any such person shall
specifically request exhibits), which documents will be
subject to the review of such Holders and underwriters, and
the Company will not file such registration statement or any
amendment thereto or any prospectus or any supplement thereto
(including any documents incorporated by reference therein)
with the Commission if (A) the underwriters, if any, shall
reasonably object to such filing or (B) if information in such
registration statement or prospectus concerning a particular
selling Holder has changed and such Holder or the
underwriters, if any, shall reasonably object.
(ii) Prepare and file with the Commission such
amendments and post-effective amendments to such registration
statement as may be necessary to keep such registration
statement effective during the period referred to in Section
11(b)(i) and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered
by such registration statement, and cause the prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed with the Commission pursuant to Rule
424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such numbers
of copies of such registration statement, each amendment
thereto, the prospectus included in such registration
statement (including each preliminary prospectus), each
supplement thereto and such other documents as they may
reasonably request in order to facilitate the disposition of
the Shares owned by them.
(iv) Use its best efforts to register and qualify
under such other securities laws of such jurisdictions as
shall be reasonably requested by any selling Holder and do any
and all other acts and things which may be reasonably
necessary or advisable to enable such selling Holder to
consummate the disposition of the Shares owned by such Holder,
in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a
condition thereto to qualify to transact business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) Promptly notify each selling Holder of the
happening of any event as a result of which the prospectus
included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to
make the statements therein not misleading and, at the request
of any such Holder, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered
to the purchasers of such Shares, such prospectus will not
contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not
misleading and
9
the Holder(s) shall suspend trading at the request of the
Company if upon advice of counsel to the Company, such
suspension is advisable.
(vi) Provide a transfer agent and registrar for all
such Shares not later than the effective date of such
registration statement.
(vii) Enter into such customary agreements (including
underwriting agreements in customary form for a primary
offering) and take all such other actions as the underwriters,
if any, reasonably request in order to expedite or facilitate
the disposition of such Shares (including, without limitation,
effecting a stock split or a combination of shares).
(viii) Make available for inspection by any selling
Holder or any underwriter participating in any disposition
pursuant to such registration statement and any attorney,
accountant or other agent retained by any such selling Holder
or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause
the officers, directors, employees and independent accountants
of the Company to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent
in connection with such registration statement.
(ix) Promptly notify the selling Holder(s) and the
underwriters, if any, of the following events and (if
requested by any such person) confirm such notification in
writing: (A) the filing of the prospectus or any prospectus
supplement and the registration statement and any amendment or
post-effective amendment thereto and, with respect to the
registration statement or any post-effective amendment
thereto, the declaration of the effectiveness of such
documents, (B) any requests by the Commission for amendments
or supplements to the registration statement or the prospectus
or for additional information, (C) the issuance or threat of
issuance by the Commission of any stop order suspending the
effectiveness of the registration statement or the initiation
of any proceedings for that purpose, and (D) the receipt by
the Company of any notification with respect to the suspension
of the qualification of the Shares for sale in any
jurisdiction or the initiation or threat of initiation of any
proceeding for such purposes and the Holder(s) shall suspend
trading at the request of the Company if upon the advice of
counsel to the Company, such suspension is advisable.
(x) Make every reasonable effort to prevent the entry
of any order suspending the effectiveness of the registration
statement and obtain at the earliest possible moment the
withdrawal of any such order, if entered.
(xi) Cooperate with the selling Holder(s) and the
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing the Shares to be sold
and not bearing any restrictive legends, and enable such
10
Shares to be in such lots and registered in such names as the
underwriters may request at least two (2) business days prior
to any delivery of the Shares to the underwriters.
(xii) Provide a CUSIP number for all the Shares not
later than the effective date of the registration statement.
(xiii) [INTENTIONALLY OMITTED]
(xiv) Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and
make generally available to its security holders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than forty-five (45) days after the
end of any twelve-month period (or ninety (90) days, if such
period is a fiscal year) (A) commencing at the end of any
fiscal quarter in which the Shares are sold to underwriters in
a firm or best efforts underwritten offering, or (B) if not
sold to underwriters in such an offering, beginning with the
first month of the first fiscal quarter of the Company
commencing after the effective date of the registration
statement, which statements shall cover such twelve-month
periods.
(c) The Company's obligations under Section 11(a) above with
respect to each holder of Shares are expressly conditioned upon such
holder's furnishing to the Company in writing such information
concerning such holder and the terms of such holder's proposed offering
as the Company shall reasonably request for inclusion in the
registration statement. If any registration statement including any of
the Shares is filed, then the Company shall indemnify each holder
thereof (and each underwriter for such holder and each person, if any,
who controls such underwriter within the meaning of the Securities Act)
from any loss, claim, damage or liability arising out of, based upon or
in any way relating to any untrue statement of a material fact
contained in such registration statement or any omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except for any such
statement or omission based on information furnished in writing by such
holder of the Shares expressly for use in connection with such
registration statement; and such holder shall indemnify the Company
(and each of its officers and directors who has signed such
registration statement, each director, each person, if any, who
controls the Company within the meaning of the Securities Act, each
underwriter for the Company and each person, if any, who controls such
underwriter within the meaning of the Securities Act) and each other
such holder against any loss, claim, damage or liability arising from
any such statement or omission which was made in reliance upon
information furnished in writing to the Company by such holder of the
Shares expressly for use in connection with such registration
statement.
(d) For purposes of this Section 11, all of the Shares shall
be deemed to be issued and outstanding.
11
(e) The rights contained in this Section 11 shall expire as to
any holder of Shares that is able to sell Shares pursuant to Rule 144
under the Securities Act.
12. CERTAIN NOTICES. In case at any time the Company shall propose to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in
stock or make any special dividend or other distribution to the holders
of its Common Stock;
(c) offer for subscription to the holders of any of its Common
Stock any additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the
Company, or consolidate, merge or otherwise combine with, or sell all
or substantially all of its assets to, another corporation; or
(e) voluntarily or involuntarily dissolve, liquidate or wind
up the affairs of the Company;
then, in any one or more of said cases, the Company shall give to the
Holder of the Warrant, by certified or registered mail, (i) at least
twenty (20) days' prior written notice of the date on which the books
of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights
to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up,
and (ii) in the case of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at
least twenty (20) days' prior written notice of the date when the same
shall take place. Any notice required by clause (i) shall also specify,
in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled
thereto, and any notice required by clause (ii) shall specify the date
on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be.
13. EQUITY PARTICIPATION. This Warrant is issued in connection with the
Loan Agreement. It is intended that this Warrant constitute an equity
participation under and pursuant to T.C.A. ss.47-24-101, et seq. and
that such equity participation be permitted under said statutes and not
constitute interest on the Note. If under any circumstances whatsoever,
fulfillment of any obligation of this Warrant, the Loan Agreement, or
any other agreement or document executed in connection with the Loan
Agreement, shall violate the lawful limit of any applicable usury
statute or any other applicable law with regard to obligations of like
character and amount, then the obligation to be fulfilled shall be
reduced to such lawful limit, such that in no event
12
shall there occur, under this Warrant, the Loan Agreement, or any other
document or instrument executed in connection with the Loan Agreement,
any violation of such lawful limit, but such obligation shall be
fulfilled to the lawful limit. If any sum is collected in excess of the
lawful limit, such excess shall be applied to reduce the principal
amount of the Note.
14. GOVERNING LAW. This warrant shall be governed by the laws of the
State of Tennessee applicable to agreements made entirely within the
State.
15. SEVERABILITY. If any provision(s) of this Warrant or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Warrant and the
application of such provisions to other persons or circumstances shall
not be affected thereby and shall be enforced to the greatest extent
permitted by law.
16. COUNTERPARTS. This Warrant may be executed in any number of
counterparts and be different parties to this Warrant in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same Warrant.
17. JURISDICTION AND VENUE. The Company hereby consents to the
jurisdiction of the courts of the State of Tennessee and the United
States District Court for the Middle District of Tennessee, as well as
to the jurisdiction of all courts from which an appeal may be taken
from such courts, for the purpose of any suit, action or other
proceeding arising out of any of its obligations arising under this
Agreement or with respect to the transactions contemplated hereby, and
expressly waives any and all objections it may have as to venue in any
such courts.
13
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
DYNAGEN, INC., a Delaware corporation
By: /s/ Dhananjay G. Wadekar
-----------------------------
Title: Executive Vice President
-----------------------------
SIRROM CAPITAL CORPORATION, a
Tennessee corporation
By: /s/ [Illegible}
-----------------------------
Title: Vice President
-----------------------------
14
SCHEDULE I
ILLUSTRATION OF ANTI-DILUTION PROVISION
Assumptions:
Outstanding Common Stock: 100,000 Shares
(fully diluted)
Fair Market Value per share: $10
New Issuance: 20,000 Shares
New Issue Price (all in) $8
Debt Warrant: 10,000 Shares
FMV of Warrant Shares: $100,000 ($10 x 10,000 shares)
Formula:
10,000 x (120,000 x $10)
---------------------------------
(100,000 x $10) + (20,000 x $8)
10,000 x 1,200,000
---------
1,160,000
10,000 x 1.0345
Adjusted No. of Warrant Shares: 10,344.83
Percentage of Outstanding: 10,344.83 = 0.0862
---------
120,000
FMV of Adj. Warrant Shares: .0862 x 1,160,000 = $100,000
15
EXHIBIT 4.9
STOCK PURCHASE WARRANT
This Warrant is issued this 18th day of June, 1997, by DYNAGEN, INC., a
Delaware corporation (the "Company"), to ODYSSEY INVESTMENT PARTNERS, L.P., a
Pennsylvania limited partnership (ODYSSEY INVESTMENT PARTNERS, L.P. and any
subsequent assignee or transferee hereof are hereinafter referred to
collectively as "Holder" or "Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM. For and in consideration of ODYSSEY
INVESTMENT PARTNERS, L.P. making a loan to the Company in an amount of One
Million and no/100ths Dollars ($1,000,000.00) pursuant to the terms of a secured
promissory note of even date herewith (the "Note") and related loan agreement of
even date herewith (the "Loan Agreement"), the payment of $150, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company hereby grants to Holder the right to purchase 133,300
shares of the Company's common stock (the "Common Stock"). The shares of Common
Stock issuable upon exercise of this Warrant are hereinafter referred to as the
"Shares." This Warrant shall be exercisable at any time and from time to time
two (2) years from the date hereof until July 31, 2002. In exercising its rights
and obligations hereunder, the Company agrees to treat the Holder no less
favorably than it treats Sirrom Capital Corporation ("Sirrom") pursuant to the
Stock Purchase Warrant issued by the Company to Sirrom on the date hereof.
2. EXERCISE PRICE. The exercise price (the "Exercise Price") per
share for this Warrant shall be One Cent ($.01).
3. EXERCISE.
(a) This Warrant may be exercised by the Holder hereof (but
only on the conditions hereinafter set forth) as to all or any
increment or increments of One Thousand (1,000) Shares (or the balance
of the Shares if less than such number), upon delivery of written
notice of intent to exercise to the Company at the following address:
99 Erie Street, Cambridge, Massachusetts 02139 or such other address as
the Company shall designate in a written notice to the Holder hereof,
together with this Warrant and payment to the Company of the aggregate
Exercise Price of the Shares so purchased. The Exercise Price shall be
payable, at the option of the Holder, (i) by certified or bank check,
or (ii) by the surrender of the Note or portion thereof having an
outstanding principal balance equal to the aggregate Exercise Price. In
addition to and without limiting the rights of the Holder 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. In lieu of exercising this Warrant for
cash, the Holder may elect to surrender a portion of 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 = Y (A - B)
A
Where: X = the number of shares of Common Stock to be issued to the
Holder;
Y = the number of shares of Common Stock to otherwise be
purchased under this Warrant;
A = the Fair Market Value of one share of the Common Stock;
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, 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 equal to the number computed using the above formula. No
fractional shares shall be issuable upon exercise of the Conversion Right, and
the number of shares to be issued in accordance with the foregoing formula is
other than a whole number, the Company shall round down to the nearest whole
number the total number of shares to be issued. For purposes of this Section
3(a), the term "Fair Market Value" shall mean the average last sale price per
share of Common Stock during the five (5) trading days immediately preceding the
effective date of conversion. If the Common Stock is not publicly traded at such
time, Fair Market Value shall be determined as follows:
(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a
recognized professional association of business appraisers.
The two appraisers shall determine the value of the shares of
Common Stock which would be issued upon the exercise of the
Warrant, taking into consideration that such shares would
constitute a minority interest, and would lack liquidity, and
further assuming that the sale would be between a willing
buyer and a willing seller, both of whom have full knowledge
of the financial and other affairs of the Company, and neither
of whom is under any compulsion to sell or to buy.
(ii) If the highest of the two appraisals is not more
than 10% more than the lowest of the appraisals, the Fair
Market Value shall be the average of the two appraisals. If
the highest of the two appraisals is 10% or more than the
lowest of the two appraisals, then a third appraiser shall be
appointed by
2
the two appraisers, and if they cannot agree on a third
appraiser, the American Arbitration Association shall appoint
the third appraiser. The third appraiser, regardless of who
appoints him or her, shall have the same qualifications as the
first two appraisers.
(iii) The Fair Market Value after the appointment of
the third appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be
paid by the Company.
(b) Upon exercise of this Warrant as aforesaid, the Company
shall as promptly as practicable, and in any event within fifteen (15)
days thereafter, execute and deliver to the Holder of this Warrant a
certificate or certificates for the total number of whole Shares for
which this Warrant is being exercised in such names and denominations
as are requested by such Holder. If this Warrant shall be exercised
with respect to less than all of the Shares, the Holder shall be
entitled to receive a new Warrant covering the number of Shares in
respect of which this Warrant shall not have been exercised, which new
Warrant shall in all other respects be identical to this Warrant. The
Company covenants and agrees that it will pay when due any and all
state and federal issue taxes which may be payable in respect of the
issuance of this Warrant or the issuance of any Shares upon exercise of
this Warrant.
4. COVENANTS AND CONDITIONS. The above provisions are subject to
the following:
(a) Neither this Warrant nor the Shares have been registered
under the Securities Act of 1933, as amended ("Securities Act") or any
state securities laws ("Blue Sky Laws"). This Warrant has been acquired
for investment purposes and not with a view to distribution or resale
and may not be pledged, hypothecated, sold, made subject to a security
interest, or otherwise transferred without (i) an effective
registration statement for such Warrant under the Securities Act and
such applicable Blue Sky Laws, or (ii) an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to the Company and
its counsel, that registration is not required under the Securities Act
or under any applicable Blue Sky Laws (the Company hereby acknowledges
that Bass, Berry & Sims is acceptable counsel). Transfer of the shares
issued upon the exercise of this Warrant shall be restricted in the
same manner and to the same extent as the Warrant and the certificates
representing such Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW
AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT
UNDER THE ACT OR
3
SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER SUCH
SECURITIES ACTS OR SUCH APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.
(b) The Company covenants and agrees that all Shares which may
be issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive
rights, if any, with respect thereto or to the issuance thereof. The
Company shall at all times reserve and keep available for issuance upon
the exercise of this Warrant such number of authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in
full of this Warrant.
(c) The Company covenants and agrees that it shall not sell
any shares of the Company's capital stock at a price below the fair
market value (as reasonably determined by the Company's board of
directors) of such shares, without the prior written consent of the
Holder hereof. In the event that the Company sells shares of the
Company's capital stock in violation of this Section 4(c), the number
of shares of Common Stock issuable upon exercise of this Warrant shall
be equal to the product obtained by multiplying the number of shares
then issuable pursuant to this Warrant prior to such sale by a
fraction, the numerator of which shall be the product of (x) the total
number of shares of Common Stock outstanding on a fully diluted basis
immediately after such issuance or sale, multiplied by (y) the fair
market value immediately prior to such issuance or sale and the
denominator of which shall be the sum of (i) the number of shares of
Common Stock outstanding on a fully diluted basis immediately prior to
such issuance or sale multiplied by the fair market value immediately
prior to such issuance or sale, plus (ii) the aggregate amount of the
consideration received by the Company upon such issuance or sale (as
illustrated on Schedule I hereto).
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4
hereof, this Warrant may be transferred, in whole or in part, to any person or
business entity, by presentation of the Warrant to the Company with written
instructions for such transfer. Upon such presentation for transfer, the Company
shall promptly execute and deliver a new Warrant or Warrants in the form hereof
in the name of the assignee or assignees and in the denominations specified in
such instructions. The Company shall pay all expenses incurred by it in
connection with the preparation, issuance and delivery of Warrants under this
Section.
4
6. WARRANT HOLDER NOT SHAREHOLDER; RIGHTS OFFERING. Except as
otherwise provided herein, this Warrant does not confer upon the Holder, as
such, any right whatsoever as a shareholder of the Company. Notwithstanding the
foregoing, if the Company should offer to all of the Company's shareholders the
right to purchase any securities of the Company, then all shares of Common Stock
that are subject to this Warrant shall be deemed to be outstanding and owned by
the Holder and the Holder shall be entitled to participate in such rights
offering.
7. [INTENTIONALLY OMITTED]
8. ADJUSTMENT UPON CHANGES IN STOCK.
(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization,
combination of shares of the Company, or other similar event, occurring
after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate price paid upon such exercise, the aggregate
number and class of shares which such Holder would have received if
this Warrant had been exercised immediately prior to such stock split,
stock dividend, recapitalization, combination of shares, or other
similar event. If any adjustment under this Section 8(a) would create a
fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and
the number of shares subject to this Warrant shall be the next higher
number of shares, rounding all fractions upward. Whenever there shall
be an adjustment pursuant to this Section 8(a), the Company shall
forthwith notify the Holder or Holders of this Warrant of such
adjustment, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares,
separation, reorganization or liquidation of the Company, or other
similar event, occurring after the date hereof, as a result of which
shares of Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes of securities
of the Company or another entity, then the Holder exercising this
Warrant shall receive, for the aggregate price paid upon such exercise,
the aggregate number and class of shares which such Holder would have
received if this Warrant had been exercised immediately prior to such
merger, consolidation, exchange of shares, separation, reorganization
or liquidation, or other similar event. If any adjustment under this
Section 8(b) would create a fractional share of Common Stock or a right
to acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares subject to this Warrant
shall be the next higher number of shares, rounding all fractions
upward. Whenever there shall be an adjustment pursuant to this Section
8(b), the Company shall forthwith notify the Holder or Holders of this
Warrant of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment
was calculated.
5
9. PUT AND SUBSTITUTION AGREEMENT.
(a) The Company hereby irrevocably grants and issues to Holder
the right and option to sell to the Company (the "Put") this Warrant
for a period of 30 days immediately following five years from the date
hereof, at a purchase price (the "Purchase Price") equal to the lower
of (i) an amount based upon seven times the Company's consolidated
EBITDA for the twelve-month period ending May 31, 2002, or (ii)
$500,000 or Holder may substitute this Warrant for that certain Stock
Purchase Warrant of even date herewith issued by Superior
Pharmaceutical Company, an Ohio corporation and wholly owned subsidiary
of the Company (the "Subsidiary Warrant") ("Right of Substitution").
For purposes of this Warrant "EBITDA" means net income, plus interest
expense, plus income taxes, plus depreciation expense, plus
amortization expense, all determined in accordance with GAAP. If Sirrom
Capital Corporation executes its right of substitution with respect to
its Stock Purchase Warrant of even date herewith on or prior to five
(5) years from the date hereof, then the Company shall notify Holder,
and Holder may exercise the Right of Substitution on the same terms as
Sirrom Capital Corporation.
(b) The Company shall pay to the Holder, in cash or certified
or cashier's check, the Purchase Price in exchange for the delivery to
the Company of this Warrant within forty-five (45) days of the receipt
of written notice, addressed as set forth in Section 3 hereto, from the
Holder of its intention to exercise the Put and stating the Purchase
Price in accordance with this Section 9.
(c) Neither the Put nor the Right of Substitution may be
exercised by Holder if the fair market value of all of the Shares
originally issuable pursuant to this Warrant is equal to or greater
than $3.75 per Share on the date five years from the date hereof.
(d) The fair market value of each share of Common Stock of the
Company issuable pursuant to this Warrant shall be the average last
sale price per share of Common Stock regular way on the principal
national securities exchange on which the Company's common stock is
listed and traded during the five (5) trading days immediately
preceding the date five years from the date hereof or if the Common
Stock is not so publicly traded at such time shall be determined as
follows:
(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a
recognized professional association of business appraisers.
The two appraisers shall determine the value of the shares of
Common Stock which would be issued upon the exercise of the
Warrant, taking into consideration that such shares would
constitute a minority interest, and would lack liquidity, and
further assuming that the sale would be between a willing
buyer and a willing seller, both of whom have full knowledge
of the financial and other affairs of the Company, and neither
of whom is under any compulsion to sell or to buy.
6
(ii) If the highest of the two appraisals is not more
than 10% more than the lowest of the appraisals, the fair
market value shall be the average of the two appraisals. If
the highest of the two appraisals is 10% or more than the
lowest of the two appraisals, then a third appraiser shall be
appointed by the two appraisers, and if they cannot agree on a
third appraiser, the American Arbitration Association shall
appoint the third appraiser. The third appraiser, regardless
of who appoints him or her, shall have the same qualifications
as the first two appraisers.
(iii) The fair market value after the appointment of
the third appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be
paid by the Company.
10. REGISTRATION.
(a) The Company and the holders of the Shares agree that if at
any time after the date hereof the Company shall propose to file a
registration statement with respect to the underwritten issuance and
sale by the Company any of its Common Stock on a form suitable for a
secondary offering, it will give notice in writing to such effect to
the registered holder(s) of the Shares at least thirty (30) days prior
to such filing, and, at the written request of any such registered
holder, made within five (5) business days after the receipt of such
notice, will include therein at the Company's cost and expense
(including the fees and expenses of counsel to such holder(s), but
excluding underwriting discounts, commissions and filing fees
attributable to the Shares included therein) such of the Shares as such
holder(s) shall request; provided, however, that if the offering being
registered by the Company is underwritten and if the representative of
the underwriters certifies in writing that the inclusion therein of the
Shares would materially and adversely affect the sale of the securities
to be sold by the Company thereunder, then the Company shall be
required to include in the offering only that number of securities,
including the Shares, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among all selling
shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder, but in no event
shall the total number of Shares included in the offering be less than
the number of securities included in the offering by any other single
selling shareholder).
7
(b) Whenever the Company undertakes to effect the registration
of any of the Shares, the Company shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement
covering such Shares and use its best efforts to cause such
registration statement to be declared effective by the
Commission as expeditiously as possible and to keep such
registration effective until the earlier of (A) the date when
all Shares covered by the registration statement have been
sold or (B) two hundred seventy (270) days from the effective
date of the registration statement; provided, that before
filing a registration statement or prospectus or any amendment
or supplements thereto, the Company will furnish to each
Holder of Shares covered by such registration statement and
the underwriters, if any, copies of all such documents
proposed to be filed (excluding exhibits, unless any such
person shall specifically request exhibits), which documents
will be subject to the review of such Holders and
underwriters, and the Company will not file such registration
statement or any amendment thereto or any prospectus or any
supplement thereto (including any documents incorporated by
reference therein) with the Commission if (A) the
underwriters, if any, shall reasonably object to such filing
or (B) if information in such registration statement or
prospectus concerning a particular selling Holder has changed
and such Holder or the underwriters, if any, shall reasonably
object.
(ii) Prepare and file with the Commission such
amendments and post-effective amendments to such registration
statement as may be necessary to keep such registration
statement effective during the period referred to in Section
10(b)(i) and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered
by such registration statement, and cause the prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed with the Commission pursuant to Rule
424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such numbers
of copies of such registration statement, each amendment
thereto, the prospectus included in such registration
statement (including each preliminary prospectus), each
supplement thereto and such other documents as they may
reasonably request in order to facilitate the disposition of
the Shares owned by them.
(iv) Use its best efforts to register and qualify
under such other securities laws of such jurisdictions as
shall be reasonably requested by any selling Holder and do any
and all other acts and things which may be reasonably
necessary or advisable to enable such selling Holder to
consummate the disposition of the Shares owned by such Holder,
in such jurisdictions; provided, however, that the Company
shall not be required in connection
8
therewith or as a condition thereto to qualify to transact
business or to file a general consent to service of process in
any such states or jurisdictions.
(v) Promptly notify each selling Holder of the
happening of any event as a result of which the prospectus
included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to
make the statements therein not misleading and, at the request
of any such Holder, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered
to the purchasers of such Shares, such prospectus will not
contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not
misleading and the Holder(s) shall suspend trading at the
request of the Company if upon advice of counsel to the
Company, such suspension is advisable.
(vi) Provide a transfer agent and registrar for all
such Shares not later than the effective date of such
registration statement.
(vii) Enter into such customary agreements (including
underwriting agreements in customary form for a primary
offering) and take all such other actions as the underwriters,
if any, reasonably request in order to expedite or facilitate
the disposition of such Shares (including, without limitation,
effecting a stock split or a combination of shares).
(viii) Make available for inspection by any selling
Holder or any underwriter participating in any disposition
pursuant to such registration statement and any attorney,
accountant or other agent retained by any such selling Holder
or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause
the officers, directors, employees and independent accountants
of the Company to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent
in connection with such registration statement.
(ix) Promptly notify the selling Holder(s) and the
underwriters, if any, of the following events and (if
requested by any such person) confirm such notification in
writing: (A) the filing of the prospectus or any prospectus
supplement and the registration statement and any amendment or
post-effective amendment thereto and, with respect to the
registration statement or any post-effective amendment
thereto, the declaration of the effectiveness of such
documents, (B) any requests by the Commission for amendments
or supplements to the registration statement or the prospectus
or for additional information, (C) the issuance or threat of
issuance by the Commission of any stop order suspending the
effectiveness of the registration statement or the initiation
of any proceedings for that purpose, and (D) the receipt by
the Company of any notification with respect to the suspension
of the qualification of the Shares for sale in any
jurisdiction or the initiation or threat of initiation
9
of any proceeding for such purposes and the Holder(s) shall
suspend trading at the request of the Company if upon advice
of counsel to the Company, such suspension is advisable.
(x) Make every reasonable effort to prevent the entry
of any order suspending the effectiveness of the registration
statement and obtain at the earliest possible moment the
withdrawal of any such order, if entered.
(xi) Cooperate with the selling Holder(s) and the
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing the Shares to be sold
and not bearing any restrictive legends, and enable such
Shares to be in such lots and registered in such names as the
underwriters may request at least two (2) business days prior
to any delivery of the Shares to the underwriters.
(xii) Provide a CUSIP number for all the Shares not
later than the effective date of the registration statement.
(xiii) [Intentionally Omitted]
(xiv) Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and
make generally available to its security holders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than forty-five (45) days after the
end of any twelve-month period (or ninety (90) days, if such
period is a fiscal year) (A) commencing at the end of any
fiscal quarter in which the Shares are sold to underwriters in
a firm or best efforts underwritten offering, or (B) if not
sold to underwriters in such an offering, beginning with the
first month of the first fiscal quarter of the Company
commencing after the effective date of the registration
statement, which statements shall cover such twelve-month
periods.
(c) The Company's obligations under Section 11(a) above with
respect to each holder of Shares are expressly conditioned upon such
holder's furnishing to the Company in writing such information
concerning such holder and the terms of such holder's proposed offering
as the Company shall reasonably request for inclusion in the
registration statement. If any registration statement including any of
the Shares is filed, then the Company shall indemnify each holder
thereof (and each underwriter for such holder and each person, if any,
who controls such underwriter within the meaning of the Securities Act)
from any loss, claim, damage or liability arising out of, based upon or
in any way relating to any untrue statement of a material fact
contained in such registration statement or any omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except for any such
statement or omission based on information furnished in writing by such
holder of the Shares expressly for use in connection with such
registration statement; and such holder shall indemnify the Company
(and each of its officers and directors
10
who has signed such registration statement, each director, each person,
if any, who controls the Company within the meaning of the Securities
Act, each underwriter for the Company and each person, if any, who
controls such underwriter within the meaning of the Securities Act) and
each other such holder against any loss, claim, damage or liability
arising from any such statement or omission which was made in reliance
upon information furnished in writing to the Company by such holder of
the Shares expressly for use in connection with such registration
statement.
(d) For purposes of this Section 10, all of the Shares shall
be deemed to be issued and outstanding.
(e) The rights contained in this Section 10 shall expire as to
any holder of Shares that is able to sell Shares pursuant to Rule 144
under the Securities Act.
11. CERTAIN NOTICES. In case at any time the Company shall propose
to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in
stock or make any special dividend or other distribution to the holders
of its Common Stock;
(c) offer for subscription to the holders of any of its
Common Stock any additional shares of stock in any class or other
rights;
(d) reorganize, or reclassify the capital stock of the
Company, or consolidate, merge or otherwise combine with, or sell all
or substantially all of its assets to, another corporation; or
(e) voluntarily or involuntarily dissolve, liquidate or
wind up the affairs of the Company;
then, in any one or more of said cases, the Company shall give to the
Holder of the Warrant, by certified or registered mail, (i) at least
twenty (20) days' prior written notice of the date on which the books
of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights
to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up,
and (ii) in the case of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at
least twenty (20) days' prior written notice of the date when the same
shall take place. Any notice required by clause (i) shall also specify,
in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled
thereto, and any notice required by clause (ii) shall specify the date
on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon
such reorganization,
11
reclassification, consolidation, merger, sale, dissolution, liquidation
or winding up, as the case may be.
12. GOVERNING LAW. This warrant shall be governed by the laws of
the State of Tennessee applicable to agreements made entirely within
the State.
13. SEVERABILITY. If any provision(s) of this Warrant or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Warrant and the
application of such provisions to other persons or circumstances shall
not be affected thereby and shall be enforced to the greatest extent
permitted by law.
14. COUNTERPARTS. This Warrant may be executed in any number of
counterparts and be different parties to this Warrant in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same Warrant.
15. JURISDICTION AND VENUE. The Company hereby consents to the
jurisdiction of the courts of the State of Tennessee and the United
States District Court for the Middle District of Tennessee, as well as
to the jurisdiction of all courts from which an appeal may be taken
from such courts, for the purpose of any suit, action or other
proceeding arising out of any of its obligations arising under this
Agreement or with respect to the transactions contemplated hereby, and
expressly waives any and all objections it may have as to venue in any
such courts.
12
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
DYNAGEN, INC., a Delaware corporation
By: /s/ Dhananjay G. Wadekar
----------------------------------
Title: Executive Vice President
-------------------------------
ODYSSEY INVESTMENT PARTNERS, L.P., a
Pennsylvania limited partnership
By: ODYSSEY ASSOCIATES, L.P., its General
Partner
By: ODYSSEY ASSOCIATES, INC., its General
Partner
By: /s/ ILLEGIBLE
----------------------------------
Title: President
-------------------------------
13
SCHEDULE I
----------
Illustration of Anti-Dilution Provision
---------------------------------------
Assumptions:
Outstanding Common Stock: 100,000 Shares
(fully diluted)
Fair Market Value per share: $10
New Issuance: 20,000 Shares
New Issue Price (all in) $8
Debt Warrant: 10,000 Shares
FMV of Warrant Shares: $100,000 ($10 x 10,000 shares)
Formula:
10,000 x (120,000 x $10)
---------------------------------
(100,000 x $10) + (20,000 x $8)
10,000 x 1,200,000
---------
1,160,000
10,000 x 1.0345
Adjusted No. of Warrant Shares: 10,344.83
Percentage of Outstanding: 10,344.83 = 0.0862
-----------
120,000
FMV of Adj. Warrant Shares: .0862 x 1,160,000 = $100,000
14
EXHIBIT 4.10
PLEDGE AND SECURITY AGREEMENT
(Borrower)
THIS PLEDGE AND SECURITY AGREEMENT ("Agreement"), dated June 18, 1997,
by and between DynaGen, Inc., a Delaware corporation ("Borrower") and Sirrom
Capital Corporation, a Tennessee corporation, with its principal office and
place of business in Nashville, Tennessee ("Sirrom") for itself and in its
capacity as Collateral Agent pursuant to that certain Collateral Agent Agreement
of even date herewith (the "Agency Agreement") by and between Sirrom and Odyssey
Investment Partners, L.P., a Pennsylvania limited partnership ("Odyssey")
(Sirrom and Odyssey are sometimes referred to herein collectively as "Lenders").
WITNESSETH:
WHEREAS, pursuant to a Loan Agreement of even date herewith, by and
between Borrower and Lenders (the "Loan Agreement"), Lenders have made loans to
Borrower in the original principal amount of $3,000,000 (the "Loan"). The Loan
is evidenced by a Secured Promissory Note of even date herewith, in the
principal amount of $2,000,000, made and executed by Borrower, payable to the
order of Sirrom (herein referred to, together with any extensions,
modifications, renewals and/or replacements thereof, as the "Sirrom Note") and a
Secured Promissory Note of even date herewith, in the principal amount of
$1,000,000, made and executed by Borrower, payable to the order of Odyssey
(herein referred to, together with any extensions, modifications, renewals
and/or replacements thereof, as the "Odyssey Note") (the Sirrom Note and the
Odyssey Note are sometimes referred to herein collectively as the "Notes") .
WHEREAS, it is a condition of Lenders' agreement to make the Loan to
Borrower that Borrower execute and deliver this Agreement to Sirrom.
AGREEMENT:
NOW THEREFORE, in consideration of the foregoing, and to enable
Borrower to obtain loans and other extensions of credit from Lenders and to
induce Lenders to have transactions with Borrower, Borrower agrees as follows:
1. Pledge. Subject to the terms of that certain Subordination Agreement
of even date herewith among Lenders and former shareholders of Superior
Pharmaceutical Company, as collateral security for the payment and performance
in full of the Obligations (as hereinafter defined), Borrower hereby pledges,
hypothecates, assigns, transfers, sets over and delivers unto Sirrom, and hereby
grants to Sirrom a security interest in, the collateral described in Schedule A
hereto, together with the proceeds thereof and all cash, additional
1
securities or other property at any time and from time to time receivable or
otherwise distributable in respect of, in exchange for, or in substitution for
any and all such pledged securities (all such pledged securities, the proceeds
thereof, cash, dividends, additional securities and other property now or
hereafter pledged hereunder are hereinafter collectively called the "Pledged
Securities");
TO HAVE AND TO HOLD the Pledged Securities, together with all rights,
titles, interests, powers, privileges and preferences pertaining or incidental
thereto, unto Sirrom, its successors and assigns; subject, however, to the
terms, covenants and conditions hereinafter set forth.
Upon delivery to Sirrom, the Pledged Securities shall be accompanied by
executed stock powers in blank and by such other instruments or documents as
Sirrom or its counsel may reasonably request. Each delivery of certificates for
such Pledged Securities shall be accompanied by a schedule showing the number of
shares and the numbers of the certificates theretofore and then pledged
hereunder, which schedule shall be attached hereto as Schedule A and made a part
hereof. Each schedule so delivered shall supersede any prior schedule so
delivered.
2. Obligations Secured. This Agreement is made, and the security
interest created hereby is granted to Sirrom, to secure full payment and
performance of any and all indebtedness and other obligations of Borrower to
Lenders, direct or contingent, however evidenced or denominated, and however or
whenever incurred, including without limitation indebtedness incurred pursuant
to any past, present or future commitment of Lenders to Borrower (regardless of
the class of such future advance), including, without limitation, the
indebtedness evidenced by the Notes (collectively the "Obligations"). Lenders
acknowledge that the Collateral is presently pledged to certain other note
holders who have a first priority pledge pursuant to a Pledge Agreement dated
June 18, 1997 by and between Borrower, Thomas Canning, Eric C. Hagerstrand and
Dennis Smith (the "Senior Pledge Agreement").
3. Representations and Warranties. Borrower hereby represents and
warrants to Sirrom (a) that Borrower is the legal and equitable owner of the
Pledged Securities, that Borrower has the complete and unconditional authority
to pledge the Pledged Securities being pledged by it, and holds the same free
and clear of all liens, charges, encumbrances and security interests of every
kind and nature except for the pledge pursuant to the Senior Pledge Agreement in
favor of Thomas Canning, Eric C. Hagerstrand and Dennis Smith, which shall be
released on or before June 18, 2000 at which time Sirrom shall have a first
priority pledge and security interest in the Pledged Securities; and (b) that no
consent or approval of any governmental body or regulatory authority, or of any
other party, which was or is necessary to the validity of this pledge, has not
been obtained. Borrower further represents and warrants that no part of the
Obligations will be used to purchase or carry any "margin stock", as defined in
Regulation U of the Board of Governors of the Federal Reserve System, 12 CFR ss.
221.1 et seq.
2
4. Registration in Nominee Name; Denominations. Subject to the rights
of the pledgees under the Senior Pledge Agreement, Sirrom shall have the right
(in its sole and absolute discretion) to hold the certificates representing the
Pledged Securities in its own name or in the name of the Borrower, endorsed or
assigned in blank or in favor of Sirrom. Borrower shall deliver to Sirrom all
certificates representing the Pledged Securities promptly upon receipt by
Borrower. Upon request and delivery of certificates representing the Pledged
Securities to the issuer of the Pledged Securities, Sirrom may have such Pledged
Securities registered in the name of Sirrom or any nominee or nominees of
Sirrom. Sirrom shall at all times have the right to exchange the certificates
representing Pledged Securities for certificates of smaller or larger
denominations for any purpose consistent with this Agreement.
5. Remedies Upon Default. Subject to the priority interest in the
Collateral and the rights contained in the Senior Pledge Agreement, upon the
occurrence of a default or Event of Default under the Loan Agreement, or in the
event that any representation or warranty herein shall prove to have been untrue
when made, then, and in any such event, Sirrom shall have all of the rights,
privileges and remedies of a secured party under the Uniform Commercial Code as
in effect in the State of Tennessee, and without limiting the foregoing, Sirrom
may (a) collect any and all amounts payable in respect of the Pledged Securities
and exercise any and all rights, privileges, options and remedies of the holder
and owner thereof, and (b) sell, transfer and/or negotiate the Pledged
Securities, or any part thereof, at public or private sale, for cash, upon
credit or for future delivery as Sirrom shall deem appropriate, including
without limitation, at Sirrom's option, the purchase of all or any part of said
securities at any public sale by Sirrom. Upon consummation of any sale, Sirrom
shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Pledged Securities so sold. Each such purchaser at any
such sale shall hold the property sold absolutely, free from any claim or right
on the part of the Borrower, and the Borrower hereby waives (to the extent
permitted by law) all rights of redemption, stay or appraisal that Borrower now
has or may at any time in the future have under any rule of law or statute now
existing or hereinafter enacted. Borrower hereby expressly waives notice to
redeem and notice of the time, place and manner of such sale.
6. Application of Proceeds. The proceeds of the sale of Pledged
Securities sold pursuant to Section 5 hereof, and the proceeds of the exercise
of any of Sirrom's other remedies hereunder, shall be applied by Sirrom as
follows:
First: To the payment of all costs and expenses incurred by Sirrom in
connection with any such sale, including, but not limited to, all court costs
and the reasonable fees and expenses of counsel for Sirrom in connection
therewith, and
Second: To the payment in full of the Obligations, first to accrued
interest and thereafter to the unpaid principal amount thereof, to the extent
not previously paid by Borrower, and
3
Third: The excess, if any, shall be paid to Borrower or any other
person lawfully thereunto entitled.
7. Reimbursement of Lender. Borrower agrees to reimburse Sirrom, upon
demand, for all expenses, including without limitation reasonable attorney's
fees, incurred by it in connection with the administration and enforcement of
this Agreement, and agrees to indemnify Sirrom and hold it harmless from and
against any and all liability incurred by it hereunder or in connection
herewith, unless such liability shall be due to willful misconduct or gross
negligence on the part of Sirrom.
8. No Waiver. No failure on the part of Sirrom to exercise, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy by Sirrom preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies are cumulative and
are not exclusive of any other remedies provided by law.
9. Limitation of Lender Liability. Except in the case of their
intentional malfeasance or gross negligence, neither Sirrom nor its partners,
employees, agents, representatives, or nominees shall be liable for any loss
incurred by Borrower arising out of any act or omission of Sirrom, its partners,
employees, agents, representatives or nominees, with respect to the care,
custody or preservation of the Pledged Securities.
10. Binding Agreement. This Agreement and the terms, covenants and
conditions hereof shall be binding upon and inure to the benefit of the parties
hereto and to all holders of indebtedness secured hereby and their respective
successors and assigns.
11. Governing Law; Amendments. This Agreement shall in all respects be
construed in accordance with and governed by the laws of the State of Tennessee
applicable to contracts to be wholly performed in such state. This Agreement may
not be amended or modified, nor may any of the Pledged Securities be released
except in a writing signed by the party to be charged therewith. Time is of the
essence with respect to the obligations of Borrower pursuant to this Agreement.
12. Further Assurances. Borrower agrees to do such further acts and
things, and to execute and deliver such additional conveyances, assignments,
agreements and instruments, as Sirrom may at any time request in connection with
the administration and enforcement of this Agreement or relative to the Pledged
Securities or any part thereof or in order to better assure and confirm unto
Sirrom its rights and remedies hereunder.
13. Headings. Section numbers and headings used herein are for
convenience only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
4
IN WITNESS WHEREOF, Borrower and Sirrom have executed this Agreement,
or have caused this Agreement to be duly executed by a duly authorized officer,
all as of the day first above written.
BORROWER:
DYNAGEN, INC.,
a Delaware corporation
By: /s/ Dhananjay G. Wadekar
----------------------------
Title: Executive Vice President
----------------------------
SIRROM:
SIRROM CAPITAL CORPORATION, a
Tennessee corporation, for itself
and in its capacity as Collateral
Agent pursuant to the Agency
Agreement
By: /s/ [Illegible]
----------------------------
Title: Vice President
----------------------------
5
SCHEDULE A
PLEDGED SECURITIES
No. of
Issuer Shares Class Certificate Nos.
- ----------------------- ------ ------- ----------------
Superior Pharmaceutical 100 Common 11, 12 and 13
Company
6
EXHIBIT 4.11
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF EFFECTIVE REGISTRATION STATEMENTS UNDER
SUCH ACT AND STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE DEBTOR THAT SUCH REGISTRATION IS NOT REQUIRED.
DYNAGEN, INC.
SUBORDINATED NOTE
$500,000.00 JUNE 18, 1997
FOR VALUE RECEIVED, DYNAGEN, INC., a Delaware corporation (the
"DEBTOR"), hereby promises to pay on or before September 30, 1997, to the order
of COUTTS & CO. AG, a Swiss corporation acting as agent for certain non-U.S.
persons (the "LENDER"), the principal sum of FIVE HUNDRED THOUSAND DOLLARS
($500,000.00) or such lesser principal amount then outstanding, together with
all accrued and unpaid interest thereon. Interest on the principal amount of
this Note will accrue from and including the date hereof until and including the
date such principal amount is paid, at a rate equal to seven percent (7.0%) per
annum. Any interest due but remaining unpaid after payment is due shall bear
interest at the rate equal to 10.0% per annum. Principal and interest shall be
payable in lawful money of the United States of America, in immediately
available funds, at the principal office of the Lender or at such other place as
the legal holder may designate from time to time in writing to the Debtor.
Interest shall be computed on the basis of a 360-day year and a 30-day month.
The principal and interest on this Note are secured by a certain Pledge
and Security Agreement among the Lender, the Debtor and each of Dr. Indu Muni
and Dhananjay Wadekar as pledgors of certain shares of Common Stock of the
Debtor (the "Pledge Agreement").
This Note is being issued in connection with a certain Bridge Financing
Purchase Agreement dated the date hereof. The outstanding balance of this Note
shall be immediately due and payable upon an Event of Default as defined in such
Bridge Financing Purchase Agreement. The Lender's sole and limited recourse in
the Event of a Default, as defined in the Bridge Financing Purchase Agreement,
is as to the Collateral as set forth in the Pledge Agreement. The Debtor may
prepay this Note at any time prior to demand for payment, acceleration or
maturity.
The Lender and any holder of this Note acknowledge and agree that the
principal and interest on this Note are unsecured by the Debtor and the rights
and obligations represented by this Note are subordinated in right of payment to
secured indebtedness of the Debtor for money borrowed from commercial bank
lenders or other institutional lenders or other holders of Senior Debt, whether
now existing or hereafter arising, as further defined in the Bridge Financing
Purchase Agreement.
The Debtor agrees to pay all costs, charges and expenses incurred by
the Lender (including, without limitation, costs of collection, court costs, and
reasonable attorneys' fees and disbursements) in connection with the successful
enforcement of the Lender's rights under this Note (all such costs, charges and
expenses being herein referred to as "COSTS"). The Debtor agrees that any delay
on the part of the Lender in exercising any rights hereunder will not operate as
a waiver of such rights, and further agrees
-2-
that any payments received hereunder will be applied first to Costs, then to
interest and the balance to principal. The Lender shall not by any act, delay,
omission, or otherwise be deemed to waive any of its rights or remedies, and no
waiver of any kind shall be valid unless in writing and signed by the Lender.
Presentment for payment, demand, protest, notice of protest and notice of
nonpayment are hereby waived. Irrespective of any claim, defense, credit or
offset Debtor may have against Lender, these shall not discharge or modify
Debtor's absolute, independent obligation to repay Lender any sums advanced to
Debtor pursuant to this Note.
This Note applies to, inures to the benefit of, and binds the
successors and assigns of the parties hereto. This Note is made under and shall
be governed by and construed in accordance with the internal laws of, and
enforced by the courts located within, the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Debtor has executed this Note as an instrument
under seal as of the date first written above.
DYNAGEN, INC.
By: /s/ Dhananjay G. Wadekar
--------------------------
Title: Executive Vice President
--------------------------
ATTEST: /s/ Dennis R. Bilodeau
--------------------------
Title: Controller
--------------------------
EXHIBIT 4.12
BRIDGE FINANCING PURCHASE AGREEMENT
BRIDGE FINANCING PURCHASE AGREEMENT, made as of June 16, 1997, by and
between Coutts & Co. AG, a Swiss corporation, acting as agent for certain
non-U.S. persons, with a principal place of business at Talstrasse 59, Zurich,
CH-8022 (the "INVESTOR") and DYNAGEN, INC., a Delaware corporation with a
principal place of business at 99 Erie Street, Cambridge, Massachusetts (the
"COMPANY").
W I T N E S S E T H:
WHEREAS, the Investor desires to provide financing to the Company upon
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the respective undertakings,
covenants and agreements of the parties set forth herein, the parties hereby
agree as follows:
1. ISSUANCE OF NOTE AND SHARES OF COMMON STOCK; PLEDGE OF STOCK . The
Company has authorized the issuance and sale to the Investor of the Company's
Subordinated Note, due September 30, 1997, in the original aggregate principal
amount of up to $1,0500,000. The Subordinated Note shall be substantially in the
form set forth in Exhibit A hereto and is herein referred to as a "NOTE," which
term shall also include any notes delivered in exchange or replacement therefor.
The Note shall be due September 30, 1997, with interest payable upon maturity of
7% per annum. The Company has also authorized the issuance and sale to the
Investor of 30150,000 shares of the Company's Common Stock (the "SHARES") in
connection with the making of the loan represented by this Agreement. The Note
and the Shares are sometimes referred to herein as the "SECURITIES."
The obligations under the Note are secured by a pledge of 600,000
shares of Common Stock of the Company by Dhananjay G. Wadekar and 400,000 shares
of Common Stock of the Company by Dr. Indu Muni pursuant to a Pledge and
Security Agreement attached hereto as Exhibit B.
The Company agrees to use the full proceeds from the sale of the Note
and Shares solely for working capital and for the acquisition of the business
and operations of Superior Pharmaceutical Company.
2. THE CLOSING. The Company agrees to issue and sell to the Investor,
and, subject to and in reliance upon the representations, warranties, terms and
conditions of this Agreement, the Investor agrees to purchase, the Note and the
Shares for the aggregate purchase price of $1,0500,000. Such purchase and sale
shall take place at a closing (the "CLOSING") to be held at the office of Testa,
Hurwitz & Thibeault, LLP, 125 High Street, Boston, Massachusetts, on June 10,
1997 at 2:00 P.M., or on such other date and at such time as may be mutually
agreed upon. At the Closing, the Company will issue and deliver to the Investor
(i) one Note, payable to the order of the Investor, in the principal amount of
up to $1,0500,000, and (ii) within, five (5) business days of the Closing, issue
one certificate for the Shares, registered in the name of such Investor, against
-2-
delivery at the Closing of a check or a receipt of a wire transfer in payment of
the purchase price for the Note to be purchased by the Investor.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Investor as follows:
3.1 AUTHORIZATION; OWNERSHIP OF SECURITIES. This Agreement and
the Note and the Shares have been duly authorized by the Company. This Agreement
and the Note and the Shares, when executed and delivered by the Company, will be
valid and binding obligations of the Company, enforceable in accordance with
their terms. The Shares, when issued and delivered in accordance with this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will not be subject to any liens or restrictions, rights of
first refusal or other preemptive rights imposed by law or contract, or through
the Company, except restrictions on transfer imposed by applicable securities
laws.
3.2 ORGANIZATION, GOOD STANDING AND AUTHORITY OF THE COMPANY.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has the requisite power
and authority to own all of its properties and assets and to carry on its
business as it is now being conducted. The Company is duly qualified to do
business and is in good standing in each jurisdiction in which it owns or leases
property or engages in any activity which would require it to qualify to do
business as a foreign corporation and in which the failure to qualify could have
a material adverse effect upon the business or operations of the Company.
3.3 AUTHORIZATION. The Company has full corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and no other corporate proceedings or actions on the
part of the Company (including any consents or waivers required for the issuance
of the Securities) are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement constitutes the valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as enforcement hereof may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to or affecting the rights of
creditors generally and subject to the fact that equitable remedies are
discretionary and may not be granted by a court of competent jurisdiction.
3.4 NO DEFAULT. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby do not and will not constitute a default under
any of the terms, conditions or provisions of the Articles of Organization or
By-Laws of the Company, or any material contract, agreement or arrangement to
which the Company is a party or by which it is bound.
-3-
3.5 CAPITAL STOCK OF THE COMPANY. As of the date hereof, the
authorized capital stock of the Company consists of 75,000,000 shares of Common
Stock $.01 par value per share, of which 30,122,477 shares were issued and
outstanding and 10,000,000 shares of preferred stock, $.01 par value per share
of which no shares were issued and outstanding. All of such outstanding shares
have been validly issued and are fully paid and nonassessable. No shares of
Common 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, and (ii) there are no outstanding convertible debt securities of
the Company. As of the Closing Date and before giving effect to the acquisition
of Superior Pharmaceutical Company by the Company pursuant to an Agreement and
Plan of Merger dated March 7, 1997, as amended (i) the authorized capital stock
of the Company will be (x) 75,000,000 shares of Common Stock, $.01 par value per
share, of which 30,347,477 shares will be issued and outstanding and (y)
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 41,000 are
issued and outstanding, and (B) 7,500 have been designated as Series B Preferred
Stock, all of which are issued and outstanding and (ii) the Company has reserved
for issuance no more than 11,000,000 shares of Common Stock with respect to the
matters described below in clause (i) of this Section.
3.6 COMPLIANCE WITH LAWS. To its best knowledge, the Company
holds all material licenses, approvals, certificates, permits and authorizations
necessary for the lawful conduct of its business and is in material compliance
with all applicable federal, state and local laws, rules, regulations and
ordinances.
3.7 SEC DOCUMENTS. None of the filings of the Company with the
SEC since July 1, 1996 (the "SEC DOCUMENTS") contained, as of 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 July 1, 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.
The Company has registered its Common Stock pursuant to the Securities
Exchange Act of 1934 (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
-4-
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 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 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.
3.8 LITIGATION. Except as set forth in the SEC Documents, there is no
action, suit, proceeding at law or in equity, arbitration or administrative or
other proceeding by or before (or to the best knowledge, information and belief
of the Company any investigation by) any governmental or other instrumentality
or agency, pending, or, to the best knowledge, information and belief of the
Company, threatened against or affecting the Company, or any of its properties
or rights which could materially and adversely affect the right or ability of
the Company to carry on its business as now conducted, or which could materially
and adversely affect the condition, whether financial or otherwise, or
properties of the Company; and the Company does not know of any valid basis for
any such action, proceeding or investigation. Except as set forth in the SEC
Documents, the Company is not subject to any judgment, order or decree entered
in any lawsuit or proceeding which may have a material adverse effect on any of
its operations, or on its ability to acquire any property or conduct business in
any area.
3.9 INTELLECTUAL PROPERTY; PROPRIETARY RIGHTS. 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, 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.
-5-
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor
represents and warrants to the Company as follows:
4.1 INVESTMENT. The Investor is acquiring the Securities for
its own account, for investment purposes only, and not with a view to the sale,
assignment, transfer or other distribution thereof. The Investor recognizes that
the Securities, have not been registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), and the Investor agrees that it will not sell,
assign, transfer, or otherwise distribute the Securities in violation of the
Securities Act.
4.2 INVESTIGATION. The Investor is knowledgeable and
experienced in the making of investments, is aware that the Company is an
early-stage company and therefore speculative investment, is able to bear the
economic risk of loss of its investment in the Company, has been granted the
opportunity to make a thorough investigation of the affairs of the Company, and
has availed itself of such opportunity either directly or through its authorized
representatives. The foregoing representation shall not be construed in any way
so as to limit, define or in any way affect the Company's liability arising from
the warranties and representations of the Company in this or any other agreement
with the Investor or any affiliate of the Investor.
4.3 RELIANCE. The Investor has been advised that the
Securities have not been and are not being registered under the Securities Act
or under the "blue sky" laws of any jurisdiction and that the Company in issuing
the Securities is relying upon, among other things, the representations and
warranties of the Investor contained in this Section 4 in concluding that such
issuance is a "private offering" and does not require compliance with the
registration provisions of the Securities Act.
4.4 LEGENDS. The Investor understands and agrees that each
instrument representing the Securities delivered to the Investor hereunder shall
bear legends substantially as follows:
"The Securities represented hereby have not been registered
under the Securities Act of 1933, as amended, and may not be
sold or transferred unless the registration provisions of said
Act have been complied with or unless in the opinion of
counsel satisfactory to the Company both as to opinion and
counsel compliance with such provisions is not required."
5. REGISTRATION RIGHTS.
5.1 "PIGGY-BACK" REGISTRATIONS. If at any time the Company
shall determine to register for its own account under the Securities Act any of
its equity securities, it shall send to the Investor as a holder of Registrable
Securities (as defined below) and any holder who has the right to acquire
Registrable Securities, written notice of such determination and, if within
twenty (20) days after receipt of such notice, such holder shall so request in
writing, the Company shall include in such registration statement all or any
part of the Registrable Securities such holder requests to be registered.
"REGISTRABLE SECURITIES" shall consist of any and all of the Shares held by an
Investor.
-6-
If, in connection with any offering involving an underwriting
of Common Stock to be issued by the Company, the managing underwriter shall
impose a limitation on the number of Securities of such Common Stock which may
be included in the registration statement because, in its judgment, such
limitation is necessary to effect an orderly public distribution, then the
Company shall be obligated to include in such registration statement only such
limited portion of the Registrable Securities with respect to which such holder
has requested inclusion hereunder; provided, however, that the Company shall not
so exclude any Registrable Securities unless it has first excluded any
securities to be offered and sold by officers and employees of the Company and
by holders who do not have contractual rights as of the date hereof to include
such securities in any registration unless the holders obtained such contractual
rights pursuant to equity financings consummated by the Company immediately
following the date hereof relating to the acquisition of Superior Pharmaceutical
Company and the creation of working capital for the business of the Company.
No incidental right under this Section 5.1 shall be construed
to limit any registration required under Section 5.2.
This Section 5.1 shall not apply to a registration of
Securities of Common Stock on Form S-8 or Form S-4 or their then equivalents
relating to an offering of Common Stock to be issued solely in connection with
any acquisition of any entity or business or otherwise issuable in connection
with any stock option, stock purchase or similar employee benefit plan.
5.2. SHORT-FORM REGISTRATIONS ON FORM S-3. In addition to the
rights provided the holder of Registrable Securities in Sections 5.1 above, if
the registration of Registrable Securities under the Securities Act can be
effected on a Form S-3 registration form (or any similar form having similar
requirements promulgated by the Commission), then the Company shall, upon the
written request of the Investor and as expeditiously as possible (but in no
event later than ninety (90) days from the date of the Investor's request),
effect qualification and registration under the Securities Act on Form S-3 of
all or such portion of the Registrable Securities as each Investor shall
specify.
The Company shall not be required to effect more than two (2)
registrations in the aggregate pursuant to this Section 5.2 and not more than
one during any twelve-month period. The Company's obligations under this Section
5.2 shall expire five (5) years after the issuance of the Shares by the Company.
Any offering of Registrable Securities pursuant to this Section shall have a
minimum market value to the public (valued at the public offering price of the
Company's Securities as of the effective date of the registration statement for
such offering) of at least $200,000 of the securities so registered.
5.3. EXPENSES. In the case of each registration effected under
Section 5.1 or 5.2, the Company shall bear all reasonable costs and expenses of
each such registration on behalf of the selling holders of Registrable
Securities (except as otherwise prohibited by state securities law or
regulation), including, but not limited to, the Company's printing, legal and
accounting fees and expenses, SEC and NASD filing fees and "Blue Sky" fees and
expenses and the reasonable fees and disbursements of one counsel competent in
securities matters for the selling holders of Registrable Securities in
connection with the registration of their Registrable Securities; provided,
-7-
however, that the Company shall have no obligation to pay or otherwise bear any
portion of the underwriters' commissions or discounts attributable to the
Registrable Securities being offered and sold by the holders of Registrable
Securities, or the fees and expenses of counsel for the selling holders of
Registrable Securities in connection with the registration of the Registrable
Securities. The Company shall pay all expenses (including reasonable attorneys'
fees subject to the limitations set forth immediately above) of the holders of
the Registrable Securities in connection with any registration initiated
pursuant to this Section 5 which is withdrawn, delayed or abandoned.
6. SUBORDINATION. The Company, for itself, its successors and assigns,
covenants and agrees, and the Investor and each successor holder of the Note by
his or its acceptance thereof, likewise covenants and agrees, that
notwithstanding any other provision of this Agreement or the Note, the payment
of the principal of and interest on the Note shall be subordinated in right of
payment, to the extent and in the manner hereinafter set forth, to the prior
payment in full of all Senior Debt (as hereinafter defined) at any time
outstanding. The provisions of this Section shall constitute a continuing
representation to all persons who, in reliance upon such provisions, become the
holders of or continue to hold Senior Debt, and such provisions are made for the
benefit of the holders of Senior Debt, and such holders are hereby made obligees
hereunder the same as if their names were written herein as such, and they or
any of them may proceed to enforce such provisions against the Company or
against the holder of the Note without the necessity of joining the Company as a
party.
(A) PAYMENT OF SENIOR DEBT. In the event of any insolvency or
bankruptcy proceedings, or any receivership, liquidation, reorganization or
other similar proceedings in connection therewith, relative to the Company or to
its property, or, in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company or distribution or marshaling of
its assets or any composition with creditors of the Company, whether or not
involving insolvency or bankruptcy, then and in any such event all Senior Debt
shall be paid in full before any payment or distribution of any character,
whether in cash, securities or other property, shall be made on account of the
Note; and any such payment or distribution, except securities which are
subordinated and junior in right of payment to the payment of all Senior Debt
then outstanding in terms of substantially the same tenor as this Section, which
would, but for the provisions hereof, be payable or deliverable in respect of
the Note shall be paid or delivered directly to the holders of Senior Debt (or
their duly authorized representatives), in the proportions in which they hold
the same, until all Senior Debt shall have been paid in full, and the holder of
the Note by becoming a holder thereof shall have designated and appointed the
holder or holders of Senior Debt (and their duly authorized representatives) as
his or its agents and attorney-in-fact to demand, sue for, collect and receive
such Senior Debt holder's ratable share of all such payments and distributions
and to file any necessary proof of claim therefor and to take all such other
action in the name of the holder of the Note or otherwise, as such Senior Debt
holders (or their authorized representatives) may determine to be necessary or
appropriate for the enforcement of this Section. The Investor and each successor
holder of the Note by its acceptance thereof agrees to execute, at the request
of the Company, a separate agreement with any holder of Senior Debt on the terms
set forth in this Section, and to take all such other action
-8-
as such holder or such holder's representative may request in order to enable
such holder to enforce all claims upon or in respect of such holder's ratable
share of the Note.
(B) NO PAYMENT ON THE NOTE UNDER CERTAIN CONDITIONS. In the
event that any default occurs in the payment of the principal of or interest on
any Senior Debt (whether as a result of the acceleration thereof by the holders
of such Senior Debt or otherwise) and during the continuance of such default for
a period up to ninety (90) days and thereafter if judicial proceedings shall
have been instituted with respect to such defaulted payment, or (if a shorter
period) until such payment has been made or such default has been cured or
waived in writing by such holder of Senior Debt then and during the continuance
of such event no payment of principal or interest on the Note shall be made by
the Company or accepted by any holder of the Note who has received notice from
the Company or from a holder of Senior Debt of such events.
(C) SCOPE OF SECTION. The provisions of this Section are
intended solely for the purpose of defining the relative rights of the holder of
the Note, on the one hand, and the holders of the Senior Debt, on the other
hand. Nothing contained in this Section or elsewhere in this Agreement or the
Note is intended to or shall impair, as between the Company, its creditors other
than the holders of Senior Debt, and the holder of the Note, the obligation of
the Company, which is unconditional and absolute, to pay to the holder of the
Note the principal of and interest on the Note as and when the same shall become
due and payable in accordance with the terms thereof, or to affect the relative
rights of the holder of the Note and creditors of the Company other than the
holders of the Senior Debt, nor shall anything herein or therein prevent the
holder of the Note from accepting any payment with respect to such Note or
exercising all remedies otherwise permitted by applicable law upon default under
such Note, subject to the rights, if any, under this Section of the holders of
Senior Debt in respect of cash, property or securities of the Company received
by the holder of the Note.
(D) SURVIVAL OF RIGHTS. The right of any present or future
holder of Senior Debt to enforce subordination of the Note pursuant to the
provisions of this Section shall not at any time be prejudiced or impaired by
any act or failure to act on the part of the Company or any such holder of
Senior Debt, including, without limitation, any forbearance, waiver, consent,
compromise, amendment, extension, renewal, or taking or release of security of
or in respect of any Senior Debt or by noncompliance by the Company with the
terms of such subordination regardless of any knowledge thereof such holder may
have or otherwise be charged with.
(E) SENIOR DEBT DEFINED. The term "Senior Debt" shall mean all
Indebtedness of the Company for money borrowed from banks or other institutional
lenders, including any extension or renewals thereof, whether outstanding on the
date hereof or thereafter created or incurred, which is not by its terms
subordinate and junior to or on a parity with the Note and which is permitted
hereby at the time it is created or incurred, including Sirrom Capital and
Odyssey Investment Partners L.P.
7. EVENTS OF DEFAULT. If any of the following events ("EVENTS OF
DEFAULT") shall occur and be continuing, then there shall be a default under the
Note:
-9-
(a) The Company shall fail to pay any installment of principal
of or interest or premium on the Note upon maturity; or
(b) Any representation or warranty made by the Company in this
Agreement shall prove to have been incorrect when made in any material respect;
or
(c) The Company shall be involved in financial difficulties as
evidenced (i) by its admitting in writing its inability to pay its debts
generally as they become due; (ii) by its commencement of a voluntary case under
Title 11 of the United States Code as from time to time in effect, or by its
authorizing, by appropriate proceedings of its Board of Directors or other
governing body, the commencement of such a voluntary case; (iii) by its filing
an answer or other pleading admitting or failing to deny the material
allegations of a petition filed against it commencing an involuntary case under
said Title 11, or seeking, consenting to or acquiescing in the relief therein
provided, or by its failing to controvert timely the material allegations of any
such petition; (iv) by the entry of an order for relief in any involuntary case
commenced under said Title 11; (v) by its seeking relief as a debtor under any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors, or by its consenting to or acquiescing in such relief;
(vi) by the entry of an order by a court of competent jurisdiction (a) finding
it to be bankrupt or insolvent, (b) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its creditors,
or (c) assuming custody of, or appointing a receiver or other custodian for, all
or a substantial part of its property; or (vii) by its making an assignment for
the benefit of, or entering into a composition with, its creditors, or
appointing or consenting to the appointment of a receiver or other custodian for
all or a substantial part of its property; or
(d) The Company shall fail to effect a registration on Form
S-3 under Section 5.2 within 120 days of the Investor's request for registration
under the Securities Act.
Upon the occurrence of an Event of Default which is not
remedied, the Investor's sole and limited recourse is to proceed against the
Collateral described in the Pledge and Security Agreement. The Investor shall
have no recourse against the Company upon an Event of Default.
8. AMENDMENT. This Agreement may not be modified or amended except by a
written instrument duly executed and delivered by or on behalf of the Investor
and the Company.
9. BINDING EFFECT. This Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns.
10. COUNTERPARTS. This Agreement may be executed simultaneously in two
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11. GOVERNING LAW. This Agreement and the respective rights and
obligations of the parties hereto shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without giving
effect to principles of conflicts of laws.
-9-
IN WITNESS WHEREOF, the Company and the Investor have executed
this Bridge Financing Purchase Agreement as an instrument under seal as of the
date first set forth above.
DYNAGEN, INC.
By: /s/ Indu A. Muni
-----------------------------
President
COUTTS & CO. AG
ACTING AS AGENT FOR CERTAIN NON-U.S. PERSONS
/s/ [Illegible]
- ------------------------------------
By:
Title: Senior Vice President
/s/ [Illegible]
- ------------------------------------
By:
Title: Senior Vice President
EXHIBIT 4.13
DYNAGEN, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES A 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 June 16, 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 A 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 50,000 shares of the class of authorized Preferred
Stock, par value $.01 per share, of the Corporation is hereby created as the
Series A 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 16th day of June, 1997.
DYNAGEN, INC.
By: /s/ Dhananjay G. Wadekar
---------------------------
Dhananjay G. Wadekar,
Executive Vice President and
Chairman of the Board
ATTEST:
/s/ Kenneth J. Gordon
- ---------------------
Kenneth J. Gordon
Assistant Secretary
EXHIBIT A
---------
A. DESCRIPTION AND DESIGNATION OF SERIES A PREFERRED STOCK
-------------------------------------------------------
1. DESIGNATION AND DEFINITIONS.
---------------------------
(A) DESIGNATION. A total of 50,000 shares of the Corporation's
previously undesignated Preferred Stock, $.01 par value, shall be designated as
the "Series A Preferred Stock." The original issue price per share of the Series
A 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 or Mandatory Conversion Date
(as defined in Section 5(c) below), as the case may be.
(ii) "CONVERSION DATE" means each date on which the
Corporation receives by telecopy written notice in accordance with Section 5(j)
hereof from a holder of Series A Preferred Stock that such holder elects to
convert shares of its Series A Preferred Stock.
(iii) "CORPORATION FAILURE" means the failure to have
the Registration Statement declared effective by the SEC other than due to the
material failure, whether by act or omission, by a holder or holders of Series A
Preferred Stock to fulfill its or their obligations under the Registration
Rights Agreement between the Corporation and the initial purchasers of the
Series A Preferred Stock (the "Registration Rights Agreement").
(iv) "Effective 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 the date on which the SEC declares effective the
Registration Statement.
(v) "ISSUE DATE" means, with respect to each share of
Series A Preferred Stock held by any holder, the date on which the Corporation
originally issued such share to such holder (irrespective of any subsequent
transfer or other disposition of such share to any other holder).
-2-
(vi) "REGISTRATION STATEMENT" means the registration
statement to be filed by the Corporation under the Securities Act of 1933, as
amended, to register the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock in accordance with the terms of the Registration Rights
Agreement.
(vii) "SEC" means the United States Securities and
Exchange Commission.
2. DIVIDENDS.
(A) STATED DIVIDEND. Commencing on the Issue Date and
continuing thereafter, a dividend will accrue quarterly in arrears at the rate
of five dollars ($5.00) per annum (the "STATED DIVIDEND") with respect to each
issued share of Series A Preferred Stock and shall be payable on the last
trading day of each fiscal quarter of the Corporation. Stated Dividends shall be
cumulative and shall be payable upon conversion, whether or not earned or
declared.
(B) PAYMENT UPON CONVERSION. On the date on which any holder
of Series A Preferred Stock converts any of its Series A Preferred Stock into
Common Stock, the accrued Stated Dividend with respect to the shares so
converted shall be paid to such holder. All accrued Stated Dividends also shall
be payable upon the liquidation, dissolution or winding up of the Corporation.
(C) PAYMENT IN COMMON STOCK. The Corporation, at its sole
discretion, may pay the Stated 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
Stated Dividend is payable. For purposes of this paragraph 2(c), 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 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 date on which the Stated
Dividend is payable.
(D) 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 Stated
Dividend shall be rounded to the nearest whole share.
(E) DECLARED DIVIDENDS. 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 A Preferred
Stock shall be entitled to the amount of dividends on the Series A Preferred
Stock as would be declared payable on the largest number of whole shares of
Common Stock into which the shares of Series A 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
-3-
shares of Series A Preferred Stock held by each holder, and not upon each share
of Series A Preferred Stock so held by the holder.
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 A 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 A
Preferred Stock with respect to liquidation preferences, the holders of each
share of Series A 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 A Preferred Stock held by any holder, plus the Stated Dividend accruing
to the Series A Preferred Stock pursuant to Section 2 above (the "LIQUIDATION
VALUE").
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 A Preferred
Stock the full amount to which they otherwise would be entitled, the holders of
Series A 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 A 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 A Preferred Stock then
outstanding.
After such payment shall have been made in full to the holders
of the Series A 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 A 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 A 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 Common Stock or Series A 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
-4-
distributions (including distributions other than cash) made hereunder shall be
made pro rata to the holders of Series A Preferred Stock.
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 A 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 A 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 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 required by law, the holders of shares of Series A 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 A Preferred Stock held by each holder, and
not upon each share of Series A Preferred Stock so held by the holder.
(B) AMENDMENTS TO CHARTER. For so long as there are any shares
of Series A 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 A Preferred Stock, voting together as a
class, each share of Series A Preferred Stock to be entitled to one vote in each
instance, if such amendment would adversely affect the rights of the holders of
Series A Preferred Stock.
5. CONVERSION RIGHTS.
(A) OPTIONAL CONVERSION. No shares of Series A Preferred Stock
held by any holder shall be convertible by such holder prior to ninety (90) days
after the Issue Date to such holder. Beginning ninety (90) days after the Issue
Date to such holder, each such holder of Series A Preferred Stock shall have the
right, at such holder's option, to convert during any five (5) trading day
period up to twenty percent (20%) of the shares of Series A 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 A
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 percent (120%) of the
Effective Price.
-5-
(ii) (A) Beginning on the 90th day after the Issue
Date and ending on the 120th day after the Issue Date, eighty percent (80%) of
the Average Quoted Price, unless the SEC shall not have declared effective the
Registration Statement as of such Conversion Date due to a Corporation Failure,
in which case such percentage shall be seventy-eight percent (78%);
(B) Beginning on the 121st day after the Issue
Date and ending on the 150th day after the Issue Date, eighty percent (80%) of
the Average Quoted Price, unless the SEC shall not have declared effective the
Registration Statement as of such Conversion Date due to a Corporation Failure,
in which case such percentage shall be seventy-six percent (76%);
(C) Beginning on the 151st day after the Issue
Date and ending on the 180th day after the Issue Date, seventy-eight percent
(78%) of the Average Quoted Price, unless the SEC shall not have declared
effective the Registration Statement as of such Conversion Date due to a
Corporation Failure, in which case such percentage shall be seventy-two percent
(72%);
(D) Beginning on the 181st day after the Issue
Date and ending on the 210th day after the Issue Date, seventy-eight percent
(78%) of the Average Quoted Price, unless the SEC shall not have declared
effective the Registration Statement as of such Conversion Date due to a
Corporation Failure, in which case such percentage shall be seventy percent
(70%);
(E) 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, unless the SEC shall not have declared effective
the Registration Statement as of such Conversion Date due to a Corporation
Failure, in which case such percentage shall be sixty-six percent (66%); and
(F) Beginning on the 366th day after the Issue
Date and ending on the second anniversary of the Issue Date, seventy-four (74%)
of the Average Quoted Price, unless the SEC shall not have declared effective
the Registration Statement as of such Conversion Date or Mandatory Conversion
Date, as the case may be, due to a Corporation Failure, in which case such
percentage shall be sixty-four (64%).
(C) MANDATORY CONVERSION. On the date that is two (2) years
from the Issue Date for each holder of Series A Preferred Stock (the "MANDATORY
CONVERSION DATE"), all shares of the Series A Preferred Stock then held by such
holder shall, without any action on the part of such holder, be automatically
converted into such number of fully paid and nonassessable shares of Common
Stock as shall be determined by multiplying the number of shares of Series A
Preferred Stock then held by such holder by a fraction, the numerator of which
is the Original Issue Price and the denominator of which is the applicable
Conversion Price.
-6-
(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 A Preferred Stock, prior to the Mandatory
Conversion Date, be entitled to convert Series A 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 A 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 this Section 5(d). Each holder shall, upon delivering
to the Corporation a notice of election to convert shares of Series A Preferred
Stock in accordance with Section 5(j) 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 A 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 A Preferred Stock to be converted shall not
be convertible. Notwithstanding the foregoing, upon the Mandatory Conversion
Date, all such shares of Series A Preferred Stock then outstanding shall be
converted into Common Stock in accordance with Section 5(c) hereof.
(E) EQUITABLE ADJUSTMENT. If the Corporation at any time
subdivides (by any stock split, stock dividend or otherwise) its outstanding
shares of Common Stock into a greater number of shares, the Conversion Price
shall be proportionately reduced, and, conversely, if the outstanding shares of
Common Stock are combined into a smaller number of shares, the Conversion Price
shall be proportionately increased.
(F) 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 A 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 A 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 A Preferred Stock.
-7-
(G) CAPITAL REORGANIZATION OR RECLASSIFICATION. If the Common
Stock issuable upon the conversion of the Series A 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 A 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
A Preferred Stock might have been converted immediately prior to such
reorganization, recapitalization, reclassification or change, all subject to
further adjustment as provided herein.
(H) CAPITAL REORGANIZATION, MERGER OR SALE OF ASSETS. If at
any time or from time to time there shall be a capital reorganization of the
Common Stock (other than a subdivision, combination, recapitalization,
reclassification or exchange of shares provided for elsewhere in this Section 5)
or a merger or consolidation of the Corporation with or into another corporation
(other than a merger or reorganization involving only a change in the state of
incorporation of the Corporation or the acquisition by the Corporation of other
businesses where the Corporation survives as a going concern), or the sale of
all or substantially all of the Corporation's capital stock or assets to any
other person, then, as a part of such reorganization, merger, or consolidation
or sale, provision shall be made so that the holders of the Series A Preferred
Stock shall thereafter be entitled to receive upon conversion of the Series A
Preferred Stock the number of shares of stock or other securities or property
(including cash) of the Corporation, or of the successor corporation resulting
from such merger, consolidation or sale, to which such holder would have been
entitled if such holder had converted its shares of Series A Preferred Stock
into Common Stock pursuant to Section 5(a) hereof.
(I) 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 A 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.
(J) EXERCISE OF CONVERSION PRIVILEGE. To exercise its
conversion privilege, a holder of Series A 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 A 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 A 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 A Preferred Stock
surrendered for conversion, the proper assignment
-8-
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 A 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 A
Preferred Stock in accordance with the provisions of this Section 5, and cash,
as provided in Section 5(k), 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 A 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 Sections 16 and 17 of
the Securities Purchase Agreement between the Corporation and the initial
purchasers of the Series A Preferred Stock.
(K) 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 A Preferred Stock. Instead of any fractional
shares of Common Stock that would otherwise be issuable upon conversion of
Series A Preferred Stock, the Corporation shall pay to the holder of the shares
of Series A 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 A Preferred Stock being
converted at any one time by any holder thereof, not upon each share of Series A
Preferred Stock being converted.
(L) PARTIAL CONVERSION. In the event some but not all of the
shares of Series A 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 A Preferred Stock which were not
converted. Such new certificate shall be so delivered on or prior to the date
set forth in Section 5(j) for the delivery of certificates for shares of Common
Stock.
(M) 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 A 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 A Preferred Stock (including any shares of
Series A Preferred Stock represented by any warrants, options, subscription or
purchase rights for the Series A Preferred Stock), and if at any time the number
of authorized but unissued shares of
-9-
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock (including any shares of
Series A Preferred Stock represented by any warrants, options, subscriptions or
purchase rights for the Series A 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.
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 A 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.
EXHIBIT 4.14
SECURITIES PURCHASE AGREEMENT
-----------------------------
This Securities Purchase Agreement (the "AGREEMENT"), dated as of June
16, 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 the
Purchasers 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 in the form of EXHIBIT A annexed hereto (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 Stock and Warrants are
sometimes hereinafter collectively referred to as the "SECURITIES."
2. CLOSING. The closing of the purchase and sale of the Preferred Stock
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 Stock 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. The
Escrow Agent shall not release the Purchase Price from escrow until it shall
have received from the Company a certificate stating that the Purchase Price is
being funded directly to Superior Pharmaceutical Company in connection with the
Superior Acquisition (as defined in Section 5(g) hereto) and that upon receipt
of such funds, the Superior Acquisition shall close. 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 Stock (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
-2-
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 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
Stock and the Warrants 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 offer, sell or otherwise transfer the
Preferred Stock (including the Conversion Shares) and the Warrants (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 Report on Form
10-Q for the fiscal quarter ended March 31, 1997 and (3) definitive Proxy
Statement of the Company dated December 27, 1996 for its Annual Meeting of
Stockholders held on January 30, 1997 (collectively, the "SEC DOCUMENTS"), which
the Company has filed pursuant to 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.
(f) Each Purchaser has no existing short position with respect
to the Common Stock.
-3-
(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 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 Warrant or the
Registration Rights Agreement or the performance of its obligations under such
agreements, including, without limitation, the issuance and sale of the
Preferred Stock, the Conversion Shares, the Warrant and the Warrant Shares
(except for the registration of the Conversion Shares and Warrant Shares under
the Securities Act pursuant to the Registration
-4-
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 Stock 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 Stock 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 Warrant has 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).
(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 and 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,
-5-
(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 Warrant 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 Stock 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 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
-6-
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, the authorized capital stock of the
Company consists of (i) 75,000,000 shares of Common Stock $.01 par value per
share, of which 30,122,477 shares were issued and outstanding, and (ii)
10,000,000 shares of preferred stock, $.01 par value per share, of which no
shares were issued and outstanding. Immediately prior to the closing of the
purchase and sale of the Preferred Stock and the Warrants pursuant to Section 1
hereof, no shares of Preferred Stock will be outstanding. All outstanding shares
of Common Stock have been validly issued and are fully paid and nonassessable.
No shares of Common 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. As of the Closing Date and before giving effect to the Superior
Acquisition (as defined in Section 5(g) hereof) and the Closing contemplated
hereunder, (i) the authorized capital stock of the Company will be (x)
75,000,000 shares of Common Stock, $.01 par value per share, of which
31,789,14430,497,477 shares will be issued and outstanding and (y) 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 no shares are issued and
outstanding and (B) 7,500 shares have been designated as Series B Preferred
Stock, all of which are issued and outstanding and (ii) the Company has reserved
for issuance no more than 11,000,000 shares of Common Stock with respect to the
Derivative Securities.
(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 July 1,
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.
(n) None of the filings of the Company with the SEC since July
1, 1996 contained, at the time they were filed, any untrue statement of a
material fact or omitted to state
-7-
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 July 1, 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 Warrant.
(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 Stock 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, 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
-8-
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 Stock, 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 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
-9-
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 Stock 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 the consummation of the acquisition of Superior Pharmaceutical
Company (the "SUPERIOR ACQUISITION") pursuant to that certain Agreement and Plan
of Merger dated as of March 7, 1997, as amended, as provided for in Section 2.
(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.
(i) The Company shall, prior to any issuance by the Company of
any of its securities issued in a private placement financing pursuant to
Regulation D or Regulation S of the Securities Act (other than debt securities
with no equity feature), offer to each Purchaser by written notice the right,
for a period of five (5) days, to purchase all of such securities for cash at an
amount equal to the price or other consideration for which such securities are
to be issued; provided, however, that the first refusal rights of the Purchasers
pursuant to this Section 5(i) shall not apply to securities issued (A) upon
conversion of any of the Preferred Shares or exercise of the Warrants, (B) 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, (C) pursuant to subscriptions, warrants,
options, convertible securities, or other rights which are outstanding on the
date of this Agreement, (D) solely 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, (E)
pursuant to the exercise of options to purchase Common Stock granted to
directors, officers, employees or consultants of the Company in connection with
their service to the Company, (F) pursuant to any other transaction by the
Company in connection with the financing of the Superior Acquisition or any
other similar acquisition by the Company and (G) upon the exercise of any right
which was not itself in violation of the terms of this Section 5(i). The
Company's written notice to the Purchasers shall describe the securities
proposed to be issued by the Company and specify the number, price and payment
terms. Each Purchaser agrees to keep the terms and existence of such securities
issuance confidential. Each Purchaser may accept the Company's offer as to the
full
-10-
number of securities offered to it or any lesser number, 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
Purchaser shall buy, upon the terms specified, the number of securities agreed
to be purchased by such Purchaser. Notwithstanding the foregoing, if the
Purchasers agree, in the aggregate, to purchase more than the full number of
securities offered by the Company, then each Purchaser accepting the Company's
offer shall first be allocated the lesser of (i) the number of securities which
such Purchaser agreed to purchase and (ii) the number of securities as is equal
to the full number of securities offered by the Company multiplied by a
fraction, the numerator of which shall be the number of Preferred Shares held by
such Purchaser as of the date of the Company's notice of offer held by such
Purchaser on the date such offer is made and the denominator of which shall be
the aggregate number of Preferred Shares held on such date by all Purchasers who
accepted the Company's offer, and the balance of the securities (if any) offered
by the Company shall be allocated among the Purchasers accepting the Company's
offer in proportion to their relative holdings of the issued and outstanding
Preferred Shares, provided that no Purchaser shall be allocated more than the
number of securities which such Purchaser agreed to purchase and provided
further that in cases covered by this sentence all Purchasers shall be allocated
among them the full number of securities offered by the Company. The Company
shall be free at any time prior to one hundred and eighty (180) days after the
date of its notice of offer to the Purchasers, to offer and sell to any third
party or parties the number of such securities not agreed by the Purchasers to
be purchased by them, at a price and on payment terms no less favorable to the
Company than those specified in such notice of offer to the Purchasers. However,
if such third party sale or sales are not consummated within such one hundred
and eighty (180) 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(i). The rights of the first offer pursuant to this Section 5(i) shall
terminate as to each individual Purchaser when such Purchaser holds less than
fifty percent (50%) of the original number of Preferred Shares originally
purchased pursuant to this Agreement. The rights contained in this Section 5(i)
are not transferable by the Purchasers.
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
Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT") in
substantially the form annexed hereto as EXHIBIT D.
-11-
(c) The Company will provide to the Purchasers an opinion or
opinions of counsel in substantially the form annexed hereto as Exhibit E.
(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 Purchaser.
(f) The Company shall have executed and delivered to the
Escrow Agent the certificates representing the Preferred Stock 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.
(h) The Company shall consummate the Superior Acquisition on
the Closing Date concurrently with the closing hereunder.
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 Stock 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
-12-
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 Stock, 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 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 Stock, 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, Purchaser agrees to Transfer the
Preferred Stock, the Conversion Shares, the 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, 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 Stock, 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
-13-
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 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 Stock 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
-14-
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 Stock, the Conversion
Shares, the Warrants and the Warrant Shares.
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 Stock, 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
-15-
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.
(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
-16-
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. Delivery of Stock; Dividend Payments.
(a) The Company will permit each Purchaser to exercise its
right to convert the Preferred Stock 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 Preferred Stock certificate, 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 shares of Preferred Stock which remains unconverted, or the newly issued
Warrant representing the portion of the Warrant which remains unexercised, to
the Purchasers 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 the Purchasers 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
-17-
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 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.
-18-
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), 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;
-19-
(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;
(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.]
-20-
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: /s/ Dhananjay G. Wadekar
--------------------------
Title: Executive Vice President
--------------------------
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,
Ardsen Financial S.A.
-------------------------------
(exact name of Purchaser)
By: /s/ J. Beck
----------------------
Title: President
----------------------
Address: POB 9765
-----------------------
Birmensdorferstr. 1Q3
-----------------------
8036 Zurich-Switzerland
-----------------------
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,
Voica Trading S.A.
-------------------------------
(exact name of Purchaser)
By: /s/ [Illegible]
----------------------
Title: President
----------------------
Address: Angernenstr. 6
------------------
8002 Zurich
------------------
Switzerland
------------------
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,
TAIB Bank E.C.
-----------------------------
(exact name of Purchaser)
By: /s/ [Illegible]
--------------------------
Title: Executive Vice President /
Vice President
--------------------------
Address: Sohl Centre, Diplomatic
Area
-----------------------
P.O. Box 20485
-----------------------
Menema, Bahrain
-----------------------
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,
LAMPTON INC.
----------------------------
(exact name of Purchaser)
By: /s/ SPSG
-------------------
Title:
-------------------
Address: Elkana Street
---------------------
P.O. Box 35411
---------------------
Jerusalem, Israel
---------------------
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,
Throne Ltd.
-----------------------------
(exact name of Purchaser)
By: /s/ Jo Wieng
--------------------
Title: General Director
--------------------
Address: 24 Route de Malacou
---------------------
Geneva 1V08
---------------------
Switzerland
---------------------
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,
Colbo Kft.
-------------------------------
(exact name of Purchaser)
By: /s/ [Illegible]
----------------------
Title: President
----------------------
Address: Gyeri Vt.
------------------
Sziyetszuitmiklos
------------------
Hungary
------------------
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,
Sovereign Partners L.P.
-----------------------------
(exact name of Purchaser)
By: /s/ [Illegible]
---------------------------
Title: President - General Manager
---------------------------
Address: 49 Perry Lane
-----------------------
Ridgefield, CT 06877
-----------------------
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,
Legong Investments NV
-------------------------------
(exact name of Purchaser)
By: /s/ [Illegible] or
I. Sankatsung
--------------------------
Title: Director
--------------------------
Address: Int. Trade Center
----------------------
TRI26 Curacao
----------------------
Neth. Antilles
----------------------
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,
RIC Asset Limited
--------------------------------
(exact name of Purchaser)
By: /s/ Mazen Hassounah
-----------------------
Title: Director
-----------------------
Address: c/o Rana Investment Company
---------------------------
P.O. Box 60168, Riyadh 11545
---------------------------
Saudi Arabia
---------------------------
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,
The Endeavour Capital Fund S.A.
-----------------------------------
(exact name of Purchaser)
By: /s/ Shmuli Margullies
--------------------------
Title: Director
--------------------------
Address: c/o Endeavour Management Inc.
-----------------------------
14/14 Divrei Chaim St.
-----------------------------
Jerusalem 94479 Israel
-----------------------------
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,
Gross Foundation Inc.
-------------------------------
(exact name of Purchaser)
By: /s/ [Illegible]
----------------------
Title: President
----------------------
Address: 1660 49 St.
------------------
Brooklyn, NY
------------------
11204
------------------
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,
Deere Park Capital Management
---------------------------------
(exact name of Purchaser)
By: /s/ [Illegible]
------------------------
Title: President
------------------------
Address: 650 Dundee Road
---------------------
Suite 460
---------------------
Northbrook, IL 60062
---------------------
EXHIBIT 4.15
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of June 16,
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 Series
A Preferred Stock (the "PREFERRED STOCK") that is 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 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) "INVESTORS" means the Initial Investors and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "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").
(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 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.
(iv) "REGISTRABLE SECURITIES" means the Conversion
Shares and the Warrant Shares issued or issuable and 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.
(v) "REGISTRATION STATEMENT" means a registration
statement of the Company under the 1933 Act.
(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 the Closing Date but in no event more than 45 days following
the 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 Initial Investors (as determined pursuant to Section l0
hereof), which consent will not be unreasonably withheld conditioned or delayed)
covering the resale of the Registrable Securities. 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 Stock 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 (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 Initial Investors and its 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 issuable upon the conversion of the
Preferred Stock and exercise of the Warrants on the Closing Date (assuming the
-2-
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 the
Closing Date but in no event more than 45 days following the 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 the 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 have been sold and no shares of Preferred Stock and no
Warrants are outstanding or (ii) the date on which all of the Registrable
Securities (in the opinion of counsel to the Initial Investors) may be
immediately publicly sold without registration and (iii) two years from the
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
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
-3-
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 Stock 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 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,
-4-
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 Initial Investors representing a majority of the Conversion Shares and
Warrant Shares held by the Initial 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 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 Initial 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
-5-
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 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
-6-
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 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
-7-
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 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
-8-
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
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
-9-
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 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.
-10-
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 Stock 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 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.
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
-11-
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.
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 Initial Investors as set forth on Schedule I to the Securities
Purchase Agreement, or at such other address as each such party 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 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
-12-
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 Securities Purchase Agreement
(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 the
Securities Purchase Agreement 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.
(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 shares of Preferred
Stock and Warrants then outstanding had been converted or exercised,
respectively, into Registrable Securities).
[REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK.]
-13-
DYNAGEN, INC.
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/ Dhananjay G. Wadekar
--------------------------
Title: Executive Vice President
--------------------------
DYNAGEN, INC.
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,
Ardsen Financial S.A.
----------------------------------
(print exact name of Investor)
By: /s/ J. Beck
-----------------------------
Title: President
-----------------------------
DYNAGEN, INC.
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,
Voica Trading S.A.
-------------------------------
(print exact name of Investor)
By: /s/ [ILLEGIBLE]
----------------------
Title: President
----------------------
DYNAGEN, INC.
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,
TAIB Bank E.C.
----------------------------------
(print exact name of Investor)
By: /s/ [ILLEGIBLE]
--------------------------
Title: Executive Vice President /
Vice President
--------------------------
DYNAGEN, INC.
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,
LAMPTON INC.
------------------------------
(print exact name of Investor)
By: /s/ SDSG
---------------------
Title: Director
---------------------
DYNAGEN, INC.
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,
THRONE LTD.
---------------------------------
(print exact name of Investor)
By: /s/ Jo Wiengo
------------------------
Title: General Director
------------------------
DYNAGEN, INC.
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,
Colbo Kft.
------------------------------
(print exact name of Investor)
By: /s/ [ILLEGIBLE]
------------------
Title: President
------------------
DYNAGEN, INC.
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,
Sovereign Partners L.P.
----------------------------------
(print exact name of Investor)
By: /s/ [ILLEGIBLE]
---------------------------
Title: President - General Partner
---------------------------
DYNAGEN, INC.
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,
Legong Investments N.V.
---------------------------------
(print exact name of Investor)
By: /s/ [ILLEGIBLE]
------------------------
Title: Director
------------------------
DYNAGEN, INC.
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,
RIC Asset Limited
-------------------------------
(print exact name of Investor)
By: /s/ Mazen Hassounah
----------------------
Title: Director
----------------------
DYNAGEN, INC.
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,
The Endeavour Capital Fund S.A.
--------------------------------
(print exact name of Investor)
By: /s/ Shmuli Margulies
-----------------------
Title: Director
-----------------------
DYNAGEN, INC.
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,
Gross Foundation Inc.
---------------------------------
(print exact name of Investor)
By: /s/ [ILLEGIBLE]
------------------------
Title: President
------------------------
DYNAGEN, INC.
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,
Deere Park Capital Management
----------------------------------
(print exact name of Investor)
By: /s/ [ILLEGIBLE]
-------------------------
Title: President
-------------------------
EXHIBIT 4.16
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- ________ RIGHT TO PURCHASE __________________
JUNE 18, 1997 SHARES OF COMMON STOCK OF DYNAGEN, INC.
VOID UNLESS EXERCISED BEFORE JUNE 18, 1999
DYNAGEN, INC.
COMMON STOCK PURCHASE WARRANT
DYNAGEN, INC., a Delaware corporation (the "COMPANY"), hereby certifies
that, in consideration of the investment by _____________ (the "HOLDER")
pursuant to the Securities 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 June 18, 1999,
____________ fully paid and non-assessable shares of Common Stock, $.01 par
value, of the Company, at an exercise price per share equal to one hundred
twenty percent (120%) of the average of the closing bid price of the Common
Stock of the Company as reported by the Nasdaq SmallCap Market or Nasdaq
National Market or, if the Common Stock is no longer traded on a Nasdaq market
such other exchange on which the Common Stock is then traded, for the five (5)
trading days immediately preceding the date on which the Securities and Exchange
Commission declares effective the registration statement to be filed by the
Company under the Securities Act of 1933, as amended, to register the shares of
Common Stock issuable upon exercise of this Warrant in accordance with that
certain Registration Rights Agreement dated as of the date hereof. 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.
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.
-2-
(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 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.
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 the Company receives (i) the original Form of
Subscription properly completed, (ii) the original Warrant and (iii) payment
pursuant to Section 1.1 above, 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
-3-
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 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
-4-
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.
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
-5-
(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 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
-6-
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 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.
Dated: June 18, 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 4.17
DYNAGEN, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B PREFERRED STOCK
The undersigned officers of DYNAGEN, INC., a corporation organized and
existing under the General Corporation Law of the State of Delaware, do 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 June 16, 1997, adopted a resolution providing for certain
powers, designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
certain shares of Series B 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 B Preferred
Stock, and that the designation and number of shares thereof
and the voting powers, designations, preferences and
relative, participating, optional or other special rights of
the shares of such series, and the qualifications,
limitations or restrictions thereof, are as set forth on
Exhibit A attached hereto.
EXECUTED as of this 16th day of June, 1997.
DYNAGEN, INC.
By: /s/ Dhananjay G. Wadekar
----------------------------
Dhananjay G. Wadekar,
Executive Vice President and
Chairman of the Board
ATTEST:
/s/ Kenneth J. Gordon
- -----------------------------
Kenneth J. Gordon
Assistant Secretary
EXHIBIT A
A. DESCRIPTION AND DESIGNATION OF SERIES B 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 B Preferred Stock" and authorized for issuance. The original issue
price per share of the Series B Preferred Stock shall be $99.70 (the "SERIES B
ORIGINAL ISSUE PRICE").
(B) CERTAIN DEFINITIONS. As used herein, the following terms,
unless the context otherwise requires, have the following respective meanings:
"COMMON STOCK" means the common stock of the
Corporation, $.01 par value.
"DIVIDEND PAYMENT DATE" is defined in Section 2(a).
"SEC" means the United States Securities and Exchange
Commission.
"SERIES B 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 for the five (5) trading days immediately preceding any
holder's Series B Conversion Date, Dividend Payment Date or Series B Mandatory
Conversion Date, as applicable.
"SERIES B CONVERSION DATE" means each date on which
the Corporation receives by telecopy written notice in accordance with Section
5(j) hereof from a holder of Series B Preferred Stock that such holder elects to
convert shares of its Series B Preferred Stock, provided that if the Corporation
does not receive the original certificate(s) representing the shares of Series B
Preferred Stock being converted together with an originally executed copy of the
notice of conversion within two (2) trading days after receipt of such
telecopied notice, then the date on which the Corporation receives such original
certificate(s) and notice shall be the Series B Conversion Date with respect to
such conversion.
"SERIES B CONVERSION PRICE" is defined in Section
5(b).
"SERIES B EFFECTIVE PRICE" means the average of the
closing bid price of the Common Stock of the Corporation as reported by the
Nasdaq SmallCap Market for the five (5) trading days immediately preceding the
date on which the SEC declares effective the Series B Registration Statement.
"SERIES B ISSUE DATE" means, with respect to each
share of Series B Preferred Stock held by any holder, the date on which the
Corporation originally issued such
-2-
share to such holder (irrespective of any subsequent transfer or other
disposition of such share to any other holder).
"SERIES B LIQUIDATION PREFERENCE" is defined in
Section 3(a).
"SERIES B REGISTRATION RIGHTS AGREEMENT" means the
Registration Rights Agreement between the Corporation and the initial
purchaser(s) of the Series B Preferred Stock.
"SERIES B REGISTRATION STATEMENT" means the
registration statement to be filed by the Corporation under the Securities Act
of 1933, as amended, to register the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock in accordance with the terms of the
Series B Registration Rights Agreement.
"SERIES B STATED DIVIDEND" is defined in Section
2(a).
2. DIVIDENDS.
(A) STATED DIVIDEND. Commencing on the Series B Issue Date and
continuing thereafter, each holder of Series B Preferred Stock will be entitled
to receive a dividend of Seven Dollars ($7.00) per share per annum (the "SERIES
B STATED DIVIDEND"). The Series B Stated Dividend will accrue daily on the basis
of a 360-day year of twelve 30-day months, whether or not the Corporation has
earnings or surplus, and the dividend payable to the holder of a share of Series
B Preferred Stock on the first Dividend Payment Date after the share is issued
will be the accrued dividend from the day the share is issued to the Dividend
Payment Date. The Series B Stated Dividend will be payable in shares of Common
Stock in accordance with Section 2(c) on the last trading day of each fiscal
quarter of the Corporation (a "DIVIDEND PAYMENT DATE"). Series B Stated
Dividends shall be cumulative and to the extent not previously paid, shall be
paid upon conversion, liquidation, dissolution, or winding-up of the
Corporation, whether or not earned or declared.
(B) PAYMENT OF ACCRUED DIVIDENDS UPON CONVERSION, LIQUIDATION,
DISSOLUTION, OR Winding-Up. On each Series B Conversion Date and each Series B
Mandatory Conversion Date, all Series B Stated Dividends accrued since the last
Dividend Payment Date with respect to the converted shares of Series B Preferred
Stock shall be paid to the holder of record of such converted shares. All Series
B Stated Dividends accrued since the last Dividend Payment Date with respect to
any outstanding share of Series B Preferred Stock shall be paid to the holder of
record thereof upon the liquidation, dissolution, or winding-up of the
Corporation.
(C) PAYMENT IN COMMON STOCK. The Corporation shall pay the
Series B Stated Dividends in shares of Common Stock at the then Series B Average
Quoted Price as of the relevant Dividend Payment Date.
(D) 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
-3-
Stock issued upon the payment of the Series B Stated Dividend shall be rounded
up to the nearest whole share.
(E) DECLARED DIVIDENDS. If the Board of Directors shall
declare a cash dividend payable upon the then outstanding shares of Common
Stock, the holders of the Series B Preferred Stock shall be entitled to the
amount of cash dividends on the Series B Preferred Stock as would be declared
payable on the largest number of whole shares of Common Stock into which the
shares of Series B 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 cash dividend, provided that the Series B Preferred Stock shall
rank as to dividends junior to the Series A Preferred Stock. Such determination
of "whole shares" shall be based upon the aggregate number of shares of Series B
Preferred Stock held by each holder, and not upon each share of Series B
Preferred Stock so held by the holder.
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 B Preferred Stock, and subject to the liquidation rights and
preferences of the Series A Preferred Stock and any other class or series of
Preferred Stock designated by the Board of Directors, after the date hereof and
in accordance with the provisions of Section 4(b) hereof, to be senior to the
Series B Preferred Stock with respect to liquidation preferences, the holders of
each share of Series B 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 Series B Original Issue Price per
share of Series B Preferred Stock held by any holder, plus all Series B Stated
Dividends that have become due but have not been paid, and all accrued but not
yet due dividends, to the date of final distribution (whether earned or not)
(the "SERIES B LIQUIDATION PREFERENCE"). For purposes hereof, the Series B
Preferred Stock shall rank on liquidation junior to the Series A Preferred
Stock.
If, upon liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds of those assets,
available for distribution to the holders of the Series B Preferred Stock and of
the shares of all other classes or series that are on a parity as to
distributions on liquidation with the Series B Preferred Stock are not
sufficient to pay in full the preferential amount required to be distributed to
the holders of the Series B Preferred Stock and of all other classes or series
that are on a parity as to distributions on liquidation with the Series B
Preferred Stock, then the assets, or the proceeds of those assets, that are
available for distribution to the holders of Series B Preferred Stock and of the
shares of all other classes or series that are on a parity as to distributions
on liquidation with the Series B Preferred Stock will be distributed to the
holders of the Series B Preferred Stock and of the shares of all other classes
or series that are on a parity as to distributions on liquidation with the
Series B Preferred Stock ratably in
-4-
accordance with the respective amount of the Series B liquidation preferences of
the shares held by each of them. After payment of the full amount of the Series
B Liquidation Preference (including accumulated unpaid dividends and accrued
dividends) and accumulated and accrued dividends to which holders of Series B
Preferred Stock are entitled, the holders of Series B Preferred Stock will not
be entitled to any further distribution of assets of the Corporation. For the
purposes of this Section, neither a consolidation or merger of the Corporation
with another corporation, nor a sale or transfer of all or any part of the
Corporation's assets for cash or securities, will be considered a liquidation,
dissolution, or winding-up of the Corporation.
(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.
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 B 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 B 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 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 required by law, the holders of shares of Series B 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 B Preferred Stock held by each holder, and
not upon each share of Series B Preferred Stock so held by the holder.
(B) AMENDMENTS. While any shares of Series B Preferred Stock
are outstanding, the Corporation will not, directly or indirectly, or through a
merger or consolidation with any other corporation, without the affirmative vote
at a meeting or the written consent of the holders of at least a majority of the
outstanding shares of Series B Preferred Stock, (i) create or increase the
authorized number of shares of any class or series of stock ranking prior to or
on a parity with the Series B Preferred Stock either as to dividends or upon
liquidation; provided, however that, without the consent of the holders of
Series B Preferred Stock, the Corporation may issue up to (x) $2,000,000 in any
class or series of stock ranking senior to the Series B Preferred Stock and (y)
$3,000,000 in any class or series of stock ranking on a parity with the Series B
Preferred Stock, (ii) create or increase the authorized shares of any class or
series of stock that entitles the holder to vote in the election of directors,
other than (x) Common Stock or (y) securities that are convertible into or
exchangeable for shares of Common Stock, that are voted with regard to the
election of directors together with the Common Stock and that do not entitle the
holders to cast more than one vote for each share of Common Stock into which
those securities may be converted, or for which they may be exchangeable, (iii)
amend, alter, or repeal
-5-
any of the provisions of the Certificate of Incorporation or By-laws of the
Corporation, or of this resolution, so as to affect adversely the preferences,
special rights or powers of the Series B Preferred Stock, (iv) authorize any
reclassification of the Series B Preferred Stock, (v) require the exchange of
Series B Preferred Stock for other securities (whether or not issued by the
Corporation) or assets, or (vi) increase the number of shares of Series B
Preferred Stock that the Corporation is authorized to issue pursuant to this
resolution.
5. CONVERSION RIGHTS.
(A) OPTIONAL CONVERSION. No shares of Series B Preferred Stock
held by any holder shall be convertible by such holder prior to one hundred
fifty (150) days after the Series B Issue Date to such holder. Beginning one
hundred fifty (150) days after the Series B Issue Date to such holder, each such
holder of Series B Preferred Stock shall have the right, at such holder's
option, to convert during any five (5) trading day period not more than twenty
percent (20%) of the shares of Series B Preferred Stock originally issued or
transferred to the 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 B Preferred Stock to be converted by a fraction, the numerator
of which is the Series B Original Issue Price, and the denominator of which is
the applicable Series B Conversion Price (as defined below).
(B) CONVERSION PRICE. The conversion price per share (the
"SERIES B CONVERSION PRICE") shall be equal to the lesser of subsections (i) and
(ii) below.
(i) One hundred twenty-five percent (125%) of the
Series B Effective Price.
(ii) (A) Beginning on the 150th day after the Series
B Issue Date and ending on the 180th day after the Series B Issue Date, eighty
percent (80%) of the Series B Average Quoted Price;
(B) Beginning on the 181st day after the Series
B Issue Date and ending on the 270th day after the Series B Issue Date,
seventy-eight percent (78%) of the Series B Average Quoted Price;
(C) Beginning on the 271st day after the Series
B Issue Date and ending on the second anniversary of the Series B Issue Date,
seventy-five percent (75%) of the Series B Average Quoted Price.
(C) MANDATORY CONVERSION. On the date that is two (2) years
from a Series B Issue Date to any holder of Series B Preferred Stock (the
"SERIES B MANDATORY CONVERSION DATE"), all shares of the Series B Preferred
Stock then held by such holder and issued on such Series B Issue Date shall,
without any action on the part of such holder, be automatically converted into
such number of fully paid and nonassessable shares of Common Stock as shall be
determined by multiplying the number of shares of Series B Preferred Stock then
held by such holder and issued on such Series B Issue Date by a fraction, the
numerator of which
-6-
is the Series B Original Issue Price and the denominator of which is the
applicable Series B Conversion Price.
(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 B Preferred Stock, prior to the Series B
Mandatory Conversion Date, be entitled to convert Series B 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 that may be deemed beneficially owned through
the ownership of the unconverted portion of the shares of Series B 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
or any person controlling the holder 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. Each
holder shall, upon delivering to the Corporation a notice of election to convert
shares of Series B Preferred Stock in accordance with Section 5(j) hereof, be
required to provide the Corporation with a completed certificate in the form of
Annex 1 hereto. If the holder cannot make such certification, the shares of
Series B Preferred Stock to be converted shall not be convertible.
Notwithstanding the foregoing, upon the Series B Mandatory Conversion Date, all
such shares of Series B Preferred Stock then outstanding shall be converted into
Common Stock in accordance with Section 5(c) hereof.
(E) EQUITABLE ADJUSTMENT. If the Corporation (i) pays a
dividend or makes a distribution on its Common Stock in shares of its Common
Stock, (ii) subdivides its outstanding Common Stock into a greater number of
shares, or (iii) combines its outstanding Common Stock into a smaller number of
shares, the Series B Conversion Price in effect immediately prior to that event
will be adjusted so that the holder of a share of Series B Preferred Stock
surrendered for conversion after that event will receive the number of shares of
Common Stock of the Corporation which the holder would have received if the
share of Series B Preferred Stock had been converted immediately before the
happening of the event (or, if there is more than one such event, if the share
of Series B Preferred Stock had been converted immediately before the first of
those events and the holder had retained all the Common Stock or other
securities or assets received after the conversion). An adjustment made pursuant
to this Subparagraph 5(e) will become effective immediately after the record
date in the case of a dividend or distribution, except as provided in
Subparagraph 5(h), and will become effective immediately after the effective
date in the case of a subdivision or combination. If such dividend or
distribution is declared but is not paid or made, the Series B Conversion Price
then in effect will be appropriately readjusted. However, a readjustment of the
Series B Conversion Price will not affect any conversion which takes place
before the readjustment.
(F) 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
-7-
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 B
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 that they would have received had their Series B
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 Series B 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 B Preferred Stock.
(G) CAPITAL REORGANIZATION, ETC. If there is a capital
reorganization, recapitalization, reclassification, or change of outstanding
shares of Common Stock (other than a change in par value, or as a result of a
subdivision or combination), or a merger or consolidation of the Corporation
with any other entity that results in a reclassification, change, conversion,
exchange, or cancellation of outstanding shares of Common Stock, or a sale or
transfer of all or substantially all of the assets of the Corporation, upon any
subsequent conversion of Series B Preferred Stock, each holder of the Series B
Preferred Stock will be entitled to receive the kind and amount of securities,
cash and other property which the holder would have received if the holder had
converted the shares of Series B Preferred Stock into Common Stock immediately
before the first of those events and had retained all the securities, cash and
other assets received as a result of all those events.
(H) DEFERRALS. In any case in which this Section 5 provides
that an adjustment will become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of the event (i) issuing
to the holder of any share of Series B Preferred Stock converted after the
record date and before the occurrence of the event the additional shares of
Common Stock issuable upon the conversion by reason of the adjustment over and
above the Common Stock issuable upon the conversion before giving effect to the
adjustment; and (ii) paying to the holder any cash in lieu of any fractional
share pursuant to Subsection 5(k).
(I) CERTIFICATE AS TO ADJUSTMENTS; NOTICE BY CORPORATION. In
each case of an adjustment or readjustment of the type described in Paragraphs
(e), (f), (g), or (h) of this Section 5, the Corporation at its expense will
furnish each holder of Series B 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.
(J) EXERCISE OF CONVERSION PRIVILEGE. To exercise its
conversion privilege, a holder of Series B 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 B Preferred Stock and, within two (2)
trading days thereafter, shall surrender the 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 address or addresses) in which the certificate(s) for shares
of Common Stock issuable upon such conversion shall be issued. The reverse side
of the certificate(s) for shares of Series B Preferred Stock surrendered
-8-
for conversion shall be completed and executed by the holder or such
certificate(s) shall be accompanied by other proper assignment thereof to the
Corporation or in blank. As promptly as practicable after the Series B
Conversion Date, but in no event more than three (3) trading days after the
Series B Conversion Date, the Corporation shall issue and shall deliver to the
holder of the shares of Series B Preferred Stock being converted, or on its
written order, 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 B
Preferred Stock in accordance with the provisions of this Section 5, and cash,
as provided in Section 5(k), 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 Series B
Conversion Date, and at such time the rights of the holder as holder of the
converted shares of Series B 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 Series B Conversion Date, the
Corporation shall pay the liquidated damages set forth in Section 18, and make
the payments required by Section 19, of the Securities Purchase Agreement
between the Corporation and the initial purchaser(s) of the Series B Preferred
Stock with respect to the sale and issuance of the Series B Preferred Stock.
(K) 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 B Preferred Stock. Instead of any fractional
shares of Common Stock that would otherwise be issuable upon conversion of
Series B Preferred Stock, the Corporation shall pay to the holder of the shares
of Series B 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 Series B 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 B Preferred Stock
being converted at any one time by any holder thereof, not upon each share of
Series B Preferred Stock being converted.
(L) PARTIAL CONVERSION. In the event some but not all of the
shares of Series B 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 B Preferred Stock that were not
converted.
(M) 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 B 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 B Preferred Stock (including any shares of
Series B Preferred Stock represented by any warrants, options, subscription or
purchase rights for the Series B Preferred Stock), and if at any time the number
of authorized but unissued shares of
-9-
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series B Preferred Stock (including any shares of
Series B Preferred Stock represented by any warrants, options, subscriptions or
purchase rights for the Series B Preferred Stock), the Corporation shall use all
reasonable efforts and take such action 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.
6. STATUS. Upon any conversion, exchange or redemption of shares of
Series B Preferred Stock, the shares of Series B Preferred Stock that are
converted, exchanged, or redeemed will have the status of authorized and
unissued shares of preferred stock, and the number of shares of preferred stock
that the Corporation will have authority to issue will not be decreased by the
conversion, exchange or redemption of shares of Series B Preferred Stock, but
the number of shares of Series B Preferred Stock that the Corporation will have
authority to issue will be reduced so that the shares of Series B Preferred
Stock that were converted, exchanged, or redeemed may not be re-issued.
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 mail or cause to be mailed to
each holder of Series B 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 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.
-10-
8. MISCELLANEOUS.
(A) The headings of the various subdivisions of this
resolution are for convenience only and will not affect the meaning or
interpretation of any of the provisions of this resolution.
(B) The preferences, special rights, or powers of the Series B
Preferred Stock may be waived, and any of the provisions of the Series B
Preferred Stock may be amended, only by the affirmative vote at a meeting or the
written consent of holders of record of at least a majority of the outstanding
shares of Series B Preferred Stock.
ANNEX I
CONVERSION CERTIFICATE
[Date]
DynaGen, Inc.
99 Erie Street
Cambridge, MA 02139
Dear Sir or Madam:
The undersigned holder of the Series B Preferred Stock (the "Holder")
of DynaGen, Inc. (the "Company") has submitted a notice of election to convert
_____ shares of the Company's Series B Preferred Stock. The Holder hereby
certifies that the conversion of such shares of Series B Preferred Stock will
not result in the Holder holding more than 4.9% of the outstanding shares of the
Company's Common Stock on the Series B Conversion Date for such converted shares
of Series B Preferred Stock.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Company's Certificate of Designations,
Preferences, and Rights of Series B Preferred Stock.
[HOLDER]
By: ___________________________
Name:
Title:
EXHIBIT 4.18
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "AGREEMENT"), dated as of June
17, 1997, is entered into by and between JULIUS BAER SECURITIES INC. acting in
its capacity as agent for certain non-U.S. persons (such non-U.S. persons
collectively, the "PURCHASER") and DYNAGEN, INC., a Delaware corporation (the
"COMPANY").
The parties hereto agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND COMMON SHARES. 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 the Purchaser on the Closing Date (as hereinafter defined) 7,500 shares (the
"PREFERRED Shares") of its Series B Preferred Stock (the "PREFERRED STOCK"),
each such Preferred Share convertible in accordance with the terms and
conditions of the Company's Certificate of Designation for the Preferred Stock
in the form of EXHIBIT A annexed hereto (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) 225,000 shares of the Company's Common Stock
(the "COMMON SHARES"). The Preferred Shares and the Common Shares (the "SHARES")
shall be purchased at the aggregate purchase price of $750,000 (the "PURCHASE
PRICE"), representing $2,250 for the Common Shares and $747,750 for the
Preferred Shares.
2. CLOSING. The closing of the purchase and sale of the Shares pursuant
to Section 1 hereof shall take place on June 17, 1997 at the offices of Morse,
Zelnick, Rose & Lander LLP, located at 450 Park Avenue, Suite 902, New York, New
York 10022 or at such other date, time and place as the Purchaser and the
Company may agree upon in writing, or, subject to the last sentence of this
Section 2, 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 Shares 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 Purchaser 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 Purchaser and the Company written instructions of
the Purchaser and the Company in substantially the form of EXHIBIT B 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 Purchaser delivers the Purchase Price to the Escrow Agent.
Commencing on the fifth business day after delivery to the Escrow Agent of the
Purchase Price, the Purchaser, 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
redeliver the Purchase Price to the Purchaser as soon as practicable in
accordance with the written instructions of the Purchaser.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER. The
Purchaser represents and warrants to, and agrees with, the Company that:
(a) The Purchaser acknowledges that the Preferred Shares, the
Conversion Shares and the Common Shares have not been and will not be registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT") or any other
applicable securities law (except that the Company has agreed to register the
Conversion Shares and the Common Shares under the Securities Act, in accordance
with the Registration Rights Agreement (as defined in Section 6(b)) 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.
The Purchaser acknowledges and agrees that the certificates
representing the Preferred Shares, the Conversion Shares and the Common 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 AVAILABLE EXEMPTION THEREFROM UNDER THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
(b) The Purchaser is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act and was not organized for the
specific purpose of acquiring the Shares. 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 Shares. The Purchaser is aware that
it may be required to bear the economic risk (including the possible loss of the
entire investment) of an investment in the Shares for an indefinite period, and
it is able to bear such risk for an indefinite period.
(c) The Purchaser is acquiring or will acquire the Shares 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.
(d) The Purchaser and/or its advisors, if any, 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, the Purchaser has had the opportunity to obtain and to review the
Company's (1) Transition Report on Form 10-K for the six-month
-2-
period ended December 31, 1996 as filed with the Securities and Exchange
Commission (the "SEC"), (2) Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1997, and (3) definitive Proxy Statement of the Company dated
December 27, 1996 for its Annual Meeting of Stockholders held on January 30,
1997 (collectively, the "SEC DOCUMENTS"), each of which the Company has filed
pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT").
(e) The Purchaser, in electing to subscribe for the Shares
hereunder, has relied upon an independent investigation made by it and its
representative, if any. The 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.
(f) The Purchaser has no existing short position with respect
to the Common Stock and agrees not to enter into any short sales or other
hedging or derivative security transactions involving the Common Stock;
provided, however, that the Purchaser may enter into a short sale or hedging
transaction at any time after a Conversion Date (as such term is defined in
Section 15) and through the Delivery Date (as defined in Section 15), solely in
order to cover that number of Conversion Shares being delivered on the Delivery
Date. The Purchaser further agrees that, at all times after the execution of
this Agreement by the Purchaser and prior to conversion of all Preferred Shares,
it will keep its purchase of the Shares confidential, except as required by law
and except as necessary or appropriate in the ordinary course of the Purchaser's
business.
(g) The 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) The 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.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Purchaser that:
-3-
(a) The Company and each of Able Laboratories, Inc. and
DynaGen Acquisition Corp. (the "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 and the Registration Rights Agreement have
been duly authorized, executed and delivered by the Company and constitute valid
and binding agreements, enforceable in accordance with their respective terms,
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 or the Registration Rights
Agreement or the performance of its obligations under such agreements,
including, without limitation, the issuance and sale of the Preferred Shares,
the Conversion Shares and the Common Shares (except for the registration of the
Conversion Shares and Common Shares under the Securities Act pursuant to the
Registration Rights Agreement, the listing of the Conversion Shares and the
Common 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 Shares pursuant to this Agreement,
nor the performance of its obligations under this Agreement 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 or any Subsidiary,
(B) any decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company or any Subsidiary of any court, governmental agency or
body, or arbitrator having jurisdiction over the Company or any Subsidiary or
over the properties or assets of the Company or any Subsidiary, (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 or any Subsidiary is a party, by which the
Company or any Subsidiary is bound, or to which any of the properties of the
Company or any Subsidiary is subject, 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 or any
Subsidiary.
(e) The Shares have been duly and validly authorized and are
(i) free and clear of any security interests, liens, claims or other
encumbrances, (ii) are duly and validly issued, (iii)
-4-
fully paid and nonassessable, (iv) not issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company, and (v) do not subject the holders thereof to personal liability by
reason of being such holders.
(f) The Conversion Shares have been duly and validly
authorized and when issued in accordance with the terms of this Agreement and
the Certificate of Designation (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 required to be 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 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 that 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 Stock or the Common Shares.
(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 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 Common 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
-5-
published rules and regulations of the SEC with respect thereto. Such financial
statements have 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 that 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, the authorized capital stock of the
Company consists of (i) 75,000,000 shares of Common Stock, $.01 par value per
share, of which 30,122,477 shares were 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 no shares
were issued and outstanding and (B) 7,500 shares have been designated Series B
Preferred Stock, of which no shares were issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. Except as contained in Section 5(i) of the Securities Purchase
Agreement dated June 16, 1997 by and among the Company and the Investors named
therein evidencing the sale of Series A Preferred Stock, no shares of Common
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, 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. As of the Closing Date and before giving effect to the Superior
Acquisition (as defined in Section 5(g) hereof) and the Closing contemplated
hereunder, (i) the authorized capital stock of the Company will be (x)
75,000,000 shares of Common Stock, $.01 par value per share, of which 30,272,477
shares will be issued and outstanding and (y) 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 41,000 shares are issued and outstanding and
(B) 7,500 shares have been designated as Series B Preferred Stock, of which no
shares are issued and outstanding.
(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, except as
disclosed in the filings of the Company with the SEC, other than continued
losses.
-6-
(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
July 1, 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.
(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 Purchaser 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 or the
Registration Rights Agreement.
(p) The Company acknowledges and agrees that Purchaser is
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 Purchaser
is 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 Purchaser or any of its representatives or agents in connection
with this Agreement and the transactions contemplated hereby and thereby is
merely incidental to the Purchaser's purchase of the Shares. The Company further
represents to the Purchaser 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 Stock 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, 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,
-7-
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 Common Shares.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Purchaser:
(a) To comply with all requirements of Section 4(2) with
respect to the Common Shares and the Preferred Shares, and Section 3(a)(9) with
respect to the Conversion Shares, and to the extent applicable Regulation D
under the Securities Act, with respect to the sale of the Preferred Shares, the
Conversion Shares and the Common Shares.
(b) To notify the Purchaser 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 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 to
satisfy the conversion rights of the Purchaser pursuant to the terms and
conditions of the Preferred Stock and the Certificate of Designation and to
satisfy the issuance of any other shares of Common Stock that are reserved for
issuance or that are issuable upon the exercise, conversion, exchange or
satisfaction of any outstanding securities or obligations or rights of the
Company.
(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 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 that 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 Common
Shares and (b) none of the Preferred Stock is outstanding, the Company shall use
its best efforts to 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.
-8-
(g) The Company will use the proceeds from the sale of the
Shares for working capital and other general corporate purposes, including
consummation of the acquisition of Superior Pharmaceutical Company (the
"SUPERIOR ACQUISITION") pursuant to that certain Agreement and Plan of Merger
dated as of March 7, 1997, as amended.
(h) The Company shall use its best efforts to promptly secure
the listing of the Conversion Shares and Common 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 use its best efforts to 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 Common Shares, the Company shall use its best efforts to
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 Purchaser 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 Purchaser, 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 Purchaser shall have entered into the
Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT") in
substantially the form annexed hereto as EXHIBIT C.
(c) The Company will provide to the Purchaser an opinion or
opinions of counsel in substantially the form annexed hereto as EXHIBIT D.
(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 Purchaser.
-9-
(f) The Company shall have executed and delivered to the
Escrow Agent the certificates representing the Shares.
(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, that
seeks to restrain, prevent or challenge the transactions contemplated by this
Agreement or the Registration Rights Agreement or that 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 Purchaser of their obligations hereunder and to the
satisfaction of the condition precedent that the representations and warranties
made by the Purchaser 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 Purchaser shall have delivered to the Escrow Agent by
wire transfer the Purchase Price for the Shares.
8. TRANSFER OF SECURITIES.
(a) Securities Act Legend. Each certificate evidencing the
Preferred Shares, the Conversion Shares and the Common 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 and the Common 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 Common Shares, the sale of the Conversion Shares and
the Common 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 and the
Common 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, the Purchaser agrees to Transfer the Preferred Shares, the
Conversion Shares and the Common Shares, including those represented by
certificate(s) from which the legend has been removed, in compliance with all
applicable securities laws.
(b) Securities Act Compliance. Each holder (a "HOLDER") of a
certificate evidencing the Preferred Shares, the Conversion Shares and the
Common Shares that bears the restrictive legend set forth in Section 3(a) above
(the "RESTRICTED SECURITIES"), and who proposes
-10-
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 five
(5) 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 Preferred Shares, the Conversion Shares or the
Common Shares not so transferred) shall bear the restrictive legend set forth in
Section 3(a), unless, in the opinion of such Holder's legal counsel (which
opinion shall be reasonably satisfactory in form and substance to legal counsel
for the Company), or in the opinion of legal counsel to 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 Holder's 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 Common 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 Stock, the Company shall
instruct its transfer agent to issue certificates, registered in the name of the
Purchaser or its nominee, for the Conversion Shares in such amounts as specified
from time to time by the Purchaser 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. Nothing in this Section shall
affect in any way
-11-
Purchaser's obligations and agreement to comply with all applicable securities
laws upon resale of the Conversion Shares.
9. FEES AND EXPENSES. Each of the Purchaser 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 three years,
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 Stock, the Conversion Shares and the Common Shares.
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 Purchaser, to:
Julius Baer Securities Inc.
330 Madison Avenue
New York, NY 10017
Telecopy: (212) 697-5322
With a copy to:
Rogers & Wells
Two Hundred Park Avenue
New York, NY 10166
Attention: Sara Hanks, Esq.
Telecopy: (212) 878-8375
If to the Company, to:
DynaGen, Inc.
99 Erie Street
Cambridge, MA 02139
Attention: President
Telephone: (617) 491-2527
Telecopy: (617) 354-3902
-12-
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 Stock, the Conversion Shares and the
Common Shares shall be a third party beneficiary of the Company's obligations
under this Agreement 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 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.
(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).
(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
-13-
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 Purchaser 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
4(l), 5(f), 8, 10, 11, 12, 13, 14, 15 and 19, shall terminate when all Preferred
Shares have been converted into shares of the Company's Common Stock and
delivered to Purchaser.
(j) The parties shall resolve any dispute arising hereunder
before a panel of three arbitrators selected pursuant to and run in accordance
with the rules of the National Association of Securities Dealers. The
arbitration shall be held in New York, New York. The winning party shall be
entitled to an award of reasonable attorney's fees and costs.
14. INDEMNIFICATION.
(a) The Company agrees to indemnify the Purchaser and its
officers, directors, employees, agents and affiliates in respect of and hold
each of them harmless from and against, any and all damages, fines, fees,
penalties, deficiencies, losses and expenses (including without limitation
interest, court costs, fees of attorneys, accountants and other experts or other
expenses of litigation or other proceedings or of any claims, default or
assessment) ("Losses") suffered, incurred or sustained by any of them or to
which any of them becomes subject, resulting from, arising out of or relating to
any misrepresentation, breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of the Company contained in this
Agreement, as such expenses are incurred, unless such Loss results primarily
from the Purchaser's gross negligence, recklessness or bad faith in performing
the obligations which are the subject of this Agreement (a "Company Indemnifying
Event").
(b) The Purchaser agrees to indemnify the Company and its
officers, directors, employees, agents and affiliates in respect of, and hold
each of them harmless from and against, any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Purchaser contained in this Agreement, as such expenses are incurred, unless
such Loss results from the Company's gross negligence, recklessness or bad faith
in performing the obligations which are the subject of this Agreement (a
"Purchase Indemnifying Event").
(c) No party shall be entitled to indemnification for Losses
relating to a Company Indemnifying Event or a Purchaser Indemnifying Event until
the aggregate amount of
-14-
such Losses exceeds $50,000 (the "Threshold"), and then such party shall be
entitled only to the amount of the Losses in excess of the Threshold.
15. METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims for
indemnification by any Indemnified Party (as defined below) under Section 14
will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any
person claiming indemnification under any provision of Section 14 (an
"Indemnified Party") might seek indemnity under Section 14 is asserted against
or sought to be collected from such Indemnified Party by a person other than the
Company, the Purchaser or any affiliate of the Company or the Purchaser (a
"Third Party Claim"), the Indemnified Party shall deliver a written
notification, enclosing a copy of all papers served, if any, and specifying the
nature of and basis for such Third Party Claim and for the Indemnified Party's
claim for indemnification that is being asserted under any provision of Section
14 against any person (the "Indemnifying Party"), together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such Third Party Claim (a "Claim Notice") with reasonable promptness
to the Indemnifying Party. If the Indemnified Party fails to provide the Claim
Notice with reasonable promptness after the Indemnified Party receives notice of
such Third Party Claim, the Indemnifying Party will not be obligated to
indemnify the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been irreparably
prejudiced by such failure of the Indemnified Party. The Indemnifying Party will
notify the Indemnified Party as soon as practicable within the period ending
thirty (30) calendar days following receipt by an Indemnifying Party of either a
Claim Notice or an Indemnity Notice (as defined below) (the "Dispute Period")
whether the Indemnifying Party disputes its liability to the Indemnified Party
under Section 14 and whether the Indemnifying Party desires, at its sole cost
and expense, to defend the Indemnified Party against such Third Party Claim.
(1) If the Indemnifying Party notifies the
Indemnified Party within the Dispute Period that the Indemnifying Party desires
to defend the Indemnified Party with respect to the Third Party Claim pursuant
to this Section 15(a), then the Indemnifying Party will have the right to
defend, with counsel reasonably satisfactory to the Indemnified Party, at the
sole cost and expense of the Indemnifying Party, such Third Party Claim in all
appropriate proceedings, which proceedings will be vigorously and diligently
prosecuted by the Indemnifying Party to a final conclusion or will be settled at
the discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any relief
other than the payment of monetary damages or that provides for the payment of
monetary damages as to which the Indemnified Party will not be indemnified in
full pursuant to Section 14). The Indemnifying Party will have full control of
such defense and proceedings, including any compromise or settlement thereof;
provided, however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnified Party's delivery
of the notice referred to in the first sentence of this Section 15(a)(1), file
any motion, answer or other pleading or take any other action that the
Indemnified Party reasonably believes to be necessary or appropriate to protect
its interests; and provided further, that if requested by the Indemnifying
Party, the Indemnified Party will, at the sole cost and expense of the
Indemnifying Party, provide
-15-
reasonable cooperation to the Indemnifying Party in contesting any Third Party
Claim that the Indemnifying Party elects to contest. The Indemnified Party may
participate in, but not control, any defense or settlement of any Third Party
Claim controlled by the Indemnifying Party pursuant to this Section 15(a)(1),
and except as provided in the preceding sentence, the Indemnified Party will
bear its own costs and expenses with respect to such participation.
Notwithstanding the foregoing, the Indemnified Party may take over the control
of the defense or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity under Section 14 with respect to such
Third Party Claim.
(2) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the Indemnifying Party desires
to defend the Third Party Claim pursuant to Section 15(a), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the Indemnifying Party fails
to give any notice whatsoever within the Dispute Period, then the Indemnified
Party will have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate proceedings, which
proceedings will be prosecuted by the Indemnified Party in a reasonable manner
and in good faith or will be settled at the discretion of the Indemnified Party
(with the consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnified Party will have full control of such
defense and proceedings, including any compromise or settlement thereof,
provided however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnified Party and its counsel in contesting
any Third Party Claim which the Indemnified Party is contesting. Notwithstanding
the foregoing provisions of this Section 15(a)(2), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the Indemnifying
Party disputes its liability hereunder to the Indemnified Party with respect to
such Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in Section 15(a)(3) below, the
Indemnifying Party will not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this Section 15(a)(2) or of the
Indemnifying Party's participation therein at the Indemnified Party's request,
and the Indemnified Party will reimburse the Indemnifying Party in full for all
reasonable costs and expenses incurred by the Indemnifying Party in connection
with such litigation. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party pursuant
to this Section 15(a)(2), and the Indemnifying Party will bear its own costs and
expenses with respect to such participation.
(3) If the Indemnifying Party notifies the
Indemnified Party that it does not dispute its liability to the Indemnified
Party with respect to the Third Party Claim under Section 14 or fails to notify
the Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes its liability to the Indemnified Party with respect to such Third Party
Claim, the Loss in the amount specified in the Claim Notice will be conclusively
deemed a liability of the Indemnifying Party under Section 14 and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on
demand. If the Indemnifying Party has timely disputed its liability with respect
to such claim, the Indemnifying Party and the Indemnified Party will proceed in
good faith to negotiate a resolution of such dispute, and if not resolved
through negotiations
-16-
within the Resolution Period, such dispute shall be resolved by arbitration in
accordance with paragraph (c) of Section 15.
(b) In the event any Indemnified Party should have a claim
under Section 14 against any Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver a written notification of a
claim for indemnity under Section 14 specifying the nature of and basis for such
claim together with the amount, or if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such claim (an "Indemnity
Notice") with reasonable promptness to the Indemnifying Party. The failure by
any Indemnified Party to give the Indemnity Notice shall not impair such party's
rights hereunder except to the extent that an Indemnifying Party demonstrates
that it has been irreparably prejudiced thereby. If the Indemnifying Party
notices the Indemnified Party that it does not dispute the claim described in
such Indemnity Notice or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes the claim described in
such Indemnity Notice, the Loss in the amount specified in the Indemnity Notice
will be conclusively deemed a liability of the Indemnifying Party under Section
14 and the Indemnifying Party shall pay the amount of such Loss to the
Indemnified Party on demand. If the Indemnifying Party has timely disputed its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party will proceed in good faith to negotiate a resolution of such dispute, and
if not resolved through negotiations within the Resolution Period, such dispute
shall be resolved by arbitration in accordance with paragraph (c) of this
Section 15.
(c) Any dispute submitted to arbitration pursuant to this
Section 15 shall be finally and conclusively determined by the decision of a
board of arbitration consisting of three (3) members (hereinafter sometimes
called the "Board of Arbitration") selected as hereinafter provided. Each of the
Indemnified Party and the Indemnifying Party shall select one (1) member and the
third member shall be selected by mutual agreement of the other members, or if
the other members fail to reach agreement on a third member within twenty (20)
days after their selection, such third member shall thereafter be selected by
the American Arbitration Association upon application made to it for such
purpose by the Indemnified Party. The Board of Arbitration shall meet on
consecutive business days in New York, New York or such other place as a
majority of the members of the Board of Arbitration determines more appropriate,
and shall reach and render a decision in writing at the end of such period of
consecutive business days (concurred in by a majority of the members of the
Board of Arbitration) with respect to the amount, if any, which the Indemnifying
Party is required to pay to the Indemnified Party in respect of a claim filed by
the Indemnified Party. In connection with rendering its decision, the Board of
Arbitration shall adopt and follow such rules and procedures as a majority of
the members of the Board of Arbitration deems necessary or appropriate. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to the Indemnified Party and the Indemnifying Party. Any decision made
by the Board of Arbitration (either prior to or after the expiration of such
thirty (30) calendar day period) shall be final, binding and conclusive on the
Indemnified Party and the Indemnifying Party and shall be entitled to be
enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. Each party to any arbitration shall bear its own expense
in relation thereto, including
-17-
but not limited to such party's attorneys fees, if any, and the expenses and
fees of the Board of Arbitration shall be divided between the Indemnifying Party
and the Indemnified Party in the same proportion as the portion of the related
claim determined by the Board of Arbitration to be payable to the Indemnified
Party bears to the portion of such claim determined not to be so payable.
16. TIME OF ESSENCE. Time shall be of the essence in this Agreement.
17. COMPLIANCE WITH TAX LAW.
The Company and the Purchaser agree that the Company will
comply with its applicable federal or other tax withholding obligations.
18. LIQUIDATED DAMAGES FOR FAILURE TO DELIVER. The Company understands
that a delay beyond the deadline for delivery, specified in Section 5(j) of the
Certificate of Designation, 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 Conversion Shares issuable at
conversion of the Preferred Stock 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 $10,000 of
No. Business Days Late Original Investment Being Converted
3 $ 50.00
4 $ 100.00
5 $ 150.00
6 $ 200.00
7 $ 250.00
8 $ 300.00
9 $ 350.00
10 $ 400.00
>10 $400.00 + $100.00 for each Business
Day Late Beyond 10 Days
The Company shall make any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit the
Purchaser's right to actual damages for the Company's failure to issue and
deliver the Conversion Shares to the Purchaser. Furthermore, in addition to any
other remedy that may be available to the Purchaser, in the event that the
Company fails for any reason to effect delivery of Conversion Shares within
seven 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 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; provided that no such election shall constitute
waiver of any right
-18-
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.
19. NON-DELIVERY OF THE SHARES. If, within twenty (20) business days of
the date after receipt by the Company of the Original Documentation, the Company
shall fail to (i) issue the Conversion Shares and (ii) deliver to the Purchaser
the Conversion Shares as required by the Certificate of Designation for any
reason other than failure by the Purchaser to comply with its obligations under
this Agreement, then the Company shall:
(a) hold the 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); 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.
20. 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 Purchaser agree to save harmless, 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), 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:
-19-
(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 Purchaser and the Company of any
discrepancy between the amounts set forth on any statement delivered by the
Purchaser 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
Purchaser, or to give any receipt therefor except to the Company or the
Purchaser, 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 Purchaser 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;
(h) have no liability for following the instructions herein or
expressly provided for herein, or the written instructions given jointly by the
Purchaser 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
-20-
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.]
-21-
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: /s/ Dhananjay G. Wadekar
--------------------------
Title: Executive Vice President
--------------------------
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,
Julius Baer Securities Inc.
By: /s/ [ILLEGIBLE]
--------------------------
Title: Managing Director
--------------------------
Address: 330 Madison Avenue
----------------------
NY NY 10017
----------------------
EXHIBIT 4.19
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of June 17,
1997 by and among DYNAGEN, INC., a Delaware corporation, with headquarters
located at 99 Erie Street, Cambridge, Massachusetts 02139 (the "Company"), and
JULIUS BAER SECURITIES INC., acting in its capacity as agent for certain
non-U.S. persons (such non-U.S. persons, the "INITIAL INVESTOR").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investor (the "PURCHASE
AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investor (i)
Series B Preferred Stock (the "PREFERRED STOCK") that is convertible into shares
(collectively, the "CONVERSION SHARES") of the Company's common stock (the
"COMMON STOCK") , all upon the terms and subject to the limitations and
conditions set forth in the Certificate of Designation, and (ii) 225,000 shares
of Common Stock (the "COMMON SHARES"); and
B. To induce the Initial Investor to execute and deliver the 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 Investor hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have
the following meanings:
(i) "INVESTORS" means the Initial Investor and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "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").
(iii) "POTENTIALLY 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 that 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) "REGISTRABLE SECURITIES" means the Conversion
Shares issued or issuable and the Common Shares, 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 and any shares of Common Stock issued in connection with
Section 2(b) hereof.
(v) "REGISTRATION STATEMENT" means a registration
statement of the Company under the 1933 Act providing for registration of the
Registrable Securities.
(b) Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Purchase Agreement.
2. REGISTRATION.
(a) Mandatory Registration. The Company shall, within 45 days
following the Closing Date, file with the SEC a Registration Statement on Form
S-3 (or, if Form S-3 is not then available to the Company, on such form of
Registration Statement as is then available to the Company to effect a
registration of the Registrable Securities, subject to the consent of the
Initial Investor (as determined pursuant to Section l0 hereof), which consent
will not be unreasonably withheld conditioned or delayed) covering the resale of
the Registrable Securities. 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 Conversion Shares as may become issuable upon conversion of
the Preferred Stock or 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 (including the taking of
such steps as are necessary to obtain the removal of any stop orders); provided,
however, that the Investors shall furnish the Company 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 Initial Investor and
its counsel prior to its filing or other submission. 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.
-2-
(b) Liquidated Damages. The Company shall use its best efforts to
obtain effectiveness of the Registration Statement within 150 days following the
Closing Date. If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not declared effective by the SEC within one hundred fifty (150) days after
the Closing Date of the sale of the Shares, or if, after the Registration
Statement has been declared effective by the SEC, sales of Registrable
Securities cannot be made pursuant Registration Statement (by reason of stop
order, the Company's failure to update the Registration Statement, the
occurrence of a Potentially Material Event, a Company Event (as defined below)
or otherwise), or (ii) any of the Registrable Securities are not designated,
listed, or included for quotation on the NASDAQ National Market System (the
"NASDAQ-NMS"), NASDAQ SmallCap, the New York Stock Exchange (the "NYSE"), or the
American Stock Exchange (the "AMEX"), then the Company will make payments to the
Investors as liquidated damages in such amounts and at such times as shall be
determined pursuant to this Section 2(b) as partial relief for the damages to
the Investor by reason of any such delay in or reduction of their ability to
sell the Registrable Securities (which remedy shall not be exclusive of any
other remedies available at law or in equity). The Company shall pay to each
holder of Registrable Securities an amount equal to (x) the aggregate purchase
price paid by the Investors for the Shares then held by such investors and of
which sales cannot be made pursuant to the Registration Statement or are not
listed, designated or included for quotation on NASDAQ-NMS, NASDAQ SmallCap,
they NYSE, or AMEX (including, without limitation, Preferred Shares that have
been converted into Conversion Shares then held by such Investors) (the
"Aggregate Share Price") multiplied by (y) two and one-half hundredths (.025)
multiplied by (z) the sum of (i) the number of months (prorated for partial
months) after the end of such 150-day period and prior to the date the
Registration Statement is declared effective by the SEC; provided, however, that
there shall be excluded form such period any delays that are solely attributable
to changes required by the Investors in the Registration Statement with respect
to information relating to the Investors, including, without limitation, changes
to the plan of distribution, or to the failure of the Investors to conduct their
review of the registration statement pursuant to Section 2(a) above in a
reasonably prompt manner; plus (ii) the number of months (prorated for partial
months) that sales cannot be made pursuant to the Registration Statement after
the Registration Statement has been declared effective; plus (iii) the number of
months (prorated for partial months) that the Common Stock is not listed or
included for quotation on the NASDAQ-NMS, NASDAQ SmallCap, NYSE or AMEX after
the Registration Statement has been declared effective. (For example, if the
Registration Statement becomes effective one (1) month after the end of such
150-day period, the Company would pay $25,000 for each $1,000,000 of Aggregate
Share Price and would continue to pay $25,000 for each $1,000,000 of Aggregate
Share Price until the Registration Statement becomes effective.) Such amounts
shall be paid in cash or, at each Investor's option (but subject to the
limitations contained Article 5 of the Certificate of Designations), may be
convertible into Common Stock at the "Series B Conversion Price" (as defined in
the Certificate of Designations). Any shares of Common Stock issued upon
conversion of such amounts shall be Registrable Securities. If the Investor
desires to convert the amounts due hereunder into Registrable Securities, it
shall so notify the Company in writing within two (2) business days of the date
on which such amounts are first payable in cash and such amounts shall be so
convertible (pursuant to the mechanics set forth in the Certificate of
Designations), beginning on the last day upon
-3-
which the cash amount would otherwise be due in accordance with the following
sentence. Payments of cash pursuant hereto shall be made within ten (10) days
after the end of each period that gives rise to such obligation, provided that,
if any such period extends for more than thirty (30) days, interim payments
shall be made for each such thirty (30) day period. Notwithstanding anything to
the contrary set forth above in this Section 2(b), if the payment of cash
liquidated damages by the Company would cause the Company to violate any
covenant under any agreement entered into in connection with the Superior
Transaction (as defined in the Purchase Agreement), then for so long as such
payment would cause such violation, the Company may pay any liquidated damages
required hereunder in shares of Common Stock, valued at the average of the
closing bid price of the Common Stock as recorded by the NASDAQ SmallCap market
for the five trading days preceding the payment date required by the immediately
preceding sentence. Any of such shares of Common Stock paid as liquidated
damages shall be Registrable Securities.
(c) 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 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 within 45 days following the Closing
Date prepare and file promptly with the SEC a Registration Statement and
thereafter use its best efforts to cause such Registration Statement to become
effective within 150 days following the Closing Date, and 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 have been
sold and no shares of Preferred Stock are outstanding, (ii) the date on which
all of the Registrable Securities (in the opinion of counsel to the Initial
Investor) may be immediately sold without registration and (iii) two years from
the 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, in accordance with the
notice provisions of Section 11(b) hereof, 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 three (3) business
days, to any information pertaining 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.
-4-
(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 of Common Stock covered for resale by the Investors under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of the
Registrable Securities (a "Company Event"), 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 forty-five (45) 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
practicable following the filing thereof. During any period when a Company Event
has occurred and is continuing, the Company shall pay liquidated damages as
provided for in Section 2(b) hereof.
(c) The Company shall furnish, in accordance with the notice
provisions of Section 11(b) hereof, to each Investor whose Registrable
Securities are included in the Registration Statement and to 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 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 to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably 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 (a) to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) to subject
itself to general taxation in any such jurisdiction, (c) to file a general
consent to service of process in any such jurisdiction, (d) to provide any
undertakings that cause the Company undue expense or burden, or
-5-
(e) to make any change in its charter or bylaws that 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 Potentially
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 Potentially Material
Event until such Investor receives written notice from the Company that such
Potentially Material Event either has been disclosed to the public or no longer
constitutes a Potentially Material Event; provided, however, that the Company
may not so suspend the right to such holders of Registrable Shares for more than
90 days in the aggregate during any 12-month period during the period the
Registration Statement is required to be in effect. Liquidated damages shall
continue to accrue pursuant to Section 2(b) hereof during any such Potentially
Material Event.
(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) 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 Initial Investor, 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 that 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 that 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
-6-
with respect thereto, containing terms substantially similar to those contained
in this Section 3(g). 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 that is otherwise consistent with
applicable laws and regulations.
(g) 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.
(i) The Company shall use its best efforts to secure the
listing, designation and inclusion for quotation of all the Registrable
Securities covered by the Registration Statement on the NASDAQ SmallCap Market,
if the listing of such Registrable Securities is then permitted under the rules
and regulations of such market. To the extent that the Company is unable to
secure such designation and quotation of any Registrable Securities, liquidated
damages shall accrue on such Registrable Securities pursuant to Section 2(b)
hereof.
(j) The Company shall 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.
(k) The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to 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.
(l) 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.
-7-
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 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.
(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 Potentially 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, and shall be entitled to liquidated damages in
accordance with Section 2(b) hereof, until such Investor receives notice in
accordance with Section 3(e) providing for the disposition of Registrable
Securities in accordance with the Registration Statement.
(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 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
-8-
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 by holders of the Registrable Securities as a result of any
investigation pursuant to Section 3(g), 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 insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or 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 that 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,
-9-
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.
(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 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 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
-10-
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 by 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 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;
-11-
(b) use its best efforts to 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 Company remains subject to such requirements
and 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 (a) any transferee of at least 30%
of the Preferred Stock and/or Common Shares, or Registrable Securities or (b) up
to but no more than five persons proved that in any case, (i) the Investor
agrees in writing with the transferees or assignees 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 transferees or assignees, 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 this sentence, the
transferees or assignees agree 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 Purchase Agreement, and (vi)
such transferees 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.
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 a majority of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
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
-12-
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 or by courier) or sent by facsimile or reputable overnight
courier service,
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 Initial Investor, to:
Julius Baer Securities Inc.
330 Madison Avenue
New York, NY 10017
Telecopy: (212) 697-5322
or at such other address as each such party 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 facsimile, the time and date
indicated by accurate electronic confirmation generated by the sending facsimile
machine, and when so sent by reputable overnight courier service, the next
business day after sending.
(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 that
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
(e) This Agreement and the Purchase Agreement (including all
schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the
-13-
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, the Certificate of Designation and the Purchase
Agreement 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.
(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 shares of Preferred
Stock then outstanding had been converted into Registrable Securities).
[REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK.]
-14-
DYNAGEN, INC.
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/ Dhananjay G. Wadekar
---------------------------
Title: Executive Vice President
---------------------------
DYNAGEN, INC.
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,
Julius Baer Securities Inc.
By: /s/ [ILLEGIBLE]
---------------------------
Title: Managing Director
---------------------------
EXHIBIT 4.20
STOCK PURCHASE WARRANT
This Warrant is issued this 18th day of June, 1997, by SUPERIOR
PHARMACEUTICAL COMPANY, an Ohio corporation (the "Company"), to SIRROM CAPITAL
CORPORATION, a Tennessee corporation (SIRROM CAPITAL CORPORATION and any
subsequent assignee or transferee hereof are hereinafter referred to
collectively as "Holder" or "Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM. For and in consideration of SIRROM
CAPITAL CORPORATION making a loan to DynaGen, Inc., a Delaware corporation and
sole shareholder of the Company in an amount of Two Million and no/100ths
Dollars ($2,000,000.00) pursuant to the terms of a secured promissory note of
even date herewith (the "Note") and related loan agreement of even date herewith
(the "Loan Agreement") and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company hereby grants to
Holder the right to purchase shares of the Company's common stock (the "Common
Stock"), which equals 10% of the capital stock of the Company on the date of
exercise. The shares of Common Stock issuable upon exercise of this Warrant are
hereinafter referred to as the "Shares." This Warrant shall be exercisable at
any time and from time to time after such time as that certain Stock Purchase
Warrant of even date herewith issued by DynaGen, Inc. in favor of Holder(s)
("Parent Warrant") has been terminated and this Warrant substituted for the
Parent Warrant, but not later than August 31, 2002 (the "Expiration Date").
2. EXERCISE PRICE. The exercise price (the "Exercise Price") per
share for which all or any of the Shares may be purchased pursuant to the terms
of this Warrant shall be One Cent ($.01).
3. EXERCISE.
(a) This Warrant may be exercised by the Holder hereof (but
only on the conditions hereinafter set forth) as to all or any
increment or increments of One Hundred (100) Shares (or the balance of
the Shares if less than such number), upon delivery of written notice
of intent to exercise to the Company at the following address: 99 Erie
Street, Cambridge, Massachusetts 02139 or such other address as the
Company shall designate in a written notice to the Holder hereof,
together with this Warrant and payment to the Company of the aggregate
Exercise Price of the Shares so purchased. The Exercise Price shall be
payable, at the option of the Holder, (i) by certified or bank check,
or (ii) by the surrender of the Note or portion thereof having an
outstanding principal balance equal to the aggregate Exercise Price. In
addition to and without limiting the rights of the Holder 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. In lieu of exercising this
Warrant for cash, the Holder may elect to surrender a portion of 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 = Y (A - B)
---------------
A
Where: X = the number of shares of Common Stock to be issued to the
Holder;
Y = the number of shares of Common Stock to otherwise be
purchased under this Warrant;
A = the Fair Market Value of one share of the Common Stock;
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, 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 equal to the number computed using the above formula. No
fractional shares shall be issuable upon exercise of the Conversion Right, and
the number of shares to be issued in accordance with the foregoing formula is
other than a whole number, the Company shall round down to the nearest whole
number the total number of shares to be issued. For purposes of this Section
3(a), the term "Fair Market Value" shall mean the average last sale price per
share of Common Stock during the five (5) trading days immediately preceding the
effective date of conversion. If the Common Stock is not publicly traded at such
time, Fair Market Value shall be determined as follows:
(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a
recognized professional association of business appraisers.
The two appraisers shall determine the value of the shares of
Common Stock which would be issued upon the exercise of the
Warrant, taking into consideration that such shares would
constitute a minority interest, and would lack liquidity, and
further assuming that the sale would be between a willing
buyer and a willing seller, both of whom have full knowledge
of the financial and other affairs of the Company, and neither
of whom is under any compulsion to sell or to buy.
2
(ii) If the highest of the two appraisals is not more
than 10% more than the lowest of the appraisals, the Fair
Market Value shall be the average of the two appraisals. If
the highest of the two appraisals is 10% or more than the
lowest of the two appraisals, then a third appraiser shall be
appointed by the two appraisers, and if they cannot agree on a
third appraiser, the American Arbitration Association shall
appoint the third appraiser. The third appraiser, regardless
of who appoints him or her, shall have the same qualifications
as the first two appraisers.
(iii) The Fair Market Value after the appointment of
the third appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be
paid one-half by the Company and one-half by the Holder.
(b) Upon exercise of this Warrant as aforesaid, the Company
shall as promptly as practicable, and in any event within fifteen (15)
days thereafter, execute and deliver to the Holder of this Warrant a
certificate or certificates for the total number of whole Shares for
which this Warrant is being exercised in such names and denominations
as are requested by such Holder. If this Warrant shall be exercised
with respect to less than all of the Shares, the Holder shall be
entitled to receive a new Warrant covering the number of Shares in
respect of which this Warrant shall not have been exercised, which new
Warrant shall in all other respects be identical to this Warrant. The
Company covenants and agrees that it will pay when due any and all
state and federal issue taxes which may be payable in respect of the
issuance of this Warrant or the issuance of any Shares upon exercise of
this Warrant.
4. COVENANTS AND CONDITIONS. The above provisions are subject to
the following:
(a) Neither this Warrant nor the Shares have been registered
under the Securities Act of 1933, as amended ("Securities Act") or any
state securities laws ("Blue Sky Laws"). This Warrant has been acquired
for investment purposes and not with a view to distribution or resale
and may not be pledged, hypothecated, sold, made subject to a security
interest, or otherwise transferred without (i) an effective
registration statement for such Warrant under the Securities Act and
such applicable Blue Sky Laws, or (ii) an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to the Company and
its counsel, that registration is not required under the Securities Act
or under any applicable Blue Sky Laws (the Company hereby acknowledges
that Bass, Berry & Sims is acceptable counsel). Transfer of the shares
issued upon the exercise of this Warrant shall be restricted in the
same manner and to the same extent as the Warrant and the certificates
representing such Shares shall bear substantially the following legend:
3
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW
AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT
UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION
UNDER SUCH SECURITIES ACTS OR SUCH APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.
(b) The Company covenants and agrees that all Shares which may
be issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive
rights, if any, with respect thereto or to the issuance thereof. The
Company shall at all times reserve and keep available for issuance upon
the exercise of this Warrant such number of authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in
full of this Warrant.
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4
hereof, this Warrant may be transferred, in whole or in part, to any person or
business entity, by presentation of the Warrant to the Company with written
instructions for such transfer. Upon such presentation for transfer, the Company
shall promptly execute and deliver a new Warrant or Warrants in the form hereof
in the name of the assignee or assignees and in the denominations specified in
such instructions. The Company shall pay all expenses incurred by it in
connection with the preparation, issuance and delivery of Warrants under this
Section.
6. WARRANT HOLDER NOT SHAREHOLDER; RIGHTS OFFERING; PREEMPTIVE
RIGHTS; PREFERENCE RIGHTS. Except as otherwise provided herein, this Warrant
does not confer upon the Holder, as such, any right whatsoever as a shareholder
of the Company. Notwithstanding the foregoing, if the Company should offer to
all of the Company's shareholders the right to purchase any securities of the
Company, then all shares of Common Stock that are subject to this Warrant shall
be deemed to be outstanding and owned by the Holder and the Holder shall be
entitled to participate in such rights offering. The Company shall not grant any
preemptive rights with respect to any of its capital stock without the prior
written consent of the Holder. The Company shall not issue any securities which
entitle the holder thereof to
4
obtain any preference over holders of Common Stock upon the dissolution,
liquidation, winding-up, sale, merger, or reorganization of the Company without
the prior written consent of the Holder.
7. OBSERVATION RIGHTS. So long as this Warrant remains
outstanding and notwithstanding the repayment of the Note, the Holder of this
Warrant shall (a) receive notice of and be entitled to attend or may send a
representative to attend all meetings of the Company's Board of Directors in a
non-voting observation capacity, (b) receive copies of all notices, packages and
documents provided to members of the Company's Board of Directors for each board
of directors meeting, and (c) receive copies of all actions taken by written
consent by the Company's Board of Directors, from the date hereof until such
time as the indebtedness evidenced by the Note has been paid in full. The
Company agrees to hold meetings of its Board of Directors (which may include
telephonic meetings) at least quarterly. All out-of-pocket expenses incurred by
Holder in attending any such meetings shall be reimbursed by Company.
8. ADJUSTMENT UPON CHANGES IN STOCK.
(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization,
combination of shares of the Company, or other similar event, occurring
after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate price paid upon such exercise, the aggregate
number and class of shares which such Holder would have received if
this Warrant had been exercised immediately prior to such stock split,
stock dividend, recapitalization, combination of shares, or other
similar event. If any adjustment under this Section 8(a) would create a
fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and
the number of shares subject to this Warrant shall be the next higher
number of shares, rounding all fractions upward. Whenever there shall
be an adjustment pursuant to this Section 8(a), the Company shall
forthwith notify the Holder or Holders of this Warrant of such
adjustment, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares,
separation, reorganization or liquidation of the Company, or other
similar event, occurring after the date hereof, as a result of which
shares of Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes of securities
of the Company or another entity, then the Holder exercising this
Warrant shall receive, for the aggregate price paid upon such exercise,
the aggregate number and class of shares which such Holder would have
received if this Warrant had been exercised immediately prior to such
merger, consolidation, exchange of shares, separation, reorganization
or liquidation, or other similar event. If any adjustment under this
Section 8(b) would create a fractional share of Common Stock or a right
to acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares
5
subject to this Warrant shall be the next higher number of shares,
rounding all fractions upward. Whenever there shall be an adjustment
pursuant to this Section 8(b), the Company shall forthwith notify the
Holder or Holders of this Warrant of such adjustment, setting forth in
reasonable detail the event requiring the adjustment and the method by
which such adjustment was calculated.
9. PUT AGREEMENT.
(a) The Company hereby irrevocably grants and issues to Holder
the right and option to sell to the Company (the "Put") this Warrant
until the Expiration Date at a purchase price (the "Purchase Price")
equal to the Fair Market Value (as hereinafter defined) of the shares
of Common Stock issuable to Holder upon exercise of this Warrant.
(b) The Company shall pay to the Holder the Purchase Price, in
cash or certified or cashier's check, in exchange for the delivery to
the Company of this Warrant within forty-five (45) days of the receipt
of written notice, addressed as set forth in Section 3 hereto, from the
Holder of its intention to exercise the Put and stating the Purchase
Price determined in accordance with this Section 9.
(c) The Fair Market Value of the shares of Common Stock of the
Company issuable pursuant to this Warrant shall be the average last
sales price per share of Common Stock during the five (5) trading days
preceding the date of purchase or if the Common Stock is not publicly
traded at such time shall be determined as follows:
(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a
recognized professional association of business appraisers.
The two appraisers shall determine the value of the shares of
Common Stock which would be issued upon the exercise of the
Warrant, taking into consideration that such shares would
constitute a minority interest, and would lack liquidity, and
further assuming that the sale would be between a willing
buyer and a willing seller, both of whom have full knowledge
of the financial and other affairs of the Company, and neither
of whom is under any compulsion to sell or to buy.
(ii) If the highest of the two appraisals is not more
than 10% more than the lowest of the appraisals, the Fair
Market Value shall be the average of the two appraisals. If
the highest of the two appraisals is 10% or more than the
lowest of the two appraisals, then a third appraiser shall be
appointed by the two appraisers, and if they cannot agree on a
third appraiser, the American Arbitration Association shall
appoint the third appraiser. The third appraiser, regardless
of who appoints him or her, shall have the same qualifications
as the first two appraisers.
6
(iii) The Fair Market Value after the appointment of
the third appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be
paid one-half by the Holder and one-half by the Company.
10. REGISTRATION.
(a) The Company and the holders of the Shares agree that if at
any time after the date hereof the Company shall propose to file a
registration statement with respect to the underwritten issuance and
sale by the Company of any of its Common Stock on a form suitable for a
secondary offering, it will give notice in writing to such effect to
the registered holder(s) of the Shares at least fifteen (15) days prior
to such filing, and, at the written request of any such registered
holder, made within five (5) days after the receipt of such notice,
will include therein at the Company's cost and expense (including the
fees and expenses of counsel to such holder(s), but excluding
underwriting discounts, commissions and filing fees attributable to the
Shares included therein) such of the Shares as such holder(s) shall
request; provided, however, that if the offering being registered by
the Company is underwritten and if the representative of the
underwriters certifies in writing that the inclusion therein of the
Shares would materially and adversely affect the sale of the securities
to be sold by the Company thereunder, then the Company shall be
required to include in the offering only that number of securities,
including the Shares, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among all selling
shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder, but in no event
shall the total number of Shares included in the offering be less than
the number of securities included in the offering by any other single
selling shareholder).
(b) Whenever the Company undertakes to effect the
registration of any of the Shares, the Company shall, as expeditiously
as reasonably possible:
(i) Prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement
covering such Shares and use its best efforts to cause such
registration statement to be declared effective by the
Commission as expeditiously as possible and to keep such
registration effective until the earlier of (A) the date when
all Shares covered by the registration statement have been
sold or (B) two hundred seventy (270) days from the effective
date of the registration statement; provided, that before
filing a registration statement or prospectus or any amendment
or supplements thereto, the Company will furnish to each
Holder of Shares covered by such registration statement and
the underwriters, if any, copies of all such documents
proposed to be filed (excluding exhibits, unless any such
person shall specifically request exhibits), which documents
will be subject to the review of such Holders and
7
underwriters, and the Company will not file such registration
statement or any amendment thereto or any prospectus or any
supplement thereto (including any documents incorporated by
reference therein) with the Commission if (A) the
underwriters, if any, shall reasonably object to such filing
or (B) if information in such registration statement or
prospectus concerning a particular selling Holder has changed
and such Holder or the underwriters, if any, shall reasonably
object.
(ii) Prepare and file with the Commission such
amendments and post-effective amendments to such registration
statement as may be necessary to keep such registration
statement effective during the period referred to in Section
10(b)(i) and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered
by such registration statement, and cause the prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed with the Commission pursuant to Rule
424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such numbers
of copies of such registration statement, each amendment
thereto, the prospectus included in such registration
statement (including each preliminary prospectus), each
supplement thereto and such other documents as they may
reasonably request in order to facilitate the disposition of
the Shares owned by them.
(iv) Use its best efforts to register and qualify
under such other securities laws of such jurisdictions as
shall be reasonably requested by any selling Holder and do any
and all other acts and things which may be reasonably
necessary or advisable to enable such selling Holder to
consummate the disposition of the Shares owned by such Holder,
in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a
condition thereto to qualify to transact business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) Promptly notify each selling Holder of the
happening of any event as a result of which the prospectus
included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to
make the statements therein not misleading and, at the request
of any such Holder, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered
to the purchasers of such Shares, such prospectus will not
contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not
misleading and the Holder(s) shall suspend trading at the
request of the Company if, upon advice of counsel to the
Company, such suspension is advisable.
(vi) Provide a transfer agent and registrar for all
such Shares not later than the effective date of such
registration statement.
8
(vii) Enter into such customary agreements (including
underwriting agreements in customary form for a primary
offering) and take all such other actions as the underwriters,
if any, reasonably request in order to expedite or facilitate
the disposition of such Shares (including, without limitation,
effecting a stock split or a combination of shares).
(viii) Make available for inspection by any selling
Holder or any underwriter participating in any disposition
pursuant to such registration statement and any attorney,
accountant or other agent retained by any such selling Holder
or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause
the officers, directors, employees and independent accountants
of the Company to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent
in connection with such registration statement.
(ix) Promptly notify the selling Holder(s) and the
underwriters, if any, of the following events and (if
requested by any such person) confirm such notification in
writing: (A) the filing of the prospectus or any prospectus
supplement and the registration statement and any amendment or
post-effective amendment thereto and, with respect to the
registration statement or any post-effective amendment
thereto, the declaration of the effectiveness of such
documents, (B) any requests by the Commission for amendments
or supplements to the registration statement or the prospectus
or for additional information, (C) the issuance or threat of
issuance by the Commission of any stop order suspending the
effectiveness of the registration statement or the initiation
of any proceedings for that purpose, and (D) the receipt by
the Company of any notification with respect to the suspension
of the qualification of the Shares for sale in any
jurisdiction or the initiation or threat of initiation of any
proceeding for such purposes and the Holder(s) shall suspend
trading at the request of the Company if, upon advice of
counsel to the Company, such suspension is advisable.
(x) Make every reasonable effort to prevent the entry
of any order suspending the effectiveness of the registration
statement and obtain at the earliest possible moment the
withdrawal of any such order, if entered.
(xi) Cooperate with the selling Holder(s) and the
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing the Shares to be sold
and not bearing any restrictive legends, and enable such
Shares to be in such lots and registered in such names as the
underwriters may request at least two (2) business days prior
to any delivery of the Shares to the underwriters.
(xii) Provide a CUSIP number for all the Shares not
later than the effective date of the registration statement.
9
(xiii) [INTENTIONALLY OMITTED]
(xiv) Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and
make generally available to its security holders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than forty-five (45) days after the
end of any twelve-month period (or ninety (90) days, if such
period is a fiscal year) (A) commencing at the end of any
fiscal quarter in which the Shares are sold to underwriters in
a firm or best efforts underwritten offering, or (B) if not
sold to underwriters in such an offering, beginning with the
first month of the first fiscal quarter of the Company
commencing after the effective date of the registration
statement, which statements shall cover such twelve-month
periods.
(c) After the date hereof, the Company shall not grant to any
holder of securities of the Company any registration rights with
respect to an underwritten offering which have a priority greater than
or equal to those granted to Holders pursuant to this Warrant without
the prior written consent of the Holder(s).
(d) The Company's obligations under Section 10(a) above with
respect to each holder of Shares are expressly conditioned upon such
holder's furnishing to the Company in writing such information
concerning such holder and the terms of such holder's proposed offering
as the Company shall reasonably request for inclusion in the
registration statement. If any registration statement including any of
the Shares is filed, then the Company shall indemnify each holder
thereof (and each underwriter for such holder and each person, if any,
who controls such underwriter within the meaning of the Securities Act)
from any loss, claim, damage or liability arising out of, based upon or
in any way relating to any untrue statement of a material fact
contained in such registration statement or any omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except for any such
statement or omission based on information furnished in writing by such
holder of the Shares expressly for use in connection with such
registration statement; and such holder shall indemnify the Company
(and each of its officers and directors who has signed such
registration statement, each director, each person, if any, who
controls the Company within the meaning of the Securities Act, each
underwriter for the Company and each person, if any, who controls such
underwriter within the meaning of the Securities Act) and each other
such holder against any loss, claim, damage or liability arising from
any such statement or omission which was made in reliance upon
information furnished in writing to the Company by such holder of the
Shares expressly for use in connection with such registration
statement.
(e) For purposes of this Section 10, all of the Shares shall
be deemed to be issued and outstanding.
(f) The rights contained in this Section 10 shall expire as to
any holder of Shares that is able to sell Shares pursuant to Rule 144
of the Securities Act.
10
11. CERTAIN NOTICES. In case at any time the Company shall propose
to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in
stock or make any special dividend or other distribution to the holders
of its Common Stock;
(c) offer for subscription to the holders of any of its
Common Stock any additional shares of stock in any class or other
rights;
(d) reorganize, or reclassify the capital stock of the
Company, or consolidate, merge or otherwise combine with, or sell all
or substantially all of its assets to, another corporation; or
(e) voluntarily or involuntarily dissolve, liquidate or
wind up the affairs of the Company;
then, in any one or more of said cases, the Company shall give to the
Holder of the Warrant, by certified or registered mail, (i) at least
twenty (20) days' prior written notice of the date on which the books
of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights
to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up,
and (ii) in the case of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at
least twenty (20) days' prior written notice of the date when the same
shall take place. Any notice required by clause (i) shall also specify,
in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled
thereto, and any notice required by clause (ii) shall specify the date
on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be.
12. EQUITY PARTICIPATION. This Warrant is issued in connection
with the Loan Agreement. It is intended that this Warrant constitute an
equity participation under and pursuant to T.C.A. ss.47-24-101, et seq.
and that such equity participation be permitted under said statutes and
not constitute interest on the Note. If under any circumstances
whatsoever, fulfillment of any obligation of this Warrant, the Loan
Agreement, or any other agreement or document executed in connection
with the Loan Agreement, shall violate the lawful limit of any
applicable usury statute or any other applicable law with regard to
obligations of like character and amount, then the obligation to be
fulfilled shall be reduced to such lawful limit, such that in no event
shall there occur, under this Warrant, the Loan Agreement, or any other
document or instrument executed in connection with the Loan Agreement,
any violation of such lawful limit, but such obligation shall be
fulfilled to the lawful limit. If any sum is
11
collected in excess of the lawful limit, such excess shall be applied
to reduce the principal amount of the Note.
13. GOVERNING LAW. This warrant shall be governed by the laws of
the State of Tennessee applicable to agreements made entirely within
the State.
14. SEVERABILITY. If any provision(s) of this Warrant or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Warrant and the
application of such provisions to other persons or circumstances shall
not be affected thereby and shall be enforced to the greatest extent
permitted by law.
15. COUNTERPARTS. This Warrant may be executed in any number of
counterparts and be different parties to this Warrant in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same Warrant.
16. JURISDICTION AND VENUE. The Company hereby consents to the
jurisdiction of the courts of the State of Tennessee and the United
States District Court for the Middle District of Tennessee, as well as
to the jurisdiction of all courts from which an appeal may be taken
from such courts, for the purpose of any suit, action or other
proceeding arising out of any of its obligations arising under this
Agreement or with respect to the transactions contemplated hereby, and
expressly waives any and all objections it may have as to venue in any
such courts.
12
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
SUPERIOR PHARMACEUTICAL COMPANY,
an Ohio corporation
By: Dhananjay G. Wadekar
--------------------------------
Title: Director
-----------------------------
SIRROM CAPITAL CORPORATION, a
Tennessee corporation
By: ILLEGIBLE
--------------------------------
Title: Vice President
-----------------------------
13
EXHIBIT 4.21
STOCK PURCHASE WARRANT
This Warrant is issued this 18th day of June, 1997, by SUPERIOR
PHARMACEUTICAL COMPANY, an Ohio corporation (the "Company"), to ODYSSEY
INVESTMENT PARTNERS, L.P., a Pennsylvania limited partnership (ODYSSEY
INVESTMENT PARTNERS, L.P. and any subsequent assignee or transferee hereof are
hereinafter referred to collectively as "Holder" or "Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM. For and in consideration of ODYSSEY
INVESTMENT PARTNERS, L.P. making a loan to DynaGen, Inc., a Delaware corporation
and sole shareholder of the Company in an amount of One Million and no/100ths
Dollars ($1,000,000.00) pursuant to the terms of a secured promissory note of
even date herewith (the "Note") and related loan agreement of even date herewith
(the "Loan Agreement"), and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company hereby grants to
Holder the right to purchase shares of the Company's common stock (the "Common
Stock"), which equals 5% of the capital stock of the Company. The shares of
Common Stock issuable upon exercise of this Warrant are hereinafter referred to
as the "Shares." This Warrant shall be exercisable at any time and from time to
time after such time as that certain Stock Purchase Warrant of even date
herewith issued by DynaGen, Inc. in favor of Holder(s) ("Parent Warrant") has
been terminated and this Warrant has been substituted for the Parent Warrant,
but not later than August 31, 2002 (the "Expiration Date"). In exercising its
rights and obligations hereunder, the Company agrees to treat the Holder no less
favorably than it treats Sirrom Capital Corporation ("Sirrom") pursuant to the
Stock Purchase Warrant issued by the Company to Sirrom on the date hereof.
2. EXERCISE PRICE. The exercise price (the "Exercise Price") per
share for this Warrant shall be One Cent ($.01).
3. EXERCISE.
(a) This Warrant may be exercised by the Holder hereof (but
only on the conditions hereinafter set forth) as to all or any
increment or increments of One Hundred (100) Shares (or the balance of
the Shares if less than such number), upon delivery of written notice
of intent to exercise to the Company at the following address: 99 Erie
Street, Cambridge, Massachusetts 02139 or such other address as the
Company shall designate in a written notice to the Holder hereof,
together with this Warrant and payment to the Company of the aggregate
Exercise Price of the Shares so purchased. The Exercise Price shall be
payable, at the option of the Holder, (i) by certified or bank check or
(ii) by the surrender of the Note or portion thereof having an
outstanding principal balance equal to the aggregate Exercise Price. In
addition to and without limiting the rights of the Holder 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. In
lieu of exercising this Warrant for cash, the Holder may elect to
surrender a portion of 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 = Y (A - B)
----------
A
Where: X = the number of shares of Common Stock to be issued to the
Holder;
Y = the number of shares of Common Stock to otherwise be
purchased under this Warrant;
A = the Fair Market Value of one share of the Common Stock;
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, 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 equal to the number computed using the above formula. No
fractional shares shall be issuable upon exercise of the Conversion Right, and
the number of shares to be issued in accordance with the foregoing formula is
other than a whole number, the Company shall round down to the nearest whole
number the total number of shares to be issued. For purposes of this Section
3(a), the term "Fair Market Value" shall mean the average last sale price per
share of Common Stock during the five (5) trading days immediately preceding the
effective date of conversion. If the Common Stock is not publicly traded at such
time, Fair Market Value shall be determined as follows:
(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a
recognized professional association of business appraisers.
The two appraisers shall determine the value of the shares of
Common Stock which would be issued upon the exercise of the
Warrant, taking into consideration that such shares would
constitute a minority interest, and would lack liquidity, and
further assuming that the sale would be between a willing
buyer and a willing seller, both of whom have full knowledge
of the financial and other affairs of the Company, and neither
of whom is under any compulsion to sell or to buy.
2
(ii) If the highest of the two appraisals is not more
than 10% more than the lowest of the appraisals, the Fair
Market Value shall be the average of the two appraisals. If
the highest of the two appraisals is 10% or more than the
lowest of the two appraisals, then a third appraiser shall be
appointed by the two appraisers, and if they cannot agree on a
third appraiser, the American Arbitration Association shall
appoint the third appraiser. The third appraiser, regardless
of who appoints him or her, shall have the same qualifications
as the first two appraisers.
(iii) The Fair Market Value after the appointment of
the third appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be
paid by the Company.
(b) Upon exercise of this Warrant as aforesaid, the Company
shall as promptly as practicable, and in any event within fifteen (15)
days thereafter, execute and deliver to the Holder of this Warrant a
certificate or certificates for the total number of whole Shares for
which this Warrant is being exercised in such names and denominations
as are requested by such Holder. If this Warrant shall be exercised
with respect to less than all of the Shares, the Holder shall be
entitled to receive a new Warrant covering the number of Shares in
respect of which this Warrant shall not have been exercised, which new
Warrant shall in all other respects be identical to this Warrant. The
Company covenants and agrees that it will pay when due any and all
state and federal issue taxes which may be payable in respect of the
issuance of this Warrant or the issuance of any Shares upon exercise of
this Warrant.
4. COVENANTS AND CONDITIONS. The above provisions are subject to
the following:
(a) Neither this Warrant nor the Shares have been registered
under the Securities Act of 1933, as amended ("Securities Act") or any
state securities laws ("Blue Sky Laws"). This Warrant has been acquired
for investment purposes and not with a view to distribution or resale
and may not be pledged, hypothecated, sold, made subject to a security
interest, or otherwise transferred without (i) an effective
registration statement for such Warrant under the Securities Act and
such applicable Blue Sky Laws, or (ii) an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to the Company and
its counsel, that registration is not required under the Securities Act
or under any applicable Blue Sky Laws (the Company hereby acknowledges
that Bass, Berry & Sims is acceptable counsel). Transfer of the shares
issued upon the exercise of this Warrant shall be restricted in the
same manner and to the same extent as the Warrant and the certificates
representing such Shares shall bear substantially the following legend:
3
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW
AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT
UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION
UNDER SUCH SECURITIES ACTS OR SUCH APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.
(b) The Company covenants and agrees that all Shares which may
be issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive
rights, if any, with respect thereto or to the issuance thereof. The
Company shall at all times reserve and keep available for issuance upon
the exercise of this Warrant such number of authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in
full of this Warrant.
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4
hereof, this Warrant may be transferred, in whole or in part, to any person or
business entity, by presentation of the Warrant to the Company with written
instructions for such transfer. Upon such presentation for transfer, the Company
shall promptly execute and deliver a new Warrant or Warrants in the form hereof
in the name of the assignee or assignees and in the denominations specified in
such instructions. The Company shall pay all expenses incurred by it in
connection with the preparation, issuance and delivery of Warrants under this
Section.
6. WARRANT HOLDER NOT SHAREHOLDER; RIGHTS OFFERING; PREEMPTIVE
RIGHTS; PREFERENCE RIGHTS. Except as otherwise provided herein, this Warrant
does not confer upon the Holder, as such, any right whatsoever as a shareholder
of the Company. Notwithstanding the foregoing, if the Company should offer to
all of the Company's shareholders the right to purchase any securities of the
Company, then all shares of Common Stock that are subject to this Warrant shall
be deemed to be outstanding and owned by the Holder and the Holder shall be
entitled to participate in such rights offering. The Company shall not grant any
preemptive rights with respect to any of its capital stock without the prior
written consent of the Holder. The Company shall not issue any securities which
entitle the holder thereof to
4
obtain any preference over holders of Common Stock upon the dissolution,
liquidation, winding-up, sale, merger, or reorganization of the Company without
the prior written consent of the Holder.
7. OBSERVATION RIGHTS. So long as this Warrant remains
outstanding and notwithstanding the repayment of the Note, the Holder of this
Warrant shall (a) receive notice of and be entitled to attend or may send a
representative to attend all meetings of the Company's Board of Directors in a
non-voting observation capacity, (b) receive copies of all notices, packages and
documents provided to members of the Company's Board of Directors for each board
of directors meeting, and (c) receive copies of all actions taken by written
consent by the Company's Board of Directors, from the date hereof until such
time as the indebtedness evidenced by the Note has been paid in full. The
Company agrees to hold meetings of its Board of Directors (which may include
telephonic meetings) at least quarterly. All out-of-pocket expenses incurred by
Holder in attending any such meetings shall be reimbursed by Company.
8. ADJUSTMENT UPON CHANGES IN STOCK.
(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization,
combination of shares of the Company, or other similar event, occurring
after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate price paid upon such exercise, the aggregate
number and class of shares which such Holder would have received if
this Warrant had been exercised immediately prior to such stock split,
stock dividend, recapitalization, combination of shares, or other
similar event. If any adjustment under this Section 8(a) would create a
fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and
the number of shares subject to this Warrant shall be the next higher
number of shares, rounding all fractions upward. Whenever there shall
be an adjustment pursuant to this Section 8(a), the Company shall
forthwith notify the Holder or Holders of this Warrant of such
adjustment, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares,
separation, reorganization or liquidation of the Company, or other
similar event, occurring after the date hereof, as a result of which
shares of Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes of securities
of the Company or another entity, then the Holder exercising this
Warrant shall receive, for the aggregate price paid upon such exercise,
the aggregate number and class of shares which such Holder would have
received if this Warrant had been exercised immediately prior to such
merger, consolidation, exchange of shares, separation, reorganization
or liquidation, or other similar event. If any adjustment under this
Section 8(b) would create a fractional share of Common Stock or a right
to acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares
5
subject to this Warrant shall be the next higher number of shares,
rounding all fractions upward. Whenever there shall be an adjustment
pursuant to this Section 8(b), the Company shall forthwith notify the
Holder or Holders of this Warrant of such adjustment, setting forth in
reasonable detail the event requiring the adjustment and the method by
which such adjustment was calculated.
9. PUT AGREEMENT.
(a) The Company hereby irrevocably grants and issues to Holder
the right and option to sell to the Company (the "Put") this Warrant
for a period of ninety (90) days ending immediately prior to the
Expiration Date at a purchase price (the "Purchase Price") equal to the
Fair Market Value (as hereinafter defined) of the shares of Common
Stock issuable to Holder upon exercise of this Warrant.
(b) The Company shall pay to the Holder the Purchase Price, in
cash or certified or cashier's check, in exchange for the delivery to
the Company of this Warrant within forty-five (45) days of the receipt
of written notice, addressed as set forth in Section 3 hereto, from the
Holder of its intention to exercise the Put and stating the Purchase
Price determined in accordance with Section 9.
(c) The Fair Market Value of the shares of Common Stock of the
Company issuable pursuant to this Warrant shall be the average last
sales price per share of Common Stock during the five (5) trading days
preceding the date of purchase or if the Common Stock is not publicly
traded at such time shall be determined as follows:
(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a
recognized professional association of business appraisers.
The two appraisers shall determine the value of the shares of
Common Stock which would be issued upon the exercise of the
Warrant, taking into consideration that such shares would
constitute a minority interest, and would lack liquidity, and
further assuming that the sale would be between a willing
buyer and a willing seller, both of whom have full knowledge
of the financial and other affairs of the Company, and neither
of whom is under any compulsion to sell or to buy.
(ii) If the highest of the two appraisals is not more
than 10% more than the lowest of the appraisals, the Fair
Market Value shall be the average of the two appraisals. If
the highest of the two appraisals is 10% or more than the
lowest of the two appraisals, then a third appraiser shall be
appointed by the two appraisers, and if they cannot agree on a
third appraiser, the American Arbitration Association shall
appoint the third appraiser. The third appraiser, regardless
of who appoints him or her, shall have the same qualifications
as the first two appraisers.
6
(iii) The Fair Market Value after the appointment of
the third appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be
paid by the Company.
10. REGISTRATION.
(a) The Company and the holders of the Shares agree that if at
any time after the date hereof the Company shall propose to file a
registration statement with respect to the underwritten issuance and
sale by the Company of any of its Common Stock on a form suitable for a
secondary offering, it will give notice in writing to such effect to
the registered holder(s) of the Shares at least fifteen (15) days prior
to such filing, and, at the written request of any such registered
holder, made within five (5) days after the receipt of such notice,
will include therein at the Company's cost and expense (including the
fees and expenses of counsel to such holder(s), but excluding
underwriting discounts, commissions and filing fees attributable to the
Shares included therein) such of the Shares as such holder(s) shall
request; provided, however, that if the offering being registered by
the Company is underwritten and if the representative of the
underwriters certifies in writing that the inclusion therein of the
Shares would materially and adversely affect the sale of the securities
to be sold by the Company thereunder, then the Company shall be
required to include in the offering only that number of securities,
including the Shares, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among all selling
shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder, but in no event
shall the total number of Shares included in the offering be less than
the number of securities included in the offering by any other single
selling shareholder).
(b) Whenever the Company undertakes to effect the registration
of any of the Shares, the Company shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement
covering such Shares and use its best efforts to cause such
registration statement to be declared effective by the
Commission as expeditiously as possible and to keep such
registration effective until the earlier of (A) the date when
all Shares covered by the registration statement have been
sold or (B) two hundred seventy (270) days from the effective
date of the registration statement; provided, that before
filing a registration statement or prospectus or any amendment
or supplements thereto, the Company will furnish to each
Holder of Shares covered by such registration statement and
the underwriters, if any, copies of all such documents
proposed to be filed (excluding exhibits, unless any such
person shall specifically request exhibits), which documents
will be subject to the review of such Holders and
7
underwriters, and the Company will not file such registration
statement or any amendment thereto or any prospectus or any
supplement thereto (including any documents incorporated by
reference therein) with the Commission if (A) the
underwriters, if any, shall reasonably object to such filing
or (B) if information in such registration statement or
prospectus concerning a particular selling Holder has changed
and such Holder or the underwriters, if any, shall reasonably
object.
(ii) Prepare and file with the Commission such
amendments and post-effective amendments to such registration
statement as may be necessary to keep such registration
statement effective during the period referred to in Section
10(b)(i) and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered
by such registration statement, and cause the prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed with the Commission pursuant to Rule
424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such numbers
of copies of such registration statement, each amendment
thereto, the prospectus included in such registration
statement (including each preliminary prospectus), each
supplement thereto and such other documents as they may
reasonably request in order to facilitate the disposition of
the Shares owned by them.
(iv) Use its best efforts to register and qualify
under such other securities laws of such jurisdictions as
shall be reasonably requested by any selling Holder and do any
and all other acts and things which may be reasonably
necessary or advisable to enable such selling Holder to
consummate the disposition of the Shares owned by such Holder,
in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a
condition thereto to qualify to transact business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) Promptly notify each selling Holder of the
happening of any event as a result of which the prospectus
included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to
make the statements therein not misleading and, at the request
of any such Holder, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered
to the purchasers of such Shares, such prospectus will not
contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not
misleading and the Holder(s) shall suspend trading at the
request of the Company if, upon advice of counsel to the
Company, such suspension is advisable.
(vi) Provide a transfer agent and registrar for all
such Shares not later than the effective date of such
registration statement.
8
(vii) Enter into such customary agreements (including
underwriting agreements in customary form for a primary
offering) and take all such other actions as the underwriters,
if any, reasonably request in order to expedite or facilitate
the disposition of such Shares (including, without limitation,
effecting a stock split or a combination of shares).
(viii) Make available for inspection by any selling
Holder or any underwriter participating in any disposition
pursuant to such registration statement and any attorney,
accountant or other agent retained by any such selling Holder
or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause
the officers, directors, employees and independent accountants
of the Company to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent
in connection with such registration statement.
(ix) Promptly notify the selling Holder(s) and the
underwriters, if any, of the following events and (if
requested by any such person) confirm such notification in
writing: (A) the filing of the prospectus or any prospectus
supplement and the registration statement and any amendment or
post-effective amendment thereto and, with respect to the
registration statement or any post-effective amendment
thereto, the declaration of the effectiveness of such
documents, (B) any requests by the Commission for amendments
or supplements to the registration statement or the prospectus
or for additional information, (C) the issuance or threat of
issuance by the Commission of any stop order suspending the
effectiveness of the registration statement or the initiation
of any proceedings for that purpose, and (D) the receipt by
the Company of any notification with respect to the suspension
of the qualification of the Shares for sale in any
jurisdiction or the initiation or threat of initiation of any
proceeding for such purposes and the Holder(s) shall suspend
trading at the request of the Company if, upon advice of
counsel to the Company, such suspension is advisable.
(x) Make every reasonable effort to prevent the entry
of any order suspending the effectiveness of the registration
statement and obtain at the earliest possible moment the
withdrawal of any such order, if entered.
(xi) Cooperate with the selling Holder(s) and the
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing the Shares to be sold
and not bearing any restrictive legends, and enable such
Shares to be in such lots and registered in such names as the
underwriters may request at least two (2) business days prior
to any delivery of the Shares to the underwriters.
(xii) Provide a CUSIP number for all the Shares not
later than the effective date of the registration statement.
9
(xiii) [INTENTIONALLY OMITTED].
(xiv) Otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and
make generally available to its security holders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act, no later than forty-five (45) days after the
end of any twelve-month period (or ninety (90) days, if such
period is a fiscal year) (A) commencing at the end of any
fiscal quarter in which the Shares are sold to underwriters in
a firm or best efforts underwritten offering, or (B) if not
sold to underwriters in such an offering, beginning with the
first month of the first fiscal quarter of the Company
commencing after the effective date of the registration
statement, which statements shall cover such twelve-month
periods.
(c) After the date hereof, the Company shall not grant to any
holder of securities of the Company any registration rights with
respect to an underwritten offering which have a priority greater than
or equal to those granted to Holders pursuant to this Warrant without
the prior written consent of the Holder(s).
(d) The Company's obligations under Section 10(a) above with
respect to each holder of Shares are expressly conditioned upon such
holder's furnishing to the Company in writing such information
concerning such holder and the terms of such holder's proposed offering
as the Company shall reasonably request for inclusion in the
registration statement. If any registration statement including any of
the Shares is filed, then the Company shall indemnify each holder
thereof (and each underwriter for such holder and each person, if any,
who controls such underwriter within the meaning of the Securities Act)
from any loss, claim, damage or liability arising out of, based upon or
in any way relating to any untrue statement of a material fact
contained in such registration statement or any omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except for any such
statement or omission based on information furnished in writing by such
holder of the Shares expressly for use in connection with such
registration statement; and such holder shall indemnify the Company
(and each of its officers and directors who has signed such
registration statement, each director, each person, if any, who
controls the Company within the meaning of the Securities Act, each
underwriter for the Company and each person, if any, who controls such
underwriter within the meaning of the Securities Act) and each other
such holder against any loss, claim, damage or liability arising from
any such statement or omission which was made in reliance upon
information furnished in writing to the Company by such holder of the
Shares expressly for use in connection with such registration
statement.
(e) For purposes of this Section 10, all of the Shares shall
be deemed to be issued and outstanding.
(f) The rights contained in this Section 10 shall expire as to
any holder of Shares that is able to sell Shares pursuant to Rule 144
of the Securities Act.
10
11. CERTAIN NOTICES. In case at any time the Company shall propose
to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in
stock or make any special dividend or other distribution to the holders
of its Common Stock;
(c) offer for subscription to the holders of any of its
Common Stock any additional shares of stock in any class or other
rights;
(d) reorganize, or reclassify the capital stock of the
Company, or consolidate, merge or otherwise combine with, or sell all
or substantially all of its assets to, another corporation; or
(e) voluntarily or involuntarily dissolve, liquidate or
wind up the affairs of the Company;
then, in any one or more of said cases, the Company shall give to the
Holder of the Warrant, by certified or registered mail, (i) at least
twenty (20) days' prior written notice of the date on which the books
of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights
to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up,
and (ii) in the case of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at
least twenty (20) days' prior written notice of the date when the same
shall take place. Any notice required by clause (i) shall also specify,
in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled
thereto, and any notice required by clause (ii) shall specify the date
on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be.
12. GOVERNING LAW. This warrant shall be governed by the laws of
the State of Tennessee applicable to agreements made entirely within
the State.
13. SEVERABILITY. If any provision(s) of this Warrant or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Warrant and the
application of such provisions to other persons or circumstances shall
not be affected thereby and shall be enforced to the greatest extent
permitted by law.
11
14. COUNTERPARTS. This Warrant may be executed in any number of
counterparts and be different parties to this Warrant in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same Warrant.
15. JURISDICTION AND VENUE. The Company hereby consents to the
jurisdiction of the courts of the State of Tennessee and the United
States District Court for the Middle District of Tennessee, as well as
to the jurisdiction of all courts from which an appeal may be taken
from such courts, for the purpose of any suit, action or other
proceeding arising out of any of its obligations arising under this
Agreement or with respect to the transactions contemplated hereby, and
expressly waives any and all objections it may have as to venue in any
such courts.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
SUPERIOR PHARMACEUTICAL COMPANY,
an Ohio corporation
By: Dhananjay G. Wadekar
--------------------------------------
Title: Director
-----------------------------------
ODYSSEY INVESTMENT PARTNERS, L.P., a
Pennsylvania limited partnership
By: ODYSSEY ASSOCIATES, L.P., its General
Partner
By: ODYSSEY ASSOCIATES, INC., its General
Partner
By: ILLEGIBLE
--------------------------------------
Title: President
-----------------------------------
12
EXHIBIT 4.22
------------
THE HUNTINGTON NATIONAL BANK
REVOLVING NOTE (LIBOR)
================================================================================
City Office CINCINNATI Division 2167 Branch CINCINNATI [X] Secured
---------- ---- ----------
Account No. 8537609377 Note No. [ ] Unsecured
------------ --------------
Account Name SUPERIOR PHARMACEUTICAL COMPANY
-----------------------------------------------------
[X] Corporation [ ] Partnership [ ] Individual/Proprietorship
[ ] Other
--------------------------------------------------------
Bank Approval Officer Initial ____ Bank Closing Officer Initial____
================================================================================
$9,000,000.00 CINCINNATI, OHIO JUNE 18, 1997
FOR VALUE RECEIVED, the undersigned, jointly and severally if more than
one, promise to pay to the order of The Huntington National Bank (hereinafter
called the "Bank", which term shall include any holder hereof) at such place as
the Bank may designate or, in the absence of such designation, at any of the
Bank's offices, the sum of NINE MILLION DOLLARS ($9,000,000.00), or so much
thereof as shall have been advanced by the Bank at any time and not hereafter
repaid (hereinafter called the "Principal Sum") together with interest as
hereinafter provided, and payable at the time(s) and in the manner(s)
hereinafter provided. The proceeds of the loan evidenced hereby may be advanced,
repaid and readvanced, in partial amounts, during the term of this Note and
prior to maturity; provided, that no partial advance of the Principal Sum shall
be for less than $N/A (which shall be $0.00, unless completed) and no partial
advance shall be made after April 5, 1998 which shall not be applicable, unless
completed). Each such advance shall be made to the undersigned upon receipt by
the Bank of disbursement instructions and upon receipt, review and approval by
the Bank of the undersigned's application for an advance, which shall be in such
form and contain such information as the Bank shall from time to time prescribe.
The Bank shall be entitled to rely on any oral or telephonic communication
requesting an advance and/or providing disbursement instructions hereunder,
which shall be received by it in good faith from anyone reasonably believed by
the Bank to be the undersigned, or the undersigned's authorized agent. The
undersigned agree that all advances made by the Bank will be evidenced by
entries made by the Bank into its electronic data processing system and/or
internal memoranda maintained by the Bank. The undersigned further agree that
the sum or sums shown on the most recent printout from the Bank's electronic
data system and/or such memoranda shall be rebuttably presumptive evidence of
the amount of the Principal sum and of the amount of any accrued interest. Each
request for an advance shall constitute a warranty and representation by the
undersigned that no event of default hereunder or under any related loan
documents has occurred and is continuing and that no event or circumstance which
would constitute such an event of default, but for the requirement that notice
be given or time elapse or both, has occurred and is continuing.
[X] If marked, this Note is executed and any advances contemplated
hereunder are to be made pursuant to an Amended and Restated Loan and Security
Agreement of even date and all the covenants, representations, agreements,
terms, and conditions contained therein, including, but not limited to,
additional conditions of default and conditions to any partial advances, are
incorporated herein as if fully rewritten.
This note is executed and the advances contemplated hereunder are to be
made pursuant to a line of credit under which the Bank has indicated its
willingness to extend credit from time to time to the undersigned, but is not
obligated to do so.
INTEREST
Prior to maturity, interest will accrue on the unpaid balance of the
Principal Sum at a variable rate of interest per annum, as selected by the
undersigned in accordance with this Note (hereinafter called the "Contract
Rate"), which shall change in the manner set forth below, equal to:
(1) The Prime Commercial Rate (hereinafter defined); OR
(2) Two (2.00) percentage points in excess of the LIBO Rate (as
hereinafter defined).
The undersigned shall give the Bank written or telephonic notice of
each request to change the interest index from the LIBO Rate to the Prime
Commercial Rate or vice versa no later than 10:00 a.m. Ohio time five Banking
Days (as hereinafter defined) prior to the date of the proposed change.
Notwithstanding anything else to the contrary that may be contained
herein, at no time shall the Contract Rate, when based on the Prime Commercial
Rate, be less than N/A% per annum (which shall not be applicable, unless
competed) nor more than N/A% per annum (which shall not be applicable, unless
competed), or, when based on the LIBO Rate, be less than N/A% per annum (which
shall not be applicable, unless completed) nor more than N/A% per annum (which
shall not be applicable, unless completed).
If the obligation evidenced by this Note is not paid at maturity,
whether maturity occurs by lapse of time, demand, acceleration or otherwise, the
unpaid balance of the Principal Sum and any unpaid interest shall, thereafter
until paid, bear interest at a rate equal to two (2.00) percentage points (which
shall be 0.00 percentage points, unless completed) in excess of the Contract
Rate.
As used herein, Prime Commercial Rate shall mean the rate established
by the Bank from time to time based on its consideration of economic, money
market, business and competitive factors, and it is not necessarily the Bank's
most favored rate.
As used herein, LIBO Rate shall mean the rate obtained by dividing (1)
actual or estimated per annum rate, or the arithmetic mean of the per annum
rates, of interest for deposits in U.S. dollars for thirty (30) day periods, as
offered and determined by the Bank in its sole discretion based upon information
which appears on page 3750, captioned British Bankers Assoc. Interest Settlement
Rates, of Telerate a service of Telerate Systems Incorporated (or such other
page that may replace that page on that service for the purpose of displaying
LIBO rates; or, if such service ceases to be available, such other reasonably
comparable money rate service as the Bank may select) or upon information
obtained from any other reasonable procedure, on each date the Contract Rate is
determined; by (2) an amount equal to one minus the stated maximum rate
(expressed as a decimal), if any, of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves) that is specified on each date the Contract Rate is determined by the
Board of Governors of the federal Reserve System (or any successor agency
thereto) for determining the maximum reserve requirement with respect to
eurocurrency funding (currently referred to as "Eurocurrency liabilities" in
Regulation D of such Board) maintained by a member bank of such System, or any
other regulations
of any governmental authority having jurisdiction with respect thereto, all as
conclusively determined by the Bank, absent manifest error, such sum to be
rounded up, if necessary, to the nearest whole multiple of one-sixteenth of one
percent (1/16 of 1.0%) per annum.
Subject to any maximum or minimum interest rate limitation specified
herein or any applicable law, the Contract Rate shall change automatically
without notice to the undersigned immediately on each Banking Day with each
change in the Prime Commercial Rate or in the LIBO Rate or the reserve
requirement, as applicable, with any change thereto effective as of the opening
of business on the day of the change.
As used herein, Banking Day shall mean any day other than a Saturday or
Sunday on which banks are open for business in Columbus, Ohio, and on which
banks in London, England, settle payments.
All interest shall be calculated on the basis of a 360 day year for the
actual number of days the Principal sum or any part thereof remains unpaid.
There shall be no penalty for prepayment. The amount of any payment shall first
be applied to the payment of any interest which is due.
In the event that any date the Bank shall reasonably determine that the
making or continuation of advances based upon the LIBO Rate has become unlawful
by compliance by the Bank in good faith with any law, governmental rule,
regulation or order, then, and in any such event, the Bank shall promptly give
notice thereof to the undersigned. In such case, the ability of the undersigned
to request an advance hereunder shall be terminated and the undersigned shall,
when required by law, repay the Principal Sum, together with all interest
accrued thereon.
MANNER OF PAYMENT
The Principal Sum shall be payable on April 5, 1998, and accrued
interest shall be due and payable monthly, beginning on May 5, 1997, and at
maturity, whether by demand, acceleration or otherwise.
LATE CHARGE
Any installment or other payment not made within 10 days of the date
such payment or installment is due shall be subject to a late charge equal to 5%
of the amount of the installment or payment.
SECURITY
As security for the payment of the obligations evidenced hereby, and
all other obligations and liabilities of the undersigned, and each of them, to
the Bank, whether now existing or hereafter arising, the undersigned hereby
grant Bank a security interest or mortgage in the following property, including
all substitutions and additions thereto, and the proceeds thereof (all, together
with any other property in which the Bank shall at any time be given a security
interest, hereinafter referred to as the "Collateral"):
ALL OF THE PROPERTY FURTHER DESCRIBED IN AN AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT OF EVEN DATE.
If, at the time of payment and discharge hereof, any of the undersigned
shall be then directly or contingently liable to the Bank as maker, indorser,
surety or guarantor of any other note, bill of exchange, or other instrument,
then the Bank may continue to hold any of the Collateral as security therefor,
even through this Note shall have been surrendered to the undersigned. The Bank
shall not be bound to take any steps necessary to preserve any rights in the
Collateral
against prior parties. If any obligation evidenced by this Note is not paid when
due, the Bank may, at its option, demand, sue for, collect or make any
compromise or settlement it deems desirable with reference to the Collateral,
and shall have the rights of a secured party under the laws of the State of
Ohio, and the undersigned shall be liable for any deficiency.
DEFAULT
Upon the occurrence of any of the following events:
(1) the undersigned fails to pay any installment when due hereunder or
to perform any obligation of the undersigned to the Bank;
(2) the undersigned fails to do all things necessary to preserve and
maintain the value and collectability of the Collateral;
(3) any event occurs and continues which constitutes a default by any
of the undersigned under any other obligation to or agreement with the Bank;
(4) the Collateral declines in value or becomes unsatisfactory to the
Bank and the undersigned fails to furnish immediately upon demand additional
Collateral satisfactory to the Bank;
(5) any guarantor revokes its guaranty, or any event occurs and
continues which constitutes a default by any guarantor under its guaranty;
(6) the undersigned fails to furnish true and complete financial
statements from time to time on request of the Bank;
(7) the death or dissolution of any of the undersigned, or any
indorser, surety, accommodation party or guarantor;
(8) any representation, warranty or other information given to the Bank
by any of the undersigned, or by an indorser, surety, accommodation party or
guarantor proves to be false, untrue or misleading; or
(9) the Bank for any reason deems itself insecure with respect to the
obligations evidenced hereby;
then the Bank may, at its option, without notice or demand, accelerate the
maturity of the obligations evidenced hereby, which obligations shall become
immediately due and payable and the undersigned shall no longer have the right
to receive advances or readvances hereunder. In the event the Bank shall
institute any action for the enforcement or collection of the obligations
evidenced hereby, the undersigned agree to pay all costs and expenses of such
action, including reasonable attorneys' fees, to extent permitted by law.
GENERAL PROVISIONS
All of the parties hereto, including the undersigned, any indorser,
surety, accommodation party or guarantor, hereby: (1) severally waive
presentment, notice of dishonor, protest, notice of consent that, without
discharging or modifying the duties of any of them and without notice, the Bank
may (A) extend the time of payment an unlimited number of times before or after
maturity, (B) grant any other indulgence at any time and from time to time to
any party hereto, (c) delay in exercising or omit to exercise any right against,
or delay in taking or omit to take any party hereto, (D) release or modify any
collateral, security or guaranties; and (3) severally waive any claim, right or
remedy which such party may now have or hereafter acquire against any other
party or parties hereto that arises
hereunder and/or from the performance by such party hereunder including, without
limitation, any claim, remedy or right of subrogation, reimbursement,
exoneration, contribution, indemnification or participation in any claim, right
or remedy of the Bank against the other party or parties, or any security which
the Bank now has or hereafter acquires, whether such claim, right or remedy
arises in equity, under contract, by statute, under common law or otherwise. The
Bank shall not be required to purse any party hereto, including an guarantor, or
to exercise any rights against any Collateral herefor before exercising any
other such rights.
The obligations evidenced hereby may from time to time be evidenced by
another note or notes given in substitution, renewal or extension hereof. Any
security interest or mortgage which secures the obligations evidenced hereby
shall remain in full force and effect notwithstanding any such substitution,
renewal, or extension.
No waiver of any term or condition of this Note shall be effective
unless in writing and signed by the party giving or granting the waiver. No
amendment of any term or condition of this Note shall be effective unless in
writing and signed by the undersigned and the Bank. No failure or delay on the
part of the Bank in exercising any right, power or privilege under this Note,
related loan documents or law nor any course of dealing, shall operate as a
waiver of such right, power or privilege or preclude any other or further
exercise thereof or of any other right, power or privilege.
The captions used herein are for reference only and shall not be deemed
a part of this Note. If any of the terms or provisions of this Note shall be
deemed enforceable, the enforceability of the remaining terms and provisions
shall not be affected. This Note shall be governed by and construed in
accordance with the law of the State of Ohio.
The undersigned agree that, to the extent that any of the undersigned
make a payment or payments to the Bank, or the Bank receives any proceeds of
Collateral, which payment or payments or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to any of the undersigned, its estate, trustee,
receiver or any other party, including without limitation any guarantor, under
any bankruptcy law, state or federal law, common law or equitable cause, then to
the extent of such payment or repayment, the obligations under this Note or the
part thereof which has been paid, reduced or satisfied by such amount shall be
reinstated and continued in full force and effect as of the date such initial
payment, reduction or satisfaction occurred.
WARRANT OF ATTORNEY
Each of the undersigned authorize any attorney at law to appear in any
Court of Record in the State of Ohio or in any other state or territory of the
United States of America after the above indebtedness becomes due, whether by
acceleration or otherwise, to waive the issuing and service of process, and to
confess judgement against an one or more of the undersigned in favor of the Bank
for the amount then appearing due together with cost of suit, and thereupon to
waive all errors and all rights of appeal and stays of execution. No such
judgment or judgments against less than all of the undersigned shall be a bar to
a subsequent judgment or judgments against any one or more of the undersigned
against whom judgment has not been obtained hereon, this being a joint and
several warrant of attorney to confess judgment. The attorney at law authorized
hereby to appear for each of the undersigned may be an attorney at law also
representing the Bank, and each of the undersigned hereby expressly waive any
conflict of interest that may exist by virtue of such representation.
WAIVER OF RIGHT TO TRIAL BY JURY
EACH OF THE UNDERSIGNED ACKNOWLEDGES THAT, AS TO ANY AND ALL DISPUTES
THAT MAY ARISE BETWEEN ANY OF THE UNDERSIGNED AND THE BANK, THE COMMERCIAL
NATURE OF THE TRANSACTION OUT OF WHICH THIS NOTE ARISES MAKES ANY SUCH DISPUTE
UNSUITABLE FOR TRIAL BY JURY. ACCORDINGLY, EACH OF THE UNDERSIGNED HEREBY WAIVES
ANY RIGHT TO TRIAL BY JURY AS TO ANY AND ALL DISPUTES THAT MAY ARISE RELATING TO
THIS NOTE OR TO ANY OF THE INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION
HEREWITH.
WARNING
BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND A COURT TRIAL. IF
YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE, AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
BORROWER:
SUPERIOR PHARMACEUTICAL COMPANY
AN OHIO CORPORATION
BY: /s/ DENNIS B. SMITH BY: /s/ ERIC C. HAGERSTRAND
---------------------- ------------------------------
DENNIS B. SMITH ERIC C. HAGERSTRAND
PRESIDENT, CEO VICE PRESIDENT, SECRETARY, CFO
EXHIBIT 99.1
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement"), dated as of the 18th day of June,
1997, is made and entered into on the terms and conditions hereinafter set
forth, by and between DYNAGEN, INC., a Delaware corporation ("Borrower"), and
SIRROM CAPITAL CORPORATION, a Tennessee corporation ("Sirrom") and ODYSSEY
INVESTMENT PARTNERS, L.P., a Pennsylvania limited partnership ("Odyssey")
(Sirrom and Odyssey are sometimes referred to herein individually as "Lender"
and collectively as the "Lenders").
RECITALS:
WHEREAS, Borrower has requested that Sirrom make available to Borrower
a term loan in the principal amount of Two Million and No/100ths Dollars
($2,000,000.00) (the "Sirrom Loan") on the terms and conditions hereinafter set
forth, and for the purpose(s) hereinafter set forth; and
WHEREAS, Borrower has requested that Odyssey make available to Borrower
a term loan in the principal amount of One Million and No/100ths Dollars
($1,000,000) (the "Odyssey Loan") on the terms and conditions hereinafter set
forth, and for the purpose(s) hereinafter set forth; and
WHEREAS, the Sirrom Loan and the Odyssey Loan are hereinafter
collectively referred to as the "Loan"; and
WHEREAS, in order to induce Lenders to make the Loan to Borrower,
Borrower has made certain representations to Lenders; and
WHEREAS, Lenders, in reliance upon the representations and inducements
of Borrower, have agreed to make the Loan upon the terms and conditions
hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the agreement of Lenders to make
the Loan, the mutual covenants and agreements hereinafter set forth, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lenders hereby agree as follows:
ARTICLE 1
THE LOAN
1.1 Evidence of Loan Indebtedness and Repayment. Subject to the terms
and conditions hereof, Lenders shall advance an aggregate total of $3,000,000.00
of the Loan proceeds to Borrower by wire transfer on the date hereof to or for
the benefit of Borrower in immediately available funds. The Loan shall be
evidenced by Secured Promissory Notes in the aggregate principal amount of Three
Million and No/100ths Dollars ($3,000,000.00), substantially in the form of
Exhibits A-1 and A-2 attached hereto and incorporated herein by this reference
(the "Notes"), dated as of the date hereof, and executed by Borrower to the
order of Lenders, respectively. The Loan shall be payable in accordance with the
terms of the Notes, this Agreement and any other instruments and documents
executed by Borrower, any Subsidiary (as hereinafter defined), any guarantor of
Borrower, or any shareholder of Borrower, now or hereafter evidencing, securing
or in any way related to the indebtedness evidenced by the Notes (all such
notes, instruments, agreements and other documents being hereinafter sometimes
individually referred to as a "Loan Document" and collectively referred to as
the "Loan Documents").
1.2 Processing Fee. Borrower shall pay a processing fee of $45,000 to
Sirrom, $33,750 of which shall be paid prior to closing with the balance of
$11,250 to be paid at closing. Borrower shall pay an application fee of $10,000
to Odyssey, all of which shall be paid at closing and a closing fee of $12,500
to Odyssey, all of which shall be paid at closing.
1.3 Purpose(s) of Loan and Use of Proceeds. The purposes of the Loan
shall be to acquire all of the capital stock of Superior Pharmaceutical Company
("Superior") through a wholly owned subsidiary of Borrower, to provide working
capital to Borrower, and to pay all costs and expenses incurred by the parties
hereto in connection with the making and documenting of the Loan, including
attorneys' fees and expenses. The proceeds of the Loan shall not be used for any
other purpose.
1.4 Prepayment. Borrower may prepay the Loan in whole or in part at any
time and from time to time without premium or penalty.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Borrower's Representations. Borrower hereby represents and warrants
to Lenders as follows, except as disclosed in any schedule hereto. The
disclosures in any schedule hereto shall qualify every other section of this
Agreement to the extent it is reasonably clear from a reading of such schedule
that the disclosures contained therein are applicable to such other sections.
2
(a) Corporate Status. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware; and has the corporate power to own and operate its
properties, to carry on its business as now conducted and to enter into
and to perform its obligations under this Agreement and the other Loan
Documents to which it is a party. Borrower is duly qualified to do
business and is in good standing in the Commonwealth of Massachusetts
and every other state in which a failure to be so qualified and in good
standing would have a material adverse effect on Borrower's financial
position or its ability to conduct its business in the manner now
conducted.
(b) Other Business Organizations. Schedule 2.1(b) hereto is a
complete list of each corporation, partnership, joint venture or other
business organization (any such corporation, partnership, joint venture
or other business organization in which Borrower holds more than a 50%
interest is referred to herein as a "Subsidiary" or, with respect to
all such organizations, the "Subsidiaries") in which Borrower or any
Subsidiary owns, directly or indirectly, any capital stock or other
equity interest, or with respect to which Borrower or any Subsidiary,
alone or in combination with others, is in a control position, which
list shows the jurisdiction of incorporation or other organization and
the percentage of stock or other equity interest of each Subsidiary
owned by Borrower. Each Subsidiary which is a corporation is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified to transact
business as a foreign corporation and is in good standing in the
jurisdictions listed in Schedule 2.1(b), which are the only
jurisdictions where the properties owned or leased or the business
transacted by it makes such licensing or qualification to do business
as a foreign corporation necessary, and no other jurisdiction has
demanded, requested or otherwise indicated that (or inquired whether)
it is required so to qualify. Each Subsidiary which is not a
corporation is duly organized and validly existing under the laws of
the jurisdiction of its organization. The outstanding capital stock of
each Subsidiary which is a corporation is validly issued, fully paid
and nonassessable. Borrower and the Subsidiaries have good and valid
title to the equity interests in the Subsidiaries shown as owned by
each of them on Schedule 2.1(b), free and clear of all liens, claims,
charges, restrictions, security interests, equities, proxies, pledges
or encumbrances of any kind, except as set forth on Schedule 2.1(b).
Except where otherwise indicated herein, any reference to Borrower in
this Agreement shall include Borrower and all of its Subsidiaries.
(c) Authorization. Borrower has full legal right, power and
authority to conduct its business and affairs. Borrower has full legal
right, power and authority to enter into and perform its respective
obligations under the Loan Documents to which each is a party, without
the consent or approval of any other person, firm, governmental agency
or other legal entity, except as set forth on Schedule 2.1(c). The
execution and delivery of this Agreement, the borrowing hereunder, the
execution and delivery of each Loan Document to which Borrower is a
party, and the performance by Borrower of its respective obligations
thereunder are within the
3
corporate powers of Borrower and have been duly authorized by all
necessary corporate action properly taken, have received all necessary
governmental approvals, if any were required, and do not and will not
contravene or conflict with any provision of law, any applicable
judgment, ordinance, regulation or order of any court or governmental
agency, the articles of incorporation or bylaws of Borrower, or any
agreement binding upon Borrower. The officer(s) executing this
Agreement, the Notes and all of the other Loan Documents to which
Borrower is a party are duly authorized to act on behalf of Borrower.
(d) Validity and Binding Effect. This Agreement and the other
Loan Documents to which the Borrower is a party are the legal, valid
and binding obligations of Borrower, and are enforceable in accordance
with their respective terms, subject only to limitations imposed by
bankruptcy, insolvency, moratorium or other similar laws affecting the
rights of creditors generally or the application of general equitable
principles.
(e) Capitalization. As of the date hereof, the authorized
capital stock of Borrower consists solely of (i) 75,000,000 shares of
common stock, $.01 par value per share ("Common Stock"), of which
32,164,144 shares are issued and outstanding (the "Common Shares") and
(ii) 10,000,000 shares of preferred stock, $.01 par value per share, of
which 50,000 shares have been designated Series A Preferred Stock of
which 41,000 shares are issued and outstanding and of which 7,500
shares have designated as Series B Preferred Stock, all of which are
issued and outstanding. 400,000 shares of Common Stock shall be
reserved for issuance upon exercise of the Stock Purchase Warrants
dated as of the date hereof and issued to Lenders (the "Borrower
Warrants"); provided, however, that the number of shares of Common
Stock reserved for issuance upon exercise of the Borrower Warrants
shall be increased from time to time in accordance with the terms of
the Borrower Warrants. As of the date hereof, except for the Borrower
Warrants and as may otherwise be set forth on Schedule 2.1(e), Borrower
does not have outstanding any stock or securities convertible or
exchangeable for any shares of its Common Stock or containing any
profit participation features, nor shall it have outstanding any rights
or options to subscribe for or to purchase its Common Stock or any
stock or securities convertible into or exchangeable for its Common
Stock or any stock appreciation rights or phantom stock plans. Schedule
2.1(e) accurately sets forth the following with respect to all
outstanding options and rights to acquire the Borrower's Common Stock
from Borrower: (i) the total number of shares issuable upon exercise of
all outstanding options, (ii) the range of exercise prices for all such
outstanding options, (iii) the number of shares issuable, the exercise
price and the expiration date for each such outstanding option and (iv)
with respect to all outstanding options, warrants and rights to acquire
Borrower's Common Stock other than the Borrower Warrants, the holder,
the number of shares covered, the exercise price and the expiration
date. As of the date hereof, Borrower does not have any obligation
(contingent or otherwise) to repurchase, redeem, retire or otherwise
acquire any shares of its Common Stock or to issue any warrants,
options or other rights to acquire its Common Stock, except
4
as set forth in the Borrower Warrants or on Schedule 2.1(e). As of the
date hereof, all of the outstanding shares of Borrower's Common Stock
have been validly issued, fully paid and are nonassessable. Except as
may be set forth on Schedule 2.1(e), there are no statutory or
contractual preemptive rights, rights of first refusal, anti-dilution
rights or any similar rights, held by any person, corporation,
partnership, limited liability company or other legal entity,
including, but not limited to, stockholders or other holders of any
securities of the Borrower, with respect to the issuance of the
Borrower Warrants or the issuance of the Common Stock upon exercise of
the Borrower Warrants. All such rights granted in the documents, if
any, listed on Schedule 2.1(e) have been effectively and irrevocably
waived to the extent required (if any) with regard to the issuance of
the Borrower Warrants, the exercise of the Borrower Warrants and the
issuance of the Common Stock upon exercise of the Borrower Warrants.
Borrower has not violated any applicable federal or state securities
laws in connection with the offer, sale or issuance of any of its
Common Stock, and the offer, sale and issuance of the Borrower Warrants
hereunder do not require registration under the Securities Act or any
applicable state securities laws. To the best of Borrower's knowledge,
there are no agreements among Borrower's stockholders with respect to
any other aspect of Borrower's affairs, except as set forth on Schedule
2.1(e). As of the date hereof, the authorized capital stock of Superior
consists solely of (i) 750 shares of common stock, no par value per
share ("Superior Common Stock"), of which 100 shares are issued and
outstanding (the "Superior Common Shares") and 35 shares of which shall
be reserved for issuance upon exercise of the Stock Purchase Warrants
dated as of the date hereof and issued to Lenders by Superior (the
"Superior Warrants"); provided, however, that the number of shares of
Common Stock reserved for issuance upon exercise of the Superior
Warrants shall be increased from time to time in accordance with the
terms of the Superior Warrants. As of the date hereof, except for the
Superior Warrants and as may otherwise be set forth on Schedule 2.1(e),
no Subsidiary has outstanding any stock or securities convertible or
exchangeable for any shares of its common stock or containing any
profit participation features, nor shall it have outstanding any rights
or options to subscribe for or to purchase its common stock or any
stock or securities convertible into or exchangeable for its common
stock or any stock appreciation rights or phantom stock plans. Schedule
2.1(e) accurately sets forth the following with respect to all
outstanding options and rights to acquire common stock from any
Subsidiary: (i) the total number of shares issuable upon exercise of
all outstanding options, (ii) the range of exercise prices for all such
outstanding options, (iii) the number of shares issuable, the exercise
price and the expiration date for each such outstanding option and (iv)
with respect to all outstanding options, warrants and rights to acquire
any Subsidiary's common stock other than the Superior Warrants, the
holder, the number of shares covered, the exercise price and the
expiration date. As of the date hereof, no Subsidiary has any
obligation (contingent or otherwise) to repurchase, redeem, retire or
otherwise acquire any shares of its common stock or to issue any
warrants, options or other rights to acquire its common stock, except
as set forth in the Superior Warrants or on Schedule 2.1(e). As of the
date hereof, all of the outstanding shares of each Subsidiary's common
stock have been validly issued,
5
fully paid and are nonassessable. Except as may be set forth on
Schedule 2.1(e), there are no statutory or contractual preemptive
rights, rights of first refusal, anti-dilution rights or any similar
rights, held by any person, corporation, partnership, limited liability
company or other legal entity, including, but not limited to,
stockholders or other holders of any securities of any Subsidiary, with
respect to the issuance of the Superior Warrants or the issuance of the
common stock upon exercise of the Superior Warrants. All such rights
granted in the documents, if any, listed on Schedule 2.1(e) have been
effectively and irrevocably waived with regard to the issuance of the
Superior Warrants, the exercise of the Superior Warrants and the
issuance of the common stock upon exercise of the Superior Warrants. No
Subsidiary has violated any applicable federal or state securities laws
in connection with the offer, sale or issuance of any of its Common
Stock, and the offer, sale and issuance of the Subsidiary Warrants
hereunder do not require registration under the Securities Act or any
applicable state securities laws. To the best of Borrower's knowledge,
there are no agreements among Subsidiary's stockholders with respect to
any other aspect of Subsidiary's affairs, except as set forth on
Schedule 2.1(e). The Borrower Warrants and the Subsidiary Warrants are
sometimes referred to herein individually as a "Warrant" and
collectively as the "Warrants." For purposes of this Section 2.1(e),
the term "Subsidiary" shall not include Able Laboratories, Inc.
(f) Trademarks, Patents, Etc. Schedule 2.1(f) is an accurate
and complete list of all patents, patent applications, trademarks,
trademark registrations, trademark applications, service marks, service
mark registrations, service mark applications, trade names, service
names, copyrights, patents, trademark and/or know-how licenses owned or
granted to or by Borrower or which are used or required by Borrower in
the operation of its business, title to each of which is, except as set
forth in Schedule 2.1(f) hereto, held by Borrower free and clear of all
adverse claims, liens, security agreements, restrictions or other
encumbrances. There is no infringement action, lawsuit, claim or
complaint which asserts that any patent, trademark, service mark,
copyright owned or licensed by or to Borrower or any of Borrower's
products, processes, know-how or operations violate or infringe the
patents, trademarks, trade names, service names, or copyrights of
others, nor, to the best of Borrower's knowledge, is Borrower in any
way making use of any confidential information or trade secrets of any
person except with the consent of such person.
(g) No Conflicts. Consummation of the transactions hereby
contemplated and the performance of the obligations of Borrower under
and pursuant to the Loan Documents to which each is a party will not
result in any breach of, or constitute a default under, any mortgage,
security deed or agreement, deed of trust, lease, bank loan or credit
agreement, articles of incorporation or bylaws, material contract,
license, franchise or any other material instrument or material
agreement to which Borrower is a party or by which Borrower, or its
respective properties may be bound or affected as to which Borrower has
not obtained an effective and irrevocable waiver.
6
(h) Litigation. Except as set forth on Schedule 2.1(h), there
are no actions, suits, proceedings or arbitrations pending, or, to the
knowledge of Borrower, threatened, against or affecting Borrower
required to be disclosed in Borrower's filings with the Securities and
Exchange Commission or involving the validity or enforceability of any
of the Loan Documents at law or in equity, or before any governmental
or administrative agency required to be disclosed in Borrower's filings
with the Securities and Exchange Commission; and to Borrower's
knowledge, Borrower is not in default with respect to any order, writ,
injunction, decree or demand of any court or any governmental
authority.
(i) Financial Statements. The financial statements of
Borrower, for the fiscal year ended December 31, 1996 contained in
Borrower's Annual Report on Form 10-K for the year ended December 31,
1996 (the "Form 10-K") and the financial statements of Superior for the
fiscal year ended December 31, 1996, attached hereto as Schedule
2.1(i)(A), are true and correct in all material respects have been
prepared on the basis of generally accepted accounting principles
consistently applied, and fairly present the financial condition of
Borrower as of the fiscal year then ended. No material adverse change
has occurred in the financial condition of Borrower since the date(s)
thereof, and no additional borrowings have been made by Borrower since
the date(s) thereof other than as set forth on Schedule 2.1(i)(B).
(j) Other Agreements; No Defaults. Borrower is not a party to
any indentures, loan or credit agreements, leases or other agreements
or instruments, or subject to any restrictions contained in their
respective articles of incorporation, bylaws or corporate restrictions
that could have a material adverse effect on the business, properties,
assets, operations or conditions, financial or otherwise, of Borrower,
or the ability of Borrower to carry out its obligations under the Loan
Documents to which it is a party. Borrower is not in default in any
material respect in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any agreement
or instrument material to its business to which it is a party,
including but not limited to this Agreement and the other Loan
Documents, and no other default or event has occurred and is continuing
that with notice or the passage of time or both would constitute a
default or event of default under any of same.
(k) Compliance With Law. Borrower has obtained all material
licenses, permits and approvals and authorizations necessary or
required in order to conduct its business and affairs as heretofore
conducted and as hereafter intended to be conducted. To Borrower's
knowledge, Borrower is in compliance with all laws, regulations,
decrees and orders applicable to it (including but not limited to laws,
regulations, decrees and orders relating to environmental, occupational
and health standards and controls, antitrust, monopoly, restraint of
trade or unfair competition), except to the extent that noncompliance,
in the aggregate, cannot reasonably be expected to have a material
adverse effect on its business, operations, property or
7
financial condition and will not materially adversely affect Borrower's
financial position or its ability to perform its obligations under the
Loan Documents.
(l) Debt. Schedule 2.1(l) is a complete and correct list of
all credit agreements, indentures, purchase agreements, promissory
notes and other evidences of indebtedness, guaranties, capital leases
and other instruments, agreements and arrangements presently in effect
providing for or relating to extensions of credit (including agreements
and arrangements for the issuance of letters of credit or for
acceptance financing) in respect of which Borrower, or any of its
properties is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question that are
outstanding and that can be outstanding are correctly stated, and all
liens of any nature given or agreed to be given as security therefor
are correctly described or indicated in such Schedule.
(m) Taxes. Borrower has filed or caused to be filed all tax
returns that to Borrower's knowledge are required to be filed (except
for returns that have been appropriately extended), and has paid, or
will pay when due, all taxes shown to be due and payable on said
returns and all other taxes, impositions, assessments, fees or other
charges imposed on them by any governmental authority, agency or
instrumentality, prior to any delinquency with respect thereto (other
than taxes, impositions, assessments, fees and charges currently being
contested in good faith by appropriate proceedings, for which
appropriate amounts have been reserved). No tax liens have been filed
against Borrower, or any of the property thereof.
(n) Small Business Concern. Borrower, taken together with its
"affiliates" (as that term is defined in 13 C.F.R. ss.121.103), is a
"Small Business Concern" within the meaning of 15 U.S.C. ss.662(5),
that is Section 103(5) of the Small Business Investment Act of 1958, as
amended, and the regulations promulgated thereunder, as currently in
effect (collectively the "SBIC Act"), including 13 C.F.R. ss.107, and
meets the applicable size eligibility criteria set forth in 13 C.F.R.
ss.121.301(c)(1) or the industry standard covering the industry in
which Borrower is primarily engaged as set forth in 13 C.F.R.
ss.121.301(c)(2). Neither Borrower nor any of its Subsidiaries
presently engages in any activities for which a small business
investment company is prohibited from providing funds by the SBIC Act,
including 13 C.F.R. ss.107.
On or before the closing of the Odyssey Loan, Odyssey
shall have received from Borrower SBA Forms 480 and 652, which have
been completed and executed by Borrower, and SBA Form 1031, Parts A and
B of which have been completed by Borrower.
8
(o) Certain Transactions. Except as set forth in the Form 10-K
or on Schedule 2.1(o), Borrower is not indebted, directly or
indirectly, to any of its shareholders, officers, or directors or to
their respective spouses or children, in any amount whatsoever; none of
said shareholders, officers or directors or any members of their
immediate families, are indebted to Borrower or have any direct or
indirect ownership interest in any firm or corporation with which
Borrower has a business relationship, or any firm or corporation which
competes with Borrower, except that shareholders, officers and/or
directors of Borrower may own no more than 4.9% of outstanding stock of
publicly traded companies which may compete with Borrower; no officer
or director of Borrower or any member of their immediate families, is,
directly or indirectly, interested in any material contract with
Borrower. Borrower is not a guarantor or indemnitor of any indebtedness
or other obligation of any other person, firm or corporation, except
for obligations of any Subsidiary.
(p) Statements Not False or Misleading. No representation or
warranty given as of the date hereof by Borrower, contained in this
Agreement or any other Loan Document, or any schedule attached hereto
or thereto, or in any statement in any document, certificate or other
instrument furnished or to be furnished by Borrower to Lender pursuant
hereto, taken as a whole, contains or will (as of the time so
furnished) contain any untrue statement of a material fact, or omits or
will (as of the time so furnished) omit to state any material fact
which is necessary in order to make the statements contained therein
not misleading.
(q) Margin Regulations. Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying
margin stock. No proceeds received pursuant to this Agreement will be
used to purchase or carry any equity security of a class which is
registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended.
(r) Significant Contracts. Schedule 2.1(r) and the exhibits to
the Form 10- K contain all material contracts as required by Item
601(10) of Regulation S-K of the Securities Act of 1933, as amended
(the "Securities Act"). Each such contract, agreement and other
document is in full force and effect as of the date hereof and Borrower
knows of no reason why such contracts, agreements and other documents
would not remain in full force and effect pursuant to the terms
thereof.
(s) Environment. Borrower has duly complied with, and its
business, operations, assets, equipment, property, leaseholds or other
facilities are in compliance with, the provisions of all federal, state
and local environmental, health, and safety laws, codes and ordinances,
and all rules and regulations promulgated thereunder, except to the
extent that failure to do so would not have a material adverse effect
on its business. Except to the extent that failure to do so would not
have a material adverse effect on its business, Borrower has been
issued and will maintain all required federal, state and local permits,
licenses, certificates and approvals relating to (1) air emissions; (2)
discharges to surface water or
9
groundwater; (3) noise emissions; (4) solid or liquid waste disposal;
(5) the use, generation, storage, transportation or disposal of toxic
or hazardous substances or wastes (which shall include any and all such
materials listed in any federal, state or local law, code or ordinance
and all rules and regulations promulgated thereunder as hazardous or
potentially hazardous); or (6) other environmental, health or safety
matters. Borrower has not received notice of, nor does it know of,
facts which might constitute any violations of any federal, state or
local environmental, health or safety laws, codes or ordinances, and
any rules or regulations promulgated thereunder with respect to its
businesses, operations, assets, equipment, property, leaseholds, or
other facilities except to the extent that such violations would not
have a material adverse effect on its business. Except to the extent
that such emission, spill, release or discharge would have a material
adverse effect on its business and except in accordance with a valid
governmental permit, license, certificate or approval, there has been
no emission, spill, release or discharge into or upon (1) the air; (2)
soils, or any improvements located thereon; (3) surface water or
groundwater; or (4) the sewer, septic system or waste treatment,
storage or disposal system servicing the premises, of any toxic or
hazardous substances or wastes at or from the premises; and to the best
of Borrower's knowledge, the premises of Borrower are free of all such
toxic or hazardous substances or wastes. There has been no complaint,
order, directive, claim, citation or notice by any governmental
authority or any person or entity with respect to (1) air emissions;
(2) spills, releases or discharges to soils or improvements located
thereon, surface water, groundwater or the sewer, septic system or
waste treatment, storage or disposal systems servicing the premises;
(3) noise emissions; (4) solid or liquid waste disposal; (5) the use,
generation, storage, transportation or disposal of toxic or hazardous
substances or waste; or (6) other environmental, health or safety
matters materially affecting Borrower or its business, operations,
assets, equipment, property, leaseholds or other facilities. Borrower
has no material indebtedness, obligation or liability (absolute or
contingent, matured or not matured), with respect to the storage,
treatment, cleanup or disposal of any solid wastes, hazardous wastes or
other toxic or hazardous substances (including without limitation any
such indebtedness, obligation, or liability with respect to any current
regulation, law or statute regarding such storage, treatment, cleanup
or disposal).
(t) Fees; Commissions. Borrower has not agreed to pay any
finder's fee, commission, origination fee (except for the processing
and commitment fees due pursuant to Section 1.2 and $185,000 of fees
payable to Quaker Capital Corporation) or other fee or charge to any
person or entity with respect to the Loan and investment transactions
contemplated hereunder.
(u) ERISA. Borrower is in compliance in all material respects
with all applicable provisions of ERISA (as defined in Section 3.11
hereof). Neither a reportable event nor a prohibited transaction (as
defined in ERISA) has occurred and is continuing with respect to any
Plan (as defined in Section 3.11 hereof); no notice of intent to
terminate a Plan has been filed nor has any Plan been terminated; no
circumstances exist which constitute grounds entitling the Pension
Benefit
10
Guaranty Corporation (together with any entity succeeding to any or all
of its functions, the "PBGC") to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor has the PBGC instituted
any such proceedings; neither Borrower nor any commonly controlled
entity (as defined in ERISA) has completely or partially withdrawn from
a multiemployer plan (as defined in ERISA); Borrower and each commonly
controlled entity has met its minimum funding requirements under ERISA
with respect to all of its Plans and the present fair market value of
all Plan property exceeds the present value of all vested benefits
under each Plan, as determined on the most recent valuation date of the
Plan and in accordance with the provisions of ERISA and the regulations
thereunder for calculating the potential liability of Borrower or any
commonly controlled entity to the PBGC or the Plan under Title IV of
ERISA; and neither Borrower nor any commonly controlled entity has
incurred any liability to the PBGC under ERISA.
(v) Title to Properties. Borrower has good, indefeasible and
insurable title to, or valid leasehold interests in, all its real
properties and good title to its other assets, free and clear of all
liens other than Permitted Liens (as defined in Section 3.15 hereof).
(w) Material Adverse Effect. Since March 31, 1997, no event
has occurred which has resulted or which Borrower reasonably believes
could be expected to result in a material adverse effect on Borrower or
Superior or Borrower's or Superior's ability to perform its obligations
under the Loan Documents. No default or event of default under any
other agreement will occur as a result of the transactions contemplated
by this Agreement or by the Warrants.
(x) Financial Solvency. Borrower is not entering into the
arrangements contemplated by this Agreement and the other Loan
Documents with actual intent to hinder, delay or defraud either present
or future creditors. On and as of the date hereof on a pro forma basis
after giving effect to the transactions contemplated by the Loan
Documents and to all debts incurred or to be created in connection
therewith:
(i) the present fair salable value of the assets of
Borrower (on a going concern and consolidated basis) will
exceed the probable liability of Borrower to Lenders;
(ii) Borrower has not incurred, nor does it intend to
or believe that it will incur, debts (including contingent
obligations) beyond its ability to pay such debts as such
debts mature (taking into account the timing and amounts of
cash to be received from any source, and of amounts to be
payable on or in respect of debts); and the amount of cash
available to Borrower after taking into account all other
anticipated uses of funds is anticipated to be sufficient to
pay all such amounts on or in respect of debts, when such
amounts are required to be paid; and
11
(iii) except as disclosed in the Form 10-K, Borrower
will have sufficient capital with which to conduct its present
and proposed business and the property of Borrower does not
constitute unreasonably small capital with which to conduct
its current business at present levels of operations.
For purposes of this Section 2.1(x) "debt" means any liability
on a (i) right to payment whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or
unsecured; or (ii) right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such
a right to an equitable remedy is reduced to judgment, fixed,
contingent, unmatured, disputed, undisputed, secured, or unsecured.
(y) Offering of Note and Warrant. Neither Borrower nor anyone
acting on its behalf has offered the Notes, the Warrants or any similar
securities for sale to, or solicited any offer to buy any of the same
from, or otherwise approached or negotiated in respect thereof, with,
any person other than Lenders and not more than 35 other institutional
investors. Neither Borrower nor anyone acting on its behalf has taken,
or will take, any action which would subject the issuance or sale of
the Notes, and the Warrants to Section 5 of the Securities Act or the
registration or qualification provisions of the blue sky laws of any
state.
(z) Registration Rights. Except as disclosed in the Form 10-K
and Schedule 2.1(z), Borrower is not under any obligation to register
under the Securities Act or the Trust Indenture Act of 1939, as
amended, any of its presently outstanding securities or any of its
securities that may subsequently be issued.
(aa) Employees. Borrower has no current labor problems or
disputes which have resulted or which Borrower reasonably believes
could be expected to have a material adverse effect upon Borrower.
(ab) Issuance Taxes. All taxes imposed on Borrower in
connection with the issuance, sale and delivery of the Notes, the
Warrants, and the Common Stock issuable upon exercise of the Warrants
have been or will be fully paid by Borrower in accordance with all laws
imposing such taxes.
(ac) List of Deposit Institutions. Schedule 2.1(ac) hereto
sets forth a true and complete list of all deposit institutions at
which Borrower has or maintains an account or deposits of any kind.
(ad) Locations and Names. Borrower has not, during the five
years preceding the date of this Agreement, been known as or used any
other corporate, trade or fictitious name, nor acquired all or
substantially all of the assets, capital stock or operating units of
any person except as described in the Form 10-K.
12
Borrower has not, during the five years preceding the date of this
Agreement, had a business location at any address other than addresses
set forth on Schedule 2.1(ad).
ARTICLE 3
COVENANTS AND AGREEMENTS
Borrower covenants and agrees that during the term of this
Agreement:
3.1 Payment of Obligations. Borrower shall pay the indebtedness
evidenced by the Notes according to the terms thereof, and shall timely pay or
perform, as the case may be, all of the other obligations of Borrower to
Lenders, direct or contingent, however evidenced or denominated, and however and
whenever incurred, including but not limited to indebtedness incurred pursuant
to any present or future commitment of Lenders to Borrower, together with
interest thereon, and any extensions, modifications, consolidations and/or
renewals thereof and any notes given in payment thereof.
3.2 Financial Statements and Reports. Borrower shall furnish to Lenders
(a) as soon as practicable and in any event within ninety (90) days after the
end of each fiscal year of Borrower, a consolidated balance sheet of Borrower as
of the close of such fiscal year, a consolidated statement of earnings and
retained earnings of Borrower as of the close of such fiscal year and a
consolidated statement of cash flows for Borrower for such fiscal year, prepared
in accordance with generally accepted accounting principles consistently applied
("GAAP"), audited by an independent certified public accountant and certified by
an officer of Borrower and accompanied by a certificate of the President of
Borrower, stating that to the best of the knowledge of such officer, Borrower
has kept, observed, performed and fulfilled each covenant, term and condition of
this Agreement and the other Loan Documents during the preceding fiscal year and
that no Event of Default, as herein defined, has occurred and is continuing (or
if an Event of Default has occurred and is continuing, specifying the nature of
same, the period of existence of same and the action Borrower has taken or
proposes to take in connection therewith), (b) within twenty (20) days of the
end of each calendar month, a balance sheet of Superior as of the close of such
month and a statement of earnings and retained earnings of Superior as of the
close of such month, all in reasonable detail (including year-to-date financial
information), and prepared substantially in accordance with GAAP (except for the
absence of footnotes and subject to year-end adjustments), (c) within forty-five
(45) days of the end of each fiscal quarter, a Form 10-Q prepared in compliance
with applicable securities laws with respect to Borrower, and (d) with
reasonable promptness, such other financial data as Lender may reasonably
request, including without limitation, the "Closing Financial Statements" as
defined in that certain Agreement and Plan of Merger Agreement dated March 7,
1997, by and among Borrower, DynaGen Acquisition Corp., Superior and the
shareholders of Superior, as amended (the "Plan of Merger").
13
3.3 Maintenance of Books and Records; Inspection. Borrower shall
maintain its books, accounts and records in accordance with GAAP, and after
reasonable notice from Lenders, shall permit Lenders, its officers, employees
and any professionals designated by Lenders in writing, at Borrower's expense,
to visit, inspect and/or audit any of its properties, books and financial
records, and to discuss its accounts, affairs and finances with Borrower or the
principal officers of Borrower during reasonable business hours, all at such
times as Lenders may reasonably request; provided that no such visit, inspection
and/or audit shall materially interfere with the conduct of Borrower's business.
3.4 Insurance. Without limiting any of the requirements of any of the
other Loan Documents, Borrower shall maintain in amounts customary for entities
engaged in comparable business activity (a) to the extent required by applicable
law, worker's compensation insurance (or maintain a legally sufficient amount of
self insurance against worker's compensation liabilities, with adequate
reserves, under a plan approved by Lender, such approval not to be unreasonably
withheld or delayed), and (b) fire and "all risk" casualty insurance on its
properties against such hazards and in at least such amounts as are customary in
Borrower's business. Borrower will make reasonable efforts to obtain and
maintain public liability insurance in an amount, and at a cost, deemed
reasonable to the Borrower's Board of Directors. At the request of Lenders,
Borrower will deliver forthwith a certificate specifying the details of such
insurance in effect.
3.5 Taxes and Assessments. Borrower shall (a) file all tax returns and
appropriate schedules thereto that are required to be filed under applicable
law, prior to the date of delinquency, (b) pay and discharge all taxes,
assessments and governmental charges or levies imposed upon Borrower upon its
income and profits or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and (c) pay all taxes, assessments and
governmental charges or levies that, if unpaid, might become a lien or charge
upon any of its properties; provided, however, that Borrower in good faith may
contest any such tax, assessment, governmental charge or levy described in the
foregoing clauses (b) and (c) so long as appropriate reserves are maintained
with respect thereto.
3.6 Corporate Existence. Borrower shall maintain its corporate
existence and good standing in the state of its incorporation, and its
qualification and good standing as a foreign corporation in each jurisdiction in
which such qualification is necessary pursuant to applicable law.
3.7 Compliance with Law and Other Agreements. Except where the failure
to do so would not materially adversely affect Borrower's operations or its
ability to fulfill its obligations under the Loan Documents, Borrower shall
maintain its business, operations and property owned or used in connection
therewith in compliance with (a) all applicable federal, state and local laws,
regulations and ordinances governing such business operations and the use and
ownership of such property, and (b) all agreements, licenses, franchises,
indentures and mortgages to which Borrower is a party or by which Borrower or
any of its properties is bound. Without limiting the foregoing, Borrower shall
pay all of its indebtedness promptly in accordance with the terms thereof.
14
3.8 Notice of Default. Borrower shall give written notice to Lenders of
the occurrence of any default, event of default or Event of Default under this
Agreement or any other Loan Document promptly upon the occurrence thereof.
3.9 Notice of Litigation. Borrower shall give notice, in writing, to
Lenders of (a) any actions, suits or proceedings instituted by any persons
whomsoever against Borrower, or affecting any of the assets of Borrower, wherein
the amount at issue is in excess of One Hundred Fifty Thousand and No/100ths
Dollars ($150,000.00), and (b) any dispute, not resolved within sixty (60) days
of the commencement thereof, between Borrower on the one hand and any
governmental regulatory body on the other hand, which dispute might materially
interfere with the normal operations of Borrower.
3.10 Conduct of Business, Name and Location of Business. Borrower will
continue to engage in a business of the same general type and manner as
conducted by it on the date of this Agreement and as proposed to be conducted in
the Form 10-K. Borrower will not change its name or any location of its business
without providing Lender with 10 days' written notice of such change. In the
event Borrower makes a change of its name or location of business, Borrower
shall promptly execute any and all financing statements, and amendments or
continuations thereof and any other documents that Lenders may reasonably
request to evidence, continue, and/or perfect any security interest in or pledge
of collateral securing the Loan.
3.11 ERISA Plan. If Borrower has in effect, or hereafter institutes, a
pension plan that is subject to the requirements of Title IV of the Employee
Retirement Income Security Act of 1974, Pub. L. No. 93-406, September 2, 1974,
88 Stat. 829, 29 U.S.C.A. ss. 1001 et seq. (1975), as amended from time to time
("ERISA"), then the following warranty and covenants shall be applicable during
such period as any such plan (the "Plan") shall be in effect: (a) Borrower
hereby warrants that no fact that might constitute grounds for the involuntary
termination of the Plan, or for the appointment by the appropriate United States
District Court of a trustee to administer the Plan, exists at the time of
execution of this Agreement, (b) Borrower hereby covenants that throughout the
existence of the Plan, Borrower's contributions under the Plan will meet the
minimum funding standards required by ERISA and Borrower will not institute a
distress termination of the Plan, and (c) Borrower covenants that it will send
to Lenders a copy of any notice of a reportable event (as defined in ERISA)
required by ERISA to be filed with the Labor Department or the Pension Benefit
Guaranty Corporation, at the time that such notice is so filed.
3.12 Dividends, Distributions, Stock Rights, etc. Except as described
on Schedule 3.12, Borrower shall not declare or pay any dividend of any kind
(other than stock dividends payable to all holders of any class of capital stock
or dividends consisting of shares of Common Stock to holders of any class of the
Company's preferred stock), in cash or in property, on any class of the capital
stock of Borrower, or purchase, redeem, retire or otherwise acquire for value
any shares of such stock, nor make any distribution of any kind in cash or
property in respect thereof, nor make any return of capital of shareholders, nor
make any payments in cash or property in respect of any stock options, stock
bonus or
15
similar plan (except as required or permitted hereunder), without the prior
written consent of Lenders. Superior shall not distribute to Borrower and
Borrower shall not receive any loans, advances, corporate expense allocations,
fees, distributions, dividends and/or any other payments or advances of any kind
from Superior other than amounts that Borrower uses to make payments under the
Notes and the promissory notes in the aggregate principal amount of $5,000,000
payable to the former shareholders of Superior pursuant to the Plan of Merger.
3.13 Guaranties; Loans; Payment of Debt. Without Lenders' prior express
written consent, Borrower shall not guarantee nor be liable in any manner,
whether directly or indirectly, or become contingently liable after the date of
this Agreement in connection with the obligations or indebtedness of any person
or entity whatsoever (other than a Subsidiary), except for the endorsement of
negotiable instruments payable to Borrower for deposit or collection in the
ordinary course of business. Without Lenders' prior express written consent,
Borrower shall not (a) make any loans, advances or extensions of credit to any
person other than in the normal course of its business, or (b) make any payment
on any subordinated debt.
3.14 Debt. Without the express prior written consent of Lenders (which
shall not be unreasonably withheld with respect to subsection 3.14(c)), Borrower
shall not create, incur, assume or suffer to exist indebtedness of any
description whatsoever, excluding:
(a) the indebtedness evidenced by the Notes;
(b) the endorsement of negotiable instruments payable to
Borrower for deposit or collection in the ordinary
course of business;
(c) debts incurred in the ordinary course of business
(each of which, individually, does not exceed
$500,000); and
(d) the indebtedness listed on Schedule 2.1(l) hereto.
3.15 No Liens. Borrower shall not create, incur, assume or suffer to
exist any lien, security interest, security title, mortgage, deed of trust or
other encumbrance upon or with respect to any of its properties, now owned or
hereafter acquired, except the following permitted liens (the "Permitted
Liens"):
(a) liens in favor of Lenders;
(b) liens for taxes or assessments or other governmental
charges or levies if not yet due and payable;
(c) liens in connection with the leasing of equipment in
favor of the lessor of such equipment;
16
(d) liens in connection with the shares of common stock
of, or assets of, Able Laboratories; and
(e) liens described on Schedule 2.1(l) hereto.
3.16 Mergers, Consolidations, Acquisitions; Sales; Name and Location.
Without the prior written consent of Lenders, Borrower shall not (a) be a party
to any merger, consolidation or corporate reorganization, nor (b) purchase or
otherwise acquire all or substantially all of the assets or stock of, or any
partnership or joint venture interest in, any other person, firm or entity, nor
(c) sell, transfer, convey, grant a security interest in or lease all or any
substantial part of its assets, nor (d) create any Subsidiaries nor convey any
of its assets to any Subsidiary. Without ten (10) days' prior written notice to
Lender, Borrower shall not change its name or its location(s) of doing business.
3.17 Transactions With Affiliates. Borrower shall not enter into any
transaction, including, without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's
business and upon fair and reasonable terms no less favorable to Borrower than
Borrower would obtain in a comparable arm's length transaction with a person not
an affiliate. For the purposes of this Section 3.17, "affiliate" shall mean a
person, corporation, partnership or other entity controlling, controlled by or
under common control with Borrower.
3.18 Environment. Borrower shall be and remain in compliance with the
provisions of all federal, state and local environmental, health, and safety
laws, codes and ordinances, and all rules and regulations issued thereunder;
notify Lenders immediately of any notice of a hazardous discharge or
environmental complaint received from any governmental agency or any other
party; notify Lenders immediately of any hazardous discharge from or affecting
Borrower's premises; immediately contain and remove the same, in compliance with
all applicable laws; promptly pay any fine or penalty assessed in connection
therewith; permit Lenders to inspect the premises, to conduct tests thereon, and
to inspect all books, correspondence, and records pertaining thereto; and at
Lenders' request, and at Borrower's expense, provide a report of a qualified
environmental engineer, satisfactory in scope, form, and content to Lenders, and
such other and further assurances reasonably satisfactory to Lenders that the
condition has been corrected.
3.19 Fixed Charge Covenant. The ratio of cash flow from operations of
Superior for each of the following fiscal years to the aggregate of Superior's
scheduled debt service for such years shall be no less than the following:
17
Year-End Ratio
-------- -----
December 31, 1997 1.25 to 1.0
December 31, 1998 1.30 to 1.0
December 31, 1999 and each year 1.35 to 1.0
thereafter
For purposes of this covenant the term "cash flow from operations" shall mean
net income, plus depreciation, plus amortization expense, plus the interest
portion of scheduled debt service, all determined in accordance with GAAP.
3.20 Informational Covenant. Borrower will furnish or cause to be
furnished to Odyssey information required by the U.S. Small Business
Administration ("SBA") concerning the economic impact of the Odyssey Loan,
including but not limited to, information concerning taxes paid and number of
employees.
Borrower will also furnish or cause to be furnished to Lenders
such other information regarding the business, affairs and condition of Borrower
as Lenders may from time to time reasonably request. Borrower will permit
Odyssey and examiners of the SBA to inspect the books and any of the properties
or assets of Borrower and its affiliates and to discuss Borrower's business with
senior management employees at such reasonable times as those persons may from
time to time request. Odyssey agrees not to disclose any confidential
information received from Borrower (except to its partners and to its
professional advisors, whom Odyssey shall cause to keep such information
confidential, and to the SBA) and to use the same care with such information as
it affords to its own confidential information.
3.21 Use of Proceeds. Borrower will use the proceeds from the Loan for
the purposes and in the amounts set forth in Paragraph 1.3 of this Agreement.
Borrower will deliver within ninety (90) days of the closing of the Loan a
written report, certified as correct by Borrower's chief financial officer
verifying the purposes and amounts for which proceeds from the Loan have been
disbursed, and, if the proceeds have not been fully disbursed within that ninety
(90) day period, an additional report also so certified, delivered not later
than the end of each succeeding ninety (90) day period, verifying the purposes
and amounts for which proceeds have been disbursed. Borrower will supply to
Lenders such additional information and documents as Lenders reasonably request
with respect to use of proceeds and will permit Lenders to have access (upon
reasonable notice and during business hours) to any and all records and
information and personnel as Lenders deem necessary to verify how proceeds have
been or are being used, and to assure that the proceeds have been used for the
purposes specified.
18
3.22 Activities and Proceeds.
(a) Neither Borrower nor any of its affiliates will engage in
any activities or use directly or indirectly the proceeds from the
Odyssey Loan for any purpose for which a small business investment
company is prohibited from providing funds by the SBIC Act, including
13 C.F.R. ss.107.
(b) Borrower will not, without obtaining the prior written
approval of Odyssey, change within one (1) year of the closing under
this Agreement, Borrower's business activity to a business activity to
which an SBIC is prohibited from providing funds by the SBIC Act.
Borrower agrees that any such changes in its business activity without
such prior written consent of Odyssey will constitute a material breach
of the obligations of Borrower under this Agreement and the financing
documents for the Odyssey Loan (an "Activity Event of Default"). If an
Activity Event of Default occurs, Odyssey has the right to demand, in
writing, immediate repayment of the securities evidencing the Odyssey
Loan, together with interest on the aggregate amount invested from the
date of the closing to the date of repayment, and Borrower will
immediately make such payment within three (3) days of receipt of a
demand. The payment remedy is in addition to any and all other rights
and remedies against Borrower to which Odyssey may be entitled.
ARTICLE 4
CONDITIONS TO CLOSING
4.1 Closing of the Loan. The obligation of Lenders to fund the Loan on
the date hereof (the "Closing Date") is subject to the fulfillment, on or prior
to the Closing Date, of each of the following conditions:
(a) Borrower shall have performed and complied in all material
respects with all of the covenants, agreements, obligations and
conditions required by this Agreement.
(b) Lenders shall have received an opinion of the Borrower's
counsel, Testa, Hurwitz & Thibeault, LLP, and an opinion of Borrower's
counsel, Taft, Stettinus & Hollister, dated the Closing Date, in form
and substance satisfactory to Lenders' counsels.
(c) Borrower shall have delivered to Lenders the Notes
executed by Borrower.
(d) Borrower shall have delivered to Lenders Stock Purchase
Warrants executed by Borrower, substantially in the form of Exhibits
B-1 and B-2 which are attached hereto and incorporated herein by
reference, together with related Warrant Valuation Letters executed by
Borrower, each in a form acceptable to Lenders.
19
(e) Borrower shall have delivered to Lenders Stock Purchase
Warrants executed by Superior, substantially in the form of Exhibits
C-1 and C-2 which are attached hereto and incorporated herein by
reference.
(f) Borrower shall have delivered to Lenders a Security
Agreement executed by Borrower (in form acceptable to Lenders) and
related UCC-1 Financing Statement(s) (in form acceptable to Lenders)
executed by Borrower.
(g) Borrower shall have delivered to Lenders a Security
Agreement executed by Superior (in a form acceptable to Lenders) and
related UCC-1 Financing Statement(s) (in form acceptable to Lenders)
executed by Superior.
(h) Borrower shall have delivered to Lenders a Pledge and
Security Agreement (in a form acceptable to Lenders) and related stock
proxy and stock power (all in form acceptable to Lenders), executed by
Borrower and related stock pledge letter (in form acceptable to
Lenders) executed by Superior. Borrower shall have delivered the stock
certificates that are described in the Pledge and Security Agreement to
the agent for the former shareholders of Superior to be held for
Lenders' benefit.
(i) Borrower shall have delivered to Lenders Landlord's
Consents and Subordination of Lien, executed by Borrower's and
Superior's landlords, in a form acceptable to Lenders with respect to
Borrower's and Superior's leasehold interests at Cambridge,
Massachusetts and Cincinnati, Ohio, respectively.
(j) Lenders shall have received copies of the certificate of
incorporation and other publicly filed organizational documents of
Borrower and Superior, certified by the Secretary of State or other
appropriate public official in the jurisdiction in which Borrower and
Superior are incorporated.
(k) Lenders shall have received certified (as of the date of
this Agreement) copies of all corporate action taken by Borrower and
Superior, including resolutions of the Board of Directors, authorizing
the execution, delivery and performance of the Loan Documents.
(l) Lenders shall have received a certificate as to the legal
existence and good standing of Borrower and Superior, issued by the
Secretary of State or other appropriate public official in the
jurisdiction in which Borrower and Superior are incorporated.
(m) Lenders shall have received certificates of the
Secretaries of State or other appropriate public officials as to
Borrower's and Superior's qualification to do business and good
standing in each jurisdiction in which a failure to be so qualified
would have a material adverse effect on its or their financial
positions or its or their ability to conduct its or their business in
the manner now conducted and as hereafter intended to be conducted.
20
(n) Borrower shall have delivered to Lenders Authorization
Agreements for Pre-Authorized Payments (Debit) executed by Borrower, in
form acceptable to Lenders.
(o) Borrower, Superior, Lenders and Huntington Bank shall have
executed an Intercreditor Agreement in form and content acceptable to
Lenders.
(p) Borrower shall have delivered to Odyssey the Small
Business Administration Forms 480, 652 and 1031 (Parts A and B)
completed by Borrower.
(q) Borrower shall have delivered to Odyssey a Small Business
Administration Economic Impact Assessment completed by Borrower, in a
form acceptable to Odyssey.
(r) Borrower shall have delivered to Lenders a Subordination
Agreement executed by the former shareholders of Superior, and
acknowledged by Borrower, in form acceptable to Lenders.
(s) Borrower shall have delivered to Lender a Guaranty
Agreement executed by Superior, in form acceptable to Lenders.
(t) Borrower shall have delivered to Lenders a Collateral
Assignment of Note executed by Borrower, together with the originals of
the related promissory notes, all in form acceptable to Lenders.
ARTICLE 5
DEFAULT AND REMEDIES
5.1 Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) Default by Borrower in the payment of the principal of or
interest on the indebtedness evidenced by any of the Notes in
accordance with the terms of the Notes, which default is not cured
within five (5) business days;
(b) Any misrepresentation by Borrower as to any material
matter hereunder or under any of the other Loan Documents, or delivery
by Borrower of any schedule, statement, resolution, report,
certificate, notice or writing to Lenders that is untrue in any
material respect on the date as of which the facts set forth therein
are stated or certified;
(c) Failure of Borrower, any Subsidiary, any guarantor of
Borrower, or any shareholder of Borrower to perform any of its
obligations, covenants or agreements under this Agreement, any of the
Notes, or any of the other Loan Documents;
21
(d) Borrower (i) shall generally not pay or shall be unable to
pay its debts as such debts become due; or (ii) shall make an
assignment for the benefit of creditors or petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for it
or a substantial part of its assets; or (iii) shall commence any
proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (iv) shall have
had any such petition or application filed or any such proceeding
commenced against it in which an order for relief is entered or an
adjudication or appointment is made; or (v) shall indicate, by any act
or intentional and purposeful omission, its consent to, approval of or
acquiescence in any such petition, application, proceeding or order for
relief or the appointment of a custodian, receiver or trustee for it or
a substantial part of its assets; or (vi) shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for
a period of sixty (60) days or more;
(e) Borrower shall be liquidated, dissolved, partitioned or
terminated, or the certificate of incorporation thereof shall expire or
be revoked;
(f) A default or event of default shall occur under any of the
other Loan Documents and, if subject to a cure right, such default or
event of default shall not be cured within the applicable cure period;
(g) Borrower shall default in the timely payment or
performance of any obligation now or hereafter owed to Lenders in
connection with any other indebtedness of Borrower now or hereafter
owed to Lenders;
(h) Borrower shall have defaulted and continue to be in
default in the timely payment or performance of any other indebtedness
or obligation, which in the aggregate exceeds Twenty-Five Thousand and
No/100ths Dollars ($25,000.00) or materially adversely affects
Borrower's financial condition.
With respect to any Event of Default described above that is capable of
being cured and that does not already provide its own cure procedure (a "Curable
Default"), the occurrence of such Curable Default shall not constitute an Event
of Default hereunder if such Curable Default is fully cured and/or corrected
within thirty (30) days (ten (10) days, if such Curable Default may be cured by
payment of a sum of money) of notice thereof to Borrower given in accordance
with the provisions hereof; provided, however, that this provision shall not
require notice to Borrower and an opportunity to cure any Curable Default of
which Borrower has had actual knowledge for the requisite number of days set
forth.
5.2 Acceleration of Maturity; Remedies. Upon the occurrence of any
Event of Default described in subsection 5.1(d), the indebtedness evidenced by
the Notes as well as any and all other indebtedness of Borrower to Lenders shall
be immediately due and payable in full; and upon the occurrence of any other
Event of Default described above, Lenders at any time thereafter may at their
option accelerate the maturity of the indebtedness evidenced by the Notes as
well as any and all other indebtedness of Borrower to Lenders; all without
notice of
22
any kind. Upon the occurrence of any such Event of Default and the acceleration
of the maturity of the indebtedness evidenced by the Notes:
(a) Lenders shall be immediately entitled to exercise any and
all rights and remedies possessed by Lenders pursuant to the terms of
the Notes and all of the other Loan Documents; and
(b) Lenders shall have any and all other rights and remedies
that Lenders may now or hereafter possess at law, in equity or by
statute.
5.3 Remedies Cumulative; No Waiver. No right, power or remedy conferred
upon or reserved to Lenders by this Agreement or any of the other Loan Documents
is intended to be exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and concurrent and shall
be in addition to any other right, power and remedy given hereunder, under any
of the other Loan Documents or now or hereafter existing at law, in equity or by
statute. No delay or omission by Lenders to exercise any right, power or remedy
accruing upon the occurrence of any Event of Default shall exhaust or impair any
such right, power or remedy or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein, and every right, power and remedy
given by this Agreement and the other Loan Documents to Lenders may be exercised
from time to time and as often as may be deemed expedient by Lenders.
5.4 Proceeds of Remedies. Any or all proceeds resulting from the
exercise of any or all of the foregoing remedies shall be applied as set forth
in the Loan Document(s) providing the remedy or remedies exercised; if none is
specified, or if the remedy is provided by this Agreement, then as follows:
First, to the costs and expenses, including, without
limitation, reasonable attorney's fees incurred by Lenders in
connection with the exercise of its remedies;
Second, to the expenses of curing the default that has
occurred, in the event that Lenders elect, in their sole discretion, to
cure the default that has occurred;
Third, to the payment of the obligations of Borrower under the
Loan Documents (the "Obligations"), including but not limited to the
payment of the principal of and interest on the indebtedness evidenced
by the Notes, in such order of priority as Lenders shall determine in
its sole discretion; and
Fourth, the remainder, if any, to Borrower or to any other
person lawfully thereunto entitled.
23
ARTICLE 6
TERMINATION
6.1 Termination of this Agreement. This Agreement shall remain in full
force and effect until the payment by Borrower of all amounts owed to Lenders on
the Notes at which time Lenders shall cancel the Notes and deliver such Notes to
Borrower.
ARTICLE 7
MISCELLANEOUS
7.1 Performance By Lenders. If Borrower shall default in the payment,
performance or observance of any covenant, term or condition of this Agreement,
which default is not cured within the applicable cure period, then Lenders may,
at Lender's option, pay, perform or observe the same, and all payments made or
costs or expenses incurred by Lenders in connection therewith (including but not
limited to reasonable attorney's fees), with interest thereon at the highest
default rate provided in the Notes (if none, then at the maximum rate from time
to time allowed by applicable law), shall be immediately repaid to Lenders by
Borrower and shall constitute a part of the Obligations. Lenders shall be the
sole judge of the necessity for any such actions and of the amounts to be paid.
7.2 Successors and Assigns Included in Parties. Whenever in this
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors, successors-in-title and assigns of such parties
shall be included, and all covenants and agreements contained in this Agreement
by or on behalf of Borrower or by or on behalf of Lenders shall bind and inure
to the benefit of their respective heirs, legal representatives,
successors-in-title and assigns, whether so expressed or not.
7.3 Costs and Expenses. Borrower agrees to pay all reasonable costs and
expenses incurred by Lenders in connection with the making of the Loan,
including but not limited to filing fees, recording taxes, indebtedness taxes,
and reasonable attorneys' fees, promptly upon demand of Lenders. Borrower
further agrees to pay all premiums for insurance required to be maintained by
Borrower pursuant to the terms of the Loan Documents and all of the
out-of-pocket costs and expenses incurred by Lenders in connection with the
collection of the Loan, amendment to the Loan Documents, or prepayment of the
Loan, including but not limited to reasonable attorneys' fees, promptly upon
demand of Lenders.
7.4 Assignment. The Notes, this Agreement and the other Loan Documents
may be endorsed, assigned and/or transferred in whole or in part by Lenders, and
any such holder and/or assignee of the same shall succeed to and be possessed of
the rights and powers of Lenders under all of the same to the extent transferred
and assigned. Lenders may grant participations in all or any portion of its
interest in the indebtedness evidenced by the Notes and in such event Borrower
shall continue to make payments due under the Loan Documents to Lenders and
Lenders shall have the sole responsibility of allocating and forwarding such
payments in the appropriate manner and amounts. Borrower shall not assign any of
its rights
24
nor delegate any of its duties hereunder or under any of the other Loan
Documents without the prior express written consent of Lenders.
7.5 Time of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Borrower hereunder and under all
of the other Loan Documents.
7.6 Severability. If any provision(s) of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
7.7 Interest and Loan Charges Not to Exceed Maximum Allowed by Law.
Anything in this Agreement, the Notes, or any of the other Loan Documents to the
contrary notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds of the Loan, acceleration of the maturity of the unpaid
balance of the Loan or otherwise, shall the interest and loan charges agreed to
be paid to Lenders for the use of the money advanced or to be advanced hereunder
exceed the maximum amounts collectible under applicable laws in effect from time
to time. It is understood and agreed by the parties that, if for any reason
whatsoever the interest or loan charges paid or contracted to be paid by
Borrower in respect of the indebtedness evidenced by the Notes shall exceed the
maximum amounts collectible under applicable laws in effect from time to time,
then ipso facto, the obligation to pay such interest and/or loan charges shall
be reduced to the maximum amounts collectible under applicable laws in effect
from time to time, and any amounts collected by Lenders that exceed such maximum
amounts shall be applied by such Lender to the reduction of the principal
balance of the indebtedness evidenced by the Notes held by such Lender and/or
refunded to Borrower, at the option of such Lender, so that at no time shall the
interest or loan charges paid or payable in respect of the indebtedness
evidenced by the Notes exceed the maximum amounts permitted from time to time by
applicable law.
7.8 Article and Section Headings; Defined Terms. Numbered and titled
article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
7.9 Notices. Any and all notices, elections or demands permitted or
required to be made under this Agreement or any of the Loan Documents shall be
in writing, signed by the party giving such notice, election or demand and shall
be delivered personally, telecopied, or sent overnight via nationally recognized
courier service (such as Federal Express), to the other party at the address set
forth below, or at such other address as may be supplied in writing and of which
receipt has been acknowledged in writing. The date of personal delivery,
telecopy or telex or the next business day after delivery to such courier
service, as the case may be, shall be the date of such notice, election or
demand. For the purposes of this Agreement:
25
The Address of Sirrom is: Sirrom Capital Corporation
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Brent Ray
Telecopy: 615/726-1208
with a copy to: Chambliss, Bahner & Stophel, P.C.
1000 Tallan Building
Two Union Square
Chattanooga, TN 37402
Attention: J. Patrick Murphy, Esq.
Telecopy: 423/265-9574
The Address of Odyssey is: Odyssey Investment Partners, L.P.
950 West Valley Road
Suite 2902
Wayne, PA 19087
Attention: Kirk Griswold
Telecopy: 610/964-9524
The Address of Borrower and
Subsidiary is: DynaGen, Inc. or Superior Pharmaceutical
Company
99 Erie Street
Cambridge, Massachusetts 02139
Attention: President
Telecopy: 617/354-3902
with a copy to: Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
Attention: John Hession, Esq.
Telecopy: 617/248-7100
The Huntington National Bank
105 West 4th Street, Suite 400
Cincinnati, Ohio 45202
Attention: Gene Fugate
Telecopy: 513/762-1873
7.10 Entire Agreement. This Agreement and the other written agreements
between Borrower and Lender represent the entire agreement between the parties
concerning the subject matter hereof, and all oral discussions and prior
agreements are merged herein; provided, if there is a conflict between this
Agreement and any other document executed
26
contemporaneously herewith with respect to the Obligations, the provision of
this Agreement shall control. The execution and delivery of this Agreement and
the other Loan Documents by the Borrower were not based upon any fact or
material provided by Lender, nor was the Borrower induced or influenced to enter
into this Agreement or the other Loan Documents by any representation,
statement, analysis or promise by Lender.
7.11 Governing Law and Amendments. This Agreement and all of the Loan
Documents shall be construed and enforced under the laws of the State of
Tennessee applicable to contracts to be wholly performed in such State except to
the extent certain rights and privileges may be granted Lender under applicable
federal laws in which event federal law shall control. No amendment or
modification hereof shall be effective except in a writing executed by each of
the parties hereto.
7.12 Survival of Representations and Warranties. All covenants,
representations and warranties contained herein or in any of the Loan Documents,
or made by or furnished on behalf of the Borrower in connection herewith or any
of the Loan Documents, shall survive the execution and delivery of this
Agreement and all other Loan Documents and shall continue in full force and
effect so long as the Obligations are unpaid.
7.13 Jurisdiction and Venue. BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF TENNESSEE AND THE UNITED STATES
DISTRICT COURT FOR THE MIDDLE DISTRICT OF TENNESSEE, AS WELL AS TO THE
JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS,
FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ANY OF
ITS OBLIGATIONS ARISING UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS OR WITH
RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND EXPRESSLY WAIVES ANY AND
ALL OBJECTIONS IT MAY HAVE AS TO VENUE OR FORUM NON CONVENIENS IN ANY OF SUCH
COURTS.
7.14 Waiver of Trial by Jury. LENDER AND BORROWER HEREBY WAIVE TRIAL BY
JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT
OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS.
7.15 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
7.16 Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly
27
construed against the party that itself or through its agent prepared the same,
it being agreed that the Borrower, Lenders and their respective agents and
attorneys have participated in the preparation hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDERS:
SIRROM CAPITAL CORPORATION, a Tennessee
corporation
By: /s/ [Illegible]
-----------------------------------
Title: Vice President
-----------------------------------
ODYSSEY INVESTMENT PARTNERS, L.P., a
Pennsylvania limited partnership
By: ODYSSEY ASSOCIATES, L.P., its General
Partner
By: ODYSSEY ASSOCIATES, INC., its General
Partner
By: /s/ [Illegible]
-----------------------------------
Title: President
-----------------------------------
BORROWER:
DYNAGEN, INC., a Delaware corporation
By: /s/ Dhananjay G. Wadekar
-----------------------------------
Title: Executive Vice President
-----------------------------------
28
INDEX OF SCHEDULES AND ATTACHMENTS
----------------------------------
Exhibit A-1 - Form of Sirrom Note
Exhibit A-2 - Form of Odyssey Note
Exhibit B -Form of Borrower Warrants
Exhibit C - Form of Subsidiary Warrants
Schedule 2.1(b) - Subsidiaries
Schedule 2.1(c) - Authorization
Schedule 2.1(e) - Options, Warrants, Stock Rights, Etc.
Schedule 2.1(f) - Trademarks, Patents, Etc.
Schedule 2.1(h) - Litigation
Schedule 2.1(i)(A) and (B) - Financial Statements
Schedule 2.1(l) - Debt and Liens
Schedule 2.1(o) - Shareholder Loans
Schedule 2.1(r) - Significant Contracts
Schedule 2.1(ac) - Deposit Institutions
Schedule 2.1(ad) - Names and Locations
Schedule 3.12 - Distributions to Shareholders
THIS AGREEMENT IS SUBJECT TO THE TERMS OF THAT CERTAIN INTERCREDITOR AGREEMENT
OF EVEN DATE HEREWITH BY AND AMONG THE PARTIES HERETO, CO-LENDER, THE HUNTINGTON
NATIONAL BANK AND SUPERIOR PHARMACEUTICAL COMPANY.
SECURITY AGREEMENT
(Borrower)
THIS SECURITY AGREEMENT ("Agreement"), dated as of the 18th day of
June, 1997, is made and entered into by and between DYNAGEN, INC., a Delaware
corporation ("Borrower"), and SIRROM CAPITAL CORPORATION, a Tennessee
corporation ("Lender"), for itself and as agent for ODYSSEY INVESTMENT PARTNERS,
L.P., a Pennsylvania limited partnership ("Co-Lender").
WITNESSETH:
WHEREAS, Lender and Co-Lender have agreed to make a loan (the "Loan")
in the aggregate amount of $3,000,000 to Borrower, pursuant to that certain Loan
Agreement of even date herewith by and between Borrower, Lender and Co-Lender
(the "Loan Agreement"); and
WHEREAS, in connection with the making of the Loan, Lender desires to
obtain from Borrower and Borrower desires to grant to Lender, for itself and as
agent for Co- Lender, a security interest in certain collateral more
particularly described below.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. Borrower hereby grants to Lender, for
itself and as agent for Co-Lender, a security interest in the following
described property and any and all proceeds (although proceeds are covered,
Lender does not authorize the sale of any of the following, except to the extent
permitted under Sections 10 and 11 hereof) and products thereof and accessions
thereto (collectively, the "Collateral"):
(a) Equipment. All equipment and other tangible personal
property of Borrower of any kind and description, whether now owned or
hereafter acquired and wherever located, together with all parts,
accessories and attachments and all replacements thereof and additions
thereto;
(b) Inventory, Accounts, Contract Rights, Chattel Paper,
Documents, Instruments and General Intangibles. All of Borrower's
inventory and any agreements for lease of same and rentals therefrom,
and all of Borrower's accounts, accounts receivable, contract rights,
chattel paper, software, documents, instruments and general intangibles
(including goodwill, but excluding patents, trademarks, copyrights and
other intellectual property) and the proceeds therefrom, whether now in
existence or owned or hereafter arising or acquired, entered into or
created, and wherever located; and whether held for lease or sale, or
furnished or to be furnished under contracts of service.
The term "Collateral" shall not include the shares of capital
stock of any Subsidiary (as defined in the Loan Agreement) owned by Borrower or
any assets of such Subsidiaries.
2. Secured Indebtedness. The obligations secured hereby shall include
(a) loans to be made concurrently or in connection with this Agreement or the
Loan Agreement as evidenced by one or more promissory notes payable to the order
of Lender and/or Co- Lender that shall be due and payable as set forth in such
promissory notes, and any renewals or extensions thereof, (b) the full and
prompt payment and performance of any and all other indebtedness and other
obligations of Borrower to Lender and/or Co-Lender, direct or contingent
(including but not limited to obligations incurred as indorser, guarantor or
surety), however evidenced or denominated, and however and whenever incurred,
including but not limited to indebtedness incurred pursuant to any present or
future commitment of Lender and/or Co-Lender to Borrower and any and all future
advances regardless of the class of such future advances, and (c) all future
advances made by Lender and/or Co-Lender for taxes, levies, insurance and
preservation of the Collateral and all attorney's fees, court costs and expenses
of whatever kind incident to the collection of any of said indebtedness or other
obligations and the enforcement and protection of the security interest created
hereby.
3. Representations, Warranties and Agreements of Borrower. Borrower
represents, warrants and agrees as follows:
(a) Borrower will promptly notify Lender, in writing, of any
change in Borrower's place or places of business if the Collateral is
used in business, or of any change in Borrower's residence if the
Collateral is not used in business, and regardless of use, of any
change in the location of the Collateral or any records pertaining
thereto.
(b) Except as set forth on Schedule 2.1(l) of the Loan
Agreement, Borrower is the owner of the Collateral free and clear of
any liens, security interests, claims and encumbrances, contingent or
otherwise. Borrower will defend the Collateral against the claims and
demands of all persons.
2
(c) Borrower will pay to Lender and Co-Lender, amounts secured
hereby as and when the same shall be due and payable, whether at
maturity, by acceleration or otherwise, and will promptly perform all
terms of said indebtedness and this or any other security or loan
agreement between Borrower, Lender and/or Co-Lender, and will promptly
discharge all said liabilities.
(d) Borrower will at all times keep the Collateral insured
against all insurable hazards in amounts equal to the full cash value
of the Collateral. Such insurance shall be obtained from such companies
as may be acceptable to Lender, with provisions satisfactory to Lender
for payment of all losses thereunder to Lender as its interests may
appear. If required by Lender, Borrower shall deposit the policies with
Lender unless the possession of such policy is required by a senior
lender, in which case Borrower shall deposit copies thereof with
Lender. If an Event of Default (as defined in the Loan Agreement) has
occurred and is continuing, any money received by Lender under said
policies may be applied to the payment of any indebtedness secured
hereby, whether or not due and payable, otherwise said money shall be
delivered by Lender to Borrower for the purpose of repairing or
restoring the Collateral. Borrower assigns to Lender all right to
receive proceeds of insurance not exceeding the amounts secured hereby,
directs any insurer to pay all proceeds directly to Lender, and
appoints Lender Borrower's attorney in fact to endorse any draft or
check made payable to Borrower in order to collect the benefits of such
insurance. If Borrower fails to keep the Collateral insured as required
by Lender, Lender shall have the right to obtain such insurance at
Borrower's expense and add the cost thereof to the other amounts
secured hereby.
(e) Borrower will pay all costs of filing of financing,
continuation and termination statements with respect to the security
interests created hereby, and Lender is authorized to do all things
that it deems necessary to perfect and continue perfection of the
security interests created hereby and to protect the Collateral.
(f) The address set forth after Borrower's signature on this
Agreement is Borrower's principal place of business and the location
where the records concerning all intangible Collateral are kept and/or
maintained. The addresses set forth on Schedule 2.1(ad) of the Loan
Agreement are all of the locations where Borrower does business and the
locations of all tangible Collateral.
4. Default. Borrower shall be in default upon the occurrence of an
Event of Default under the Loan Agreement.
5. Remedies Upon Default. Upon the occurrence of an Event of Default
(as defined in the Loan Agreement), all sums secured hereby shall immediately
become due and payable at Lender's option without notice to Borrower, and Lender
may proceed to enforce payment of same and to exercise any and all rights and
remedies provided by the Uniform Commercial Code (Tennessee) or other applicable
law, as well as all other rights and remedies possessed by Lender, all of which
shall be cumulative. Upon the occurrence of an
3
Event of Default and upon demand by Lender, Borrower shall assemble the
Collateral and make it available to Lender at a place reasonably convenient to
Lender and Borrower. Any notice of sale, lease or other intended disposition of
the Collateral by Lender sent to Borrower at the address hereinafter set forth,
or at such other address of Borrower as may be shown on Lender's records, at
least five (5) business days prior to such action, shall constitute reasonable
notice to Borrower.
Lender may waive any default before or after the same has been declared
without impairing its right to declare a subsequent default hereunder, this
right being a continuing one.
6. Severability. If any provision of this Agreement is held invalid,
such invalidity shall not affect the validity or enforceability of the remaining
provisions of this Agreement.
7. Binding Effect. This Agreement shall inure to the benefit of
Lender's and Co- Lender's successors and assigns and shall bind Borrower's
heirs, representatives, successors and assigns. If Borrower is composed of more
than one person, firm and/or entity, their obligations hereunder shall be joint
and several.
8. Termination Statement. Borrower agrees that, notwithstanding the
payment in full of all indebtedness secured hereby and whether or not there is
any outstanding obligation of Lender and Co-Lender to make future advances,
Lender shall not be required to send Borrower a termination statement with
respect to any financing statement filed to perfect Lender's security
interest(s) in any of the Collateral, unless and until Borrower shall have made
written demand therefor. Upon receipt of proper written demand, Lender may at
its option, in lieu of sending a termination statement to Borrower, cause said
termination statement to be filed with the appropriate filing officer(s).
9. Protection of Collateral. Except for Permitted Liens (as defined in
the Loan Agreement), Borrower will not permit any liens or security interests
other than those created by this Agreement to attach to any of the Collateral,
nor permit any of the Collateral to be levied upon under any legal process, nor
permit anything to be done that may impair the security intended to be afforded
by this Agreement, nor permit any tangible Collateral to become attached to or
commingled with other goods without the prior written consent of Lender.
10. Special Agreements With Respect to Certain Tangible Collateral.
Borrower additionally agrees and warrants as follows:
(a) Borrower will not permit any of the Collateral to be
removed from the location specified herein, except for temporary
periods in the normal and customary use thereof, without the prior
written consent of Lender, and will permit Lender to inspect the
Collateral during business hours upon reasonable prior notice.
4
(b) If any of the Collateral is equipment or goods of a type
normally used in more than one state (whether or not actually so used),
Borrower will contemporaneously herewith furnish Lender a list of the
states wherein such equipment or goods are or will be used, and
hereafter will notify Lender in writing (i) of any other states in
which such equipment or goods are so used, and (ii) of any change in
the location of Borrower's principal place of business.
(c) Borrower will not sell, exchange, lease or otherwise
dispose of any of the Collateral or any interest therein (except in the
ordinary course of conduct of its business) without the prior written
consent of Lender.
(d) Borrower will keep the Collateral in good condition and
repair and will pay and discharge all taxes, levies and other
impositions levied thereon as well as the cost of repairs to or
maintenance of same, and will not permit anything to be done that may
impair the value of any of the Collateral. If Borrower fails to pay
such sums, Lender may do so for Borrower's account and add the amount
thereof to the other amounts secured hereby.
(e) Until default in any of the terms hereof, or the terms of
any indebtedness secured hereby, Borrower shall be entitled to
possession of the Collateral and to use the same in any lawful manner,
provided that such use does not cause excessive wear and tear to the
Collateral, cause it to decline in value at an excessive rate, or
violate the terms of any policy of insurance thereon.
(f) Borrower will not allow the Collateral to be attached to
real estate in such manner as to become a fixture or a part of any real
estate.
11. Special Agreements With Respect to Intangible and Certain Tangible
Collateral. Borrower additionally warrants and agrees as follows:
(a) So long as Borrower is not in default hereunder, Borrower
shall have the right to process and sell Borrower's inventory in the
regular course of business. Lender's security interest hereunder shall
attach to all proceeds of all sales or other dispositions of the
Collateral. If at any time any such proceeds shall be represented by
any instruments, chattel paper or documents of title, then such
instruments, chattel paper or documents of title shall be promptly
delivered to Lender and shall be subject to the security interest
granted hereby. If at any time any of Borrower's inventory is
represented by any document of title, such document of title will be
delivered promptly to Lender and shall be subject to the security
interest granted hereby.
(b) By the execution of this Agreement, Lender shall not be
obligated to do or perform any of the acts or things provided in any
contracts covered hereby that are to be done or performed by Borrower,
but if there is a default by Borrower in the payment of any amount due
in respect of any indebtedness secured hereby, then
5
Lender may, at its election, perform some or all of the obligations
provided in said contracts to be performed by Borrower, and if Lender
incurs any liability or expenses by reason thereof, the same shall be
payable by Borrower upon demand and shall also be secured by this
Agreement.
(c) At any time after Borrower is in default hereunder or
under the Loan Agreement, Lender shall have the right to notify the
account debtors obligated on any or all of Borrower's accounts
receivable to make payment thereof directly to Lender, and to take
control of all proceeds of any such accounts receivable. Until such
time as Lender elects to exercise such right by mailing to Borrower
written notice thereof, Borrower is authorized, as agent of the Lender,
to collect and enforce said accounts receivable.
12. Power of Attorney. Borrower hereby constitutes the Lender or its
designee, as Borrower's attorney-in-fact with power, upon the occurrence and
during the continuance of an Event of Default, to endorse Borrower's name upon
any notes, acceptances, checks, drafts, money orders, or other evidences of
payment or Collateral that may come into either its or the Lender's possession;
to sign the name of Borrower on any invoice or bill of lading relating to any of
the accounts receivable, drafts against customers, assignments and verifications
of accounts receivable and notices to customers; to send verifications of
accounts receivable; to notify the Post Office authorities to change the address
for delivery of mail addressed to Borrower to such address as the Lender may
designate; to execute any of the documents referred to in Section 3(e) hereof in
order to perfect and/or maintain the security interests and liens granted herein
by Borrower to the Lender; and to do all other acts and things necessary to
carry out this Security Agreement. All acts of said attorney or designee are
hereby ratified and approved, and said attorney or designee shall not be liable
for any acts of commission or omission (other than acts of gross negligence or
willful misconduct), nor for any error of judgment or mistake of fact or law;
this power being coupled with an interest is irrevocable until all of the
obligations secured hereby are paid in full and any and all promissory notes
executed in connection therewith are terminated and satisfied.
13. Governing Law and Amendments. This Agreement and all of the Loan
Documents shall be construed and enforced under the laws of the State of
Tennessee applicable to contracts to be wholly performed in such State. No
amendment or modification hereof shall be effective except in a writing executed
by each of the parties hereto.
14. Survival of Representations and Warranties. All representations and
warranties contained herein or made by or furnished on behalf of the Borrowers
in connection herewith shall survive the execution and delivery of this
Agreement.
6
15. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
16. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Borrower, Lender and their respective agents have participated in the
preparation hereof.
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement,
or have caused this Agreement to be executed as of the date first above written.
BORROWER:
DYNAGEN, INC.
By: /s/ Dhananjay G. Wadekar
--------------------------------
Title: Executive Vice President
--------------------------------
Address: 99 Erie Street
Cambridge, Massachusetts 02139
LENDER:
SIRROM CAPITAL CORPORATION, a Tennessee
corporation, for itself and in its
capacity as Collateral Agent for
Co-Lender and itself
By: /s/ [Illegible]
--------------------------------
Title: Vice President
--------------------------------
7
EXHIBIT 99.3
------------
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amended and Restated Loan and Security Agreement (the "Agreement")
is entered into at Cincinnati, Ohio, by and between The Huntington National Bank
(hereinafter referred to as the "Bank"), and Superior Pharmaceutical Company, an
Ohio corporation (hereinafter referred to as the "Company"), as of the 18th day
of June, 1997.
WHEREAS, on May 9, 1994, the Bank and the Company executed and entered
into a certain Loan and Security Agreement (the "Original Loan Agreement")
pursuant to the terms of which the Bank extended to the Company credit in the
amount of $6,000,000.00;
WHEREAS, subsequent to the execution of the Original Agreement, the
Bank and the Company entered into the following agreements modifying or amending
the Original Agreement: (i) A first Amendment to Loan and Security Agreement
dated as of January 19, 1995; (ii) a certain letter agreement dated as of May 4,
1995; (iii) a certain letter agreement dated as of July 31, 1995; (iv) a certain
letter agreement dated as of January 25, 1996; (v) a certain Loan Extension
and/or Modification Agreement dated as of April 22, 1996; (vi) a certain
Amendment to Loan Agreement dated as of August 30, 1996; and (vii) a certain
Amendment to Loan Agreement dated as of November 11, 1996 (referred to
collectively with the Original Loan Agreement as the "Prior Loan Agreements");
WHEREAS, on February 19, 1997, the Bank increased the revolving credit
available to the Company pursuant to, and the Company executed and delivered to
the Bank, a Revolving Note in the amount of $2,000,000.00 (referred to
collectively with the Prior Loan Agreements as the "Prior Agreements"); and
WHEREAS, the parties hereto desire to amend and restate in their
entirety the relationship and obligations previously evidenced by the Prior
Agreements, to merge all the terms, conditions and provisions set forth in the
Prior Agreements into this Agreement, and to make certain additional
modifications therein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and certain other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree that
the relationship and obligations previously evidenced by the Prior Agreements
are hereby merged into, and amended and restated in their entirety by, this
Agreement, which shall hereafter govern and control said relationship and
obligations without reference to the Prior Agreements. The execution of this
Agreement shall not be deemed a termination of the relationship between the
parties hereto or the full payment or performance of the obligations previously
existing between the parties and evidenced by the Prior Agreements, but shall be
deemed an amendment and restatement thereof. To the extent that any collateral
security interests were created and perfected in connection with the Prior
Agreements and the obligations evidenced thereby, such collateral security
interests shall remain in full force and effect, and the priority thereof shall
remain unchanged. The parties hereto hereby agree as follows:
SECTION 1. THE LOAN.
- ---------------------
1.1 Amount of Loan. Subject to the terms and conditions of this
Agreement, the Bank will lend to the Company up to the sum of Nine Million
Dollars ($9,000,000.00) (hereinafter referred to as the "Loan"). The Loan shall
take the form of a revolving credit and, subject to the provisions of Section
1.2 of this Agreement, the outstanding principal balance may be increased and
decreased an unlimited number of times. Subject to annual review and renewal by
the Bank (which renewal shall be at the Bank's sole discretion), the Company's
right to obtain advances pursuant to this revolving credit shall terminate on
April 5, 1998.
1.2 Borrowing Base for Loan.
(a) Borrowing Base. The principal balance of the Loan outstanding at
any one time shall not exceed an amount equal to the sum of (i) 80% of the
Company's Eligible Accounts Receiv able, as hereinafter defined, plus (ii) 60%
of the Company's Eligible Inventory, as hereinafter
defined, up to a maximum of $5,500,000.00 attributable to the Company's Eligible
Inventory (which sum of the said percentages is hereinafter sometimes referred
to as the "Borrowing Base").
(b) Eligible Accounts Receivable. The term "Eligible Account
Receivable" or "Eligible Account" means an account receivable owing to the
Company from a party (the "Account Debtor") which met all of the following
requirements at the time it came into existence and which continues to meet the
same until it is collected in full:
(i) The account is not more than 90 days past the date of its
invoice;
(ii) The account arose from the performance of services or an
outright and lawful sale of goods and related services by the
Company, all such goods having been lawfully shipped to the
Account Debtor, and the Company has possession of, and will
deliver to the Bank if requested hereunder, copies of all
invoices, shipping documents and delivery receipts evidencing
such shipment;
(iii) The amount of the account does not include any sales or
other taxes;
(iv) The account did not arise from a consumer transaction,
which shall be defined for purposes of this Agreement as the
providing of goods or services for purposes that are primarily
personal, family or household;
(v) The account is not subject to any prior assignment, claim,
lien or security interest, and the Company will not make any
further assignment thereof or create any further security
interest therein nor permit the Company's rights therein to be
reached by attachment, levy, garnishment or other judicial
process;
(vi) The account is not subject to any set-off, credit,
allowance, adjustment or discount (excepting only any
applicable discount for prompt payment), and the Account
Debtor has not objected as to his liability or the amount of
his liability thereon and has not returned or claimed the
right to return any of the goods from the sale out of which
the account arose;
(vii) The account did not arise from a transaction with a
person, corporation or entity affiliated with the Company;
(viii) The account arose in the ordinary course of the
Company's business and no notice of bankruptcy, insolvency or
financial distress or embarrassment of the Account Debtor has
been received by the Company;
(ix) The Bank has not notified the Company that the account or
the Account Debtor is unsatisfactory (although the Bank
reserves the right to do so in its sole discretion at any
time); and
(x) The account is not evidenced by chattel paper, nor by any
promissory note, payment instrument or written agreement
(other than invoices, shipping documents and delivery
receipts).
In the event that more than 50% of the Company's Eligible Accounts Receivable
shall at any one time become more than 90 days past due, none of the Company's
accounts receivable shall there after be Eligible Accounts Receivable, until
such time, if any, as the Bank may, in its sole discretion, determine that the
Company's percentage of past due accounts has been satisfactorily reduced or
eliminated. In the event that more than 50% of the accounts receivable
outstanding from any one Account Debtor shall at any one time become more than
90 days past due, none of the accounts receivable outstanding from that Account
Debtor shall thereafter be included in calculating the Company's Eligible
Accounts Receivable, until such time, if any, as the Bank may, in its sole
discretion determine otherwise.
2
(c) Eligible Inventory. The term "Eligible Inventory" means that
inventory (as defined in Section 11.1 of this Agreement) of the Company, which
the Bank, in its sole credit judgment, deems to be Eligible Inventory, based
upon such credit and collateral considerations as the Bank may deem appropriate.
For purposes of determining the Borrowing Base, Eligible Inventory shall be
valued at the lesser of cost or fair market value. Unless the Bank shall in its
sole discretion determine otherwise, cost shall be calculated on a FIFO basis.
(d) Draws by the Company. No draws on the Loan shall be permitted
unless the Company shall have provided to the Bank a certificate, in a form
satisfactory to the Bank, which shall include a report on:
(i) the total balance due on all of the Company's accounts
receivable and the total balance due on all Eligible Accounts
Receivable;
(ii) the total value of the Company's Eligible Inventory; and
(iii) the amount of the advance sought by the Company.
In addition, no draws on the Loan shall be permitted unless the Company shall be
in compliance with all of the terms of this Agreement and with all other
agreements with the Bank.
SECTION 2. INTEREST RATE.
- --------------------------
The Company agrees to pay to the Bank monthly interest on the unpaid
balance of the Loan pursuant to the terms of a certain Promissory Note of even
date herewith (the "Note").
SECTION 3. EVIDENCE OF THE LOAN AND TERMS OF PAYMENT.
- ------------------------------------------------------
The Loan shall be evidenced by the Note or by one or more notes
subsequently executed in substitution therefor. Repayment of the Loan shall be
made in accordance with the terms of the note or notes then outstanding pursuant
to this Agreement.
SECTION 4. USE OF PROCEEDS AND PREPAYMENT.
- -------------------------------------------
The proceeds of the Loan shall be used by the Company solely for
general corporate working capital. The Company, if not then in default
hereunder, may have the right to prepay at any time and from time to time before
maturity amounts due to the Bank, but only pursuant to the provisions of this
Agreement, the Note or any note or notes executed pursuant hereto. The Company
acknowledges that, under those specific circumstances identified in the Note,
prepayments of the Loan may be prohibited.
SECTION 5. SECURITY.
- ---------------------
As security for the Loan, the Company has granted the Bank a first and
continuing security interest in all of the Company's accounts, inventory,
equipment, documents, instruments, general intangibles, chattel paper, and all
other tangible and intangible personal property and fixtures of every kind and
description (including pharmaceutical distribution rights), whether now owned or
hereafter acquired or created by the Company, as more particularly described in
and governed by Section 11 of this Agreement. As further security for the Loan,
the Company shall deliver the joint and several, absolute, unconditional and
continuing guaranty of payment of the Loan and payment and performance of all
other obligations of the Company (the "Guaranty") in favor of the Bank from
DynaGen, Inc., a Delaware corporation and the parent corporation of the Company
(the "Guarantor").
SECTION 6. WARRANTIES AND REPRESENTATIONS.
- -------------------------------------------
The Company warrants and represents to the Bank:
3
6.1 Subsidiaries. The Company has no subsidiaries and will not create
or acquire any subsidiaries without the prior written consent of the Bank.
6.2 Corporate Organization and Authority. The Company:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to
carry on its business as now conducted and as presently
proposed to be conducted; and
(c) is not doing business or conducting any activity in any
jurisdiction in which it has not duly qualified and become
authorized to do business.
6.3 Financial Statements. The Company's financial statements for the
fiscal year ended December 31, 1996 and for the four month period ended April
30, 1997, which have been supplied to the Bank, have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
represent the Company's financial condition as of such date. There has been no
material adverse change in the Company's financial condition since April 30,
1997.
6.4 Full Disclosure. The financial statements referred to in Section
6.3 do not, nor does this Agreement or any written statement furnished by the
Company to the Bank in connection with obtaining the Loan, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading. There is no fact which
the Company has not disclosed to the Bank in writing which materially affects
the properties, business, prospects, profits or condition (financial or
otherwise) of the Company or the ability of the Company to perform this
Agreement.
6.5 Pending Litigation. There are no proceedings pending, or to the
knowledge of the Company threatened, against or affecting the Company in any
court or before any governmental authority or arbitration board or tribunal
which, individually or in the aggregate, involve the possibility of materially
and adversely affecting the properties, business, prospects, profits or
condition (financial or otherwise) of the Company, or the ability of the Company
to perform this Agreement, except as set forth on one or more schedules to this
Agreement.
6.6 Title to Properties. The Company has good and marketable title to
all the property which it purports to own (except as sold or otherwise disposed
of in the ordinary course of business), free from any liens and encumbrances,
except those to which the Bank has previously consented.
6.7 Borrowing is Legal and Authorized.
(a) The Board of Directors of the Company has duly authorized the
execution and delivery of this Agreement and of the notes and documents
contemplated herein, and the note or notes executed in connection with this
Agreement will constitute valid and binding obligations of the Company
enforceable in accordance with their terms.
(b) The execution of this Agreement and related notes and documents and
the compliance by the Company with all the provisions of this Agreement:
(i) are within the corporate powers of the Company; and
(ii) are legal and will not conflict with, result in any breach in
any of the provisions of, constitute a default under, or
result in the creation of any lien or encumbrance upon any
property of the Company under the provisions of, any
agreement, charter instrument, bylaw, or other instrument to
which the Company is a party or by which it may be bound.
4
(c) There are no limitations in any indenture, mortgage, deed of trust
or other agreement or instrument to which the Company is now a party or by which
the Company may be bound with respect to the payment of principal or interest on
any indebtedness of the Company, including the Note or notes to be executed in
connection with this Agreement.
6.8 No Defaults. No event has occurred and no condition exists which
would constitute an Event of Default pursuant to this Agreement. The Company is
not in violation in any material respect of any term of any agreement, charter
instrument, bylaw or other instrument to which it is a party or by which it may
be bound.
6.9 Government Consent. Neither the nature of the Company or of its
business or properties, nor any relationship between the Company and any other
entity or person, nor any circumstance in connection with the execution of this
Agreement, is such as to require a consent, approval or authorization of, or
filing, registration or qualification with, any governmental authority on the
part of the Company as a condition to the execution and delivery of this
Agreement and the notes and documents contemplated herein.
6.10 Taxes.
(a) All tax returns required to be filed by the Company in any
jurisdiction have in fact been filed, and all taxes, assessments, fees and other
governmental charges upon the Company, or upon any of its respective properties,
which are due and payable have been paid. The Company does not know of any
proposed additional tax assessment against it.
(b) The provisions for taxes on the books of the Company for its
current fiscal period are adequate.
6.11 Compliance with Law. The Company:
(a) is not in violation of any laws, ordinances, governmental
rules or regulations to which it is subject; and
(b) has not failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership
of its properties or to the conduct of its business,
which violation or failure to obtain might materially and adversely affect the
business, prospects, profits, properties or condition (financial or otherwise)
of the Company.
6.12 Restrictions on Company. The Company is not a party to any
contract or agreement, or subject to any charter or other corporate restriction,
which materially and adversely affects the business of the Company. The Company
is not a party to any contract or agreement which restricts the right or ability
of the Company to incur indebtedness, other than this Agreement. The Company has
not agreed or consented to cause or permit in the future (upon the happening of
a contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a lien or encumbrance.
6.13 Environmental Protection. The Company represents and warrants to
Bank that, to its knowledge after due investigation:
(a) that the property at which it operates (the "Property") is not
being and has not been used for the storage, treatment,
generation, transportation, processing, handling, production
or disposal of any hazardous substance in violation of any
environmental laws;
(b) the Property does not contain any hazardous substance in
violation of any environmental laws;
5
(c) there has been no release of any hazardous substance on, at or
from the Property or any property adjacent to or within the
immediate vicinity of the Property, and the Company has not
received any form of notice or inquiry with regard to such a
release or the threat of such a release;
(d) no event has occurred with respect to the Property which, with
the passage of time or the giving of notice, or both, would
constitute a violation of any applicable environmental laws;
(e) there are no agreements or orders or directives of any
federal, state or local governmental agency or authority
relating to the Property which require any work, repair,
construction, containment, clean up, investigations, studies,
removal or other remedial action with respect to the Property;
and
(f) there are no actions, suits, claims or proceedings, pending or
threatened, which seek any remedy that arise out of the
condition, ownership, use, operation, sale, transfer or
conveyance of the Property and (I) a violation or alleged
violation of any applicable environmental laws, (II) the
presence of any hazardous substance or release of any
hazardous substance or the threat of such a release, or (III)
human exposure to any hazardous substance.
SECTION 7. CLOSING CONDITIONS.
- -------------------------------
The obligation of the Bank to make the Loan shall be subject to the
following conditions precedent:
7.1 Compliance with this Agreement. By the execution hereof, the
Company certifies that it has performed and complied with all agreements and
conditions contained herein which are required to be performed or complied with
by the Company before or at closing.
7.2 Certified Resolutions. The Bank shall have received a certified
copy of resolutions adopted by the Board of Directors of the Company authorizing
the execution and delivery of this Agreement and the notes and related documents
described herein, in a form satisfactory to the Bank, as well as a certified
copy of resolutions adopted by the Board of Directors of the Guarantor
authorizing the execution and delivery of the Guaranty.
7.3 Warranties and Representations. On the date of each advance
pursuant to the Loan, the warranties and representations set forth in Section 6
hereof shall be true and correct on and as of such date with the same effect as
though such warranties and representations had been made on and as of such date,
except to the extent that such warranties and representations expressly relate
to an earlier date.
SECTION 8. COMPANY BUSINESS COVENANTS.
- ---------------------------------------
The Company covenants that on and after the date of this Agreement, so
long as any of the indebtedness provided for herein remains unpaid:
8.1 Payment of Taxes and Claims. The Company will pay before they
become delinquent:
(a) all taxes, assessments and governmental charges or levies
imposed upon it or its property; and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords, bailees and other like persons which,
if unpaid, might result in the creation of a lien or
encumbrance upon its property,
provided that items of the foregoing description need not be paid while being
contested in good faith and by appropriate proceedings and provided further that
adequate book reserves have been
6
established with respect thereto and provided further that the Company's title
to, and its right to use, its property is not materially adversely affected
thereby. In the case of any item of the foregoing description involving in
excess of the amount which the Company's independent public accountants shall
fix as the threshold of materiality for purposes of their audit of the then
current year, the appropriateness of the proceedings shall be supported by an
opinion of the independent counsel responsible for such proceedings and the
adequacy of such reserves shall be supported by the opinion of the independent
accountants.
8.2 Maintenance of Properties and Corporate Existence. The Company
shall:
(a) Property--maintain its property in good condition and make all
renewals, replacements, additions, betterments and
improvements thereto which are deemed necessary by the
Company;
(b) Insurance--maintain, with financially sound and reputable
insurers, insurance with respect to its properties and
business against such casualties and contingencies, of such
types (including but not limited to fire and casualty, public
liability, products liability, larceny, embezzlement or other
criminal misappropriation insurance) and in such amounts as is
customary in the case of corporations of established
reputations engaged in the same or a similar business and
similarly situated;
(c) Financial Records--keep true books, records and accounts in
which full and correct entries will be made of all its
business transactions, and reflect in its financial statements
adequate accruals and appropriations to reserves, all in
accordance with generally accepted accounting principles;
(d) Corporate Existence and Rights--do or cause to be done all
things necessary (i) to preserve and keep in full force and
effect its existence, rights and franchises, and (ii) to
maintain its status as a corporation duly organized and
existing and in good standing under the laws of the state of
its incorporation; and
(e) Compliance with Law--not be in violation of any laws,
ordinances, or governmental rules and regulations to which it
is subject and will not fail to obtain any licenses, permits,
franchises or other governmental authorizations necessary to
the ownership of its properties or to the conduct of its
business, which violation or failure to obtain might
materially and adversely affect the business, prospects,
profits, properties or condition (financial or otherwise) of
the Company.
8.3 Sale of Assets or Merger.
(a) Sale of Assets. The Company will not, without the prior written
consent of the Bank, except in the ordinary course of business, sell, lease,
transfer or otherwise dispose of, any of its assets.
(b) Merger and Consolidation. The Company will not, without the prior
written consent of the Bank, consolidate with or merge into any other entity, or
permit any other entity to consolidate with or merge into it.
8.4 Liens and Encumbrances. The Company will not (i) cause or permit or
(ii) agree or consent to cause or permit in the future (upon the happening of a
contingency or otherwise), any of its property, whether now owned or hereafter
acquired, to be subject to a lien or encumbrance in excess of $100,000.00
without giving the Bank prior written notice thereof; provided, however, that
the following liens do not require prior written notice regardless of amount:
(a) liens securing taxes, assessments or governmental charges or
levies or the claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons
provided the payment thereof is not at the time required by
Section 8.1;
7
(b) liens incurred or deposits made in the ordinary course of
business (i) in connection with workmen's compensation,
unemployment insurance, social security and other like laws,
or (ii) to secure the performance of letters of credit, bids,
tenders, sales contracts, leases, statutory obligations,
surety, appeal and performance bonds and other similar
obligations not incurred in connection with the borrowing of
money, the obtaining of advances or the payment of the
deferred purchase price of property;
(c) attachment, judgment and other similar liens arising in
connection with court proceedings, provided the execution or
other enforcement of such liens is effectively stayed and the
claims secured thereby are being actively contested in good
faith and by appropriate proceedings;
(d) reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other
similar title exceptions or encumbrances affecting real
property, provided they do not in the aggregate materially
detract from the value of said property or materially
interfere with its use in the ordinary conduct of the owning
company's business;
(e) inchoate liens arising under ERISA to secure the contingent
liability of the Company.
8.5 Other Borrowings. The Company will not create or incur any
indebtedness for borrowed money or advances, including through the execution of
capitalized lease agreements, in excess of $100,000.00 without giving the Bank
prior written notice thereof.
8.6 Contingent Liabilities. The Company will not guarantee, indorse or
otherwise become surety for or upon the obligations of others, except by
indorsement of negotiable instruments for deposit or collection in the ordinary
course of business, in excess of $100,000.00 without giving the Bank prior
written notice thereof.
8.7 Operating Lease Rentals. The Company will not enter into operating
leases providing in the aggregate for annual rentals in excess of $100,000.00
without giving the Bank prior written notice thereof.
8.8 Loans and Advances by the Company. The Company shall not make any
loans or advances to any person, corporation or entity if such loans will exceed
an aggregate total outstanding at any one time of $100,000.00 without the prior
written consent of the Bank.
8.9 Distributions by the Company to the Guarantor. The Company shall
not, without the prior written consent of the Bank, make any distributions to
the Guarantor, whether in the form of dividends, subordinated debt payments or
otherwise, other than distributions of sums sufficient to enable the Guarantor
to pay the principal and interest due to the former shareholders of the Company
(the "Shareholders") in connection with the Guarantor's purchase of all of the
capital stock of the Company from the Shareholders; provided, however, that such
permitted payments shall not be made by the Company, or received by the
Guarantor, following the occurrence of, and during the continuation of, an event
default hereunder, and notice to the Guarantor thereof.
8.10 Acquisition of Capital Stock. The Company shall not redeem or
acquire any of its own capital stock except through the use of the net proceeds
from the simultaneous sale of an equivalent amount of its capital stock.
8.11 Investments. The Company shall not purchase for investment
securities of any kind, excepting bonds or other obligations of the United
States or its federal agencies, certificates of deposit issued by commercial
banks or savings associations and commercial paper rated at least A-1 or P-1 and
having a maturity of not more than one year.
8
8.12 Sale of Receivables. The Company shall not sell any of its
accounts receivable or notes receivable, with or without recourse, nor shall it
assign or encumber any of its accounts receivable or notes receivable.
8.13 Bank of Account. During the term of this Agreement, the Company
shall maintain its primary depository relationship (including checking and
savings accounts) with the Bank. The Company hereby grants the Bank a security
interest in such accounts and all other properties owned by the Company now or
hereafter in the possession of the Bank as security for payment of the Loan and
all other obligations of the Company to the Bank. The Bank shall continue to
make Cash Management, Bank Card and other services available to the Company.
8.14 Working Capital. The Company shall maintain a working capital of
not less than $2,350,000.00 through the date hereof, and shall maintain a
working capital of not less than $3,750,000.00 thereafter. For the purposes of
this Agreement, "working capital" shall mean the excess of current assets over
current liabilities, both as determined in accordance with generally accepted
accounting principles consistently applied.
8.15 Tangible Net Worth and Subordinated Debt. The Company shall
maintain an aggregate of tangible net worth plus subordinated debt of not less
than $2,750,000.00 through the date hereof, and shall maintain an aggregate of
tangible net worth plus subordinated debt of not less than $4,250,000.00
thereafter.
8.16 Ratio of Total Liabilities to Tangible Net Worth Plus Subordinated
Debt. The Company shall maintain a ratio of total liabilities to the aggregate
of tangible net worth plus subordinated debt of not greater than 3.00-to-1.00
through the date hereof, and shall maintain a ratio of total liabilities to the
aggregate of tangible net worth plus subordinated debt of not greater than
2.30-to-1.00 thereafter.
8.17 Interest Coverage Ratio. The Company shall maintain an interest
coverage ratio (defined as earnings before interest and taxes divided by paid
interest expense) of 2.00-to-1.00.
8.18 ERISA. The Company shall with respect to any employee pension
benefit plan it maintains:
(a) at all times make prompt payment of contributions required to
meet the minimum funding standards set forth in Section 302
through 305 of ERISA with respect to the plan,
(b) promptly, after the filing thereof, furnish to the Bank copies
of each annual report required to be filed pursuant to Section
103 of ERISA in connection with the plan for the plan year,
including any certified financial statements or actuarial
statements required pursuant to said Section 103,
(c) notify the Bank immediately of any fact, including, but not
limited to, any "Reportable Event," as that term is defined in
Section 4043 of ERISA, arising in connection with the plan
which might constitute grounds for termination thereof by the
Pension Benefit Guaranty Corporation or for the appointment by
the appropriate United States District Court of a Trustee to
administer the plan,
(d) notify the Bank of any "Prohibited Transaction" as that term
is defined in Section 406 of ERISA.
The Company will not:
(e) engage in any "Prohibited Transaction," or
(f) terminate any such plan in a manner which could result in the
imposition of a lien on the property of the Company pursuant
to Section 4068 of ERISA.
9
8.19 Environmental Protection.
(a) Covenants. The Company covenants and agrees with Bank as
follows:
(i) Company shall keep, and shall cause all operators, tenants,
sub-tenants, licensees and occupants of the Property to keep,
the Property free of all hazardous substances, except for
hazardous substances stored, treated, generated, transported,
processed, handled, produced or disposed of in the normal
operation of the Property in accordance with all Environmental
Laws.
(ii) Company shall comply with, and shall cause all operators,
tenants, sub-tenants, licensees and occupants of the Property
to comply with, all environmental laws.
(iii) Company shall promptly provide the Bank with a copy of all
notifications which Company gives or receives with respect to
any past or present release of any hazardous substance or the
threat of such a release on, at or from the Property or any
property adjacent to or within the immediate vicinity of the
Property.
(iv) Company shall undertake and complete all investigations,
studies, sampling and testing for hazardous substances
required by Bank and, in accordance with all environmental
laws, all removal and other remedial actions necessary to
contain, remove and clean up all hazardous substances that are
determined to be present at the Property in violation of any
environmental laws.
(v) Bank shall have the right, but not the obligation, to cure any
violation by Company of the environmental laws.
(b) Indemnity. Company covenants and agrees, at its sole cost and
expense, to indemnify, defend and save the Bank harmless from and against any
and all damages, losses, liabilities, obligations, penalties, claims,
litigation, demands, defenses, judgments, suits, actions, proceedings, costs,
disbursements and/or expenses (including, without limitation, reasonable
attorneys' and experts' fees and expenses) of any kind or nature whatsoever
which may at any time be imposed upon, incurred by or asserted or awarded
against the Bank arising out of the condition, ownership, use, operation, sale,
transfer or conveyance of the Property and
(i) the storage, treatment, generation, transportation,
processing, handling, production or disposal of any hazardous
substance;
(ii) the presence of any hazardous substance or a release of any
hazardous substance or the threat of such a release;
(iii) human exposure to any hazardous substance;
(iv) a violation of any environmental laws; or
(v) a material misrepresentation or inaccuracy in any
representation or warranty or material breach of or failure to
perform any covenant made by Company herein (collectively, the
"Indemnified Matters").
The liability of Company to the Bank hereunder shall in no way be limited,
abridged, impaired or otherwise affected by (A) the repayment of all sums and
the satisfaction of all obligations of Company under this Agreement or any other
document or agreement executed in connection herewith or referenced herein (the
"Loan Documents"), (B) the foreclosure of any mortgage or other security
interest, or the acceptance of a deed in lieu thereof, (C) any amendment or
modification of the Loan Documents by or for the benefit of Company or any
subsequent owner of the Property, (D) any extensions of time for payment or
performance required by the Loan Documents, (E) the release or discharge of any
Loan Document or of Company, the Guarantor or any other person from the
performance or observance of any of the agreements, covenants, terms or
conditions contained in the Loan Documents whether by the Bank, by operation of
law or
10
otherwise, (F) the invalidity or unenforceability of any of the terms or
provisions of the Loan Documents, (G) any exculpatory provision contained in the
Loan Documents limiting the Bank's recourse to the Property, (H) any applicable
statute of limitations, (I) the sale or assignment of the Loan Documents, (J)
the sale, transfer or conveyance of all or part of the Property, (K) the legal
incapacity of the Company, (L) the release or discharge, in whole or in part, of
the Company in any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding, or (M) any other
circumstances which might otherwise constitute a legal or equitable release or
discharge, in whole or in part, of the Company under the Loan Documents. The
foregoing indemnity shall be in addition to any and all other obligations and
liabilities the Company may have to the Bank at common law.
8.20 No Consignment. The Company shall not include in Eligible
Inventory any items consigned to the Company for sale nor shall the Company
consign its inventory to another for sale.
8.21 Ownership and Management. The Company shall not permit any
material change in its ownership or management, including, but not limited to,
the discharge or resignation of Eric C. Hagerstrand or Dennis B. Smith.
SECTION 9. INFORMATION AS TO COMPANY.
- --------------------------------------
The Company shall deliver the following to the Bank:
(a) within 20 days after the end of each month, financial
statements, including a balance sheet and statements of income
and surplus, certified by the president or chief financial
officer of the Company as fairly representing the Company's
financial condition and results of operations for the period
then ended;
(b) within 20 days after the end of each month, a statement signed
by the president or chief financial officer of the Company
certifying that the Company is in compliance with terms of
this Agreement;
(c) within 20 days after the end of each month, a report signed by
the president or chief financial officer of the Company
setting forth the number and dollar total of accounts
receivable past due for not more than 30 days, the number and
dollar total past due for not more than 60 days, the number
and dollar total past due for not more than 90 days, and the
number and dollar total past due for more than 90 days;
(d) within 120 days of the end of each fiscal year, financial
statements prepared in accordance with generally accepted
accounting principles consistently applied, audited by an
independent public accountant satisfactory to the Bank,
containing a balance sheet and statements of income and
surplus, and fairly representing the Company's financial
condition and results of operations for the period then ended;
(e) within 45 days after the end of each fiscal quarter of the
Guarantor, a copy of the Guarantor's Form 10-Q fairly
representing the Guarantor's financial condition and results
of operations for the period then ended;
(f) within 120 days of the end of each fiscal year of the
Guarantor, financial statements prepared in accordance with
generally accepted accounting principles consistently applied,
audited by an independent public accountant satisfactory to
the Bank, containing a balance sheet and statements of income
and surplus, and fairly representing the Guarantor's financial
condition and results of operations for the period then ended;
(g) immediately upon becoming aware of the existence of any
condition or event which constitutes an Event of Default, a
written notice specifying the nature and
11
period of existence thereof and what action the Company is
taking or proposes to take with respect thereto;
(h) at the request of the Bank, such other information as the Bank
may from time to time reasonably require.
In addition, the Bank's Asset Based Lending Division ("ABLD") shall perform
semi-annual audits of the Company. These audits shall be at no cost or expense
to the Company, but the Company shall provide the ABLD auditors with access to
such books, records and other documentation and information as they shall
reasonably require for the purpose of performing such audits.
SECTION 10. EVENTS OF DEFAULT.
- -------------------------------
10.1 Nature of Events. An "Event of Default" shall exist if any of the
following occurs and is continuing:
(a) the Company fails to make any payment on any note executed in
connection with this Agreement on or before the date such
payment is due;
(b) the Company fails to make any payment of interest on any note
executed in connection with this Agreement on or before five
days after the date such payment is due;
(c) the Company fails to perform or observe any covenant contained
in this Agreement, or fails to comply with any other provision
of this Agreement, and such failure continues for more than 30
days after such failure shall first become known to any
officer of the Company;
(d) any warranty, representation or other statement by or on
behalf of the Company contained in this Agreement, or in any
instrument furnished in compliance with or in reference to
this Agreement, or relating to the Guarantor, is false or
misleading in any material respect;
(e) the Company defaults on any obligation to the Bank, or on any
other obligation to its shareholders or trade creditors, and
such results in a material, negative impact on the Company's
condition (financial or otherwise);
(f) the Company becomes insolvent or bankrupt, or makes an
assignment for the benefit of creditors, or consents to the
appointment of a trustee, receiver or liquidator;
(g) bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings are instituted by or against the
Company;
(h) the Company or any indorser, surety, or guarantor of the Loan
is dissolved or dies;
(i) a final judgment or judgments, from which no further right of
appeal exists, for the payment of money aggregating in excess
of $100,000.00 is or are outstanding against the Company and
any one of such judgments has been outstanding for more than
180 days from the date of its entry and has not been
discharged in full or stayed;
(j) the property furnished as security declines in value, and the
Company does not immediately, upon demand from the Bank,
furnish to the Bank additional security of like value;
12
(k) the Guarantor fails to contribute a minimum of $1,500,000.00
to the Company in the form of subordinated debt, an equity
purchase or a capital contribution by the date hereof;
(l) the Guarantor has not achieved a tangible net worth, exclusive
of the effect thereon of the $4,250,000.00 tangible net worth
of the Company, of $3,000,000.00 by the execution of this
Agreement, or fails to achieve a tangible net worth, exclusive
of the effect thereon of the $4,250,000.00 tangible net worth
of the Company, of $4,000,000.00 within 120 days following the
execution hereof and to thereafter maintain such level of
tangible net worth during the existence of this Agreement; or
(m) an event of default occurs and continues past any applicable
cure period in any obligation owed by Guarantor and secured by
Guarantor's or the Company's assets or capital stock.
10.2 Default Remedies.
(a) Acceleration. If an Event of Default exists, the Bank may
immediately exercise any right, power or remedy permitted to the Bank by law,
and shall have, in particular, without limiting the generality of the foregoing,
the right to declare the entire principal and all interest accrued on all notes
then outstanding pursuant to this Agreement to be forthwith due and payable,
without any presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Company.
(b) Nonwaiver. No course of dealing on the part of the Bank nor any
delay or failure on the part of the Bank to exercise any right shall operate as
a waiver of such right or otherwise prejudice the Bank's rights, powers and
remedies.
SECTION 11. SECURITY AGREEMENT
- -------------------------------
11.1 Grant of Security Interest. The Company hereby grants, pledges and
assigns to the Bank a security interest in the following property, whether the
Company's interest therein as owner, co-owner, lessee, consignee, secured party
or otherwise be now owned or existing, or hereafter arising or acquired, and
wherever located, together with all substitutions, replacements, additions and
accessions therefor or thereto, all replacement and repair parts therefor, all
documents including, but not limited to, negotiable documents, documents of
title, warehouse receipts, storage receipts, dock receipts, dock warrants,
express bills, freight bills, airbills, bills of lading and other documents
relating thereto, all products thereof and all cash and non-cash proceeds
thereof including, but not limited to, notes, drafts, checks, instruments,
insurance proceeds, indemnity proceeds, warranty and guaranty proceeds and
proceeds arising in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the following property by any
governmental body, authority, bureau or agency (or any person acting under color
of governmental authority):
(a) All of the Company's machinery, equipment, tools, furniture,
furnishings and fixtures including, but not limited to, all
manufacturing, fabricating, processing, transporting and
packaging equipment, power systems, heating, cooling and
ventilating systems, lighting and communications systems,
electric, gas and water distribution systems, food service
systems, fire prevention, alarm and security systems, laundry
systems and computing and data processing systems (hereinafter
sometimes called the "Equipment");
(b) All of the Company's inventory including, but not limited to,
all goods, merchandise and other personal property furnished
under any contract of service or intended for sale or lease,
all parts, supplies, raw materials, work in process, finished
goods, materials used or consumed in the Company's business,
repossessed and returned goods (hereinafter sometimes called
the "Inventory");
13
(c) All of the Company's accounts, accounts receivable, contract
rights, guaranties of accounts, chattel paper, income tax
refunds, instruments, negotiable documents, notes, drafts,
acceptances and other forms of obligations and receivables
arising from or in connection with the operation of the
Company's business including, but not limited to, those
arising from or in connection with the Company's sale, lease
or other disposition of Inventory (hereinafter sometimes
called the "Receiv ables"), and all books, records, ledger
cards, computer programs and other documents or property at
any time evidencing or relating to the Receivables; and
(d) All of the Company's general intangibles, trade names,
trademarks, trade secrets, goodwill, patents, patent
applications, copyrights, deposit accounts, licenses,
franchises and distribution rights (all of the foregoing
hereinafter sometimes called the "Collateral").
The security interest hereby granted is to secure the prompt and full
payment and complete performance of all Obligations of the Company to the Bank.
The word "Obligations" is used in its most comprehensive sense and includes,
without limitation, all indebtedness, debts and liabilities (including
principal, interest, late charges, collection costs, attorneys' fees and the
like) of the Company to the Bank, whether now existing or hereafter arising,
either created by the Company alone or together with another or others, primary
or secondary, secured or unsecured, absolute or contingent, liquidated or
unliquidated, direct or indirect, whether evidenced by note, draft, application
for letter of credit or otherwise, and any and all renewals of or substitutes
therefor. The word "Obligations" shall include, BUT NOT BE LIMITED TO, all
indebtedness owed by the Company to the Bank in connection with the Loan.
It is the Company's express intention that this Agreement and the
continuing security interest granted hereby, in addition to covering all present
Obligations of the Company to the Bank, shall extend to all future Obligations
of the Company to the Bank, whether or not such Obligations are reduced or
entirely extinguished and thereafter increased or reincurred, whether or not
such Obligations are related to the indebtedness identified above by class, type
or kind and whether or not such Obligations are specifically contemplated by the
Company and the Bank as of the date hereof. The absence of any reference to this
Agreement in any documents, instru ments or agreements evidencing or relating to
any Obligation secured hereby shall not limit or be construed to limit the scope
or applicability of this Agreement.
11.2 General Covenants as to the Collateral. The Company represents,
warrants and covenants as follows:
(a) Except for such claims and interest, if any, to which the Bank
has consented in advance and the security interest granted
hereby (i) the Company is, or as to Collateral arising or to
be acquired after the date hereof, shall be, the sole owner of
the Collateral free from any and all liens, security
interests, encumbrances, claims and interests; and (ii) no
security agreement, financing statement, equivalent security
or lien instrument or continuation statement covering any of
the Collateral is on file or of record in any public office.
(b) Except as otherwise provided in this Agreement, the Company
shall not create, permit or suffer to exist, and shall take
such action as is necessary to remove, any claim to or
interest in or lien or encumbrance upon the Collateral, and
shall defend the right, title and interest of the Bank in and
to the Collateral against all claims and demands of all
persons and entities at any time claiming the same or any
interest therein.
(c) The Company's principal place of business and chief executive
office is located at the address set forth in Section 12.1 of
this Agreement; the Company has no other place of business;
and, unless the Bank consents in writing to a change in the
location of the Equipment, Inventory or the Company's records
concerning the
14
Receivables prior to such a change in location, the Equipment,
Inventory and the Company's records concerning the Receivables
shall be kept at either of these locations.
(d) At least thirty (30) days prior to the occurrence of any of
the following events, the Company shall deliver to the loan
officer who is handling the Company's Obligations on behalf of
the Bank written notice of such impending events: (i) a change
in the Company's principal place of business or chief
executive office; (ii) the opening or closing of any place of
business; or (iii) a change in the Company's name, identity or
corporate structure.
(e) Subject to any limitation stated therein or in connection
therewith, all information furnished by the Company concerning
the Collateral or otherwise in connection with the
Obligations, is or shall be at the time the same is furnished,
accurate, correct and complete in all material respects.
(f) The Collateral is and shall (i) remain personal property and,
without the prior written consent of the Bank, which consent
may be withheld pending the Bank's receipt of such documents
or instruments as may be reasonably requested by the Bank, not
be affixed to real estate in such manner as to become a
fixture or realty, and (ii) be used primarily for business
purposes.
11.3 Application of Proceeds from the Collection of Receivables. All
amounts received by the Bank representing payment of Receivables may be applied
by the Bank to the payment of the Obligations in such order of preference as the
Bank may determine, or the Bank may, at its option, impound all or any portion
of such amounts and retain said amounts as security for the payment of the
Obligations, with the right on the part of the Company, upon approval by the
Bank, to obtain the release of all or part of such impounded amounts. The Bank
may, however, at any time, apply all or any part of such impounded amounts as
aforesaid. The Company also authorizes the Bank at any time, without notice, to
appropriate and apply any balances, credits, deposits, accounts or money of the
Company in the Bank's possession, custody or control to the payment of any of
the Obligations.
If any of the Company's Receivables arise out of contracts with or
orders from the United States or any State or any department, agency or
instrumentality thereof, the Company shall immediately notify the Bank thereof
in writing and shall execute any instrument and take any steps required by the
Bank in order that all money due and to become due under such contract or order
shall be assigned to the Bank and due notice thereof given to the appropriate
governmental agency.
The Company agrees to execute, deliver, file and record all such
notices, affidavits, assignments, financing statements and other instruments as
shall in the judgment of the Bank be necessary or desirable to evidence,
validate and perfect the security interest of the Bank in the Receivables. The
Bank shall have the right to notify any person or entities owing any Receivables
and to demand and receive payment, but the Bank shall have no duty so to do.
Upon request of the Bank at any time, the Company shall notify such account
debtors and shall indicate on all invoices to such account debtors that the
accounts are payable to the Bank.
11.4 Insurance. The Company shall have and maintain insurance at all
times with respect to all Equipment and Inventory (i) insuring against risks of
fire (including so-called extended coverage), explosion, theft, sprinkler
leakage and such other casualties as the Bank may designate, and (ii) insuring
against liability for personal injury and property damage relating to the
Equipment and Inventory, containing such terms, in such form, for such periods
and written by such companies as may be satisfactory to the Bank, such insurance
to be payable to the Bank and the Company as their interests may appear. All
policies of insurance shall provide for twenty (20) days written minimum
cancellation notice to the Bank and, at request of the Bank, shall be delivered
to and held by it. The Bank may act as attorney for the Company in obtaining,
adjusting, settling and canceling such insurance and indorsing any drafts. In
the event of failure to provide insurance as herein provided, the Bank may, at
its option, provide such
15
insurance and the Company shall pay to the Bank, upon demand, the cost thereof.
Should the Company fail to pay said sum to the Bank upon demand, interest shall
accrue thereon, from the date of demand until paid in full, at the highest rate
set forth in any document or instrument evidencing any of the Obligations.
11.5 Inspection. The Company shall at all times keep accurate and
complete records of the Receivables and the Company shall, at all reasonable
times and from time to time, allow the Bank, by or through any of its officers,
agents, attorneys or accountants, to examine, inspect and make extracts from the
Company's books and records and to arrange for verification of the Receivables
directly with account debtors or by other methods to examine and inspect the
Collateral wherever located. The Company shall perform, do, make, execute and
deliver all such additional and further act, things, deeds, assurances and
instruments as the Bank may require to more completely vest in and assure to the
Bank its rights hereunder and in or to the Collateral.
11.6 Preservation and Disposition of Collateral.
(a) Except for such claims and interests as are otherwise permitted
under this Agreement, the Company shall keep the Collateral free from any and
all liens, security interests, encumbrances, claims and interests. The Company
shall advise the Bank promptly, in writing and in reasonable detail, (i) of any
material encumbrance upon or claim asserted against any of the Collateral; (ii)
of any material change in the composition of the Collateral; and (iii) of the
occurrence of any other event that would have a material effect upon the
aggregate value of the Collateral or upon the security interest of the Bank.
(b) The Company shall not sell or otherwise dispose of the Collateral;
provided, however, that until default, the Company may use the Inventory in any
lawful manner not inconsistent with this agreement or with the terms or
conditions of any policy of insurance thereon and may also sell or otherwise
dispose of the Inventory in the ordinary course of the Company's business. A
sale in the ordinary course of business shall not include a transfer in partial
or total satisfaction of a debt.
(c) The Company shall keep the Collateral in good condition and shall
not misuse, abuse, secrete, waste or destroy and of the same.
(d) The Company shall not use the Collateral in violation of any
statute, ordinance, regulation, rule, decree or order.
(e) The Company shall pay promptly when due all taxes, assessments,
charges or levies upon the Collateral or in respect to the income or profits
therefrom, except that no such charge need be paid if (i) the validity thereof
is being contested in good faith by appropriate proceedings; (ii) such
proceedings do not involve any danger of sale, forfeiture or loss of any
Collateral or any interest therein; and (iii) such charge is adequately reserved
against in accordance with generally accepted accounting principles.
(f) At its option, the Bank may discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on the Collateral
and may pay for the maintenance and preservation of the Inventory. The Company
agrees to reimburse the Bank upon demand for any payment made or any expense
incurred (including reasonable attorneys' fees) by the Bank pursuant to the
foregoing authorization. Should the Company fail to pay said sum to the Bank
upon demand, interest shall accrue thereon, from the date of demand until paid
in full, at the highest rate set forth in any document or instrument evidencing
any of the Obligations.
(g) Upon the Bank's request at any time or times, the Company shall
assign and deliver to the Bank any Collateral and shall furnish to the Bank
additional collateral of value and character satisfactory to Bank as security
for the Obligations.
11.7 Extensions and Compromises. With respect to any Collateral held by
the Bank as security of the Obligations, the Company assents to all extensions
or postponements of the time of payment thereof or any other indulgence in
connection therewith, to each substitution,
16
exchange or release of Collateral, to the addition or release of any party
primarily or secondarily liable, to the acceptance of partial payments thereon
and to the settlement, compromise or adjustment thereof, all in such manner and
at such time or times as the Bank may deem advisable. The Bank shall have no
duty as to the collection or protection of Collateral or any income therefrom,
nor as to the preservation of rights against prior parties, nor as to the
preservation of any right pertaining thereto, beyond the safe custody of
Collateral in the possession of the Bank.
11.8 Financing Statements. At the request of the Bank, the Company
shall join with the Bank in executing one or more financing statements in a form
satisfactory to the Bank and shall pay the cost of filing the same in all public
offices wherever filing is deemed by the Bank to be necessary or desirable. A
carbon, photographic or other reproduction of this agreement or of a financing
statement shall be sufficient as a financing statement.
11.9 Bank's Appointment as Attorney-in-Fact. The Company hereby
irrevocably constitutes and appoints the Bank and any officer or agent thereof,
with full power of substitution, as the Company's true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Company and in the name of the Company or in the Bank's own name,
from time to time in the Bank's discretion, for the purpose of carrying out the
terms of this agreement, to take any and all documents and instruments that may
be necessary or desirable to accomplish the purposes of this agreement and,
without limiting the generality of the foregoing, hereby grants to the Bank the
power and right, on behalf of the Company, without notice to or assent by the
Company:
(a) To execute, file and record all such financing statements,
certificates of title and other certificates of registration
and operation and similar documents and instruments including,
but not limited to, those relating to aircraft or marine
vessels, as the Bank may deem necessary or desirable to
protect, perfect and validate the Bank's security interest.
(b) Upon the occurrence and continuance of any event of default
under Section 10 hereof, (i) to sign and indorse any invoices,
freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and
other documents relating to the Collateral; (ii) to commence
and prosecute any suits, actions or proceeding at law in
equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right
in respect of any Collateral; (iii) to defend any suit, action
or proceeding brought against the Company with respect to any
Collateral; (iv) to settle, compromise or adjust any suit,
action or proceeding described above and, in connection
therewith, to give such discharges or releases as the Bank may
deem appropriate; and (v) generally, to sell, transfer,
pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though
the Bank were the absolute owner thereof for all purposes, and
to do, at the Bank's option and the Company's expense, at any
time or from time to time, all acts and things which the Bank
deems necessary to protect, preserve or realize upon the
Collateral and the Bank's security interest therein, in order
to effect the intent of this agreement, all as fully and
effectively as the Company might do.
The Company hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
The powers conferred upon the Bank hereunder are solely to protect its
interests in the Collateral and shall not impose and duty upon the Bank to
exercise any such powers. The Bank shall be accountable only for amounts that
the Bank actually receives as a result of the exercise of such powers and
neither the Bank nor any of its officers, directors, employees or agents shall
be responsible to the Company for any act of failure to act, except for the
Bank's own gross negligence or willful misconduct.
17
11.10 Default. If any event of default in the payments or performance
of any of the Obligations secured by this agreement or the performance of any
covenant contained herein shall occur and be continuing; or if any warranty,
representations or statement made or furnished to the Bank by the Company proves
to have been false in any material respect when made or furnished:
(a) the Bank may, at its option and without notice, declare the
unpaid balance of any or all of the Obligations immediately
due and payable and this agreement and any or all of the
Obligations in default.
(b) All payments received by the Company under or in connection
with any of the Collateral shall be held by the Company in
trust for the Bank, shall be segregated from other funds of
the Company and shall forthwith upon receipt by the Company be
turned over to the Bank in the same form as received by the
Company (duly indorsed by the Company to the Bank, if
required). Any and all such payments so received by the Bank
(whether from the Company or otherwise) may, in the sole
discretion of the Bank, be held by the Bank as collateral
security for, and/or then or at any time thereafter be applied
in whole or in part by the Bank against, all or any part of
the Obligations in such order as the Bank may elect. Any
balance of such payments held by the Bank and remaining after
payment in full of all the Obligations shall be paid over to
the Company or to whomsoever may be lawfully entitled to
receive the same. Nothing set forth in this subparagraph (b)
shall authorize or be construed to authorize the Company to
sell or otherwise dispose of any Collateral except as provided
in Section 11.6 hereof.
(c) The Bank shall have the rights and remedies of a secured party
under this agreement, under any other instrument or agreement
securing, evidencing or relating to the Obligations and under
the law of the State of Ohio. Without limiting the generality
of the foregoing, the Bank shall have the right to take
possession of the Collateral and for that purpose the Bank may
enter upon, with or without breaking into, any premises on
which the Collateral or books and records relating to the
Collateral or any part thereof may be situated and remove the
same therefrom. The Company expressly agrees that the Bank,
without demand of performance or other demand, advertisement
or notice of any kind (except the notices specified below of
time and place of public sale or disposition or time after
which a private sale or disposition is to occur) to or upon
the Company or any other person or entity (all and each of
which demands, advertisements and/or notices are hereby
expressly waived), may forthwith collect, receive, appropriate
and realize upon the Collateral, or any part thereof, and/or
may forthwith sell, lease, assign, give option or options to
purchase or sell or otherwise dispose of and deliver the
Collateral (or contract to do so), or any part thereof, in one
or more parcels at public or private sales or sales, at any of
the Bank's offices or elsewhere at such prices as the Bank may
deem best, for cash or credit or for future delivery without
assumption of any credit risk. The Bank shall have the right
upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in the Company. The
Company further agrees, at the Bank's request, to assemble the
Collateral and to make it available to the Bank at such places
as the Bank may reasonably select, whether at the Company's
premises or elsewhere. The Company further agrees to allow the
Bank to use or occupy the Company's premises without charge,
for the purpose of effecting the Bank's remedies in respect of
the Collateral. The Bank shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of
every kind incurred in connection therewith or incidental to
the care of safekeeping of any or all of the Collateral or in
any way relating to the rights of the Bank hereunder,
including reasonable attorneys' fees and legal expenses, to
the payment in whole or in part of the Obligations, in such
order as the Bank may
18
elect, and only after so paying over such net proceeds and
after the payment by the Bank of any other amount required by
any provision of law, including Ohio Revised Code Section
1309.47(A)(3), need the Bank account for the surplus, if any,
to the Company. To the extent permitted by applicable law, the
Company waives all claims, damages and demands against the
Bank arising out of the repossession, retention, sale or
disposition of the Collateral. The Company agrees that the
Bank need not give more than five (5) days notice (which
notification shall be deemed given when mailed, postage
prepaid, addressed to the Company at the Company's address set
forth in Section 12.1 of this Agreement, or when telecopied or
telegraphed to that address or when telephoned or otherwise
communicated orally to the Company or any agent of the Company
at that address) of the time and place of any public sale or
of the time after which a private sale may take place and that
such notice is reasonable notification of such matters. The
Company shall remain liable for any deficiency if the proceeds
of any sale or disposition of the Collateral are insufficient
to pay all amounts to which the Bank is entitled. The Company
shall also be liable for the costs of collecting any of the
Obligations or otherwise enforcing the terms thereof or of
this agreement including reasonable attorneys' fees.
11.11 General. Any provision of this security agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. The Bank shall not be
deemed to have waived any of its rights hereunder or under any other agreement,
instrument or paper signed by the Company unless such waiver be in writing and
signed by the Bank. No delay or omission on the part of the Bank in exercising
any right shall operate as a waiver of such right or any other right. All of the
Bank's rights and remedies, whether evidenced hereby or by any other agreement,
instrument or paper, shall be cumulative and may be exercised singularly or
concurrently.
SECTION 12. MISCELLANEOUS.
- --------------------------
12.1 Notices.
(a) All communications under this Agreement or under the notes executed
pursuant hereto shall be in writing and may be mailed by registered, certified
or first class mail, postage prepaid, transmitted via facsimile or delivered by
a recognized overnight courier service,
(1) if to the Bank, at the following address, or at such other
address as may have been furnished in writing to the Company
by the Bank:
The Huntington National Bank
105 West Fourth Street, Suite 400
Cincinnati, Ohio 45202
ATTN: Gene Fugate
(2) if to the Company, at the following address, or at such other
address as may have been furnished in writing to the Bank by
the Company:
Superior Pharmaceutical Company
1385 Kemper Meadow Dr.
Cincinnati, Ohio 45240
ATTN: Eric Hagerstrand
19
with a copy to:
DynaGen, Inc.
99 Erie Street
Boston, Massachusetts 02139
ATTN: President
(b) Any notice so addressed and mailed by registered, certified or
first class mail, transmitted by facsimile or delivered by such overnight
courier service, shall be deemed to be given when so mailed, transmitted or
delivered.
12.2 Reproduction of Documents. This Agreement and all documents
relating hereto including, without limitation, (a) consents, waivers and
modification which may hereafter be executed, (b) documents received by the Bank
at the closing or otherwise, and (c) financial statements, certificates and
other information previously or hereafter furnished to the Bank, may be
reproduced by the Bank by any photographic, photostatic, microfilm, micro-card,
miniature photographic or other similar process and the Bank may destroy any
original document so reproduced. The Company agrees and stipulates that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Bank in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall be likewise be admissible in evidence.
12.3 Survival. All warranties, representations, and covenants made by
the Company herein or on any certificate or other instrument delivered by it or
on its behalf under this Agreement shall be considered to have been relied upon
by the Bank and shall survive the closing of the Loan regardless of any
investigation made by the Bank on its behalf. All statements in any such
certificate or other instrument shall constitute warranties and representations
by the Company.
12.4 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the heirs, successors and assigns of each of the parties.
12.5 Amendment and Waiver. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of the Company and the Bank.
12.6 Duplicate Originals. Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
12.7 Termination. This Agreement may be terminated by either party by
written notice to the other party that no further advances are to be made
hereunder and upon the Company thereafter paying in full all outstanding
advances made pursuant to this Agreement, all accrued interest and all other
obligations and indebtedness of the Company to the Bank arising hereunder or in
connection herewith.
12.8 Governing Law and Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio. Any action commenced
for the enforcement of any provision contained in, or otherwise in connection
with, this Agreement, shall be commenced in a court of competent jurisdiction in
Cincinnati, Ohio, and the parties hereto irrevocably submit to the jurisdiction
of such court and waive the right to dispute such venue.
20
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
The Huntington National Bank
By: [ILLEGIBLE]
--------------------------------
Its: Vice President
-------------------------------
Superior Pharmaceutical Company
By: /s/ Dennis Smith
--------------------------------
Its: CEO/PRESIDENT
-------------------------------
By: /s/ Eric C. Hagerstrand
--------------------------------
Its: Chairman, Vice President
-------------------------------
CONSENT, ACKNOWLEDGMENT AND
AGREEMENT OF GUARANTOR
The Guarantor hereby consents to the terms and conditions set forth in
the foregoing Agreement, and further agrees to comply with and abide by the
provisions contained in Subsections 8.9, 8.21 and Paragraphs (k) and (l) of
Subsection 10.1.
GUARANTOR:
DYNAGEN, INC.
By: /s/ Dhananjay G. Wadekar
--------------------------------
Its: Executive Vice President
-------------------------------
21
EXHIBIT 99.4
------------
- --------------------------------------------------------------------------------
GUARANTOR DEBTOR:
DYNAGEN, INC. SUPERIOR PHARMACEUTICAL COMPANY
99 ERIE STREET 1385 KEMPER MEADOW ROAD
CAMBRIDGE, MASSACHUSETTS 02139 CINCINNATI, OHIO 45240
- --------------------------------------------------------------------------------
CONTINUING GUARANTY
UNLIMITED
For the purpose of inducing The Huntington National Bank (hereinafter referred
to as "Bank") to lend money or advance credit to, or renew, extend or forbear
from demanding immediate payment of the Obligations of SUPERIOR PHARMACEUTICAL
COMPANY (hereinafter referred to as "Debtor"), the undersigned (hereinafter
referred to as "Guarantors" whether one or more), jointly and severally if more
than one (which joint and several liability shall exist regardless of whether
additional Guarantors have evidenced or may in the future evidence their
undertaking by executing this Guaranty, by co-signing one or more promissory
notes or other instruments of indebtedness, by executing one or more separate
agreements of guaranty of any or all of the Obligations referred to herein, or
otherwise), hereby unconditionally guarantee the prompt and full payment to Bank
when due, whether by acceleration or otherwise, of all Obligations of any kind
for which Debtor is now or may hereafter become liable to Bank in any manner.
The word "Obligations" is used in its most comprehensive sense and includes,
without limitation, all indebtedness, debts and liabilities (including
principal, interest, late charges, collection costs, attorneys' fees and the
like) of Debtor to Bank, either created by Debtor alone or together with another
or others, primary or secondary, secured or unsecured, absolute or contingent,
liquidated or unliquidated, direct or indirect, whether evidenced by note,
draft, application for letter of credit, agreements of guaranty or otherwise,
and any and all renewals of, extensions of or substitutes therefor. The word
"Obligations" shall include, BUT NOT BE LIMITED TO, all indebtedness owed by
Debtor to Bank by reason of credit extended or to be extended to Debtor in the
principal amount of $9,000,000.00, pursuant to one or more instruments of
indebtedness and related loan documents.
Guarantors, and each of them, hereby promise that if one or more of the
Obligations are not paid promptly when due, they, and each of them, will, upon
request of Bank, pay the Obligations to Bank, irrespective of any action or lack
of action on Bank's part in connection with the acquisition, perfection,
possession, enforcement or disposition of any or all Obligations or any or all
security therefor or otherwise, and further irrespective of any invalidity in
any or all Obligations, the unenforceability thereof or the insufficiency,
invalidity or unenforceability of any security therefor.
Guarantors waive notice of any and all acceptances of this Guaranty. This
Guaranty is a continuing guaranty, and, in addition to covering all present
Obligations of Debtor to Bank, will extend to all future Obligations of Debtor
to Bank, and this whether such Obligations are reduced or entirely extinguished
and thereafter increased or reincurred. This Guaranty is made and will remain in
effect as to any and all Obligations of Debtor incurred or arising prior to
receipt by the loan officer of Bank who is handling Debtor's Obligations of
written notice of termination of this Guaranty. No revocation will in any way
affect the duties of Guarantors to Bank with respect to Obligations of Debtor
incurred prior to the receipt of such notice by such loan officer of Bank.
Revocation by any one or more of Guarantors will not affect the duties of the
remaining Guarantor or Guarantors.
Guarantors waive presentment, demand, protest, notice of protest, and notice of
dishonor or other nonpayment of any and all Obligations and further waive notice
of sale or other disposition of any collateral or security now held or hereafter
acquired by Bank. Guarantors agree that no extension of time, whether one or
more, nor any other indulgence granted by Bank to Debtor, or to Guarantors, or
any of them, and no omission or delay on Bank's part in exercising any right
against, or in taking any action to collect from or pursue Bank's remedies
against Debtor or Guarantors, or any of them, will release, discharge or modify
the duties of Guarantors. Guarantors agree that Bank may, without notice to or
further consent from Guarantors, release or modify any collateral, security or
other guaranties, and no such action will release, discharge or modify the
duties of Guarantors hereunder. Guarantors further agree that Bank will not be
required to pursue or exhaust any of its rights or remedies against Debtor or
Guarantors, or any of them, with respect to payment of any of the Obligations,
or to pursue, exhaust or preserve any of its rights or remedies with respect to
any collateral, security or other guaranties given to secure the Obligations, or
to take any action of any sort, prior to demanding payment from or pursuing its
remedies against Guarantors.
Guarantors agree to furnish true and complete financial statements (a) within
forty five (45) days after the end of each calendar quarter, financial
statements contained in Guarantor's quarterly reports in Form 10-Q, including a
balance sheet and statements of income and surplus, certified by the president
or chief financial officer of the undersigned as fairly representing the
undersigned's financial condition as of the end of such period; (b) within forty
five (45) days after the end of each calendar quarter and at such other times
reasonably requested by Bank, a statement signed by the president or chief
financial officer of the undersigned setting forth and certifying the
calculation of the Borrowing Base as of the end of that period; (c) within one
hundred twenty (120) days of the end of each fiscal year, an audited financial
statement prepared in accordance with generally accepted accounting principles
consistently applied by independent public accountants satisfactory to the Bank,
containing a balance sheet, statements of income and surplus, statements of
source and use of funds and reconciliation of capital accounts, along with any
management letters written by such accountants; (d) immediately upon becoming
aware of the existence of any condition or event which constitutes an Event of
Default, a written notice specifying the nature and period of existence thereof
and what action the undersigned is taking or proposes to take with respect
thereto; (e) at the request of the Bank, such other information as the Bank may
from time to time reasonably require, and agree that failure to furnish such
financial statements may constitute or be deemed to constitute a default or
event of default of the Obligations. Guarantors agree that any legal suit,
action or proceeding arising out of or relating to this Guaranty may be
instituted in a state or federal court of appropriate subject matter
jurisdiction in the State of Ohio; waive any objection which they may have now
or hereafter to the venue of any such suit, action or proceeding; and
irrevocably submit to the jurisdiction of any such court in any such suit,
action or proceeding.
Guarantors hereby authorize any attorney at law to appear for them in any action
on any or all Obligations guaranteed hereby at any time after such Obligations
become due, whether by acceleration or otherwise, in any court of record in or
of the State of Ohio or elsewhere, to waive the issuing and service of process
against, and confess judgment against Guarantors, or any of them, in favor of
Bank for the amount that may be due, including interest, late charges,
collection costs, attorneys' fees and the like as provided for in said
Obligations, and costs of suit, and to waive and release all errors in said
proceedings and judgments, and all petitions in error, and right of appeal
from the judgments rendered. No such judgment or judgments against less than all
of Guarantors shall be a bar to a subsequent judgment or judgments against any
one or more of Guarantors against whom judgment has not been obtained hereon,
this being a joint and several warrant of attorney to confess judgment.
If any Obligation of Debtor is assigned by Bank, this Guaranty will inure to the
benefit of Bank's assignee, and to the benefit of any subsequent assignee, to
the extent of the assignment or assignments, provided that no assignment will
operate to relieve Guarantors, or any of them, from any duty to Bank hereunder
with respect to any unassigned Obligation. In the event that any one or more of
the provisions contained in this Guaranty or any application thereof shall be
determined to be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and any
other applications thereof shall not in any way be affected or impaired thereby.
This Guaranty shall be construed in accordance with the law of the State of
Ohio. As security for payment by Guarantors hereunder, and of all other
liabilities of Guarantors to Bank whether now existing or hereafter arising,
Guarantors hereby grant Bank a security interest in the following property:
N/A
- --------------------------------------------------------------------------------
whether Guarantors' interest therein as owner, co-owner, lessee, consignee,
secured party or otherwise be now owned or existing or hereafter arising or
acquired, and wherever located, together with all substitutions, replacements,
additions and accessions therefor or thereto, all replacement and repair parts
therefor, all negotiable documents relating thereto, all products thereof and
any and all cash and non-cash proceeds thereof including, but not limited to
notes, drafts, checks, instruments and insurance proceeds (hereinafter the
"Collateral"). If at the time of payment of the Obligations and any discharge
hereof, Guarantors shall be then directly or contingently liable to Bank as
maker, indorser, surety or guarantor of any other loan or obligation whether the
same shall be evidenced by a note, bill of exchange, agreement of guaranty or
other instrument, then Bank may continue to hold the Collateral as security
therefor, even though this Guaranty shall have been surrendered to Guarantors.
Bank shall not be bound to take any steps necessary to preserve any rights in
the Collateral against prior parties. If any Obligations hereunder are not paid
when due, Bank may, at its option, demand, sue for, collect or make any
compromise or settlement it deems desirable with reference to the Collateral,
and shall have the rights of a secured party under the law of the State of Ohio.
Guarantors shall be liable for any deficiency.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
Executed and delivered at CINCINNATI, OHIO on June 18, 1997.
---------------- -------------
GUARANTOR:
DYNAGEN, INC.,
A DELAWARE CORPORATION
BY: /s/ Dhananjay G. Wadekar
------------------------------------
NAME: Dhananjay G. Wadekar
------------------------------------
TITLE: Executive Vice President
------------------------------------
