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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
DYNAGEN, INC.
(Name of Registrant as Specified In Its Charter)
NOT APPLICABLE
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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DYNAGEN, INC.
840 MEMORIAL DRIVE
CAMBRIDGE, MA 02139
January 30, 1998
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
DynaGen, Inc. (the "Company"). The meeting will be held at the offices of Foley,
Hoag & Eliot LLP, One Post Office Square, Boston, MA 02109, on March 4, 1998,
beginning at 10:00 A.M. EST.
As a stockholder, your vote is important. We encourage you to execute and
return your proxy promptly whether you plan to attend the meeting or not so that
we may have as many shares as possible represented at the meeting. Returning
your completed proxy will not prevent you from voting in person at the meeting
prior to the proxy's exercise if you wish to do so. If you do wish to attend the
meeting in person, we ask that you notify the Company at (617) 491-2527 so that
appropriate arrangements can be made to accommodate all stockholders wishing to
attend.
Thank you for your cooperation, continued support and interest in DynaGen,
Inc.
Sincerely,
Dhananjay G. Wadekar
Chairman of the Board of Directors
<PAGE> 3
DYNAGEN, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 4, 1998
Notice is hereby given that a Special Meeting of Stockholders of DynaGen,
Inc. (the "Company") will be held at the offices of Foley, Hoag & Eliot LLP, One
Post Office Square, Boston, MA 02109, on March 4, 1998, beginning at 10:00 A.M.
EST, for the following purposes:
1. To consider and act upon a proposed plan of recapitalization that will
result in a one-for-ten reverse split of the Company's Common Stock.
2. Conditional on approval of Proposal No. 1, to consider and act upon a
proposal to approve the Company's 1998 Stock Option Plan.
3. To transact such further business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on January 9, 1998
as the record date for the determination of the stockholders of the Company
entitled to notice of, and to vote at, said Meeting and any adjournment thereof.
Only stockholders of record on such date are entitled to notice of, and to vote
at, said Meeting or any adjournment thereof.
By Order of the Board of Directors,
Dhananjay G. Wadekar
Chairman of the Board
Boston, Massachusetts
January 30, 1998
YOUR VOTE IS IMPORTANT.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY, WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING.
<PAGE> 4
DYNAGEN, INC.
840 MEMORIAL DRIVE
CAMBRIDGE, MA 02139
------------------------
PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS
------------------------
MARCH 4, 1998
Proxies in the form enclosed with this Proxy Statement are solicited by the
Board of Directors of DynaGen, Inc., a Delaware corporation (the "Company"), for
use at the Special Meeting of Stockholders to be held on Wednesday, March 4,
1998, at 10:00 a.m. EST (the "Meeting"), at the offices of Foley, Hoag & Eliot
LLP, One Post Office Square, Boston, MA 02109.
Only stockholders of record as of January 9, 1998 will be entitled to
notice of and to vote at the Meeting and any adjournments thereof. As of that
date, 47,807,366 shares of the Company's common stock, $0.01 par value per share
(the "Common Stock"), were issued and outstanding. The holders of Common Stock
are entitled to one vote per share on any proposal presented at the Meeting.
Also, the Company had issued and outstanding (i) 37,007 shares of Series A
Convertible Preferred Stock, $0.01 par value (the "Series A Stock"), entitled to
an aggregate of 35,877,661 votes, (ii) 12,515 shares of Series B Convertible
Preferred Stock, $0.01 par value (the "Series B Stock"), entitled to an
aggregate of 4,665,960 votes and (iii) 7,500 shares of Series C Convertible
Preferred Stock, $0.01 par value (the "Series C Stock"), entitled to an
aggregate of 5,100,000 votes (collectively, the Series A Stock, the Series B
Stock and the Series C Stock are referred to as the "Preferred Stock"). The
Company has no other voting securities outstanding. Stockholders may vote in
person or by proxy. Execution of a proxy will not in any way affect a
stockholder's right to attend the Meeting and vote in person. Any stockholder
giving a proxy has the right to revoke it at any time before it is exercised.
Proxies may be revoked by (1) filing with the Secretary of the Company, before
the taking of the vote at the Meeting, a written notice of revocation bearing a
later date than the proxy, (2) duly executing a later-dated proxy relating to
the same shares and delivering it to the Secretary of the Company before the
taking of the vote at the Meeting or (3) attending the Meeting and voting in
person (although attendance at the Meeting will not in and of itself constitute
a revocation of a proxy). Any written notice of revocation or subsequent proxy
should be sent so as to be delivered to DynaGen, Inc., 840 Memorial Drive,
Cambridge, MA 02139, Attention: Secretary, at or before the taking of the vote
at the Meeting.
The representation in person or by proxy of at least a majority of the
outstanding shares entitled to vote at the Meeting is necessary to establish a
quorum for the transaction of business. Abstentions and broker non-votes are
counted as present or represented for purposes of determining the presence or
absence of a quorum. An affirmative vote of a majority of the issued and
outstanding shares of Common Stock and Preferred Stock, voting together as a
class, is necessary to approve the proposal to amend the Company's Certificate
of Incorporation. An affirmative vote of the majority of shares present in
person or represented by proxy at the Meeting is required to approve the
Company's 1998 Stock Option Plan. An automated system administered by the
Company's transfer agent tabulates the votes. Abstentions are included in the
number of shares present or represented and voting and, therefore, will have the
effect of negative votes. Broker non-votes are not so included, but have the
effect of a vote "against" the proposal to amend the Certificate of
Incorporation.
The shares will be voted FOR each proposal if no specification is made.
The Board of Directors knows of no other matter to be presented at the
Meeting. If any other matter
should be presented at the Meeting upon which a vote properly may be taken,
shares represented by all proxies received by the Company will be voted with
respect thereto in accordance with the best judgment of the persons named as
attorneys in the proxies.
THIS PROXY STATEMENT AND THE FORM OF PROXY WERE FIRST MAILED TO
STOCKHOLDERS ON OR ABOUT JANUARY 30, 1998.
<PAGE> 5
PROPOSAL NO. 1
PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO EFFECT A ONE-FOR-TEN REVERSE STOCK SPLIT
The Board of Directors has adopted a resolution declaring the advisability
of, and submitting to the stockholders for approval, a proposal to amend the
Company's Certificate of Incorporation (the "Proposed Amendment") to effect a
recapitalization the Company pursuant to which (i) each ten shares of Common
Stock will be automatically converted into one new share of Common Stock and
(ii) the authorized Common Stock will consist of 75,000,000 shares, $0.01 par
value per share (the "Reverse Split"). The text of the Proposed Amendment is set
forth in Exhibit A to this Proxy Statement. Shares of the Company's Common Stock
do not have preemptive or similar rights. The Reverse Split will become
effective as of 5:00 p.m. EST on the date that the certificate of amendment to
the Company's Certificate of Incorporation is filed with the Secretary of State
of Delaware (the "Effective Date"). If for any reason the Board of Directors
deems it advisable, the Proposed Amendment may be abandoned at any time before
the Effective Date, whether before or after the Meeting (even if such proposal
has been approved by the stockholders).
In lieu of issuing less than one whole share resulting from the Reverse
Split to holders of a number of shares not divisible by ten, the Company will
determine the fair value of each outstanding share of Common Stock held on the
Effective Date immediately before the Reverse Split takes effect (the
"Fractional Share Purchase Price"). The Company currently anticipates that the
Fractional Share Purchase Price will be based on the average daily closing bid
price per share of the Common Stock as reported by the primary trading market
for the Company's Common Stock for the ten (10) trading days immediately
preceding the Effective Date. In the event the Company determines that unusual
trading activity would cause such amount to be an inappropriate measure of the
fair value of the Common Stock, the Company may base the Fractional Share
Purchase Price on the fair market value of the Common Stock as reasonably
determined in good faith by the Board of Directors of the Company. Stockholders
who hold a number of shares not divisible by ten on the Effective Date
immediately before the Reverse Split takes effect will be entitled to receive,
in lieu of a fractional share, cash in an amount equal to the Fractional Share
Purchase Price times the remainder left after dividing their total number of
shares by ten ("Remainder Shares").
As soon as practicable after the Effective Date, the Company will mail a
letter of transmittal to each holder of record of a stock certificate or
certificates representing Common Stock issued and outstanding on the Effective
Date immediately before the Reverse Split. The letter of transmittal will
contain instructions for the surrender of such certificate or certificates to
the Company's designated exchange agent in exchange for certificates
representing the number of whole shares of Common Stock (plus the Fractional
Share Purchase Price for any Remainder Shares) into which the shares of Common
Stock have been converted as a result of the Reverse Split. No cash payment will
be made or new certificate issued to a stockholder until he has surrendered his
outstanding certificates together with the letter of transmittal to the
Company's exchange agent. See "Exchange of Stock Certificates."
THE BOARD OF DIRECTORS BELIEVES THAT THE ADOPTION OF THE PROPOSED AMENDMENT
IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE PROPOSED AMENDMENT.
PURPOSES OF THE REVERSE SPLIT
Eligibility for Continued Listing on Nasdaq SmallCap Market
The Company's Common Stock has been listed on the Nasdaq Stock Market, Inc.
("Nasdaq"), and has traded on the Nasdaq SmallCap Market (the "SmallCap
Market"), since August 21, 1990, when the Company completed its initial public
offering. Effective February 23, 1998, upon the implementation of new continued
listing requirements of Nasdaq, the Company's Common Stock will be subject to
delisting from the SmallCap Market if it does not meet such criteria.
The Company is currently exploring a number of potential transactions
designed to enable the Company to meet these criteria. However, there can be no
assurance that the Company will consummate any such
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transaction or that the consummation of any such transaction would result in the
Company complying with the maintenance requirements.
In August 1997, the Securities and Exchange Commission approved a proposal
to revise maintenance criteria for securities traded on the SmallCap Market. The
new listing criteria, which become effective on February 23, 1998, require,
among other things, the minimum bid price of the Company's Common Stock to equal
or exceed $1.00 per share. The closing price of the Company's Common stock on
January 9, 1998 was approximately $0.09 per share. The Company believes that if
the Proposed Amendment is approved by the stockholders at the Meeting, and the
Reverse Split is effected, the Company's shares of Common Stock will have a
significantly greater likelihood of reaching the minimum bid price in excess of
$1.00 per share, and therefore will satisfy one of the above mentioned SmallCap
Market maintenance criteria. However, the Reverse Split, even if it did have the
effect of increasing the minimum bid price for the Company's Common Stock to
greater than $1.00 per share, would not itself ensure the Company's continued
listing on the SmallCap Market. In addition to satisfying the minimum bid price
requirements the Company would also need to satisfy other criteria to maintain
its listing, including maintaining (i) a market capitalization of at least
$35,000,000, or net tangible assets of $2,000,000, or net income of $500,000 in
the latest fiscal year or two of the last three fiscal years, (ii) a public
float (i.e., shares held other than by officers, directors and beneficial owners
of more than 10% of the total shares outstanding) of at least 500,000 shares,
(iii) a market value of the public float of at least $1,000,000, (iv) at least
300 shareholders (round lot holders), (v) at least two market makers and (vi)
compliance with certain corporate governance requirements. The Company believes
that it satisfies all of these other maintenance criteria except for the market
capitalization criteria. As of January 1, 1998, the Company's market
capitalization was approximately $6,525,000. There can be no assurance that the
Company will be successful in meeting these maintenance criteria or that, even
if these maintenance criteria are met, the Company will be able to continue to
meet the new criteria. If the Reverse Split is not approved by the stockholders
at the Meeting, then it is unlikely that the Company will meet the new listing
maintenance criteria. The delisting of the Company's Common Stock from the
SmallCap Market could adversely affect the liquidity of the Company's Common
Stock and the ability of the Company to raise capital. If the Company's Common
Stock is delisted from the SmallCap Market, the shares of Common Stock will
likely be quoted in the "pink sheets" maintained by the National Quotation
Bureau, Inc. or the OTC Bulletin Board maintained by Nasdaq. If the Common Stock
is listed on the OTC Bulletin Board or the pink sheets, then the spread between
the bid and ask price of the shares of Common Stock is likely to be greater than
at present and stockholders may experience a greater degree of difficulty in
engaging in trades of shares of Common Stock. The Company's Common Stock is also
listed on the Boston Stock Exchange.
Effect of Low Trading Price on Market for Company's Securities
The Board of Directors further believes that low trading prices of the
Company's Common Stock may have an adverse impact upon the efficient operation
of the trading market in the Company's securities. In particular, brokerage
firms often charge a greater percentage commission on low-priced shares than
that which would be charged on a transaction in the same dollar amount of
securities with a higher per share price. Also, the Company believes that some
brokerage firms may be reluctant to recommend purchases of low-priced stock to
their clients or make a market in such shares, which tendencies may adversely
affect the Company. The Reverse Split may lessen these adverse effects if it
results in a higher price per share of the Company's Common Stock. Stockholders
should note that the effect of the Reverse Split upon the market prices for the
Company's Common Stock cannot be accurately predicted. In particular, there is
no assurance that prices for shares of the Common Stock after the Reverse Split
will be ten times the prices for shares of the Common Stock immediately prior to
the Reverse Split. Furthermore, there can be no assurance that the proposed
Reverse Split will achieve the desired results which have been outlined above,
nor can there be any assurance that the Reverse Split will not adversely impact
the market price of the Common Stock or, alternatively, that any increased price
per share of the Common Stock immediately after the proposed Reverse Split will
be sustained for any prolonged period of time. In addition, the Reverse Split
may have the effect of creating odd lots of stock (i.e., lots of fewer than 100
shares) for some stockholders and such odd lots may be more difficult to sell or
have higher brokerage commissions associated with the sale of such odd lots.
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Greater Availability of Common Stock for Future Issuances
As of January 9, 1998, there were 47,807,366 shares of Common Stock issued
and outstanding, and outstanding warrants, convertible debt, convertible
preferred stock and options were convertible into approximately 98,860,000
shares of Common Stock. The number of shares of Common Stock which the Company
may be required to issue upon conversion of shares of Preferred Stock fluctuates
based on the trading price of the Common Stock from time to time. If the
Company's Common Stock continues to trade at its present price (approximately
$0.09 per share as of January 9), then the Company will not have adequate shares
of Common Stock available when necessary for issuance upon conversion of
Preferred Stock. One purpose of the Reverse Split is to ensure the Company's
ability to meet its obligations to holders of its convertible securities.
If the Reverse Split is approved, the Board of Directors would have the
authority to issue approximately 60,333,263 additional shares of Common Stock
without further stockholder approval. The Board of Directors believes that the
Reverse Split would provide sufficient shares for issuance upon conversion of
the Preferred Stock, as well as for such corporate purposes as the Board of
Directors may determine to be necessary or desirable. These purposes may
include, without limitation, acquiring other businesses in exchange for shares
of Common Stock, entering into collaborative research arrangements with other
companies or acquiring complementary technologies, products or businesses from
third parties in exchange for Common Stock. Other corporate purposes may include
issuing shares of Common Stock in connection with research and development
relationships, strategic alliances or other corporate partnering programs and
issuing shares of Common Stock to raise additional working capital for ongoing
operations or planned research projects, and the financing of the Company's
recent acquisition of a generic drug manufacturer. The Company may also issue
additional shares of Common Stock to attract and retain valuable employees by
the issuance of additional stock options, including additional shares reserved
for future option grants under the Company's existing stock plans. The Company
does not have any current commitments or agreements relating to any
acquisitions.
Under the Delaware General Corporation Law, the Board of Directors
generally may issue authorized but unissued shares of Common Stock without
further stockholder approval. The Board of Directors does not currently intend
to seek stockholder approval prior to any future issuance of additional shares
of Common Stock, unless stockholder action is required in a specific case by
applicable law, the rules of any exchange or market on which the Company's
securities may then be listed, or the Certificate of Incorporation or By-Laws of
the Company then in effect.
The issuance of any additional shares of Common Stock by the Company may,
depending on the circumstances under which those shares are issued, reduce
stockholders' equity per share and may reduce the percentage ownership of Common
Stock of existing stockholders. The Company, however, will receive consideration
for any additional shares of Common Stock issued, which could reduce or
eliminate the economic effect to each stockholder of such dilution.
Authorized but unissued shares of Common Stock could be used to make more
difficult a change in control of the Company. For example, such shares could be
sold to purchasers who might side with the Board of Directors in opposing a
takeover bid that the Board determines not to be in the best interests of the
Company and its stockholders. The Board of Directors does not now plan to
propose any anti-takeover measures in future proxy solicitations. The Company is
not aware of any pending or threatened efforts to obtain control of the Company,
and the Board of Directors has no current intention to use any issuance of
Common Stock to impede a takeover attempt.
EFFECT OF THE REVERSE SPLIT
As a result of the Reverse Split, the number of whole shares of Common
Stock held by stockholders of record as of the close of business on the
Effective Date will be equal to the number of shares of Common Stock held
immediately prior to the close of business on the Effective Date divided by ten,
plus cash in lieu of any fractional share. The authorized shares of Common Stock
will consist of 75,000,000 shares, $0.01 par value per share. The Reverse Split
will not affect a stockholder's percentage ownership interest in the Company or
proportional voting power, except for minor differences resulting from the
payment of cash in lieu of fractional shares. The terms of Common Stock and
Preferred Stock, and the rights and privileges of the
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holders of such shares, will be unaffected by the Reverse Split. The number of
shares of Common Stock issued and outstanding will be reduced. Consequently, the
aggregate par value of the issued Common Stock will be lower, and the number of
authorized but unissued shares of Common Stock will be greater, after the
Reverse Split. Future issuances of Common Stock may have the effect of diluting
the earnings per share and book value per share, as well as the stock ownership
and voting rights, of outstanding Common Stock. As the Reverse Split will
increase the number of authorized but unissued shares of Common Stock, it may be
construed as having an anti-takeover effect by permitting the issuance of shares
to purchasers who might oppose a hostile takeover bid or oppose any efforts to
amend or repeal certain provisions of the Company's Certificate of Incorporation
or By-laws.
Dissenting Stockholders will not have appraisal rights under Delaware law
or under the Company's Certificate of Incorporation or By-laws.
The Reverse Split may leave certain stockholders with an odd lot of the
Company's Common Stock (i.e., a number of shares less than 100). These shares
may be more difficult to sell, or require a greater commission to sell, than
shares in multiples of 100.
The Common Stock is currently registered under Section 12(g) of the
Exchange Act and as a result, the Company is subject to the periodic reporting
and other requirements of the Exchange Act. The Reverse Split will not affect
the registration of the Common Stock under the Exchange Act, and the Company has
no current intention of terminating its registration under the Exchange Act.
Upon consummation of the Reverse Split, the total number of shares
currently reserved for outstanding warrants, grants of stock options and all
stock options previously granted would be decreased proportionately. The cash
consideration payable per share upon exercise of the stock warrants and options
would be increased proportionately.
EXCHANGE OF STOCK CERTIFICATES
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE, THE COMPANY INTENDS TO
ENCOURAGE STOCKHOLDERS TO EXCHANGE THEIR STOCK CERTIFICATES EVIDENCING SHARES OF
COMMON STOCK OUTSTANDING BEFORE THE EFFECTIVENESS OF THE REVERSE SPLIT ("OLD
DYNAGEN SHARES") FOR CERTIFICATES REPRESENTING THE NUMBER OF WHOLE SHARES OF
COMMON STOCK INTO WHICH THEIR OLD DYNAGEN SHARES HAVE BEEN CONVERTED AS A RESULT
OF THE REVERSE SPLIT ("NEW DYNAGEN SHARES"), AS WELL AS CASH IN LIEU OF
FRACTIONAL SHARES RESULTING FROM THE REVERSE SPLIT. AFTER THE EFFECTIVE DATE OF
THE REVERSE SPLIT, CERTIFICATES FOR OLD DYNAGEN SHARES WILL REPRESENT ONLY THE
RIGHT TO RECEIVE CERTIFICATES FOR NEW DYNAGEN SHARES WHEN SURRENDERED. AT THE
EFFECTIVE DATE OF THE REVERSE SPLIT, THE OLD DYNAGEN SHARES WILL CEASE TO EXIST
AND THEREAFTER, ALL TRADING ACTIVITY AND MARKET QUOTATIONS FOR THE COMPANY'S
COMMON STOCK WILL BE EXCLUSIVELY IN NEW DYNAGEN SHARES.
STOCKHOLDERS WILL BE FURNISHED WITH THE NECESSARY MATERIALS AND
INSTRUCTIONS FOR THE SURRENDER AND EXCHANGE OF STOCK CERTIFICATES AT THE
APPROPRIATE TIME BY THE COMPANY'S DESIGNATED EXCHANGE AGENT. STOCKHOLDERS WILL
NOT BE REQUIRED TO PAY A TRANSFER OR OTHER FEE IN CONNECTION WITH THE EXCHANGE
OF CERTIFICATES.
STOCKHOLDERS SHOULD NOT SUBMIT ANY CERTIFICATES TO THE EXCHANGE AGENT UNTIL
REQUESTED TO DO SO.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT
The following general description of certain federal income tax
consequences of the Reverse Split is based upon the Internal Revenue Code of
1986, as amended (the "Code"), the applicable Treasury Regulations promulgated
thereunder, judicial authority and current administrative rulings and practices
all as in effect on the date of this Proxy Statement. The Company has not sought
and will not seek an opinion of counsel or a ruling from the Internal Revenue
Service regarding the federal income tax consequences of the Reverse Split. This
discussion is for general information only and does not address aspects of
federal income taxation that may be relevant to special classes of taxpayers,
such as non-resident aliens, broker-dealers, tax-exempt organizations, banks or
insurance companies, and does not discuss the tax consequences under the laws of
any
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foreign, state or local jurisdiction. Stockholders are urged to consult their
own tax advisors as to the federal, state, local and foreign tax consequences to
them of the Reverse Split.
The Company believes that the Reverse Split will constitute a
reorganization within the meaning of section 368(a)(1)(E) of the Code.
Accordingly, the Reverse Split will have the following federal income tax
consequences:
1. No gain or loss will be recognized by holders of Old DynaGen Shares
upon their receipt in exchange therefor in the Reverse Split of New DynaGen
Shares.
2. A stockholder who receives cash in the Reverse Split will recognize
gain to the extent that such cash exceeds his adjusted tax basis in the Old
DynaGen Shares. Such gain will be capital gain provided the stockholder
holds the Old DynaGen Shares as capital assets at the time of the Reverse
Split.
3. A stockholder's aggregate tax basis in the New DynaGen Shares
received in the Reverse Split will equal his aggregate tax basis in the Old
DynaGen Shares surrendered in exchange therefor, reduced by any cash
received and increased by the gain recognized by such stockholder.
4. The holding period of New DynaGen Shares received in the Reverse
Split will include the period for which the Old DynaGen Shares surrendered
in exchange therefore were held, provided that the Old DynaGen Shares are
here held as capital assets at the time of the Reverse Split.
5. The Company will recognize no gain or loss as a result of the
Reverse Split.
VOTE REQUIRED
The Proposed Amendment would effect the Reverse Split. Approval of the
Proposed Amendment would require the affirmative vote of a majority of all of
the issued and outstanding shares of Common Stock and Preferred Stock, voting
together as a class.
The Board of Directors reserves the right to abandon the Proposed Amendment
without further action by the stockholders at any time before the filing of the
certificate of amendment to the Company's Certificate of Incorporation effecting
the Proposed Amendment with the Delaware Secretary of State, notwithstanding
authorization of the Proposed Amendment by the stockholders.
The foregoing summary of the Proposed Amendment is qualified in its
entirety by reference to the complete text of the Proposed Amendment, which is
set forth as Exhibit A to this Proxy Statement.
PROPOSAL NO. 2
1998 STOCK OPTION PLAN
Proposal No. 2, to approve the Company's 1998 Stock Option Plan, will be
placed before the stockholders for a vote at the meeting only if the Proposed
Amendment which is the subject of Proposal No. 1 is approved by the
Stockholders.
The Board of Directors believes that the Company's ability to continue to
attract and retain qualified employment candidates is in large part dependent
upon the Company's ability to provide such employment candidates long-term,
equity-based incentives in the form of stock options as part of their
compensation. As of December 31, 1997, 1,650,841 shares remained available for
future option grants under the Company's 1991 Stock Plan and there were no
shares available for grant under the 1989 Stock Option Plan. The Board of
Directors believes that the shares remaining available for future option grants
under the 1991 Plan and 1989 Plan are insufficient for such purposes.
The Board of Directors of the Company has adopted the 1998 Stock Option
Plan (the "1998 Plan"), subject to approval by the stockholders. A total of
2,500,000 shares of Common Stock (after giving effect to the Reverse Split) are
reserved for issuance under the 1998 Plan. Under the Internal Revenue Code (the
"Code"), stockholder approval of the 1998 Plan is necessary for stock options
relating to the shares issuable under the 1998 Plan to qualify as incentive
stock options under Section 422 of the Code. In addition, Nasdaq Stock Market,
Inc. rules (the "Nasdaq Rules") require stockholder approval of the 1998 Plan.
Approval for
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purposes of the Code and the Nasdaq Rules will require the affirmative vote of a
majority of the shares of Common Stock and Preferred Stock, voting together as a
class, present or represented at the meeting and voting on the 1998 Plan. The
full text of the 1998 Plan as adopted by the Board of Directors is printed as
Appendix A, beginning on page A-1. A summary of some of its provisions is set
forth hereinafter under the caption "Benefit Plans."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSAL TO APPROVE THE 1998 STOCK OPTION PLAN.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's voting securities as of January 1, 1998, by (i) each
person or entity known to the Company to own beneficially five percent or more
of the Company's Series A Stock, Series B Stock, Series C Stock and Common
Stock, (ii) each of the Company's directors, (iii) the Company's Principal
Executive Officer and each of the other Named Executive Officers, and (iv) all
directors and executive officers of the Company as a group. Except as otherwise
noted, each beneficial owner has sole voting and investment power with respect
to the shares shown.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
-------------------------------------------------------------------------------------
SERIES A SERIES B SERIES C
COMMON STOCK STOCK STOCK STOCK
------------------------- ----------------- ----------------- -----------------
PERCENT(2) PERCENT PERCENT PERCENT
NAME AND ADDRESS NUMBER OF CLASS NUMBER OF CLASS NUMBER OF CLASS NUMBER OF CLASS
- ----------------------------- ---------- ---------- ------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dhananjay G. Wadekar......... 1,351,250 3.2% -- -- -- -- -- --
c/o DynaGen, Inc.
840 Memorial Drive
Cambridge, MA 02139
Dr. Indu A. Muni............. 1,137,250 2.7% -- -- -- -- -- --
c/o DynaGen, Inc.
840 Memorial Drive
Cambridge, MA 02139
Dr. F. Howard Schneider...... 272,859(3) * -- -- -- -- -- --
c/o DynaGen, Inc.
840 Memorial Drive
Cambridge, MA 02139
Steven Georgiev.............. 82,500(4) * -- -- -- -- -- --
c/o DynaGen, Inc.
840 Memorial Drive
Cambridge, MA 02139
Dr. Michael Sorell........... 82,500(4) * -- -- -- -- -- --
115 East 92nd Street
New York, NY 10128
Ardsen Financial S.A......... 3,753,399(5) 8.1% 3,580 9.7% -- -- -- --
P.O. Box 9765
123 Birmensdarfer St.
8036 Zurich
Switzerland
Voica Trading S.A............ 3,302,572(5) 7.2% 3,150 8.5% -- -- -- --
P.O. Box 9765
123 Birmensdarfer St.
8036 Zurich
Switzerland
Taib Bank E.C................ 2,830,776(5) 6.2% 2,700 7.3% -- -- -- --
Sahl Centre, Diplomatic
Area
P.O. Box 20485
Manama, Bahrain
Colbo KFT.................... 2,170,262(5) 4.9% 2,070 5.6% -- -- -- --
Mogurt Raktarhaz Gyari ut
2310 Szigetszentimikios
Hungary
Sovereign Partners L.P....... 2,096,871(5) 4.7% 2,000 5.4% -- -- -- --
Executive Pavilion
90 Grove Street
Ridgewood, CT 06878
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
-------------------------------------------------------------------------------------
SERIES A SERIES B SERIES C
COMMON STOCK STOCK STOCK STOCK
------------------------- ----------------- ----------------- -----------------
PERCENT(2) PERCENT PERCENT PERCENT
NAME AND ADDRESS NUMBER OF CLASS NUMBER OF CLASS NUMBER OF CLASS NUMBER OF CLASS
- ----------------------------- ---------- ---------- ------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Legong Investments N.V....... 4,822,804(5) 10.2% 4,600 12.4% -- -- -- --
c/o MIT Fund Management LTD
1171 East Putnam Avenue
Riverside, CT 06878
RIC Asset Limited............ 4,508,273(5) 9.6% 4,300 11.6% -- -- -- --
c/o Rana Investment Co.
P.O. Box 60148
Riyadh 11545
Saudi Arabia
The Endeavor Capital Fund
S.A........................ 10,093,246(6) 19.2% 4,607 12.5% -- -- 7,500 100%
c/o Endeavor Management
14/14 Divrei Chaim St.
Jerusalem 94479, Israel
Gross Foundation............. 2,621,089(5) 5.8% 2,500 6.8% -- -- -- --
1660 49th St.
Brooklyn, NY 11204
Julius Baer Securities,
Inc........................ 4,906,261(7) 10.4% -- -- 7,500 59.9% -- --
As agent for certain
non - U.S. persons
330 Madison Ave.
New York, NY 10017
Coutts & Co. AG.............. 3,236,989(7) 7.1% -- -- 5,015 40.1% -- --
Talstrasse 59
Zurich CH8022
Switzerland
All directors and executive
officers as group (6
persons)................... 3,037,359(8) 7.1% -- -- -- -- -- --
</TABLE>
- ---------------
* Less than one percent.
(1) To the Company's knowledge, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes to this table.
(2) Percentage ownership is based on 42,501,441 shares of Common Stock
outstanding, plus securities deemed to be outstanding, with respect to
individual stockholders, pursuant to Rule 13d-3(d)(1) under the Exchange
Act.
(3) Includes 202,859 shares issuable to Dr. Schneider pursuant to immediately
exercisable stock options. Does not include 100 shares owned by Dr.
Schneider's wife, of which he disclaims any beneficial interest or control.
(4) Consists of 82,500 shares issuable pursuant to immediately exercisable stock
options.
(5) Represents shares issuable upon conversion of shares of Series A Stock. The
terms of the Series A Stock prohibit the holder from converting shares of
Series A Stock if such conversion would result in beneficial ownership of
more than 4.9% of the outstanding Common Stock.
(6) Represents shares issuable upon conversion of Series A and Series C Stock.
The terms of the Series A and Series C Stock prohibit the holder from
converting shares of Series A or Series C Stock if such conversion would
result in beneficial ownership of more than 4.9% of the outstanding Common
Stock.
(7) Represents shares issuable upon an assumed conversion of Series B Stock. The
terms of the Series B Stock prohibit the holder from converting shares of
Series B Stock if such conversion would result in beneficial ownership of
more than 4.9% of the outstanding Common Stock.
(8) Includes 457,859 shares issuable pursuant to immediately exercisable stock
options.
9
<PAGE> 13
BENEFIT PLANS
1998 STOCK OPTION PLAN
On January 9, 1998, the Company's Board of Directors adopted the Company's
1998 Stock Option Plan (the "1998 Plan"), subject to (i) the Company's
stockholders approval at the Meeting and (ii) approval of the Reverse Split. A
total of 2,500,000 shares of Common Stock (after giving effect to the Reverse
Split) are reserved for issuance under the 1998 Plan. The 1998 Plan authorizes
(i) the grant of options to purchase Common Stock intended to qualify as
incentive stock options ("Incentive Options"), as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) the grant of
options that do not so qualify ("Nonqualified Options"). As of January 23, 1998,
no options to purchase shares of Common Stock were outstanding under the 1998
Plan.
The 1998 Plan is administered by the Board of Directors. The Board selects
the individuals to whom awards will be granted, and determines the option
exercise price and other terms of each award, subject to the provisions of the
1998 Plan.
Incentive Options may be granted under the 1998 Plan to employees and
officers of the Company, including members of the Board of Directors who are
also employees. Nonqualified Options may be granted under the 1998 Plan to
employees, officers, individuals providing services to the Company and members
of the Board of Directors, whether or not they are employees of the Company.
No options may extend for more than ten years from the date of grant (five
years in the case of employees or officers holding 10% or more of the total
combined voting power of all classes of stock of the Company or any subsidiary
or parent ("greater-than-ten-percent-stockholders"). The exercise price for
Incentive Options may not be less than the fair market value of the Common Stock
on the date of grant or, in the case of a greater-than-ten-percent-stockholder,
not less than 110% of the fair market value. The aggregate fair market value
(determined at the time of grant) of shares issuable pursuant to Incentive
Options first becoming exercisable by any employee or officer in any calendar
year may not exceed $100,000.
Options are non-transferable except by will or by the laws of descent or
distribution. Options generally may not be exercised after (i) termination by
the Company for cause or voluntary termination by the optionee of the optionee's
employment with the Company, (ii) sixty days following termination by the
Company without cause of the optionee's employment with the Company, or (iii) in
the event of the optionee's permanent and total disability or death, the earlier
of the expiration date of such option or one year following the date of such
disability or death.
Payment of the exercise price for shares subject to options may be made
with cash, certified check, bank draft, postal or express money order payable to
the order of the Company for an amount equal to the exercise price for such
shares, or, with the consent of the Company, shares of Common Stock of the
Company having a fair market value equal to the option price of such shares, or,
with the consent of the Company, a combination of the foregoing. Full payment
for shares exercised must be made at the time of exercise.
Shares underlying options which expire or terminate may be the subject of
future options. The 1998 Plan terminates on January 9, 2008.
FEDERAL INCOME TAX INFORMATION WITH RESPECT TO THE 1998 STOCK OPTION PLAN
The grantee of a Nonqualified Option recognizes no income for federal
income tax purposes on the grant thereof. On the exercise of a Nonqualified
Option, the difference between the fair market value of the underlying shares of
Common Stock on the exercise date and the option exercise price is treated as
compensation to the holder of the option taxable as ordinary income in the year
of exercise, and such fair market value becomes the basis for the underlying
shares which will be used in computing any capital gain or loss upon disposition
of such shares. Subject to certain limitations, the Company may deduct for the
year of exercise an amount equal to the amount recognized by the option holder
as ordinary income upon exercise of a Nonqualified Option.
10
<PAGE> 14
The grantee of an Incentive Option recognizes no income for federal income
tax purposes on the grant thereof. Except as provided below with respect to the
alternative minimum tax, there is no tax upon exercise of an Incentive Option.
If no disposition of shares acquired upon exercise of the Incentive Option is
made by the option holder within two years from the date of the grant of the
Incentive Option or within one year after exercise of the Incentive Option, any
gain realized by the option holder on the subsequent sale of such shares is
treated, for federal income tax purposes, as mid-term capital gain if the shares
were held for more than 12 months but not more than 18 months and as long-term
capital gain if the shares were held for more than 18 months. If the shares are
sold prior to the expiration of such periods, the difference between the lesser
of the value of the shares at the date of exercise or at the date of sale and
the exercise price of the Incentive Option is treated as compensation to the
employee taxable as ordinary income and the excess gain, if any, is treated as
capital gain (which will be mid-term capital gain if the shares are held for
more than 12 months but not more than 18 months, and long-term capital gain if
the shares are held for more than 18 months).
The excess of the fair market value of the underlying shares over the
option price at the time of exercise of an Incentive Option will constitute an
item of tax preference for purposes of the alternative minimum tax. Taxpayers
who incur the alternative minimum tax are allowed a credit which may be carried
forward indefinitely to be used as a credit against the regular tax liability in
a later year; however, the minimum tax credit can not reduce the regular tax
below the alternative minimum tax for that carryover year.
In connection with the sale of the shares covered by Incentive Options, the
Company is allowed a deduction for tax purposes only to the extent, and at the
time, the option holder receives ordinary income (for example, by reason of the
sale of shares by the holder of an Incentive Option within two years of the date
of the granting of the Incentive Option or one year after the exercise of the
Incentive Option), subject to certain limitations on the deductibility of
compensation paid to executives.
NEW PLAN BENEFITS
Options under the 1998 Plan are granted by the Board of Directors on a
discretionary basis. Therefore, the Company is unable to determine the dollar
value and number of options which will be received by or allocated to, or which
would have, had the 1998 Plan been in effect during 1997, been received by or
allocated to, (i) any of the Company's executive officers, (ii) the Company's
current executive officers, as a group, and (iii) the Company's employees who
are not executive officers, as a group, as a result of the adoption of the 1998
Plan.
AMENDMENT OF 1998 PLAN
The Company's Board of Directors may amend or terminate the 1998 Plan at
any time and from time to time, except that the class of persons eligible to
receive options may not be changed, nor the aggregate number of shares issuable
thereunder increased, (other than pursuant to certain changes in the Company's
capital structure) without the approval of the stockholders of the Company. The
Board is expressly authorized to amend the Plan, at any time and from time to
time, to conform it to the provisions of Rule 16b-3 under the Exchange Act, as
that rule may be amended from time to time.
11
<PAGE> 15
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for services rendered in all capacities to the Company for the
fiscal years ended December 31, 1997, June 30, 1996 and June 30, 1995 of (i) the
Chief Executive Officer of the Company during 1997 and (ii) the other executive
officers of the Company serving on December 31, 1997 whose salary and bonus for
1997 exceeded $100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION ------------
------------------ SECURITIES ALL OTHER
NAME AND FISCAL SALARY(1) BONUS UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) OPTIONS(#) ($)
- ------------------------------------------ ------ --------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Dr. Indu A. Muni.......................... 1997 $ 124,300 -- -- 252(2)
President, Chief 1996 115,500 -- -- 304(2)
Executive Officer and Treasurer 1995 115,500 -- -- 304(2)
Dhananjay G. Wadekar...................... 1997 $ 124,300 -- -- 252(2)
Executive Vice President 1996 115,500 -- -- 304(2)
1995 115,500 -- -- 304(2)
Dr. F. Howard Schneider................... 1997 $ 98,898 -- -- 252(2)
Senior Vice President -- Technology 1996 115,500 -- 10,000 304(2)
1995 115,500 -- -- 304(2)
</TABLE>
- ---------------
(1) Other than salary described herein, the Company did not pay any Named
Executive Officer any compensation, including incidental personal benefits,
in excess of 10% of such Named Executive Officer's salary.
(2) Amount represents the dollar value of group-term life insurance premiums
paid by the Company for the benefit of the Named Executive Officer.
(3) Dr. Schneider resigned his position as Senior Vice President -- Technology
on November 7, 1997. Dr. Schneider continues to serve on the Company's Board
of Directors.
OPTION GRANTS
No options were granted to any Named Executive Officer during fiscal 1997.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information concerning the number
and value of unexercised stock options held by the Named Executive Officers as
of December 31, 1997. None of the Named Executive Officers Company exercised any
stock options during fiscal 1997.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1997(#) HELD AT DECEMBER 31, 1997(1)
----------------------------- -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Dr. Indu A. Muni........................ -- -- -- --
Dhananjay G. Wadekar.................... -- -- -- --
Dr. F. Howard Schneider................. 202,859 -- $ 1,100 --
</TABLE>
\
- ---------------
(1) Value is based on the December 31, 1997 closing price on the Nasdaq SmallCap
Market of $0.13 per share. Actual gains, if any, on exercise will depend on
the value of the Common Stock on the date of the sale of shares.
12
<PAGE> 16
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company has entered into employment agreements with Dr. Muni, the
Company's President, Chief Executive Officer and Treasurer and Mr. Wadekar, the
Company's Chairman of the Board and Executive Vice President. Dr. Schneider, the
Company's Senior Vice President -- Technology, also had a similar agreement
until his resignation from his position on November 7, 1997. Dr. Muni's
agreement expires in August 1998, and Mr. Wadekar's agreement expires in October
1998.
For 1997 the Board of Directors and the Compensation Committee set Dr. Muni
and Mr. Wadekar's annual base salaries at $145,000 and approved an arrangement
whereby Dr. Schneider was paid an annual base salary of $116,000 for a four-day
work week. In addition, each of Dr. Muni, Mr. Wadekar and Dr. Schneider have
agreed that (i) during his respective period of employment with the Company and
for a period of one year thereafter, he will not engage in any business activity
engaged in or under development by the Company and (ii) for a period of three
years following his respective period of employment, he will not engage in any
activities for any direct competitor similar or related to those activities
engaged in during the preceding two years of employment with the Company. In the
event the Company terminates Dr. Muni's or Mr. Wadekar's employment without
cause, the Company is obligated to pay to him an amount equal to three months
base salary.
COMPENSATION OF DIRECTORS
Directors who are also employees of the Company are not compensated for
attending meetings of the Board of Directors. The Company has instituted a
policy of paying directors who are not employees of the Company a participation
fee of $1,000 for each meeting of the Board of Directors attended and for each
committee meeting attended, up to a maximum of $1,000 per calendar day,
regardless of how may meetings occur on one day. All directors are also
reimbursed for out-of-pocket expenses incurred in connection with attendance at
meetings and other services as directors. Directors are entitled to receive
stock options under the 1998 Stock Option Plan, the 1991 Stock Plan and the 1989
Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors and the Compensation Committee were responsible for
determining compensation of executive officers of the Company. During fiscal
1997, Drs. Muni and Schneider and Mr. Wadekar served on the Board of Directors.
None of these three officers was present during discussion of and abstained from
voting with respect to his own compensation as an executive officer of the
Company. The Board of Directors did not grant any options to Drs. Muni or
Schneider or Mr. Wadekar during fiscal 1997.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
None of the directors or executive officers of the Company has any interest
in the adoption of Proposal Nos. 1 or 2 except that, with respect to the 1998
Stock Option Plan which is the subject of Proposal No. 2, in the future the
Company's directors and executive officers might, in the discretion of the
Board, be granted stock options.
OTHER BUSINESS
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than that stated above. If any other business
should come before the Meeting, votes may be cast pursuant to proxies in respect
to any such business in the best judgment of the person or persons acting under
the proxies.
STOCKHOLDER PROPOSALS
It is contemplated that the 1998 Annual Meeting of Stockholders will be
held on or about June 30, 1998. Proposals of stockholders intended for inclusion
in the proxy statement to be mailed to all stockholders
13
<PAGE> 17
entitled to vote at the 1998 Annual Meeting of Stockholders must have been
received at the Company's principal executive offices not later than August 27,
1997, as stated in the Company's proxy statement for the 1997 Annual Meeting of
Stockholders dated December 27, 1996.
EXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by the Company, and in
addition to soliciting stockholders by mail through its regular employees, the
Company may request banks and brokers to solicit their customers who have stock
of the Company registered in the name of a nominee and, if so, will reimburse
such banks and brokers for their reasonable out-of-pocket costs. Also, the
Company may retain a professional proxy solicitation firm to assist in the proxy
solicitation and, if so, will pay such solicitation firm customary fees plus
expenses. Solicitation by officers and employees of the Company may also be made
of some stockholders in person or by mail, telephone or telegraph, following the
original solicitation.
By Order of the Board of Directors,
DHANANJAY G. WADEKAR
Chairman of the Board
January 30, 1998
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE
WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED.
14
<PAGE> 18
EXHIBIT A
TEXT OF PROPOSED AMENDMENT
RESOLVED: That the Certificate of Incorporation of the corporation be
amended by deleting Paragraph 4 thereof and inserting in its place the following
paragraph:
4. The total number of shares of stock which the corporation shall have
authority to issue is 85,000,000 shares, consisting of 75,000,000 shares of
common stock, having a par value of $0.01 per share (the "Common Stock"), and
10,000,000 shares of preferred stock, having a par value of $0.01 per share (the
"Preferred Stock").
At the same time as the filing of this Amendment to the Certificate of
Incorporation of the corporation with the Secretary of the State of Delaware
becomes effective, each ten (10) shares of common stock of the corporation, par
value of $0.01 per share (the "Old Common Stock"), issued and outstanding or
held in the treasury of the Corporation immediately prior to the effectiveness
of such filing, shall be combined, reclassified and changed into one (1) fully
paid and nonassessable share of Common Stock.
Each holder of record of a certificate or certificates for one or more
shares of the Old Common Stock shall be entitled to receive as soon as
practicable, upon surrender of such certificate, a certificate or certificates
representing the largest whole number of shares of Common Stock to which such
holder shall be entitled pursuant to the provisions of the immediately preceding
paragraph. Any certificate for one or more shares of the Old Common Stock not so
surrendered shall be deemed to represent one share of the Common Stock for each
ten (10) shares of the Old Common Stock previously represented by such
certificate.
No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon such combination and reclassification of the Old
Common Stock into shares of Common Stock. Instead of there being issued any
fractional shares of Common Stock which would otherwise be issuable upon such
combination and reclassification, the corporation shall pay to the holders of
the shares of Old Common Stock which were thus combined and reclassified cash in
respect of such fraction in an amount equal to the same fraction of the market
price per share of the Common Stock (as determined in a manner prescribed by the
Board of Directors) at the close of business on the date such combination and
reclassification becomes effective.
The designations and powers, the rights and preferences and the
qualifications, limitations or restrictions with respect to each class of stock
of the corporation shall be as determined by the Board of Directors from time to
time.
15
<PAGE> 19
APPENDIX A
DYNAGEN, INC.
1998 STOCK OPTION PLAN
SECTION 1. Purpose
This 1998 Stock Option Plan (the "Plan") of DynaGen, Inc. a Delaware
corporation (the "Company"), is designed to provide additional incentive to
executives and other key employees of the Company and its subsidiaries and for
certain other individuals providing services to or acting as directors of the
Company and its subsidiaries. The Company intends that this purpose will be
effected by the granting of incentive stock options ("Incentive Stock Options")
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and nonqualified stock options ("Nonqualified Options") under the Plan
which afford such executives, key employees, directors and other eligible
individuals an opportunity to acquire or increase their proprietary interest in
the Company through the acquisition of shares of its Common Stock. The Company
intends that Incentive Stock Options issued under the Plan will qualify as
"incentive stock options" as defined in Section 422 of the Code and the terms of
the Plan shall be interpreted in accordance with this intention, provided,
however, that no option granted hereunder will qualify as an "incentive stock
option" unless the Plan is approved by the stockholders of the Company within
twelve months prior to or following the adoption of the Plan by the Board. The
term "subsidiary" shall have the meaning set forth in Section 424 of the Code.
SECTION 2. Administration
2.1 Administration by the Board. The Plan shall be administered by the
Board of Directors.
2.2 Powers of the Board. Subject to the terms and conditions of the Plan,
the Board shall have the power:
(a) To determine from time to time the persons eligible to receive
options and the options to be granted to such persons under the Plan and to
prescribe the terms, conditions, restrictions, if any, and provisions
(which need not be identical) of each option granted under the Plan to such
persons;
(b) To construe and interpret the Plan and options granted thereunder
and to establish, amend, and revoke rules and regulations for
administration of the Plan. In this connection, the Board may correct any
defect or supply any omission, or reconcile any inconsistency in the Plan,
or in any option agreement, in the manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective. All decisions and
determinations by the Board in the exercise of this power shall be final
and binding upon the Company and optionees;
(c) To make, in its sole discretion, changes to any outstanding option
granted under the Plan, including: (i) to reduce the exercise price, (ii)
to accelerate the vesting schedule or (iii) to extend the expiration date;
and
(d) Generally, to exercise such powers and to perform such acts as are
deemed necessary or expedient to promote the best interests of the Company
with respect to the Plan.
SECTION 3. Stock
3.1 Stock to be Issued. The stock subject to the options granted under
the Plan shall be shares of the Company's authorized but unissued Common Stock,
$0.01 par value (the "Common Stock"), or shares of the Company's Common Stock
held in treasury. The total number of shares that may be issued pursuant to
options granted under the Plan shall not exceed an aggregate of 2,500,000 shares
of Common Stock; provided, however, that the class and aggregate number of
shares which may be subject to options granted under the Plan shall be subject
to adjustment as provided in Section 8 hereof.
A-1
<PAGE> 20
3.2 Expiration, Cancellation or Termination of Option. Whenever any
outstanding option under the Plan expires, is cancelled or is otherwise
terminated (other than by exercise), the shares of Common Stock allocable to the
unexercised portion of such option may again be the subject of options under the
Plan.
3.3 Limitation on Grants. In no event may any Plan participant be granted
options with respect to more than 800,000 shares of Common Stock under the Plan
in any calendar year. The number of shares of Common Stock issuable pursuant to
an option granted to a Plan participant in a calendar year that is subsequently
forfeited, cancelled or otherwise terminated shall continue to count toward the
foregoing limitation in such calendar year. In addition, if the exercise price
of an option is subsequently reduced, the transaction shall be deemed a
cancellation of the original option and the grant of a new one so that both
transactions shall count toward the maximum shares issuable in the calendar year
of each respective transaction.
SECTION 4. Eligibility
4.1 Persons Eligible. Incentive Stock Options under the Plan may be
granted only to officers and other employees of the Company or its subsidiaries.
Nonqualified Options may be granted to officers or other employees of the
Company or its subsidiaries, and to members of the Board and consultants or
other persons who render services to the Company (regardless of whether they are
also employees).
4.2 Greater-Than-Ten-Percent Stockholders. Except as may otherwise be
permitted by the Code or other applicable law or regulation, no Incentive Stock
Option shall be granted to an individual who, at the time the option is granted,
owns (including ownership attributed pursuant to Section 424 of the Code) more
than ten percent of the total combined voting power of all classes of stock of
the Company or any subsidiary (a "greater- than-ten-percent stockholder"),
unless such Incentive Stock Option provides that (i) the purchase price per
share shall not be less than one hundred ten percent of the fair market value of
the Common Stock at the time such option is granted, and (ii) that such option
shall not be exercisable to any extent after the expiration of five years from
the date it is granted.
4.3 Maximum Aggregate Fair Market Value. The aggregate fair market value
(determined at the time the option is granted) of the Common Stock with respect
to which Incentive Stock Options are exercisable for the first time by any
optionee during any calendar year (under the Plan and any other plans of the
Company or its subsidiary for the issuance of incentive stock options) shall not
exceed $100,000 (or such greater amount as may from time to time be permitted
with respect to incentive stock options by the Code or any other applicable law
or regulation).
SECTION 5. Termination of Employment or Death of Optionee
5.1 Termination of Employment. Except as may be otherwise expressly
provided herein, options shall terminate on the earlier of:
(a) the date of expiration thereof,
(b) the date of termination of the optionee's employment with
or services to the Company by it for cause (as determined by the
Company), or voluntarily by the optionee; or
(c) thirty days after the date of termination of the
optionee's employment with or services to the Company by it without
cause;
provided that Nonqualified Options granted to persons who are not employees of
the Company need not, unless the Board determines otherwise, be subject to the
provisions set forth in clauses (b) and (c) above.
An employment relationship between the Company and the optionee shall be
deemed to exist during any period in which the optionee is employed by the
Company or any subsidiary. Whether authorized leave of absence, or absence on
military or government service, shall constitute termination of the employment
relationship between the Company and the optionee shall be determined by the
Board at the time thereof.
A-2
<PAGE> 21
As used herein, "cause" shall mean (x) any material breach by the optionee
of any agreement to which the optionee and the Company are both parties, (y) any
act or omission to act by the optionee which may have a material and adverse
effect on the Company's business or on the optionee's ability to perform
services for the Company, including, without limitation, the commission of any
crime (other than ordinary traffic violations), or (z) any material misconduct
or material neglect of duties by the optionee in connection with the business or
affairs of the Company or any affiliate of the Company.
5.2 Death or Permanent Disability of Optionee. In the event of the death
or permanent and total disability of the holder of an option prior to
termination of the optionee's employment with or services to the Company and
before the date of expiration of such option, such option shall terminate on the
earlier of such date of expiration or one year following the date of such death
or disability. After the death of the optionee, his/her executors,
administrators or any person or persons to whom his/her option may be
transferred by will or by the laws of descent and distribution, shall have the
right, at any time prior to such termination, to exercise the option to the
extent the optionee was entitled to exercise such option immediately prior to
his/her death. An optionee is permanently and totally disabled if he/she is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to last for a
continuous period of not less than twelve months; permanent and total disability
shall be determined in accordance with Section 22(e)(3) of the Code and the
regulations issued thereunder.
SECTION 6. Terms of the Option Agreements
Each option agreement shall be in writing and shall contain such terms,
conditions, restrictions, if any, and provisions as the Board shall from time to
time deem appropriate. Such provisions or conditions may include without
limitation restrictions on transfer, repurchase rights, or such other provisions
as shall be determined by the Board; provided that such additional provisions
shall not be inconsistent with any other term or condition of the Plan and such
additional provisions shall not cause any Incentive Stock Option granted under
the Plan to fail to qualify as an incentive option within the meaning of Section
422 of the Code. Option agreements need not be identical, but each option
agreement by appropriate language shall include the substance of all of the
following provisions:
6.1 Expiration of Option. Notwithstanding any other provision of the Plan
or of any option agreement, each option shall expire on the date specified in
the option agreement, which date shall not, in the case of an Incentive Stock
Option, be later than the tenth anniversary (fifth anniversary in the case of a
greater-than-ten-percent stockholder) of the date on which the option was
granted, or as specified in Section 5 hereof.
6.2 Exercise. Subject to Section 7.3 hereof, each option may be
exercised, so long as it is valid and outstanding, from time to time in part or
as a whole, subject to any limitations with respect to the number of shares for
which the option may be exercised at a particular time and to such other
conditions as the Board in its discretion may specify upon granting the option.
6.3 Purchase Price. The purchase price per share under each option shall
be determined by the Board at the time the option is granted; provided, however,
that the option price of any Incentive Stock Option shall not, unless otherwise
permitted by the Code or other applicable law or regulation, be less than the
fair market value of the Common Stock on the date the option is granted (110% of
the fair market value in the case of a greater-than-ten-percent stockholder).
For the purpose of the Plan the fair market value of the Common Stock shall be
the closing price per share on the date of the grant of the option as reported
by The Nasdaq Stock Market, Inc. ("Nasdaq"), or, if the Common Stock is not
quoted on Nasdaq, as reported by a nationally recognized stock exchange, or, if
the Common Stock is not listed on such an exchange, the fair market value as
determined by the Board.
6.4 Transferability of Options. Options shall not be transferable by the
optionee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during his or her lifetime, only by him or her.
6.5 Rights of Optionees. Except as required under any law or regulation
respecting, reporting or disclosure of beneficial ownership of securities, no
optionee shall be deemed for any purpose to be the owner of
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any shares of Common Stock subject to any option unless and until the option
shall have been exercised pursuant to the terms thereof, and the Company shall
have issued and delivered the shares to the optionee.
6.6 "Lockup" Agreement. The Board may in its discretion specify upon
granting an option that the optionee shall agree for a period of time from the
effective date of any registration of securities of the Company (upon request of
the Company or the underwriters managing any underwritten offering of the
Company's securities), not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any shares issued pursuant
to the exercise of such option, without the prior written consent of the Company
or such underwriters, as the case may be.
SECTION 7. Method of Exercise; Payment of Purchase Price
7.1 Method of Exercise. Any option granted under the Plan may be exercised
by the optionee by delivering to the Company on any business day a written
notice specifying the number of shares of Common Stock the optionee then desires
to purchase and specifying the address to which the certificates for such shares
are to be mailed (the "Notice"), accompanied by payment for such shares.
7.2 Payment of Purchase Price. Payment for the shares of Common Stock
purchased pursuant to the exercise of an option shall be made by:
(a) cash in an amount, or a check, bank draft or postal or express
money order payable in an amount, equal to the aggregate exercise price for
the number of shares specified in the Notice;
(b) with the consent of the Board, shares of Common Stock of the
Company having a fair market value (as defined for purposes of Section 6.3
hereof) equal to such aggregate exercise price;
(c) with the consent of the Board, a personal recourse note issued by
the optionee to the Company in a principal amount equal to such aggregate
exercise price and with such other terms, including interest rate and
maturity, as the Board may determine in its discretion; provided that the
interest rate borne by such note shall not be less than the lowest
applicable federal rate, as defined in Section 1274(d) of the Code;
(d) with the consent of the Board, such other consideration that is
acceptable to the Board and that has a fair market value, as determined by
the Board, equal to such aggregate exercise price, including any
broker-directed cashless exercise/resale procedure adopted by the Board; or
(e) with the consent of the Board, any combination of the foregoing.
As promptly as practicable after receipt of the Notice and accompanying
payment, the Company shall deliver to the optionee certificates for the
number of shares with respect to which such option has been so exercised,
issued in the optionee's name; provided, however, that such delivery shall
be deemed effected for all purposes when the Company or a stock transfer
agent of the Company shall have deposited such certificates in the United
States mail, addressed to the optionee, at the address specified in the
Notice.
7.3 Special Limits Affecting Section 16(b) Option Holders. Shares
issuable upon exercise of options granted to a person who in the opinion of the
Board may be deemed to be a director or officer of the Company within the
meaning of Section 16(b) of the Exchange Act and the rules and regulations
thereunder shall not be sold or disposed of until after the expiration of six
months following the date of grant.
SECTION 8. Changes in Company's Capital Structure
8.1 Rights of Company. The existence of outstanding options shall not
affect in any way the right or power of the Company or its stockholders to make
or authorize, without limitation, any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of Common
Stock, or any issue of bonds, debentures, preferred or prior preference stock or
other capital stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
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8.2 Recapitalization, Stock Splits and Dividends. If the Company shall
effect a subdivision or consolidation of shares or other capital readjustment,
the payment of a stock dividend, or other increase or reduction of the number of
shares of the Common Stock outstanding, in any such case without receiving
compensation therefor in money, services or property, then (i) the number,
class, and price per share of shares of stock subject to outstanding options
hereunder shall be appropriately adjusted in such a manner as to entitle an
optionee to receive upon exercise of an option, for the same aggregate cash
consideration, the same total number and class of shares as he or she would have
received as a result of the event requiring the adjustment had he or she
exercised his or her option in full immediately prior to such event; and (ii)
the number and class of shares with respect to which options may be granted
under the Plan, and the number and class of shares set forth in Section 3.3,
shall be adjusted by substituting for the total number of shares of Common Stock
then reserved for issuance under the Plan that number and class of shares of
stock that the owner of an equal number of outstanding shares of Common Stock
would own as the result of the event requiring the adjustment.
8.3 Merger without Change of Control. After a merger of one or more
corporations into the Company, or after a consolidation of the Company and one
or more corporations in which (i) the Company shall be the surviving
corporation, and (ii) the stockholders of the Company immediately prior to such
merger or consolidation own after such merger or consolidation shares
representing at least fifty percent of the voting power of the Company, each
holder of an outstanding option shall, at no additional cost, be entitled upon
exercise of such option to receive in lieu of the number of shares as to which
such option shall then be so exercisable, the number and class of shares of
stock or other securities to which such holder would have been entitled pursuant
to the terms of the agreement of merger or consolidation if, immediately prior
to such merger or consolidation, such holder had been the holder of record of a
number of shares of Common Stock equal to the number of shares for which such
option was exercisable.
8.4 Sale or Merger with Change of Control. If the Company is merged into
or consolidated with another corporation under circumstances where the Company
is not the surviving corporation, or if there is a merger or consolidation where
the Company is the surviving corporation but the stockholders of the Company
immediately prior to such merger or consolidation do not own after such merger
or consolidation shares representing at least fifty percent of the voting power
of the Company, or if the Company is liquidated, or sells or otherwise disposes
of substantially all of its assets to another corporation while unexercised
options remain outstanding under the Plan, (i) subject to the provisions of
clause (iii) below, after the effective date of such merger, consolidation,
liquidation, sale or disposition, as the case may be, each holder of an
outstanding option shall be entitled, upon exercise of such option, to receive,
in lieu of shares of Common Stock, shares of such stock or other securities,
cash or property as the holders of shares of Common Stock received pursuant to
the terms of the merger, consolidation, liquidation, sale or disposition; (ii)
the Board may accelerate the time for exercise of all unexercised and unexpired
options to and after a date prior to the effective date of such merger,
consolidation, liquidation, sale or disposition, as the case may be, specified
by the Board; or (iii) all outstanding options may be cancelled by the Board as
of the effective date of any such merger, consolidation, liquidation, sale or
disposition provided that (x) notice of such cancellation shall be given to each
holder of an option and (y) each holder of an option shall have the right to
exercise such option to the extent that the same is then exercisable or, if the
Board shall have accelerated the time for exercise of all unexercised and
unexpired options, in full during the 30-day period preceding the effective date
of such merger, consolidation, liquidation, sale or disposition.
8.5 Adjustments to Common Stock Subject to Options. Except as
hereinbefore expressly provided, the issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, for cash
or property, or for labor or services, either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock then subject to
outstanding options.
8.6 Miscellaneous. Adjustments under this Section 8 shall be determined
by the Board, and such determinations shall be conclusive. No fractional shares
of Common Stock shall be issued under the Plan on account of any adjustment
specified above.
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SECTION 9. General Restrictions
9.1 Investment Representations. The Company may require any person to
whom an option is granted, as a condition of exercising such option, to give
written assurances in substance and form satisfactory to the Company to the
effect that such person is acquiring the Common Stock subject to the option for
his or her own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate in order to comply with federal and
applicable state securities laws.
9.2 Compliance with Securities Laws. The Company shall not be required to
sell or issue any shares under any option if the issuance of such shares shall
constitute a violation by the optionee or by the Company of any provisions of
any law or regulation of any governmental authority. In addition, in connection
with the Securities Act of 1933, as now in effect or hereafter amended (the
"Act"), upon exercise of any option, the Company shall not be required to issue
such shares unless the Board has received evidence satisfactory to it to the
effect that the holder of such option will not transfer such shares except
pursuant to a registration statement in effect under such Act or unless an
opinion of counsel satisfactory to the Company has been received by the Company
to the effect that such registration is not required. Any determination in this
connection by the Board shall be final, binding and conclusive. In the event the
shares issuable on exercise of an option are not registered under the Act, the
Company may imprint upon any certificate representing shares so issued the
following legend or any other legend which counsel for the Company considers
necessary or advisable to comply with the Act and with applicable state
securities laws:
The shares of stock represented by this certificate have been acquired
for investment and have not been registered under the Securities Act of
1933. Such securities may not be sold, transferred, pledged or
hypothecated unless the registration provisions of said Act have been
complied with or unless the Corporation has received an opinion of its
counsel that such registration is not required, except upon such
registration or upon receipt by the Corporation of an opinion of counsel
satisfactory to the Corporation, in form and substance satisfactory to
the Corporation, that registration is not required for such sale or
transfer.
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act; and in the event any shares are
so registered the Company may remove any legend on certificates representing
such shares. The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of an option or the issuance of shares
pursuant thereto to comply with any law or regulation of any governmental
authority.
9.3 Employment Obligation. The granting of any option shall not impose
upon the Company any obligation to employ or continue to employ any optionee;
and the right of the Company to terminate the employment of any officer or other
employee shall not be diminished or affected by reason of the fact that an
option has been granted to him or her.
SECTION 10. Withholding Taxes
10.1 Rights of Company. The Company may require an employee exercising a
Nonqualified Option, or disposing of shares of Common Stock acquired pursuant to
the exercise of an Incentive Option in a disqualifying disposition (as defined
in Section 421(b) of the Code), to reimburse the Company for any taxes required
by any government to be withheld or otherwise deducted and paid by the Company
in respect of the issuance or disposition of such shares. In lieu thereof, the
Company shall have the right to withhold the amount of such taxes from any other
sums due or to become due from the Company to the employee upon such terms and
conditions as the Company may prescribe. The Company may, in its discretion,
hold the stock certificate to which such employee is otherwise entitled upon the
exercise of an Option as security for the payment of any such withholding tax
liability, until cash sufficient to pay that liability has been received or
accumulated.
10.2 Payment in Shares. An employee may elect to have such tax
withholding obligation satisfied, in whole or in part, by (i) authorizing the
Company to withhold from shares of Common Stock to be issued pursuant to the
exercise of a Nonqualified Option a number of shares with an aggregate fair
market value (as
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defined in Section 6.3 hereof determined as of the date the withholding is
effected) that would satisfy the withholding amount due with respect to such
exercise, or (ii) transferring to the Company shares of Common Stock owned by
the employee with an aggregate fair market value (as defined in Section 6.3
hereof determined as of the date the withholding is effected) that would satisfy
the withholding amount due. With respect to any employee who is subject to
Section 16 of the Exchange Act, the following additional restrictions shall
apply:
(a) the election to satisfy tax withholding obligations relating to an
option exercise in the manner permitted by this Section 10.2 shall be made
either (1) during the period beginning on the third business day following
the date of release of quarterly or annual summary statements of sales and
earnings of the Company and ending on the twelfth business day following
such date, or (2) at least six (6) months prior to the date of exercise of
the option;
(b) such election shall be irrevocable;
(c) such election shall be subject to the consent or approval of the
Board; and
(d) the Common Stock withheld to satisfy tax withholding, if granted
at the discretion of the Board, must pertain to an option which has been
held by the employee for at least six (6) months from the date of grant of
the option.
10.3 Notice of Disqualifying Disposition. Each holder of an Incentive
Option shall agree to notify the Company in writing immediately after making a
disqualifying disposition (as defined in Section 421(b) of the Code) of any
Common Stock purchased upon exercise of the Incentive Option.
SECTION 11. Amendment or Termination of Plan
11.1 Amendment. The Board may terminate the Plan and may amend the Plan
at any time, and from time to time, subject to the limitation that, except as
provided in Section 8 hereof, no amendment shall be effective unless approved by
the stockholders of the Company in accordance with applicable law and
regulations, at an annual or special meeting held within 12 months before or
after the date of adoption of such amendment, in any instance in which such
amendment would: (i) increase the number of shares of Common Stock that may be
issued under, or as to which Options may be granted pursuant to, the Plan; or
(ii) change in substance the provisions of Section 4 hereof relating to
eligibility to participate in the Plan. Without limiting the generality of the
foregoing, the Board is expressly authorized to amend the Plan, at any time and
from time to time, to conform it to the provisions of Rule 16b-3 under the
Exchange Act, as that Rule may be amended from time to time.
Except as provided in Section 8 hereof, the rights and obligations under
any option granted before amendment of the Plan or any unexercised portion of
such option shall not be adversely affected by amendment of the Plan or such
option without the consent of the holder of such option.
11.2 Termination. The Plan shall terminate as of the tenth anniversary of
its effective date. The Board may terminate the Plan at any earlier time for any
or no reason. No Option may be granted after the Plan has been terminated. No
Option granted while the Plan is in effect shall be altered or impaired by
termination of the Plan, except upon the consent of the holder of such Option.
The power of the Board to construe and interpret the Plan and the Options
granted prior to the termination of the Plan shall continue after such
termination.
SECTION 12. Nonexclusivity of Plan
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable, including the granting of
stock options otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
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SECTION 13. Effective Date and Duration of Plan
The Plan shall become effective upon its adoption by the Board, provided
that the stockholders of the Company shall have approved the Plan within twelve
months prior to or following the adoption of the Plan by the Board. Subject to
the foregoing, options may be granted under the Plan at any time subsequent to
its effective date; provided, however, that (a) no such option shall be
exercised or exercisable unless the stockholders of the Company shall have
approved the Plan within twelve months prior to or following the adoption of the
Plan by the Board, and (b) all options issued prior to the date of such
stockholders' approval shall contain a reference to such condition. No option
may be granted under the Plan after the tenth anniversary of the effective date.
The Plan shall terminate (i) when the total amount of the Common Stock with
respect to which options may be granted shall have been issued upon the exercise
of options or (ii) by action of the Board of Directors pursuant to Section 11
hereof, whichever shall first occur.
SECTION 14. Provisions of General Application
14.1 Severability. The invalidity or unenforceability of any provision of
the Plan shall not affect the validity or enforceability of any other provision
of the Plan, each of which shall remain in full force and effect.
14.2 Construction. The headings in the Plan are included for convenience
only and shall not in any way effect the meaning or interpretation of the Plan.
Any term defined in the singular shall include the plural, and vice versa. The
words "herein," "hereof" and "hereunder" refer to the Plan as a whole and not to
any particular part of the Plan. The word "including" as used herein shall not
be construed so as to exclude any other thing not referred to or described.
14.3 Further Assurances. The Company and any holder of an option shall
from time to time execute and deliver any and all further instruments, documents
and agreements and do such other and further acts and things as may be required
or useful to carry out the intent and purpose of the Plan and such option and to
assure to the Company and such option holder the benefits contemplated by the
Plan; provided, however, that neither the Company nor any option holder shall in
any event be required to take any action inconsistent with the provisions of the
Plan.
14.4 Governing Law. The Plan and each Option shall be governed by the
laws of the State of Delaware.
* * * * *
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
DYNAGEN, INC. A STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH
THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS NEED ONLY SIGN
AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE.
DYNAGEN, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 4, 1998
The undersigned stockholder of DynaGen, Inc. (the "Company"), revoking all
prior proxies, hereby appoints Dhananjay G. Wadekar and David A. Broadwin, Esq.,
or any of them acting singly, proxies, with full power of substitution, to vote
all shares of capital stock of the Company which the undersigned is entitled to
vote at the Special Meeting of Stockholders to be held at the offices of Foley,
Hoag & Eliot LLP, One Post Office Square, Boston, MA 02109 on March 4, 1998,
beginning at 10:00 a.m. EST and at any adjournments thereof, upon matters set
forth in the Notice of Special Meeting dated January 30, 1998 and the related
Proxy Statement, copies of which have been received by the undersigned, and in
their discretion upon any business that may properly come before the meeting or
any adjournments thereof. Attendance of the undersigned at the meeting or any
adjourned session thereof will not be deemed to revoke this proxy unless the
undersigned shall affirmatively indicate the intention of the undersigned to
vote the shares represented hereby in person prior to the exercise of this
proxy.
1. To amend the Company's Certificate of Incorporation to effect a one-for-ten
reverse split of the Company's common stock, $0.01 par value per share.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To approve the 1998 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN WITH RESPECT TO ONE OR MORE OF THE PROPOSALS SET FORTH ABOVE,
WILL BE VOTED FOR SUCH PROPOSAL OR PROPOSALS.
DATED: , 1998 Signature of Stockholder(s):
Mark here if Stockholder's address has changed: [ ]
New address: ____________________________
____________________________
Please promptly date and sign this proxy and mail it in the enclosed
envelope to assure representation of your shares. No postage need be affixed if
mailed in the United States. PLEASE SIGN EXACTLY AS NAME(S) APPEAR ON STOCK
CERTIFICATE. When shares are held by joint owners, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If stockholder is a corporation, please sign full corporate
name by president or other authorized officer and, if a partnership, please sign
full partnership name by an authorized partner or other person.
Mark here if you plan to attend the meeting: [ ]
23
