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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): March 2, 1998
DYNAGEN, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 1-11352 04-3029787
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(State or other jurisdiction of (Commission file number) (I.R.S. Employer
incorporation or organization) Identification No.)
840 MEMORIAL DRIVE, CAMBRIDGE, MA 02139
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (617) 491-2527
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NO CHANGE SINCE LAST REPORT
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(Former name or address, if changed since last report)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 15, 1997, DynaGen, Inc. ("DynaGen"), Generic Distributors
Incorporated, a wholly-owned subsidiary of DynaGen ("GDI") and Superior
Pharmaceutical Company also a wholly-owned subsidiary of DynaGen ("Superior")
(together with DynaGen and GDI, the "Buyers"), entered into an Asset Purchase
Agreement (the "Asset Purchase Agreement") by and among the Buyers and Generic
Distributors Limited Partnership ("GDLP"), United Pharmacists, Inc. ("UPI"), and
Mr. Donald Couvillon ("Mr. Couvillon")(together with GDLP and UPI, the
"Sellers"). On February 26, 1998, the Asset Purchase Agreement was amended by
Amendment No. 1 to the Asset Purchase Agreement ("Amendment No. 1"). Pursuant to
Amendment No. 1, Superior ceased to be a party to the Asset Purchase Agreement.
On March 2, 1998, DynaGen and GDI acquired, pursuant to the Asset Purchase
Agreement, as amended, substantially all of the assets of the Sellers' generic
drug distribution business (the "Assets"). The purchase price and terms for the
transaction were determined in arms-length negotiations between the parties. On
March 2, 1998, DynaGen and GDI paid the Sellers $1,200,000 in cash, $1,050,000
in value of Series E Preferred Stock of DynaGen and $100,000 in value of Series
F Preferred Stock of DynaGen. DynaGen and GDI further agreed to assume certain
liabilities of the Sellers, including but not limited to, all liabilities of the
Sellers as of March 2, 1998 relating to accounts payable and accrued expenses
(to the extent such expenses were incurred in the normal course of business) and
all liabilities of the Sellers under certain assumed contracts. A copy of the
Asset Purchase Agreement is attached as Exhibit 2.1 to this Current Report on
Form 8-K.
The information contained in the press release dated March 2, 1998
attached as Exhibit 99.1, is hereby incorporated by reference.
The following debt financings and equity issuances were arranged to
fund the Acquisition:
1. GDI obtained a term loan in the amount of $1.2 million from Fleet
National Bank ("Fleet")(the "Term Loan") pursuant to a credit agreement by and
between GDI, DynaGen, Able Laboratories, a wholly-owned subsidiary of DynaGen
("Able") and Fleet (the "Credit Agreement"). The proceeds of the Term Loan are
to be used solely in the financing of the acquisition of the assets of the
Sellers. The Term Loan is evidenced by a note issued by GDI to Fleet (the "Term
Note"). The Term Note is payable over a five year term, due and payable on April
26, 2003, with interest on the outstanding principal balance being paid monthly
in arrears and quarterly principal reduction payments of $42,860 each being made
on the final day of each February, May, August and November, commencing May 31,
1998. The outstanding principal balance of the Term Note will bear interest at a
per annum rate of LIBOR (as defined in the Credit Agreement), plus 300 basis
points. A copy of the Credit Agreement is attached as Exhibit 4.1 to this
Current Report on Form 8-K. A copy of the Term Note is attached as Exhibit 4.2
to this Current Report on Form 8-K.
2. GDI obtained a line of credit of up to $300,000 from Fleet, pursuant
to the Credit Agreement (the "Line of Credit"). The Proceeds of the Line of
Credit are to be used to fund the
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working capital requirements of GDI. The Line of Credit is evidenced by a note
issued by GDI to Fleet (the "Line of Credit Note"). The Line of Credit is
scheduled to terminate on May 31, 1999 but such date may be extended at the sole
discretion of Fleet. Advances made by Fleet under the Line of Credit will bear
interest commencing with the date of such advance and ending on the last day of
such Interest Period (defined as, as to each advance under the Line of Credit,
the period commencing on the day of an advance and ending on the 30th day
thereafter) at a per annum rate of LIBOR (as defined in the Credit Agreement),
plus 250 basis points. Interest on each advance outstanding under the Line of
Credit shall be paid monthly in arrears on each Interest Payment Date (defined
as the last day of such Interest Period).
3. Both the Term Note and the Line of Credit Note are secured by a
first-lien security interest on all of the assets, inventory and equipment of
GDI, a first-lien interest in substantially all of the assets, inventory and
equipment of Able and a first-lien security interest in, coupled with the pledge
of, 51% of the outstanding Common Stock of Able as so held by DynaGen and all of
the outstanding Common Stock of GDI as so held by DynaGen. The Term Note and the
Line of Credit Note are guaranteed by DynaGen pursuant to a Guaranty Agreement
by and between DynaGen and Fleet. The Term Note and the Line of Credit Note are
further guaranteed by Able pursuant to a Guaranty Agreement by and between Able
and Fleet.
4. As part of the consideration paid for the purchase of the Assets of
the Sellers, DynaGen issued $1,050,000 in value of Series E Preferred Stock,
(the "Series E Preferred") to GDLP. The Series E Preferred is non-transferable
and none of the shares of Series E Preferred to be transferred from DynaGen to
GDLP may be distributed as either Preferred Stock or Common Stock to the limited
partners of GDLP. Only proceeds from the sale of DynaGen's Common Stock, upon
conversion of the Series E Preferred, may be distributed to the limited partners
of GDLP. The Series E Preferred is convertible into Common Stock, of DynaGen
(the "Common Stock") beginning twelve months after February 27, 1998. No more
than $42,000 of the Series E Preferred may be converted in any five (5) business
days. The conversion price will be based on the average closing bid price of the
Common Stock of DynaGen as reported by NASDAQ over the three day trading period
prior to conversion. The shares of Series E Preferred will rank higher than
shares of Common Stock in liquidation preference, but will rank lower than any
other series of preferred stock of DynaGen currently outstanding or issued in
the future (with the exception of the Series F Preferred Stock, in which case
the Series E Preferred will be on a parity with the Series F Preferred Stock). A
copy of the Certificate of Designations, Preferences and Rights of the Series E
Preferred is attached as Exhibit 4.5 to this Current Report on 8-K.
5. As part of the consideration paid for the purchase of the Assets of
the Sellers, DynaGen issued $100,000 in value of Series F Preferred Stock, (the
"Series F Preferred") to GDLP. The Series F Preferred is non-transferable and
none of the shares of Series F Preferred to be transferred from DynaGen to GDLP
may be distributed as either Preferred Stock or Common Stock to the limited
partners of GDLP. Only proceeds from the sale of DynaGen's Common Stock, upon
conversion of the Series F Preferred, may be distributed to the limited partners
of GDLP. The Series F Preferred is convertible into Common Stock of DynaGen
beginning on June 25, 1998. No more than 200 shares ($20,000) of the Series F
Preferred Stock may be converted in any five business days. The conversion price
will be based on the average closing
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bid price of Common Stock of DynaGen as reported by NASDAQ over the three (3)
day trading period prior to conversion. The shares of Series F Preferred will
rank higher than shares of Common Stock in liquidation preference, but will rank
lower than any other series of preferred stock of DynaGen currently outstanding
or issued in the future (with the exception of the Series E Preferred, in which
case the Series F Preferred will be on a parity with the Series E Preferred). A
copy of the Certificate of Designations, Preferences and Rights of the Series F
Preferred is attached as Exhibit 4.6 to this Current Report on 8-K.
DynaGen develops, manufactures and markets proprietary and generic
diagnostic and therapeutic products for human health care. During 1996, DynaGen
began expanding its business focus from being a developments and licensing
company to building a diversified healthcare company focused on the manufacture
and distribution of generic drug products and specialty pharmaceuticals, as well
as the continued development of therapeutic products for immune system
modulation and bone and joint repair and a medical device for tumor localization
and tracking during breast biopsy. Superior is a pharmaceutical manufacturing
firm that markets and distributes generic pharmaceutical products to independent
retail chains and institutional pharmacies. Able is a pharmaceutical
manufacturing firm specializing in all phases of drug manufacturing and
over-the-counter/generic drug compounding for generic wholesalers, retail drug
chains and ethical drug procedures. GDLP is a generic drug distributor that
markets and distributes generic pharmaceutical products to independent retail
chains and institutional pharmacies. GDI, as a wholly-owned subsidiary of
DynaGen intends to continue to use the Assets purchased from the Sellers for the
purpose of distributing generic drugs.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The financial statements of GDLP are not required to be filed
with this report on Form 8-K. Pursuant to Regulation S-X Rule
1.02 (w), GDLP is not a "significant" subsidiary of DynaGen.
(b) UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.
The financial statements of GDLP are not required to be filed
with this report on Form 8-K. Pursuant to Regulation S-X Rule
1.02 (w), GDLP is not a "significant" subsidiary of DynaGen.
(c) EXHIBITS.
2.1 Asset Purchase Agreement dated December 15, 1997 by and among
DynaGen, Inc., Superior Pharmaceutical Company, Generic
Distributors Incorporated, Generic Distributors Limited
Partnership, United Pharmacists, Inc., and Mr. Donald
Couvillon.
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None of the schedules and exhibits to the Asset Purchase
Agreement, as listed below, have been filed with this Form
8-K. Pursuant to Item 601(b)(2) of Regulation S-K, the
schedules and exhibits to the Asset Purchase Agreement are
either immaterial to an investment decision or the information
contained in such schedules or exhibits is disclosed elsewhere
in the agreement or is included as another exhibit to this
Form 8-K. A copy of any of these omitted schedules and
exhibits will be furnished by the Company to the Commission
upon the request of the Commission.
Schedules and Exhibits to the Asset Purchase Agreement
Schedule A The Purchased Assets
Schedule B Assumed Contracts
Schedule C Proprietary and Intellectual Property Rights
Schedule D Bill of Sale
Schedule E Financial Statements of Generic Distributors
Limited Partnership
Schedule F Employees of Generic Distributors Limited
Partnership
Schedule G Sellers' Disclosure Schedule
Exhibit A Opinion of Arnold, Pettway & Dixon, LLP
Exhibit B Employment, Non-compete and
Confidentiality Agreements between Buyers
and Mr. Donald Couvillon
Exhibit C Consulting, Non-compete and
Confidentiality Agreements between Buyers
and Mr. Sidney Johnson
Exhibit D Opinion of Testa, Hurwitz & Thibeault, LLP
Exhibit E Certificate of Designations, Preferences and
Rights of Series E Preferred Stock of
DynaGen, Inc.
Exhibit F Lease Termination for GDLP Properties at
1611 Olive Street, 1609 Olive Street and 506
North 16th Street, Ouachita Parish, Monroe
Louisiana
Exhibit G Lease to be entered into by Generic
Distributors Incorporated for Properties at
1611 Olive Street, 1609 Olive Street and 506
North 16th Street, Ouachita Parish, Monroe
Louisiana
Exhibit H Certificate of Designations, Preferences and
Rights of Series F Preferred Stock of
DynaGen Inc.
2.2 Amendment No. 1 to the Asset Purchase Agreement
dated February 26, 1998 by and among DynaGen, Inc.,
Superior Pharmaceutical Company, Generic
Distributors Incorporated, Generic Distributors
Limited Partnership, United Pharmacists, Inc., and
Mr. Donald Couvillon.
4.1 Credit Agreement by and between DynaGen, Inc.,
Generic Distributors Incorporated, Able
Laboratories, Inc., and Fleet National Bank dated
February 26, 1998.
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None of the following schedules and exhibits to the Credit
Agreement have been filed with this Form 8-K. Pursuant to Item
601(b)(2) of Regulation S-K, the schedules and exhibits to the
Credit Agreement are either immaterial to an investment
decision or the information contained in such schedules or
exhibits is disclosed elsewhere in the agreement or is
included as another exhibit to this Form 8-K. A copy of any of
these omitted schedules and exhibits will be furnished by the
Company to the Commission upon the request of the Commission.
Schedules and Exhibits to the Credit Agreement
Schedule A Borrowers' Disclosure Schedule
Exhibit 1 Borrowing Base Certificate
Exhibit 2 Consents and Approvals
Exhibit 3 Description of Financial Statements
Exhibit 4 Liabilities Not Disclosed in Financial Statements
Exhibit 5 Litigation Threatened or Pending
Exhibit 6 Subsidiaries, Affiliates and Trade Names
Exhibit 7 Encumbrances Not Otherwise Disclosed
Exhibit 8 Places of Business
Exhibit 9 Permitted Liens
Exhibit 10 Preexisting Agreements
Exhibit 11 Contingent Liabilities
Exhibit 12 DynaGen Investment Policy Exhibit 13 Redemptions
Exhibit 14 Dividends
4.2 Term Note issued by Generic Distributors
Incorporated to Fleet National Bank dated February
26, 1998.
4.3 Pledge and Security Agreement by and between
DynaGen, Inc. and Fleet National Bank dated February
26, 1998.
4.4 Security Agreement by and between Generic
Distributors Incorporated and Fleet National Bank
dated February 26, 1998.
4.5 Certificate of Designations, Preferences and Rights
of Series E Preferred Stock of DynaGen.
4.6 Certificate of Designations, Preferences and Rights
of Series F Preferred Stock of DynaGen.
99.1 Press Release of DynaGen issued March 2, 1998.
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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
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Title: Executive Vice President
Dated: March 10, 1998
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EXHIBIT INDEX
Exhibit
Numbers Exhibits
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2.1 Asset Purchase Agreement dated December 15, 1997 by and among
DynaGen, Inc., Superior Pharmaceutical Company, Generic
Distributors Incorporated, Generic Distributors Limited
Partnership, United Pharmacists, Inc., and Mr. Donald
Couvillon.
2.2 Amendment No. 1 to the Asset Purchase Agreement dated
February 26, 1998 by and among DynaGen, Inc., Superior
Pharmaceutical Company, Generic Distributors Incorporated,
Generic Distributors Limited Partnership, United Pharmacists,
Inc., and Mr. Donald Couvillon.
4.1 Credit Agreement by and between DynaGen, Inc., Generic
Distributors Incorporated, Able Laboratories, Inc., and Fleet
National Bank dated February 26, 1998.
4.2 Term Note issued by Generic Distributors Incorporated to Fleet
National Bank dated February 26, 1998.
4.3 Pledge and Security Agreement by and between DynaGen, Inc. and
Fleet National Bank dated February 26, 1998.
4.4 Security Agreement by and between Generic Distributors
Incorporated and Fleet National Bank dated February 26, 1998.
4.5 Certificate of Designations, Preferences and Rights of Series
E Preferred Stock of DynaGen.
4.6 Certificate of Designations, Preferences and Rights of Series
F Preferred Stock of DynaGen.
99.1 Press Release of DynaGen issued March 2, 1998.
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
DYNAGEN INC.,
GENERIC DISTRIBUTORS INCORPORATED,
SUPERIOR PHARMACEUTICAL COMPANY,
GENERIC DISTRIBUTORS LIMITED PARTNERSHIP
UNITED PHARMACISTS, INC., GENERAL PARTNER,
AND
DON COUVILLON
DATED AS OF DECEMBER 15, 1997
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ASSET PURCHASE AGREEMENT
AGREEMENT dated as of December 15, 1997, (this "AGREEMENT") by and among
DynaGen, Inc., a Delaware corporation ("PARENT") and Superior Pharmaceutical
Company, an Ohio corporation and a wholly-owned subsidiary of Parent
("SUPERIOR"), Generic Distributors Incorporated, a Delaware corporation and a
wholly-owned subsidiary of Superior ("GDI" and, collectively with Parent and
Superior, the "BUYERS") and Generic Distributors Limited Partnership, a
Louisiana limited partnership ("GDLP"); United Pharmacists, Inc., a Louisiana
corporation and general partner of GDLP (the "GENERAL PARTNER") and Mr. Don
Couvillon ("MR. COUVILLON") (collectively with GDLP, the General Partner, and
Mr. Couvillon the "SELLERS").
W I T N E S S E T H :
WHEREAS, GDLP conducts a business which distributes generic pharmaceutical
products (the "BUSINESS"); and
WHEREAS, Buyers desire to purchase from Sellers substantially all of the
assets, properties and Business as a going concern, with the exception of
certain excluded assets hereinafter specified, and Sellers desire to sell
substantially all of such assets of the Business to the Buyers, upon the terms
and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
SECTION 1.01. PURCHASE AND SALE OF ASSETS. Upon the terms and subject to
the conditions of this Agreement, Buyers agree to purchase from Sellers and
Sellers agree to sell, transfer, assign and deliver to Buyers at the time of
Closing (as defined in Section 1.07), free and clear of all liens, security
interests, encumbrances, claims and or other restrictions of any kind ("LIENS"),
all of the assets, properties, and business, other than the Excluded Assets, of
every kind and description, wherever located, real, personal or mixed, tangible
or intangible, owned, held or used in the conduct of the Business as presently
conducted (the "PURCHASED ASSETS"), and including, without limitation, all
right, title and interest of GDLP in, to and under:
(i) all cash, personal property and interests therein, including all
capital equipment, machinery, furniture and furnishings, telephone
communications equipment, all computers and
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computer equipment, vehicles and other tangible property used in connection with
the Business, including without limitation the items listed on SCHEDULE A;
(ii) all accounts, notes and other receivables of the Business net of
payment discounts actually taken, and all inventories of items of the type sold
or offered for sale by or through the Business, including, without limitation,
goods held by or for the Sellers or any of them for sale, lease or license or to
be furnished under contracts of service, samples, goods-in-transit,
work-in-process, raw materials, and other materials and supplies of every kind,
nature and description used or which may be used in connection with the
manufacture, packing, and sale of such inventory relating to the Business as of
the Closing Date;
(iii) all rights under all contracts, agreements (including agreements
relating to sales, distribution or manufacturing rights), non-competition
covenants, confidentiality and invention assignment agreements, leases (except
leases of real property), licenses, commitments, sales and purchase orders and
other agreements of the Business, including without limitation the contracts
listed on SCHEDULE B (collectively, the "ASSUMED CONTRACTS");
(iv) all prepaid expenses and deposits to the extent relating to the
operation of the business, including but not limited to those relating to ad
valorem taxes, leases and rentals, and including without limitation the items
listed on SCHEDULE B;
(v) all of Sellers' rights, claims, credits, causes of action or rights of
set-off against third parties relating to the Purchased Assets;
(vi) all patents, copyrights, trademarks and trade names (including but not
limited to "Generic Distributors"), technology, know-how, processes, trade
secrets, inventions, proprietary data, formulae, research and development data,
computer software programs and other intangible property or intellectual
property rights, and any applications for the same, used or held for use in the
Business, including the rights to sue for past infringements thereof, including
without limitation the items listed on SCHEDULE C;
(vii) all transferable licenses, permits or other governmental
authorizations affecting, or relating in any way to, the Business;
(viii) all books, records, files and papers (other than minute books,
partnership agreements, bylaws, articles of incorporation, stock and other
ownership records, and other corporate and partnership related documents of GDLP
and the General Partner), whether in hard copy or computer format, that relate
to the Business (Sellers being entitled to retain a copy, but not ownership,
thereof), including, without limitation, sales and promotional literature;
manuals and data; invoices from suppliers, invoices to customers and copies of
any canceled or unfilled orders in each case for the current fiscal year and for
any prior year to the extent available; sales and purchase correspondence; lists
of present and former suppliers; lists of present and former customers; and all
accounting records pertaining to the Business; provided, however, that GDLP and
the General Partner will be given reasonable access, upon twenty-four (24) hours
notice, to
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all items specified in this Section 1.01(viii), to the extent necessary to
prosecute or defend a claim; and
(ix) all goodwill associated with the Business or the Purchased Assets,
together with the right to represent to third parties that the Buyers are the
successors to the Business;
(x) all unfilled sales and purchase orders of or related to the Business
made or entered into by the Business in the ordinary course of its business and
all rights which the Business may have against its customers, suppliers or
vendors under express or implied warranties related to the Business or products
or services sold or offered by or through the Business to the extent assignable,
and the right to receive mail and other communications and shipments of
merchandise addressed to the Business; and
(xi) the proceeds of any insurance, and the right to receive the proceeds
of any insurance, with respect to any claims which have been or may be asserted
in connection with any of the Purchased Assets or Assumed Liabilities (as such
term is hereinafter defined) and the right to continue and maintain any
insurance with respect thereto.
SECTION 1.02. EXCLUDED ASSETS. Buyers expressly understand and agree all
manufacturers' rebates accrued as of the Closing Date, and all minute books,
partnership agreements, bylaws, articles of incorporation, stock and other
ownership records, and other corporate and partnership related documents of GDLP
and the General Partner (the "EXCLUDED ASSETS") are not included in the
Purchased Assets.
SECTION 1.03 ASSUMPTION OF LIABILITIES. Upon the terms and subject to the
conditions of this Agreement, Buyers agree, effective at the time of Closing, to
assume only the following specific liabilities of the Business (the "ASSUMED
LIABILITIES"):
(i) all liabilities of the Business as of the Closing Date (as that term is
defined in Section 1.07) relating to accounts payable and accrued expenses to
the extent such expenses are incurred in the normal course of business; and
(ii) all liabilities of the Business under the Assumed Contracts (other
than liabilities or obligations attributable to any failure by the Business to
comply with the terms thereof prior to the Closing Date).
SECTION 1.04. EXCLUDED LIABILITIES. Notwithstanding any provision in this
Agreement to the contrary, Buyers are assuming only the Assumed Liabilities and
are not assuming any other liability or obligation of the Business of whatever
nature whether presently in existence or arising or asserted hereafter. All such
other liabilities and obligations shall be retained by and remain obligations
and liabilities of the Sellers (all such liabilities and obligations not being
assumed being herein referred to as the "EXCLUDED LIABILITIES"). Without
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limiting the foregoing, each of the following shall be Excluded Liabilities for
the purposes of this Agreement:
(i) all liabilities pending, threatened, existing or arising prior to the
Closing Date, for claims made by customers of the Business, unless the Buyers
cause, in whole or in part, any such claim, after the Closing Date in which case
the Buyers will be obligated for such liability to the customers;
(ii) all liabilities pending, threatened, existing or arising prior to the
Closing Date, for claims made by suppliers of the Business, unless the Buyers
cause, in whole or in part any such claim, after the Closing Date in which case
the Buyers will be obligated for such liability to the customers;
(iii) all liabilities pending, threatened, existing or arising prior to the
Closing Date, for claims made by employees of the Business, unless the Buyers
cause, in whole or in part any such claim, after the Closing Date in which case
the Buyers will be obligated for such liability to the customers;
(iv) all liabilities, or claims made by government agencies including but
not limited to; the Environmental Protection Agency (the "EPA"), the
Occupational Health and Safety Administration ("OSHA"), the Drug Enforcement
Agency (the "DEA"), the Food Drug Administration (the "FDA") and the Internal
Revenue Service (the "IRS"), unless the Buyers cause in whole or in part any
claim, after the Closing Date in which case the Buyers will be obligated for
such liability;
(v) any obligation or liability for taxes of any kind (other than sales or
use taxes resulting from the transfer of the Purchased Assets, or any transfer
tax or other fees incurred in transferring title to any titled assets in the
State of Louisiana or elsewhere) arising from or in connection with the
transactions contemplated hereby with respect to the Purchased Assets or the
operation of the Business which is incurred in or attributable to the period
prior to the Closing Date (as is hereinafter defined), Sellers being responsible
for any such taxes arising from this transaction;
(vi) any liabilities or obligations relating to employees, employee
benefits or compensation arrangements existing on or prior to the Closing Date;
(vii) any environmental liability relating to the Business or the premises
on which the Business has been conducted to the extent such liability relates
to, or arises out of, actions or inaction occurring prior to the Closing Date;
(viii) any liability or obligation relating to the sales returns and
allowances policies of the Business with respect to products sold prior to the
Closing Date;
(ix) any liability or obligation for personal injury (whether based on
negligence, breach of warranty, strict liability or any other theory) caused by
or arising out of or resulting
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from, directly or indirectly, the sale by the Business of any products prior
to the Closing Date; and
(x) in general, any liability or obligation of any kind (whether absolute,
accrued, contingent or otherwise, known or unknown) in connection with, or
arising by reason of, ownership of the Purchased Assets or the operation of the
Business prior to the date hereof, whether or not such liability or obligation
arises or is asserted prior to the Closing Date.
SECTION 1.05. PURCHASE PRICE. (a) The purchase price for the Purchased
Assets (the "PURCHASE PRICE") is (i) $1,200,000 in cash, and (ii) $1,050,000 in
Series E Convertible Preferred Stock of the Parent (the "SERIES E PREFERRED")
which is convertible into Common Stock of the Parent after twelve (12) months
from the Closing Date, and (iii) the assumption of the Assumed Liabilities. The
Purchase Price shall be paid as provided in Section 1.07.
(b) Buyers and Sellers hereby agree that if the total amount of Partners'
Equity (as determined according to Section 1.08) on the Closing Date is less
than $1,617,000, the cash payment of the Purchase Price from Buyers to Sellers
will be reduced on a dollar-for-dollar basis for each dollar amount of Partners'
Equity below $1,617,000. The Sellers will be responsible for paying to Buyers
any refundable difference in cash within three (3) business days after the
Closing Audit contemplated under Section 1.08.
(c) Buyers and Sellers hereby agree that if the total amount of Partners'
Equity in GDLP on the Closing Date is greater than $1,617,000, all dollar
amounts in excess of $1,617,000 will be refunded directly to GDLP as additional
consideration for the purchase of the Business. The refund contemplated under
this section shall be paid as follows: (i) in cash, to the extent that the
Closing Balance Sheet (as determined by the Closing Audit contemplated under
Section 1.08) represents a cash balance in excess of $300,000, each dollar above
$300,000 shall be paid in cash within three (3) business days of the completion
and delivery of the Closing Financial Statement (as that term is defined in
Section 1.08) to eliminate the refund due the Sellers if any, and (ii) to the
extent that the cash amount in (i) is insufficient to satisfy the total refund
due, any excess amount owed the Sellers will be paid by the Buyers in cash no
later than 105 days after the Closing Date (as that term is defined in Section
1.07).
(d) Buyers and Sellers hereby agree that none of the shares of Series E
Preferred to be transferred from the Parent to the Sellers (under Section 1.05
(a)) may be distributed as either Preferred Stock or Common Stock to the Limited
Partners of GDLP. Only proceeds from the sale of the Parent's Common Stock may
be distributed to the Limited Partners of GDLP.
SECTION 1.06. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Purchased Assets in a reasonable manner (in order to reduce
the valuation assigned to goodwill) between the payment for the assets of the
Business and assumption of stated liabilities of the Business and for the
employment, consulting and the non-compete agreements to be signed by Mr.
Couvillon and Mr. Johnson at the Closing. The amount of the Assumed Liabilities
will not cause an adjustment of the $2,250,000 Purchase Price, provided GDLP
maintains the Partners' Equity requirement of $1,617,000 as provided in Section
1.05.
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SECTION 1.07. CLOSING. The closing (the "CLOSING") of the purchase and sale
of the Purchased Assets and the assumption of the Assumed Liabilities hereunder
shall take place at the offices of GDLP in Monroe, Louisiana at 11:00 a.m. on
December 15, 1997 (the "CLOSING DATE"), or as soon as possible thereafter if all
conditions set forth herein are satisfied; such date may be extended from time
to time with the prior written consent of the parties hereto. At the Closing:
(a) Buyers shall pay the Purchase Price of $1,200,000 in cash on December
16, 1997 by a certified or official bank check payable to the order of Generic
Distributors Limited Partnership, or if Buyers receive wire transfer
instructions at least two business days prior to the Closing, send wire
transfers of $1,200,000 to an account specified by the Sellers.
(b) Buyers shall deliver one stock certificate representing the shares of
Series E Preferred to the Sellers in the name of Generic Distributors Limited
Partnership. None of the shares of Series E Preferred to be transferred from the
Parent to the Sellers may be distributed as either Preferred Stock or Common
Stock to the Limited Partners of GDLP. Only proceeds from the sale of the
Parent's Common Stock may be distributed to the Limited Partners of GDLP. The
Series E Preferred may be converted into Common Stock of the Parent after twelve
(12) months from the Closing Date. No more than $42,000 of the preferred stock
may be converted in any five (5) business days. The Conversion price will be
based on the average closing bid price of Common Stock of the Parent as reported
by NASDAQ over the three (3) day trading period prior to conversion. GDLP may
decide to sell the Common Stock immediately or hold the shares as an investment.
However, when net proceeds from the sale of the Common Stock (if sold within 2
days of conversion) and conversion value of the unsold Common Stock equals
$1,050,000, the remaining convertible shares held by GDLP will be canceled. The
shares of Series E Preferred will rank higher than shares of Common Stock in
liquidation preference, but will rank lower than any other series of preferred
stock of Parent currently outstanding or issued in the future. Preferred shares
will not carry dividends and will be non-transferable. The terms of the Series E
Preferred Stock are set forth on EXHIBIT E.
(c) Sellers and Buyers shall enter into a Bill of Sale substantially in the
form attached hereto as SCHEDULE D, and Sellers shall deliver to Buyers such
deeds, endorsements, consents, assignments and other good and sufficient
instruments of conveyance and assignment (the "CONVEYANCE DOCUMENTS") as the
Buyers and Sellers and their respective counsel shall deem reasonably necessary
or appropriate to convey to and vest in the Buyers all right, title and interest
in, to and under the Purchased Assets.
(d) Sellers and Buyers shall also execute and deliver all such instruments,
documents and certificates as may be reasonably requested by the other Party
that are necessary, appropriate or desirable for the consummation at the Closing
of the transactions contemplated by this Agreement including legal opinions,
good standing certificates, evidence of each party's authority to consummate the
transactions contemplated by this Agreement, and evidence of any third party's
consent as herein required to consummate the transactions contemplated by this
Agreement.
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SECTION 1.08. CLOSING AUDIT AND ADJUSTMENTS. (a) The Sellers, in good
faith, have prepared an estimate of the Closing Balance Sheet as of November 25,
1997 (the "ESTIMATED CLOSING BALANCE SHEET"), and an estimate of the Closing
Statement of Partners' Equity as of November 25, 1997 (the "ESTIMATED CLOSING
STATEMENT OF PARTNERS' EQUITY") utilizing the books and records of GDLP and the
taking of a physical inventory, in accordance with generally accepted accounting
principles. If the Partners' Equity of GDLP as set forth on the Estimated
Closing Statement of Partners' Equity reflects (i) Partners' Equity of less than
$1,617,000 as of the Closing Date, the Purchase Price shall be reduced, dollar
for dollar, by an amount equal to such shortfall, or (ii) Partners' Equity of
more than $1,617,000 as of the Closing Date, the Purchase Price shall be
increased, dollar for dollar, by an amount equal to such excess. Any increase in
the Purchase Price will be paid to the Sellers in the manner explained in
Section 1.05(c).
(b) As promptly as practicable after the Closing Date but in no event later
than sixty (60) days after December 31, 1997, Buyers shall oversee and cause to
be prepared by Wolfe & Company, Inc.("Wolfe") an audited balance sheet of GDLP,
(the "CLOSING BALANCE SHEET") and an audited Statement of Operations, Statement
of Partners' Equity, and a Statement of Cash Flow (collectively, the "CLOSING
FINANCIAL STATEMENTS") as at the close of business on the day immediately
preceding the Closing Date, together with the report of Wolfe, addressed to
Buyers and Sellers, stating that its examination of such Closing Financial
Statements were made in accordance with U.S. generally accepted accounting
principles and applied on a basis consistent with such U.S. generally accepted
accounting principles and the financial statements of Sellers as to and for the
period ended December 31, 1996, previously furnished to Buyers. The cost of such
audit and the preparation of the Estimated and Closing Statements by Wolfe shall
be shared equally by Buyers and Sellers and Sellers share thereof shall be an
Excluded Liability, and paid to Buyers on receipt of an invoice therefor.
(c) The scope of the audit and the procedures to be followed shall be
agreed upon by Wolfe, Sellers and Buyers prior to the commencement of field
work. The audit is to be made as of December 31, 1997 with an appropriate
adjustment made to reflect a "roll back" to the Closing Date to be used in
creating the Closing Financial Statements. Buyers and its accountants shall be
provided with all information used to value or record items on the Closing
Financial Statements and have the right to witness or participate in the taking
and pricing of the physical inventory. In addition, Buyers and its accountants
shall have full access to review the work papers of Wolfe, and shall have access
to the books and records of the Sellers as shall be necessary in connection with
such audit simultaneously with the delivery of such books and records to Wolfe.
(d) The calculation of Partners' Equity set forth in the Closing Financial
Statements shall be deemed to be conclusive and binding upon the parties, unless
at or prior to the fifth business day following the completion of the Closing
Financial Statements and the delivery to Buyers and Sellers, Sellers or Buyers
shall give written notice to the other that it objects to the valuation,
inclusion or omission of any item. Such notice shall specify Sellers or Buyers
objections to the computation of Partners' Equity, citing the items or
principles disputed. In the
<PAGE> 9
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event that Sellers and Buyers are unable to mutually agree upon the valuation or
amount of any disputed item set forth in such notice within twenty (20) days
after receipt thereof by the non-objecting party, the parties shall resolve
their dispute according to the procedures detailed in Section 9.14 of this
Agreement.
(e) If the Partner's Equity of GDLP showing in the Closing Financial
Statements as finally determined in accordance with the above shall be more or
less than $1,617,000 (the shortfall or excess being referred to as the "FINAL
ADJUSTMENT"), Buyers or Sellers shall pay to each other, within three (3)
business days of the completion and delivery of the Closing Financial Statements
an amount necessary to reconcile the Estimated Adjustment and the Final
Adjustments. Any payments contemplated under this Section shall be paid
according to Sections 1.05(b) and 1.05(c).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers hereby jointly and severally represent and warrant to
each of Parent, Superior and GDI that, except as set forth in the written
disclosure schedules to be delivered prior to Closing by the Sellers to the
Parent (the "Sellers' DISCLOSURE SCHEDULES");
SECTION 2.01. LEGAL EXISTENCE AND POWER. GDLP is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Louisiana and has all requisite power and authority to own, lease or operate its
properties and assets and to carry on its business as now being conducted, and
is duly qualified to do business and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, other than in such jurisdictions
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect (as defined below) on the Business.
("MATERIAL ADVERSE EFFECT" shall mean, with respect to Parent on the one hand
and the Sellers on the other hand, the result of one or more events, changes or
effects which, individually or in the aggregate, would have a material adverse
effect or impact on the business, assets, results of operations, prospects or
financial condition of such party and its subsidiaries, taken as a whole, or is
reasonably likely to delay or prevent the consummation of the transactions
contemplated hereby.)
SECTION 2.02. AUTHORIZATION. The execution, delivery and performance by the
Sellers, of this Agreement and the other transactions contemplated herein, are
within the Sellers' power and authority and, have been duly authorized by all
necessary actions of the General Partner and the Limited Partners of GDLP. Each
of the documents to which the Sellers are a party has been duly authorized,
executed and delivered by the Sellers and constitutes a valid and binding
obligation of the Sellers, enforceable against the Sellers in accordance with
its terms.
<PAGE> 10
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SECTION 2.03. GOVERNMENT AUTHORIZATION. The execution, delivery and
performance by the Sellers of this Agreement requires no action or consent by or
in respect of, or filing with, any governmental body, agency, official or
authority.
SECTION 2.04. NON-CONTRAVENTION. The execution, delivery and performance by
the Sellers of this Agreement does not and will not, with or without the giving
of notice, the lapse of time or both, (i) contravene or conflict with the
partnership agreement or other governing documents of GDLP (the "GDLP CHARTER")
or the General Partner; (ii) contravene or conflict with or constitute a
violation of any provision of any law, rule, regulation, judgment, injunction,
order or decree currently in effect and binding upon or applicable to the
Business; (iii) require any consent, approval or other action by any individual,
corporation, partnership, joint venture, limited liability company, limited
liability partnership, association, trust or other entity or organization
including a governmental authority (a "PERSON"); (iv) contravene or conflict
with or constitute a violation of or a default under, or give rise to any right
of termination, cancellation or acceleration of any right or obligation of GDLP
or to a loss of any benefit to which GDLP is entitled under any material
provision of any agreement binding upon the Business, or any license, franchise,
permit or other similar authorization held by the Business, or (v) create or
result in any mortgage, lien, pledge, claim, charge, security interest,
easement, assessment, restrictive covenant, reservation, restriction or
encumbrance of any kind on any Purchased Asset or the Business, except, in the
case of clauses (ii), (iii) and (iv), for such matters as would not have a
Material Adverse Effect on the Business.
SECTION 2.05. FINANCIAL STATEMENTS. Attached hereto as SCHEDULE E are the
following financial statements of the Business (collectively, the "FINANCIAL
STATEMENTS"):
(i) the audited balance sheets of GDLP as of December 31, 1994, December
31, 1995, and December 31, 1996 and the related audited statements of
operations, partners' equity, and cash flows as of December 31, 1994, December
31, 1995, and December 31, 1996 (together with the notes and schedules thereto,
audited by, and accompanied by the report thereon, of KPMG Peat Marwick L.L.P.);
and
(ii) the unaudited Estimated Closing Balance Sheet of GDLP as of November
25, 1997 and the related unaudited Estimated Closing Statement of Partners'
Equity, (together with the notes and schedules thereto) as of November 25, 1997.
Each of the Financial Statements has been prepared in accordance with GAAP
applied on a consistent basis and fairly presents the financial position of the
Business as of its date or the results of operations or changes in financial
position of the Business for the periods then ended (subject, in the case of
unaudited interim financial statements, to recurring year-end adjustments, which
adjustments will not be material in amount or effect). Except as may be set
forth in the Financial Statements, all of the revenues and expenses of the
Business reflected in the Financial Statements were derived or incurred in the
ordinary course of business. The account records underlying the Financial
Statements accurately and fairly reflect, in reasonable detail and in all
material respects, the transactions of the Business, and the books of account of
the Business have been maintained in accordance with GAAP applied on a
consistent basis. All accounts, notes
<PAGE> 11
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and other receivables of the Business are valid and enforceable, are not subject
to any valid defense, set off, counterclaim or claim for returns or refunds, and
are collectible in full in accordance with their terms in the ordinary course of
business, except to the extent of any reserves therefor are reflected on the
Balance Sheet or taken in the ordinary course of business consistent with past
practice, which in the aggregate are not material to the Business.
SECTION 2.06. ABSENCE OF UNDISCLOSED LIABILITIES. The Business has no
liabilities or obligations which are, or reasonably could be expected to be, in
the aggregate, material to the Purchased Assets, results of operation, prospects
or financial condition of the Business, except those liabilities or obligations
which are (a) fully reflected or adequately reserved against in the Financial
Statements, (b) disclosed in this Agreement or in the Sellers' Disclosure
Schedules or (c) incurred in the ordinary course of business consistent with
past practice since the date of the Estimated Closing Balance Sheet. For the
purposes of this Agreement, the phrase "LIABILITIES OR OBLIGATIONS" shall
include any direct or indirect indebtedness, claim, loss, damage, deficiency
(including deferred income tax and other net tax deficiencies), cost, expense,
obligation, guarantee, or responsibility, whether accrued, absolute or
contingent, fixed or unfixed, liquidated or unliquidated, secured or unsecured.
SECTION 2.07. TITLE AND CONDITION OF ASSETS. The Purchased Assets
constitute, and on the Closing Date will constitute, all of the assets and
properties used or held for use in the conduct of the Business, and are, and on
the Closing Date will be, generally adequate to conduct the Business (other than
the Excluded Assets) as currently conducted. The Business has, and on the
Closing Date will have record and marketable title to, or valid leasehold
interests in, all of its assets and properties, whether real, personal or mixed,
tangible or intangible, and whether now owned, leased or subleased or acquired
after the date of this Agreement, including all assets and properties identified
on the Balance Sheet, except for assets and properties sold since the date of
the Estimated Closing Balance Sheet in the ordinary course of business
consistent with past practices and as permitted by this Agreement. Except as
disclosed in the Financial Statements or in the Sellers' Disclosure Schedules,
none of such Purchased Assets is, or on the Closing Date will be, subject to any
Liens, except for (i) Liens incurred in the ordinary course of business which
are not yet due and payable, (ii) Liens which do not materially detract from the
value of or interfere with the present use of the property affected thereby and
which do not, individually or in the aggregate, have a Material Adverse Effect
on the Business (the "PERMITTED Liens"). The Purchased Assets are in good
operating condition, reasonable wear and tear excepted, and the operation and
use of such property in the Business conforms in all material respects to all
applicable laws, ordinances, regulations, permits, licenses and certificates
where nonconformity would have a Material Adverse Effect on the Business.
SECTION 2.08. SUBSEQUENT EVENTS. Since the date of the Estimated Closing
Balance Sheet, the Business has been conducted in the ordinary course of
business consistent with past practices and the Business has not:
(a) Incurred any change that would have a Material Adverse Effect on the
operations of the Business.
<PAGE> 12
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(b) Amended or otherwise changed the GDLP Charter in any manner which would
reasonably be expected to have a Material Adverse Effect on the Business.
(c) Incurred any indebtedness for borrowed money or guaranteed any such
indebtedness of another Person, guaranteed any debt securities of another
Person, entered into any "keep well" or other agreement to maintain any
financial statement condition of another Person, or entered into any arrangement
having the economic effect of any of the foregoing, except for the endorsement
of checks in the normal course of business, and the extension of credit to the
Business by suppliers in the normal course of business.
(d) Created or assumed or permitted to exist any Lien on the Purchased
Assets, other than Permitted Liens.
(e) Made any loan or capital contribution to or investment in any Person.
(f) Entered into any lease or acquisition of any asset or made any other
investment for aggregate consideration in excess of $10,000.
(g) Sold, leased, pledged, transferred or otherwise disposed of any asset
with an aggregate fair market value in excess of $10,000.
(h) Entered into any agreement or transaction, or made any commitment,
relating to its assets or business (including the acquisition or disposition of
any assets or business) or relinquished any contract or other right, other than
transactions, commitments and relinquishments in the ordinary course of business
consistent with past practices and those contemplated by this Agreement.
(i) Changed any method or practice of financial or tax accounting or any
method of maintaining books and records.
(j) (i) Granted any severance or termination pay to any partner or, except
in the ordinary course of business consistent with past practice, to any
employee, (ii) entered into any employment, severance, consulting, deferred
compensation or other similar agreement (or any amendment to any agreement) with
any partner, or except in the ordinary course of business consistent with past
practice, with any employee of the Business, (iii) changed any benefits payable
under existing severance or termination pay policies or employment, severance,
consulting or other similar agreements, or (iv) changed the compensation, bonus
or other benefits payable to partners or employees of the Business other than
periodic increases in the ordinary course of business consistent with past
practice.
(k) Paid, discharged, settled or satisfied any claim, Lien or liability,
other than those (i) which were reflected or reserved against in the Balance
Sheet and in the ordinary course of business consistent with past practice, or
(ii) which were incurred since the date of the Estimated Closing Balance Sheet
in the ordinary course of business consistent with past practice.
<PAGE> 13
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(l) Written down the value of any inventory or written off as uncollectible
(including the factoring of receivables) any notes, accounts or other
receivables or any portion thereof other than in the ordinary course of business
consistent with past practice.
(m) Written up the value of any fixed assets or any portion thereof other
than in the ordinary course of business consistent with past practice.
(n) Made any change to the depreciation schedule or otherwise made
adjustment prior to the Closing Date which will affect the book value or working
capital of the Business at the time of Closing.
(o) Entered into any transaction with the Sellers or any affiliates of the
Sellers, other than in the ordinary course of, and pursuant to the reasonable
requirements of, the Business and upon terms that were no less favorable to the
Business than it could have obtained in a comparable transaction with a Person
who was not an affiliate.
(p) Entered into any agreement, undertaking or commitment to do any of the
foregoing.
(q) Suffered any damage, destruction or other casualty loss not covered by
insurance affecting the Business or assets of the Business which has had or
would reasonably be expected to result in or have a Material Adverse Effect on
the Business.
SECTION 2.09. LEGAL PROCEEDINGS. There is no action, suit, litigation,
governmental investigation or other proceeding pending or, to the knowledge of
the Sellers, threatened against or relating to the Business or any of its
properties, or the transactions contemplated by this Agreement, and, to the
knowledge of the Sellers, no basis for any action exists.
SECTION 2.10. MATERIAL CONTRACTS. (a) Except for agreements, contracts,
plans, leases, arrangements or commitments disclosed in Sellers' Disclosure
Schedules, GDLP is not a party to or subject to any other contracts that are
material to the Business. Each contract, plan, lease, arrangement, or commitment
disclosed in the Sellers' Disclosure Schedules is a valid and binding agreement
of GDLP and is in full force and effect, and neither GDLP nor the Sellers nor,
to the knowledge of Sellers or GDLP any other party thereto, is in default under
the terms of any such Contract, nor has any event or circumstance occurred that,
with notice or lapse of time or both, would constitute an event of default
thereunder with respect to GDLP or, to the knowledge of the Business or the
Sellers, any other party thereto. Neither the Business nor the Sellers have
breached, or received in writing any claim or threat that they have breached,
any of the terms or conditions of any other agreement, contract or commitment in
such a manner as would permit any other party to cancel or terminate the same or
would permit any other party to seek damages from the Business or the Sellers
that could reasonably be expected to have a Material Adverse Effect on the
Business. The Sellers have obtained, or will obtain prior to the Closing Date,
all necessary consents, waivers and approvals as are required in connection with
this Agreement under any of the material agreements of the Business or Sellers.
<PAGE> 14
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SECTION 2.11 EMPLOYEE. SCHEDULE F sets forth a true and complete list of
(a) the names, titles, annual salaries and other compensation of all employees
of the Business (the "EMPLOYEES"), and (b) the wage rates for non-salaried
Employees of the Business (by classification). Any agreements, commitments or
understandings between the Business and any Employee concerning such Employee's
future salary, compensation or terms of employment are described in SCHEDULE F.
Except as set forth on SCHEDULE F none of such Employees has indicated to the
Business that he or she intends to resign or retire as a result of the
transactions contemplated by this Agreement or otherwise. The Business is in
compliance with all currently applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice, failure to comply with which or
engagement in which, as the case may be, has had, or could reasonably be
expected to have, a Material Adverse Effect on the Business. There is no unfair
labor practice complaint pending or, to the knowledge of the Sellers, threatened
against the Business before the National Labor Relations Board. None of the
employees of the Business are represented by any labor union in any capacity
whatsoever.
SECTION 2.12. EMPLOYEE BENEFIT PLANS. Except as set forth in the Sellers'
Disclosure Schedules neither the Business nor any Person that together with the
Business would be treated as a single employer (an "ERISA AFFILIATE") under
Section 414 of the Internal Revenue Code of 1986 (the "CODE") has established or
maintains or is obligated to make contributions to or under or otherwise
participate in (a) any bonus or other type of incentive compensation plan,
program, agreement, policy, commitment, contract or arrangement (whether or not
set forth in a written document), (b) any pension, profit-sharing, retirement or
other plan, program or arrangement, or (c) any other employee benefit plan, fund
or program, including, but not limited to, those described in Section 3(3) of
the Employment Retirement Income Security Act of 1974, as amended ("ERISA"). All
such plans (individually, a "PLAN" and collectively, the "PLANS") have been
operated and administered in all material respects in accordance with, as
applicable, ERISA, and the Code, and the related rules and regulations adopted
by those federal agencies responsible for the administration of such laws. No
act or failure to act by the Sellers has resulted in, nor do the Sellers have
knowledge of a "prohibited transaction" (as defined in ERISA) with respect to
the Plans that is not subject to a statutory or regulatory exception. No
"reportable event" (as defined in ERISA) has occurred with respect to any of the
Plans which is subject to Title IV of ERISA. At the Effective Time, the fair
market value of the assets of any Plan which is subject to Title IV of ERISA
will exceed the present value of all benefits accrued under such Title IV Plan,
determined on a termination basis using assumptions established by the Pension
Benefit Guaranty Commission as in effect on that date. Neither the Business nor
any ERISA Affiliate has (i) engaged in, or is a successor or parent corporation
to an entity that has engaged in, a transaction described in Section 4069 of
ERISA, or (ii) incurred, or reasonably expects to incur prior to the Closing
Date, any liability under Title IV of ERISA arising in connection with the
termination of, or complete or partial withdrawal from, any Plan covered or
previously covered by Title IV or ERISA that could become a liability of the
Parent or any of its subsidiaries or any of their ERISA Affiliates after the
Closing Date. The Business has not previously made, nor is currently making, and
is not obligated in any way to make, any contributions to any multi-employer
plan within the meaning of the Multi-Employer Pension Plan Amendments Act of
1980.
<PAGE> 15
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SECTION 2.13. TRANSACTIONS WITH AFFILIATES. Except as set forth in the
Sellers' Disclosure Schedules since January 1, 1997, there have been and are no
agreements or other continuing transactions between the Business, on the one
hand, and any affiliate of the Business, any partner of the Business, any
affiliate of any partner of GDLP, or any member of any such partner's family, on
the other hand. Except as set forth in the Sellers' Disclosure Schedules, to the
knowledge of the Sellers, none of the partners of GDLP (a) has any material
direct or indirect interest in any entity which does business with the GDLP or
any property, asset or right which is used by the GDLP; or (b) has any
contractual relationship with GDLP.
SECTION 2.14. INSURANCE COVERAGE. The Sellers have furnished to the Buyers
a list of, and true and complete copies of, all insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, Limited and General Partners of the Business (including without
limitation any policies pertaining to product liability). There is no claim by
the Business pending under any of such policies or bonds as to which coverage
has been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums payable under all such policies and bonds have been paid and
the Business is otherwise in compliance in all material respects with the terms
and conditions of all such policies and bonds. Such policies of insurance and
bonds (or other policies and bonds providing substantially similar insurance
coverage) have been in effect since January 1, 1997 and remain in full force and
effect.
SECTION 2.15. COMPLIANCE WITH LAWS. The Sellers have all requisite material
licenses, permits and certificates, including environmental, health and safety
permits, from federal, state and local authorities necessary to conduct the
Business and own and operate the Purchased Assets. The Sellers are not in
violation of any law, regulation or ordinance relating to the Purchased Assets
or the Business, the violation of which could have a Material Adverse Effect on
the Business or the Purchased Assets or which would substantially impair the
continuation of the Business as presently conducted.
SECTION 2.16. ACCOUNTS RECEIVABLE; INVENTORIES. (a) Except as set forth on
the Sellers' Disclosure Schedules, the accounts receivable of the Business,
including the accounts receivable reflected on the Balance Sheet and accounts
receivable acquired by the Business between the date of the Estimated Closing
Balance Sheet and the Closing Date, are valid and existing and represent bona
fide claims against debtors for sales and other charges, and were acquired in
the ordinary course of business and have been collected, or are expected to be
collected in the ordinary course of business within a period not exceeding 90
days from invoice date, in full and in accordance with their terms at their
recorded amounts, subject only to the reserve for receivables as reflected on
the face of the Balance Sheet, and (subject to the aforesaid reserves) are
subject to no refunds, discounts (except for normal cash and manufacturer's
rebates accrued as to the closing date) or other adjustments and, to the best
knowledge of the Sellers, to no defenses, rights of setoff, counterclaims,
encumbrances or conditions affecting any thereof. The accounts receivable have
been accrued on the books of the Business in the ordinary course of business
consistent with past practices in accordance with GAAP, and the amount reserved
for doubtful accounts and allowances disclosed in the Balance Sheet or accrued
on such books is consistent with past practices.
<PAGE> 16
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(b) The Sellers' Disclosure Schedules set forth a detailed list of all
inventory of the Business. All of the inventories that are reflected in the
Sellers' Disclosure Schedules, (i) were purchased or acquired in the ordinary
course of the Business and in a manner consistent with the regular inventory
practices of the Sellers, (ii) have been or will be used or sold in the ordinary
course of business and in a manner consistent with its regular inventory
practices, (iii) are not in excess of the reasonable requirements of the
Business, and (iv) are or will be reflected in the Financial Statements of the
Business in accordance with GAAP consistently applied. Since the date of the
Estimated Closing Balance Sheet, due provision was made on the books of the
Business in the ordinary course of business consistent with past practices to
provide for all slow-moving, obsolete or unusable inventories to their estimated
useful values and such inventory reserves are adequate to provide for such
slow-moving, obsolete or unusable inventory and inventory shrinkage.
(c) Except as disclosed on the Sellers' Disclosure Schedules, the inventory
does not consist of any damaged or obsolete inventory or inventory not fit for
use in the ordinary course of business, including without limitation (i) any
finished goods that represent products returned prior to the Closing Date, (ii)
any finished goods for which no sales are forecast in the sales plan of the
Business (iii) any finished goods not salable in the ordinary course of business
at the published prices of the Business without additional manufacturing or
packaging cost, (iv) any finished goods that are "remnant," and (v) any finished
goods that, as a result of any judgment, order, decree or settlement relating to
product labeling or otherwise, may not be used in current product formulation.
All inventory has been stored, shipped and otherwise handled in compliance in
all material respects with all applicable federal and state law, rules, and
regulations (including, without limitation those promulgated by the FDA).
SECTION 2.17. TAX MATTERS. The Business has filed all federal, state and
local tax returns and reports which it is required to file with respect to the
Purchased Assets and the Business and has paid all taxes, interest, penalties,
assessments and deficiencies due or claimed to be due thereunder. All applicable
federal, state and local taxes, assessments, fees and other governmental charges
imposed on the Business with respect to the Purchased Assets which have become
due and payable, whether or not disputed, have been paid. The Business is
current in the payment of all income, real and personal property, franchise,
sales, use and withholding taxes with respect to the Purchased Assets and the
Business. There are no pending audits, issues, examinations, asserted
deficiencies or claims for additional taxes or interest or penalties thereon by
or before any federal, state, local or other taxing authority with respect to
the Purchased Assets or the Business.
SECTION 2.18. INTELLECTUAL PROPERTY. SCHEDULE C lists all Intellectual
Property Rights owned and/or used by the Sellers in the conduct of the Business.
The Sellers own or have a valid license to use from third parties such
Intellectual Property Rights. To the best knowledge of the Sellers, the
Intellectual Property Rights of the Business do not violate, infringe upon or
misappropriate the Intellectual Property Rights of any Person where such
violation or infringement would have a Material Adverse Effect on the Business.
<PAGE> 17
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SECTION 2.19. CERTAIN FDA MATTERS. (a) The Sellers have not made any untrue
statement of a material fact or fraudulent statement to the FDA, failed to
disclose a fact required to be disclosed to the FDA, or committed any act, made
any statement, or failed to make any statement that could provide a basis for
the FDA to invoke its policy respecting "Fraud, Untrue Statements of Material
Facts, Bribery, and Illegal Gratuities," set forth in 56 Fed. Reg 46191
(September 10, 1991).
(b) The Business has provided to Parent for review, all correspondence to
or from the FDA, the DEA and any other state agency regulating the affairs of
the Business (the "LOCAL AGENCIES"), minutes of meetings with the FDA, the DEA
and any Local Agency, any existing written reports of phone conversations,
visits or other contracts with FDA, the DEA, and any Local Agency, notices of
inspectional observations, establishment inspection reports, and all other
documents in its possession concerning communications to or from the FDA, the
DEA and any Local Agency, (including without limitation any Form 482's issued by
the FDA), or prepared by the FDA, the DEA and any Local Agency which bear in any
way on the compliance of the Business with FDA, DEA and state regulatory
requirements.
(c) The Business has provided to Parent for review all documents reflecting
conclusions, opinions, or suggestions of any Limited Partners, General Partners,
employees, or agents, in-house or outside attorneys, or outside consultants,
which bear in any way on the compliance of the Business with FDA, DEA and state
regulatory requirements.
(d) The Business is not aware of any information, whether or not in written
form, that it has not provided in the course of the review, which bears in any
way on the compliance of the Business with FDA, DEA and state regulatory
requirements.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND GDI
Buyers hereby jointly and severally represent and warrant to the Sellers as
follows:
SECTION 3.01. CORPORATE EXISTENCE AND POWER. Each of Parent and GDI is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and that Superior is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Ohio and each has all requisite power and authority to own, lease or operate
its properties and assets and to carry on its business as now being conducted.
Each of Parent, Superior, GDI is duly qualified to do business and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
other than in such jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on Parent. Each
of Parent, Superior and GDI has heretofore made available to the Sellers true
and complete copies of its Certificate of Incorporation and By-Laws, as amended
to date and as currently in effect.
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SECTION 3.02. CORPORATE AUTHORIZATION. The execution, delivery and
performance by Parent, Superior and GDI of this Agreement and the other
transactions contemplated herein are within the corporate power and authority of
Parent, Superior, and GDI and have been duly authorized by all necessary
corporate action. Each of the documents to which the Parent, Superior, and GDI
are a party has been duly authorized, executed and delivered by each of Parent,
Superior, and GDI (to the extent a party thereto) and constitutes a valid and
binding obligation of Parent, Superior, and GDI, enforceable against each of
Parent, Superior, and GDI in accordance with its terms.
SECTION 3.03. SERIES E PREFERRED AUTHORIZATION. The shares of Series E
Preferred to be issued pursuant to this Agreement will, at the time of Closing,
be duly authorized, validly issued, fully paid and nonassessable and will not be
subject to preemptive rights.
SECTION 3.04. NON-CONTRAVENTION. The execution, delivery and performance by
Parent, Superior, and GDI of this Agreement (to the extent a party thereto) and
the consummation by Parent, Superior, and GDI of the other transactions
contemplated by this Agreement do not and will not, with or without the giving
of notice, the lapse of time or both: (i) contravene or conflict with the
Certificate of Incorporation or By-Laws of Parent or any of its subsidiaries,
(ii) contravene or conflict with or constitute a violation of any provision of
any law, rule, regulation, judgment, injunction, order or decree currently in
effect and binding upon or applicable to Parent or any of its subsidiaries or
any of their respective properties, (iii) require any consent, approval or other
action by any Person, contravene or conflict with or constitute a violation of
or a default under, or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Parent or any of its subsidiaries or
to a loss of any benefit to which Parent or any of its subsidiaries is entitled,
under any material provision of (A) any agreement binding upon Parent or any of
its subsidiaries, or (B) any license, franchise, permit or other similar
authorization held by Parent or any of its subsidiaries, or (iv) create or
result in any Lien on any asset of Parent or any of its subsidiaries, except in
the case of clauses (ii), (iii) and (iv), for such matters as would not have a
Material Adverse Effect on Parent, Superior, or GDI.
SECTION 3.05. LEGAL PROCEEDINGS. There is no action, suit, investigation or
other proceeding pending or, to the knowledge of Parent, threatened against or
relating to Parent or any of its subsidiaries or any of their respective
properties or businesses, or the transactions contemplated by this Agreement
which may have a Material Adverse Effect, and, to the knowledge of the Parent,
no basis for any action exists.
SECTION 3.06 SECURITIES AND EXCHANGE COMMISSION DOCUMENTS. Parent has made
available to the Sellers a true and complete copy of the following Parent
documents: (i) its annual report on Form 10-K for the fiscal year ended December
31, 1996; (ii) its quarterly report on Form 10-Q for the fiscal quarter ended
September 30, 1997; (iii) its current reports on Form 8-K dated January 15,
1997, February 3, 1997, March 24, 1997 and July 3, 1997; (iv) the proxy
statement dated December 27, 1996; and (v) each report, schedule, registration
statement and definitive proxy filed by Parent with the Securities and Exchange
Commission (the "SEC") since
<PAGE> 19
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and publicly available prior to the Closing Date (collectively, the "PARENT SEC
DOCUMENTS"), which are all of the documents (other than preliminary material)
that Parent was required to file with the SEC since such date. As of their
respective dates, the Parent SEC Documents complied in all material respects
with the requirements of the Securities Act, or the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Parent SEC Documents, and none of the Parent SEC Documents, as of their
respective dates, contained any untrue statement of a material fact or omitted
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. None of Parent's subsidiaries is required to file any forms,
reports or other documents with the SEC. The consolidated financial statements
of Parent and its subsidiaries included in the Parent SEC Documents complied as
to form in all material respects with the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Rule
10-01 of Regulation S-X of the SEC) and fairly present in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal recurring adjustments, none of which will be material) the
consolidated financial position of Parent and its subsidiaries as of their
respective dates and the consolidated results of operations and the consolidated
cash flows of Parent and its subsidiaries for the periods presented therein.
SECTION 3.07. GOVERNMENT AUTHORIZATIONS. The execution, delivery and
performance by the Buyers of this Agreement requires no action or consent by or
in respect of, or filing with, any governmental body, agency, official or
authority.
SECTION 3.08. UNDISCLOSED LIABILITIES. The Buyers have no liabilities or
obligations which are, or reasonably could be expected to be, in the aggregate,
material to their results of operation, prospects or financial condition, except
those liabilities or obligations which have previously been disclosed in this
Agreement, the Parent SEC Documents or incurred in the ordinary course of
business consistent with past practice since the date of the Estimated Closing
Balance Sheet which could have a Material Adverse Effect on the business of the
Buyers.
SECTION 3.09. COMPLIANCE WITH LAWS. The Buyers are not in violation of any
law, regulation or ordinance relating to Buyers' current business, the violation
of which could have a Material Adverse Effect on the business of the Buyers.
SECTION 3.10. CERTAIN FDA MATTERS. (a) From and after the Closing Date,
Buyers will store, ship, and otherwise handle all inventory transferred by
Sellers to Buyers, pursuant to this Agreement, in compliance in all material
respects with all applicable federal and state law, rules and regulations
(including, without limitation those promulgated by the FDA where noncompliance
could have a Material Adverse Effect on the Business acquired), provided,
however, that the Buyers' representation and warranty under this Section 3.10(a)
shall not apply to, and specifically excludes, any failure on the part of Buyers
to so comply in any material respect with such applicable federal and state law,
rules and regulations, which arises out of, or results from, any materially
noncompliant condition that existed as of the Closing Date, and which
noncompliance constitutes a breach of Sellers' representations and warranties.
<PAGE> 20
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(b) The Buyers are not aware of any information, whether or not in written
form, that it has not provided in the course of the review, which bears in any
way on the noncompliance in any material respect of the Parent and Superior with
FDA, DEA and state regulatory requirements.
ARTICLE IV
COVENANTS OF ALL PARTIES
Each of the parties hereto hereby covenants and agrees with the other
parties as follows:
SECTION 4.01. COOPERATION. It shall cooperate fully with the other parties
hereto in furnishing any information or performing any action reasonably
requested by any such party, which information or action is necessary to the
speedy and successful consummation of the transactions contemplated by this
Agreement.
SECTION 4.02. MISCELLANEOUS AGREEMENTS AND CONSENTS. Subject to the terms
and conditions provided in this Agreement, each party shall use all reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, appropriate or desirable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement. Each
party shall, and shall cause each of its affiliates to, use their respective
reasonable efforts to obtain consents of all third parties and governmental
authorities necessary, appropriate or desirable for the consummation of the
transactions contemplated by this Agreement.
SECTION 4.03. BEST EFFORTS AND FURTHER ASSURANCES. Each of the parties to
this Agreement shall use its best efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the Conditions to
Closing under this Agreement. Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting the consummation of the transactions contemplated hereby. Subject to
its further rights under this Agreement, each party shall use all reasonable
efforts to cause the Closing to occur at the earliest practicable time.
SECTION 4.04. BEST EFFORTS TO MAINTAIN THE BUSINESS AND RETAIN KEY
EMPLOYEES. The Buyers will make reasonable best efforts to maintain and preserve
the operations of the Business in the future and the Sellers will assist the
Buyers in retaining certain key employees of the Business.
SECTION 4.05. CONFIDENTIALITY. (a) All information furnished by one party
(the "DISCLOSING PARTY") to any other party (the "RECEIVING PARTY") in
connection with this Agreement and the transactions contemplated hereby shall be
kept confidential by the Receiving Party (and shall be used by it only in
connection with this Agreement and the transactions contemplated hereby), except
to the extent that such information (i) is or becomes generally
<PAGE> 21
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available to the public other than as a direct or indirect result of disclosure
by the Receiving Party (or any of its directors, officers, partners, employees,
agents, advisors or affiliates (the "AGENTS")), (ii) was within the possession
of the Receiving Party prior to its being furnished to the Receiving Party by or
on behalf of the Disclosing Party (provided that the source of such information
is not known by the Receiving Party to be bound by a confidentiality agreement
with or other contractual, legal or fiduciary obligation of confidentiality to
the Disclosing Party or any other Person with respect to such information),
(iii) becomes available to the Receiving Party on a non-confidential basis from
a source other than the Disclosing Party or any of its Agents (provided that
such source is not known by the Receiving Party to be bound by a confidentiality
agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the Disclosing Party or any other Person with respect to such
information), or (iv) is required to be disclosed in any document filed with the
SEC or any other governmental authority.
SECTION 4.06. SECURITIES REGISTRATION. The Parent shall use its best
efforts to take all action as may be required as a condition to the availability
of Rule 144 under the Securities Act (or any successor exemptive rule
hereinafter in effect) including but not limited to the timely filing of all
reports required to be filed pursuant to said Securities Act in order to permit
the sale, transfer or other disposition under Rule 144 with respect to such
Common Stock as is acquired upon conversion of the Series E Preferred in
accordance with this agreement. The Buyers shall furnish to any holder of
registrable shares forthwith upon request (i) a written statement by the Company
as to its compliance with the reporting requirements of Rule 144, (ii) a copy of
the most recent annual or quarterly report of the Parent as filed with the SEC,
and (iii) such other reports and documents as a holder may reasonably request in
availing itself of any rule or regulation of the SEC allowing a holder to sell
any such registrable shares without registration.
ARTICLE V
COVENANTS OF THE SELLERS
Each of the Sellers hereby jointly and severally covenant and agree with
Parent, Superior and GDI that, from and after the date hereof to the Closing
Date:
SECTION 5.01. PRESERVATION OF BUSINESS ORGANIZATION. The Sellers shall use
all reasonable efforts to preserve without material impairment the GDLP Charter
and GDLP's goodwill as to suppliers, distributors, customers and others having
business relations with GDLP.
SECTION 5.02. CARRY ON IN REGULAR COURSE. (a) The Sellers shall carry on
the Business in the ordinary and usual course in a manner consistent with its
past practices. Notwithstanding the foregoing, the Sellers shall not, directly
or indirectly, do, or propose to do or make any commitment or obligation, with
respect to (i) any act or activity referenced in Section 2.08 (a) - (q), or (ii)
enter into any agreement, undertaking or commitment to do any of the foregoing.
SECTION 5.03. CONSENTS. The Sellers shall use all reasonable efforts to
obtain all required or necessary consents in writing to the transactions
contemplated by this Agreement
<PAGE> 22
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and/or such amendments, assignments or instruments (including but not limited to
the execution of a new lease for the properties at 1611 Olive Street, 1609 Olive
Street and 506 North 16th Street in Ouachita Parish, Monroe, Louisiana) or
modifications of such documents or instruments as may be required so that the
transactions contemplated by this Agreement shall not result in any default with
respect to any law, rule, regulation, order, decree, license, agreement or
commitment to which GDLP is a party or the Business is bound.
SECTION 5.04. ACCESS. Until the Closing Date, Sellers (a) will give Buyers,
its counsel, financial advisors, auditors and other authorized representatives
full access to the offices, properties, books and records of the Sellers and the
Business related to the Purchased Assets and the Business during normal business
hours and upon reasonable notice, in such a manner as not unreasonably to
disrupt the normal activities of the Business, (b) will furnish to Buyers, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information relating to the Purchased
Assets and the Business as Buyers may reasonably request and (c) will instruct
the employees of the Business to cooperate with Buyers in its investigation of
the Purchased Assets and the Business; PROVIDED that no investigation pursuant
to this Section shall affect any representation or warranty given by Sellers
hereunder.
SECTION 5.05. NOTICES OF CERTAIN EVENTS. Sellers shall promptly notify
Buyers of: (i) any notice or other communication from any Person received by
Sellers or the Business, to the knowledge of the Sellers or the Business
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this agreement; (ii) any notice or other
communication received by Sellers or the Business, to the knowledge of Sellers
or the Business, from any governmental or regulatory agency or authority in
connection with the transactions contemplated by this Agreement; and (iii) any
actions, suits, claims, investigations or proceedings commenced, threatened or
pending against GDLP or the Business relating to or involving the Purchased
Assets that, if pending on the date of this Agreement, would have been required
in the Buyers' opinion to have been disclosed pursuant to Section 2.09 or that
relate to the consummation of the transactions contemplated by this Agreement.
SECTION 5.06. NO SOLICITATION. From the date of the Letter of Intent
underlying this agreement (September 16, 1997) until the earlier of the Closing
Date or termination of this Agreement pursuant to its terms, the Sellers shall
not, and will instruct their partners, employees, shareholders, representatives,
agents and affiliates not to, directly or indirectly, initiate, solicit,
encourage or participate in discussions with, provide information to, or approve
transactions with, any Person or group concerning any merger, purchase or sale
of assets or business combination (an "ACQUISITION PROPOSAL"). The Sellers have
and will continue to immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. The Sellers will (i) notify Buyers as promptly as
practicable if any inquiry or proposal is made or any information or access is
requested in writing in connection with an Acquisition Proposal or potential
Acquisition Proposal and (ii) as promptly as practicable, notify Buyers of the
significant terms and conditions of any such Acquisition Proposal.
<PAGE> 23
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ARTICLE VI
CONDITIONS OF CLOSING
SECTION 6.01. CONDITIONS TO OBLIGATION OF BUYERS AND SELLERS. The
obligations of each of the parties hereto under this Agreement to consummate the
Agreement and the other transactions to be consummated at the Closing are
subject to the satisfaction or waiver of the following conditions:
(a) Parent, Superior, GDI and the Sellers shall have received all approvals
or requirements of governmental authorities and third parties to permit the
consummation of the transactions contemplated by this Agreement and to permit
Parent, Superior and GDI to own the Purchased Assets, and to operate the
Business after the Closing. Each such approval shall be in form and substance
reasonably satisfactory to Parent and shall remain in full force and effect at
the Closing Date.
(b) No action, suit, litigation, injunction, restraining order, proceeding
or investigation shall (i) have been instituted and be pending, or (ii) be
threatened by any Person or governmental authority, which would materially and
adversely affect the Agreement and the other transactions contemplated by this
Agreement. On the Closing Date, there shall not be in force any proceeding,
order or decree restraining or enjoining consummation of this Agreement or the
other transactions contemplated by this Agreement, or placing any limitation
upon such consummation or to invalidate, suspend or require modification of any
provision of this Agreement.
SECTION 6.02. CONDITIONS APPLICABLE TO PARENT, SUPERIOR AND GDI. The
obligations of Parent, Superior and GDI under this Agreement to consummate the
Agreement and the other transactions contemplated by this Agreement are subject
to the satisfaction or waiver of the following conditions:
(a) All the terms, covenants and conditions of this Agreement to be
complied with and performed by the Sellers on or before the Closing Date shall
have been complied with and performed in all material respects.
(b) The representations and warranties of the Sellers set forth in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same force and effect as if such representations and warranties
were made as of the Closing Date.
(c) Buyers shall have completed a due diligence investigation of the
Business satisfactory to the Buyers in its sole discretion.
(d) Buyers shall have received documentation, satisfactory to Buyers in its
sole discretion, evidencing Sellers' ownership of the Purchased Assets.
<PAGE> 24
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(e) Buyers shall have received an opinion of Arnold, Pettway & Dixon, LLP,
counsel to the Sellers, dated the Closing Date substantially in the form
attached hereto as EXHIBIT A.
(f) Without prejudice to Buyers' rights under Article VII, Sellers, shall
have delivered to Buyers revised Sellers' Disclosure Schedules to this Agreement
containing information updated in all material respects to the Closing Date.
(g) Buyers shall have received such closing documents as it may reasonably
request, all in form and substance reasonably satisfactory to Buyers.
(h) The Buyers and the Sellers shall mutually agree on the amount of funds
that GDLP shall distribute to its employee, (excluding Mr. Couvillon), as a
performance bonus at the Closing Date.
(i) Mr. Couvillon shall enter into an employment, non-compete and
confidentiality agreement prior to the Closing Date. Such agreement is attached
as EXHIBIT B.
(j) Mr. Johnson shall enter into a consulting, non-compete and
confidentiality agreement prior to the Closing Date. Additional consulting
services required, if any, will be negotiated with Mr. Johnson who will make his
best efforts to provide such services. Such agreements are attached as EXHIBIT
C.
(k) Parent shall have received or have a legally binding commitment to
receive, not less than an aggregate of $1,500,000 of equity capital or debt
financing, or a combination thereof.
(l) Buyers shall have received the Termination of Leases in the form
attached hereto as Exhibit F, executed by GDI and R.W. Gregory, Jr. (the
"Landlord").
(m) Buyers shall have entered into the lease in the form attached hereto as
Exhibit G, with Landlord, for the facilities at 1611 Olive Street, 1609 Olive
Street and 506 North 16th Street, Ouachita Parish, Monroe Louisiana.
SECTION 6.03. CONDITIONS APPLICABLE TO THE SELLERS. The obligations of the
Sellers under this Agreement to consummate the Agreement and the other
transactions contemplated to be consummated at the Closing are subject to the
satisfaction or waiver of the following conditions:
(a) All the terms, covenants and conditions of this Agreement to be
complied with and performed by the Buyers on or before the Closing Date shall
have been complied with and performed in all material respects.
(b) The representations and warranties of the Buyers set forth in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same force and effect as if such representations and warranties
were made as of the Closing Date.
<PAGE> 25
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(c) Sellers shall have received an opinion of Testa, Hurwitz & Thibeault,
LLP dated the Closing Date substantially in the form attached hereto as EXHIBIT
D.
(d) Sellers shall have received such closing documents as it may reasonably
request, all in form and substance reasonably satisfactory to Sellers.
(e) The Buyers and the Sellers shall mutually agree on the amount of funds
that GDLP shall distribute to its employee, excluding Mr. Couvillon, as a
performance bonus at the Closing Date.
(f) Mr. Couvillon shall enter into an employment, non-compete and
confidentiality agreement prior to the Closing Date. Such agreement is attached
as EXHIBIT B.
(g) Mr. Johnson shall enter into a consulting, non-compete and
confidentiality agreement prior to the Closing Date. Additional consulting
services required, if any, will be negotiated with Mr. Johnson who will make his
best efforts to provide such services. Such agreement is attached as EXHIBIT C.
ARTICLE VII
TERMINATION
SECTION 7.01. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Effective
Time:
(i) by written mutual consent of Parent and the Sellers for any reason;
(ii) at the option of Parent, by written notice from Parent to the Sellers
if (i) a material breach by the Sellers of any of their respective
representations, warranties or agreements contained in this Agreement occurs,
(ii) Parent has notified the Sellers in writing of the existence of such breach,
and (iii) the Sellers have failed to cure such breach within 10 days after
receiving such notice (or if such breach is not capable of being cured within
such 10 day period, but is capable of being cured within 30 days, the breaching
party shall have commenced good faith steps to promptly cure such breach);
(iii) at the option of the Sellers, by written notice from the Sellers to
Parent if (i) a material breach by Parent, Superior or GDI of any of their
representations, warranties or agreements contained in this Agreement occurs,
(ii) the Sellers have notified Parent, Superior and GDI in writing of the
existence of such breach, and (iii) Parent, Superior and GDI have failed to cure
such breach within 10 days after receiving such notice (or if such breach is not
capable of
<PAGE> 26
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being cured within such 10 day period, but is capable of being cured within 30
days, the breaching party shall have commenced good faith steps to promptly cure
such breach);
(iv) by either Parent or the Sellers if a court of competent jurisdiction
or governmental, regulatory or administrative agency shall have issued an order,
decree or ruling or taken any other action, in each case having the effect of
prohibiting the Agreement (provided that the right to terminate this Agreement
under this Section 7.01(d) shall not be available to any party who has been the
primary cause of the issuance of any such order, decree or ruling or the taking
of such action);
(v) at the option of Parent, by Parent if there shall have occurred any
change having a Material Adverse Effect on the Business prior to Closing;
(vi) by Parent, if the results of Parent's due diligence investigation of
the Business prove unsatisfactory in any material respect; or
(vii) at the option of the Sellers, by the Sellers if there shall have
occurred any change having a Material Adverse Effect on Parent prior to Closing.
SECTION 7.02. EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 7.01, such termination shall be without liability of any
party (or any director, officer, partner, employee, shareholder, agent,
consultant or representative of such party) to any other party to this
Agreement; PROVIDED that if such termination shall result from the failure of a
party to fulfill a condition to the performance of the obligations of another
party or to perform a covenant of this Agreement or from breach by any party to
this Agreement, such party shall be fully liable for any and all losses incurred
or suffered by the other party as a result of such failure or breach. The
provisions of Section 9.02 and the provisions relating to confidentiality
contained in Section 4.05 shall survive any termination hereof pursuant to
Section 7.01.
ARTICLE VIII
SURVIVAL, INDEMNIFICATION
SECTION 8.01. SURVIVAL. The covenants, agreements, representations and
warranties of the Sellers and Buyers contained in this Agreement shall survive
the Closing until one year from Closing; PROVIDED, HOWEVER, that the covenants,
agreements, representations and warranties set forth in Section 2.17 of this
agreement shall survive until the applicable statutes of limitation with respect
to Taxes shall have expired. The representations and warranties of the Sellers
made in Sections 2.05 and 2.16 shall survive the Closing until the release by
Parent of the combined audited financial statement of Parent and GDLP.
Notwithstanding the preceding sentences, any covenant, agreement, claim,
representation or warranty in respect of which a claim of indemnity may be
sought under Section 8.02 or Section 8.03 shall survive the time at which it
would otherwise terminate pursuant to the preceding sentences, if notice of the
inaccuracy or breach thereof giving rise to such right to a claim of indemnity
shall have been given to the party against
<PAGE> 27
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whom such indemnity may be sought prior to such time and any obligation of
indemnity shall survive until such claim of indemnity is resolved.
SECTION 8.02. INDEMNIFICATION BY THE SELLERS. The Sellers shall indemnify
and hold the Buyers harmless against:
(i) all damages, losses, obligations, liabilities, claims, actions or
causes of action sustained or suffered by the Buyers and arising out of or in
connection with (i) a breach of any representation, warranty or agreement of the
Sellers contained in or made pursuant to this Agreement, (ii) tax liabilities
and obligations retained by the Business; or (iii) any Excluded Liabilities; and
(ii) all reasonable costs, expenses or settlement payments (including,
without limitation, reasonable attorneys', accountants' and other professional
fees) incurred by the Buyers in connection with any action, suit, proceeding,
demand, assessment or judgment incident to any of the matters indemnified
against under this Section 8.02 or incurred in the enforcement of such
indemnification.
SECTION 8.03. INDEMNIFICATION BY THE BUYERS. (a) The Buyers shall indemnify
and hold the Sellers harmless against all damages, losses, obligations,
liabilities, claims, actions or causes of action sustained or suffered by the
Sellers and arising out of or in connection with (i) any of the Assumed
Contracts or Assumed Liabilities, (ii) a breach of any representation, warranty
or agreement of the Buyers contained in or made pursuant to this Agreement,
(iii) the operations of the Buyers with the respect to GDLP from and after the
Closing Date (except where such damages, losses, obligations, liabilities,
claims, actions or causes of actions arise in connection with events or
circumstances occurring prior to Closing).
(b) The Buyers shall indemnify the Sellers for all reasonable costs,
expenses or settlement payments (including, without limitation, reasonable
attorneys', accountants' and other professional fees) incurred by the Sellers in
connection with any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against under this Section 8.03 or
incurred in the enforcement of such indemnification.
SECTION 8.04. PROCEDURE FOR THIRD PARTY CLAIMS. The obligations and
liabilities of the Indemnifying Party (as hereinafter defined) under Section
8.04 with respect to claims resulting from the assertion of liability by third
parties (including governmental penalties, fines and assessments) shall be
subject to the following terms and conditions:
(a) The party claiming indemnification (the "INDEMNIFIED PARTY") shall give
prompt written notice to the other party (the "INDEMNIFYING PARTY") of any
assertion of liability by a third party which might give rise to a claim by the
Indemnified Party against the Indemnifying Party based on the indemnity
agreements contained in Section 8.02 and 8.03. Such notice shall comply with the
provisions of Section 9.09; PROVIDED that failure to give notice under this
Section 8.04 (a) shall not relieve the Indemnifying Party from its obligation
pursuant to this Section 8.04 unless the failure to give timely notice adversely
prejudices the rights of the
<PAGE> 28
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Indemnifying Party to settle, dismiss or otherwise satisfy any damages, losses,
obligations, liabilities, claims, actions or causes of action to be indemnified
pursuant to this Section 8.04;
(b) In the event any claim, action, suit or proceeding (a "LEGAL ACTION")
is brought or made against an Indemnified Party, with respect to which the
Indemnifying Party may have liability under an indemnity agreement contained in
Section 8.02 or 8.03, the Legal Action shall, upon the written agreement of the
Indemnifying Party that it is obligated to indemnify under such an indemnity
agreement, be defended (and such defense shall include all proceedings on appeal
or for review which counsel for the Indemnifying Party shall deem appropriate)
by the Indemnifying Party. Such defense shall be conducted totally within the
control and discretion of the Indemnifying Party. The Indemnified Party shall
have the right to be represented by counsel and accountants, at its own expense,
and the Indemnified Party shall be kept fully informed as to such Legal Action
at all stages thereof whether or not it is represented. If the Indemnifying
Party does not agree that it is obligated to indemnify under Section 8.02 or
Section 8.03 with respect to a Legal Action, it shall nevertheless have the
right to be represented by counsel and accountants, at its own expense, and the
Indemnifying Party shall be kept fully informed as to such Legal Action at all
stages thereof whether or not it is so represented. Until the Indemnifying Party
shall have so assumed the defense of any Legal Action, all legal or other
expenses reasonably incurred by the Indemnified Party shall be borne by the
Indemnifying Party to the extent an obligation to indemnify exists under Section
8.02 or 8.03. The Indemnifying Party shall make available to the Indemnified
Party and its attorneys and accountants all books and records of the
Indemnifying Party relating to such Legal Action and the parties hereto agree to
render to each other such assistance as they may reasonably require of each
other in order to facilitate the proper and adequate defense of any such Legal
Action;
SECTION 8.05. LIMITATIONS ON INDEMNITY. (a) Neither party shall be
obligated to make any payments to the other party under Section 8.02 or 8.03
except to the extent that the aggregate amount of the damages, losses,
obligations, liabilities, costs and expenses indemnified under Section 8.02 or
8.03 exceeds $30,000 and only for those amounts in excess of such $30,000
aggregate amount.
(b) Neither party shall have any liability for any particular claim under
Section 8.02 or 8.03 unless notified of such claim on or before the date one (1)
year after the Closing Date.
(c) The liability of either party to indemnify the other under Sections
8.02 or 8.03 shall be limited, in the aggregate, to a maximum reimbursement
equal to $1,200,000.
(d) Neither party shall be liable to the other party for any liability,
loss, cost or expense (including reasonable attorneys' fees) that is actually
received from any other Person through rights of indemnity, contribution,
insurance or otherwise.
SECTION 8.06 LIMITATION ON THE PERSONAL LIABILITY OF MR. COUVILLON. The
personal liability of Mr. Couvillon, as a Seller shall be limited as follows:
<PAGE> 29
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(i) initially Mr. Couvillon's liability shall be limited to 50% of his
respective pro rata share of the Purchase Price (as that term is defined in
Section 1.05 in this Agreement) based upon his ownership interest as a limited
partner of GDLP, and his respective ownership interest of the General Partner's
general partnership interest of GDLP;
(ii) upon completion of the Closing Balance Sheet and the Closing Financial
Statements, Mr. Couvillon's liability will be reduced to 37.5% of his respective
pro rata share of the Purchase Price; and
(iii) upon the passing of six months from the Closing Date, his liability
will be reduced to 25% of his respective pro rata share of the Purchase Price.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. SPECIFIC PERFORMANCE. Each of the parties to this Agreement
hereby acknowledges that the other parties will have no adequate remedy at law
if it fails to perform any of its obligations under this Agreement. In such
event, each of the parties agrees that the other parties shall have the right,
in addition to any other rights it may have (whether at law or in equity), to
specific performance of this Agreement, except as set forth to the contrary
herein.
SECTION 9.02. EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense.
SECTION 9.03. FURTHER ASSURANCES. If at any time after the Closing, Buyers
or Sellers shall consider it advisable that any further conveyance, agreements,
documents or instruments or any other things are necessary or desirable to vest,
perfect, confirm or record in the Buyers, the title to any property, rights,
privileges, powers and franchises of the Business, Sellers or Buyers shall
execute and deliver, upon Buyers' or Sellers' reasonable request, any and all
proper conveyances, agreements, documents and instruments, and do all things
necessary or proper to vest, perfect, confirm or record title to such property,
rights, privileges, powers and franchises in the Buyers, and otherwise to carry
out the provisions of this Agreement.
SECTION 9.04. PARTIES IN INTEREST. All the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors and permitted assigns of the parties
hereto. Nothing expressed or implied in this Agreement is intended to or shall
be construed to confer upon or give any Person other than the parties hereto,
their permitted successors or assigns, and their respective sellers any rights
or remedies under or by reason of this Agreement or any transaction contemplated
hereby or thereby.
SECTION 9.05. ENTIRE AGREEMENT. This Agreement together with the Exhibits
and Schedules thereto, supersede any other agreement, whether written or oral,
that may have been
<PAGE> 30
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made or entered into by the Buyers and Sellers (or by any officers, directors,
partners or employees of any of such parties) relating to the matters
contemplated hereby. This Agreement together with the Exhibits and Schedules
thereto, constitute the entire agreement by the parties, and there are no
agreements or commitments except as set forth herein or therein.
SECTION 9.06. AMENDMENT OR MODIFICATION. This Agreement may be amended only
with the written consent of the Buyers and Sellers.
SECTION 9.07. WAIVER. Any party to this Agreement may, by written notice to
the other parties to this Agreement, (i) extend the time for the performance of
any of the obligations or other actions of the other parties for its benefit
under this Agreement; (ii) waive any inaccuracies in the representations or
warranties of the other parties made to it, contained in this Agreement; (iii)
waive compliance with any of the conditions or covenants of the other parties
for its benefit contained in this Agreement; or (iv) waive or modify performance
of any of the obligations of the other parties for its benefit under this
Agreement. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement including any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants, conditions or
agreements contained in this Agreement. The failure of any party hereto to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or thereof or the right of such
party thereafter to enforce each and every such provision. No waiver of any
breach of or non-compliance with this Agreement shall be held to be a waiver of
any other or subsequent breach or non-compliance.
SECTION 9.08. ASSIGNABILITY. Neither this Agreement nor any rights
hereunder shall be assignable without the consent of the non-assigning party
except that Parent can assign to a different wholly-owned subsidiary without
consent of Sellers.
SECTION 9.09. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be delivered by hand or overnight
courier service, mailed or sent by graphic scanning or other telegraphic
communications equipment of the sending party. A party may change its address
for purposes of receiving notices by giving notice of said change of address in
the manner provided for herein. Notices of change of address shall only be
effective upon receipt. All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement shall be deemed to
have been given on the date of receipt if delivered by hand or overnight courier
service or sent by facsimile, or on the date five business days after dispatch
by certified or registered mail if mailed, in each case delivered, sent or
mailed (properly addressed) to such party.
SECTION 9.10. CHOICE OF LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law thereof.
<PAGE> 31
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SECTION 9.11. INVALIDITY OF PROVISIONS. Each of the provisions contained in
this Agreement is distinct and severable and a declaration of invalidity or
unenforceability of any such provision or part thereof by a court of competent
jurisdiction shall not affect the validity or enforceability of any other
provision hereof or thereof.
SECTION 9.12. ATTORNEY'S FEES. The prevailing party in any legal action or
arbitration arising out of this Agreement shall be entitled to its attorneys'
fees and costs.
SECTION 9.13. RESOLUTIONS OF CONFLICTS; ARBITRATION. The following
provisions shall apply with respect to the assertion of claims and the
indemnification provisions of Article VIII.
(a) The Sellers and Parent shall attempt promptly and in good faith to
agree upon the rights of the parties with respect to any disputed claims. If the
Sellers and the Parent should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and the Sellers or Parent
or GDI, as the case may be, shall satisfy the claim in accordance with the terms
thereof.
(b) Any dispute or controversy concerning the indemnity obligations of
Article VIII not agreed to by the parties pursuant to Section 9.14(a) shall be
resolved in good faith by mediation among the Sellers and the senior executive
officers of Parent. If such dispute can not be resolved by mediation within 30
days, then except for the right of either party to apply to a court of competent
jurisdiction for a temporary restraining order, preliminary injunction, or other
equitable relief to preserve the status quo or prevent irreparable harm pending
the selection and confirmation of an arbitrator, any continuing dispute,
controversy or claim arising out of, in connection with, or in relation to the
indemnity obligations under Article VIII shall be settled by arbitration in
accordance with Section 9.14(c) below.
(c) If no agreement can be reached after good faith attempts pursuant to
Section 9.14(a) and 9.14(b), either Parent or the Sellers may demand arbitration
of the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to arbitration; and in
any such event the matter shall be settled by arbitration conducted by a single
arbitrator mutually agreeable to the Sellers and the Parent, or if a single
arbitrator cannot be agreed to by the parties within thirty (30) days, then by
three arbitrators. In the event of three arbitrators, Parent and the Sellers
shall each select one arbitrator, and the two arbitrators so elected shall
select a third arbitrator. The decision of the arbitrators so selected as to the
validity and amount of any claim in dispute shall be binding and conclusive upon
the parties to this Agreement, and the parties shall act in accordance with such
decision and satisfy any such claim in accordance therewith. Judgment upon any
award rendered by the arbitrators may be entered in any court having
jurisdiction. Any such arbitration shall be held in Atlanta, Georgia. Any such
arbitration shall be conducted under the rules then in effect of the American
Arbitration Association, and shall be based on the provisions and limitations of
Article VIII. Notwithstanding anything contained herein to the contrary, no
claim for Damages, may be made until such claim is finally resolved pursuant to
the process and procedures set forth above in this Section.
<PAGE> 32
ASSET PURCHASE AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly executed
and delivered by the parties on the date first above written.
<TABLE>
<CAPTION>
BUYERS: SELLERS:
<S> <C>
DynaGen, Inc. Generic Distributors Limited Partnership
(a Delaware corporation) (a Louisiana limited partnership)
By: /S/ DHANANJAY G. WADEKAR By: /S/ GENERIC DISTRIBUTORS LIMITED PARTNERSHIP
------------------------ ------------------------- -------------------
Title: Dhananjay G. Wadekar By: Donald Couvillon
Chairman of the Board and
Executive Vice President
Superior Pharmaceutical Company United Pharmacists, Inc.
(an Ohio corporation, and subsidiary of (a Louisiana corporation)
DynaGen, Inc.)
By: /S/ DONALD COUVILLON
By: /S/ ERIC HAGERSTRAND --------------------
-------------------- Title: President
Title: Treasurer
Generic Distributors Incorporated /S/ DONALD COUVILLON
(a Delaware corporation, and subsidiary of --------------------
Superior Pharmaceutical Company.) Mr. Don Couvillon, Individually
By: /S/ DHANANJAY WADEKAR
---------------------
Title: Executive Vice President
</TABLE>
<PAGE> 1
EXHIBIT 2.2
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
Amendment No. 1 dated as of February 26, 1998, to the Asset Purchase
Agreement dated as of December 15, 1997 (the "ASSET PURCHASE AGREEMENT") by and
among DynaGen, Inc., a Delaware corporation ("PARENT") and Superior
Pharmaceutical Company, an Ohio Corporation and a wholly-owned subsidiary of
Parent ("SUPERIOR"), Generic Distributors Incorporated, a Delaware corporation
and a wholly owned subsidiary of Superior ("GDI" and, collectively with Parent
and Superior, the "BUYERS") and Generic Distributors Limited Partnership, a
Louisiana limited partnership ("GDLP"); United Pharmacists, Inc., a Louisiana
corporation and general partner of GDLP (the "GENERAL PARTNER") and Mr. Don
Couvillon ("MR. COUVILLON") (collectively with GDLP, the General Partner, and
Mr. Couvillon, the "SELLERS"). Terms used herein but not defined herein shall
have the meanings used in the Asset Purchase Agreement; and
WHEREAS, the parties desire to amend the Asset Purchase Agreement, the
Bill of Sale between Buyers and Sellers, the Employment Agreement of Mr.
Couvillon and the Consulting Agreement of Mr. Johnson (collectively, the
"Operative Documents") and reconfirm their obligations under the Asset Purchase
Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the adequacy of which is hereby acknowledged, the parties
hereby specifically amend the Asset Purchase Agreement and Operative Documents
as set forth below:
1. PARTIES TO THE AGREEMENT. Superior will hereby cease to be a party
to the Asset Purchase Agreement and any all representations, warranties,
covenants, obligations and Conditions to Closing previously applicable to
Superior will hereby cease to exist, and Superior shall be relieved and
discharged of any and all obligations under the Asset Purchase Agreement and
Operative Documents. Any and all references to Superior in the Asset Purchase
Agreement and Operative Documents are hereby removed. Furthermore, as a result
of a corporate reorganization, GDI shall be recognized as a wholly owned
subsidiary of Parent. Any and all references to GDI's status as a wholly owned
subsidiary of Superior are hereby revised to reflect GDI's status as a
wholly-owned subsidiary of Parent.
2. PURCHASE PRICE. (a) Paragraph (a) of Section 1.05 Purchase Price, is
hereby amended by renumbering (iii) to (iv) and inserting the following
immediately before the newly numbered (iv): "(iii) 1,500 shares of Series F
Convertible Preferred Stock of the Parent (the "SERIES F PREFERRED") which is
convertible into $100,000 in value of Common Stock of the Parent commencing 120
days from the Closing Date," The amended paragraph shall read as follows:
"(a) The purchase price for the Purchased Assets (the "PURCHASE PRICE")
is (i)$1,200,000 in cash, and (ii) $1,050,000 in Series E Convertible Preferred
Stock of the Parent (the "SERIES E PREFERRED") which is convertible into Common
Stock of the Parent after twelve (12) months from the Closing Date, (iii) 1,500
shares of Series F Convertible Preferred Stock of the Parent (the "SERIES F
PREFERRED"), which is convertible into $100,000 in value of Common Stock of the
Parent commencing 120 days
<PAGE> 2
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from the Closing; and (iv) the assumption of the Assumed Liabilities. The
Purchase Price shall be paid as provided in Section 1.07."
b. Paragraph (b) of Section 1.05 Purchase Price, is hereby amended by
striking both references to $1,617,000 in the first sentence of paragraph (b)
and replacing such number with $1,717,000. The amended paragraph shall read as
follows:
"(b) Buyers and Sellers hereby agree that if the total amount of
Partners' Equity (as determined according to Section 1.08) on the
Closing Date is less than $1,717,000, the cash payment of the Purchase
Price from Buyers to Sellers will be reduced on a dollar- for-dollar
basis for each dollar amount of Partners' Equity below $1,717,000. The
Sellers will be responsible for paying to Buyers any refundable
difference in cash within three (3) business days after the Closing
Audit contemplated under Section 1.08."
c. Paragraph (c) of Section 1.05 Purchase Price, is hereby amended by
striking both references to $1,617,000 in the first sentence of paragraph (c)
and replacing such number with $1,717,000. The amended paragraph shall read as
follows:
"(c) Buyers and Sellers hereby agree that if the total amount of
Partners' Equity in GDLP on the Closing Date is greater than
$1,717,000, all dollar amounts in excess of $1,717,000 will be refunded
directly to GDLP as additional consideration for the purchase of the
Business. The refund contemplated under this section shall be paid as
follows: (i) in cash, to the extent that the Closing Balance Sheet (as
determined by the Closing Audit contemplated under Section 1.08)
represents a cash balance in excess of $300,000, each dollar above
$300,000 shall be paid in cash within three (3) business days of the
completion and delivery of the Closing Financial Statement (as that
term is definedin Section 1.08) to eliminate the refund due the Sellers
if any, and (ii) to the extent ththe cash amount in (i) is insufficient
to satisfy the total refund due, any excess amount owed the Sellers
will be paid by the Buyers in cash no later than 105 days after the
Closing Date (as that term is defined in Section 1.07)."
d. Paragraph (d) of Section 1.05 Purchase Price, is hereby amended by
inserting "or Series F Preferred" after Series E Preferred. The amended
paragraph shall read as follows:
"(d) Buyers and Sellers hereby agree that none of the shares of Series
E Preferred or Series F Preferred to be transferred from the Parent to
the Sellers (under Section 1.05 (a)) may be distributed as either
Preferred Stock or Common Stock to the Limited Partners of GDLP. Only
proceeds from the sale of the Parent's Common Stock may be distributed
to the Limited Partners of GDLP."
e. Section 1.05 Purchase Price, is hereby amended by inserting new
paragraph (e) after paragraph (d). The new paragraph shall read as follows:
Amendment No. 1 to asset Purchase Agreement
<PAGE> 3
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"(e) Buyers and Sellers hereby agree that if all of the shares of
Series E Preferred are converted by GDLP in accordance with the
Certificate of Designations, Preferences and Rights of Series E
Preferred Stock, as such document was filed with the Secretary of State
of Delaware on December 15, 1997 (the "Series E CERTIFICATE OF
DESIGNATION"), and the Stockholder's Total Value Account (as that term
is defined in the Series E Certificate of Designation) does not equal
$1,050,000, after all of the shares of Series E Preferred have been
converted into Common Stock of the Parent and the Common Stock issued
upon conversion has subsequently been sold or held in excess of five
(5) trading days by GDLP, then the difference between the Stockholder's
Total Value Account after all such conversions and $1,050,000 shall be
equal to a dollar amount referred to as the "DEFICIENCY IN NET
PROCEEDS." In the event that such a Deficiency in Net Proceeds shall
arise, Buyers agree that in order to reduce the dollar amount of the
Deficiency in Net Proceeds to a dollar amount equal to zero, additional
shares of Series F Preferred shall be issued to the Sellers. The shares
of Series F Preferred issued in accordance with this section shall be
immediately convertible into Common Stock of the Parent in accordance
with the Certificate of Designations, Preferences and Rights of Series
F Preferred Stock, as such document was filed with the Secretary of
State of Delaware on February 27, 1998 (the "SERIES F CERTIFICATE OF
DESIGNATION"). The number of shares of Series F Preferred to be issued
by Buyers to Sellers to reduce the Deficiency in Net Proceeds to a
dollar amount equal to zero shall be determined as follows: (i) Buyers
shall initially issue an additional 100 shares of Series F Preferred to
Sellers (the "ADDITIONAL SERIES F SHARES"); (ii) Sellers may then
convert the Additional Series F Shares into Common Stock of the Parent
according to the terms of the Series F Certificate of Designation and
such conversions shall be appropriately reflected in the GDLP
Deficiency in Net Proceeds Total Value Account (as such term is defined
in the Series F Certificate of Designation); (iii) when the dollar
amount of the GDLP Deficiency in Net Proceeds Total Value Account is
equal to (or greater than) the dollar amount of the Deficiency in Net
Proceeds, any unconverted Additional Series F Shares will be
automatically canceled by Parent without consideration; (iv) in the
event that all 100 shares of the Additional Series F Shares are
converted and the dollar amount of the GDLP Deficiency in Net Proceeds
Total Value Account is still not equal to (or greater than) the dollar
amount of the Deficiency in Net Proceeds, the Buyers shall repeat the
provisions of (i), (ii), (iii) and (iv) of this paragraph. Once the
dollar amount of the GDLP Deficiency in Net Proceeds Total Value
Account is equal to (or greater than) the dollar amount of the
Deficiency in Net Proceeds, any unconverted Additional Series F Shares
will be automatically canceled by Parent without consideration. The
Additional Series F Shares issued in accordance with this section, at
the time of issuance will be duly authorized, validly issued, fully
paid and nonassessable and will not be subject to preemptive rights."
3. ALLOCATION OF PURCHASE PRICE. Section 1.06 Allocation of Purchase
Price, is hereby amended by striking $2,250,000 and inserting $2,350,000 in its
place, and further by striking $1,617,000 and inserting $1,717,000 in its place.
The amended section shall read as follows:
Amendment No. 1 to asset Purchase Agreement
<PAGE> 4
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"The Purchase Price shall be allocated among the Purchased Assets in a
reasonable manner (in order to reduce the valuation assigned to
goodwill) between the payment for the assets of the Business and
assumption of stated liabilities of the Business and for the consulting
and the non-compete agreements to be signed by Mr. Couvillon and Mr.
Johnson at the Closing. The amount of the Assumed Liabilities will not
cause an adjustment of the $2,350,000 Purchase Price, provided GDLP
maintains the Partners' Equity requirement of $1,717,000 as provided in
Section 1.05."
4. CLOSING. Section 1.07 Closing, is hereby amended by striking "on
December 16, 1997" in paragraph (a) and replacing it with "at the time of
Closing." The amended paragraph shall read as follows:
"(a) Buyers shall pay the Purchase Price of $1,200,000 in cash at the
time of Closing by a certified or official bank check payable to the
order of Generic Distributors LimitedPartnership, or if Buyers receive
wire transfer instructions at least two business days prior to the
Closing, send wire transfers of $1,200,000 to an account specified by
the Sellers."
b. Paragraph (b) of Section 1.07 Closing, is hereby amended inserting
"(with the exception of the Series F Preferred Stock, in which case the Series E
will be on a parity with the Series F Preferred Stock), provided however that
Parent shall not create or designate a series of preferred stock senior to the
Series E Preferred Stock if the sole purpose of such new series of preferred
stock is the acquisition of the capital stock or assets of another corporation
in any business combination. Parent may create or designate a new series of
preferred stock senior to or on a parity with the Series E Preferred Stock if
the purpose of such new series of preferred stock is a financing for working
capital obligations and general corporate purposes." after "currently
outstanding or issued in the future" in the seventh sentence. Paragraph (b) of
Section 1.07 Closing is hereby further amended by striking the parenthetical
"(if sold within 2 days of conversion)" in the eighth sentence and replacing it
with "(if sold within five (5) days of conversion)." The amended paragraph shall
read as follows:
"(b) Buyers shall deliver one stock certificate representing the shares
of Series E Preferred to the Sellers in the name of Generic
Distributors Limited Partnership. None of the shares of Series E
Preferred to be transferred from the Parent to the Sellers may be
distributed as either Preferred Stock or Common Stock to the Limited
Partners of GDLP. Only proceeds from the sale of the Parent's Common
Stock may be distributed to the Limited Partners of GDLP. The Series E
Preferred may be converted into Common Stock of the Parent after twelve
(12) months from the Closing Date. No more than $42,000 of the
preferred stock may be converted in any five (5) business days. The
Conversion price will be based on the average closing bid price of
Common Stock of the Parent as reported by NASDAQ over the three (3) day
trading period prior to conversion. GDLP may decide to sell the Common
Stock immediately or hold the shares as an investment. However, when
net proceeds from the sale of the Common Stock (if sold within five (5)
days of conversion) and conversion value of the unsold Common Stock
equals $1,050,000, the remaining convertible shares held by GDLP will
be canceled. The shares of Series E Preferred will rank higher than
shares of Common Stock in liquidation
Amendment No. 1 to asset Purchase Agreement
<PAGE> 5
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preference, but will rank lower than any other series of preferred
stock of Parent currently outstanding or issued in the future (with the
exception of the Series F Preferred Stock, in which case the Series E
will be on a parity with the Series F Preferred Stock), provided
however that Parent shall not create or designate a series of preferred
stock senior to the Series E Preferred Stock if the sole purpose of
such new series of preferred stock is the acquisition of the capital
stock or assets of another corporation in any business combination.
Parent may create or designate a new series of preferred stock senior
to or on a parity with the Series E Preferred Stock if the purpose of
such new series of preferred stock is a financing for working capital
obligations and general corporate purposes. Preferred shares will not
carry dividends and will be non-transferable. The terms of the Series E
Preferred Stock are set forth on EXHIBIT E.
c. Section 1.07 Closing, is hereby amended by relettering paragraphs
(c) and (d) to become paragraphs (d) and (e) respectively; the following shall
be inserted immediately before the newly lettered paragraphs (d) and (e):
"(c) Buyers shall deliver one stock certificate representing the shares
of Series F Preferred to the Sellers in the name of Generic
Distributors Limited Partnership. None of the shares of Series F
Preferred to be transferred from the Parent to the Sellers may be
distributed as either Preferred Stock or Common Stock to the Limited
Partners of GDLP. Only proceeds from the sale of the Parent's Common
Stock may be distributed to the Limited Partners of GDLP. The Series F
Preferred may be converted into Common Stock of the Parent any time
after June 25, 1998. No more 200 shares of the Series F Preferred Stock
may be converted in any five (5) business days. The Conversion price
will be based on the average closing bid price of Common Stock of the
Parent as reported by NASDAQ over the three (3) day trading period
prior to conversion. GDLP may decide to sell the Common Stock
immediately or hold the shares as an investment. However, when net
proceeds from the sale of the Common Stock (if sold within five (5)
days of conversion) and conversion value of the unsold Common Stock
equals $100,000, the remaining convertible shares held by GDLP (with
the exception of any Additional Shares of Series F issued pursuant to
Section 1.05(e)) will be canceled. The shares of Series F Preferred
will rank higher than shares of Common Stock in liquidation preference,
but will rank lower than any other series of preferred stock of Parent
currently outstanding or issued in the future (with the exception of
the Series E Preferred Stock, in which case the Series F Preferred
Stock will be on a parity with the Series E Preferred Stock), provided
however that Parent shall not create or designate a series of preferred
stock senior to the Series F Preferred Stock if the sole purpose of
such new series of preferred stock is the acquisition of the capital
stock or assets of another corporation in any business combination.
Parent may create or designate a new series of preferred stock senior
to or on a parity with the Series F Preferred Stock if the purpose of
such new series of preferred stock is a financing for working capital
obligations and general corporate purposes. The Series F Preferred
Stock will not carry dividends and will be non-transferable. The terms
of the Series F Preferred Stock are set forth on EXHIBIT H."
Amendment No. 1 to asset Purchase Agreement
<PAGE> 6
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5. CLOSING AUDIT AND ADJUSTMENTS. Paragraph (a) of Section 1.08 Closing
Audit and Adjustments, is hereby amended by striking both references to
"November 25, 1997" and replacing both with "the Closing Date." Furthermore,
Section 1.08 Closing Audit and Adjustments is hereby amended by striking both
references to $1,617,000 in the second sentence of paragraph (a) are replacing
such number with $1,717,000. The amended paragraph shall read as follows:
"(a) The Sellers, in good faith, have prepared an estimate of the
Closing Balance Sheet as of the Closing Date (the "ESTIMATED CLOSING
BALANCE SHEET"), and an estimate of the Closing Statement of Partners'
Equity as of the Closing Date (the "ESTIMATED CLOSING STATEMENT OF
PARTNERS' EQUITY") utilizing the books and records of GDLP and the
taking of a physical inventory, in accordance with generally accepted
accounting principles. If the Partners' Equity of GDLP as set forth on
the Estimated Closing Statement of Partners' Equity reflects (i)
Partners' Equity of less than $1,717,000 as of the Closing Date, the
Purchase Price shall be reduced, dollar for dollar, by an amount equal
to such shortfall, or(ii) Partners' Equity of more than $1,717,000 as
of the Closing Date, the Purchase Price shall be increased, dollar for
dollar, by an amount equal to such excess. Any increase in the Purchase
Price will be paid to the Sellers in the manner explained in Section
1.05(c)."
b. Paragraph (c) of Section 1.08 Closing Audit and Adjustments, is
hereby amended by striking "with an appropriate adjustment made to reflect a
"roll back" to the Closing Date to be used in creating the Closing Financial
Statements." and replacing it with "with an appropriate adjustment made to
reflect a "roll forward to the Closing Date to be used in creating the Closing
Financial Statements." The amended paragraph shall read as follows:
"(c) The scope of the audit and the procedures to be followed shall be
agreed upon by Wolfe, Sellers and Buyers prior to the commencement of
field work. The audit is to be made as of December 31, 1997 with an
appropriate adjustment made to reflect a "roll forward" to the Closing
Date to be used in creating the Closing Financial Statements. Buyers
and its accountants shall be provided with all information used to
value or record items on the Closing Financial Statements and have the
right to witness or participate inthe taking and pricing of the
physical inventory. In addition, Buyers and its accountantsshall have
full access to review the work papers of Wolfe, and shall have access
to the books and records of the Sellers as shall be necessary in
connection with such audit simultaneously with the delivery of such
books and records to Wolfe."
d. Paragraph (e) of Section 1.08 Closing Audit and Adjustments, is
hereby amended by striking the reference to $1,617,000 in the first sentence of
paragraph (e) and replacing such number with $1,717,000. The amended paragraph
shall read as follows:
"(e) If the Partner's Equity of GDLP showing in the Closing Financial
Statements as finally determined in accordance with the above shall be
more or less than $1,717,000 (the shortfall or excess being referred to
as the "FINAL ADJUSTMENT"), Buyers or Sellers shall pay to each other,
within three (3) business days of the completion and delivery ofthe
Closing Financial Statements an amount necessary to reconcile the
Estimated
Amendment No. 1 to asset Purchase Agreement
<PAGE> 7
'
-7-
Adjustment and the Final Adjustments. Any payments contemplated under
this Section shall be paid according to Sections 1.05(b) and 1.05(c)."
6. SERIES F PREFERRED AUTHORIZATION. Article III representations and
Warranties of Parent and GDI is amended by adding Section 3.11 Series F
Preferred Authorization. The New Section shall read as follows:
"SECTION 3.11. SERIES F PREFERRED AUTHORIZATION. The shares of Series F
Preferred to be issued pursuant to this Agreement will, at the time of
Closing, be duly authorized, validly issued, fully paid and
nonassessable and will not be subject to preemptive rights."
7. SECURITIES REGISTRATION. Section 4.06 Securities Registration, is
hereby amended by inserting "or Series F Preferred" after "Series E Preferred"
in the first sentence of Section 4.06. The amended section shall read as
follows:
"The Parent shall use its best efforts to take all action as may be
required as a condition to the availability of Rule 144 under the
Securities Act (or any successor exemptive rule hereinafter in effect)
including but not limited to the timely filing of all reports required
to be filed pursuant to said Securities Act in order to permit the
sale, transfer or other disposition under Rule 144 with respect to such
Common Stock as is acquired upon conversion of the Series E Preferred
or Series F Preferred in accordance with thisagreement. The Buyers
shall furnish to any holder of registrable shares forthwith n
uporequest (i) a written statement by the Company as to its compliance
with the reporting requirements of Rule 144, (ii) a copy of the most
recent annual or quarterly report of theParent as filed with the SEC,
and (iii) such other reports and documents as a holder may reasonably
request in availing itself of any rule or regulation of the SEC
allowing a holder to sell any such registrable shares without
registration."
8. ESCROW OBLIGATION. Section 6.03 Conditions Applicable to the
Sellers, shall be amended by adding new paragraph (h) after paragraph (g). The
new paragraph (h) shall read as follows:
Sellers shall deposit the sum of $100,000 in a Cash Collateral Account
at Fleet National Bank in Boston, Massachusetts ("FLEET"). Such account is being
established to protect the Buyers against further liability arising under the
DEA judgment entered against GDLP on March 12, 1997 (the "DEA Judgment") wherein
GDLP was ordered to pay a civil penalty of $200,000 of which $196,000 was
suspended for five years from March 12, 1997. At the conclusion of the five year
judgment suspension period, the remaining balance in the Cash Collateral Account
shall become the property of GDI.
9. BILL OF SALE. Schedule D, the Bill of Sale between Sellers and
Buyers (the "Bill of Sale") is hereby amended by striking the reference to
December 15, 1997 in the first sentence of the first paragraph and the first
sentence of the second paragraph and replacing such date with "as of the Closing
Date." The Bill of Sale is further amended to remove DynaGen, Inc. as a party to
Amendment No. 1 to asset Purchase Agreement
<PAGE> 8
-8-
the Bill of Sale and any and all references to DynaGen, Inc. in the Bill of Sale
are hereby removed. The amended Bill of Sale shall read as follows:
"BILL OF SALE dated of the Closing Date, from Generic Distributors
Limited Partnership, United Pharmacists, Inc., and Mr. Don Couvillon
(collectively the "SELLERS") to Generic Distributors Incorporated
("GDI")( the "BUYERS").
WHEREAS, on the terms and subject to the conditions set forth in the
Asset Purchase Agreement dated as of the Closing Date between the
Sellers and the Buyers (the "Agreement"), the Sellers have agreed to
transfer to the Buyers, and the Buagreed to purchase and acquire, all
of the Sellers' rights, title and interest in and tsubstantially all of
the Sellers' assets relating to the Business (as defined in the
Agreement), as further specified in the Agreement and the exhibits
thereto (the "PURCHASED ASSETS")."
10. COUVILLON EMPLOYMENT AGREEMENT. Exhibit A to Exhibit B of the Asset
Purchase Agreement (the "Couvillon Employment Agreement") is hereby amended by
striking the sentence "You will receive as a signing bonus 100,000 shares of
Common Stock of DynaGen, Inc. paid at the Closing." in the second paragraph and
replacing it with "You will receive at the Closing, as a signing bonus, 700
shares of Series F Convertible Preferred Stock of DynaGen, Inc., which is
convertible into $50,000 in value of Common Stock of DynaGen, Inc. commencing
120 days from the Closing." Exhibit A to Exhibit B of the Asset Purchase
Agreement is hereby further amended by adding "(such bonus may be payable in
Common Stock of DynaGen, Inc. at your option)." to the third sentence of
paragraph 2. The amended Exhibit A to the Couvillon Employment Agreement shall
read as follows:
"2. COMPENSATION. Your Base Salary shall be $110,000 per annum payable
at the rate of $9,166.66 per month. The salary shall be reviewed, but
not reduced, by GDI's Board of Directors on each anniversary date of
this Agreement or at any intermediate stage in the discretion of the
Board. You will receive a bonus of $25,000 to be paid in cash one
hundred and twenty (120) days after the Closing of the Asset Purchase
Agreement (such bonus may be payable in Common Stock of DynaGen, Inc.
at your option). You will receive at the Closing, as a signing bonus,
700 shares of Series F Convertible Preferred Stock of DynaGen, Inc.,
which is convertible into $50,000 in value of Common Stock of DynaGen,
Inc. commencing 120 days from the Closing. You will receive additional
consideration of $33,333 per year (as separate and specific
consideration for undertaking the restrictive covenants contained in
the non-competition and non-solicitation subsections of Section 6 of
this Agreement) for each year of this agreement that you remain
employed by GDI and do not breach any agreement or undertaking
involving the Employee's covenants on non-competition,
non-solicitation, confidentiality and assignment of inventions."
Amendment No. 1 to asset Purchase Agreement
<PAGE> 9
-9-
11. JOHNSON CONSULTING AGREEMENT. Exhibit A to Exhibit C of the Asset
Purchase Agreement (the "Johnson Consulting Agreement") is hereby amended by
striking the sentence "You will receive as a signing bonus 100,000 shares of
Common Stock of DynaGen, Inc. paid at the Closing." in the second paragraph. The
removed sentence shall be replaced with "You will receive at the Closing, as a
signing bonus, 700 shares of Series F Convertible Preferred Stock of DynaGen,
Inc., which is convertible into $50,000 in value of Common Stock of DynaGen,
Inc. commencing 120 days from the Closing." The amended Exhibit A to the Johnson
Consulting Agreement shall read as follows:
"2. COMPENSATION. Your Base Salary shall be $4,166 per month. You will
receive at the Closing, as a signing bonus, 700 shares of Series F
Convertible Preferred Stock of DynaGen, Inc., which is convertible into
$50,000 in value of Common Stock of DynaGen, Inc. commencing 120 days
from the Closing. You will receive additional consideration of $33,333
per year (as separate and specific consideration for undertaking the
restrictive covenants contained in the non-competition and
non-solicitation subsections of Section 6 of this Agreement) for each
of the three (3) years after the Closing Date provided that you do not
breach any agreement or undertaking involving the covenants on
non-competition, non-solicitation, confidentiality and assignment of
inventions."
12. EXHIBIT H. The Asset Purchase Agreement is hereby amended by adding
Exhibit H, Certificate of Designations, Preferences and Rights of Series F
Preferred Stock.
Except as expressly set forth above, the Asset Purchase Agreement shall remain
in full force and effect and the parties hereby reconfirm their representations,
obligations and covenants as set forth in the Asset Purchase Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Amendment No. 1 to asset Purchase Agreement
<PAGE> 10
-10-
IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly
executed and delivered by the parties on the date first above written.
<TABLE>
<CAPTION>
<S> <C>
BUYERS: SELLERS:
DynaGen, Inc. Generic Distributors Limited Partnership
(a Delaware corporation) (a Louisiana limited partnership)
By: /s/ DHANANJAY G. WADEKAR By: /s/ GENERIC DISTRIBUTORS LIMITED PARTNERSHIP
------------------------ --------------------------------------------
Title: Dhananjay G. Wadekar
Chairman of the Board and By: Donald Couvillon
Executive Vice President
Superior Pharmaceutical Company United Pharmacists, Inc.
(an Ohio corporation, and subsidiary of (a Louisiana corporation)
DynaGen, Inc.)
By: /s/ ERIC HAGERSTRAND By: /s/ DONALD COUVILLON
-------------------- ---------------------
Title: Treasurer Title: President
Generic Distributors Incorporated /s/ DONALD COUVILLON
(a Delaware corporation, and subsidiary of Superior --------------------
Pharmaceutical Company.) Mr. Don Couvillon, Individually
By: /s/ DHANANJAY WADEKAR
----------------------
Title: Executive Vice President
</TABLE>
<PAGE> 1
EXHIBIT 4.1
FLEET NATIONAL BANK CREDIT AGREEMENT
- -------------------------------------------------------------------------------
This Credit Agreement is made as of the 26th day of February, 1998 by
and between:
Fleet National Bank (the "BANK"), a national banking
association having a principal place of business at One
Federal Street, Boston, Massachusetts 02110-2010;
Generic Distributors, Incorportated ("GDI"), a
corporation duly organized and existing under the laws of
the State of Delaware and having a principal place of
business at 1611 Olive Street, Monroe, Louisiana 71201;
DynaGen, Inc. ("DYNAGEN"), a corporation duly organized
and existing under the laws of the State of Delaware and
having a principal place of business at 840 Memorial
Drive, Cambridge, Massachusetts 02139; and
Able Laboratories, Inc. ("ABLE LABS"), a corporation duly
organized and existing under the laws of the State of
Delaware and having a principal place of business at 6
Hollywood Court, South Plainfield, New Jersey 07080;
(GDI, DynaGen and Able Labs are hereinater sometimes
collectively referred to herein as the "OBLIGORS", and
all such references to "Obligors" shall be to each of
GDI, DynaGen and Able Labs both singly and collectively
in each instance);
in consideration of the mutual covenants and benefits to be derived herefrom.
W I T N E S S E T H:
--------------------
SECTION 1. DEFINITIONS AND RULES OF INTERPRETATION
1.1 DEFINITIONS. All capitalized terms used in this Agreement or in any
certificate, report or other document made or delivered pursuant to this
Agreement (unless otherwise defined therein) shall have the meanings assigned to
them below.
AFFILIATE means any Subsidiary or any other person, corporation or other entity
which directly or indirectly controls, or is controlled by, or is
under common control with the Obligors or any Subsidiary.
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<PAGE> 2
AGREEMENT means this Credit Agreement.
ASSET PURCHASE AGREEMENT means that certain Asset Purchase Agreement dated
as of December 15, 1997, by and among Generic Distributors Limited
Partnership, a Louisiana limited partnership, United Pharmacists,
Inc., as general partner and being a Louisiana corporation, and
Donald Couvillon, as sellers and DynaGen and GDI, as buyers, as
amended from time to time.
AVAILABILITY means at any time the lesser of: (i) or (ii), below:
(i) up to (A) Three Hundred Thousand Dollars
($300,000.00), minus (B) the aggregate amounts then undrawn on
all outstanding letters of credit, acceptances, or any other
accommodations issued or incurred by the Bank for the account
and/or the benefit of GDI; or
(ii) up to the difference between: (A) the Borrowing
Base, minus (B) the aggregate outstanding Indebtedness owed to
the Bank under the Term Loan and the Line of Credit, minus (C)
the aggregate amounts then undrawn on all outstanding letters
of credit, acceptances, or any other accommodations issued or
incurred by the Bank for the account and/or the benefit of
GDI.
BUSINESS DAY means: (i) for all purposes other than as covered by clause (ii)
below, any day other than a Saturday, Sunday or legal holiday on
which banks in Boston, Massachusetts are open for the conduct of a
substantial part of their commercial banking business; and (ii) with
respect to all notices and determinations in connection with, and
payments of principal and interest on, a loan advance accruing
interest at a rate based on LIBOR, any day that is a Business Day
described in clause (i) and that is also a day for trading by and
between banks in U.S. Dollar deposits in the London interbank market.
BANKING DAY means, in respect of any date that is specified in this Agreement to
be subject to adjustment in accordance with the applicable Modified
Following Business Day Convention, a day on which commercial banks
settle payments in London.
BORROWING BASE means an amount equal to (A) eighty percent (80%) of the Eligible
Receivables, plus (B) thirty percent (30%) of the Eligible Inventory,
plus (B) one hundred percent (100%) of the Hard Assets.
BORROWING BASE CERTIFICATE means a borrowing base certificate executed by (and
by the President or chief financial officer of Able Labs as to the
Hard Assets) in substantially the form of EXHIBIT 1 annexed hereto.
CAPITAL ASSETS means assets that in accordance with GAAP are required or
permitted to be depreciated or amortized on a balance sheet.
CAPITAL LEASES means capital leases, conditional sales contracts and other title
retention agreements relating to the purchase or acquisition of
Capital Assets.
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<PAGE> 3
CONTRA ACCOUNT means any account receivable from an account debtor that can be
offset by a liability owed to such account debtor.
CONTROL shall be deemed to exist if any person, entity or corporation, or
combination thereof shall have possession, directly or indirectly, of
the power to direct the management or policies of the Obligors or any
person, entity, or corporation deemed to be an Affiliate of the
Obligors, and shall be deemed to include any holder of 10% or more of
any stock or other interest in the Obligors or in any person, entity
or corporation deemed to be an Affiliate of the Obligors, whether
such holding is direct or indirect.
CURRENT MATURITY OF LONG-TERM DEBT ("CMLTD") means the current maturity of
long-term Indebtedness paid during the applicable period, including,
but not limited to, amounts required to be paid during such period
under Capital Leases.
CURRENT RATIO means the ratio of Total Current Assets to Total Current
Liabilities.
DEBT SERVICE COVERAGE RATIO means, during the applicable period, that quotient
equal to (A) the aggregate of Earnings Before Interest, Taxes,
Depreciation and Amortization, divided by (B) the sum of (i) Interest
and (ii) Current Maturity of Long-Term Debt; that is,
EBITDA
----------------
Interest + CMLTD
DIVIDENDS means, for the applicable period, the aggregate of all amounts paid
or payable (without duplication) as dividends, distributions or owner
withdrawals (whether in the form of cash, stock or otherwise), and
includes any purchase, redemption or other retirement of any shares
or other ownership interest directly or indirectly through a
Subsidiary or otherwise and includes return of capital to
shareholders, partners or members.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION("EBITDA")
means, for the applicable period, income from continuing operations
before the payment of Interest and taxes plus depreciation and
amortization determined in accordance with GAAP.
ELIGIBLE INVENTORY means the value (cost or fair market value, whichever is
less, after deducting all transportation, processing, handling
charges, and all other costs and expenses affecting the value
thereof) of any and all finished goods, wares, merchandise and other
tangible personal property held by GDI for sale or other disposition
in the ordinary course of business at such locations, and of such
types and qualities, as the Bank in its reasonable discretion from
time to time determines to be acceptable for borrowing.
ELIGIBLE RECEIVABLES means the sum of all accounts receivable of GDI from
account debtors which have been earned by performance and are owed to
GDI by such of the GDI's trade customers as the Bank determines to be
satisfactory in the Bank's reasonable discretion in each instance.
The following is a partial listing of those types of accounts
receivable which shall not be determined to be Eligible Receivables:
-3-
<PAGE> 4
(i) Any which is more than ninety (90) days old as
shown on the agings of the GDI's accounts receivable and on Borrowing
Base Certificates (as defined herein) furnished the Bank from time to
time.
(ii) Any which is owed by any account debtor liable
on any account described in sub-paragraph (i) above.
(iii) Any account receivable which, when aggregated
with all of the accounts of that account debtor, exceeds twenty percent
(20%) of the then aggregate of Eligible Receivables.
(iv) Any which arises out of the sale by GDI of goods
consigned or delivered to GDI or to the account debtor on sale or
return terms (whether or not compliance has been made with Section
2-326 of the Uniform Commercial Code).
(v) Any which arises out of any sale made on a basis
other than upon terms usual to the business of GDI.
(vi) Any which arises out of any sale made on a "bill
and hold," dated, or delayed shipping basis.
(vii) Any which is owed by any account debtor whose
principal place of business is not within the continental United States
or the District of Columbia (to the extent that such accounts are
uninsured or exceed their insurance coverage unless backed by letters
of credit or cash payment documents in form and substance and issued by
a bank acceptable to the Bank).
(viii) Any which is owed by any Affiliate, excluding
those accounts receivable (or any qualifying portion thereof, if
applicable) due from Superior Pharmaceutical Company to GDI that would
otherwise satisfy all other provisions of this definition of "Eligible
Receivables" up to a maximum acceptable amount of $100,000.00 in the
aggregate. (EXAMPLE 1: If GDI has accounts receivable owing by Superior
Pharmaceutical Company totaling $300,000.00, with Superior
Pharmaceutical Company having contra claims against GDI totaling
$250,000.00, the amount of GDI's accounts receivable owing by Superior
Pharmaceutical Company that would be included for purposes of
determining GDI's Eligible Receivables, assuming no other cause for
exclusion of any portion thereof, is $50,000.00. EXAMPLE 2: If GDI has
accounts receivable owing by Superior Pharmaceutical Company totaling
$300,000.00, with Superior Pharmaceutical Company having contra claims
against GDI totaling $100,000.00, the amount of GDI's accounts
receivable owing by Superior Pharmaceutical that would be included for
purposes of determining GDI's Eligible Receivables, assuming no other
cause for exclusion of any portion thereof, is $100,000.00.)
(ix) Any as to which the account debtor holds or is
entitled to any claim, counterclaim, set off, or chargeback (or which
includes terms under which the account debtor can return to GDI for
credit or refund, the goods giving rise to such account or account
receivable).
-4-
<PAGE> 5
(x) Any which is evidenced by a promissory note.
(xi) Any which is owed by any person employed by, or
a salesperson of, GDI.
(xii) Any which the Bank in its reasonable discretion
considers unacceptable for any reason.
EVENTS OF DEFAULT shall have the meaning given such term in Section 9 of this
Agreement.
GAAP means generally accepted accounting principles in the United States of
America, as from time to time in effect; provided, however, that for
purposes of compliance with Section 8 of this Agreement and the related
definitions, GAAP means such principles as in effect on the date of the
preparation and delivery of the financial statements described in
Section 4.3 and Schedule A hereto and consistently followed, without
giving effect to any subsequent changes other than changes consented to
in writing by the Bank.
HARD ASSETS means the orderly liquidation value of the unencumbered tangible
assets of Able Labs as reported pursuant to an appraisal acceptable to
the Bank in its sole discretion (such as the Appraisal of MB Valuation
Services, Inc. dated March 21, 1997, referenced as an example for
illustrative purposes only, it being acknowledged that the actual
orderly liquidation value of such Hard Assets shall be adjusted from
time to time to reflect the actual orderly liquidation value of such
assets).
INDEBTEDNESS means all obligations that in accordance with GAAP should be
classified as liabilities upon a balance sheet or to which reference
should be made by footnotes thereto.
INTANGIBLE ASSETS means the sum of Indebtedness due from Affiliates,
Subsidiaries, officers, directors or shareholders, plus assets that in
accordance with GAAP are properly classifiable as intangible assets,
including, but not limited to, goodwill, franchises, licenses, patents,
trademarks, trade names and copyrights.
INTEREST means, for the applicable period, all interest paid or payable,
including, but not limited to, interest paid or payable on Indebtedness
and on Capital Leases, determined in accordance with GAAP.
INTEREST PAYMENT DATE means, as to each advance under the Line of Credit, the
last day of such Interest Period.
INTEREST PERIOD means, as to each advance under the Line of Credit, the period
commencing on the day of an advance and ending on the thirtieth (30th)
day thereafter.
LEVERAGE RATIO means, for the applicable period, that quotient equal to: (A)
Total Liabilities, divided by (B) Tangible Net Worth.
-5-
<PAGE> 6
LIBOR means, as applicable to any LIBOR advance, the rate per annum (rounded
upward, if necessary, to the nearest 1/32 of one percent) as determined
on the basis of the offered rates for deposits in U.S. Dollars, for a
thirty (30) day period of time as appearing on the Telerate page 3750
as of 11:00 a.m. London time on the day that is two (2) Banking Days
preceding the first day of such advance; provided, however, if the rate
described above does not appear on the Telerate System on any
applicable interest determination date, LIBOR shall be the rate
(rounded upwards as described above, if necessary) for deposits in
dollars for a period substantially equal to the interest period on the
Reuters Page "LIBO" (or such other page as may replace the LIBO Page on
that service for the purpose of displaying such rates), as of 11:00
a.m. (London Time), on the day that is two (2) Banking Days preceding
the first day of such advance. If both the Telerate and Reuters system
are unavailable, then the rate for that date will be determined on the
basis of the offered rates for deposits in U.S. Dollars for a period of
time comparable to such advance which are offered by four major banks
in the London interbank market at approximately 11:00 a.m. London time,
on the day that is two (2) Banking Days preceding the first day of such
advance. The principal London office of each of the four major London
banks will be requested to provide a quotation of its U.S. Dollar
deposit offered rate. If at least two such quotations are provided as
requested, the rate for that date will be the arithmetic mean of the
quotations. If fewer than two quotations are provided as requested, the
rate for that date will be determined on the basis of the rates quoted
for loans in U.S. Dollars to leading European banks for a period of
time comparable to such advance offered by major banks in New York City
at approximately 11:00 a.m. New York City time, on the day that is two
(2) Banking Days preceding the first day of such LIBOR advance. In the
event that the Bank is unable to obtain any such quotation as provided
above, it will be deemed that LIBOR pursuant to an advance cannot be
determined. In the event that the Board of Governors of the Federal
Reserve System shall impose a reserve percentage with respect to LIBOR
deposits of the Bank, then for any period during which such reserve
percentage shall apply, LIBOR shall be equal to the amount determined
above divided by an amount equal to 1 minus the reserve percentage.
LINE OF CREDIT means the maximum principal amount set forth in Section 2.1
of this Agreement that the Bank may advance to GDI and GDI may borrow
from the Bank.
LINE OF CREDIT NOTE means the promissory note executed and delivered by GDI
which evidences the Line of Credit, as it may be amended in writing
from time to time.
NET INCOME means, for any period, the net income realized, after all taxes
actually paid or accrued and all expenses and other charges, determined
in accordance with GAAP.
NOTES means the Line of Credit Note and the Term Note executed and delivered
by GDI evidencing the Line of Credit and the Term Loan, respectively.
ODYSSEY means Odyssey Investment Partners, L.P., a Pennsylvania limited
partnership, and its successors and/or assigns.
-6-
<PAGE> 7
RELATED AGREEMENTS means the various agreements and documents described under
the heading "Related Agreements" in Schedule A to this Agreement and
such other documents as requested by the Bank, delivered or caused to
be delivered, by the Obligors to the Bank.
SIRROM means Sirrom Capital Corporation, a Tennessee corporation, and its
successors and/or assigns.
SUBSIDIARY means any corporation, person or entity, a majority of whose
outstanding shares or other ownership interests having ordinary voting
powers, shall at any time be owned or Controlled by the Obligors or one
or more of their Subsidiaries.
TANGIBLE NET WORTH means, for the applicable period, Total Assets, minus the sum
of: (i) Intangible Assets and (ii) Total Liabilities.
TERM LOAN means the loan in the original principal amount of $1,200,000.00
extended by the Bank to GDI under Section 3 of this Agreement.
TERM NOTE means the promissory note executed and delivered by GDI which
evidences the Term Loan established under Section 3 of this Agreement.
TERMINATION DATE shall have the meaning given such term in Section 2.1 of this
Agreement.
TOTAL ASSETS means total assets determined in accordance with GAAP.
TOTAL CURRENT ASSETS means total current assets determined in accordance with
GAAP.
TOTAL CURRENT LIABILITIES means total current Indebtedness determined in
accordance with GAAP.
TOTAL LIABILITIES means total Indebtedness determined in accordance with
GAAP.
1.2 ACCOUNTING TERMS. All terms of an accounting character shall have
the meanings assigned thereto by GAAP applied on a basis consistent with the
financial statements referred to in Section 4.3 of this Agreement, modified to
the extent, but only to the extent, that such meanings are specifically modified
herein.
1.3 RULES OF INTERPRETATION. The following rules of interpretation
shall govern this Agreement:
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or
supplemented from time to time in accordance with its
terms and the terms of this Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any amendment or
modification to such law.
-7-
<PAGE> 8
(d) A reference to any person includes its permitted
successors and permitted assigns.
(e) The words "include", "includes" and "including" are not
limiting.
(f) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined
in the Uniform Commercial Code as in effect in the
Commonwealth of Massachusetts, have the meanings assigned
to them therein, with the term "instrument" being that
defined under Article 9 of the Uniform Commercial Code.
(g) The words "herein", "hereof", "hereunder" and words of
like import shall refer to this Agreement as a whole and
not to any particular section or subdivision of this
Agreement.
SECTION 2. THE LINE OF CREDIT
2.1. THE LINE OF CREDIT. Pursuant to the terms of this Agreement and
upon the satisfaction of the conditions precedent referred to in Section 5
hereof, the Bank may in its sole discretion lend to GDI, and GDI may in its sole
discretion borrow from the Bank, advances not to exceed the Availability, as
determined by the Bank from time to time hereafter, as evidenced by the Line of
Credit Note. If any discretionary advances are made during the period from the
date hereof until May 31, 1999 (as such date may be extended in writing from
time to time in the Bank's sole and absolute discretion, the "Termination
Date"), unless an Event of Default occurs, GDI may borrow, repay and reborrow
under this Agreement; provided, however, that for any period of twelve (12)
consecutive months there shall be no borrowings or reborrowings and no
outstanding principal under the Line of Credit Note for at least thirty (30)
consecutive days; and provided, further that all outstanding principal plus
accrued and unpaid interest shall be paid in full on the Termination Date.
2.2. ADVANCES. If any advance is made, the advance shall be made by a
deposit to any of GDI's accounts with the Bank. Advances will be payable as
provided in the Line of Credit Note. If any advance is made, the Bank may, at
its option, record on the books and records of the Bank or endorse on a schedule
attached to the Line of Credit Note, an appropriate notation evidencing any
advance, each repayment on account of the principal thereof and the amount of
interest paid; and GDI authorizes the Bank to maintain such records or make such
notations and agrees that the amount shown on the books and records or on said
schedule, as applicable, as outstanding from time to time shall constitute the
amount owing to the Bank pursuant to this Agreement, absent manifest error. In
the event the amount shown on the schedule conflicts with the amount noted as
due pursuant to the books and records of the Bank, the books and records of the
Bank shall control the disposition of the conflict.
2.3. INTEREST. Advances made by the Bank to GDI pursuant to the Line of
Credit will bear interest commencing with the date of such advance and ending on
the last day of such
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Interest Period at a per annum rate of LIBOR, plus two hundred fifty (250) basis
points. Interest on each advance outstanding under the Line of Credit shall be
paid monthly in arrears on each Interest Payment Date. All computations of
interest on the Line of Credit Note shall be made on the basis of a three
hundred sixty (360)-day year and actual days elapsed. On default or after
maturity or after judgment has been rendered on the Line of Credit Note, the
unpaid principal balance of the Line of Credit Note shall, at the option of the
Bank, bear interest at a rate which is four (4) percentage points per annum
greater than that which would otherwise be applicable. If, at any time, the rate
of interest, together with all amounts which constitute interest and which are
reserved, charged or taken by Bank as compensation for fees, services or
expenses incidental to the making, negotiating or collection of any advance
evidenced hereby, shall be deemed by any competent court of law, governmental
agency or tribunal to exceed the maximum rate of interest permitted to be
charged by the Bank to GDI, then, during such time as such rate of interest
would be deemed excessive, that portion of each sum paid attributable to that
portion of such interest rate that exceeds the maximum rate of interest so
permitted shall be deemed a voluntary prepayment of principal.
2.4. PROCEDURES FOR BORROWING.
(a) GDI may request advances pursuant to the Line of Credit
from time to time hereafter in accordance with the procedures set forth in
Section 2.4.(c), below.
(b) At the time of each advance made under or pursuant to this
Agreement, GDI shall immediately become indebted to the Bank for the amount
thereof. Each advance made by the Bank may, at the Bank's option, be (i)
credited by the Bank to any deposit account of GDI with the Bank; (ii) credited
by the Bank to a deposit account designated by GDI; (iii) paid to a person
designated by GDI; (iv) paid to GDI; or (v) applied to any Indebtedness owed by
GDI to the Bank (each of the foregoing of which may be by check, draft, or other
written order or by bank wire or other transfer).
(c) Provided the Bank has received the most recent Borrowing
Base Certificate required under Section 6.1.(b)(iii) below, GDI may request
advances under the Line of Credit in such manner as may from time to time be
acceptable to the Bank, and which may include, without limitation, (i) telephone
notice to such person as may be designated by the Bank or (ii) written notice.
2.5. ADVANCES IN EXCESS OF AVAILABILITY; REPAYMENTS. The making of
loans, advances, and credits by the Bank in excess of Availability is for the
benefit of GDI and does not affect the obligations of GDI hereunder. The making
of any such loans, advances, and credits in excess of Availability on any one
occasion shall not obligate the Bank to make any such loans, credits, or
advances on any other occasion nor to permit such loans, credits, or advances to
remain outstanding. In the event that the amount of the Availability decreases
below the then principal balance of such loans, the Borrower shall immediately
pay to the Bank the amount by which such principal balance exceeds the
Availability.
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2.6. PREPAYMENTS. GDI may prepay the Line of Credit Note, in whole or
in part, at any time, without penalty, but GDI shall pay to the Bank a yield
maintenance fee in an amount computed as follows: the current rate for United
States Treasury securities (bills on discounted basis shall be converted to a
bond equivalent) with a maturity date closest to the maturity date of the
advance(s) as to which the prepayment is made, shall be subtracted from the
"cost of funds" component of LIBOR as in effect at the time of prepayment. If
the result is zero or a negative number, there shall be no yield maintenance
fee. If the result is a positive number, then the resulting percentage shall be
multiplied by the amount of the principal balance being prepaid. The resulting
amount shall be divided by 360 and multiplied by the number of days remaining in
the applicable term for the advance(s) as to which the prepayment is made. Said
amount shall be reduced to present value calculated by using the number of days
remaining in the designated term and using the above-referenced United States
Treasury security rate and the number of days remaining in the applicable term
for the advance(s) as to which the prepayment is made. The resulting amount
shall be the yield maintenance fee due to the Bank upon prepayment. If by reason
of an event of default the Bank elects to declare the Line of Credit Note to be
immediately due and payable, then any yield maintenance fee with respect to the
Line of Credit Note shall become due and payable in the same manner as though
GDI had exercised such right of prepayment. Any prepayment hereunder will be
applied first to the payment of all accrued interest to the date of the
prepayment and the remainder to the outstanding principal.
2.7. LATE CHARGE. The Bank may collect a late charge not to exceed five
percent (5.0%) of any installment of principal or interest, or of any other
amount due to the Bank which is not paid or reimbursed by GDI within ten (10)
days of the due date thereof to defray the cost and extra expense involved in
handling such delinquent payment and the increased risk of non-collection. The
minimum late charge shall be $25.00.
2.8. USE OF PROCEEDS. All advances under the Line of Credit shall be
used by GDI solely for working capital purposes.
SECTION 3. THE TERM LOAN
3.1. THE TERM LOAN. Pursuant to the terms of this Agreement and upon
the satisfaction of the conditions precedent referred to in Section 5 hereof,
the Bank shall lend to GDI, and GDI shall borrow from the Bank the principal
amount of One Million Two Hundred Thousand Dollars ($1,200,000.00) (the "Term
Loan") as evidenced by the Term Note. The proceeds of the Term Loan shall be
used solely to assist in the financing of the acquisition of the assets of
Generic Distributors Limited Partnership, as more fully set forth and
contemplated under the Asset Purchase Agreement.
3.2. REPAYMENT. The Term Note shall be payable over a five (5) year
term, with interest on the outstanding principal balance of the Term Note being
paid monthly in arrears and quarterly principal reduction payments of $42,860.00
each being made on the final day of each February, May, August and November,
commencing May 31, 1998, as more particularly set forth in the Term Note.
Additionally, so long as the Leverage Ratio of GDI is equal to or greater than
3.00 to 1.0 (as measured at each fiscal year end commencing as of the fiscal
year ending December 31,
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<PAGE> 11
1998), GDI shall make an annual principal reduction payment due on April 30th of
each year, the first of such annual payments being due and payable on April 30,
1999 and continuing on each anniversary date thereafter, in an amount equal to
the product of: (i) Earnings Before Interest, Taxes, Depreciation and
Amortization in excess of the amount required to satisfy the Debt Service
Coverage Ratio for the preceding fiscal year, multiplied by (ii) a factor of
one-half (1/2). The Bank may, at its option, record on the books and records of
the Bank or endorse on a schedule attached to the Term Note, an appropriate
notation evidencing each repayment on account of the principal thereof and the
amount of interest paid; and GDI authorizes the Bank to maintain such records or
make such notations and agree that the amount shown on the books and records or
on said schedule, as applicable, as outstanding from time to time shall
constitute the amount owing to the Bank pursuant to the Term Loan, absent
manifest error. In the event the amount shown on the schedule conflicts with the
amount noted as due pursuant to the books and records of the Bank, the books and
records of the Bank shall control the disposition of the conflict.
3.3. INTEREST. The outstanding principal balance of the Term Note will
bear interest at a per annum rate of LIBOR, plus three hundred (300) basis
points. All computations of interest on the Term Note shall be made on the basis
of a three hundred sixty (360)-day year and actual days elapsed. On default or
after maturity or after judgment has been rendered on the Term Note, the unpaid
principal balance of the Term Note shall, at the option of the Bank, bear
interest at a rate which is four (4) percentage points per annum greater than
that which would otherwise be applicable. If, at any time, the rate of interest,
together with all amounts which constitute interest and which are reserved,
charged or taken by Bank as compensation for fees, services or expenses
incidental to the making, negotiating or collection of any advance evidenced
hereby, shall be deemed by any competent court of law, governmental agency or
tribunal to exceed the maximum rate of interest permitted to be charged by the
Bank to GDI, then, during such time as such rate of interest would be deemed
excessive, that portion of each sum paid attributable to that portion of such
interest rate that exceeds the maximum rate of interest so permitted shall be
deemed a voluntary prepayment of principal.
3.4. PREPAYMENTS. GDI may prepay the Term Note, in whole or in part, at
any time, without penalty, but GDI shall pay to the Bank a yield maintenance fee
in an amount computed as follows: the current rate for United States Treasury
securities (bills on discounted basis shall be converted to a bond equivalent)
with a maturity date closest to the remaining term of the interest period, shall
be subtracted from the "cost of funds" component of LIBOR as in effect at the
time of prepayment. If the result is zero or a negative number, there shall be
no yield maintenance fee. If the result is a positive number, then the resulting
percentage shall be multiplied by the amount of the principal balance being
prepaid. The resulting amount shall be divided by 360 and multiplied by the
number of days remaining in the term of the interest period. Said amount shall
be reduced to present value calculated by using the number of days remaining in
the designated term and using the above-referenced United States Treasury
security rate and the number of days remaining in the term as to which the
prepayment is made. The resulting amount shall be the yield maintenance fee due
to the Bank upon prepayment. If by reason of an event of default the Bank elects
to declare the Term Note to be immediately due and payable, then any yield
maintenance fee with respect to the Term Note shall become due and payable in
the same manner as though GDI had exercised such right of prepayment. Any
prepayment hereunder will be applied first to
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<PAGE> 12
the payment of all accrued interest to the date of the prepayment and the
remainder to the outstanding principal.
3.5. LATE CHARGE. The Bank may collect a late charge not to exceed five
percent (5.0%) of any installment of principal or interest, or of any other
amount due to the Bank which is not paid or reimbursed by GDI within ten (10)
days of the due date thereof to defray the cost and extra expense involved in
handling such delinquent payment and the increased risk of non-collection. The
minimum late charge shall be $25.00.
3.6. USE OF PROCEEDS. GDI shall use the proceeds of the Term Loan to
fund the cash portion of the purchase price under the Asset Purchase Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES
The Obligors hereby represent and warrant to the Bank (which
representations and warranties will survive the delivery of the Notes and this
Agreement and the making of any advances and shall be deemed to be continuing
until the Notes are fully paid and this Agreement is terminated) that:
4.1. EXISTENCE AND POWER. (a) The Obligors are and will each continue
to be, duly organized and validly existing and in good standing under the laws
of their respective states of organization; (b) the Obligors have each filed in
all locations required under the laws of each jurisdiction in which they do
business; (c) the Obligors are each qualified and in good standing to do
business in all other jurisdictions in which the property owned, leased or
operated by them or the nature of the business conducted by them makes such
qualification necessary; except where the failure to be so qualified would not
have a material adverse effect on the business, assets, operations, liabilities
or financial condition of such Obligor; (d) the Obligors have the power to
execute and deliver this Agreement, the Notes, the Related Agreements and to
borrow hereunder; and (e) the Obligors have all requisite permits,
authorizations and licenses, without unusual restrictions or limitations, to
own, operate and lease their properties and to conduct the business in which
they are presently engaged, all of which are in full force and effect, except
where the failure to do so would not have a material adverse effect on the
business, assets, operations, liabilities or financial condition of such
Obligor.
4.2. AUTHORITY. The making and performance by the Obligors of this
Agreement and the Related Agreements have been authorized by all necessary
corporate action. The execution and delivery of this Agreement, the Notes and
the Related Agreements, the consummation of the transactions herein and therein
contemplated, the fulfillment of or compliance with the terms and provisions
hereof and thereof, (a) are within their powers, (b) will not violate any
provision of law or of their respective organizational documents, or (c) will
not result in the breach of, or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any property or assets of the
Obligors pursuant to any indenture or bank loan or credit agreement (other than
those with the Bank) or other agreement or instrument to which any Obligor is a
party. Except as provided on Schedule A under the heading "Consents and
Approvals," no approval, authorization, consent or other order of or
registration or filing with any person, entity
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<PAGE> 13
or governmental body is required in connection with the making and performance
of this Agreement, the Notes or the Related Agreements, except where the failure
to obtain such approval, authorization, consent or other order of or
registration or filing would not have a material adverse effect on the business,
assets, operations, liabilities or financial condition of such Obligor.
4.3. FINANCIAL CONDITION. The financial statements described in
Schedule A hereto under the heading "Description of Financial Statements",
heretofore delivered to the Bank, were prepared in conformity with GAAP and are
correct and complete and fairly present in all material respects the financial
condition and the results of operations of the Obligors for the periods and as
of the dates thereof. There are no direct or contingent liabilities not
disclosed in such statements or in Schedule A hereto under the heading
"Liabilities Not Disclosed in Financial Statements." Since the date of the
latest financial statement delivered to the Bank, there has been no material
adverse change in the assets, liabilities, financial condition, business or
prospects of the Obligors or any Affiliate since the date of such financial
statements.
4.4. INFORMATION COMPLETE. Subject to any limitations stated therein or
in connection therewith, all information furnished or to be furnished by the
Obligors pursuant to the terms hereof is, or will be at the time the same is
furnished, accurate and complete in all material respects necessary in order to
make the information furnished, in the light of the circumstances under which
such information is furnished, not misleading.
4.5. STATUTORY COMPLIANCE. The Obligors are in compliance with all
federal, state, county and municipal laws, ordinances, rules or regulations
applicable to them, their property or the conduct of their business, including,
without limitation, those pertaining to or concerning the employment of labor,
employee benefits, public health, safety and the environment except as such
non-compliance would not have a material adverse effect on the assets,
liabilities or financial condition of such Obligor.
4.6. LITIGATION. Except such as are disclosed in Schedule A hereto
under the heading "Litigation, Pending or Threatened," no proceedings by or
before any private, public or governmental body, agency or authority and no
litigation is pending, or, so far as is known to the Obligors or any of its
officers, threatened against them
4.7. SUBSIDIARIES, AFFILIATES. The Obligors have no Subsidiaries or
Affiliates other than those shown on Schedule A attached hereto under the
heading "Subsidiaries, Affiliates and Trade Names". DynaGen is the sole
shareholder of both GDI and Able Labs.
4.8. EVENTS OF DEFAULT. No Event of Default has occurred and no event
has occurred or is continuing which, pursuant to the provisions of Section 9,
with the lapse of time and/or the giving of a notice specified therein, would
constitute such an Event of Default.
4.9. USE OF PROCEEDS. GDI shall use the proceeds of each advance under
the Line of Credit for general working capital purposes, and no part of such
proceeds will be used, in whole or in part, for the purpose of (a) acquiring all
or substantially all of the assets or stock of any
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<PAGE> 14
person, entity or corporation or (b) purchasing or carrying any "margin stock"
as such term is defined in Regulation U of the Board of Governors of the Federal
Reserve System.
4.10. VALIDITY. This Agreement, the Notes and all Related Agreements,
upon the execution and delivery thereof, will be legal, valid, binding and
enforceable obligations of the Obligors in accordance with the terms of each.
4.11. TITLE TO PROPERTY. The Obligors have good and marketable title to
their properties and assets subject to no mortgage, pledge, lien, security
interest, encumbrance or other charge not set forth in (a) Schedule A hereto
under the heading "Encumbrances Not Otherwise Disclosed", (b) the financial
statements delivered pursuant to Section 4.3 above or (c) any Related Agreement.
4.12. TAXES. The Obligors have filed all tax returns and reports
required to be filed by them with all federal, state or local authorities and
have paid in full or made adequate provision for the payment of all taxes,
interest, penalties, assessments or deficiencies shown to be due or claimed to
be due on or in respect of such tax returns and reports.
4.13. BUSINESS NAME AND LOCATIONS. The Obligors conduct their business
solely in their own name without the use of a trade name or the intervention of
or through any other entity of any kind, other than as disclosed on Schedule A
under the heading "Subsidiaries, Affiliates and Trade Names." All books and
records relating to the Obligors' assets are located at the Obligors' chief
executive offices as set forth above and their other places and locations, where
their assets are located, are as set forth on Schedule A hereto under the
heading "Places of Business."
4.13. ERISA. Except as any such actions would not have a material
adverse effect on such Obligors business, assets, operations, liabilities or
financial condition, the Obligors shall not:
(i) violate or fail to be in full compliance with any Employee
Benefit Plan. As used herein, the term "Employee Benefit Plan" has the
same meaning given it in Section 3(3) of the Employee Retirement
Insurance Security Act of 1974, P.L. 93-406 (September 2, 1974)
(hereinafter referred to as "ERISA") with the exception of any
requirement of any relationship to interstate commerce imposed thereon;
(ii) fail timely to file all reports and filings required by
ERISA to be filed by the Obligors;
(iii) engage in any "prohibited transactions" or "reportable
events" (respectively as described in ERISA);
(iv) engage in, or commit, any act such that a tax or penalty
could be imposed upon the Obligors on account thereof pursuant to
ERISA;
(v) accumulate any material funding deficiency within the
meaning of ERISA; or
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<PAGE> 15
(vi) terminate any Employee Benefit Plan such that a lien
could be asserted against any assets of the Obligors on account thereof
pursuant to ERISA.
4.14. HAZARDOUS MATERIALS. (d) The Obligors have never: occupied or
operated a site or vessel on which any hazardous material or oil was stored or
transported without compliance with all statutes, regulations, ordinances,
directives, and orders of every federal, state, municipal and other governmental
authority which has or claims jurisdiction relative thereto, (site, vessel, and
hazardous material respectively being defined in Mass. Gen. Laws Ch.21E);
disposed of, transported, or arranged for the transport of any hazardous
material or oil without compliance with all such statutes, regulations,
ordinances, directives, and orders; been legally responsible for any release or
threat of release of any hazardous material or oil; received notification of any
potential or known release or threat of release of any hazardous material or oil
from any site or vessel occupied or operated by the Obligors and/or of the
incurrence of any expense or loss in connection with the assessment,
containment, or removal of any release or threat of release of any hazardous
material or oil from any such site or vessel. (e) The Obligors shall: not
dispose of any hazardous material or oil on any site or vessel occupied or
operated by the Obligors; not store on any site or vessel occupied or operated
by the Obligors, or transport or arrange for the transport of any hazardous
material or oil except if such storage or transport is in the ordinary course of
the Obligors' business and is in compliance with all such statutes, regulations,
ordinances, directives and orders; take all such action, including, without
limitation, the conducting of engineering tests to confirm that no hazardous
material or oil is or ever was disposed of on any site or vessel occupied or
operated by the Obligors; provide the Bank with written notice: upon the
intended storage or transport of any hazardous material or oil by the Obligors;
upon the Obligors' obtaining knowledge or notice of any potential or known
release or threat of release of any hazardous material or oil at or from any
site or vessel occupied or operated by the Obligors; and/or upon the Obligors'
obtaining knowledge of any incurrence of any expense or loss by any governmental
authority in connection with the assessment, containment, or removal of any
hazardous material or oil for which expense or loss the Obligors may be liable.
SECTION 5. CONDITIONS PRECEDENT
5.1. INITIAL ADVANCES. The initial advance under the Line of Credit and
the Term Loan shall be subject to the following conditions precedent:
(a) PROOF OF ACTION. The Bank shall have received such documents
evidencing each of the Obligors' power to execute and deliver this Agreement,
the Notes and the Related Agreements as the Bank or its counsel shall reasonably
request.
(b) THE NOTES, RELATED AGREEMENTS AND DOCUMENTS. The Obligors shall
have delivered to the Bank this Agreement and such other documents as the Bank
may request including, but not limited to, the following:
(i) the Line of Credit Note made by GDI payable to the Bank;
(ii) the Term Note made by GDI payable to the Bank;
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<PAGE> 16
(iii) an unconditional and unlimited Guaranty from DynaGen with
respect to the obligations of GDI to the Bank;
(iv) an unconditional and unlimited Guaranty from Able Labs
with respect to the obligations of GDI to the Bank;
(v) a Pledge and Security Agreement from DynaGen with respect
to 100% of the stock of GDI and 51% of the stock of Able Labs to secure
DynaGen's liabilities and obligations to the Bank including, but not
limited to, its Guaranty and DynaGen's obligations hereunder;
(vi) a Security Agreement from Able Labs covering all business
assets to secure Able Labs' liabilities and obligations to the Bank
including, but not limited to, its Guaranty and Able Lab's obligations
hereunder;
(vii) a Security Agreement from GDI covering all business
assets to secure its liabilities and obligations to the Bank;
(viii) a Pledge Agreement with respect to a $100,000.00 cash
collateral account established by GDI to secure the Obligors'
obligations to the Bank;
(ix) a Landlord Waiver and an Assignment of Lessee's Interests
(with lessor's consent) with respect to the location of GDI in Monroe,
Louisiana;
(x) an Assignment of Seller's Representations and Warranties
obtained in connection with the asset acquisition of Generic
Distributors Limited Partnership;
(xi) an Assignment of Covenants Not to Compete with respect to
the employment contracts entered into with Messrs. Couvillon and
Johnson in connection with the asset acquisition of Generic
Distributors Limited Partnership; and
(xii) a fully executed and completed Asset Purchase Agreement
with copies of all schedules and exhibits thereto.
(c) APPROVAL OF BANK COUNSEL. All legal matters incident to the
transactions hereby contemplated shall be satisfactory to counsel for the Bank.
(d) OPINIONS OF COUNSEL. The Bank shall have received from both counsel
for the Obligors and counsel for the Sellers under the Asset Purchase Agreement
a written opinion satisfactory, in form and substance, to the Bank and its
counsel.
(e) WAIVER AND CONSENT. The Bank shall have been furnished with a
waiver and consent from each of Sirrom and Odyssey (and any other necessary
party listed under the heading "Consents ands Approvals" on Schedule A annexed
hereto) with respect to the establishment of the Line of Credit and the Term
Loan, such waivers and consents to be in form and substance satisfactory to the
Bank and its counsel.
5.2 SUBSEQUENT ADVANCES. Every advance under the Line of Credit may be
made by the Bank in the sole discretion of the Bank, but in any event shall be
subject to the following conditions precedent that:
(a) NO EVENT OF DEFAULT. No Event of Default has occurred and no event
has occurred or is continuing which, pursuant to the provisions of Section 9,
with the lapse of time and/or the giving of notice as specified therein, would
constitute an Event of Default.
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(b) NO MATERIAL ADVERSE CHANGE. There has been no material adverse
change (as determined solely by the Bank) in the assets, liabilities, financial
condition or business of the Obligors since the date of any financial statements
delivered to the Bank before or after the date of this Agreement.
(c) REPRESENTATIONS AND WARRANTIES. That the representations and
warranties contained in Sections 4.1 through 4.14 are true and correct in all
material respects, and that the Obligors shall have so certified to the Bank.
Any request for a borrowing shall be deemed a certification by the Obligors as
to the truth and accuracy of the representations and warranties contained in
Sections 4.1 through 4.14 as of the date of such request.
SECTION 6. AFFIRMATIVE COVENANTS
Unless the Bank consents in writing, the Obligors covenant and agree
that, until payment in full of the Notes and the complete performance of all
obligations hereunder and under any Related Agreement, they shall:
6.1. FINANCIAL STATEMENTS; NOTICE OF DEFAULT. Deliver to the Bank:
(a) GENERAL INFORMATION: promptly upon the Bank's written request, such
information (not otherwise required to be delivered by this Section 6.1) about
the financial condition, business and operations of the Obligors and/or any
Affiliate or Subsidiary as the Bank may, from time to time, reasonably request.
(b) MONTHLY REPORTS OF GDI: within twenty (20) days after the close of
each calendar month, in form and detail satisfactory to the Bank, GDI shall
furnish the Bank with:
(i) a statement, current as of the close of business on the last
business day of the preceding calendar month, setting forth all
Eligible Receivables of GDI, showing separately those receivables which
are less than 30, 60 and 90 days old, the value of each category,
together with a description of all liens, claims, encumbrances,
setoffs, defenses and counterclaims with respect to any other
receivables and certified by an officer of GDI;
(ii) a statement, current as of the close of business on the last
business day of the preceding calendar month, setting forth all
Eligible Inventory of GDI and certified by an officer of GDI; and
(iii) a Borrowing Base Certificate certified by an officer of GDI.
(c) QUARTERLY REPORTS OF GDI: within sixty (60) days after the close of
each fiscal quarter of GDI, a balance sheet as of the close of each period and
statements of income and
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retained earnings for that portion of the year-to-date then ended and internally
prepared by GDI and certified by an officer as true, accurate and complete.
(d) ANNUAL REPORTS OF GDI: within one hundred twenty (120) days after
the close of each fiscal year of GDI, financial statements including a balance
sheet as of the close of such year and statements of income and retained
earnings and cash flows for the year then ended, and accompanied by a report
thereon, prepared in conformity with GAAP and containing an opinion, unqualified
as to scope, of a firm of independent certified public accountants acceptable to
the Bank.
(e) QUARTERLY REPORTS OF DYNAGEN'S AFFILIATES: within sixty (60) days
after the close of each fiscal quarter of DynaGen, a balance sheet as of the
close of each fiscal quarter and statements of income and retained earnings for
that portion of the year-to-date then ended for each one of the Obligors and
Superior Pharmaceutical Company and internally prepared by such entity and
certified by an officer of such entity as true, accurate and complete.
(f) sECURITIES FILINGS OF DYNAGEN: within ten (10) days after filing
same with the Securities and Exchange Commission as required by applicable law,
DynaGen shall furnish the Bank with copies of all such filings including,
without limitation, Form 10-K and Form 10-Q reports.
(g) CERTIFICATE OF COMPLIANCE: simultaneously with the delivery of the
financial statements required in (c) above, a Certificate of Compliance
certifying that, as at the end of the applicable period, the Obligors are in
full compliance with all affirmative, negative and financial covenants set forth
in this Agreement applicable to such persons and certified by an officer of such
person(s), as accurate, true and complete.
All financial statements delivered to the Bank shall be consolidated and/or
consolidating, as the Bank shall require. Upon becoming aware of any Event of
Default or of any occurrence which but for the giving of notice or the passage
of time would become an Event of Default, the Obligors will promptly deliver
written notice thereof to the Bank.
6.2. INSURANCE. (a) Keep their properties insured against fire and other
hazards (so called "All Risk" coverage) in amounts and with companies
satisfactory to the Bank to the same extent and covering such risks as is
customary in the same or a similar business, but in no event in an amount less
than the full insurable value thereof, which policies shall name the Bank as
loss payee as its interest may appear, (b) maintain public liability coverage
against claims for personal injuries or death, and (c) maintain all worker's
compensation, employment or similar insurance as may be required by applicable
law. Such All Risk property insurance coverage shall provide for a minimum of
thirty (30) days' written cancellation notice to the Bank. The Obligors agree to
deliver copies of all of the aforesaid insurance policies to the Bank. In the
event of any loss or damage to any of their respective assets, including any
collateral securing any advance under the Line of Credit or indebtedness
outstanding under the Term Loan, they shall give immediate written notice to the
Bank and to their respective insurers of such loss or damage and shall promptly
file proofs of loss with said insurers.
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6.3. COMPLIANCE WITH LAWS; PAYMENT OF TAXES AND OTHER LIENS. Comply with
all federal, state, county and municipal laws, rules, ordinances and regulations
applicable to them, their business or property, including without limitation,
those pertaining to or concerning the employment of labor, employee benefits,
public health, safety and the environment, except where non-compliance would not
have a material adverse effect on the business, assets, operations, liabilities
or financial condition of such Obligor. The Obligors shall pay all taxes,
assessments, governmental charges or levies, or claims for labor, supplies, rent
and other obligations made against them or their property which, if unpaid,
might become a lien or charge against them or their property, except liabilities
being contested in good faith with the prior written consent of the Bank and
against which, if requested by the Bank, they shall maintain reserves in amount
and in form (book, cash, bond or otherwise) satisfactory to the Bank.
6.4. CHIEF EXECUTIVE OFFICES AND PLACES OF BUSINESS. Maintain their chief
executive offices, principal places of business and locations of assets at the
locations set forth in this Agreement. All business records, including those
pertaining to all accounts and contract rights, shall be kept at the said chief
executive offices, unless prior written consent of Bank is obtained to a change
of location.
6.5. INSPECTION. Upon reasonable prior notice, allow the Bank by or through
any of its officers, agents, attorneys, or accountants designated by it, for the
purpose of ascertaining whether or not each and every provision hereof and of
any Related Agreement, instrument or document is being performed and for the
purpose of examining assets and the records relating thereto, to enter their
offices, residence, and plants to examine or inspect any of the properties,
books and records or extracts therefrom and to make copies thereof and to
discuss the affairs, finances and accounts thereof with it and its accountants,
all at such reasonable times and as often as the Bank may reasonably request, it
being acknowledged that the Bank need not provide any such prior notice in the
event that there then exists an Event of Default or the Bank deems itself
insecure.
6.6. LITIGATION. Promptly advise the Bank of the commencement of or threat
of litigation, including arbitration proceedings and any proceedings before any
governmental agency, which might have an adverse effect upon their assets,
liabilities, financial condition or business, or where the amount involved is
$50,000 or more.
6.7. NOTICES OF ENVIRONMENTAL AND LABOR ACTIONS AND CLAIMS. Immediately
notify the Bank in writing of (a) any enforcement, clean-up, removal or other
action instituted or threatened by any federal, state, county or municipal
authority or agency pursuant to any public health, safety or environmental laws,
rules, ordinances and regulations, (b) any and all claims made or threatened by
any third party against the Obligors or any real property owned or operated by
them relating either to the existence of, or damage, loss or injury from any
toxic substances or hazardous wastes or any other conditions constituting actual
or potential violations of such laws, rules, ordinances or regulations and (c)
any enforcement or compliance action, instituted or threatened or claim made or
threatened by any federal or state authority relating to the employment of labor
or employee benefits.
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6.8. MAINTENANCE OF EXISTENCE. Continue to conduct their business as
presently conducted, maintain their existence and maintain their properties in
good repair, working order and operating condition. The Obligors shall
immediately notify the Bank of any event causing material loss or unusual
depreciation in the value of their business assets and the amount of same.
6.9. PERFORMANCE. Comply with all terms and conditions of this Agreement,
the Related Agreements and the Notes and pay all debts before the same shall
become delinquent.
6.10. DEPOSITS. Maintain the Bank as their principal bank of deposit and
account.
SECTION 7. NEGATIVE COVENANTS
Unless the Bank consents in writing, the Obligors covenant and agree that,
until payment is made in full of the Notes and the complete performance of all
obligations hereunder and under any Related Agreement, they shall not:
7.1. ENCUMBRANCES AND AGREEMENTS NOT TO PLEDGE.
(a) Incur or permit to exist any lien, mortgage, security interest,
pledge, charge or other encumbrance against any of their property or assets,
whether now owned or hereafter acquired (including, without limitation, any lien
or encumbrance relating to any response, removal or clean-up of any toxic
substances or hazardous wastes), except: (i) Permitted Liens as set forth on
Schedule A under the heading "Permitted Liens"; (ii) liens in favor of the Bank,
as contemplated pursuant to this Agreement; (iii) pledges or deposits in
connection with or to secure worker's compensation and unemployment insurance;
(iv) tax liens which are being contested in good faith and for which proper
reserves have been established; (v) liens, mortgages, security interests,
pledges, charges or other encumbrances in favor of the Bank or specifically
permitted, in writing, by the Bank; and (vi) liens created in connection with
purchase money financing by any of the Obligors in an amount not to exceed
$500,000.00 in the aggregate.
(b) Except as heretofore previously existing and disclosed to the Bank
as set forth on Schedule A under the heading "Preexisting Agreements", enter
into or permit to exist any agreement, arrangement or understanding, either oral
or in writing, with any person or entity other than the Bank, which restricts or
prohibits the Obligors from incurring or permitting to exist any lien, mortgage,
security interest, pledge, charge or other encumbrance on all or any portion of
the Obligors' property or assets.
7.2. LIMITATION ON INDEBTEDNESS. Create or incur any indebtedness for
borrowed money, become liable, either actually or contingently, in respect of
letters of credit or banker's acceptances or issue or sell any of its
obligations, excluding, however, from the operation of this covenant: (a) the
Line of Credit and Term Loan hereunder; (b) indebtedness owed by DynaGen to
Huntington National Bank under a certain $9,000,000.00 line of credit facility
established in connection with the acquisition of the stock of Superior
Pharmaceuticals, Inc., (c) indebtedness in the aggregate principal amount of
$3,000.000.00 owed by DynaGen to Sirrom and Odyssey; (d) indebtedness in the
aggregate principal amount of $5,000,000.00 owed by DynaGen to the prior
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<PAGE> 21
shareholders of Superior Pharmaceuticals, Inc.; (e) unsecured and subordinate
bridge loan financing for DynaGen and Able Labs only an aggregate amount not
exceeding $500,000.00; and (f) unsecured Indebtedness in an aggregate amount not
exceeding $535,000.00 to GFL Performance Fund Limited pursuant to a certain Note
Purchase Agreement dated as of January 31, 1996 by and between DynaGen and GFL
Performance Fund Limited.
7.3. DISPOSITION OF ASSETS. Sell, lease, pledge, transfer or otherwise
dispose of all or any of their assets (other than the disposition of inventory
in the ordinary course of business as presently conducted), whether now owned or
hereafter acquired, except for Permitted Liens and liens or encumbrances
required or permitted hereby or by any Related Agreement.
7.4. CONTINGENT LIABILITIES. Except as listed under the heading "Contingent
Liabilities" on Schedule A annexed hereto, assume, guarantee, endorse or
otherwise become liable upon the obligations of any person, entity or
corporation except by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business.
7.5. CONSOLIDATION, MERGER, OR CONVERSION. Without the Bank's prior written
consent, merge, consolidate or convert with or into any other corporation or
entity; and, for the purposes of this Section 7.5, the acquisition of all or
substantially all of the assets, together with the assumption of all or
substantially all of the obligations and liabilities, of any corporation or
entity shall be deemed to be a consolidation with such corporation or entity;
provided, however, that DynaGen may acquire the capital stock or assets of
another corporation or entity through the issuance of DynaGen's equity
securities (whether common stock or preferred stock) and without DynaGen
incurring or guarantying any Indebtedness to such corporation, entity or other
party as apart of such acquisition, merger or other business combination.
7.6. LOANS, ADVANCES, INVESTMENTS. Except as expressly permitted herein,
without the Bank's prior written consent, purchase or otherwise acquire any
shares, ownership interest or obligations of, or make loans or advances to, or
investments in, any individual, entity or corporation (including, without
limitation, any Affiliate or Subsidiary) other than investments in direct
obligations of the United States of America, certificates of deposit (or similar
investments) issued by the Bank, or those investments made from time to time
consistent with the terms and conditions of DynaGen's current investment policy
(a copy of which is set forth under the heading "DynaGen Investment Policy" on
Schedule A annexed hereto).
7.7. ACQUISITION OF SHARES OF OBLIGOR. Without the Bank's prior written
consent, purchase, acquire, redeem or retire for cash, or make any commitment to
purchase, acquire, redeem or retire any of the shares or other ownership
interest of the Obligors, whether now or hereafter outstanding, except for
redemptions required under previously issued preferred shares of DynaGen and
warrants issued in favor of Sirrom and Odyssey as set forth under the heading
"Redemptions" on Schedule A annexed hereto.
7.8. DIVIDENDS. Except as described under the heading "Dividends" on
Exhibit A annexed hereto, declare, pay, authorize or make any Dividend, except
Dividends payable solely in capital stock.
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<PAGE> 22
7.9 ISSUANCE OF STOCK. Without the Bank's prior written consent and
pertaining to GDI and Able only, issue any additional share of common stock.
7.10. TRANSACTIONS WITH SUBSIDIARIES AND AFFILIATES. Enter into, or be a
party to, any transaction with any Subsidiary or Affiliate (including, without
limitation, transactions involving the purchase, sale or exchange of property,
the rendering of services or the sale of stock) except in the ordinary course of
business and upon fair and reasonable terms no less favorable than would be
obtained in a comparable arm's-length transaction with a person other than a
Subsidiary or an Affiliate. GDI may reimburse DynaGen for certain intercompany
expenses paid by DynaGen and relating to GDI incurred in the ordinary course of
business, such expenses not to exceed $15,000.00 per month or $125,000.00 in the
aggregate during any fiscal year.
7.11. CHANGE OF NAME OR LOCATION. Without the Bank's prior written consent,
change their names or conduct their business under any trade name or style other
than as hereinabove set forth or change their chief executive office, places of
business or the present locations of their assets or records relating thereto
from those addresses hereinabove set forth.
7.12. SUBSIDIARIES, AFFILIATES. Without the Bank's prior written consent,
acquire, form or dispose of any Subsidiary or Affiliate or acquire all or
substantially all or any material portion of the shares or other ownership
interest or assets of any other person, entity or corporation.
7.13. STRUCTURE, TAX CLASSIFICATION. Without the Bank's prior written
consent, make or consent to a change in capital structure or convert into any
other type of entity, or change an election to be taxed under Subchapter C of
the Internal Revenue Code.
SECTION 8. FINANCIAL COVENANTS
Unless the Bank consents in writing, the Obligors covenant and agree that
until payment in full of the Notes and the complete performance of all
obligations hereunder and under any Related Agreement:
8.1. CALCULATION OF FINANCIAL COVENANTS. The calculation of the financial
covenants set forth in this Section 8 shall be measured against the financial
statements required to be delivered to the Bank pursuant to Section 6.1 of this
Agreement on both a consolidated basis and on a consolidating basis.
8.2. CURRENT RATIO. GDI shall not permit its Current Ratio to be less than
the ratio of 1.75 to 1.0 as of the end of any fiscal quarter.
8.3. TANGIBLE NET WORTH. GDI shall not permit its Tangible Net Worth to
fall below the dollar amount set for such measuring date:
For the fiscal year ending December 31, 1997,
and for each fiscal quarter (other than the
fourth quarter) ending during the fiscal
year of 1998...........................................$440,000.00;
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For the fiscal year ending December 31, 1998,
and for each fiscal quarter (other than the
fourth quarter) ending during the fiscal year
of 1999.............................................$ 640,000.00;
For the fiscal year ending December 31, 1999,
and for each fiscal quarter (other than the
fourth quarter) ending during the fiscal year
of 2000.............................................$ 840,000.00;
For the fiscal year ending December 31, 2000,
and for each fiscal quarter (other than the
fourth quarter) ending during the fiscal year
of 2001.............................................$1,040,000.00; and
For the fiscal year ending December 31, 2001,
and for each fiscal quarter (other than the
fourth quarter) thereafter..........................$1,240,000.00.
8.4. LEVERAGE RATIO. GDI shall not permit its Leverage Ratio to exceed the
ratio set for such period:
For the fiscal quarter ending December 31, 1997.......4.70 to 1.0;
For the fiscal quarter ending March 31, 1998..........4.50 to 1.0;
For the fiscal quarter ending June 30, 1998...........4.25 to 1.0;
For the fiscal quarter ending September 30, 1998......4.00 to 1.0;
For the fiscal quarter ending December 31, 1998.......3.75 to 1.0;
For the fiscal quarter ending March 31, 1999..........3.50 to 1.0;
For the fiscal quarter ending June 30, 1999...........3.25 to 1.0; and
For the fiscal quarter ending September 30, 1999
and as of the end of each fiscal quarter thereafter...3.00 to 1.0.
8.5. DEBT SERVICE COVERAGE RATIO. GDI shall not permit its Debt Service
Coverage Ratio, measured annually as of each fiscal year end, to be less than
the ratio of 1.25 to 1.0.
8.6. NET INCOME. GDI shall not permit its Net Income to be less than
$200,000.00 for any fiscal year.
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<PAGE> 24
SECTION 9. EVENTS OF DEFAULT; REMEDIES
If any one or more of the following "Events of Default" shall occur:
9.1. (a) Failure to make due payment of the principal of the Notes, or in
the payment of interest on the Notes or in the payment of any other liability
owing by any of the Obligors, now existing or hereinafter incurred, whether
direct or contingent or (b) any Related Agreement ceases to be in full force and
effect or any party to any Related Agreement notifies the Bank that such party
has no continuing obligation to pay or perform in accordance with the terms of
the applicable Related Agreement; or
9.2. Failure by the Obligors to observe or perform any covenant contained
in Sections 6.1, 6.3, 6.5 through 6.9, 7.1 through 7.4, 7.6, 7.9 and 7.12
hereof, or failure by the Obligors or any Affiliate (excluding Superior
Pharmaceutical Company) or any other party executing a Related Agreement to
perform any act, duty, obligation or other agreement contained in this
Agreement, the Notes or any Related Agreement for fifteen (15) days following
the Bank giving notice thereof; or
9.3. Any representation or warranty made by the Obligors herein or in any
Related Agreement, or any statement, certificate or other data furnished by the
Obligors in connection herewith or with any Related Agreement, proves at any
time to be incorrect in any material respect; or
9.4. A judgment or judgments for the payment of money in excess of $50,000
shall be rendered against the Obligors or any Affiliate (excluding Superior
Pharmaceutical Company), and any such judgment shall remain unsatisfied and in
effect for any period of thirty (30) consecutive days without a stay of
execution; or
9.5. Any levy, seizure, attachment, garnishment, execution or similar
process shall be issued or levied on any of the Obligors' or Affiliate's
(excluding Superior Pharmaceutical Company) property; or
9.6. The Obligors or any Affiliate (excluding Superior Pharmaceutical
Company) shall (a) apply for or consent to the appointment of a receiver,
conservator, trustee or liquidator of all or a substantial part of any of its
assets; (b) be unable, or admit in writing its inability, to pay its debts as
they mature; (c) file or permit the filing of any petition, case, arrangement,
reorganization, or the like under any insolvency or bankruptcy law, or the
adjudication of it as a bankrupt, or the making of an assignment for the benefit
of creditors or the consenting to any form of arrangement for the satisfaction,
settlement or delay of debt or the appointment of a receiver for all or any part
of its properties; or (d) take any action for the purpose of effecting any of
the foregoing; or
9.7. An order, judgment or decree shall be entered, or a case shall be
commenced, against the Obligors or any Affiliate (excluding Superior
Pharmaceutical Company), without the application, approval or consent of the
Obligors or such Affiliate (excluding Superior Pharmaceutical Company) by or in
any court of competent jurisdiction, approving a petition or permitting the
commencement of a case seeking reorganization or liquidation of the Obligors or
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<PAGE> 25
such Affiliate (excluding Superior Pharmaceutical Company) or appointing a
receiver, trustee, conservator or liquidator of the Obligors or such Affiliate
(excluding Superior Pharmaceutical Company)or of all or a substantial part of
its assets and the Obligors or such Affiliate (excluding Superior
Pharmaceutical Company), by any act, indicates its approval thereof, consent
thereto, or acquiescence therein, or such order, judgment, decree or case shall
continue unstayed and in effect for any period of thirty (30) consecutive days;
or
9.8. The Obligors or any Affiliate (excluding Superior Pharmaceutical
Company) shall dissolve or liquidate, or be dissolved or liquidated, or cease to
legally exist, or merge, consolidate or convert, or be merged, consolidated or
converted with or into any other corporation or entity without the Bank's prior
written consent; or
9.9. Failure by the Obligors or any Affiliate (excluding Superior
Pharmaceutical Company) to pay any other Indebtedness or obligation, whether
contingent or otherwise, or if any such other Indebtedness or obligation shall
be accelerated, or if there exists any event of default under any instrument,
document or agreement governing, evidencing or securing such other Indebtedness
or obligation; or
9.10. Any federal or state authority, for any reason, shall classify, alter
or reclassify the tax status applicable to any of the Obligors or any Affiliate
(excluding Superior Pharmaceutical Company) or any of their respective
operations from the tax status attributed or deemed attributed to such Obligor
or such Affiliate (excluding Superior Pharmaceutical Company) as of the date of
the execution and delivery of this Agreement by the Obligors;
then, and in such event (other than an event described in Sections 9.6 or 9.7
above), the Bank may declare the then outstanding principal balance and all
interest accrued on the Notes and all applicable late charges and surcharges and
all other liabilities and obligations of the Obligors to the Bank to be
forthwith due and payable, whereupon the same shall become forthwith due and
payable, and the availability of the Line of Credit shall be deemed to be
automatically terminated, all of the foregoing without presentment or demand for
payment, notice of non-payment, protest or any other notice or demand of any
kind, all of which are expressly waived by the Obligors. Notwithstanding the
foregoing, upon the occurrence of an event described in Section 9.6 or Section
9.7 above, (i) the availability of the Line of Credit shall automatically
terminate and (ii) the outstanding principal balance and all interest accrued on
the Notes and all applicable late charges and surcharges and all other
liabilities and obligations of the Obligors to the Bank shall become
automatically due and payable without presentment or demand for payment, notice
of non-payment, protest or any other notice or demand of any kind, all of which
are expressly waived by the Obligors.
SECTION 10. MISCELLANEOUS
10.1. WAIVERS.
(a) The Obligors hereby waive presentment, demand, notice, protest,
notice of acceptance of this Agreement, notices of advances made, credit
extended, collateral received or
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<PAGE> 26
delivered or other action taken in reliance hereon and all other demands and
notices of any description. With respect to this Agreement, the Related
Agreements, the Notes and any collateral now or hereafter securing the Notes,
the Obligors assent to any extension or postponement of the time of payment or
any other indulgence, to any substitution, exchange or release of any collateral
now or hereafter securing the Notes, to the addition or release of any party or
person primarily or secondarily liable, to the acceptance of partial payments
thereon and the settlement, compromising or adjusting of any 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 any collateral now or
hereafter securing the Notes or any income thereon, nor as to the preservation
of rights against prior parties, nor as to the preservation of any rights
pertaining thereto beyond the safe custody thereof. The Bank may exercise its
rights with respect to any collateral without resorting or regard to other
collateral now or hereafter securing the Notes or sources of reimbursement for
liability. The Bank shall not be deemed to have waived any of its rights upon or
under any document or agreement relating to the liabilities of the Obligors or
any collateral now or hereafter securing any such liabilities 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. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right on any future occasion. The Bank may revoke any permission
or waiver previously granted to the Obligors, such revocation shall be effective
whether given orally or in writing. All rights and remedies of the Bank with
respect to this Agreement, the Related Agreements, the Notes or any collateral
now or hereafter securing the Notes, whether evidenced hereby or by any other
instrument or document, shall be cumulative and may be exercised singularly or
concurrently.
(b) THE BANK AND THE OBLIGORS IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY
JURY IN ANY PROCEEDING HEREAFTER INSTITUTED BY OR AGAINST THE BANK OR THE
OBLIGORS IN RESPECT OF THIS AGREEMENT, THE NOTES OR ANY RELATED AGREEMENT.
(c) The Obligors acknowledge that the transaction of which this
agreement is a part is a commercial transaction.
10.2. NOTICES. All notices, requests or demands to or upon a party to this
Agreement shall be given or made by the other party hereto in writing, in
person, by facsimile transmission with a confirmation copy to follow by regular
first-class U.S. mail, by overnight courier or by depositing in the mail postage
prepaid, return receipt requested addressed to the addressee at the address set
forth below or to such other addresses as such addressee may have designated in
writing to the other party hereto. No other method of giving any notice, request
or demand is hereby precluded.
If to the Bank: Fleet National Bank
One Federal Street
Boston, MA 02110-2010
Attn: Raymond C. Hoefling, Vice President
Mail Stop:MA OF D04D
(617) 346-0799
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<PAGE> 27
With a copy to: Chappell Cohen DiFronzo &
Zinnershine LLP
99 Summer Street, 18th Floor
Boston, MA 02110
Attn: Louis J. DiFronzo, Jr., Esquire
(617) 772-9696
If to DynaGen: DynaGen, Inc.
Riverside Technology Center
840 Memorial Drive
Cambridge, MA 02139
Attn: Dhananjay G. Wadekar, Chairman
(617) 354-3902
If to Able Labs: Able Laboratories, Inc.
6 Hollywood Court
South Plainfield, NJ 07080
Attn: Mr. Steven Kuchen
If to GDI: Generic Distributors, Inc.
1611 Olive Street
Monroe, LA 71201
Attn: Mr. Donald Couvillon
With a copy to: Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
Attn: John M. Hession, Esquire
(617) 248-7100
10.3. EXPENSES; ADDITIONAL DOCUMENTS. The Obligors will pay all taxes
levied or assessed upon the principal sum of the advances made against the Bank
and all expenses arising out of the preparation, administration, amendment,
waiver, modification, protection, collection and/or other enforcement of this
Agreement, the Related Agreements, the Notes, or of any collateral or security
interest now or hereafter granted to secure the Notes or security interest or
lien granted under any Related Agreement and the Notes (including, without
limitation, counsels' reasonable fees). The Obligors will permit the Bank or its
agents to enter their property upon reasonable notice and at a time that is
least intrusive to business operations and to appraise assets now or hereafter
constituting collateral from time to time and shall reimburse the Bank upon
demand for the costs thereof. The Obligors will, from time to time, at their
expense, execute and deliver to the Bank all such other and further instruments
and documents and take or cause to be taken all such other and future action as
the Bank shall request in order to effect and confirm or vest more securely all
rights contemplated by this Agreement or any Related Agreement.
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<PAGE> 28
10.4. INDEMNIFICATION. The Obligors, jointly and severally, shall
indemnify, defend, and hold the Bank harmless of and from any claim brought or
threatened against the Bank by the Obligors or any other person (as well as from
attorneys' reasonable fees and expenses in connection therewith) on account of
the Bank's relationship with the Obligors or (each of which may be defended,
compromised, settled, or pursued by the Bank with counsel of the Bank's
selection, but at the expense of the Obligors). The within indemnification shall
survive payment of the Notes and/or any termination, release, or discharge
executed by the Bank in favor of the Obligors. Furthermore, the Obligors,
jointly and severally, agree to defend, indemnify and hold harmless the Bank and
any participants, successors or assigns of the Bank and the officers, directors,
employees and agents of each of them from and against any and all losses,
claims, liabilities, asserted liabilities, costs and expenses, including,
without limitation, costs of litigation and attorneys' reasonable fees incurred
in connection with any and all claims or proceedings for bodily injury, property
damage, abatement or remediation, environmental damage or impairment or any
other injury or damage (including all foreseeable and unforeseeable
consequential damage) or any diminution in value of any collateral resulting
from or relating, directly or indirectly, to (a) any release, spilling, leaking,
migrating, discharging, escaping, leaching, dumping or disposing (a "Release")
into the environment of any toxic substances or hazardous wastes (actual or
threatened), a threatened Release, the existence or removal of any toxic
substances or hazardous wastes on, into, from, through or under any real
property owned or operated by the Obligors (whether or not such Release was
caused by the Obligors or any Affiliate, a tenant, subtenant, prior owner or
tenant or any other person and whether or not the alleged liability is
attributable to the handling, storage, generation, transportation or disposal of
toxic substances or hazardous wastes or the mere presence of such toxic
substances or hazardous wastes) or (b) the breach or alleged breach by the
Obligors of any federal, state or local law or regulation concerning public
health, safety or the environment with respect to any real property owned or
operated by the Obligors and/or any business conducted thereon. It is
acknowledged and agreed that the scope of this indemnity shall not include
damages suffered by the Bank due solely to its own gross negligence or willful
misconduct.
10.5. LIEN AND SET OFF. The Obligors hereby each grant to the Bank, a lien,
security interest and right of setoff as security for all liabilities and
obligations to Bank, whether now existing or hereafter arising, upon and against
all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of the Bank or any entity under the
control of Fleet Financial Group, Inc., or in transit to any of them. At any
time, without demand or notice, Bank may set off the same or any part thereof
and apply the same to any liability or obligation of the Obligors even though
unmatured and regardless of the adequacy of any other collateral securing the
loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE NOTES, PRIOR TO EXERCISING ITS
RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
OBLIGORS ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLE WAIVED.
10.6. PAYMENTS. All payments made by the Obligors to the Bank should be in
lawful money of the United States in immediately available funds. The Bank is
authorized (but not required) to charge principal and interest and all other
amounts due hereunder, under any Related Agreement and under the Notes to any
account of GDI when and as it becomes due.
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<PAGE> 29
10.7. LOST INSTRUMENTS. Upon receipt of an affidavit of an officer of the
Bank as to the loss, theft, destruction or mutilation of any of the Notes or
Related Agreement which is not of public record, and, in the case of any such
loss, theft, destruction or mutilation, upon surrender and cancellation of any
such Notes or Related Agreement, the Obligors will issue, in lieu thereof, a
replacement of such Note or Related Agreement in the same principal amount
thereof and otherwise of like tenor.
10.8. MODIFIED FOLLOWING BUSINESS DAY CONVENTION. In the event that any
payment due date or any other relevant date should fall on a day that is not a
Business Day, then an adjustment shall be made so that such date shall be the
first following day that is a Business Day.
10.9. GOVERNING LAW. This Agreement, the Related Agreements and the rights
and obligations of the parties hereunder and thereunder shall be construed and
interpreted in accordance with the laws of the Commonwealth of Massachusetts.
The Obligors agree that the execution of this Agreement and Related Agreements
and the performance of the Obligors' obligations hereunder and thereunder shall
be deemed to have a situs in the Commonwealth of Massachusetts and the Obligors
shall be subject to the personal jurisdiction of the courts of the Commonwealth
of Massachusetts with respect to any action the Bank or its successors or
assigns may commence hereunder or thereunder. Accordingly, the Obligors hereby
specifically and irrevocably consent to the jurisdiction of the courts of the
Commonwealth of Massachusetts with respect to all matters concerning this
Agreement, the Related Agreements, the Notes or the enforcement of any of the
foregoing.
10.10. SURVIVAL OF REPRESENTATIONS. All representations, warranties,
covenants and agreements herein contained or made in writing in connection with
this Agreement shall survive the execution and delivery of the Notes, shall
continue in full force and effect until all amounts payable on account of the
Notes, the Related Agreements and this Agreement shall have been paid in full
and this Agreement has been terminated.
10.11. SEVERABILITY. If any provision of this Agreement shall to any extent
be held invalid or unenforceable, then only such provision shall be deemed
ineffective and the remainder of this Agreement shall not be affected.
10.12. INTEGRATION; MODIFICATIONS. This Agreement is intended by the
parties as the final, complete and exclusive statement of the transactions
evidenced by this Agreement. No modification or amendment hereof shall be
effective unless the same shall be in writing and signed by the parties hereto.
10.13. ASSIGNMENTS. The Obligors may not assign any of their obligations
hereunder or under any Related Agreement to any person without the prior written
consent of the Bank. The Bank may, without notice to or consent of the Obligors,
or any other person, sell, assign, grant a participation in or otherwise dispose
of all or any portion of the Notes, this Agreement and the Related Agreements.
In connection therewith, the Bank may disclose to a prospective purchaser,
assignee, participant or transferee, any information possessed by the Bank
relating to the Obligors, the Line of Credit, the Term Loan, and the collateral
securing same. Without limiting
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<PAGE> 30
the generality of the foregoing, the Bank may at any time pledge all or any
portion of its rights hereunder including any Notes or portion(s) thereof to any
of the twelve (12) Federal Reserve Banks organized under Section 4 of the
Federal Reserve Act, 12 United States Code, Section 341; but no such pledge or
enforcement thereof shall release the Bank from its obligations hereunder.
10.14. SUCCESSORS AND ASSIGNS. Except as otherwise provided in section
10.13 hereof, this Agreement shall be binding upon and shall inure to the
benefit of the Obligors, the Bank and their respective successors and assigns.
10.15. TERMINATION OF THIS AGREEMENT. This Agreement shall terminate upon
the written agreement of the parties hereto to the termination of any obligation
to the Bank to make advances under the Line of Credit and full and final payment
of all amounts due hereunder, under the Related Agreements and under the Notes.
Upon the termination of Line of Credit, GDI shall pay the Bank all of the then
principal balance of the Notes and all accrued and unpaid interest thereon
(whether or not then due). Following such payment, all provisions of this
Agreement, other than those contained in Sections 2 and 3, above, shall remain
in full force and effect until all of the Indebtedness owed to the Bank shall
have been paid in full. The release by the Bank of the security interests or any
collateral granted the Bank by the Obligors hereunder may be upon such
conditions and indemnifications as the Bank may require.
<The remainder of this page intentionally left blank.>
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<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement
to be duly executed as a sealed instrument as of the day and year first above
written.
OBLIGORS:
Witness: Generic Distributors, Incorporated
/s/ Edwin Pease By: /s/ Jay Wadekar
- -------------------------- -----------------------------------
Print Name: Jay Wadekar
---------------------------
Title: Executive Vice President
--------------------------------
Witness: DynaGen, Inc.
/s/ Edwin Pease By: /s/ Jay Wadekar
- -------------------------- -----------------------------------
Print Name: Jay Wadekar
---------------------------
Title: Executive Vice President
--------------------------------
Witness: Able Laboratories, Inc.
/s/ Edwin Pease By: /s/ Jay Wadekar
- -------------------------- ----------------------------------
Print Name: Jay Wadekar
--------------------------
Title: Executive Vice President
-------------------------------
BANK:
Witness: Fleet National Bank
/s/ Michael J. Dinga By: /s/ Raymond C. Hoefling
- -------------------------- ---------------------------------
Michael J. Dinga Raymond C. Hoefling
Vice President
-31-
<PAGE> 1
EXHIBIT 4.2
FLEET NATIONAL BANK COMMERCIAL TERM PROMISSORY NOTE
- -------------------------------------------------------------------------------
$1,200,000.00 February 26, 1998
For value received, Generic Distributors Incorporated (the "Borrower")
hereby promises to pay to the order of FLEET NATIONAL BANK (the "Bank"), at the
office of the Bank located at One Federal Street, Boston, Massachusetts
02110-2010 or at such other office as the holder hereof may designate, the
principal sum of ONE MILLION TWO HUNDRED THOUSAND DOLLARS ($1,200,000.00),
together with interest thereon, payable as provided herein.
Principal and interest on this Note shall be payable as follows:
(a) Commencing on March 31, 1998 and on the last day of each calendar
month thereafter, the Borrower shall pay monthly payments of interest on the
then outstanding principal balance hereof.
(b) On the last day of each of the months of February, May, August,
and November of each calendar year, commencing with the corresponding payment
due on May 31, 1998, the Borrower shall make quarterly payments of principal
each in the amount of Forty-Two Thousand Eight Hundred Sixty Dollars
($42,860.00).
(c) Additionally, so long as the Leverage Ratio (as defined in the
Agreement) of the Borrower is equal to or greater than 3.0 to 1.0 (as measured
at each fiscal quarter end), the Borrower shall also make an annual principal
reduction payment, due and payable on the last day of April of each year, in an
amount equal to fifty percent (50%) of the excess Earnings Before Interest,
Taxes, Depreciation and Amortization (as defined in the Agreement) required to
satisfy the Debt Service Coverage Ratio (as defined in the Agreement) for the
preceding fiscal year.
(d) In all events, the entire unpaid principal amount of this Note,
together with any and all accrued and unpaid interest thereon and all other
amounts payable hereunder, if not sooner paid, shall be due and payable on April
26, 2003.
The interest on the unpaid balance shall be payable on the dates
provided above and is to be computed on the basis of a 360-day year and actual
days elapsed, at a variable rate per year equal to the LIBOR (as defined below)
plus three hundred (300) basis points.
CERTAIN DEFINITIONS RELATING TO INTEREST RATE
BANKING DAY. The term "Banking Day" means in respect of any date that
is specified in this Agreement to be subject to adjustment in accordance with
the applicable Modified Following Business Day Convention, a day on which
commercial banks settle payments in London.
BUSINESS DAY. The term "Business Day" means, in respect of any date
that is specified in this Note to be subject to adjustment in accordance with
the applicable Modified Following
<PAGE> 2
Business Day Convention, (i) for all purposes other than as covered by clause
(ii) below, any day other than a Saturday, Sunday or legal holiday on which
banks in Boston, Massachusetts are open for the conduct of a substantial part of
their commercial banking business; and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest on, a
loan advance accruing interest at a rate based on LIBOR, any day that is a
Business Day described in clause (i) and that is also a day for trading by and
between banks in U.S. Dollar deposits in the London interbank market.
LIBOR. The term "LIBOR" means, as applicable to any LIBOR advance, the
rate per annum (rounded upward, if necessary, to the nearest 1/32 of one
percent) as determined on the basis of the offered rates for deposits in U.S.
Dollars, for a thirty (30) day period of time as appearing on the Telerate page
3750 as of 11:00 a.m. London time on the day that is two (2) Banking Days
preceding the first day of such advance; provided, however, if the rate
described above does not appear on the Telerate System on any applicable
interest determination date, LIBOR shall be the rate (rounded upwards as
described above, if necessary) for deposits in dollars for a period
substantially equal to the interest period on the Reuters Page "LIBO" (or such
other page as may replace the LIBO Page on that service for the purpose of
displaying such rates), as of 11:00 a.m. (London Time), on the day that is two
(2) Banking Days preceding the first day of such advance. If both the Telerate
and Reuters system are unavailable, then the rate for that date will be
determined on the basis of the offered rates for deposits in U.S. Dollars for a
period of time comparable to such advance which are offered by four major banks
in the London interbank market at approximately 11:00 a.m. London time, on the
day that is two (2) Banking Days preceding the first day of such advance. The
principal London office of each of the four major London banks will be requested
to provide a quotation of its U.S. Dollar deposit offered rate. If at least two
such quotations are provided as requested, the rate for that date will be the
arithmetic mean of the quotations. If fewer than two quotations are provided as
requested, the rate for that date will be determined on the basis of the rates
quoted for loans in U.S. Dollars to leading European banks for a period of time
comparable to such advance offered by major banks in New York City at
approximately 11:00 a.m. New York City time, on the day that is two (2) Banking
Days preceding the first day of such LIBOR advance. In the event that the Bank
is unable to obtain any such quotation as provided above, it will be deemed that
LIBOR pursuant to an advance cannot be determined. In the event that the Board
of Governors of the Federal Reserve System shall impose a reserve percentage
with respect to LIBOR deposits of the Bank, then for any period during which
such reserve percentage shall apply, LIBOR shall be equal to the amount
determined above divided by an amount equal to 1 minus the reserve percentage.
MODIFIED FOLLOWING BUSINESS DAY CONVENTION.
In the event that any payment due date or any other relevant date
should fall on a day that is not a Business Day, then an adjustment shall be
made so that such date shall be the first following day that is a Business Day.
-2-
<PAGE> 3
OTHER TERMS.
PAYMENTS. All payments of interest, principal and fees shall be made in lawful
money of the United States in immediately available funds: (a) by direct charge
to an account of either of the Borrower maintained with the Bank (or the then
holder of this Note), or (b) by wire transfer to the Bank, or (c) by check
payable to the Bank and delivered to the Bank at an address as the holder of
this Note may designate in a written notice to the Borrower. Payments shall be
credited on the Business Day on which immediately available funds are received
prior to one o'clock P.M. Eastern Time; payments received after one o'clock P.M.
Eastern Time shall be credited to this Note on the next Business Day. Payments
which are by check, which are not in the form of immediately available funds,
shall not be credited to this Note until such funds become immediately available
to the Bank, and, with respect to payments by check, such credit shall be
provisional until the item is finally paid by the payor bank. All payments
shall, at the option of the Bank, be applied first to the payment of all costs
and expenses incurred by the Bank arising out of this Note or any document or
agreement governing or securing this Note and which has not been paid or
reimbursed to the Bank, then to interest on the unpaid principal of all advances
due under this Note and the balance on account of the principal (in reverse
order of maturity) of all advances due under this Note.
DEFAULT RATE. On default or after maturity or after judgment has been rendered
on this Note, the unpaid principal balance of this Note shall, at the option of
the Bank, bear interest at a rate which is four (4) percentage points per annum
greater than that which would otherwise be applicable.
LATE FEES. The Bank may collect a late charge not to exceed five percent (5.00%)
of any installment of interest or principal, or of any other amount due to the
Bank which is not paid or reimbursed by the Borrower within ten (10) days of the
due date thereof to defray the cost and extra expense involved in handling such
delinquent payment and the increased risk of non-collection. The minimum late
charge shall be $25.00.
USURY. If, at any time, the rate of interest, together with all amounts which
constitute interest and which are reserved, charged or taken by Bank as
compensation for fees, services or expenses incidental to the making,
negotiating or collection of any advance evidenced hereby, shall be deemed by
any competent court of law, governmental agency or tribunal to exceed the
maximum rate of interest permitted to be charged by the Bank to the Borrower,
then, during such time as such rate of interest would be deemed excessive, that
portion of each sum paid attributable to that portion of such interest rate that
exceeds the maximum rate of interest so permitted shall be deemed a voluntary
prepayment of principal.
PREPAYMENT. This Note or any portion thereof may be prepaid in full or in part
at any time without penalty, but the Borrower shall pay to the Bank a yield
maintenance fee in an amount computed as follows: the current rate for United
States Treasury securities (bills on discounted basis shall be converted to a
bond equivalent) with a maturity date closest to the maturity date of the
advance(s) as to which the prepayment is made, shall be subtracted from the
"cost of funds" component of LIBOR as in effect at the time of prepayment. If
the result is zero or a negative number, there shall be no yield maintenance
fee. If the result is a positive number, then the resulting percentage shall be
multiplied by the amount of the principal balance being prepaid. The resulting
amount
-3-
<PAGE> 4
shall be divided by 360 and multiplied by the number of days remaining in
the applicable term for the advance(s) as to which the prepayment is made. Said
amount shall be reduced to present value calculated by using the number of days
remaining in the designated term and using the above-referenced United States
Treasury security rate and the number of days remaining in the applicable term
for the advance(s) as to which the prepayment is made. The resulting amount
shall be the yield maintenance fee due to the Bank upon prepayment. If by reason
of an event of default the Bank elects to declare this Note to be immediately
due and payable, then any yield maintenance fee with respect to this Note shall
become due and payable in the same manner as though the Borrower had exercised
such right of prepayment. Any prepayment hereunder will be applied first to the
payment of all accrued interest to the date of the prepayment and the remainder
to the outstanding principal.
DEFAULT. Upon the happening of any Event of Default (as defined in the Credit
Agreement dated February 26, 1998 (as amended from time to time, the
"Agreement")), the Bank may declare the then outstanding principal of this Note
and all interest accrued thereon and all applicable late charges and surcharges
and all other liabilities and obligations of the Borrower to the Bank to be
forthwith due and payable, whereupon the same shall become forthwith due and
payable, without presentment or demand for payment, notice of non-payment,
protest or any other demand or notice of any kind all of which are expressly
waived by the Borrower. Failure to exercise such option shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default.
Further, the Borrower agrees to pay all costs and expenses, including attorneys'
reasonable fees arising out of or with respect to the validity, enforceability,
defense, collection or preservation of this Note.
MISCELLANEOUS
Upon receipt of an affidavit of an officer of the Bank as to the loss,
theft, destruction or mutilation of any of this Note or any related agreement
which is not of public record, and, in the case of any such loss, theft,
destruction or mutilation, upon surrender and cancellation of any such Note or
any related agreement, the Borrower will issue, in lieu thereof, a replacement
of such Note or related agreement in the same principal amount thereof and
otherwise of like tenor. This Note shall not be necessary to establish the
indebtedness of the Borrower to the Bank on account of such loans, advances, and
repayments.
The Borrower may not assign any of its rights or obligations hereunder
or under any related agreement to any person without the prior written consent
of the Bank. Without limiting the generality of the foregoing, the Bank may at
any time pledge all or any portion of its rights hereunder including this Note
or portion(s) thereof to any of the twelve (12) Federal Reserve Banks organized
under Section 4 of the Federal Reserve Act, 12 United States Code, Section 341;
but no such pledge or enforcement thereof shall release the Bank from its
obligations hereunder. The Bank also may, without notice to or consent of the
Borrower or any other person, sell, assign, grant a participation in or
otherwise dispose of all or any portion of this Note, the Agreement and/or any
related agreements. In connection therewith, the Bank may disclose to a
prospective purchaser, assignee, participant or transferee, any information
possessed by the Bank relating to this Note, the Agreement, the Borrower, any
guarantor or any collateral.
-4-
<PAGE> 5
The Borrower hereby grants to the Bank, a lien, security interest and
right of setoff as security for all liabilities and obligations to the Bank,
whether now existing or hereafter arising, upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of the Bank or any entity under the control of Fleet
Financial Group, Inc., or in transit to any of them. At any time after the
occurrence of an Event of Default, without demand or notice, the Bank may set
off the same or any part thereof and apply the same to any liability or
obligation of the Borrower even though unmatured and regardless of the adequacy
of any other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THIS NOTE, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.
THE BORROWER AND THE BANK, RESPECTIVELY, TO THE EXTENT ENTITLED
THERETO, WAIVE ANY PRESENT OR FUTURE RIGHT OF THE BORROWER, THE BANK, OR OF ANY
GUARANTOR OR ENDORSER OF THE BORROWER OR OF ANY OTHER PERSON LIABLE TO THE BANK
ON ACCOUNT OF OR IN RESPECT TO THE LIABILITIES, TO A TRIAL BY JURY IN ANY CASE
OR CONTROVERSY IN WHICH THE BANK IS OR BECOMES A PARTY (WHETHER SUCH CASE OR
CONTROVERSY IS INITIATED BY OR AGAINST THE BANK OR IN WHICH THE BANK IS JOINED
AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT
TO, ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWER, ANY SUCH PERSON, AND THE
BANK.
THE BORROWER ACKNOWLEDGES THAT THIS NOTE IS PART OF A COMMERCIAL
TRANSACTION. The Borrower further waives diligence, demand, presentment for
payment, notice of nonpayment, protest and notice of protest, and notice of any
renewals or extensions of this Note, and all rights under any statute of
limitations, and agree that the time for payment of this Note may be changed and
extended at Bank's sole discretion, without impairing their liability hereon,
and further consent to the release of all or any part of the security for the
payment hereof at the discretion of Bank, or the release of any party liable for
this obligation without affecting the liability of the other parties hereto. Any
delay on the part of the Bank in exercising any right hereunder shall not
operate as a waiver of any such right, and any waiver granted for one occasion
shall not operate as a waiver in the event of any subsequent default.
This Note has been executed and delivered in accordance with the
Agreement of even date herewith between the Borrower and the Bank, incorporated
herein by reference, which sets forth further terms and conditions upon which
the entire unpaid principal hereof and all interest hereon may become due and
payable, and generally as to further rights of the Bank and duties of the
Borrower and any guarantor, endorser or surety of any obligation of the Borrower
to the Bank (a "Guarantor") with respect hereto. All advances made by the Bank
to the Borrower shall be evidenced by the books and records of the Bank which
shall be conclusive, absent manifest error, and may be recorded on any grid
schedule(s) attached hereto and made a part hereof.
-5-
<PAGE> 6
All payments shall, at the option of the Bank, be applied first to the
payment of all costs and expenses incurred by the Bank arising out of this Note
or any document or agreement governing or securing this Note and which has not
been paid or reimbursed to the Bank, then to interest on the unpaid principal of
all advances due under this Note and the balance on account of the principal of
all advances due under this Note.
If any provision of this Note shall, to any extent, be held invalid or
unenforceable, then only such provision shall be deemed ineffective and the
remainder of this Note shall not be affected.
This Note shall bind the heirs, executors, administrators, successors
and assigns of each Borrower and all Guarantors hereto and shall inure to the
benefit of the Bank, its successors and assigns.
<The remainder of this page is intentionally left blank.>
-6-
<PAGE> 7
This Note is executed as a sealed instrument and shall be governed by
and construed in accordance with the laws of the Commonwealth of Massachusetts.
WITNESS: BORROWER:
Generic Distributors Incorporated
/s/ John Hession By: /s/ Jay Wadekar
- ------------------------- -----------------------------------------
Print Name: John Hession Name: Jay Wadekar a/k/a Dhananjay Wadekar
------------- --------------------------------------
Title: Executive Vice President
--------------------------------------
-7-
<PAGE> 1
EXHIBIT 4.3
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT ("Agreement"), dated February 26,
1998, by and between DynaGen, Inc., a Delaware corporation ("Pledgor") and Fleet
National Bank, a national banking association with a principal office at One
Federal Street, Boston, Massachusetts ("Lender").
WITNESSETH:
WHEREAS, pursuant to a Credit Agreement of even date, by and between,
among others, Pledgor and Lender (the "Credit Agreement"), Lender has made
certain loans to Generic Distributors, Incorporated, a Delaware corporation,
("Borrower") which are unconditionally guaranteed by Pledgor. Specifically, such
loans consist of (i) a term loan arrangement in the original principal amount of
One Million Two Hundred Thousand Dollars ($1,200,000.00) (the "Term Loan") and
(ii) a revolving line of credit in the maximum aggregate principal amount of
Three Hundred Thousand Dollars ($300,000.00) (the "Line of Credit"). The Term
Loan is evidenced by, among other things, a Commercial Term Promissory Note of
even date in the original principal amount of One Million Two Hundred Thousand
Dollars ($1,200,000.00) made and executed by Borrower payable to the order of
Lender (herein referred to, together with any extensions, modifications,
renewals and/or replacements thereof, as the "Term Note"). The Line of Credit is
evidenced by, among other things, a Commercial Revolving Line of Credit
Promissory Note of even date in the maximum aggregate principal amount of Three
Hundred Thousand Dollars ($300,000.00) made and executed by Borrower payable to
the order of Lender (herein referred to, together with any extensions,
modifications, renewals and/or replacements thereof, as the "Line of Credit
Note") (the Term Note and the Line of Credit Note are sometimes referred to
herein collectively as the "Notes", and the Term Loan and the Line of Credit are
sometimes referred to herein collectively as the "Loans"). As stated above,
Pledgor has unconditionally guaranteed the payment and performance of the
Borrower's obligations, liabilities and indebtedness to Lender pursuant to a
Guaranty Agreement of even date (the "Guaranty").
WHEREAS, it is a condition of Lender's agreement to make the Loans to
Borrower that Pledgor execute and deliver this Agreement to Lender to secure
Pledgor's obligations under the Guaranty.
AGREEMENT:
NOW THEREFORE, in consideration of the foregoing, and to enable
Borrower and/or Pledgor to obtain loans and other extensions of credit from
Lender and to induce Lender to have transaction with Borrower and/or Pledgor,
Pledgor agrees as follows:
1. PLEDGE. Pledgor hereby pledges, hypothecates, assigns, transfers,
sets over and delivers unto Lender, and hereby grants to Lender a security
interest in, the collateral described in SCHEDULE A hereto, together with the
proceeds thereof and all cash, additional securities or other property at any
time and from time to time receivable or otherwise distributable in respect
<PAGE> 2
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 Lender, its successors and assigns; subject, however, to the
terms, covenants and conditions hereinafter set forth.
Upon delivery to Lender, the Pledged Securities shall be accompanied by
executed stock powers in blank and by such other instruments or documents as
Lender 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 Lender, to secure full payment and
performance of any and all indebtedness and other obligations of Pledgor to
Lender, 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 Lender to Pledgor (regardless of
the class of such future advance), including, without limitation, the
indebtedness evidenced by the Notes (collectively the "Obligations").
3. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and
warrants to Lender (a) that Pledgor is the legal and equitable owner of the
Pledged Securities, that Pledgor 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 interest of every kind
and nature; 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. Pledgor 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.
4. REGISTRATION IN NOMINEE NAME; DENOMINATIONS. Lender 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
Pledgor, endorsed or assigned in blank or in favor of Lender. Pledgor shall
deliver to Lender all certificates representing the Pledged Securities promptly
upon receipt by Pledgor. Upon request and delivery of certificates representing
the Pledged Securities to the issuer of the Pledged Securities, Lender may have
such Pledged Securities registered in the name of Lender or any nominee or
nominees of Lender. Lender 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.
2
<PAGE> 3
5. REMEDIES UPON DEFAULT. Upon the occurrence of a default or Event of
Default under the Credit 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, Lender shall have all of the rights, privileges and remedies of a secured
party under the Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts, and without limiting the foregoing, Lender may (a) collect 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 Lender shall deem appropriate, including without limitation, at
Lender's option, the purchase of all or any part of said securities at any
public sale by Lender. Upon consummation of any sale, Lender shall have the
right to assign, transfer and deliver to the purchaser or purchasers thereof the
Pledged Securities sol sold. Each such purchaser at any such sale shall hold the
property sold absolutely, from any claim or right on the part of the Pledgor,
and the Pledgor hereby waives (to the extent permitted by law) all rights of
redemption, stay or appraisal that Pledgor now has or may at any time in the
future have under any rule of law or statute now existing or hereinafter
enacted. Pledgor 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 Lender's other remedies hereunder, shall be applied by Lender as
follows:
FIRST: To the payment of all costs and expenses incurred by Lender in
connection with any such sale, including, but not limited to, all court costs
and the reasonable fees and expenses of counsel for Lender in connection
therewith, and
SECOND: To the payment in full of the Obligations, first to accrued
interest and thereafter to the unpaid amount thereof, to the extent not
previously paid by Pledgor, and
THIRD: The excess, if any, shall be paid to Pledgor or any other person
lawfully thereunto entitled.
7. REIMBURSEMENT OF LENDER. Pledgor agrees to reimburse Lender, 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 Lender 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 Lender.
8. NO WAIVER. No failure on the part of Lender to exercise, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall nay single or partial exercise of any such right,
power or remedy by Lender 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 Lender nor its partners,
employees, agents, representatives, or
3
<PAGE> 4
nominees shall be liable for any loss incurred by Pledgor arising out of any act
or omission of Lender, 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 LAWS; AMENDMENTS. This Agreement shall in all respects be
construed in accordance with and governed by the laws of the Commonwealth of
Massachusetts 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 Pledgor pursuant to
this Agreement.
12. FURTHER ASSURANCES. Pledgor agrees to do such further acts and
things, and to execute and deliver such additional conveyances, assignments,
agreements and instruments, as Lender 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
Lender its rights and remedies hereunder.
13. HEADINGS. Section numbers and heading used herein are for
convenience only and are not to affect the construction of or to be taken into
consideration in interpreting this
Agreement.
<The remainder of this page intentionally left blank.>
4
<PAGE> 5
IN WITNESS WHEREOF, Pledgor and Lender 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.
PLEDGOR:
DYNAGEN, INC.,
Witness: /s/ John Hession a Delaware Corporation
By: /s/ Jay Wadekar
----------------------------------
Jay Wadekar a/k/a
Print Name: Dhananjay G. Wadekar
-------------------------
Title: Executive Vice President
------------------------------
LENDER:
FLEET NATIONAL BANK,
Witness: /s/ Michael J. Dinga a national banking association
MICHAEL J. DINGA
By: /s/ Raymond C. Hoefling
----------------------------------
Print Name: Raymond C. Hoefling
-------------------------
Title: Vice President
------------------------------
5
<PAGE> 6
SCHEDULE A
PLEDGED SECURITIES
NO. OF
ISSUER SHARES CLASS CERTIFICATE NOS.
------------- -------- ------- ----------------
Generic Distributors Incorporated 100 Common 1
Able Laboratories, Inc. 51 Common 2
6
<PAGE> 1
EXHIBIT 4.4
FLEET NATIONAL BANK SECURITY AGREEMENT
- --------------------------------------------------------------------------------
Generic Distributors Incorporated (the "Debtor"), a Delaware
corporation having its chief executive office and principal place of business,
at 1611 Olive Street, Monroe, Louisiana 71201 hereby grants to Fleet National
Bank (the "Bank"), having an address at One Federal Street, Boston,
Massachusetts 02110-2010, a security interest in all of the Debtor's present and
future right, title and interest in and to any and all of the following property
whether now existing or hereafter created and wherever located (all of which is
hereinafter called the "Collateral"):
All equipment and fixtures, as defined in the Uniform
Commercial Code (as defined below) and all machinery, tools, parts,
furniture, furnishings, motor vehicles and other personal property,
tangible or intangible, presently owned or hereafter acquired by the
Debtor, together with additions and accessions thereto and
substitutions and replacements therefor, and the products and proceeds
(including insurance and condemnation proceeds) thereof;
All inventory and goods as defined in the Uniform Commercial
Code, whether presently owned or hereafter acquired, including, without
limitation, all inventory in the possession of others or in transit,
all goods held for sale or lease or to be furnished under contacts for
service or which have been so furnished, raw materials, work in
process, and materials used or consumed or to be used or consumed in
the business of the Debtor, and completed and unshipped merchandise,
and the products and proceeds (including insurance and condemnation
proceeds) of the foregoing;
All accounts, chattel paper, instruments, documents and
general intangibles, as defined in the Uniform Commercial Code,
including those now existing and those hereafter arising or coming into
existence, and including, without limitation, all rights of payment for
goods sold or leased or services rendered, all rights of payment under
contracts whether or not currently due or not yet earned by performance
and accounts receivable arising or to arise therefrom, and all rights
of the Debtor in and to the goods represented thereby including
returned and repossessed goods, and all rights the Debtor may have or
acquire for securing or enforcing the foregoing, including, without
limitation, the rights to reserves, deposits, income tax refunds,
choses in action, judgments or insurance proceeds, and the products and
proceeds of all of the foregoing;
All goodwill, trade secrets, computer programs, customer
lists, trade names, trademarks, copyrights, franchises, licenses and
patents and the proceeds thereof;
All books and records relating to the conduct of Debtor's
business;
All deposit accounts maintained by the Debtor with the Bank or
other bank, trust company, investment firm or fund or any similar
institution or organization and the proceeds thereof;
Any deposits, credits, collateral or property of the Debtor at
any time now or hereafter in the possession, custody, safekeeping or
control of the Bank or any entity under the control of Fleet Financial
Group, Inc. or in transit to any of them and the
<PAGE> 2
proceeds thereof (the "Deposits and Securities");
The following other collateral, together with all additions thereto,
substitutions and replacements therefor and the products and proceeds (including
insurance and condemnation proceeds) thereof;
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
to secure the payment and performance of all liabilities and obligations now or
hereafter owing from the Debtor to the Bank of whatever kind of nature, whether
or not currently contemplated at the time of this Agreement, whether such
obligations be direct or indirect, absolute or contingent or due or to become
due, including all obligations of the Debtor, actual or contingent, in respect
of letters of credit or banker's acceptances issued by the Bank for the account
of or guarantied by the Debtor and all obligations of any partnership or joint
venture as to which Debtor is or may become personally liable (the
"Obligations", which term shall include all accrued interest and all costs and
expenses, including attorney's fees, costs and expenses relating to the
appraisal and/or valuation of assets and all costs and expenses incurred or paid
by the Bank in exercising, preserving, defending, collecting, enforcing,
administering or protecting any of its rights under the Obligations or hereunder
or with respect to the Collateral or in any litigation arising out of the
transactions evidenced by the Obligations). The Bank shall have the unrestricted
right from time to time to apply (or to change any application already made) the
proceeds of any of the Collateral to any Obligations, as the Bank, in its sole
discretion, may determine.
I. REPRESENTATIONS AND WARRANTIES OF DEBTOR
The Debtor hereby restates, remakes, affirms, and confirms in their
entirety each of the representations and warranties and warrants of the Debtor
as set forth in a certain Credit Agreement dated of even date herewith by and
between the Debtor and the Bank, among others, (together with any extensions,
renewals, substitutions, modifications, or replacements thereof, the "Credit
Agreement") as if such representations and warranties were fully and completely
contained in this Agreement.
In addition to the foregoing, the Debtor further represents and
warrants that if any of the Collateral is to be attached to real estate, a
description of said real estate has been delivered to the Bank and the name and
address of each record owner is as follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
II. COVENANTS OF DEBTOR
The Debtor hereby restates, remakes, affirms and confirms in their
entirely each of the agreements and covenants of the Debtor as set forth in the
Credit Agreement, as if such
-2-
<PAGE> 3
agreements and covenants were fully and completely contained in this Agreement.
In addition to the foregoing, the Debtor further agrees and covenants
that:
(a) The Debtor shall, at all times, keep the Bank accurately informed
in writing of each location where the Debtor's assets are kept and of each of
its places of business and the Debtor shall not remove any records to another
state or change the location or open or close, move or change any existing or
new place of business without giving the Bank at least thirty (30) days' prior
written notice thereof.
(b) The Debtor will, at its expense, furnish to the Bank, upon Bank's
demand, such further information, will execute and deliver to the Bank such
financing statements and other agreements, instruments or documents, and will do
all such acts as the Bank may, at any time or from time to time, reasonably
request, or as may be necessary or appropriate to establish and maintain a valid
and enforceable first security interest of the Bank in the Collateral.
(c) The Debtor will notify the Bank in writing promptly upon its
learning of any event, condition, loss, damage, litigation, administrative
proceeding or other circumstance which may materially and adversely affect the
Bank's security interest in the Collateral. In the event that the Bank, in its
sole discretion, shall determine that there has been any loss, damage or
material diminution in the value of the Collateral, the Debtor will, whenever
the Bank requests, pay to the Bank such amounts as the Bank, in its sole
discretion, shall have determined represents such loss, damage or material
diminution in value (any such payment not to affect the Bank's security interest
in such Collateral).
(d) The Debtor will, at such intervals as the Bank may request, notify
the Bank, upon a form satisfactory to the Bank, of all Collateral which has come
into existence since the date hereof or the date of the last notification.
(e) At its option, but without obligation to do so, the Bank may
discharge taxes, liens, security interests or other encumbrances at any time
levied or placed on the Collateral; may place and pay for insurance on the
Collateral; may order and pay for the repair, maintenance and preservation of
the Collateral; and may pay any fees for filing or recording such instruments or
documents as may be necessary or desirable to perfect the security interest
granted herein. The Debtor agrees to reimburse the Bank on demand for any
payment made or any expense incurred by the Bank pursuant to the foregoing
authorization, and all such payments and expenses shall constitute part of the
principal amount of Obligations hereby secured and shall bear interest at the
highest rate payable on the Obligations of the Debtor to the Bank.
(f) If any part of the Collateral is a fixture, the Debtor will, on
demand, furnish the Bank with a disclaimer or release signed by all persons
having an interest in the real estate or any interest in the Collateral which is
prior to the Bank's interest.
(g) The Bank, in it sole discretion, from time to time shall have the
right to demand and receive from the Debtor additional property of a nature and
type not included in the Collateral, including, without limitation, interests in
real property, and thereafter the words "Collateral" and "security interest"
shall include any such additional property and the Bank's
-3-
<PAGE> 4
interest therein. The Debtor shall promptly, upon request of the Bank, deliver,
transfer and assign to the Bank all of Debtor's right, title and interest in
such additional property; and shall execute and deliver to the Bank, at Debtor's
expense, any writings and do all things necessary or requested by the Bank to
vest in or assure to the Bank (including, without limitation, all steps to
create and perfect) its security interest in such additional property.
(h) All representations now or hereafter made by the Debtor to the
Bank, whether in this Agreement and/or the Credit Agreement, or in any
supporting or supplemental documentation or statement are, will be, and shall
continue to be true and correct in all respects.
III. EVENTS OF DEFAULT
The occurrence of a default under this Agreement and/or the occurrence
of any one or more Events of Default as defined in the Credit Agreement which is
not cured or remedied beyond any applicable grace period shall constitute an
"Event of Default" under this Security Agreement.
IV. REMEDIES
Upon and after the occurrence of an Event of Default or, if the
Obligation is a demand Obligation, then at any time after demand, all of the
Obligations may, at the option of the Bank and without demand (except for the
necessity of demand for any demand Obligation), notice or legal process of any
kind, be declared, and immediately shall become, due and payable.
The Bank may proceed by a suit or suits at law or in equity to
foreclose the security interests and sell the Collateral and proceeds, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction. For the purposes of Louisiana executory process procedures, the
Debtor does hereby acknowledge the Obligation and confess judgment in favor of
the Bank for the full amount of the Obligation. The Debtor does by these
presents consent, agree and stipulate that upon the occurrence of an Event of
Default it shall be lawful for the Bank, and the Debtor does hereby authorize
the Bank, to cause all and singular the Collateral and Proceeds to be seized and
sold under executory or ordinary process, at the Bank's sole option, without
appraisement, being hereby expressly waived, as an entirety or in parcels or
portions, as the Bank may determine, to the highest bidder, and otherwise
exercise the rights, powers and remedies afforded herein and under applicable
Louisiana law. Any and all declarations of fact made by authentic act before a
Notary Public in the presence of two witnesses by a person declaring that such
facts lie within his or her knowledge shall constitute authentic evidence of
such facts for the purpose of executory process. The Debtor hereby waives in
favor of the Bank: (a) the benefit of appraisement, as provided in Louisiana
Code of Civil Procedure Articles 2332, 2336, 2723, and 2724, and all other laws
conferring the same; (b) the demand and three days' delay accorded by Louisiana
Code of Civil Procedure Articles 2639 and 2721; (c) the notice of seizure
required by Louisiana Code of Civil Procedure Articles 2293 and 2721; (d) the
three days' delay provided by Louisiana Code of Civil Procedure Articles 2331
and 2722; and (e) the benefit of the other provisions of Louisiana Code of Civil
Procedure Articles 2331, 2722 and 2723, not specifically mentioned above. In the
event the Collateral and Proceeds or any part thereof are seized as an incident
to an action for the recognition or enforcement of this Agreement by executory
process, ordinary process, sequestration, writ of ficri facias, or otherwise,
the Debtor and the Bank agree
-4-
<PAGE> 5
that the court issuing any such order shall, if petitioned for by the Bank,
direct the applicable sheriff to appoint as a keeper of the Collateral and
Proceeds, the Bank or any agent designated by the Bank or any person named by
the Bank at the time such seizure is effected. This designation is pursuant to
Louisiana Revised Statutes 9:5136-9:5140.2 and the Bank shall be entitled to all
the rights and benefits afforded thereunder as the same may be amended. It is
hereby agreed that the keeper shall be entitled to receive reasonable
compensation and its reasonable costs and expenses The designation of keeper
made herein shall not be deemed to require the Bank to provoke the appointment
of such a keeper.
To the extent permitted under Louisiana law, the Bank shall have the
following additional rights and remedies:
(a) All of the rights and remedies of a secured party under the Uniform
Commercial Code in effect from time to time in the state referred to in the
Bank's address set forth at the beginning of this Agreement (the "Uniform
Commercial Code") or any other applicable law or at equity, all of which rights
and remedies shall be cumulative and non-exclusive, to the extent permitted by
law, in addition to any other rights and remedies contained in this Security
Agreement or in any document, instrument or agreement evidencing, governing or
securing the Obligations.
(b) The right to (i) take possession of the Collateral, without resort
to legal process and without prior notice to Debtor, and for that purpose Debtor
hereby irrevocably appoints the Bank its attorney-in-fact to enter upon any
premises on which the Collateral or any part thereof may be situated and remove
the Collateral therefrom, or (ii) require the Debtor to assemble the Collateral
and make it available to Bank in a place to be designated by the Bank, in its
sole discretion. The Debtor shall make available to the Bank all premises,
locations and facilities necessary for the Bank's taking possession of the
Collateral or for removing or putting the Collateral in saleable form.
(c) The right to sell or otherwise dispose of all or any part of the
Collateral by public or private sale or sales. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, the Bank will give the Debtor at least (5) days'
prior written notice of the time and place of any public sale thereof or of the
time after which any private sale or any other intended disposition (which may
include, without limitation, a public sale or lease of all or part of the
Collateral) is to be made. The Debtor agrees that 5 days is a reasonable time
for such notice. The Bank, its employees, attorneys and agents may bid and
become purchasers at any such sale, if public, and may purchase at any private
sale any of the Collateral that is of a type customarily sold on a recognized
market or which is subject to widely distributed standard price quotations. Any
public or private sale shall be free from any right of redemption which the
Debtor waives and releases. If there is a deficiency after such sale and the
application of the net proceeds from such sale, the Debtor shall be responsible
for the same, with interest.
(d) The Bank shall have the right (and Debtor irrevocably appoints the
Bank as attorney-in-fact for the Debtor for this purpose, such appointment being
coupled with an interest), with contemporaneous notice to Debtor but without
resort to legal process, to notify the persons liable for payment of the
Accounts at any time and direct such persons to make payments directly
-5-
<PAGE> 6
to the Bank, and to perform all acts the Debtor could take to collect on the
Account, including, but without limitation, the right to notify postal
authorities to change the address for delivery, open mail, endorse checks, bring
collection suits, and realize upon Collateral securing the Accounts. At the
Bank's request, all bills and statements sent by the Debtor to the persons
liable for payments of the Accounts shall state that they have been assigned to,
and are solely payable to, the Bank, and Debtor shall direct persons liable for
the payment of the Accounts to pay directly to the Bank any sums due or to
become due on account thereof.
(e) The Bank may from time to time without demand or notice apply and
set off any or all of the Deposits and Securities against, any and all
Obligations even though such Obligations be unmatured.
V. WAIVERS
(a) DEBTOR ACKNOWLEDGES THAT THIS AGREEMENT IS PART OF A COMMERCIAL
TRANSACTION.
(b) THE BANK AND DEBTOR IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY
IN ANY PROCEEDING HEREAFTER INSTITUTED BY OR AGAINST THE BANK OR THE DEBTOR IN
RESPECT OF THIS AGREEMENT, ANY DOCUMENT, INSTRUMENT OR AGREEMENT EVIDENCING,
GOVERNING OR SECURING THE OBLIGATIONS HEREBY SECURED OR THE COLLATERAL.
(c) THE DEBTOR WAIVES NOTICE OF NON-PAYMENT, DEMAND, PRESENTMENT,
PROTEST OR NOTICE OF PROTEST OF THE COLLATERAL AND ALL OTHER NOTICES, CONSENTS
TO ANY RENEWALS OR EXTENSIONS OF TIME OF PAYMENT THEREOF AND GENERALLY WAIVES
ANY AND ALL SURETYSHIP DEFENSES AND DEFENSES IN THE NATURE THEREOF.
VI. GENERAL
(a) No waiver by the Bank of any failure to pay or perform shall be
effective unless in writing nor operate as a waiver of any other failure to pay
or perform or of the same failure to pay or perform on a future occasion, nor
shall the failure or delay of the Bank to exercise, or the partial exercise of,
any right, power or privilege provided for hereunder in any circumstances
preclude the full exercise of such right, power or privilege in the same or
similar circumstances in the future or the exercise of any other right or
remedy.
(b) This Security Agreement is intended as the final, complete and
exclusive statement of the provisions contained in this Security Agreement. No
amendment, modification, termination or waiver of any provision of this Security
Agreement or consent to any departure by the Debtor therefrom shall, in any
event, be effective unless the same shall be in writing and signed by the Bank.
Any waiver of, or consent to any departure from, any provision of this Security
Agreement shall be effective only in the specific instance of and for the
specific purpose for which it is given, and shall not be deemed to extend to
similar situations or to the same situation at a subsequent time. No notice to
or demand upon the Debtor shall in any case entitle Debtor to any other or
further notice or demand in similar or other circumstances.
-6-
<PAGE> 7
(c) All rights of the Bank hereunder shall inure to the benefit of its
successors and assigns, and all obligations of the Debtor shall bind the heirs,
legal representatives, successors and assigns of Debtor.
(d) Debtor will pay to the Bank on demand any and all costs and
expenses, including attorney's fees, costs and expenses relating to the
appraisal and/or valuation of assets and (exclusive of those claims in which the
Bank has been found by a court of competent jurisdiction, with all appeal
periods having expired or otherwise been exhausted, to have acted with wilful
misconduct and actual bad faith) all costs and expenses incurred or paid by the
Bank in exercising, collecting, establishing, defending, preserving, protecting,
administering or enforcing any of its rights in the Collateral or under any of
the Obligations.
(e) This Agreement and the security interest created hereby shall be
governed by and construed in accordance with the laws of the state referred to
in the Bank's address set forth at the beginning of this Agreement.
(f) Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall to any extent be held invalid or
unenforceable, then only such provision shall be deemed ineffective and the
remainder of this Agreement shall not be affected.
(g) Debtor hereby acknowledges receipt of a full completed copy of this
Security Agreement.
<The remainder of this page intentionally left blank.>
-7-
<PAGE> 8
IN WITNESS WHEREOF, Debtor has duly authorized and executed this
Agreement as a sealed agreement this 27th day of February, 1998.
WITNESS: DEBTOR:
/s/ Edwin Pease
- ------------------------ GENERIC DISTRIBUTORS INCORPORATED
By: /s/ Indu Muni
--------------------------------------
Name: Indu Muni
------------------------------------
Title: President
-----------------------------------
BANK:
FLEET NATIONAL BANK
By: /s/ Raymond C. Hoefling
--------------------------------------
Name: Raymond C. Hoefling
------------------------------------
Title: Vice President
----------------------------------
-8-
<PAGE> 1
EXHIBIT 4.5
DYNAGEN, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES E PREFERRED STOCK
The undersigned officer of DYNAGEN, INC., a corporation organized and
existing under the General Corporation Law of the State of Delaware, hereby
certifies 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., in a meeting held on December 15, 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 E 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 10,500 shares of the class of authorized Preferred
Stock, par value $.01 per share, of the Corporation is hereby created as the
Series E 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 15th day of December, 1997.
DYNAGEN, INC.
By: /s/ Dhananjay G. Wadekar
-------------------------------------
Dhananjay G. Wadekar,
Executive Vice President and
Chairman of the Board
<PAGE> 2
2
EXHIBIT A
A. DESCRIPTION AND DESIGNATION OF SERIES E PREFERRED STOCK
1. DESIGNATION. A total of 10,500 shares of the Corporation's previously
undesignated Preferred Stock, $.01 par value, shall be designated as the "Series
E Preferred Stock." The original issue price per share of the Series E Preferred
Stock shall be $100.00 (the "ORIGINAL ISSUE PRICE").
2. NON-TRANSFERABILITY. Series E Preferred Stock shall be non-transferable
because there does not exist an established trading market for said stock and
the Series E Preferred Stock may only be converted by the original holder of the
stock certificates evidencing ownership of such shares.
3. PARTICIPATING DIVIDENDS. In the event that 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 E Preferred
Stock shall be entitled to the amount of dividends on the Series E Preferred
Stock as would be declared payable on the largest number of whole shares of
Common Stock into which the shares of Series E Preferred Stock held by each
holder thereof could be converted pursuant to the provisions of Section 6
hereof, such number to be determined as of the record date for the determination
of holders of Common Stock entitled to receive such dividend. Such determination
of "whole shares" shall be based upon the aggregate number of shares of Series E
Preferred Stock held by each holder, and not upon each share of Series E
Preferred Stock so held by the holder.
4. 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 E
Preferred Stock (if any), and subject to the liquidation rights and preferences
of any class or series of preferred stock issued in the future and designated by
the Board of Directors to be senior to, or on a parity with the Series E
Preferred with respect to liquidation preferences, the holders of each share of
Series E 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 aggregate amount equal to $1,050,000 minus the aggregate amount of
all actual cash proceeds received from the sale of the Converted Shares of
Common Stock as that term is defined in Section 6(c)(i) (the "LIQUIDATION
VALUE"), which liquidation value shall be distributed pro rata to the holders of
the Series E Preferred Stock in proportion to the number of shares held by each
such holder of Series E Preferred Stock. The Series E Preferred Stock will rank
junior to all classes of preferred stock currently outstanding but senior to the
Common Stock.
<PAGE> 3
3
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 E Preferred Stock the full
amounts to which they otherwise would be entitled, the holders of Series E
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 E 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 E Preferred Stock then outstanding.
After such payment shall have been made in full to the holders of the
Series E 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 E
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 other class or series of capital stock designated to be
junior to the Series E Preferred Stock (if any) in right of payment upon any
liquidation, dissolution or winding up of the Corporation.
The amounts set forth above shall be subject to equitable adjustment by the
Board of Directors whenever there shall occur a stock dividend, stock split,
combination, reorganization, recapitalization, reclassification or other similar
event involving a change in the capital structure of the Series E Preferred
Stock.
(b) DISTRIBUTIONS OTHER THAN CASH. Whenever the distributions provided for
in this Section shall be payable in property other than cash, the value of such
distribution shall be the fair market value of such property as determined in
good faith by the Board of Directors. All distributions (including distributions
other than cash) made hereunder shall be made PRO RATA to the holders of Series
E Preferred Stock.
(c) DESIGNATION OF SENIOR PREFERRED STOCK. The Corporation shall not create
or designate a series of preferred stock senior to the Series E Preferred Stock
if the sole purpose of such new series of preferred stock is the acquisition of
the capital stock or assets of another corporation in any business combination
where the Corporation is the acquiror. The Corporation may create or designate a
new series of preferred stock senior to or on a parity with the Series E
Preferred Stock if the purpose of such new series of preferred stock is a
financing for the Corporation's working capital obligations or general corporate
purposes.
5. VOTING POWER.
(a) GENERAL. Except as otherwise expressly provided in this Section 5 or as
otherwise required by the General Corporation Law of the State of Delaware, each
holder of Series E 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 E Preferred
Stock could be converted, pursuant to the provisions and limitations
<PAGE> 4
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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 E 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 E Preferred Stock held by each holder, and not upon
each share of Series E Preferred Stock so held by the holder.
6. CONVERSION RIGHTS. The holders of the Series E Preferred Stock shall
have the following rights with respect to the conversion of such shares into
shares of Common Stock:
(a) OPTIONAL CONVERSION. No shares of Series E Preferred Stock held by any
holder shall be convertible by such holder prior to three hundred and sixty-five
(365) days after the original date of issue of the Series E Preferred Stock (the
"ORIGINAL ISSUE DATE"). Beginning three hundred and sixty-five (365) days after
the Original Issue Date, each such holder of Series E Preferred Stock shall have
the right, at such holder's option, to convert during any five (5) trading day
period up to a maximum of 420 shares of Series E 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 E 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" shall equal the average of the closing bid price of
the Common Stock of the Corporation as reported in the National Association of
Securities Dealers Automated Quotation ("NASDAQ") system for the SmallCap Market
for the three (3) trading days immediately prior to the day of the conversion.
(c) AUTOMATIC CANCELLATION OF PREFERRED STOCK.
(i) AUTOMATIC CANCELLATION. Subject to the limitations set forth in
Section 6(a) above, if a Series E Preferred Stock holder converts Series E
Preferred Stock into Common Stock (the "CONVERTED SHARES OF COMMON STOCK")
pursuant to this Section 6 and thereafter sells the Converted Shares of Common
Stock within five (5) trading days of the Conversion Date as defined in Section
6(f), the dollar amount of the net proceeds from this sale (after brokers'
commissions and expenses but before payment of any tax liabilities resulting
from the sale) will be added to an account of the selling Series E Preferred
Stock holder(s), that for purposes of this section shall be called the
"STOCKHOLDER'S TOTAL VALUE ACCOUNT." If a Series E Preferred Stock holder
converts Series E Preferred Stock into Common Stock pursuant to Section 6 and
thereafter does not sell the Converted Shares of Common Stock within five (5)
trading days of the Conversion Date, a dollar amount, equal to the Conversion
Price for such Converted Shares of Common Stock multiplied by the number of such
Converted Shares of Common Stock held in excess of five (5) trading days, will
be added to the Stockholder's Total Value Account. Once the aggregate dollar
amount of all Stockholders' Total Value Accounts exceeds $1,050,000, any
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and all remaining, unconverted shares of Series E Preferred Stock will be
automatically canceled by the Corporation without consideration
(ii) EXAMPLE. By way of example and illustration of the foregoing
conversion mechanics, if a holder of Series E Preferred Stock converts 420
shares of Series E Preferred Stock on the first day possible under Section 6(a)
above, at a Conversion Price of $1.00 (thereby receiving 42,000 shares of Common
Stock) and resells all of those shares within the next five (5) trading days at
a sale price of $0.75 per share, $31,500 (a sale price of $0.75 multiplied by
42,000 shares sold), less any costs of the transaction (that is, broker's
commissions and expenses but not payment of any tax liability resulting from the
sale) will be added to the Stockholder's Total Value Account. If, after waiting
five (5) trading days the holder of Series E Preferred Stock converts another
420 shares of Series E Preferred Stock, at a Conversion Price of $2.00 (thereby
receiving 21,000 shares of Common Stock) and resells only 10,000 shares within
the next five (5) trading days at a sale price of $1.50 per share, $15,000 (a
sale price of $1.50 multiplied by 10,000 shares sold) less any costs of the
transaction will be added to the Stockholder's Total Value Account.
Additionally, $22,000 will be added to the Stockholder's Total Value Account
reflecting the 11,000 unsold shares of Common Stock valued at the $2.00
Conversion Price. This value applies because the shares of Common Stock were
held for more than five (5) trading days. Once the aggregate amount of all
Stockholders' Total Value Accounts reaches or exceeds $1,050,000, all the
remaining shares of unconverted Series E Preferred Stock will be automatically
canceled by the Corporation without any further action by the holder(s) of
Series E Preferred Stock.
(iii) SURRENDER OF CERTIFICATES UPON AUTOMATIC CANCELLATION. Upon the
occurrence of the cancellation events specified in the preceding paragraph (i),
the holders of the Series E Preferred Stock shall, upon notice from the
Corporation, surrender the certificates representing such shares at the office
of the Corporation or of its transfer agent for the Common Stock.
(d) CAPITAL REORGANIZATION OR RECLASSIFICATION. If the Common Stock
issuable upon the conversion of the Series E 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 6, 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 E 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 E Preferred Stock
might have been converted immediately prior to such reorganization,
recapitalization, reclassification or change, all subject to further adjustment
as provided herein.
(e) 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
<PAGE> 6
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this Section 6) 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 E Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series E Preferred Stock the total 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 all of
their shares of Series E Preferred Stock into Common Stock at the Conversion
Price (notwithstanding the limitations on conversion set forth in Section 6(a)
above).
(f) EXERCISE OF CONVERSION PRIVILEGE. To exercise its conversion privilege
in accordance with the time limitations of Section 6(a), a holder of Series E
Preferred Stock shall surrender the certificate(s) representing the shares being
converted to the Corporation at its principal office, and shall give written
notice to the Corporation at that office that such holder elects to convert such
shares. 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 certificate(s) for shares of Series E
Preferred Stock surrendered for conversion shall be accompanied by proper
assignment thereof to the Corporation or in blank. The date when such written
notice is received by the Corporation, together with the certificate(s)
representing the shares of Series E Preferred Stock being converted, shall be
the "CONVERSION DATE." As promptly as practicable after the Conversion Date, the
Corporation shall issue and shall deliver to the holder of the shares of Series
E 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 E Preferred Stock in accordance with the
provisions of this Section 6, and cash, as provided in Section 6(g), 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 E 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.
(g) 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 E Preferred Stock. Instead of any fractional shares of Common
Stock which would otherwise be issuable upon conversion of Series E Preferred
Stock, the Corporation shall pay to the holder of the shares of Series E
Preferred Stock which were 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 E
<PAGE> 7
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Preferred Stock being converted at any one time by any holder thereof, not upon
each share of Series E Preferred Stock being converted.
(h) PARTIAL CONVERSION. In the event some but not all of the shares of
Series E 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 E Preferred Stock which were not converted.
(i) 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 E
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 E Preferred Stock (including any shares of Series E Preferred Stock
represented by any warrants, options, subscription or purchase rights for the
Series E Preferred Stock), and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Series E Preferred Stock (including any
shares of Series E Preferred Stock represented by any warrants, options,
subscriptions or purchase rights for the Series E 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.
(j) NO REISSUANCE OF PREFERRED STOCK. Until the cancellation of all issued
and outstanding shares of Series E Preferred Stock as set forth in Section 6(c)
above, no share or shares of Series E Preferred Stock acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated from the
shares of Series E Preferred Stock which the Corporation shall be authorized to
issue. The Corporation shall from time to time take such appropriate corporate
action as may be necessary to reduce the authorized number of shares of the
Series E Preferred Stock. Any shares of Series E Preferred Stock so canceled or
retired may be added to the Corporation's reserve of authorized but undesignated
Preferred Stock.
7. NOTICES OF RECORD DATE. In the event of any:
(a) taking by the Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of capital stock of any class or any
other securities or property, or to receive any other right, or
(b) capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, or any transfer of all or substantially all of
the assets of the Corporation to any other Corporation, or any other entity or
person, or
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(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 E 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.
<PAGE> 1
EXHIBIT 4.6
DYNAGEN, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES F PREFERRED STOCK
The undersigned officer of DYNAGEN, INC., a corporation organized and
existing under the General Corporation Law of the State of Delaware, hereby
certifies 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., in a meeting held on February 24, 1998, 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 F 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 5,000 shares of the class of authorized Preferred
Stock, par value $.01 per share, of the Corporation is hereby created as the
Series F 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 24th day of February, 1998.
DYNAGEN, INC.
By: /s/ Dhananjay G. Wadekar
----------------------------------
Dhananjay G. Wadekar,
Executive Vice President and
Chairman of the Board
<PAGE> 2
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EXHIBIT A
A. DESCRIPTION AND DESIGNATION OF SERIES F PREFERRED STOCK
1. DESIGNATION. A total of 5,000 shares of the Corporation's previously
undesignated Preferred Stock, $.01 par value, shall be designated as the "Series
F Preferred Stock." The original issue price per share of the Series F Preferred
Stock shall be $100.00 (the "ORIGINAL ISSUE PRICE").
2. NON-TRANSFERABILITY. Series F Preferred Stock shall be non-transferable
because there does not exist an established trading market for said stock and
the Series F Preferred Stock may only be converted by the original holder of the
stock certificates evidencing ownership of such shares.
3. PARTICIPATING DIVIDENDS. In the event that 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 F Preferred
Stock shall be entitled to the amount of dividends on the Series F Preferred
Stock as would be declared payable on the largest number of whole shares of
Common Stock into which the shares of Series F Preferred Stock held by each
holder thereof could be converted pursuant to the provisions of Section 6
hereof, such number to be determined as of the record date for the determination
of holders of Common Stock entitled to receive such dividend. Such determination
of "whole shares" shall be based upon the aggregate number of shares of Series F
Preferred Stock held by each holder, and not upon each share of Series F
Preferred Stock so held by the holder.
4. 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 F
Preferred Stock (if any), and subject to the liquidation rights and preferences
of any class or series of preferred stock issued in the future and designated by
the Board of Directors to be senior to, or on a parity with the Series F
Preferred with respect to liquidation preferences, the holders of each share of
Series F 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 aggregate amount equal to $500,000, minus the aggregate amount of
all actual cash proceeds received from the sale of the Converted Shares of
Common Stock as that term is defined in Section 6(c)(i) (the "LIQUIDATION
VALUE"). The Liquidation Value shall be distributed pro rata to the holders of
the Series F Preferred Stock in proportion to the number of shares held by each
such holder of Series F Preferred Stock. The Series F Preferred Stock will rank
junior to all
<PAGE> 3
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classes of preferred stock currently outstanding but senior to the Common Stock
(with the exception of the Series E Preferred Stock, in which case the Series F
Preferred Stock shall rank on a parity with the Series E Preferred Stock).
If, upon liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation available for distribution to its stockholders shall
be insufficient to pay the holders of the Series F Preferred Stock the full
Liquidation Value to which they otherwise would be entitled, the holders of
Series F Preferred Stock shall share ratably in any distribution of available
assets PRO RATA in proportion to the respective Liquidation Value amount which
would otherwise be payable upon liquidation with respect to the outstanding
shares of the Series F Preferred Stock if all liquidation preference amounts
with respect to such shares were paid in full, based upon the aggregate
Liquidation Value amount payable upon all shares of Series F Preferred Stock
then outstanding.
After such payment shall have been made in full to the holders of the
Series F 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 F
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 other class or series of capital stock designated to be
junior to the Series F Preferred Stock (if any) in right of payment upon any
liquidation, dissolution or winding up of the Corporation.
The amounts set forth above shall be subject to equitable adjustment by the
Board of Directors whenever there shall occur a stock dividend, stock split,
combination, reorganization, recapitalization, reclassification or other similar
event involving a change in the capital structure of the Series F Preferred
Stock.
(b) DISTRIBUTIONS OTHER THAN CASH. Whenever the distributions provided for
in this Section shall be payable in property other than cash, the value of such
distribution shall be the fair market value of such property as determined in
good faith by the Board of Directors. All distributions (including distributions
other than cash) made hereunder shall be made PRO RATA to the holders of Series
F Preferred Stock.
(c) DESIGNATION OF SENIOR PREFERRED STOCK. Without the consent of the
holders of a majority of the outstanding shares of Series F Preferred Stock, and
during the period of time in which the Series F Preferred Stock is outstanding,
the Corporation shall not create or designate a series of preferred stock senior
to the Series F Preferred Stock if the sole purpose of such new series of
preferred stock is the acquisition of the capital stock or assets of another
corporation in any business combination where the Corporation is the acquiror.
The Corporation may create or designate a new series of preferred stock senior
to or on a parity with the Series F Preferred Stock if the purpose of such new
series of preferred stock is a financing for the Corporation's working capital
obligations or general corporate purposes (on a consolidated basis).
<PAGE> 4
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5. VOTING POWER.
(A) GENERAL. Except as otherwise expressly provided in this Section 5 or as
otherwise required by the General Corporation Law of the State of Delaware, each
holder of Series F 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 F Preferred
Stock could be converted, pursuant to the provisions of Section 6 hereof (but
determined as if all shares of the Series F Preferred Stock could otherwise
convert all of such Series F Preferred Stock into Common Stock, notwithstanding
the conversion limitations of Section 6(a) hereof) at the record date for the
determination of stockholders entitled to vote on any matter or, if no such
record date is established, at the date such vote is taken or any written
consent of stockholders is solicited. Except as otherwise expressly required by
law, the holders of shares of Series F 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 F Preferred Stock held by each holder, and not upon
each share of Series F Preferred Stock so held by the holder.
6. CONVERSION RIGHTS. The holders of the Series F Preferred Stock shall
have the following rights with respect to the conversion of such shares into
shares of Common Stock:
(a) OPTIONAL CONVERSION. No shares of Series F Preferred Stock held by any
holder shall be convertible by such holder prior to June 30, 1998. Beginning on
June 30, 1998, a maximum aggregate amount of 200 shares of Series F Preferred
Stock (calculated for all holders of Series F Preferred Stock) may be
convertible in any five (5) trading day period. Each holder of Series F
Preferred Stock shall have the right, at such holder's option, to convert the
shares of Series F Preferred Stock held by such holder (subject to the maximum
aggregate amount of 200 shares of Series F Preferred Stock convertible into
Common Stock during each five (5) day trading period) into such number of fully
paid and nonassessable shares of Common Stock as shall be determined by
multiplying the number of shares of Series F 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" shall equal the average of the closing bid price of
the Common Stock of the Corporation as reported in the National Association of
Securities Dealers Automated Quotation ("NASDAQ") system for the SmallCap Market
for the three (3) trading days immediately prior to the day of the conversion.
(c) AUTOMATIC CANCELLATION OF PREFERRED STOCK.
(i) AUTOMATIC CANCELLATION. Subject to the limitations set forth in
Section 6(a) above, if a Series F Preferred Stock holder converts Series F
Preferred Stock into Common Stock (the "CONVERTED SHARES OF COMMON STOCK")
pursuant to this Section 6 and thereafter sells the
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Converted Shares of Common Stock within five (5) trading days of the Conversion
Date as defined in Section 6(f), the dollar amount of the net proceeds from this
sale (after brokers' commissions and expenses but before payment of any tax
liabilities resulting from the sale) will be added to the account of the selling
holder(s) of Series F Preferred Stock that for purposes of this section shall be
called the following: (1) the "GDLP TOTAL VALUE ACCOUNT" (reflecting the
conversion of up to 1,500 shares of Series F Preferred Stock issued to Generic
Distributors Limited Partnership ("GDLP") in connection with a certain Asset
Purchase Agreement by and among DynaGen, Generic Distributors Incorporated,
GDLP, United Pharmacists Inc., and Mr. Donald Couvillon ("COUVILLON"), dated as
of December 15, 1997, as amended (the "ASSET PURCHASE AGREEMENT"); (2) the "GDLP
DEFICIENCY IN NET PROCEEDS TOTAL VALUE ACCOUNT" (reflecting the issuance of any
Additional Series F Shares (as that term is defined in Amendment No. 1 to the
Asset Purchase Agreement) to GDLP in connection with any Deficiency in Net
Proceeds, (as that term is defined in such Amendment No. 1); (3) the "COUVILLON
TOTAL VALUE ACCOUNT" (reflecting the conversion of up to 700 shares of Series F
Preferred Stock issued to Couvillon pursuant to the Asset Purchase Agreement);
and (4) the "JOHNSON TOTAL VALUE ACCOUNT" (reflecting the conversion of up to
700 shares of Series F Preferred Stock issued to Mr. Sidney Johnson ("JOHNSON")
pursuant to the Asset Purchase Agreement). The GDLP Total Value Account, the
GDLP Deficiency in Net Proceeds Total Value Account, the Couvillon Total Value
Account and the Johnson Total Value Account shall be collectively known as the
"STOCKHOLDERS' TOTAL VALUE ACCOUNTS".
If a holder of Series F Preferred Stock converts Series F Preferred Stock
into Common Stock pursuant to Section 6(a) and thereafter does not sell the
Converted Shares of Common Stock within five (5) trading days of the Conversion
Date, then a dollar amount, equal to the Conversion Price for such Converted
Shares of Common Stock multiplied by the number of such Converted Shares of
Common Stock held in excess of such five (5) trading days, will be added to the
applicable Stockholder's Total Value Account (that is, the GDLP Total Value
Account, the GDLP Deficiency in Net Proceeds Total Value Account, the Couvillon
Total Value Account or the Johnson Total Value Account, as the case may be).
Once the aggregate dollar amount of the GDLP Total Value Account equals or
exceeds $100,000, any and all remaining unconverted shares of Series F Preferred
Stock held by GDLP (with the exception of any Additional Series F Shares issued
pursuant to Section 1.05(e) of the Asset Purchase Agreement) will be
automatically canceled by the Corporation without consideration. Once the
aggregate dollar amount of the GDLP Deficiency in Net Proceeds Total Value
Account equals or exceeds the Deficiency in Net Proceeds, any and all remaining
unconverted Additional Series F Shares held by GDLP will be automatically
canceled by the Corporation without consideration. Once the aggregate dollar
amount of the Couvillon Total Value Account exceeds $50,000, any and all
remaining, unconverted shares of Series F Preferred Stock held by Couvillon will
be automatically canceled by the Corporation without consideration. Once the
aggregate dollar amount of the Johnson Total Value Account exceeds $50,000, any
and all remaining, unconverted shares of Series F Preferred Stock held by
Johnson will be automatically canceled by the Corporation without consideration.
(ii) EXAMPLE. By way of example and illustration of the foregoing
conversion mechanics, if a holder of Series F Preferred Stock converts 100
shares of Series F Preferred
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Stock on the first day eligible for conversion under Section 6(a) above, at a
Conversion Price of $1.00 (thereby receiving 10,000 shares of Common Stock) and
resells all of those shares within the next five (5) trading days at a sale
price of $0.75 per share, then $7,500 (a sale price of $0.75 multiplied by
10,000 shares sold), less any costs of the transaction (that is, broker's
commissions and expenses but not payment of any tax liability resulting from the
sale) will be added to the Stockholders' Total Value Account. If, after waiting
five (5) trading days, the holder of Series F Preferred Stock converts another
100 shares of Series F Preferred Stock, at a Conversion Price of $2.00 (thereby
receiving 5,000 shares of Common Stock) but resells only 2,500 of the 5,000
shares within the next five (5) trading days at a sale price of $1.50 per share,
then $3,750 (a sale price of $1.50 multiplied by 2,500 shares of Common Stock
sold) less any costs of the transaction will be added to the Stockholder's Total
Value Account. Additionally, $5,000 will be added to the Stockholders' Total
Value Account, reflecting the 2,500 unsold shares of Common Stock valued at the
$2.00 Conversion Price. This value applies because the 2,500 shares of Common
Stock were held, and not sold, for more than five (5) trading days. Once the
aggregate amount of the Stockholders' Total Value Accounts reaches or exceeds
amounts mentioned in Section 6(c)(i) above, all the remaining shares of
unconverted Series F Preferred Stock, held by that holder will be automatically
canceled in accordance with 6(c)(i) above, by the Corporation without any
further action by the holder(s) of Series F Preferred Stock.
(iii) SURRENDER OF CERTIFICATES UPON AUTOMATIC CANCELLATION. Upon the
occurrence of the cancellation events specified in the preceding paragraph (i),
the holders of the Series F Preferred Stock shall, upon notice from the
Corporation, surrender the certificates representing such shares at the office
of the Corporation or of its transfer agent for the Common Stock.
(d) CAPITAL REORGANIZATION OR RECLASSIFICATION. If the Common Stock
issuable upon the conversion of the Series F 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 6, 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 F 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 F Preferred Stock
might have been converted immediately prior to such reorganization,
recapitalization, reclassification or change, all subject to further adjustment
as provided herein.
(e) 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 6) 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
<PAGE> 7
7
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 F Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series F Preferred Stock the total 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 all of
their shares of Series F Preferred Stock into Common Stock at the Conversion
Price (notwithstanding the limitations on conversion set forth in Section 6(a)
above).
(f) EXERCISE OF CONVERSION PRIVILEGE. To exercise its conversion privilege
in accordance with the time limitations of Section 6(a), a holder of Series F
Preferred Stock shall surrender the certificate(s) representing the shares being
converted to the Corporation at its principal office, and shall give written
notice to the Corporation at that office that such holder elects to convert such
shares. 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 certificate(s) for shares of Series F
Preferred Stock surrendered for conversion shall be accompanied by proper
assignment thereof to the Corporation or in blank. The date when such written
notice is received by the Corporation, together with the certificate(s)
representing the shares of Series F Preferred Stock being converted, shall be
the "CONVERSION DATE." As promptly as practicable after the Conversion Date, the
Corporation shall issue and shall deliver to the holder of the shares of Series
F 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 F Preferred Stock in accordance with the
provisions of this Section 6, and cash, as provided in Section 6(g), 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 F 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.
(g) 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 F Preferred Stock. Instead of any fractional shares of Common
Stock which would otherwise be issuable upon conversion of Series F Preferred
Stock, the Corporation shall pay to the holder of the shares of Series F
Preferred Stock which were 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 F Preferred Stock being
converted at any one time by any holder thereof, not upon each share of Series F
Preferred Stock being converted.
(h) PARTIAL CONVERSION. In the event some but not all of the shares of
Series F Preferred Stock represented by a certificate(s) surrendered by a holder
are converted, the
<PAGE> 8
8
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 F Preferred Stock which were not converted.
(i) 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 F
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 F Preferred Stock (including any shares of Series F Preferred Stock
represented by any warrants, options, subscription or purchase rights for the
Series F Preferred Stock), and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Series F Preferred Stock (including any
shares of Series F Preferred Stock represented by any warrants, options,
subscriptions or purchase rights for the Series F 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.
(j) NO REISSUANCE OF PREFERRED STOCK. Until the cancellation of all issued
and outstanding shares of Series F Preferred Stock as set forth in Section 6(c)
above, no share or shares of Series F Preferred Stock acquired by the
Corporation by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated from the
shares of Series F Preferred Stock which the Corporation shall be authorized to
issue. The Corporation shall from time to time take such appropriate corporate
action as may be necessary to reduce the authorized number of shares of the
Series F Preferred Stock. Any shares of Series F Preferred Stock so canceled or
retired may be added to the Corporation's reserve of authorized but undesignated
Preferred Stock.
7. NOTICES OF RECORD DATE. In the event of any:
(a) taking by the Corporation of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of capital stock of any class or any
other securities or property, or to receive any other right, or
(b) capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, or any transfer of all or substantially all of
the assets of the Corporation to any other Corporation, or any other entity or
person, or
(c) voluntary or involuntary dissolution, liquidation or winding up of the
Corporation,
then and in each such event the Corporation shall mail or cause to be mailed to
each holder of Series F 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,
<PAGE> 9
9
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.
<PAGE> 1
EXHIBIT 99.1
[LOGO] DYNAGEN, INC.
- -------------------------------------------------------------------------------
PRESS RELEASE
DYNAGEN, INC. COMPLETES ACQUISITION OF
GENERIC DISTRIBUTORS LIMITED PARTNERSHIP
- ACQUISITION TO ADD $6 MILLION PROFITABLE REVENUE -
CAMBRIDGE, MA, March 2, 1998 -- DynaGen, Inc. (NASDAQ:DYGN; BSE:DYG)
today announced that it has completed the acquisition of Generic Distributors
Limited Partnership (GDI), of Monroe, Louisiana. GDI distributes generic
pharmaceutical products primarily in Louisiana and the southern United States.
GDI, formed in 1986 as a limited partnership, has experienced
consistent growth in its revenues and earnings over the past few years. In 1996,
GDI reported revenues of over $6.0 million and earnings before taxes and
partnership distributions of $325,000. In 1997, GDI's estimated revenues were
approximately $7 million. The Company, based in an 11,000 square foot facility,
employs 23 people and primarily serves independent pharmacies and regional
healthcare institutions.
The purchase price of $2,350,000 was financed by a $1,200,000 five-year
term loan from Fleet Bank and $1,150,000 in Series E and Series F DynaGen
convertible preferred stock. The Series E Prefered Stock (representing
$1,050,000 in value) cannot be converted into DynaGen Common Stock until one
year from the closing. Subsequent to that time period, the Series E Prefered
Stock can only be converted at a rate of $40,000 per week at the prevailing
market price. The Series F Prefered Stock (representing $100,000 value) cannot
be converted into DynaGen Common Stock until 120 days from the closing.
Subsequent to that time period the Series F Preferred Stock held by Generic
Distributors Limited Partnership can only be converted at a rate of $10,000 per
week at the prevailing market price. Fleet Bank has also provided $300,000 in a
working capital line of credit.
In June 1997, DynaGen acquired Superior Pharmaceutical Company of
Cincinnati, Ohio, a distributor of generic products. Superior, with offices in
Cincinnati and Memphis, Tennessee, is estimated to achieve sales of $24 million
in 1997.
"The acquisition of GDI further strengthens our position in the generic
pharmaceutical industry," said Denny Smith, President and CEO of Superior
Pharmaceutical Company. "It is our intention to continue to build on our current
revenue base through both internal growth and additional acquisition to reach
DynaGen's goal of $100 million per year in this business as quickly as
possible."
DynaGen, Inc., a healthcare company founded in 1988 develops,
manufactures and distributes brand and generic therapeutic products.
Any statements which are not historical facts contained in this press
release are forward-looking statements that involve risks and uncertainties.
Please refer to the risk factors identified in the Company's recent report on
Form 10-K. The Company's acquisition of GDI involves a number of potential
risks, including difficulties in the assimilation of GDI's operations and
products, diversion of management's resources, uncertainties associated with
operating in new markets and working with new employees and customers, and the
potential loss of the acquired company's key employees. There can also be no
assurance that the GDI acquisition will not have a material adverse effect upon
DynaGen's business and results of operations. Once integrated, GDI may not
achieve levels of revenues, profitability or productivity anticipated or
otherwise perform as expected.
Contacts:
Paul Lovito Wayne Schumacher
LBI Group, Inc. Martin E. Janis & Co., Inc.
(800) 913-9767 (312) 943-1100
840 MEMORIAL DRIVE * CAMBRIDGE, MA 02139 USA * 617/491-2527 * FAX: 617/354-3902
