FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 1-11352
------------------------------
DYNAGEN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3029787
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification No.)
840 MEMORIAL DRIVE
CAMBRIDGE, MA 02139
(Address of principal executive offices)
(617) 491-2527
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of April 30, 1999 there were outstanding 46,324,244 shares of common stock,
$.01 par value per share.
<PAGE>
DYNAGEN, INC.
FORM 10-QSB
QUARTERLY REPORT
MARCH 31, 1999
TABLE OF CONTENTS
Facing Page 1
Table of Contents 2
PART I. FINANCIAL INFORMATION (*)
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet 3
Condensed Consolidated Statements of Loss 5
Condensed Consolidated Statements of Changes
in Stockholders' Equity (Deficit) 6
Condensed Consolidated Statements of
Cash Flows 7
Notes to Unaudited Condensed Consolidated
Financial Statements 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities 24
Item 3. Defaults on Senior Securities 25
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 28
(*) The financial information at December 31, 1998 has been derived from
the audited financial statements at that date and should be read in
conjunction therewith. All other financial statements are unaudited.
2
<PAGE>
PART I. FINANCIAL INFORMATION
DYNAGEN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 204,773 $ 97,045
Accounts receivable, net of
allowance accounts for
doubtful accounts of
$62,490 and $68,133 4,173,257 3,673,472
Rebates 433,774 398,724
Inventory 6,983,933 6,647,079
Notes receivable 110,000 150,000
Prepaid expenses and other
current assets 148,634 201,470
Total current assets 12,054,371 11,167,790
------------ ------------
Property and equipment, net 1,820,691 1,685,010
------------ ------------
Other assets:
Customer lists, net of accumulated
amortization of $4,475,873 and
$4,205,133 6,965,332 7,636,072
Goodwill, net of accumulated amorti-
tization of $55,021 and $48,567 331,198 337,652
Patents and trademarks, net of
accumulated amortization of
$5,435 and $0 59,794 65,229
Deferred debt financing costs, net
of accumulated amortization 257,516 277,325
Deposits and other assets 322,085 276,372
------------ ------------
Total other assets 7,935,925 8,592,650
------------ ------------
$ 21,810,987 $ 21,445,450
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
DYNAGEN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Current liabilities:
Bank overdraft $ 905,625 $ 621,313
Notes payable and current
portion of long-term debt 14,522,192 13,162,041
Accounts payable and accrued
expenses 4,177,793 3,705,209
Deferred revenue 88,034 100,000
Acquisition obligation 4,083,000 4,083,000
------------ ------------
Total current liabilities 23,776,644 21,671,563
Warrant put liability 887,734 858,435
Long term debt, less current portion 1,170,926 1,510,813
------------ ------------
Total liabilities 25,835,304 24,040,811
------------ ------------
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $.01 par value,
10,000,000 shares authorized,
45,975 and 52,152 shares of Series
A through H outstanding,
(liquidation value $4,595,235
and $5,212,977) 460 521
Common stock, $.01 par value,
75,000,000 shares authorized,
43,019,671 and 37,612,612 shares
issued and outstanding 430,197 376,126
Additional paid-in capital 47,595,589 47,181,545
Accumulated deficit (52,050,563) (50,153,553)
------------- ------------
Total stockholders' equity (deficit) (4,024,317) (2,595,361)
------------- ------------
$ 21,810,987 $ 21,445,450
============= ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
-----------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months EndeD
------------------
March 31, March 31,
1999 1998
------------ -------------
<S> <C> <C>
Revenues:
Product sales $ 7,024,798 $ 6,961,583
Fees and royalties -0- 42
------------ -------------
Total revenues 7,024,798 6,961,625
------------ -------------
Costs and expenses:
Cost of sales 5,616,657 5,558,562
Research and development 176,354 226,617
Selling, general and
administrative 1,990,817 2,466,917
Loss on impairment of
customer lists 400,000 -0-
------------ -------------
Total costs and expenses 8,183,828 8,252,096
------------ -------------
Operating loss (1,159,030) (1,290,471)
------------ -------------
Other income (expense):
Investment and other income, net 30,751 53,006
Interest and financing expense (768,731) (441,597)
Other income,(expense) net (737,980) (388,591)
------------ -------------
Net loss (1,897,010) (1,679,062)
Less returns to preferred stockholders:
Beneficial conversion feature 191,750 50,000
Dividends paid and accrued 16,123 62,238
------------ -------------
Net loss applicable to common stock $ (2,104,883) $ (1,791,300)
============ =============
Net loss per share-basic $ (0.05) $ (0.24)
============ =============
Weighted average shares outstanding 40,003,490 7,566,447
============ =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
DynaGen, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Three Months Ended March 31, 1999 and 1998
- --------------------------------------- ------------------- ---------------------- -----------------------
Preferred Stock Common Stock
Comprehensive
Description Income
Shares Amount Shares Amount
- --------------------------------------- --------------- ----------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 63,522 $ 635 4,315,137 $43,151
Stock issued for GDI acquisition 12,000 120 - -
Shares issued in private placements 10,000 100 - -
Stock issued for services - - 60,000 600
Delayed registration penalty - - - -
Conversion of note payable - - 1,040,949 10,410
Conversion of preferred stock (30,810) (308) 9,251,865 92,519
Comprehensive income: Net loss $ (1,679,062) - - - -
============= ------- ------ ---------- --------
Balance at March 31, 1998 54,712 $ 547 14,667,951 $146,680
======= ======= ========== ========
- --------------------------------------- --------------- ----------- ---------- ------------- ------------
Balance at December 31, 1998 52,152 $ 521 37,612,612 $376,126
Conversion of preferred stock (6,177) (61) 3,793,488 37,935
Conversion of debt - - 1,463,571 14,636
Commission paid on private
placement - - 25,000 250
Common stock issued for bonus - - 125,000 1,250
Beneficial conversion feature of
debenture - - - -
Comprehensive income: Net loss $ (1,897,011) - - - -
============= ------- ------ ---------- --------
Balance at March 31, 1999 45,975 $ 460 43,019,671 $430,197
======= ======= ========== ========
- --------------------------------------- --------------- ----------- ---------- ------------- ------------
</TABLE>
<TABLE>
<CAPTION>
DynaGen, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Three Months Ended March 31, 1999 and 1998 (continued)
- --------------------------------------- ---- -------------- ----------------- -----------
Additional
Paid-In Accumulated
Description Capital Deficit Total
- --------------------------------------- -------------- ----------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1997 $39,137,311 $(36,556,469) $2,624,628
Stock issued for GDI acquisition 1,199,880 - 1,200,000
Shares issued in private placements 920,444 - 920,544
Stock issued for services 38,600 - 39,200
Delayed registration penalty (87,500) - (87,500)
Conversion of note payable 144,590 - 155,000
Conversion of preferred stock (92,211) - -
Comprehensive income: Net loss - (1,679,062) (1,679,062)
----------- ------------ ----------
Balance at March 31, 1998 $41,261,114 $(38,235,531) $3,172,810
=========== ============ ==========
- --------------------------------------- -------------- ----------------- ---------------
Balance at December 31, 1998 $47,181,545 $(50,153,553) $(2,595,361)
Conversion of preferred stock (37,874) - -
Conversion of debt 206,083 - 220,719
Commission paid on private
placement 155,835 - 156,085
Common stock issued for bonus 27,500 - 28,750
Beneficial conversion feature of
debenture 62,500 - 62,500
Comprehensive income: Net loss - (1,897,010) (1,897,010)
----------- ------------ -----------
Balance at March 31, 1999 $47,595,589 $(52,050,563) $(4,024,317)
=========== ============ ===========
- --------------------------------------- -------------- ----------------- ---------------
</TABLE>
6
<PAGE>
<PAGE>
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,897,010) $(1,679,062)
Adjustments to reconcile
net loss to net cash used for
operating activities:
Loss on impairment of customer
lists 400,000 ---
Beneficial conversion feature of
convertible note 62,500 ---
Stock, stock options and warrants
issued for services 184,835 39,200
Depreciation and amortization 413,660 844,783
(Increase) decrease in operating
assets:
Accounts receivable (499,785) (134,663)
Rebates ( 35,050) 377,643
Inventory (336,854) 1,706,503
Prepaid expenses and other
current assets 92,836 (21,983)
Deposits and other assets ( 45,713) 79,142
Increase (decrease) in operating
liabilities:
Accounts payable and accrued
expenses 538,303 (2,498,208)
Deferred revenue (11,966) ---
------------- -------------
Net cash used for operating
activities (1,134,244) (1,286,645)
------------- -------------
</TABLE>
7
<PAGE>
DYNAGEN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1999 1998
--------- -------------
<S> <C> <C>
Cash flows from investing activities:
Purchase of wholly-owned subsidiary,
net of cash received in acquisition $ --- $ (756,406)
Purchase of property and equipment (217,604) (45,603)
Increase in deferred financing and
acquisition costs --- (50,000)
--------- -------------
Net cash used for investing activities (217,604) (852,009)
--------- -------------
Cash flows from financing activities:
Net proceeds from stock warrants and options ---
Net proceeds from private stock placements --- 920,544
Proceeds from bank loan --- 1,200,000
Net proceeds from debt placements 1,345,000 200,000
Repayment of debt obligations (218,526)
Net change in line of credit 77,980 120,990
Net change in accounts receivable factoring (29,190) ---
Increase (decrease)in bank overdraft 284,312 (142,616)
Repayment of Superior notes payable --- (416,666)
--------- -------------
Net cash provided by financing activities 1,459,576 1,882,252
--------- -------------
Net change in cash and cash equivalents 107,728 (256,402)
Cash and cash equivalents at beginning 97,045 697,045
--------- -------------
Cash and cash equivalents at end $ 204,773 $ 440,643
========= =============
Supplemental cash flow information:
Interest paid $ 187,514 $ 208,291
Common stock issued for convertible
note payable and accrued interest 220,719 155,000
Debt issued for delayed registration
penalty --- 87,500
Schedule of non-cash investing and financing activities:
On March 2, 1998, the Company purchased the net assets
of Generic Distributors Limited Partnership for $2,350,000.
In connection with the acquisition, non-cash financing
activities, liabilities assumed and customer lists were as follows:
Fair value of assets acquired $ 2,375,274
Cash paid (1,150,000)
Preferred stock issued (1,200,000)
Liabilities assumed (658,274)
-----------
Customer lists (exclusive of other acquisition costs of $96,205) $ 633,000
===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
8
<PAGE>
DYNAGEN, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of DynaGen, Inc.
(the "Company") and its wholly-owned subsidiaries, Able Laboratories, Inc.
("Able"), which is engaged in the manufacture of generic pharmaceuticals, and
Superior Pharmaceutical Company ("Superior") and Generic Distributors Inc.
("GDI") both of which are engaged in the distribution of generic pharmaceuticals
and Apex Pharmaceuticals, Inc. which is developing therapeutic products. The
consolidated financial statements no longer include the accounts of BioTrack,
Inc. In 1998, the Company sold the majority of its shares in BioTrack in
exchange for a promissory note of BioTrack in the principal amount of
$1,000,000. The Company's ownership interest in BioTrack on March 31, 1999 was
approximately 24%. Accordingly, BioTrack's financial statements are not included
in the accompanying consolidated financial statements. All significant
intercompany balances and transactions have been eliminated in consolidation.
The results of operations for the periods reported are not necessarily
indicative of those that may be expected for a full year. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
which are necessary for a fair statement of operating results for the interim
periods presented have been made.
The financial information included in this report has been prepared in
conformity with the accounting policies reflected in the financial statements
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998 filed with the Securities and Exchange Commission.
USE OF ESTIMATES
In preparing consolidated financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the balance sheet date and reported amounts of revenues and
expenses during the reporting period. Material estimates that are particularly
susceptible to significant change in the near term relate to the carrying values
of rebates receivable and intangible assets, the valuation of equity instruments
issued by the Company and the amount of obligations due as a result of defaults
on certain debt obligations. Actual results could differ materially from those
estimates.
EARNINGS PER SHARE
9
<PAGE>
Basic earnings per share represents income available to common stock
divided by the weighted-average number of common shares outstanding during the
period. Diluted earnings per share reflects additional common shares that would
have been outstanding if dilutive potential common shares had been issued, as
well as any adjustment to income that would result from the assumed issuance.
For all periods presented, options, warrants and put warrants, were
anti-dilutive and so were excluded in calculating diluted earnings per share.
The loss applicable to common stockholders has been increased by the
stated dividends on the convertible preferred stock and the amortization of
discounts on convertible preferred stock due to beneficial conversion features.
Shares of common stock that were, as of March 31, 1999, contingently issuable to
the former stockholders of Superior have not been included in earnings per share
because to do so would have had an anti-dilutive effect.
2. GENERIC DISTRIBUTORS, INC.
On March 2, 1998, the Company through its subsidiary, Generic
Distributors, Incorporated ("GDI"), completed the acquisition of substantially
all of the assets and liabilities of Generic Distributors Limited Partnership
("GDLP"), of Monroe, LA. In connection with the acquisition, the Company paid
the limited partnership $1,200,000 in cash, 10,500 shares of Series E
Convertible Preferred Stock valued at $1,050,000 and 1,500 shares of Series F
Convertible Preferred Stock valued at $100,000, for a total purchase price of
$2,350,000. The Series E Preferred Stock is convertible beginning 12 months from
the closing into the Company's common shares at the then prevailing market
prices. The Series F Preferred Stock is convertible into $100,000 in value of
the Company's common stock commencing 120 days after the closing at the then
prevailing market prices. In connection with the transaction, GDI received
$1,200,000 in a five-year term loan from Fleet Bank. The loan matures on April
26, 2003. Fleet Bank also established a revolving line of credit for general
working capital in the amount of $300,000. The line bears interest at LIBOR plus
2-1/2%. The loans are secured by all of the assets of GDI and Able and a pledge
of all of the common stock of GDI, and are guaranteed by the Company. In
addition, the Company entered into employment and consulting agreements with the
sellers.
The GDI acquisition has been accounted for as a purchase. The results
of operations of GDI have been included in the Company's consolidated financial
statements since the date of acquisition. The purchase price allocation was
based on the estimated fair values at the date of acquisition. The Company
allocated $729,205 of the purchase price to customer lists, based on an
independent appraisal. This amount is being amortized on a straight line basis
over five years. Amortization of customer lists amounted to $36,460 and $11,740
for the three months ended March 31, 1999 and 1998, respectively.
10
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Unaudited pro forma consolidated operating results for the Company,
assuming the acquisition of GDI had been made as of the beginning of fiscal
1998, are as follows:
Three Months Ended
March 31,1998
-------------
Revenues $ 8,142,348
Net loss $(1,781,614)
------------
Net loss per share $ (0.24)
============
The unaudited pro forma information is not necessarily indicative of
either (i) the actual results of operations that would have occurred had the
purchases been made as of the beginning of the fiscal period presented or(ii)
future results of operations of the combined companies.
3. INVENTORY
Inventory consists of the following:
March 31, December 31,
1999 1998
---- ----
Raw materials $ 466,394 $ 401,531
Work-in-progress 55,548 66,372
Finished goods 6,461,991 6,179,176
---------- ----------
$6,983,933 $6,647,079
4. DEBT
Notes payable consist of the following:
March 31, December 31,
1999 1998
---- ----
Convertible note payable $ - $ 155,000
Bridge loans 1,820,000 725,000
Accounts receivable factoring 155,640 184,830
Machinery & Equipment
Financing 410,667 586,333
7% Convertible Debenture 500,000 250,000
8% Convertible Debenture 328,500 328,500
Secured debt - Fleet Bank 1,128,560 1,171,420
Loan Payable -Huntington 4,583,084 4,505,104
Notes payable - Superior
Acquisition 3,766,667 3,766,667
Senior subordinated debt 3,000,000 3,000,000
Total 15,693,118 14,672,854
Less current portion 14,522,192 13,162,041
----------- ----------
Long-term debt $ 1,170,926 $ 1,510,813
=========== ===========
11
<PAGE>
5. SUBSEQUENT EVENTS
During April 1999, the Company received $425,000 by issuing 9%
Convertible Subordinated Debentures. The debentures mature in one year from date
of issuance and carry a quarterly interest payment of 9% per annum. The
principal and interest accrued shall be automatically converted into shares of
Common Stock on the maturity date. Each tranche of $1,000,000 will be converted
into 5% of the shares of Common Stock of DynaGen that are issued and outstanding
on the date of conversion and smaller amounts will be prorated.
On April 28, 1999, the Company issued a promissory note for $100,000 to
an accredited investor for an investment of like amount in the Company. The note
carried an interest rate of 10% and was to be repaid from the proceeds of any
venture capital, institutional or other financing. The Company repaid this note
from the proceeds of its sale in 1999 of 9% subordinated convertible debentures.
On April 29, 1999 the Chairman and Chief Executive Officer of the
Company loaned the Company $150,000 to meet short term working capital
requirements. The note carried an interest rate of 10% and is to be repaid from
the proceeds of any venture capital, institutional or other financing. The
Company repaid this note from the proceeds of its sale in 1999 of 9%
subordinated convertible debentures.
During April 1999, 600 shares of Series B preferred stock were
converted into 242,900 shares of Common Stock.
During April 1999, 1,855 shares of Series C preferred stock were
converted into 649,084 shares of common stock.
In April 1999, 6,250 shares of Series H preferred stock were converted
into 2,412,589 shares of Common Stock.
12
<PAGE>
In May 1999, the Company received $3,000,000 by issuing 9% subordinated
convertible debentures. The debentures are payable in shares of Common Stock of
the Company.
In May 1999, the Company settled all claims of the former Superior
stockholders by paying $1,500,000 in cash; issuing 1,500,000 shares of Common
Stock; issuing warrants to purchase 1,000,000 shares of Common Stock at price of
$.86 per share; and issuing warrants to purchase 300,000 shares of Common Stock
at a price of $.01 per share. See "Legal Proceedings."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following information should be read in conjunction with the
consolidated financial statements and notes thereto in Part I, Item 1 of this
Quarterly Report and with Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1998.
The Company does not provide forecasts of the future financial
performance of the Company. However, from time to time, information provided by
the Company or statements made by its employees may contain "forward-looking"
information that involves risks and uncertainties. In particular, statements
contained in this Form 10-QSB which are not historical facts constitute forward-
looking statements and are made under the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Each forward-looking statement should
be read in conjunction with the consolidated financial statements and notes
thereto in Part I, Item
13
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1, of this Quarterly Report and with the information contained in Item 2,
including, but not limited to, "Certain Factors That May Affect Future Results"
contained herein, together with the Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1998, including, but not
limited to, the section therein entitled "Certain Factors That May Affect Future
Results."
RESULTS OF OPERATIONS
DynaGen makes and sells generic drugs for the human health care market.
During 1998 and the first quarter of 1999, we shifted our business focus from
being a development and licensing company to building a company focused on the
manufacture and distribution of generic drug products and specialty
pharmaceuticals. We intend to implement this strategy through the internal
product development as well as through the acquisition of businesses,
technologies and products that we believe are undervalued. In August 1996, we
acquired the tablet business of Able Laboratories, Inc. ("Able"), a generic
pharmaceutical product subsidiary of Alpharma, Inc. In addition, we acquired
Superior Pharmaceutical Company ("Superior"), a distributor of generic
pharmaceuticals, in June 1997. In March 1998, we acquired Generic Distributors
Limited Partnership through our wholly-owned subsidiary, Generic Distributors
Incorporated ("GDI").
We have financed our operating losses primarily through the proceeds
from public and private stock offerings and debt offerings. We anticipate that
revenues from product sales will not be sufficient to fund our current
operations or produce an operating profit until such time as we can establish
acceptance of our products in their respective markets and expand our
distribution channels. We have incurred losses since inception and expect to
incur additional losses until such time as we can successfully develop,
manufacture, and sell or license our existing and proposed products and
technologies.
Our history of operating losses raises substantial doubt about our
ability to continue operations. If we are unable to secure significant
additional financing or to renegotiate our agreements with our existing
creditors, we may have to file for bankruptcy. Our independent auditors issued
an opinion on our financial statements as of December 31, 1998 and for the year
then ended which included an explanatory paragraph expressing substantial doubt
about our ability to continue as a going concern. See "-- Certain Factors That
May Affect Future Results."
Revenues for the three-month period ended March 31, 1999 were
$7,024,798, compared to $6,961,625 for the period ended March 31, 1998. The
increase of $63,173 is primarily the result of increased product sales by
Superior Pharmaceuticals. The GDI acquisition was completed on March 1, 1998.
Therefore, results for the first quarter of 1998 include only one month of sales
for GDI.
14
<PAGE>
Cost of product sales was $5,616,657, or 80% of product sales for the
three-month period ended March 31, 1999, compared to $5,558,562, or also 80% of
product sales during first quarter 1998. The Company has maintained the gross
profit margin at 20% due to the smaller margins of the distribution business.
Research and development expenses for the three-month period ended
March 31, 1999 were $176,354, compared to $226,617 for the three-month period
ended March 31, 1998. All of these expenses relate to research which is
currently being conducted at Able Laboratories to identify and develop generic
drug candidates for future manufacturing and sales.
Selling, general and administrative expenses for the three-month period
ended March 31, 1999 were $1,990,817, compared to $2,466,917 for the three-month
period ended March 31, 1998. The $476,100 decrease is primarily due to the cost
cutbacks and reduction of staff at our headquarters in Cambridge.
We recorded an additional $400,000 of loss on impairment of Superior's
customer lists in the first quarter of 1999 based on our revised projections of
Superior's cash flows after reviewing Superior's performance during the first
quarter of 1999.
Investment and other income was $30,751 for the three months ended
March 31, 1999, compared to $53,006 for the three-month period ended March 31,
1998. The first quarter 1998 includes income received from sale of BioTrack
stock held by the Company whereas the first quarter 1999 includes $21,000 of
income recorded from forgiveness of old payables. Interest and financing
expenses of $768,731 for the three-month period ended March 31, 1999, compared
to $441,598 for the three-month period ended March 31, 1998, relate primarily to
private placements of equity. We issued several warrants in connection with debt
placement, the values of which are included in our financing costs.
Liquidity and Capital Resources
As of March 31, 1999, we had a working capital deficit of $11,722,273,
compared to a working capital deficit of $10,503,773 at December 31, 1998. Cash
was $204,773 at March 31, 1999 compared to $97,045 at December, 1998. The
Company continued to have a working capital deficit as funds were raised through
short term debt placements. We expect our cash needs for the next 12 months to
be approximately $5,000,000. We intend to generate the needed cash through
additional financing activities. We can give no assurance, though, that we will
be able to obtain such financing or, if we do, that the financing will be
sufficient for our needs. If we are not able to raise the needed financing, we
will likely need to seek the protection of the bankruptcy courts. See "Certain
Factors That May Affect Future Results."
In June 1997, we acquired Superior Pharmaceutical Company, of
Cincinnati, Ohio, for an adjusted purchase price of $15.9 million in cash, notes
and stock. The merger agreement guaranteed that the
15
<PAGE>
selling shareholders would receive at least $5,000,000 in the stock value as of
June 1998. The agreement provided that we would make up any shortfall in this
guaranteed stock value through the issuance of additional stock and cash.
The Common Stock traded at approximately $0.50 per share as of June
18, 1998, and we therefore became obligated to pay approximately $4,000,000 in
cash to the former stockholders of Superior. Under the agreement, we then owed
the former stockholders a total of approximately $9,000,000 in common stock,
cash and notes. On July 31, 1998 we entered into a contingent settlement
agreement to reduce the remaining purchase price to approximately $4,000,000. We
continued to seek the exact amount and the form of payment (i.e., cash and/or
stock) for the final settlement, but were unable to obtain sufficient financing.
On December 17, 1998, the former Superior stockholders commenced a civil action
in the Court of Common Pleas, Hamilton County, Ohio. The complaint filed by the
former Superior stockholders alleged that we owed them approximately $9,000,000,
including $4,166,667 in connection with promissory notes issued in connection
with the merger as well as $4,817,660 as an adjustment to the purchase price. In
May 1999, we settled all issues between us and the former Superior stockholders.
The former Superior stockholders agreed to dismiss their lawsuit in exchange for
our:
o paying $1,500,000 in cash;
o issuing 1,500,000 shares of Common Stock;
o issuing warrants to purchase 1,000,000 shares of Common Stock
at price of $.86 per share; and
o issuing warrants to purchase 300,000 shares of Common Stock at
a price of $.01 per share.
16
<PAGE>
We have satisfied various liabilities by divesting substantially all
of our equity ownership in BioTrack, Inc., a subsidiary formed to develop and
commercialize a technology involving tumor localization and tracking. In 1998,
in connection with our shift in business focus, the Board of Directors
determined that BioTrack did not fit into our plan to be a generic drug
manufacturing and distribution company. On April 30, 1998, the Board of
Directors unanimously voted to divest our majority share in BioTrack. Our equity
in BioTrack was reduced to approximately 1,300,000 shares, or 24%, and we
distributed the balance to the inventors of the technology, investors and
BioTrack management.
We have senior secured working capital and lending facilities from
three separate entities. Huntington National Bank has provided working capital
for Superior Pharmaceutical. The initial note matured in June 1998 and since
then, Huntington has extended the facility on a monthly basis. Fleet Capital has
provided a term loan for the acquisition of GDI. K&L Financial has provided
working capital for Able Laboratories. We are in default of certain financial
covenants, but we have not defaulted on payment obligations in connection with
these agreements.
To date we have met substantially all of our capital requirements
through the sale of securities and loans convertible into common stock. The
negative impact of events in 1997 and 1998 has severely limited our ability to
raise capital in a conventional sale of our securities. We have engaged an
investment banking firm that specializes in the turnaround of companies to seek
both debt and equity financing. We cannot give any assurance that we will raise
the needed financing. If we cannot raise such financing, we will not have
adequate working capital for our operations. Under such circumstances we may
have to seek protection of the bankruptcy courts. See "Certain Factors That May
Affect Future Results."
We have also been working with our trade creditors to reduce our
obligations. A substantial majority of the creditors have accepted our payment
plans, which include periodic payments, discounts of amounts outstanding, and
acceptance of shares of Common Stock. We can give no assurance, however, that
our creditors will continue to accept our proposed payment plans or that we will
be able to execute any such plan if it is accepted. If we are unable to meet our
obligations to our trade creditors, we may have to seek protection of the
bankruptcy courts. See "Certain Factors That May Affect Future Results."
17
<PAGE>
YEAR 2000 COMPLIANCE
Many computer systems and software products could experience problems
handling dates beyond the year 1999 because the systems are coded to accept only
two-digit entries in the date code fields. In ability of products and systems on
which we rely to process these dates could have a material adverse effect on our
business.
We have assessed our internal processes and systems. We believe that
our sales, administration, and general operations are substantially year 2000
compliant. Prior to purchasing any new equipment or software, it is company
policy to ensure that the specifications include year 2000 compliance.
We intend to query major suppliers and other third parties upon which
we may be dependent to determine the extent of their Year 2000 compliance. We
intend to complete this inquiry and assessment of the Year 2000 readiness of the
systems and products of these suppliers and other third parties by mid-1999.
However, due to the need to devote management and financial resources to other
matters, we have not as yet completed this inquiry and assessment.
Contingency Plan
To minimize potential disruptions, we intend to adopt a contingency
plan, if deemed necessary, to address any issues raised during our planned
assessment in 1999. Because no specific instance of material Year 2000
non-compliance has been discovered to date, we have not adopted a contingency
plan to deal with Year 2000 issues.
Costs
Based on our internal investigation to date, we do not expect the total
costs of our Year 2000 review and compliance to have a material adverse effect
on our business or financial results. We may have to spend a material amount to
develop and implement a contingency plan during 1999, if we find that a material
supplier or other third party on whom we rely will face business interruptions
as a result of Year 2000 issues.
Risks
Based on our limited review of our Year 2000 issues to date, we do not
anticipate significant interruption of normal internal operations. The risk
posed by Year 2000 issues depends substantially on the number and type of any
instances of non-compliance that have not yet been discovered by us. To the
extent that our internal systems, or products and services obtained from third
parties, are found not to be year 2000 compliant, we could face business
disruptions which could, in turn, cause delays in meeting operating
18
<PAGE>
goals and could divert significant management resources.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
We do not provide forecasts of our future financial performance.
However, from time to time, information provided by us or statements made by our
employees may contain "forward-looking" information that involves risks and
uncertainties. In particular, statements contained in this Report that are not
historical facts, including statements relating to liquidity and capital
resources, constitute forward-looking statements and are made under the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Our
actual results of operations and financial condition have varied, and may in the
future vary, significantly from those stated in any forward-looking statements.
Factors that may cause such differences include, without limitation, the risks,
uncertainties and other information discussed within this Form 10-QSB, the
matters discussed under the heading "Certain Factors that may Affect Future
Results" in our Annual Report on Form 10-KSB for the year ended December 31,
1998, as well as the accuracy of our internal estimates of revenue and operating
expense levels.
The following risk factors should be read in conjunction with the
financial statements and related notes thereto. The following factors, among
others, could cause our actual results to differ materially from those contained
in forward-looking statements contained or incorporated by reference in this
report and presented by management from time to time. Such factors, among
others, may have a material adverse effect upon our business, results of
operations and financial condition.
OUR FINANCIAL CONDITION IS HIGHLY UNCERTAIN; WE HAVE A HISTORY OF LOSSES
AND WE ANTICIPATE FUTURE LOSSES
We have incurred operating losses in every operating period since our
inception and had an accumulated deficit of $52,050,563 as of March 31, 1999. We
incurred a net loss of $1,897,010 in the three months ended March 31, 1999.
Our losses have resulted principally from expenses we incurred in
research and development activities, and from general and administrative costs
associated with our development efforts. In addition, our Able subsidiary has
incurred operating losses, primarily because revenues have not equaled expenses.
To continue development of our current and proposed products, we will need to
expend substantial additional resources to conduct further product development
and to establish manufacturing, sales, marketing, regulatory and administrative
capabilities. Therefore, we expect to incur substantial operating losses over
the next several years as we expand our product programs and commence marketing
efforts.
We can give no assurance that we will ever generate substantial
19
<PAGE>
revenues from our business, or achieve profitability.
OUR ABILITY TO CONTINUE OPERATIONS IS IN QUESTION; WE NEED TO RAISE
SIGNIFICANT ADDITIONAL FUNDS TO CONTINUE OPERATIONS
Our history of operating losses raises substantial doubt about our
ability to continue operations. If we are unable to secure significant
additional financing or to renegotiate our agreements with our existing
creditors, we may be obliged to seek protection from our creditors by declaring
bankruptcy. Our independent auditors issued an opinion on our financial
statements as of December 31, 1998 and for the year then ended which included an
explanatory paragraph expressing substantial doubt about our ability to continue
as a going concern. The reasons cited by the independent auditors include the
following:
we have incurred recurring losses from operations resulting in
a stockholders' deficit and a working capital deficiency at
December 31, 1998;
we have defaulted on conditions placed upon us by our banks and
other lenders;
our ability to use cash generated by our subsidiaries is
restricted under the terms of the subsidiaries' loan
agreements.
OUR FINANCIAL CONDITION IS HIGHLY UNCERTAIN, AND WE MAY NEED TO SEEK
PROTECTION FROM OUR CREDITORS BY FILING FOR BANKRUPTCY
We will likely be forced to declare bankruptcy if we cannot continue to
pay our creditors. As of March 31, 1999, our total assets were less than our
total liabilities. We need to raise at least $5,000,000 to continue operations
for the next year. We also need to renegotiate the terms of our existing
agreements with our creditors. If we do not raise the necessary money or are not
successful in renegotiating the terms of our existing arrangements, we will
probably have to seek the protection of the bankruptcy courts and holders of
Common Stock would stand to lose their entire investment. See "-- Our Ability to
Continue Operations is in Question; We Need to Raise Significant Additional
Funds to Continue Operations."
20
<PAGE>
OUR COMMON STOCK HAS BEEN DELISTED FROM THE NASDAQ STOCK MARKET AND MAY BE
DELISTED FROM THE BOSTON STOCK EXCHANGE
Our Common Stock was delisted from the Nasdaq Stock Market as of the
close of trading on October 6, 1998. We received a notice from the Boston Stock
Exchange on April 12, 1999 informing us that our Common Stock does not meet the
requirements for continued listing on that exchange.
The minimum amount of stockholders' equity for continued listing on the
Boston Stock Exchange is $500,000; we had a stockholders' deficit of
approximately $4,000,000, a shortfall of approximately $4,500,000. We are in the
process of responding to the Boston Stock Exchange's notice. However, we do not
currently meet the listing requirements. We anticipate that the Common Stock
will continue to be quoted on the OTC Bulletin Board. Delisting of the Common
Stock from the Boston Stock Exchange could have a material adverse effect on the
public perception of the value of the Common Stock and, consequently, on our
ability to raise capital necessary for our continued operations.
OUR COMMON STOCK MAY BE SUBJECT TO PENNY STOCK RULES
The Securities Enforcement and Penny Stock Reform Act of 1990 applies
to stock characterized as "penny stocks," and requires additional disclosure
relating to the market for penny stock. The Securities and Exchange Commission
has adopted regulations that generally define a penny stock to be any equity
security that has a market price of less that $5.00 per share, subject to
certain exceptions. The exceptions include exchange-listed equity securities and
any equity security issued by an issuer that has (i) net tangible assets of at
least $2,000,000, if the issuer has been in continuous operation for at least
three years, (ii) net tangible assets of at least $5,000,000, if the issuer has
been in continuous operation for less than three years, or (iii) average annual
revenue of at least $6,000,000 for the last three years. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith.
If our Common Stock is delisted from the Boston Stock Exchange, then
trading in the Common Stock would be covered by Rules 15g-1 through 15g-6 and
15g-9 promulgated under the Securities Exchange Act. Under those rules,
broker/dealers who recommend such securities to persons other than established
customers and institutional accredited investors must make a special written
suitability determination for the purchaser and must have received the
purchaser's written agreement to a transaction prior to sale. These regulations
would likely limit the ability of broker/dealers to trade in our Common Stock
and thus would make it more difficult for purchases of Common Stock to sell
their securities in the secondary market. The market liquidity for the Common
Stock could be severely affected.
21
<PAGE>
WE ARE OBLIGATED TO ISSUE A LARGE NUMBER OF SHARES OF COMMON STOCK AT PRICES
BELOW THE MARKET PRICE, WHICH COULD ADVERSELY AFFECT THE VALUE OF THE COMMON
STOCK
We are obligated to issue a large number of shares at prices lower than
market value. Therefore, the Common Stock could lose value if a large number of
shares are issued into the market. At March 31, 1999 we had 43,019,671 shares of
Common Stock issued and outstanding. We have issued a large number of
securities, such as options, warrants, convertible preferred stock and
convertible notes, that are convertible by their holders into shares of Common
Stock. As of March 31, 1999, we were obligated to issue up to approximately
31,282,349 shares of Common Stock upon the conversion or exercise of convertible
securities. We have also reserved 20,795,010 shares of Common Stock for issuance
pursuant to options granted to our employees, officers, directors and
consultants. The holders of these convertible securities likely would only
exercise their rights to acquire Common Stock at times when the exercise price
is lower than the price at which they could buy the Common Stock on the open
market. Therefore, because we would likely receive less than current market
price for any shares of Common Stock issued upon exercise of options and
warrants, the exercise of a large number of these convertible securities could
reduce the per-share market price of Common Stock held by existing investors.
Also, the exercise of a large number of convertible securities could limit our
ability to obtain additional equity capital by selling Common Stock. In all
likelihood, we would be able to sell shares of Common Stock elsewhere on more
favorable terms at the time the holders of convertible securities choose to
exercise their rights.
22
<PAGE>
OUR STOCK PRICE IS HIGHLY VOLATILE; THE VALUE OF THE COMMON STOCK MAY
FLUCTUATE WIDELY FROM DAY TO DAY
Volatility in our stock price may negatively impact the market price
of our Common Stock and increases the risk that we could be the subject of
costly securities litigation. The market price of our Common Stock has
fluctuated between $70.00 and $.10 from January 1, 1993 to December 31, 1998 and
was approximately $.59 on May 7, 1999. It is likely that the price of the Common
Stock will continue to fluctuate widely in the future. The market price of our
Common Stock could fluctuate substantially based on a variety of factors,
including:
o quarterly fluctuations in our operating results;
o announcements of new products by us or our competitors;
o key personnel losses;
o sales of common stock; and
o developments or announcements with respect to industry
standards, patents or proprietary rights.
WE MAY BE SURPRISED BY YEAR 2000 ISSUES
Many currently installed software products and computer systems are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. This ability is commonly referred to as being Year 2000
compliant. The use of software and computer systems that are not Year 2000
compliant could result in system failures or miscalculations causing disruptions
of operations, including a temporary inability to process transactions, send
invoices or engage in similar normal business activities. We have not conducted
a Year 2000 review of our vendors and suppliers or licensees. Failure of systems
maintained by our vendors and suppliers to operate properly with regard to the
Year 2000 and thereafter could require us to incur significant unanticipated
expenses to remedy any problems or replace affected vendors and suppliers. See
"Year 2000 Compliance."
23
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
On December 17, 1998, the former Superior stockholders commenced a
civil action in the Court of Common Pleas, Hamilton County, Ohio. The complaint
filed by the former Superior stockholders alleged that we owed them
approximately $9,000,000, including $4,166,667 in connection with promissory
notes issued in connection with the merger as well as $4,817,660 as an
adjustment to the purchase price. In May 1999, we settled all issues between us
and the former Superior stockholders. The former Superior stockholders agreed to
dismiss their lawsuit in exchange for our:
o paying $1,500,000 in cash;
o issuing 1,500,000 shares of Common Stock;
o issuing warrants to purchase 1,000,000 shares of Common Stock
at price of $.86 per share; and
o issuing warrants to purchase 300,000 shares of Common Stock at
a price of $.01 per share.
Except for the above matter, the Company is not party to any pending
legal proceedings, other than routine litigation that is incidental to the
business, which would have a material adverse effect on the Company's financial
position or results of operations for the three-month period ended March 31,
1999.
ITEM 2. CHANGES IN SECURITIES
---------------------
a. Not applicable.
b. Sales of Unregistered Securities - In the three months ended
March 31, 1999, the Company sold the following securities:
On January 7, 1999, the Company issued a warrant to purchase
45,000 shares of Common Stock at an exercise price of $0.25, in connection with
an accredited investor of units each consisting of a $25,000 12% unsecured
promissory note and a warrent to purchase 15,000 shares of Common Stock. The
Company received $75,000 in proceeds from the sale of the units.
On January 26, 1999, the Company issued a warrant to purchase
35,500 shares of Common Stock at an exercise price of $0.05, and a Warrant to
purchase 2,000 shares of Common Stock at an exercise price of $0.30. On January
26, 1999, the Company also issued a Warrant to purchase 500,000 shares of Common
Stock at an exercise price of $0.05. These three warrants were issued in
connection with a 10% unsecured promissory note for $500,000 executed by the
Company on January 27, 1999. The Company received $500,000 in aggregate proceeds
from the sale of the promissory note on January 27, 1999.
On February 26, 1999, the Company issued several warrants
totaling a purchase of 195,000 shares of Common Stock at an exercise price of
$0.25 in connection with the sale to accredited investors of units each
consisting of a $25,000 12% unsecured promissory note and a warrent to purchase
15,000 shares of Common Stock. The Company received $325,000 on February 26,
1999 from the proceeds of the
24
<PAGE>
notes.
On March 29, 1999, the Company issued a 7% Convertible Debenture in the
principal amount of $250,000 to a private investor. The Company received
aggregate proceeds of $250,000 from the sale. The debenture may be converted
into common stock at a discount of 20% to the 5-day average closing bid prior to
conversion or, at the option of the investor, repaid through the proceeds of
future financing. The Company repaid this note from the proceeds of its sale in
May 1999 of 9% subordinated convertible debentures.
On March 30, 1999, the Company issued 300,000 shares to an accredited
investor to repay a loan of $50,000 received during March 1999.
During the quarter ended March 31, 1999, the Company issued an aggregate
of 5,257,059 shares of Common Stock upon exercise of options and warrants and
conversion of convertible debt and equity securities.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
-----------------------------
The Company has incurred recurring losses from operations resulting in an
accumulated deficit of $52,050,563 and a working capital deficiency of
$11,722,273 at March 31, 1999. In addition, the Company is in default with
respect to certain covenants in its debt agreements and obligated to make
payments as follows:
Sirrom Capital Corporation ("Sirrom") and Odyssey Investment Partners,
L.P. ("Odyssey") - The Company issued secured promissory notes in the aggregate
principal amount of $3,000,000 on June 18, 1997 due June 17, 2002. In addition,
the Company issued stock warrants to purchase in the aggregate 400,000 shares of
the Company's common stock and granted Sirrom and Odyssey the right to sell to
the Company the warrants (put warrants) under a put and substitution agreement.
At the time of issuance, $702,000 of the proceeds was allocated to the put
warrants, resulting in a discount on the promissory notes.
The discount on the notes was being amortized to expense over the term of
the promissory notes. The Company is in default of certain covenants in the loan
agreement and has not obtained a waiver of the defaults from the lender.
Accordingly, the total principal amount of the loan, $3,000,000, has been
classified as a current liability and the unamortized discount on the loan has
been charged to expense.
25
<PAGE>
The Huntington National Bank - The Company's subsidiary, Superior, has a
line of credit with the Huntington National Bank in the amount of approximately
$4,500,000. At March 31, 1999, Superior is in default of certain loan covenants,
in the loan and security agreement with the bank. Superior is in negotiations
with the bank with respect to the defaults, but has not received a waiver of the
defaults at the present time.
The Company has guaranteed the loan to the bank. The loan and security
agreement with the bank requires the Company to achieve a tangible net worth,
exclusive of the tangible net worth of Superior, of $4,000,000, which the
Company has not achieved at March 31, 1999.
The loan and security agreement with the bank allowed Superior to make
distributions to the Company in amounts sufficient to enable the Company to pay
the debt service due to the former stockholders of Superior, provided, however,
that such permitted payments cannot be made by Superior in the event of a
default.
26
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) List of Exhibits
The following exhibits, required by Item 601 of Regulation S-B, are filed
as part of this Quarterly Report on Form 10-QSB. Exhibit numbers, where
applicable, in the left column correspond to those of Item 601 of Regulation
S-B.
Exhibit
No. Description of Exhibit
- --- ----------------------
10.1 Warrant to purchase 500,000 shares of Common Stock for $0.05
per share, dated January 26, 1999 in the name of Zinga
Investment Ltd.
10.2 $500,000 Promissory Note Dated January 26, 1999 in the name of
Antonio Fernandez
10.3 Warrant to purchase 2,000 shares of Common Stock for $0.30 per
share, dated January 26, 1999 in the name of Alvin Alfonso
10.4 Warrant to purchase 35,500 shares of Common Stock for $0.05
per share, dated January 26, 1999 in the name of Global
Holdings LLP
10.5 Form of 12% Note Due May 28, 1999 issued in connection with
the Company's private placement of Units, each consisting of a
$25,000 Note and a warrant to purchase 15,000 shares of Common
Stock
10.6 Warrant to purchase 500,000 shares of Common Stock, dated
January 26, 1999 issued in connection with the Company's
private placement of Units, each consisting of a $25,000 Note
and a warrant to purchase 15,000 shares of Common Stock
10.7 Warrant to purchase 200,000 shares of Common Stock for $0.22
per share, dated February 18, 1999 in the name of David Slavny
10.8 Stock Option in the name of C. Robert Cusick, dated February
4, 1999*
10.9 Stock Option in the name of Dhananjay Wadekar, dated February
4, 1999*
10.10 Stock Option in the name of Steven Georgiev, dated February
4, 1999*
10.11 Stock Option in the name of Howard Schneider, dated November
19, 1998*
10.12 Stock Option in the name of Steven Georgiev, dated November
19, 1998*
- ----------------
* Indicates management compensatory contract.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DYNAGEN, INC.
By: /s/ Dhananjay G. Wadekar
---------------------------
Dhananjay G. Wadekar
Duly Authorized Officer and
Principal Financial and
Accounting Officer
Date: May 14, 1999
28
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- --- ----------------------
10.1 Warrant to purchase 500,000 shares of Common Stock for $0.05
per share, dated January 26, 1999 in the name of Zinga
Investment Ltd.
10.2 $500,000 Promissory Note Dated January 26, 1999 in the name of
Antonio Fernandez
10.3 Warrant to purchase 2,000 shares of Common Stock for $0.30 per
share, dated January 26, 1999 in the name of Alvin Alfonso
10.4 Warrant to purchase 35,500 shares of Common Stock for $0.05
per share, dated January 26, 1999 in the name of Global
Holdings LLP
10.5 Form of 12% Note Due May 28, 1999 issued in connection with
the Company's private placement of Units, each consisting of a
$25,000 Note and a warrant to purchase 15,000 shares of Common
Stock
10.6 Warrant to purchase 500,000 shares of Common Stock, dated
January 26, 1999 issued in connection with the Company's
private placement of Units, each consisting of a $25,000 Note
and a warrant to purchase 15,000 shares of Common Stock
10.7 Warrant to purchase 200,000 shares of Common Stock for $0.22
per share, dated February 18, 1999 in the name of David Slavny
10.8 Stock Option in the name of C. Robert Cusick, dated February
4, 1999*
10.9 Stock Option in the name of Dhananjay Wadekar, dated February
4, 1999*
10.10 Stock Option in the name of Steven Georgiev, dated February
4, 1999*
10.11 Stock Option in the name of Howard Schneider, dated November
19, 1998*
10.12 Stock Option in the name of Steven Georgiev, dated November
19, 1998*
- ----------------
* Indicates management compensatory contract.
29
EXHIBIT 10.1
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on January 26, 2002.
WARRANT TO PURCHASE COMMON STOCK
OF
DYNAGEN, INC.
FOR VALUE RECEIVED, DYNAGEN, INC., a Delaware corporation (the "Company"),
hereby certifies that Zinga Investment Ltd., or its permitted assigns, is
entitled to purchase from the Company, at any time or from time to time
commencing on January 26, 1999 and prior to 5:00 P.M., Eastern Standard Time, on
January 26, 2002, a total of Five Hundred Thousand (500,000) fully paid and
nonassessable shares of the common stock, par value $.01 per share, of the
Company for an aggregate purchase price of $0.05 per share. (Hereinafter, (i)
said common stock, together with any other equity securities which may be issued
by the Company with respect thereto or in substitution therefor, is referred to
as the "Common Stock", (ii) the shares of the Common Stock purchasable hereunder
are referred to as the "Warrant Shares", (iii) the aggregate purchase price
payable hereunder for the Warrant Shares is referred to as the "Aggregate
Warrant Price", (iv) the price payable hereunder for each of the Warrant Shares
is referred to as the "Exercise Price", (v) this Warrant, and all warrants
hereafter issued in exchange or substitution for this Warrant are referred to as
the "Warrant" and (vi) the holder of this Warrant is referred to as the
"Holder".) The Exercise Price is subject to adjustment as hereinafter provided.
1. Exercise of Warrant.
(a) Exercise. This Warrant may be exercised, in whole at any time or in
part from time to time, commencing on January 26, 1999 and prior to 5:00 P.M.,
Eastern Standard Time on January 26, 2002, by the Holder of this Warrant by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Subsection 9(a) hereof, together with
proper payment of the Aggregate Warrant Price, or the proportionate part thereof
if this Warrant is exercised in part. Payment for Warrant Shares shall be made
by certified or official bank check payable to the order of the Company. If this
Warrant is exercised in part, the Holder is entitled to receive a new Warrant
covering the number of Warrant Shares in respect of which this Warrant has not
been exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon such surrender of this
<PAGE>
Warrant, the Company will (a) issue a certificate or certificates in the name of
the Holder for the largest number of whole shares of the Common Stock to which
the Holder shall be entitled if this Warrant is exercised in whole and (b)
deliver the proportionate part thereof if this Warrant is exercised in part,
pursuant to the provisions of the Warrant. In lieu of any fractional share of
the Common Stock which would otherwise be issuable in respect to the exercise of
the Warrant, the Company at its option may (a) pay in cash an amount equal to
the product of (i) the daily mean average of the Closing Price of a share of
Common Stock on the ten consecutive trading days before the Conversion Date and
(ii) such fraction of a share or (b) issue an additional share of Common Stock.
Upon exercise of the Warrant, the Company shall issue and deliver to
the Holder certificates for the Common Stock issuable upon such exercise within
ten business days after such exercise and the person exercising shall be deemed
to be the holder of record of the Common Stock issuable upon such exercise.
No warrant granted herein shall be exercisable after 5:00 p.m. Eastern
Standard Time on the second anniversary of the date of issuance.
(b) Net Issuance. Notwithstanding anything to the contrary contained in
Subsection 1(a) hereof, in the case of any exercise on or prior to January 26,
2002 the Holder may elect to exercise this Warrant in whole or in part by
receiving shares of Common Stock equal to the net issuance value (as determined
below) of this Warrant, or any part hereof, upon surrender of this Warrant at
the principal office of the Company together with notice of such election (with
the form at the end hereof duly executed), in which event the Company shall
issue to the Holder a number of shares of Common Stock computed using the
following formula:
X= Y (A-B)
-------
A
Where: X = the number of shares of Common Stock to be
issued to the Holder
Y = the number of shares of Common Stock as to
which this Warrant is to be exercised
A = the current fair market value of one share of
Common Stock calculated as of the last trading
day immediately preceding the exercise of this
warrant
B = the Exercise Price
(c) Certain Adjustments
The Exercise Price and the number of Warrant Shares shall be equitably
adjusted from time to time to account for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events.
<PAGE>
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of this Warrant, the Company will at all times have authorized and
reserved, and will keep available, solely for issuance or delivery upon the
exercise of this Warrant, the number of shares of the Common Stock as from time
to time shall be issuable upon the exercise of this Warrant.
3. Fully Paid Stock: Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights, and the Company will take all such actions as may be
necessary to assure that the par value or stated value, if any, per share of the
Common Stock is at all times equal to or less than the then Exercise Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes that may be
payable in respect of the issue of any Warrant Share or certificate therefor.
4. Transfer.
(a) Securities Laws. Neither this Warrant nor the Warrant
Shares issuable upon the exercise hereof have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any state
securities laws and unless so registered may not be transferred, sold, pledged,
hypothecated or otherwise disposed of unless an exemption from such registration
is available. In the event Holder desires to transfer this Warrant or any of the
Warrant Shares issued, the Holder must give the Company prior written notice of
such proposed transfer including the name and address of the proposed
transferee. Such transfer may be made only either (i) upon publication by the
Securities and Exchange Commission (the "Commission") of a ruling,
interpretation, opinion or "no action letter" based upon facts presented to said
Commission, or (ii) upon receipt by the Company of an opinion of counsel to the
Company in either case to the effect that the proposed transfer will not violate
the provisions of the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or the rules and regulations promulgated under
either such act, or to the effect that the Warrant or Warrant Shares to be sold
or transferred has been registered under the Securities Act and that there is in
effect a registration statement in which is included a prospectus meeting the
requirements of Subsection 10(a) of the Securities Act, which is being or will
be delivered to the purchaser or transferee at or prior to the time of delivery
of the certificates evidencing the Warrant or Warrant Shares to be sold or
transferred.
(b) Conditions to Transfer. Prior to any such proposed
transfer, and as a condition thereto, if such transfer is not made pursuant to
an effective registration statement under the Securities Act, the Holder will,
if requested by the Company, deliver to the Company (i) an investment covenant
signed by the proposed transferee, (ii) an agreement by such transferee to the
impression of the restrictive investment legend set forth herein on the
certificate or certificates representing the securities acquired by such
transferee, (iii) an agreement by such transferee that the Company may place a
"stop transfer order" with its transfer agent or registrar, and (iv) an
<PAGE>
agreement by the transferee to indemnify the Company to the same extent as set
forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder
understands the meaning and legal consequences of this Section 4, and the Holder
hereby agrees to indemnify and hold harmless the Company, its representatives
and each officer and director thereof from and against any and all loss, damage
or liability (including all attorneys' fees and costs incurred in enforcing this
indemnity provision) due to or arising out of (a) the inaccuracy of any
representation or the breach of any warranty of the Holder contained in, or any
other breach of, this warrant, (b) any transfer of the Warrant or any of the
Warrant Shares in violation of the Securities Act, the Exchange Act or the rules
and regulations promulgated under either of such acts, (c) any transfer of the
Warrant or any of the Warrant Shares not in accordance with this Warrant or (d)
any untrue statement or omission to state any material fact in connection with
the investment representations or with respect to the facts and representations
supplied by the Holder to counsel to the Company upon which its opinion as to a
proposed transfer shall have been based.
(d) Transfer. Except as restricted hereby, this Warrant and
the Warrant Shares issued may be transferred by the Holder in whole or in part
at any time or from time to time. Upon surrender of this Warrant to the Company
or, if the Company so instructs the Holder in writing, at the office of its
stock transfer agent, if any, with assignment documentation duly executed and
funds sufficient to pay any transfer tax, and upon compliance with the foregoing
provisions, the Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in such instrument of assignment, and this
Warrant shall promptly be canceled. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of this Warrant in any way contrary to the
provisions of this Warrant, or any levy of execution, attachment or other
process attempted upon the Warrant, shall be null and void and without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares
have been registered under the Securities Act, upon exercise of any part of the
Warrant and the issuance of any of the Warrant Shares, the Company shall
instruct its transfer agent to enter stop transfer orders with respect to such
shares, and all certificates representing Warrant Shares shall bear on the face
thereof substantially the following legend, insofar as is consistent with
Massachusetts law:
"The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended, and may
not be sold, offered for sale, assigned, transferred or otherwise
disposed of unless registered pursuant to the provisions of that Act or
an opinion of counsel to the Company is obtained stating that such
disposition is in compliance with an available exemption from such
registration."
5. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of an
unsecured indemnity from the Holder reasonably satisfactory to the Company, if
lost, stolen or destroyed, and upon surrender
<PAGE>
and cancellation of the Warrant, if mutilated, the Company shall execute and
deliver to the Holder a new Warrant of like date, tenor and denomination.
6. Registration Rights. The Holder shall have the right to have the
Warrant Shares included for sale on a registration statement filed by the
Company that covers shares of common stock held by stockholders of the Company,
except a registration statement filed on Form S-4 and Form S-8 or their
successor forms or any other form which does not permit registration of Warrant
Shares (an "Eligible Registration Statement"), all at the Company's cost and
expense (except commissions or discounts and fees of the Holder's own
professionals, if any). The Company shall file an Eligible Registration
Statement as promptly as practicable after the filing of its Annual Report on
Form 10-K for the year ended December 31, 1998 which shall include the Warrant
Shares and shall thereafter use its best efforts to cause the same to be
declared effective as promptly as practicable, and in any event shall use its
best efforts to cause the same to be declared effective within six months after
the date hereof and to remain effective for a period ending one year from the
effective date. The Company shall have no obligation to include any Warrant
Shares in any subsequent registration statement if, at the time of filing such
subsequent registration statement, such Warrant Shares could then be sold under
144. The Warrant Shares need not be issued and outstanding to be included on any
registration statement filed under this Section 6.
In the event any Warrant Shares are included in a registration
statement, then without limiting any other provision of this Warrant:
(a) to the extent permitted by law, the Company will indemnify and hold
harmless the Holder against any losses, claims, damages or liabilities, joint or
several, to which the Holder may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based on any untrue or alleged untrue
statement of any material fact contained in such registration statement or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, provided, however, that such indemnity obligation shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld or delayed) nor shall
the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in connection with such registration in reliance upon and in conformity
with written information furnished in connection with such registration by or on
behalf of the Holder.
(b) to the extent permitted by law, the Holder will indemnify and hold
harmless the Company, each of its directors, each of its officers who has signed
the registration statement, each person, if any, who controls the Company within
the meaning of the Securities Act, and any underwriter for the Company (within
the meaning of the Securities Act) against any losses, claims, damages or
liabilities to which the Company or any such director, officer, controlling
person or underwriter may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any
<PAGE>
untrue statement or alleged untrue statement of any material fact contained in
such registration statement or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such registration
statement in reliance upon and in conformity with written information furnished
by the Holder in connection with such registration statement; provided, however,
that such indemnity obligation shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder (which consent shall not be unreasonably
withheld or delayed) and provided further that the Holder shall have any
liability under this Section 6 in excess of the dollar amount received by the
Holder from the sale of the Warrant Shares.
Promptly after receipt by an indemnified party under this Section 6 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 6, notify the indemnifying party in writing of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties. The failure to notify an indemnifying party
promptly of the commencement of any such action, if prejudicial to his ability
to defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 6, but the omission so to notify the
indemnifying party will not relieve him of any liability that he may have to any
indemnified party otherwise than under this Section 6.
7. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
8. Communication. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by certified
mail, return receipt requested, or sent by facsimile, addressed to:
(a) the Company at 840 Memorial Drive, Cambridge,
Massachusetts 02139, or such other address as the Company has designated in
writing to the Holder, with a copy to David A. Broadwin, Esq., Foley, Hoag &
Eliot LLP, One Post Office Square, Boston, Massachusetts 02109, or
(b) the Holder at P.O. Box 172461, Hialeah, FL 33017, or such
other address as the Holder has designated in writing to the Company.
Any notice given hereunder shall be effective upon the earlier of (i)
receipt, or (ii) a date three days from the date of mailing.
<PAGE>
9. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof
10. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of The Commonwealth of Massachusetts without giving
effect to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, DYNAGEN, INC. has caused this Warrant to be signed
by its Executive Vice President and its corporate seal to be hereunto affixed
and attested by its Secretary this 26th day of January, 1999.
ATTEST: DYNAGEN, INC.
: By:
- ----------------------------- -----------------------------
Dhananjay Wadekar
Executive Vice President
[Corporate Seal]
<PAGE>
SUBSCRIPTION
The undersigned, _______________________________________, pursuant to
the provisions of the foregoing Warrant, hereby agrees to subscribe for the
purchase of ________ shares of the Common Stock of DYNAGEN, INC. covered by said
Warrant, and makes payment therefor in full at the price per share provided by
said Warrant.
Dated:____________________________ Signature:_________________________________
Address:__________________________
__________________________
__________________________
ASSIGNMENT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns
and transfers unto ______________________________ the foregoing Warrant and all
rights evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
DYNAGEN, INC..
Dated:____________________________ Signature:_________________________________
Address:__________________________
__________________________
__________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto ___________________________ the right to purchase _________
shares of the Common Stock of DYNAGEN, INC. by the foregoing Warrant, and a
proportionate part of said Warrant and the rights evidenced hereby, and does
irrevocably constitute and appoint ___________________________________,
attorney, to transfer that part of said Warrant on the books of DYNAGEN, INC.
Dated:____________________________ Signature:_________________________________
Address:__________________________
__________________________
__________________________
<PAGE>
NET ISSUANCE ELECTION
The undersigned, _______________________________, pursuant to the
provisions of the foregoing Warrant, hereby tenders the right to purchase _____
shares of the Common Stock of DYNAGEN, INC., and a proportionate part of said
Warrant and the rights evidenced thereby, in exchange for a number of shares of
said Common Stock to be computed in accordance with the provisions of Section 1
(b) of said Warrant.
Dated:____________________________ Signature:_________________________________
Address:__________________________
__________________________
__________________________
EXHIBIT 10.2
PROMISSORY NOTE
$500,000 Boston, Massachusetts
January 26, 1999
On May 15, 1999 (the "Maturity Date"), for value received, the
undersigned DynaGen, Inc., a Delaware corporation (the "Maker"), promises to pay
to Antonio Fernandez (the "Payee"), the principal sum of Five Hundred Thousand
United States Dollars ($500,000) or the then outstanding principal amount
hereof, together with interest on any and all principal amounts remaining unpaid
hereunder from time to time outstanding from the date hereof until payment in
full, such interest to be payable at such rates and such times as are
hereinafter specified.
1. INTEREST AND PRINCIPAL
1.01 Interest. The Maker shall pay interest on the outstanding
principal amount of this Note from the date hereof until such principal amount
is paid in full at the rate of ten percent (10%) per annum for the period from
the date of this Note through April 15, 1999 and twelve percent (12%) per annum
for the period between April 16, 1999 and May 15, 1999. Interest shall accrue
and shall be paid on the Maturity Date. Any overdue installment of interest or
principal, and any amount of principal and interest outstanding while an Event
of Default has occurred and is ongoing, shall bear interest at the rate of
eighteen percent (18%) per annum. Interest shall be calculated on the basis of a
365 day year for the actual number of days elapsed.
1.02 Optional Prepayment. This Note may be prepaid in whole or in part,
at any time or from time to time before the Maturity Date, at the option of the
Maker, by paying to the Payee an amount equal to the principal amount to be
prepaid together with all interest accrued and unpaid thereon.
1.03 Mandatory Prepayment. This Note shall be prepaid from the proceeds
of and at the closing of any senior debt financing that yields aggregate net
proceeds, net of offering expenses, and/or total availability to the Maker
exceeding $5,000,000.
1.04 Delivery of Payment. All payments made hereunder shall be made by
bank check sent by overnight courier or at the Payee's election, by wire
transfer, to the Payee at the address set forth above or to such other address
as the Payee may from time to time designate in writing to the Maker. Such
payments shall be accompanied by a notice setting forth in reasonable detail (a)
the amount of interest and principal being paid and (b) the remaining principal
amount. If any payments are required to be made on a day which is not a Business
Day (as hereinafter defined) the date on which such payment is required to be
made shall be extended to, and such payment shall be required to be made on, the
next Business Day. "Business Day" shall mean a day other than Saturday, Sunday
and any day which shall be in the City of Boston, Massachusetts, a legal holiday
or a day on which banking institutions are authorized by law to close.
<PAGE>
2. EVENT OF DEFAULT
2.01 Events of Default. An "Event of Default" shall occur if:
(a) the Maker defaults in the payment of principal on this
Note when the same becomes due and payable, at maturity or otherwise,
including pursuant to Section 1.03;
(b) the Maker fails to comply with any of the other agreements
contained in this Note, and the Default continues for the period and
after the notice specified below; and
(c) the Maker pursuant to or within the meaning of any
Bankruptcy Law (as defined below):
(i) commences a voluntary case;
(ii) consents to the entry of an order against it for
relief in an involuntary case; or
(iii) makes a general assignment for the benefit of
its creditors; or
(d) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Maker in an involuntary
case;
(ii) appoints a Custodian (as hereinafter defined)
for all or substantially all of the assets of the Maker; or
(iii) orders a liquidation of the Maker.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law. The term "Custodian" means any receiver, trustee,
assignee, liquidator, or similar official under any Bankruptcy Law.
A default under clause (b) above shall not constitute an Event of
Default until Payee notifies the Maker of the Default and the Maker does not
cure the Default within 60 days of such notice. The notice must specify the
Event of Default, demand that it be remedied, and state that it is a notice of
Event of Default.
<PAGE>
3. MISCELLANEOUS
The undersigned hereby waives presentment, demand for payment, notice
of dishonor, and any and all other notices or demands in connection with the
delivery, acceptance, performance, default or enforcement of this Note, and
hereby consents to any extensions of time, renewals, releases of any party to
this Note, waivers or modifications that may be granted or consented to by the
Payee in respect to the time of payment or any other provision of this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
(EXCLUSIVE OF THE LAWS GOVERNING CONFLICTS OF LAWS) OF THE COMMONWEALTH OF
MASSACHUSETTS.
DYNAGEN, INC.
By:
--------------------------------
Name: Dhananjay Wadekar
Title: Executive Vice President
EXHIBIT 10.3
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on January 26, 2001.
WARRANT TO PURCHASE COMMON STOCK
OF
DYNAGEN, INC.
FOR VALUE RECEIVED, DYNAGEN, INC., a Delaware corporation (the "Company"),
hereby certifies that Alvin Alfonso, or his permitted assigns, is entitled to
purchase from the Company, at any time or from time to time commencing on
January 26, 1999 and prior to 5:00 P.M., Eastern Standard Time, on January 26,
2001, a total of 2,000 fully paid and nonassessable shares of the common stock,
par value $.01 per share, of the Company for an aggregate purchase price of
$0.30 per share. (Hereinafter, (i) said common stock, together with any other
equity securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock," (ii) the shares of
the Common Stock purchasable hereunder are referred to as the "Warrant Shares,"
(iii) the aggregate purchase price payable hereunder for the Warrant Shares is
referred to as the "Aggregate Warrant Price," (iv) the price payable hereunder
for each of the Warrant Shares is referred to as the "Exercise Price," (v) this
Warrant, and all warrants hereafter issued in exchange or substitution for this
Warrant are referred to as the "Warrant" and (vi) the holder of this Warrant is
referred to as the "Holder.") The Exercise Price is subject to adjustment as
hereinafter provided.
1. Exercise of Warrant
(a) Exercise. This Warrant may be exercised, in whole at any time or in
part from time to time, commencing on January 26, 1999 and prior to 5:00 P.M.,
Eastern Standard Time on January 26, 2001, by the Holder of this Warrant by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Section 7(a) hereof, together with proper
payment of the Aggregate Warrant Price, or the proportionate part thereof if
this Warrant is exercised in part. Payment for Warrant Shares shall be made by
certified or official bank check payable to the order of the Company. If this
Warrant is exercised in part, the Holder is entitled to receive a new Warrant
covering the number of Warrant Shares in respect of which this Warrant has not
been exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon such surrender of this Warrant,
the Company will (a) issue a certificate or certificates in the name of the
Holder for the largest number of whole shares of the Common Stock
<PAGE>
to which the Holder shall be entitled if this Warrant is exercised in whole and
(b) deliver the proportionate part thereof if this Warrant is exercised in part,
pursuant to the provisions of the Warrant. In lieu of any fractional share of
the Common Stock which would otherwise be issuable in respect to the exercise of
the Warrant, the Company at its option may (a) pay in cash an amount equal to
the product of (i) the daily mean average of the closing price of a share of
Common Stock on the ten consecutive trading days before the conversion date and
(ii) such fraction of a share or (b) issue an additional share of Common Stock.
Upon exercise of the Warrant, the Company shall issue and deliver to
the Holder certificates for the Common Stock issuable upon such exercise within
ten business days after such exercise and the person exercising shall be deemed
to be the holder of record of the Common Stock issuable upon such exercise.
No warrant granted herein shall be exercisable after 5:00 p.m. Eastern
Standard Time on the second anniversary of the date of issuance.
(b) Net Issuance. Notwithstanding anything to the contrary contained in
Section 1(a) hereof, in the case of any exercise on or prior to January 26, 2001
the Holder may elect to exercise this Warrant in whole or in part by receiving
shares of Common Stock equal to the net issuance value (as determined below) of
this Warrant, or any part hereof, upon surrender of this Warrant at the
principal office of the Company together with notice of such election (with the
form at the end hereof duly executed), in which event the Company shall issue to
the Holder a number of shares of Common Stock computed using the following
formula:
X = Y (A-B)
-------
A
Where: X = the number of shares of Common Stock to be
issued to the Holder
Y = the number of shares of Common Stock as to
which this Warrant is to be exercised
A = the daily mean average of the closing price of
a share of Common Stock on the ten consecutive
trading days before the conversion date
B = the Exercise Price
(c) Certain Adjustments
The Exercise Price and the number of Warrant Shares shall be equitably
adjusted from time to time to account for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events.
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of this Warrant, the Company will at all times have authorized and
reserved, and will keep available,
<PAGE>
solely for issuance or delivery upon the exercise of this Warrant, the number of
shares of the Common Stock as from time to time shall be issuable upon the
exercise of this Warrant.
3. Fully Paid Stock: Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights, and the Company will take all such actions as may be
necessary to assure that the par value or stated value, if any, per share of the
Common Stock is at all times equal to or less than the then Exercise Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes that may be
payable in respect of the issue of any Warrant Share or certificate therefor.
4. Transfer
(a) Securities Laws. Neither this Warrant nor the Warrant
Shares issuable upon the exercise hereof have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any state
securities laws and unless so registered may not be transferred, sold, pledged,
hypothecated or otherwise disposed of ("Transferred") unless an exemption from
such registration is available or if the Warrant or the Warrant Shares are sold
in accordance with Rule 144 promulgated under the Securities Act. In the event
Holder desires to transfer this Warrant or any of the Warrant Shares issued, the
Holder must give the Company prior written notice of such proposed transfer
including the name and address of the proposed transferee. Such transfer may be
made only either (i) upon publication by the Securities and Exchange Commission
(the "Commission") of a ruling, interpretation, opinion or "no action letter"
based upon facts presented to said Commission, or (ii) upon receipt by the
Company of an opinion of counsel to the Company in either case to the effect
that the proposed transfer will not violate the provisions of the Securities
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
the rules and regulations promulgated under either such act, or to the effect
that the Warrant or Warrant Shares to be sold or transferred have been
registered under the Securities Act and that there is in effect a registration
statement in which is included a prospectus meeting the requirements of Section
10(a) of the Securities Act, which is being or will be delivered to the
purchaser or transferee at or prior to the time of delivery of the certificates
evidencing the Warrant or Warrant Shares to be sold or transferred.
(b) Conditions to Transfer. Prior to any such proposed
transfer, and as a condition thereto, if such transfer is not made pursuant to
an effective registration statement under the Securities Act, the Holder will,
if requested by the Company, deliver to the Company (i) an investment covenant
signed by the proposed transferee, (ii) an agreement by such transferee to the
impression of the restrictive investment legend set forth herein on the
certificate or certificates representing the securities acquired by such
transferee, (iii) an agreement by such transferee that the Company may place a
"stop transfer order" with its transfer agent or registrar, and (iv) an
agreement by the transferee to indemnify the Company to the same extent as set
forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder
understands the meaning and legal consequences of this Section 4, and the Holder
hereby agrees to indemnify and
<PAGE>
hold harmless the Company, its representatives and each officer and director
thereof from and against any and all loss, damage or liability (including all
attorneys' fees and costs incurred in enforcing this indemnity provision) due to
or arising out of (a) the inaccuracy of any representation or the breach of any
warranty of the Holder contained in, or any other breach of, this warrant, (b)
any transfer of the Warrant or any of the Warrant Shares in violation of the
Securities Act, the Exchange Act or the rules and regulations promulgated under
either of such acts, (c) any transfer of the Warrant or any of the Warrant
Shares not in accordance with this Warrant or (d) any untrue statement or
omission to state any material fact in connection with the investment
representations or with respect to the facts and representations supplied by the
Holder to counsel to the Company upon which its opinion as to a proposed
transfer shall have been based.
(d) Transfer. Except as restricted hereby, this Warrant and
the Warrant Shares issued may be transferred by the Holder in whole or in part
at any time or from time to time. Upon surrender of this Warrant to the Company
or, if the Company so instructs the Holder in writing, at the office of its
stock transfer agent, if any, with assignment documentation duly executed and
funds sufficient to pay any transfer tax, and upon compliance with the foregoing
provisions, the Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in such instrument of assignment, and this
Warrant shall promptly be canceled. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of this Warrant in any way contrary to the
provisions of this Warrant, or any levy of execution, attachment or other
process attempted upon the Warrant, shall be null and void and without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares
have been registered under the Securities Act, upon exercise of any part of the
Warrant and the issuance of any of the Warrant Shares, the Company shall
instruct its transfer agent to enter stop transfer orders with respect to such
shares, and all certificates representing Warrant Shares shall bear on the face
thereof substantially the following legend, insofar as is consistent with
Massachusetts law:
"The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended, and may
not be sold, offered for sale, assigned, transferred or otherwise
disposed of unless registered pursuant to the provisions of that Act or
an opinion of counsel to the Company is obtained stating that such
disposition is in compliance with an available exemption from such
registration."
5. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of an
unsecured indemnity from the Holder reasonably satisfactory to the Company, if
lost, stolen or destroyed, and upon surrender and cancellation of the Warrant,
if mutilated, the Company shall execute and deliver to the Holder a new Warrant
of like date, tenor and denomination.
6. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
<PAGE>
7. Communication. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by certified
mail, return receipt requested, overnight delivery service, or sent by
facsimile, addressed to:
(a) the Company at 840 Memorial Drive, Cambridge,
Massachusetts 02139, or such other address as the Company has designated in
writing to the Holder, with a copy to David A. Broadwin, Esq., Foley, Hoag &
Eliot LLP, One Post Office Square, Boston, Massachusetts 02109, or
(b) the Holder at 1168 Partridge Avenue, Miami Springs, FL
33166, or such other address as the Holder has designated in writing to the
Company.
Any notice given hereunder shall be effective upon the earlier of (i)
receipt, or (ii) a date three days from the date of mailing or, if sent by
facsimile, upon confirmation of transmission.
8. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
9. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of The Commonwealth of Massachusetts without giving
effect to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, DYNAGEN, INC. has caused this Warrant to be signed
by its Executive Vice President and its corporate seal to be hereunto affixed
and attested by its Secretary this ____ day of _________, 1999.
ATTEST: DYNAGEN, INC.
: By:
------------------------- -------------------------
Dhananjay Wadekar
Executive Vice President
<PAGE>
SUBSCRIPTION
The undersigned, _______________________________________, pursuant to
the provisions of the foregoing Warrant, hereby agrees to subscribe for the
purchase of ________ shares of the Common Stock of DYNAGEN, INC. covered by said
Warrant, and makes payment therefor in full at the price per share provided by
said Warrant.
Dated:____________________________ Signature:_________________________
Address:__________________________
__________________________
__________________________
ASSIGNMENT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns
and transfers unto ______________________________ the foregoing Warrant and all
rights evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
DYNAGEN, INC..
Dated:____________________________ Signature:_________________________
Address:__________________________
__________________________
__________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and transfers
unto ___________________________ the right to purchase _________ shares of the
Common Stock of DYNAGEN, INC. by the foregoing Warrant, and a proportionate part
of said Warrant and the rights evidenced hereby, and does irrevocably constitute
and appoint _________________________, attorney, to transfer that part of said
Warrant on the books of DYNAGEN, INC.
Dated:____________________________ Signature:_________________________
Address:__________________________
__________________________
__________________________
<PAGE>
NET ISSUANCE ELECTION
The undersigned, _______________________________, pursuant to the
provisions of the foregoing Warrant, hereby tenders the right to purchase _____
shares of the Common Stock of DYNAGEN, INC., and a proportionate part of said
Warrant and the rights evidenced thereby, in exchange for a number of shares of
said Common Stock to be computed in accordance with the provisions of Section
1(b) of said Warrant.
Dated:____________________________ Signature:_________________________
Address:__________________________
__________________________
__________________________
EXHIBIT 10.4
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on January 26, 2001.
WARRANT TO PURCHASE COMMON STOCK
OF
DYNAGEN, INC.
FOR VALUE RECEIVED, DYNAGEN, INC., a Delaware corporation (the "Company"),
hereby certifies that Global Holdings LLP, or its permitted assigns, is entitled
to purchase from the Company, at any time or from time to time commencing on
January 26, 1999 and prior to 5:00 P.M., Eastern Standard Time, on January 26,
2001, a total of 35,500 fully paid and nonassessable shares of the common stock,
par value $.01 per share, of the Company for an aggregate purchase price of
$0.05 per share. (Hereinafter, (i) said common stock, together with any other
equity securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock," (ii) the shares of
the Common Stock purchasable hereunder are referred to as the "Warrant Shares,"
(iii) the aggregate purchase price payable hereunder for the Warrant Shares is
referred to as the "Aggregate Warrant Price," (iv) the price payable hereunder
for each of the Warrant Shares is referred to as the "Exercise Price," (v) this
Warrant, and all warrants hereafter issued in exchange or substitution for this
Warrant are referred to as the "Warrant" and (vi) the holder of this Warrant is
referred to as the "Holder.") The Exercise Price is subject to adjustment as
hereinafter provided.
1. Exercise of Warrant
(a) Exercise. This Warrant may be exercised, in whole at any time or in
part from time to time, commencing on January 26, 1999 and prior to 5:00 P.M.,
Eastern Standard Time on January 26, 2001, by the Holder of this Warrant by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Section 7(a) hereof, together with proper
payment of the Aggregate Warrant Price, or the proportionate part thereof if
this Warrant is exercised in part. Payment for Warrant Shares shall be made by
certified or official bank check payable to the order of the Company. If this
Warrant is exercised in part, the Holder is entitled to receive a new Warrant
covering the number of Warrant Shares in respect of which this Warrant has not
been exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon such surrender of this Warrant,
the Company will (a) issue a certificate or
<PAGE>
certificates in the name of the Holder for the largest number of whole shares of
the Common Stock to which the Holder shall be entitled if this Warrant is
exercised in whole and (b) deliver the proportionate part thereof if this
Warrant is exercised in part, pursuant to the provisions of the Warrant. In lieu
of any fractional share of the Common Stock which would otherwise be issuable in
respect to the exercise of the Warrant, the Company at its option may (a) pay in
cash an amount equal to the product of (i) the daily mean average of the closing
price of a share of Common Stock on the ten consecutive trading days before the
conversion date and (ii) such fraction of a share or (b) issue an additional
share of Common Stock.
Upon exercise of the Warrant, the Company shall issue and deliver to
the Holder certificates for the Common Stock issuable upon such exercise within
ten business days after such exercise and the person exercising shall be deemed
to be the holder of record of the Common Stock issuable upon such exercise.
No warrant granted herein shall be exercisable after 5:00 p.m. Eastern
Standard Time on the second anniversary of the date of issuance.
(b) Net Issuance. Notwithstanding anything to the contrary contained in
Section 1(a) hereof, in the case of any exercise on or prior to January 26, 2001
the Holder may elect to exercise this Warrant in whole or in part by receiving
shares of Common Stock equal to the net issuance value (as determined below) of
this Warrant, or any part hereof, upon surrender of this Warrant at the
principal office of the Company together with notice of such election (with the
form at the end hereof duly executed), in which event the Company shall issue to
the Holder a number of shares of Common Stock computed using the following
formula:
X = Y (A-B)
-------
A
Where: X = the number of shares of Common Stock to be
issued to the Holder
Y = the number of shares of Common Stock as to
which this Warrant is to be exercised
A = the daily mean average of the closing price of
a share of Common Stock on the ten consecutive
trading days before the conversion date
B = the Exercise Price
(c) Certain Adjustments
The Exercise Price and the number of Warrant Shares shall be equitably
adjusted from time to time to account for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events.
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of
<PAGE>
this Warrant, the Company will at all times have authorized and reserved, and
will keep available, solely for issuance or delivery upon the exercise of this
Warrant, the number of shares of the Common Stock as from time to time shall be
issuable upon the exercise of this Warrant.
3. Fully Paid Stock: Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights, and the Company will take all such actions as may be
necessary to assure that the par value or stated value, if any, per share of the
Common Stock is at all times equal to or less than the then Exercise Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes that may be
payable in respect of the issue of any Warrant Share or certificate therefor.
4. Transfer
(a) Securities Laws. Neither this Warrant nor the Warrant
Shares issuable upon the exercise hereof have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any state
securities laws and unless so registered may not be transferred, sold, pledged,
hypothecated or otherwise disposed of ("Transferred") unless an exemption from
such registration is available or if the Warrant or the Warrant Shares are sold
in accordance with Rule 144 promulgated under the Securities Act. In the event
Holder desires to transfer this Warrant or any of the Warrant Shares issued, the
Holder must give the Company prior written notice of such proposed transfer
including the name and address of the proposed transferee. Such transfer may be
made only either (i) upon publication by the Securities and Exchange Commission
(the "Commission") of a ruling, interpretation, opinion or "no action letter"
based upon facts presented to said Commission, or (ii) upon receipt by the
Company of an opinion of counsel to the Company in either case to the effect
that the proposed transfer will not violate the provisions of the Securities
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
the rules and regulations promulgated under either such act, or to the effect
that the Warrant or Warrant Shares to be sold or transferred have been
registered under the Securities Act and that there is in effect a registration
statement in which is included a prospectus meeting the requirements of Section
10(a) of the Securities Act, which is being or will be delivered to the
purchaser or transferee at or prior to the time of delivery of the certificates
evidencing the Warrant or Warrant Shares to be sold or transferred.
(b) Conditions to Transfer. Prior to any such proposed
transfer, and as a condition thereto, if such transfer is not made pursuant to
an effective registration statement under the Securities Act, the Holder will,
if requested by the Company, deliver to the Company (i) an investment covenant
signed by the proposed transferee, (ii) an agreement by such transferee to the
impression of the restrictive investment legend set forth herein on the
certificate or certificates representing the securities acquired by such
transferee, (iii) an agreement by such transferee that the Company may place a
"stop transfer order" with its transfer agent or registrar, and (iv) an
agreement by the transferee to indemnify the Company to the same extent as set
forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder
understands the
<PAGE>
meaning and legal consequences of this Section 4, and the Holder hereby agrees
to indemnify and hold harmless the Company, its representatives and each officer
and director thereof from and against any and all loss, damage or liability
(including all attorneys' fees and costs incurred in enforcing this indemnity
provision) due to or arising out of (a) the inaccuracy of any representation or
the breach of any warranty of the Holder contained in, or any other breach of,
this warrant, (b) any transfer of the Warrant or any of the Warrant Shares in
violation of the Securities Act, the Exchange Act or the rules and regulations
promulgated under either of such acts, (c) any transfer of the Warrant or any of
the Warrant Shares not in accordance with this Warrant or (d) any untrue
statement or omission to state any material fact in connection with the
investment representations or with respect to the facts and representations
supplied by the Holder to counsel to the Company upon which its opinion as to a
proposed transfer shall have been based.
(d) Transfer. Except as restricted hereby, this Warrant and
the Warrant Shares issued may be transferred by the Holder in whole or in part
at any time or from time to time. Upon surrender of this Warrant to the Company
or, if the Company so instructs the Holder in writing, at the office of its
stock transfer agent, if any, with assignment documentation duly executed and
funds sufficient to pay any transfer tax, and upon compliance with the foregoing
provisions, the Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in such instrument of assignment, and this
Warrant shall promptly be canceled. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of this Warrant in any way contrary to the
provisions of this Warrant, or any levy of execution, attachment or other
process attempted upon the Warrant, shall be null and void and without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares
have been registered under the Securities Act, upon exercise of any part of the
Warrant and the issuance of any of the Warrant Shares, the Company shall
instruct its transfer agent to enter stop transfer orders with respect to such
shares, and all certificates representing Warrant Shares shall bear on the face
thereof substantially the following legend, insofar as is consistent with
Massachusetts law:
"The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended, and may
not be sold, offered for sale, assigned, transferred or otherwise
disposed of unless registered pursuant to the provisions of that Act or
an opinion of counsel to the Company is obtained stating that such
disposition is in compliance with an available exemption from such
registration."
5. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of an
unsecured indemnity from the Holder reasonably satisfactory to the Company, if
lost, stolen or destroyed, and upon surrender and cancellation of the Warrant,
if mutilated, the Company shall execute and deliver to the Holder a new Warrant
of like date, tenor and denomination.
6. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a
<PAGE>
shareholder, prior to the exercise hereof.
7. Communication. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by certified
mail, return receipt requested, overnight delivery service, or sent by
facsimile, addressed to:
(a) the Company at 840 Memorial Drive, Cambridge,
Massachusetts 02139, or such other address as the Company has designated in
writing to the Holder, with a copy to David A. Broadwin, Esq., Foley, Hoag &
Eliot LLP, One Post Office Square, Boston, Massachusetts 02109, or
(b) the Holder at 22 Old Country Road, P.O. Box 539, Quogue,
NY 11959, or such other address as the Holder has designated in writing to the
Company.
Any notice given hereunder shall be effective upon the earlier of (i)
receipt, or (ii) a date three days from the date of mailing or, if sent by
facsimile, upon confirmation of transmission.
8. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
9. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of The Commonwealth of Massachusetts without giving
effect to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, DYNAGEN, INC. has caused this Warrant to be signed
by its Executive Vice President and its corporate seal to be hereunto affixed
and attested by its Secretary this ____ day of _________, 1999.
ATTEST: DYNAGEN, INC.
: By:
------------------------- -------------------------
Dhananjay Wadekar
Executive Vice President
[Corporate Seal]
<PAGE>
SUBSCRIPTION
The undersigned, _______________________________________, pursuant to
the provisions of the foregoing Warrant, hereby agrees to subscribe for the
purchase of ________ shares of the Common Stock of DYNAGEN, INC. covered by said
Warrant, and makes payment therefor in full at the price per share provided by
said Warrant.
Dated:____________________________ Signature:_________________________
Address:__________________________
__________________________
__________________________
ASSIGNMENT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns
and transfers unto ______________________________ the foregoing Warrant and all
rights evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
DYNAGEN, INC..
Dated:____________________________ Signature:_________________________
Address:__________________________
__________________________
__________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and transfers
unto ___________________________ the right to purchase _________ shares of the
Common Stock of DYNAGEN, INC. by the foregoing Warrant, and a proportionate part
of said Warrant and the rights evidenced hereby, and does irrevocably constitute
and appoint _________________________, attorney, to transfer that part of said
Warrant on the books of DYNAGEN, INC.
Dated:____________________________ Signature:_________________________
Address:__________________________
__________________________
__________________________
NET ISSUANCE ELECTION
<PAGE>
The undersigned, _______________________________, pursuant to the
provisions of the foregoing Warrant, hereby tenders the right to purchase _____
shares of the Common Stock of DYNAGEN, INC., and a proportionate part of said
Warrant and the rights evidenced thereby, in exchange for a number of shares of
said Common Stock to be computed in accordance with the provisions of Section
1(b) of said Warrant.
Dated:____________________________ Signature:_________________________
Address:__________________________
__________________________
__________________________
EXHIBIT 10.5
AN INVESTMENT IN THE UNITS OF WHICH THIS NOTE FORMS A PART INVOLVES
SUBSTANTIAL RISKS. THE COMPANY INTENDS TO REPAY THE NOTE WITH THE PROCEEDS OF
FUTURE FINANCINGS. IF THE COMPANY DOES NOT OBTAIN ADDITIONAL FINANCING ON A
TIMELY BASIS, IT MAY NOT BE ABLE TO REPAY THE NOTE ON A TIMELY BASIS. EACH
POTENTIAL INVESTOR SHOULD CAREFULLY REVIEW THE SUBSCRIPTION AGREEMENT AND ALL
EXHIBITS THERETO PRIOR TO MAKING AN INVESTMENT DECISION. IN PARTICULAR,
POTENTIAL INVESTORS SHOULD READ AND CAREFULLY CONSIDER THE INFORMATION SET FORTH
UNDER THE HEADINGS "SPECIAL CONSIDERATIONS" AND "RISK FACTORS" IN THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997, AS AMENDED
THROUGH THE DATE HEREOF (ATTACHED TO THE SUBSCRIPTION AGREEMENT AS EXHIBIT D AND
INCORPORATED HEREIN BY REFERENCE) AND THE COMPANY'S QUARTERLY REPORT ON FORM
10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998, AS AMENDED THROUGH THE DATE
HEREOF (ATTACHED TO THE SUBSCRIPTION AGREEMENT AS EXHIBIT E AND INCORPORATED
HEREIN BY REFERENCE).
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR
UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE
UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAW OR (II)
THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL TO
THE HOLDER OF SUCH NOTE, WHICH OTHER COUNSEL IS REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH NOTE MAY BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE
STATE SECURITIES LAWS.
DYNAGEN, INC.
NOTE DUE MAY 28, 1999
$___________________ February 28, 1999
FOR VALUE RECEIVED, on May 28, 1999 (the "Maturity Date"), the
undersigned DynaGen, Inc., a Delaware corporation (the "Company"), with its
principal office at 840 Memorial Drive, Cambridge, Massachusetts 02139, promises
to pay to the order of_________________, with a principal place of business
at___________________________________ (the "Payee" or "the holder of this
Note"), or registered assigns, the principal amount of __________________ in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public or private debts, together with
interest at a rate equal to 12% per annum.
This Note is one of several notes of the Company issued in connection
with a bridge financing for the Company of up to $500,000, which notes, together
with this Note, are hereinafter referred to as the "Notes."
1. Events of Default. Upon the occurrence of any of the following
events (herein called "Events of Default") which shall have occurred and be
continuing:
<PAGE>
(a) the Company defaults in the payment of interest on this
Note when the same becomes due and payable and such Default continues
for a period of 10 days;
(b) the Company defaults in the payment of principal on this
Note when the same becomes due and payable, at maturity or otherwise
and such default continues for a period of 10 days;
(c) the Company fails to comply with any of the other
agreements contained in this Note, and the Default continues for the
period and after the notice specified below; and
(d) the Company pursuant to or within the meaning of any
Bankruptcy Law (as defined below):
(i) commences a voluntary case;
(ii) consents to the entry of an order against it for
relief in an involuntary case; or
(iii) makes a general assignment for the benefit of
its creditors; or
(e) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company in an
involuntary case;
(ii) appoints a Custodian (as hereinafter defined) for
all or substantially all of the assets of the Company;
or
(iii) orders a liquidation of the Company;
then in any such event the holder of this Note may, by written notice to the
Company, declare the entire unpaid principal amount of this Note outstanding
together with accrued interest thereon due and payable, and the same shall,
unless such default shall be cured within ten (10) days after such notice,
forthwith become due and payable upon the expiration of such ten-day period,
without presentment, demand protest, or other notice of any kind, all of which
are expressly waived.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law. The term "Custodian" means any receiver, trustee,
assignee, liquidator, or similar official under any Bankruptcy Law.
A default under clause (c) above shall not constitute an Event of
Default until the Payee notifies the Company of the Default and the Company does
not cure the Default within 20 days of
<PAGE>
such notice. The notice must specify the Event of Default, demand that it be
remedied, and state that it is a notice of Event of Default.
2. Non-Waiver and Other Remedies. No course of dealing or delay on the
part of the holder of this Note in exercising any right thereunder shall operate
as a waiver thereof or otherwise prejudice the right of the holder of this Note.
No remedy conferred hereby shall be exclusive of any other remedy referred to
herein or now or hereinafter available at law, in equity, by statute or
otherwise.
3. Affirmative Covenants. The Company covenants and agrees that, while
this Note is outstanding, it shall:
(a) Do all things necessary to preserve its corporate
existence and continue to engage in business of the same general type as
conducted as of the date hereof,
(b) Promptly notify the holder of this Note of the occurrence
of any Event of Default under this Note; and
(c) Comply in all material respects with all statutes, laws,
ordinances, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations and requirements (collectively,
"Requirements(s)") of all governmental bodies which are applicable to the
Company or its properties, except wherein the failure to comply would not have a
material adverse effect on the Company or its property; provided that nothing
contained herein shall prevent the Company from contesting the validity or the
application of any Requirements.
4. Voluntary Prepayment. This Note may be called by the Company at any
time in whole or in part from time to time, without penalty at the principal
amount plus accrued but unpaid interest.
Any partial call shall be made pro rata among the holders of the Notes.
5. Holder as Deemed Owner. The Company may deem and treat the
registered holder hereof as the absolute owner of this Note (whether or not this
Note shall be overdue and notwithstanding any notice of ownership or writing
hereon made by anyone other than the Company) for the purpose of receiving
payment hereof or thereof or on account hereof and for all other purposes, and
the Company shall not be affected by notice to the contrary. The Company will
act as registrar for the Notes and any transfers of Notes may be made through
the Company in such capacity.
6. Corporate Obligation. It is expressly understood that this Note is
solely a corporate obligation of the Company, and that any and all personal
liability, either at common law or in equity or by constitution or statute, of,
and any and all such rights and claims against, every promoter, subscriber,
incorporator, shareholder, officer or director, as such, are hereby expressly
waived and released by the holder hereof by the acceptance of this Note and as a
part of the consideration for the issue hereof.
7. Required Consent. The Company may not modify any of the terms of the
Note without the prior written consent of the holders of all of the outstanding
Notes.
<PAGE>
8. Lost Documents. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Note or any Note
exchanged for it, and (in the case of loss, theft or destruction) of indemnity
satisfactory to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of such Note,
if mutilated, the Company will make and deliver to in lieu of such Note a new
Note of like tenor and unpaid principal amount and dated as of the original date
of the Note.
9. Miscellaneous
(a) Parties in Interest. All covenants, agreements, and
undertakings in this Note by and on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective permitted successors and assigns
of the parties hereto whether so expressed or not.
(b) Notices. All notices, requests, consents and demands shall
be made in writing and shall be mailed first class, certified mail, return
receipt requested, to the Company or to the holder of this Note at such
respective addresses as may be furnished in writing to the other party hereto.
(c) Construction. This Note shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, this Note has been executed and delivered on the
date specified above by the duly authorized representative of the Company.
DYNAGEN, INC.
_____________________ By:
Attest Dhananjay G. Wadekar
Executive Vice President
EXHIBIT 10.6
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on _________ __, 2004.
WARRANT TO PURCHASE COMMON STOCK
OF
DYNAGEN, INC.
FOR VALUE RECEIVED, DYNAGEN, INC., a Delaware corporation (the "Company"),
hereby certifies that______________, or its permitted assigns, is entitled to
purchase from the Company, at any time or from time to time commencing on
_________ __, 1999 and prior to 5:00 P.M., Eastern Standard Time, on _________
__, 2004, a total of _____________ fully paid and nonassessable shares of the
common stock, par value $.01 per share, of the Company for an aggregate purchase
price of $0.25 per share. (Hereinafter, (i) said common stock, together with any
other equity securities which may be issued by the Company with respect thereto
or in substitution therefor, is referred to as the "Common Stock", (ii) the
shares of the Common Stock purchasable hereunder are referred to as the "Warrant
Shares", (iii) the aggregate purchase price payable hereunder for the Warrant
Shares is referred to as the "Aggregate Warrant Price", (iv) the price payable
hereunder for each of the Warrant Shares is referred to as the "Exercise Price",
(v) this Warrant, and all warrants hereafter issued in exchange or substitution
for this Warrant are referred to as the "Warrant" and (vi) the holder of this
Warrant is referred to as the "Holder".)
The Exercise Price is subject to adjustment as hereinafter provided.
1. Exercise of Warrant
(a) Exercise. This Warrant may be exercised, in whole at any time or in
part from time to time, commencing on ________ __, 1999 and prior to 5:00 P.M.,
Eastern Standard Time on _________ __, 2004, by the Holder of this Warrant by
the surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Section 7(a) hereof, together with proper
payment of the Aggregate Warrant Price, or the proportionate part thereof if
this Warrant is exercised in part. Payment for Warrant Shares shall be made by
certified or official bank check payable to the order of the Company. If this
Warrant is exercised in part, the Holder is entitled to receive a new Warrant
covering the number of Warrant Shares in respect of which this Warrant has not
been exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon such surrender of this
<PAGE>
Warrant, the Company will (a) issue a certificate or certificates in the name of
the Holder for the largest number of whole shares of the Common Stock to which
the Holder shall be entitled if this Warrant is exercised in whole and (b)
deliver the proportionate part thereof if this Warrant is exercised in part,
pursuant to the provisions of the Warrant. In lieu of any fractional share of
the Common Stock which would otherwise be issuable in respect to the exercise of
the Warrant, the Company at its option may (a) pay in cash an amount equal to
the product of (i) the daily mean average of the closing price of a share of
Common Stock on the ten consecutive trading days before the conversion date and
(ii) such fraction of a share or (b) issue an additional share of Common Stock.
Upon exercise of the Warrant, the Company shall issue and deliver to
the Holder certificates for the Common Stock issuable upon such exercise within
ten business days after such exercise and the person exercising shall be deemed
to be the holder of record of the Common Stock issuable upon such exercise.
No warrant granted herein shall be exercisable after 5:00 p.m. Eastern
Standard Time on the fourth anniversary of the date of issuance.
(b) Net Issuance. Notwithstanding anything to the contrary contained in
Section 1(a) hereof, in the case of any exercise on or prior to _________ __,
2004 the Holder may elect to exercise this Warrant in whole or in part by
receiving shares of Common Stock equal to the net issuance value (as determined
below) of this Warrant, or any part hereof, upon surrender of this Warrant at
the principal office of the Company together with notice of such election (with
the form at the end hereof duly executed), in which event the Company shall
issue to the Holder a number of shares of Common Stock computed using the
following formula:
X= Y (A-B)
-------
A
Where: X = the number of shares of Common Stock to be
issued to the Holder
Y = the number of shares of Common Stock as to
which this Warrant is to be exercised
A = the daily mean average of the closing price of
a share of Common Stock on the ten consecutive
trading days before the conversion date
B = the Exercise Price
(c) Certain Adjustments
The Exercise Price and the number of Warrant Shares shall be equitably
adjusted from time to time to account for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events.
<PAGE>
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of this Warrant, the Company will at all times have authorized and
reserved, and will keep available, solely for issuance or delivery upon the
exercise of this Warrant, the number of shares of the Common Stock as from time
to time shall be issuable upon the exercise of this Warrant.
3. Fully Paid Stock: Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights, and the Company will take all such actions as may be
necessary to assure that the par value or stated value, if any, per share of the
Common Stock is at all times equal to or less than the then Exercise Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes that may be
payable in respect of the issue of any Warrant Share or certificate therefor.
4. Transfer.
(a) Securities Laws. Neither this Warrant nor the Warrant
Shares issuable upon the exercise hereof have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any state
securities laws and unless so registered may not be transferred, sold, pledged,
hypothecated or otherwise disposed of ("Transferred") unless an exemption from
such registration is available or if the Warrant or the Warrant Shares are sold
in accordance with Rule 144 promulgated under the Securities Act. In the event
Holder desires to transfer this Warrant or any of the Warrant Shares issued, the
Holder must give the Company prior written notice of such proposed transfer
including the name and address of the proposed transferee. Such transfer may be
made only either (i) upon publication by the Securities and Exchange Commission
(the "Commission") of a ruling, interpretation, opinion or "no action letter"
based upon facts presented to said Commission, or (ii) upon receipt by the
Company of an opinion of counsel to the Company in either case to the effect
that the proposed transfer will not violate the provisions of the Securities
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
the rules and regulations promulgated under either such act, or to the effect
that the Warrant or Warrant Shares to be sold or transferred have been
registered under the Securities Act and that there is in effect a registration
statement in which is included a prospectus meeting the requirements of Section
10(a) of the Securities Act, which is being or will be delivered to the
purchaser or transferee at or prior to the time of delivery of the certificates
evidencing the Warrant or Warrant Shares to be sold or transferred.
(b) Conditions to Transfer. Prior to any such proposed
transfer, and as a condition thereto, if such transfer is not made pursuant to
an effective registration statement under the Securities Act, the Holder will,
if requested by the Company, deliver to the Company (i) an investment covenant
signed by the proposed transferee, (ii) an agreement by such transferee to the
impression of the restrictive investment legend set forth herein on the
certificate or certificates representing the securities acquired by such
transferee, (iii) an agreement by such transferee that the Company may place a
"stop transfer order" with its transfer agent or registrar, and (iv) an
<PAGE>
agreement by the transferee to indemnify the Company to the same extent as set
forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder
understands the meaning and legal consequences of this Section 4, and the Holder
hereby agrees to indemnify and hold harmless the Company, its representatives
and each officer and director thereof from and against any and all loss, damage
or liability (including all attorneys' fees and costs incurred in enforcing this
indemnity provision) due to or arising out of (a) the inaccuracy of any
representation or the breach of any warranty of the Holder contained in, or any
other breach of, this warrant, (b) any transfer of the Warrant or any of the
Warrant Shares in violation of the Securities Act, the Exchange Act or the rules
and regulations promulgated under either of such acts, (c) any transfer of the
Warrant or any of the Warrant Shares not in accordance with this Warrant or (d)
any untrue statement or omission to state any material fact in connection with
the investment representations or with respect to the facts and representations
supplied by the Holder to counsel to the Company upon which its opinion as to a
proposed transfer shall have been based.
(d) Transfer. Except as restricted hereby, this Warrant and
the Warrant Shares issued may be transferred by the Holder in whole or in part
at any time or from time to time. Upon surrender of this Warrant to the Company
or, if the Company so instructs the Holder in writing, at the office of its
stock transfer agent, if any, with assignment documentation duly executed and
funds sufficient to pay any transfer tax, and upon compliance with the foregoing
provisions, the Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in such instrument of assignment, and this
Warrant shall promptly be canceled. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of this Warrant in any way contrary to the
provisions of this Warrant, or any levy of execution, attachment or other
process attempted upon the Warrant, shall be null and void and without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares
have been registered under the Securities Act, upon exercise of any part of the
Warrant and the issuance of any of the Warrant Shares, the Company shall
instruct its transfer agent to enter stop transfer orders with respect to such
shares, and all certificates representing Warrant Shares shall bear on the face
thereof substantially the following legend, insofar as is consistent with
Massachusetts law:
"The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended, and may
not be sold, offered for sale, assigned, transferred or otherwise
disposed of unless registered pursuant to the provisions of that Act or
an opinion of counsel to the Company is obtained stating that such
disposition is in compliance with an available exemption from such
registration."
5. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of an
unsecured indemnity from the Holder reasonably satisfactory to the Company, if
lost, stolen or destroyed, and upon surrender
<PAGE>
and cancellation of the Warrant, if mutilated, the Company shall execute and
deliver to the Holder a new Warrant of like date, tenor and denomination.
6. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
7. Communication. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by certified
mail, return receipt requested, overnight delivery service, or sent by
facsimile, addressed to:
(a) the Company at 840 Memorial Drive, Cambridge,
Massachusetts 02139, or such other address as the Company has designated in
writing to the Holder, with a copy to David A. Broadwin, Esq., Foley, Hoag &
Eliot LLP, One Post Office Square, Boston, Massachusetts 02109, or
(b) the Holder at ____________________________________, or
such other address as the Holder has designated in writing to the Company.
Any notice given hereunder shall be effective upon the earlier of (i)
receipt, or (ii) a date three days from the date of mailing.
8. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof
9. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of The Commonwealth of Massachusetts without giving
effect to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, DYNAGEN, INC. has caused this Warrant to be
executed and delivered on the date specified above by the duly authorized
representative of the Company.
ATTEST: DYNAGEN, INC.
: By:
- ----------------------------- -----------------------------
Dhananjay Wadekar
Executive Vice President
<PAGE>
SUBSCRIPTION
The undersigned, _______________________________________, pursuant to
the provisions of the foregoing Warrant, hereby agrees to subscribe for the
purchase of ________ shares of the Common Stock of DYNAGEN, INC. covered by said
Warrant, and makes payment therefor in full at the price per share provided by
said Warrant.
Dated:____________________________ Signature:_________________________________
Address:__________________________
__________________________
__________________________
ASSIGNMENT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns
and transfers unto ______________________________ the foregoing Warrant and all
rights evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
DYNAGEN, INC..
Dated:____________________________ Signature:_________________________________
Address:__________________________
__________________________
__________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and transfers
unto ___________________________ the right to purchase _________ shares of the
Common Stock of DYNAGEN, INC. by the foregoing Warrant, and a proportionate part
of said Warrant and the rights evidenced hereby, and does irrevocably constitute
and appoint ___________________________________, attorney, to transfer that part
of said Warrant on the books of DYNAGEN, INC.
Dated:____________________________ Signature:_________________________________
Address:__________________________
__________________________
__________________________
<PAGE>
NET ISSUANCE ELECTION
The undersigned, _______________________________, pursuant to the
provisions of the foregoing Warrant, hereby tenders the right to purchase _____
shares of the Common Stock of DYNAGEN, INC., and a proportionate part of said
Warrant and the rights evidenced thereby, in exchange for a number of shares of
said Common Stock to be computed in accordance with the provisions of Section 1
(b) of said Warrant.
Dated:____________________________ Signature:_________________________________
Address:__________________________
__________________________
__________________________
EXHIBIT 10.7
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on February 18, 2001.
WARRANT TO PURCHASE COMMON STOCK
OF
DYNAGEN, INC.
FOR VALUE RECEIVED, DYNAGEN, INC., a Delaware corporation (the "Company"),
hereby certifies that David Slavny, or his permitted assigns, is entitled to
purchase from the Company, at any time or from time to time commencing on
February 18, 1999 and prior to 5:00 P.M., Eastern Standard Time, on February 18,
2001, a total of 200,000 fully paid and nonassessable shares of the common
stock, par value $.01 per share, of the Company for an aggregate purchase price
of $0.22 per share. (Hereinafter, (i) said common stock, together with any other
equity securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the "Common Stock," (ii) the shares of
the Common Stock purchasable hereunder are referred to as the "Warrant Shares,"
(iii) the aggregate purchase price payable hereunder for the Warrant Shares is
referred to as the "Aggregate Warrant Price," (iv) the price payable hereunder
for each of the Warrant Shares is referred to as the "Exercise Price," (v) this
Warrant, and all warrants hereafter issued in exchange or substitution for this
Warrant are referred to as the "Warrant" and (vi) the holder of this Warrant is
referred to as the "Holder.") The Exercise Price is subject to adjustment as
hereinafter provided.
1. Exercise of Warrant
(a) Exercise. This Warrant may be exercised, in whole at any time or in
part from time to time, commencing on February 18, 1999 and prior to 5:00 P.M.,
Eastern Standard Time on February 18, 2001, by the Holder of this Warrant by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Section 7(a) hereof, together with proper
payment of the Aggregate Warrant Price, or the proportionate part thereof if
this Warrant is exercised in part. Payment for Warrant Shares shall be made by
certified or official bank check payable to the order of the Company. If this
Warrant is exercised in part, the Holder is entitled to receive a new Warrant
covering the number of Warrant Shares in respect of which this Warrant has not
been exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon such surrender of this Warrant,
the Company will
<PAGE>
(a) issue a certificate or certificates in the name of the Holder for the
largest number of whole shares of the Common Stock to which the Holder shall be
entitled if this Warrant is exercised in whole and (b) deliver the proportionate
part thereof if this Warrant is exercised in part, pursuant to the provisions of
the Warrant. In lieu of any fractional share of the Common Stock which would
otherwise be issuable in respect to the exercise of the Warrant, the Company at
its option may (a) pay in cash an amount equal to the product of (i) the daily
mean average of the closing price of a share of Common Stock on the ten
consecutive trading days before the conversion date and (ii) such fraction of a
share or (b) issue an additional share of Common Stock.
Upon exercise of the Warrant, the Company shall issue and deliver to
the Holder certificates for the Common Stock issuable upon such exercise within
ten business days after such exercise and the person exercising shall be deemed
to be the holder of record of the Common Stock issuable upon such exercise.
No warrant granted herein shall be exercisable after 5:00 p.m. Eastern
Standard Time on the second anniversary of the date of issuance.
(b) Net Issuance. Notwithstanding anything to the contrary contained in
Section 1(a) hereof, in the case of any exercise on or prior to February 18,
2001 the Holder may elect to exercise this Warrant in whole or in part by
receiving shares of Common Stock equal to the net issuance value (as determined
below) of this Warrant, or any part hereof, upon surrender of this Warrant at
the principal office of the Company together with notice of such election (with
the form at the end hereof duly executed), in which event the Company shall
issue to the Holder a number of shares of Common Stock computed using the
following formula:
X= Y (A-B)
-------
A
Where: X = the number of shares of Common Stock to be
issued to the Holder
Y = the number of shares of Common Stock as to
which this Warrant is to be exercised
A = the daily mean average of the closing price of
a share of Common Stock on the ten consecutive
trading days before the conversion date
B = the Exercise Price
(c) Certain Adjustments
The Exercise Price and the number of Warrant Shares shall be equitably
adjusted from time to time to account for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events.
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of
2
<PAGE>
this Warrant, the Company will at all times have authorized and reserved, and
will keep available, solely for issuance or delivery upon the exercise of this
Warrant, the number of shares of the Common Stock as from time to time shall be
issuable upon the exercise of this Warrant.
3. Fully Paid Stock: Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights, and the Company will take all such actions as may be
necessary to assure that the par value or stated value, if any, per share of the
Common Stock is at all times equal to or less than the then Exercise Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes that may be
payable in respect of the issue of any Warrant Share or certificate therefor.
4. Transfer
(a) Securities Laws. Neither this Warrant nor the Warrant
Shares issuable upon the exercise hereof have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any state
securities laws and unless so registered may not be transferred, sold, pledged,
hypothecated or otherwise disposed of ("Transferred") unless an exemption from
such registration is available or if the Warrant or the Warrant Shares are sold
in accordance with Rule 144 promulgated under the Securities Act. In the event
Holder desires to transfer this Warrant or any of the Warrant Shares issued, the
Holder must give the Company prior written notice of such proposed transfer
including the name and address of the proposed transferee. Such transfer may be
made only either (i) upon publication by the Securities and Exchange Commission
(the "Commission") of a ruling, interpretation, opinion or "no action letter"
based upon facts presented to said Commission, or (ii) upon receipt by the
Company of an opinion of counsel to the Company in either case to the effect
that the proposed transfer will not violate the provisions of the Securities
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
the rules and regulations promulgated under either such act, or to the effect
that the Warrant or Warrant Shares to be sold or transferred have been
registered under the Securities Act and that there is in effect a registration
statement in which is included a prospectus meeting the requirements of Section
10(a) of the Securities Act, which is being or will be delivered to the
purchaser or transferee at or prior to the time of delivery of the certificates
evidencing the Warrant or Warrant Shares to be sold or transferred.
(b) Conditions to Transfer. Prior to any such proposed
transfer, and as a condition thereto, if such transfer is not made pursuant to
an effective registration statement under the Securities Act, the Holder will,
if requested by the Company, deliver to the Company (i) an investment covenant
signed by the proposed transferee, (ii) an agreement by such transferee to the
impression of the restrictive investment legend set forth herein on the
certificate or certificates representing the securities acquired by such
transferee, (iii) an agreement by such transferee that the Company may place a
"stop transfer order" with its transfer agent or registrar, and (iv) an
agreement by the transferee to indemnify the Company to the same extent as set
forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder
understands the
3
<PAGE>
meaning and legal consequences of this Section 4, and the Holder hereby agrees
to indemnify and hold harmless the Company, its representatives and each officer
and director thereof from and against any and all loss, damage or liability
(including all attorneys' fees and costs incurred in enforcing this indemnity
provision) due to or arising out of (a) the inaccuracy of any representation or
the breach of any warranty of the Holder contained in, or any other breach of,
this warrant, (b) any transfer of the Warrant or any of the Warrant Shares in
violation of the Securities Act, the Exchange Act or the rules and regulations
promulgated under either of such acts, (c) any transfer of the Warrant or any of
the Warrant Shares not in accordance with this Warrant or (d) any untrue
statement or omission to state any material fact in connection with the
investment representations or with respect to the facts and representations
supplied by the Holder to counsel to the Company upon which its opinion as to a
proposed transfer shall have been based.
(d) Transfer. Except as restricted hereby, this Warrant and
the Warrant Shares issued may be transferred by the Holder in whole or in part
at any time or from time to time. Upon surrender of this Warrant to the Company
or, if the Company so instructs the Holder in writing, at the office of its
stock transfer agent, if any, with assignment documentation duly executed and
funds sufficient to pay any transfer tax, and upon compliance with the foregoing
provisions, the Company shall, without charge, execute and deliver a new Warrant
in the name of the assignee named in such instrument of assignment, and this
Warrant shall promptly be canceled. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of this Warrant in any way contrary to the
provisions of this Warrant, or any levy of execution, attachment or other
process attempted upon the Warrant, shall be null and void and without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares
have been registered under the Securities Act, upon exercise of any part of the
Warrant and the issuance of any of the Warrant Shares, the Company shall
instruct its transfer agent to enter stop transfer orders with respect to such
shares, and all certificates representing Warrant Shares shall bear on the face
thereof substantially the following legend, insofar as is consistent with
Massachusetts law:
"The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended, and may
not be sold, offered for sale, assigned, transferred or otherwise
disposed of unless registered pursuant to the provisions of that Act or
an opinion of counsel to the Company is obtained stating that such
disposition is in compliance with an available exemption from such
registration."
5. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of an
unsecured indemnity from the Holder reasonably satisfactory to the Company, if
lost, stolen or destroyed, and upon surrender and cancellation of the Warrant,
if mutilated, the Company shall execute and deliver to the Holder a new Warrant
of like date, tenor and denomination.
6. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as
4
<PAGE>
a shareholder, prior to the exercise hereof.
7. Communication. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by certified
mail, return receipt requested, overnight delivery service, or sent by
facsimile, addressed to:
(a) the Company at 840 Memorial Drive, Cambridge,
Massachusetts 02139, or such other address as the Company has designated in
writing to the Holder, with a copy to David A. Broadwin, Esq., Foley, Hoag &
Eliot LLP, One Post Office Square, Boston, Massachusetts 02109, or
(b) the Holder at 4474 Club Drive, NE, Atlanta, GA 30399, or
such other address as the Holder has designated in writing to the Company.
Any notice given hereunder shall be effective upon the earlier of (i)
receipt, or (ii) a date three days from the date of mailing or, if sent by
facsimile, upon confirmation of transmission.
8. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
9. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of The Commonwealth of Massachusetts without giving
effect to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, DYNAGEN, INC. has caused this Warrant to be signed
by its Executive Vice President and its corporate seal to be hereunto affixed
and attested by its Secretary this ____ day of _________, 1999.
ATTEST: DYNAGEN, INC.
: By:
- ----------------------------- -----------------------------
Dhananjay Wadekar
Executive Vice President
5
<PAGE>
SUBSCRIPTION
The undersigned, _______________________________________, pursuant to
the provisions of the foregoing Warrant, hereby agrees to subscribe for the
purchase of ________ shares of the Common Stock of DYNAGEN, INC. covered by said
Warrant, and makes payment therefor in full at the price per share provided by
said Warrant.
Dated:____________________________ Signature:_________________________________
Address:__________________________
__________________________
__________________________
ASSIGNMENT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns
and transfers unto ______________________________ the foregoing Warrant and all
rights evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
DYNAGEN, INC..
Dated:____________________________ Signature:_________________________________
Address:__________________________
__________________________
__________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and transfers
unto ___________________________ the right to purchase _________ shares of the
Common Stock of DYNAGEN, INC. by the foregoing Warrant, and a proportionate part
of said Warrant and the rights evidenced hereby, and does irrevocably constitute
and appoint _________________________, attorney, to transfer that part of said
Warrant on the books of DYNAGEN, INC.
Dated:____________________________ Signature:_________________________________
Address:__________________________
__________________________
__________________________
6
<PAGE>
NET ISSUANCE ELECTION
The undersigned, _______________________________, pursuant to the
provisions of the foregoing Warrant, hereby tenders the right to purchase _____
shares of the Common Stock of DYNAGEN, INC., and a proportionate part of said
Warrant and the rights evidenced thereby, in exchange for a number of shares of
said Common Stock to be computed in accordance with the provisions of Section
1(b) of said Warrant.
Dated:____________________________ Signature:_________________________________
Address:__________________________
__________________________
__________________________
EXHIBIT 10.8
INCENTIVE STOCK OPTION
GRANTED BY
DYNAGEN, INC.
(hereinafter called the "Company")
TO
C. Robert Cusick
-------------------------------
(hereinafter called the "Holder")
UNDER THE
1998 STOCK OPTION PLAN
For valuable consideration, the receipt of which is hereby
acknowledged, the Company hereby grants to the Holder the following option:
FIRST: Subject to the terms and conditions hereinafter set forth, the
Holder is hereby given the right and option to purchase from the Company shares
of the common stock, $.01 par value per share, ("Common Stock"), of the Company.
Schedule A hereto, the provisions of which are incorporated by reference herein,
sets forth (a) the maximum number of shares that the Holder may purchase upon
exercise of this Option, (b) the exercise price per share of Common Stock
purchasable hereunder, (c) the expiration date of this Option, (d) the vesting
rate and (e) certain other terms and conditions applicable to this Option.
This Option is and shall be subject in every respect to the provisions
of the Company's 1998 Stock Option Plan, as the same may be amended from time to
time (the "Plan"). A copy of the Plan is being delivered herewith, and the Plan
is hereby incorporated herein by reference and made a part hereof. In the event
of any conflict or inconsistency between the terms of this Option and those of
the Plan, the terms of the Plan shall govern.
This Option shall be exercised in whole or in part by the Holder's
delivery to the Company of written notice (the "Notice of Exercise") setting
forth the number of shares with respect to which this Option is to be exercised,
together with (a) cash in an amount, or a check, bank draft or postal or express
money order payable in an amount, equal to the aggregate exercise price for the
shares being purchased, (b) with the consent of the Board (which term shall
herein include the "Committee," as that term is defined in the Plan), shares of
Common Stock having a fair market value equal to such aggregate exercise price;
(c) with the consent of the Board, a personal recourse note issued by the Holder
to the Company in a principal amount equal to such
<PAGE>
aggregate exercise price and with such other terms, including interest rate and
maturity, as the Board may determine in its discretion, provided that the
interest rate borne by such note shall not be less than the lowest applicable
federal rate, as defined in Section 1274(d) of the Internal Revenue Code of
1986, as amended; (d) with the consent of the Board, such other consideration
that is acceptable to the Board and that has a fair market value, as determined
by the Board, equal to such aggregate exercise price; or (e) with the consent of
the Board, any combination of the foregoing. The "fair market value" of the
Common Stock shall equal (i) the closing price per share on the date of grant of
the Option as reported by the National Market System or another automated
quotation system of the National Association of Securities Dealers, Inc.,
including the OTC Bulletin Board, (ii) if the Common Stock is not quoted on any
such system, as reported by a national stock exchange or (iii) if the Common
Stock is not listed on such an exchange, the fair market value as determined by
the Board.
SECOND: The Company, in its discretion, may file a registration
statement on Form S- 8 under the Securities Act of 1933, as amended, to register
shares of Common Stock reserved for issuance under the Plan. At any time at
which such a registration statement is not in effect, it shall be a condition
precedent to any exercise of this Option that the Holder shall deliver to the
Company a customary "investment letter" satisfactory to the Company and its
counsel in which, among other things, the Holder shall (a) state that he or she
is acquiring shares of Common Stock subject to the Option for his or her own
account for investment and not with a view to the resale or distribution thereof
and (b) acknowledge that those shares are not freely transferable except in
compliance with federal and state securities laws.
THIRD: In order to exercise this option in whole or in part, the Holder
shall deliver to the Company the Notice of Exercise and related investment
letter, payment of exercise price pursuant to Paragraphs First and Second hereof
and any agreement not inconsistent with the provisions of Section 7 of the Plan
that may then be required by the Company in its sole discretion, including
without limitation an executed counterpart of the Stockholder Agreement entered
into by and among certain stockholders of the Company, or any amendment thereto,
or successor agreement. As promptly as practicable after receipt by the Company,
such materials, the Company shall deliver to the Holder (or if any other
individual or individuals are exercising this Option, to such individual or
individuals) a certificate registered in the name of the Holder (or the names of
the other individual or individuals exercising this Option) and representing the
number of shares with respect to which this Option is then being exercised;
provided, however, that if any law or regulation or order of the Securities and
Exchange Commission or any other body having jurisdiction in the premises shall
require the Company or the Holder (or the individual or individuals exercising
this Option) to take any action in connection with the shares then being
purchased, the date for the delivery of the certificate for such shares shall be
extended for the period necessary to take and complete such action. The Company
may imprint upon said certificate the legend contemplated by Section 9.2 of the
Plan and such other legends as counsel for the Company may consider appropriate.
Delivery by the Company of the certificates for such shares shall be deemed
effected for all purposes when the Company or a stock transfer agent of the
Company shall have deposited such certificates in the United States mail,
addressed to the Holder, at the address specified in the Notice. The Company
will pay all fees or expenses necessarily incurred by the Company in connection
with the issuance and delivery of shares pursuant to the exercise of this
Option.
-2-
<PAGE>
The Company will, at all times while any portion of this Option is
outstanding, reserve and keep available, out of shares of its authorized and
unissued Common Stock or shares of Common Stock held in treasury, a sufficient
number of shares of its Common Stock to satisfy the requirements of this Option.
FOURTH: If the Company shall effect any subdivision or consolidation of
shares of its stock or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares outstanding, in
any such case without receiving compensation therefor in money, services or
property, then the number, class and per share price of shares of stock subject
to this Option shall be appropriately adjusted in such a manner as to entitle
the Holder to receive upon exercise of this Option, for the same aggregate cash
consideration, the same total number and class of shares as he or she would have
received as a result of the event requiring the adjustment had he or she
exercised this Option in full immediately prior to such event.
If the Company shall be a party to a reorganization or merger with one
or more other corporations (whether or not the Company is the surviving or
resulting corporation), shall consolidate with or into one or more other
corporations, shall be liquidated, or shall sell or otherwise dispose of
substantially all of its assets to another corporation (each a "Transaction"),
then:
(a) subject to the provisions of clauses (b) and (c) below,
after the effective date of the Transaction, the Holder of this Option
shall be entitled, upon exercise hereof and at no additional cost, to
receive shares of Common Stock or, if applicable, shares of such other
stock or other securities, cash or property as the holders of shares of
Common Stock received pursuant to the terms of the Transaction;
(b) the Board may accelerate the time for exercise of this
Option to a date prior to the effective date of the Transaction, as
specified by the Board; or
(c) this Option may be canceled by the Board as of the
effective date of the Transaction, provided that (i) notice of such
cancellation shall have been given to the Holder and (ii) the Holder
shall have the right to exercise this Option to the extent the same is
then exercisable or, if the Board shall have accelerated the time for
exercise of this Option, in full during the thirty-day period preceding
the effective date of the Transaction.
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to this Option.
FIFTH: Neither the Holder nor any other person shall, by virtue of the
granting of this Option, be deemed for any purpose to be the owner of any shares
of Common Stock subject to
-3-
<PAGE>
this Option or to be entitled to the rights or privileges of a holder of such
shares unless and until this Option has been exercised pursuant to the terms
hereof with respect to such shares and the Company has issued and delivered the
shares to the Holder.
SIXTH: This Option is not transferable by the Holder or by operation of
law, otherwise than by will or under the laws of descent and distribution. This
Option is exercisable, during the Holder's lifetime, only by the Holder.
In the event that the Holder's employment with the Company or any
subsidiary is terminated by the Company without "Cause" (as defined
hereinafter), the Holder shall have the right to exercise this Option within
thirty days after the latest date on which the Holder so ceases to be an
employee of the Company or any subsidiary or parent (but not later than the
expiration date of this Option) with respect to the shares which were
purchasable by the Holder by exercise of this Option on such date.
In the event that the Holder's employment is terminated by the Holder
for any reason or by the Company for Cause, this Option shall terminate
immediately. As used in this Option, "Cause" shall mean a determination by the
Company (including the Board) or a subsidiary or parent that the Holder's
employment with the Company or such subsidiary or parent should be terminated as
a result of (i) a material breach by the Holder of any agreement to which the
Holder and the Company (or such subsidiary or parent) are both parties, (ii) any
act (other than retirement) by the Holder that may have a material and adverse
effect on the business of the Company or any subsidiary or on the ability to
perform services for the Company or such subsidiary, including the proven or
admitted commission of any crime (other than an ordinary traffic violation), or
(iii) any material misconduct or material neglect of duties by the Holder in
connection with the business or affairs of the Company or such subsidiary or
parent.
In the event of the death or permanent and total disability of the
Holder prior to termination of the Holder's employment with the Company and all
subsidiaries or parents and prior to the date of expiration of this Option, this
Option shall terminate on the earlier of the expiration date of this Option or
one year following the date of such death or disability.
In the event of the death of the Holder prior to termination of the
Holder's employment with the Company and all subsidiaries or parents and prior
to the date of expiration of this Option, the Holder's executors, administrators
or any individual or individuals to whom this Option is transferred by will or
under the laws of descent and distribution, as the case may be, shall have the
right to exercise this Option with respect to the number of shares purchasable
by the Holder at the date of death.
SEVENTH: The Holder agrees that, during the 180-day period commencing
with the closing date of any public offering by the Company of shares of Common
Stock pursuant to a registration statement filed under the Securities Act of
1933, as amended, or any successor act, the Holder will not, without the prior
written consent of the representative or representatives of the underwriters of
such offering, directly or indirectly, sell, offer to sell, contract to sell,
grant any option for the sale of, assign, transfer, pledge, hypothecate or
otherwise dispose of or encumber any shares of Common Stock acquired upon
exercise of this Option, other than such
-4-
<PAGE>
shares, if any, as shall be covered by such registration statement or as shall
be consented to by the Company and such representative or representatives. The
Holder further agrees that, in order to facilitate any such public offering, (a)
the agreements in this Paragraph Seventh shall be for the benefit of such
underwriters as well as the Company and (b) upon request of such representative
or representatives, the Holder will execute a separate written instrument to the
effect set forth in the preceding sentence, with such changes therein as such
representative or representatives may request, provided that such changes are
not materially adverse to the interest of the Holder.
EIGHTH: If the Company in its discretion determines that it is
obligated to withhold tax with respect to shares of Common Stock received on
exercise of this Option, the Holder agrees that the Company may withhold from
the Holder's wages the appropriate amount of federal, state or local withholding
taxes attributable to the Holder's exercise of such Option. At the Company's
discretion, the amount required to be withheld may be withheld in cash from such
wages or (with respect to compensation income attributable to the exercise of
this Option) in kind from the Common Stock otherwise deliverable to the Holder
on exercise of this Option. The Holder further agrees that, if the Company does
not withhold an amount from the Holder's wages sufficient to satisfy the
Company's withholding obligation, the Holder will remit to the Company on
demand, in cash, the amount estimated by the Company to be underwithheld.
NINTH: Any notice to be given to the Company hereunder shall be deemed
sufficient if addressed to the Company and delivered at the office of the Chief
Financial Officer of the Company, or to such other officer or at such other
address as the Company may hereafter designate, or when deposited in the mail,
postage prepaid, addressed to the attention of the Chief Financial Officer of
the Company at such office or other address.
Any notice to be given to the Holder hereunder shall be deemed
sufficient if addressed to and delivered in person to the Holder at his address
furnished to the Company or when deposited in the mail, postage prepaid,
addressed to the Holder at such address.
TENTH: This Option is subject to all laws, regulations and orders of
any governmental authority which may be applicable thereto and, notwithstanding
any of the provisions hereof, the Holder agrees that he will not exercise the
Option granted hereby nor will the Company be obligated to issue any shares of
stock hereunder if the exercise thereof or the issuance of such shares, as the
case may be, would constitute a violation by the Holder or the Company of any
such law, regulation or order or any provision thereof.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in its name and on its behalf as of the effective date.
DYNAGEN, INC.
By:___________________________________________
Name:
Title:
Acknowledgment
The undersigned Holder acknowledges receipt of this Stock Option
Agreement, including Schedule A hereto, and a copy of the 1998 Stock Option
Plan, and agrees to be bound by all obligations of the Holder as set forth in
such Stock Option Agreement.
HOLDER
______________________________________________
Name
<PAGE>
SCHEDULE A
DYNAGEN, INC.
INCENTIVE STOCK OPTION
----------------------
Date of Grant: February 4, 1999
--------------------
Name of Holder: C. Robert Cusick
--------------------
Address: 1100 Lancaster St.
--------------------
Pittsburgh, PA 15218
--------------------
Social Security Number:
---------------------
Maximum number of shares for which
this Option is exercisable: 900,000
---------------------
Exercise (purchase) price per share: $.01
---------------------
Expiration date of this Option: February 4, 2004
---------------------
Vesting rate: 300,000 options vest immediately.
The remaining 600,000 options vest pro
rata on a monthly basis over the course
of the year for the number of months
during which Mr. Cusick served as a
Director or officer of the Company.
----------------------------------------
Other terms and conditions: NONE
----
EXHIBIT 10.9
INCENTIVE STOCK OPTION
GRANTED BY
DYNAGEN, INC.
(hereinafter called the "Company")
TO
Dhananjay G. Wadekar
-------------------------------
(hereinafter called the "Holder")
UNDER THE
1998 STOCK OPTION PLAN
For valuable consideration, the receipt of which is hereby
acknowledged, the Company hereby grants to the Holder the following option:
FIRST: Subject to the terms and conditions hereinafter set forth, the
Holder is hereby given the right and option to purchase from the Company shares
of the common stock, $.01 par value per share, ("Common Stock"), of the Company.
Schedule A hereto, the provisions of which are incorporated by reference herein,
sets forth (a) the maximum number of shares that the Holder may purchase upon
exercise of this Option, (b) the exercise price per share of Common Stock
purchasable hereunder, (c) the expiration date of this Option, (d) the vesting
rate and (e) certain other terms and conditions applicable to this Option.
This Option is and shall be subject in every respect to the provisions
of the Company's 1998 Stock Option Plan, as the same may be amended from time to
time (the "Plan"). A copy of the Plan is being delivered herewith, and the Plan
is hereby incorporated herein by reference and made a part hereof. In the event
of any conflict or inconsistency between the terms of this Option and those of
the Plan, the terms of the Plan shall govern.
This Option shall be exercised in whole or in part by the Holder's
delivery to the Company of written notice (the "Notice of Exercise") setting
forth the number of shares with respect to which this Option is to be exercised,
together with (a) cash in an amount, or a check, bank draft or postal or express
money order payable in an amount, equal to the aggregate exercise price for the
shares being purchased, (b) with the consent of the Board (which term shall
herein include the "Committee," as that term is defined in the Plan), shares of
Common Stock having a fair market value equal to such aggregate exercise price;
(c) with the consent of the Board, a personal recourse note issued by the Holder
to the Company in a principal amount equal to such
<PAGE>
aggregate exercise price and with such other terms, including interest rate and
maturity, as the Board may determine in its discretion, provided that the
interest rate borne by such note shall not be less than the lowest applicable
federal rate, as defined in Section 1274(d) of the Internal Revenue Code of
1986, as amended; (d) with the consent of the Board, such other consideration
that is acceptable to the Board and that has a fair market value, as determined
by the Board, equal to such aggregate exercise price; or (e) with the consent of
the Board, any combination of the foregoing. The "fair market value" of the
Common Stock shall equal (i) the closing price per share on the date of grant of
the Option as reported by the National Market System or another automated
quotation system of the National Association of Securities Dealers, Inc.,
including the OTC Bulletin Board, (ii) if the Common Stock is not quoted on any
such system, as reported by a national stock exchange or (iii) if the Common
Stock is not listed on such an exchange, the fair market value as determined by
the Board.
SECOND: The Company, in its discretion, may file a registration
statement on Form S- 8 under the Securities Act of 1933, as amended, to register
shares of Common Stock reserved for issuance under the Plan. At any time at
which such a registration statement is not in effect, it shall be a condition
precedent to any exercise of this Option that the Holder shall deliver to the
Company a customary "investment letter" satisfactory to the Company and its
counsel in which, among other things, the Holder shall (a) state that he or she
is acquiring shares of Common Stock subject to the Option for his or her own
account for investment and not with a view to the resale or distribution thereof
and (b) acknowledge that those shares are not freely transferable except in
compliance with federal and state securities laws.
THIRD: In order to exercise this option in whole or in part, the Holder
shall deliver to the Company the Notice of Exercise and related investment
letter, payment of exercise price pursuant to Paragraphs First and Second hereof
and any agreement not inconsistent with the provisions of Section 7 of the Plan
that may then be required by the Company in its sole discretion, including
without limitation an executed counterpart of the Stockholder Agreement entered
into by and among certain stockholders of the Company, or any amendment thereto,
or successor agreement. As promptly as practicable after receipt by the Company,
such materials, the Company shall deliver to the Holder (or if any other
individual or individuals are exercising this Option, to such individual or
individuals) a certificate registered in the name of the Holder (or the names of
the other individual or individuals exercising this Option) and representing the
number of shares with respect to which this Option is then being exercised;
provided, however, that if any law or regulation or order of the Securities and
Exchange Commission or any other body having jurisdiction in the premises shall
require the Company or the Holder (or the individual or individuals exercising
this Option) to take any action in connection with the shares then being
purchased, the date for the delivery of the certificate for such shares shall be
extended for the period necessary to take and complete such action. The Company
may imprint upon said certificate the legend contemplated by Section 9.2 of the
Plan and such other legends as counsel for the Company may consider appropriate.
Delivery by the Company of the certificates for such shares shall be deemed
effected for all purposes when the Company or a stock transfer agent of the
Company shall have deposited such certificates in the United States mail,
addressed to the Holder, at the address specified in the Notice. The Company
will pay all fees or expenses necessarily incurred by the Company in connection
with the issuance and delivery of shares pursuant to the exercise of this
Option.
-2-
<PAGE>
The Company will, at all times while any portion of this Option is
outstanding, reserve and keep available, out of shares of its authorized and
unissued Common Stock or shares of Common Stock held in treasury, a sufficient
number of shares of its Common Stock to satisfy the requirements of this Option.
FOURTH: If the Company shall effect any subdivision or consolidation of
shares of its stock or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares outstanding, in
any such case without receiving compensation therefor in money, services or
property, then the number, class and per share price of shares of stock subject
to this Option shall be appropriately adjusted in such a manner as to entitle
the Holder to receive upon exercise of this Option, for the same aggregate cash
consideration, the same total number and class of shares as he or she would have
received as a result of the event requiring the adjustment had he or she
exercised this Option in full immediately prior to such event.
If the Company shall be a party to a reorganization or merger with one
or more other corporations (whether or not the Company is the surviving or
resulting corporation), shall consolidate with or into one or more other
corporations, shall be liquidated, or shall sell or otherwise dispose of
substantially all of its assets to another corporation (each a "Transaction"),
then:
(a) subject to the provisions of clauses (b) and (c) below,
after the effective date of the Transaction, the Holder of this Option
shall be entitled, upon exercise hereof and at no additional cost, to
receive shares of Common Stock or, if applicable, shares of such other
stock or other securities, cash or property as the holders of shares of
Common Stock received pursuant to the terms of the Transaction;
(b) the Board may accelerate the time for exercise of this
Option to a date prior to the effective date of the Transaction, as
specified by the Board; or
(c) this Option may be canceled by the Board as of the
effective date of the Transaction, provided that (i) notice of such
cancellation shall have been given to the Holder and (ii) the Holder
shall have the right to exercise this Option to the extent the same is
then exercisable or, if the Board shall have accelerated the time for
exercise of this Option, in full during the thirty-day period preceding
the effective date of the Transaction.
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to this Option.
FIFTH: Neither the Holder nor any other person shall, by virtue of the
granting of this Option, be deemed for any purpose to be the owner of any shares
of Common Stock subject to
-3-
<PAGE>
this Option or to be entitled to the rights or privileges of a holder of such
shares unless and until this Option has been exercised pursuant to the terms
hereof with respect to such shares and the Company has issued and delivered the
shares to the Holder.
SIXTH: This Option is not transferable by the Holder or by operation of
law, otherwise than by will or under the laws of descent and distribution. This
Option is exercisable, during the Holder's lifetime, only by the Holder.
In the event that the Holder's employment with the Company or any
subsidiary is terminated by the Company without "Cause" (as defined
hereinafter), the Holder shall have the right to exercise this Option within
thirty days after the latest date on which the Holder so ceases to be an
employee of the Company or any subsidiary or parent (but not later than the
expiration date of this Option) with respect to the shares which were
purchasable by the Holder by exercise of this Option on such date.
In the event that the Holder's employment is terminated by the Holder
for any reason or by the Company for Cause, this Option shall terminate
immediately. As used in this Option, "Cause" shall mean a determination by the
Company (including the Board) or a subsidiary or parent that the Holder's
employment with the Company or such subsidiary or parent should be terminated as
a result of (i) a material breach by the Holder of any agreement to which the
Holder and the Company (or such subsidiary or parent) are both parties, (ii) any
act (other than retirement) by the Holder that may have a material and adverse
effect on the business of the Company or any subsidiary or on the ability to
perform services for the Company or such subsidiary, including the proven or
admitted commission of any crime (other than an ordinary traffic violation), or
(iii) any material misconduct or material neglect of duties by the Holder in
connection with the business or affairs of the Company or such subsidiary or
parent.
In the event of the death or permanent and total disability of the
Holder prior to termination of the Holder's employment with the Company and all
subsidiaries or parents and prior to the date of expiration of this Option, this
Option shall terminate on the earlier of the expiration date of this Option or
one year following the date of such death or disability.
In the event of the death of the Holder prior to termination of the
Holder's employment with the Company and all subsidiaries or parents and prior
to the date of expiration of this Option, the Holder's executors, administrators
or any individual or individuals to whom this Option is transferred by will or
under the laws of descent and distribution, as the case may be, shall have the
right to exercise this Option with respect to the number of shares purchasable
by the Holder at the date of death.
SEVENTH: The Holder agrees that, during the 180-day period commencing
with the closing date of any public offering by the Company of shares of Common
Stock pursuant to a registration statement filed under the Securities Act of
1933, as amended, or any successor act, the Holder will not, without the prior
written consent of the representative or representatives of the underwriters of
such offering, directly or indirectly, sell, offer to sell, contract to sell,
grant any option for the sale of, assign, transfer, pledge, hypothecate or
otherwise dispose of or encumber any shares of Common Stock acquired upon
exercise of this Option, other than such
-4-
<PAGE>
shares, if any, as shall be covered by such registration statement or as shall
be consented to by the Company and such representative or representatives. The
Holder further agrees that, in order to facilitate any such public offering, (a)
the agreements in this Paragraph Seventh shall be for the benefit of such
underwriters as well as the Company and (b) upon request of such representative
or representatives, the Holder will execute a separate written instrument to the
effect set forth in the preceding sentence, with such changes therein as such
representative or representatives may request, provided that such changes are
not materially adverse to the interest of the Holder.
EIGHTH: If the Company in its discretion determines that it is
obligated to withhold tax with respect to shares of Common Stock received on
exercise of this Option, the Holder agrees that the Company may withhold from
the Holder's wages the appropriate amount of federal, state or local withholding
taxes attributable to the Holder's exercise of such Option. At the Company's
discretion, the amount required to be withheld may be withheld in cash from such
wages or (with respect to compensation income attributable to the exercise of
this Option) in kind from the Common Stock otherwise deliverable to the Holder
on exercise of this Option. The Holder further agrees that, if the Company does
not withhold an amount from the Holder's wages sufficient to satisfy the
Company's withholding obligation, the Holder will remit to the Company on
demand, in cash, the amount estimated by the Company to be underwithheld.
NINTH: Any notice to be given to the Company hereunder shall be deemed
sufficient if addressed to the Company and delivered at the office of the Chief
Financial Officer of the Company, or to such other officer or at such other
address as the Company may hereafter designate, or when deposited in the mail,
postage prepaid, addressed to the attention of the Chief Financial Officer of
the Company at such office or other address.
Any notice to be given to the Holder hereunder shall be deemed
sufficient if addressed to and delivered in person to the Holder at his address
furnished to the Company or when deposited in the mail, postage prepaid,
addressed to the Holder at such address.
TENTH: This Option is subject to all laws, regulations and orders of
any governmental authority which may be applicable thereto and, notwithstanding
any of the provisions hereof, the Holder agrees that he will not exercise the
Option granted hereby nor will the Company be obligated to issue any shares of
stock hereunder if the exercise thereof or the issuance of such shares, as the
case may be, would constitute a violation by the Holder or the Company of any
such law, regulation or order or any provision thereof.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in its name and on its behalf as of the effective date.
DYNAGEN, INC.
By:___________________________________________
Name:
Title:
Acknowledgment
The undersigned Holder acknowledges receipt of this Stock Option
Agreement, including Schedule A hereto, and a copy of the 1998 Stock Option
Plan, and agrees to be bound by all obligations of the Holder as set forth in
such Stock Option Agreement.
HOLDER
______________________________________________
Name
<PAGE>
SCHEDULE A
DYNAGEN, INC.
STOCK OPTION
------------
Date of Grant: February 4, 1999
---------------------
Name of Holder: Dhananjay G. Wadekar
---------------------
Address: 381 South Street
---------------------
Needham, MA 02192
---------------------
Social Security Number: ###-##-####
---------------------
Maximum number of shares for which
this Option is exercisable: 400,000
---------------------
Exercise (purchase) price per share: $.01
---------------------
Expiration date of this Option: February 4, 2004
---------------------
Vesting rate: 100,000 of these options are vested
immediately. The remainder vest pro rata
on a monthly basis over the course of
the year for the number of months during
which Mr. Wadekar serves as a Director
or Officer of the Company.
----------------------------------------
Other terms and conditions: NONE
----
EXHIBIT 10.10
INCENTIVE STOCK OPTION
GRANTED BY
DYNAGEN, INC.
(hereinafter called the "Company")
TO
Steven Georgiev
-------------------------------
(hereinafter called the "Holder")
UNDER THE
1998 STOCK OPTION PLAN
For valuable consideration, the receipt of which is hereby
acknowledged, the Company hereby grants to the Holder the following option:
FIRST: Subject to the terms and conditions hereinafter set forth, the
Holder is hereby given the right and option to purchase from the Company shares
of the common stock, $.01 par value per share, ("Common Stock"), of the Company.
Schedule A hereto, the provisions of which are incorporated by reference herein,
sets forth (a) the maximum number of shares that the Holder may purchase upon
exercise of this Option, (b) the exercise price per share of Common Stock
purchasable hereunder, (c) the expiration date of this Option, (d) the vesting
rate and (e) certain other terms and conditions applicable to this Option.
This Option is and shall be subject in every respect to the provisions
of the Company's 1998 Stock Option Plan, as the same may be amended from time to
time (the "Plan"). A copy of the Plan is being delivered herewith, and the Plan
is hereby incorporated herein by reference and made a part hereof. In the event
of any conflict or inconsistency between the terms of this Option and those of
the Plan, the terms of the Plan shall govern.
This Option shall be exercised in whole or in part by the Holder's
delivery to the Company of written notice (the "Notice of Exercise") setting
forth the number of shares with respect to which this Option is to be exercised,
together with (a) cash in an amount, or a check, bank draft or postal or express
money order payable in an amount, equal to the aggregate exercise price for the
shares being purchased, (b) with the consent of the Board (which term shall
herein include the "Committee," as that term is defined in the Plan), shares of
Common Stock having a fair market value equal to such aggregate exercise price;
(c) with the consent of the Board, a personal recourse note issued by the Holder
to the Company in a principal amount equal to such
<PAGE>
aggregate exercise price and with such other terms, including interest rate and
maturity, as the Board may determine in its discretion, provided that the
interest rate borne by such note shall not be less than the lowest applicable
federal rate, as defined in Section 1274(d) of the Internal Revenue Code of
1986, as amended; (d) with the consent of the Board, such other consideration
that is acceptable to the Board and that has a fair market value, as determined
by the Board, equal to such aggregate exercise price; or (e) with the consent of
the Board, any combination of the foregoing. The "fair market value" of the
Common Stock shall equal (i) the closing price per share on the date of grant of
the Option as reported by the National Market System or another automated
quotation system of the National Association of Securities Dealers, Inc.,
including the OTC Bulletin Board, (ii) if the Common Stock is not quoted on any
such system, as reported by a national stock exchange or (iii) if the Common
Stock is not listed on such an exchange, the fair market value as determined by
the Board.
SECOND: The Company, in its discretion, may file a registration
statement on Form S- 8 under the Securities Act of 1933, as amended, to register
shares of Common Stock reserved for issuance under the Plan. At any time at
which such a registration statement is not in effect, it shall be a condition
precedent to any exercise of this Option that the Holder shall deliver to the
Company a customary "investment letter" satisfactory to the Company and its
counsel in which, among other things, the Holder shall (a) state that he or she
is acquiring shares of Common Stock subject to the Option for his or her own
account for investment and not with a view to the resale or distribution thereof
and (b) acknowledge that those shares are not freely transferable except in
compliance with federal and state securities laws.
THIRD: In order to exercise this option in whole or in part, the Holder
shall deliver to the Company the Notice of Exercise and related investment
letter, payment of exercise price pursuant to Paragraphs First and Second hereof
and any agreement not inconsistent with the provisions of Section 7 of the Plan
that may then be required by the Company in its sole discretion, including
without limitation an executed counterpart of the Stockholder Agreement entered
into by and among certain stockholders of the Company, or any amendment thereto,
or successor agreement. As promptly as practicable after receipt by the Company,
such materials, the Company shall deliver to the Holder (or if any other
individual or individuals are exercising this Option, to such individual or
individuals) a certificate registered in the name of the Holder (or the names of
the other individual or individuals exercising this Option) and representing the
number of shares with respect to which this Option is then being exercised;
provided, however, that if any law or regulation or order of the Securities and
Exchange Commission or any other body having jurisdiction in the premises shall
require the Company or the Holder (or the individual or individuals exercising
this Option) to take any action in connection with the shares then being
purchased, the date for the delivery of the certificate for such shares shall be
extended for the period necessary to take and complete such action. The Company
may imprint upon said certificate the legend contemplated by Section 9.2 of the
Plan and such other legends as counsel for the Company may consider appropriate.
Delivery by the Company of the certificates for such shares shall be deemed
effected for all purposes when the Company or a stock transfer agent of the
Company shall have deposited such certificates in the United States mail,
addressed to the Holder, at the address specified in the Notice. The Company
will pay all fees or expenses necessarily incurred by the Company in connection
with the issuance and delivery of shares pursuant to the exercise of this
Option.
-2-
<PAGE>
The Company will, at all times while any portion of this Option is
outstanding, reserve and keep available, out of shares of its authorized and
unissued Common Stock or shares of Common Stock held in treasury, a sufficient
number of shares of its Common Stock to satisfy the requirements of this Option.
FOURTH: If the Company shall effect any subdivision or consolidation of
shares of its stock or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares outstanding, in
any such case without receiving compensation therefor in money, services or
property, then the number, class and per share price of shares of stock subject
to this Option shall be appropriately adjusted in such a manner as to entitle
the Holder to receive upon exercise of this Option, for the same aggregate cash
consideration, the same total number and class of shares as he or she would have
received as a result of the event requiring the adjustment had he or she
exercised this Option in full immediately prior to such event.
If the Company shall be a party to a reorganization or merger with one
or more other corporations (whether or not the Company is the surviving or
resulting corporation), shall consolidate with or into one or more other
corporations, shall be liquidated, or shall sell or otherwise dispose of
substantially all of its assets to another corporation (each a "Transaction"),
then:
(a) subject to the provisions of clauses (b) and (c) below,
after the effective date of the Transaction, the Holder of this Option
shall be entitled, upon exercise hereof and at no additional cost, to
receive shares of Common Stock or, if applicable, shares of such other
stock or other securities, cash or property as the holders of shares of
Common Stock received pursuant to the terms of the Transaction;
(b) the Board may accelerate the time for exercise of this
Option to a date prior to the effective date of the Transaction, as
specified by the Board; or
(c) this Option may be canceled by the Board as of the
effective date of the Transaction, provided that (i) notice of such
cancellation shall have been given to the Holder and (ii) the Holder
shall have the right to exercise this Option to the extent the same is
then exercisable or, if the Board shall have accelerated the time for
exercise of this Option, in full during the thirty-day period preceding
the effective date of the Transaction.
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to this Option.
FIFTH: Neither the Holder nor any other person shall, by virtue of the
granting of this Option, be deemed for any purpose to be the owner of any shares
of Common Stock subject to
-3-
<PAGE>
this Option or to be entitled to the rights or privileges of a holder of such
shares unless and until this Option has been exercised pursuant to the terms
hereof with respect to such shares and the Company has issued and delivered the
shares to the Holder.
SIXTH: This Option is not transferable by the Holder or by operation of
law, otherwise than by will or under the laws of descent and distribution. This
Option is exercisable, during the Holder's lifetime, only by the Holder.
In the event that the Holder's employment with the Company or any
subsidiary is terminated by the Company without "Cause" (as defined
hereinafter), the Holder shall have the right to exercise this Option within
thirty days after the latest date on which the Holder so ceases to be an
employee of the Company or any subsidiary or parent (but not later than the
expiration date of this Option) with respect to the shares which were
purchasable by the Holder by exercise of this Option on such date.
In the event that the Holder's employment is terminated by the Holder
for any reason or by the Company for Cause, this Option shall terminate
immediately. As used in this Option, "Cause" shall mean a determination by the
Company (including the Board) or a subsidiary or parent that the Holder's
employment with the Company or such subsidiary or parent should be terminated as
a result of (i) a material breach by the Holder of any agreement to which the
Holder and the Company (or such subsidiary or parent) are both parties, (ii) any
act (other than retirement) by the Holder that may have a material and adverse
effect on the business of the Company or any subsidiary or on the ability to
perform services for the Company or such subsidiary, including the proven or
admitted commission of any crime (other than an ordinary traffic violation), or
(iii) any material misconduct or material neglect of duties by the Holder in
connection with the business or affairs of the Company or such subsidiary or
parent.
In the event of the death or permanent and total disability of the
Holder prior to termination of the Holder's employment with the Company and all
subsidiaries or parents and prior to the date of expiration of this Option, this
Option shall terminate on the earlier of the expiration date of this Option or
one year following the date of such death or disability.
In the event of the death of the Holder prior to termination of the
Holder's employment with the Company and all subsidiaries or parents and prior
to the date of expiration of this Option, the Holder's executors, administrators
or any individual or individuals to whom this Option is transferred by will or
under the laws of descent and distribution, as the case may be, shall have the
right to exercise this Option with respect to the number of shares purchasable
by the Holder at the date of death.
SEVENTH: The Holder agrees that, during the 180-day period commencing
with the closing date of any public offering by the Company of shares of Common
Stock pursuant to a registration statement filed under the Securities Act of
1933, as amended, or any successor act, the Holder will not, without the prior
written consent of the representative or representatives of the underwriters of
such offering, directly or indirectly, sell, offer to sell, contract to sell,
grant any option for the sale of, assign, transfer, pledge, hypothecate or
otherwise dispose of or encumber any shares of Common Stock acquired upon
exercise of this Option, other than such
-4-
<PAGE>
shares, if any, as shall be covered by such registration statement or as shall
be consented to by the Company and such representative or representatives. The
Holder further agrees that, in order to facilitate any such public offering, (a)
the agreements in this Paragraph Seventh shall be for the benefit of such
underwriters as well as the Company and (b) upon request of such representative
or representatives, the Holder will execute a separate written instrument to the
effect set forth in the preceding sentence, with such changes therein as such
representative or representatives may request, provided that such changes are
not materially adverse to the interest of the Holder.
EIGHTH: If the Company in its discretion determines that it is
obligated to withhold tax with respect to shares of Common Stock received on
exercise of this Option, the Holder agrees that the Company may withhold from
the Holder's wages the appropriate amount of federal, state or local withholding
taxes attributable to the Holder's exercise of such Option. At the Company's
discretion, the amount required to be withheld may be withheld in cash from such
wages or (with respect to compensation income attributable to the exercise of
this Option) in kind from the Common Stock otherwise deliverable to the Holder
on exercise of this Option. The Holder further agrees that, if the Company does
not withhold an amount from the Holder's wages sufficient to satisfy the
Company's withholding obligation, the Holder will remit to the Company on
demand, in cash, the amount estimated by the Company to be underwithheld.
NINTH: Any notice to be given to the Company hereunder shall be deemed
sufficient if addressed to the Company and delivered at the office of the Chief
Financial Officer of the Company, or to such other officer or at such other
address as the Company may hereafter designate, or when deposited in the mail,
postage prepaid, addressed to the attention of the Chief Financial Officer of
the Company at such office or other address.
Any notice to be given to the Holder hereunder shall be deemed
sufficient if addressed to and delivered in person to the Holder at his address
furnished to the Company or when deposited in the mail, postage prepaid,
addressed to the Holder at such address.
TENTH: This Option is subject to all laws, regulations and orders of
any governmental authority which may be applicable thereto and, notwithstanding
any of the provisions hereof, the Holder agrees that he will not exercise the
Option granted hereby nor will the Company be obligated to issue any shares of
stock hereunder if the exercise thereof or the issuance of such shares, as the
case may be, would constitute a violation by the Holder or the Company of any
such law, regulation or order or any provision thereof.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in its name and on its behalf as of the effective date.
DYNAGEN, INC.
By:___________________________________________
Name:
Title:
Acknowledgment
The undersigned Holder acknowledges receipt of this Stock Option
Agreement, including Schedule A hereto, and a copy of the 1998 Stock Option
Plan, and agrees to be bound by all obligations of the Holder as set forth in
such Stock Option Agreement.
HOLDER
______________________________________________
Name
<PAGE>
SCHEDULE A
DYNAGEN, INC.
INCENTIVE STOCK OPTION
----------------------
Date of Grant: February 4, 1999
---------------------
Name of Holder: Steven Georgiev
---------------------
Address: 142 Arlington Street
---------------------
Winchester, MA 01890
---------------------
Social Security Number: ###-##-####
---------------------
Maximum number of shares for which
this Option is exercisable: 200,000
---------------------
Exercise (purchase) price per share: $.01
---------------------
Expiration date of this Option: February 4, 2004
---------------------
Vesting rate: These options vest pro rata on a monthly
basis over the course of the year for
the number of months during which
Mr. Georgiev serves as a Director or
officer of the Company.
----------------------------------------
----------------------------------------
----------------------------------------
Other terms and conditions: NONE
----
EXHIBIT 10.11
INCENTIVE STOCK OPTION
GRANTED BY
DYNAGEN, INC.
(hereinafter called the "Company")
TO
F. Howard Schneider
-------------------------------
(hereinafter called the "Holder")
UNDER THE
1998 STOCK OPTION PLAN
For valuable consideration, the receipt of which is hereby
acknowledged, the Company hereby grants to the Holder the following option:
FIRST: Subject to the terms and conditions hereinafter set forth, the
Holder is hereby given the right and option to purchase from the Company shares
of the common stock, $.01 par value per share, ("Common Stock"), of the Company.
Schedule A hereto, the provisions of which are incorporated by reference herein,
sets forth (a) the maximum number of shares that the Holder may purchase upon
exercise of this Option, (b) the exercise price per share of Common Stock
purchasable hereunder, (c) the expiration date of this Option, (d) the vesting
rate and (e) certain other terms and conditions applicable to this Option.
This Option is and shall be subject in every respect to the provisions
of the Company's 1998 Stock Option Plan, as the same may be amended from time to
time (the "Plan"). A copy of the Plan is being delivered herewith, and the Plan
is hereby incorporated herein by reference and made a part hereof. In the event
of any conflict or inconsistency between the terms of this Option and those of
the Plan, the terms of the Plan shall govern.
This Option shall be exercised in whole or in part by the Holder's
delivery to the Company of written notice (the "Notice of Exercise") setting
forth the number of shares with respect to which this Option is to be exercised,
together with (a) cash in an amount, or a check, bank draft or postal or express
money order payable in an amount, equal to the aggregate exercise price for the
shares being purchased, (b) with the consent of the Board (which term shall
herein include the "Committee," as that term is defined in the Plan), shares of
Common Stock having a fair market value equal to such aggregate exercise price;
(c) with the consent of the Board, a personal recourse note issued by the Holder
to the Company in a principal amount equal to such
<PAGE>
aggregate exercise price and with such other terms, including interest rate and
maturity, as the Board may determine in its discretion, provided that the
interest rate borne by such note shall not be less than the lowest applicable
federal rate, as defined in Section 1274(d) of the Internal Revenue Code of
1986, as amended; (d) with the consent of the Board, such other consideration
that is acceptable to the Board and that has a fair market value, as determined
by the Board, equal to such aggregate exercise price; or (e) with the consent of
the Board, any combination of the foregoing. The "fair market value" of the
Common Stock shall equal (i) the closing price per share on the date of grant of
the Option as reported by the National Market System or another automated
quotation system of the National Association of Securities Dealers, Inc.,
including the OTC Bulletin Board, (ii) if the Common Stock is not quoted on any
such system, as reported by a national stock exchange or (iii) if the Common
Stock is not listed on such an exchange, the fair market value as determined by
the Board.
SECOND: The Company, in its discretion, may file a registration
statement on Form S- 8 under the Securities Act of 1933, as amended, to register
shares of Common Stock reserved for issuance under the Plan. At any time at
which such a registration statement is not in effect, it shall be a condition
precedent to any exercise of this Option that the Holder shall deliver to the
Company a customary "investment letter" satisfactory to the Company and its
counsel in which, among other things, the Holder shall (a) state that he or she
is acquiring shares of Common Stock subject to the Option for his or her own
account for investment and not with a view to the resale or distribution thereof
and (b) acknowledge that those shares are not freely transferable except in
compliance with federal and state securities laws.
THIRD: In order to exercise this option in whole or in part, the Holder
shall deliver to the Company the Notice of Exercise and related investment
letter, payment of exercise price pursuant to Paragraphs First and Second hereof
and any agreement not inconsistent with the provisions of Section 7 of the Plan
that may then be required by the Company in its sole discretion, including
without limitation an executed counterpart of the Stockholder Agreement entered
into by and among certain stockholders of the Company, or any amendment thereto,
or successor agreement. As promptly as practicable after receipt by the Company,
such materials, the Company shall deliver to the Holder (or if any other
individual or individuals are exercising this Option, to such individual or
individuals) a certificate registered in the name of the Holder (or the names of
the other individual or individuals exercising this Option) and representing the
number of shares with respect to which this Option is then being exercised;
provided, however, that if any law or regulation or order of the Securities and
Exchange Commission or any other body having jurisdiction in the premises shall
require the Company or the Holder (or the individual or individuals exercising
this Option) to take any action in connection with the shares then being
purchased, the date for the delivery of the certificate for such shares shall be
extended for the period necessary to take and complete such action. The Company
may imprint upon said certificate the legend contemplated by Section 9.2 of the
Plan and such other legends as counsel for the Company may consider appropriate.
Delivery by the Company of the certificates for such shares shall be deemed
effected for all purposes when the Company or a stock transfer agent of the
Company shall have deposited such certificates in the United States mail,
addressed to the Holder, at the address specified in the Notice. The Company
will pay all fees or expenses necessarily incurred by the Company in connection
with the issuance and delivery of shares pursuant to the exercise of this
Option.
-2-
<PAGE>
The Company will, at all times while any portion of this Option is
outstanding, reserve and keep available, out of shares of its authorized and
unissued Common Stock or shares of Common Stock held in treasury, a sufficient
number of shares of its Common Stock to satisfy the requirements of this Option.
FOURTH: If the Company shall effect any subdivision or consolidation of
shares of its stock or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares outstanding, in
any such case without receiving compensation therefor in money, services or
property, then the number, class and per share price of shares of stock subject
to this Option shall be appropriately adjusted in such a manner as to entitle
the Holder to receive upon exercise of this Option, for the same aggregate cash
consideration, the same total number and class of shares as he or she would have
received as a result of the event requiring the adjustment had he or she
exercised this Option in full immediately prior to such event.
If the Company shall be a party to a reorganization or merger with one
or more other corporations (whether or not the Company is the surviving or
resulting corporation), shall consolidate with or into one or more other
corporations, shall be liquidated, or shall sell or otherwise dispose of
substantially all of its assets to another corporation (each a "Transaction"),
then:
(a) subject to the provisions of clauses (b) and (c) below,
after the effective date of the Transaction, the Holder of this Option
shall be entitled, upon exercise hereof and at no additional cost, to
receive shares of Common Stock or, if applicable, shares of such other
stock or other securities, cash or property as the holders of shares of
Common Stock received pursuant to the terms of the Transaction;
(b) the Board may accelerate the time for exercise of this
Option to a date prior to the effective date of the Transaction, as
specified by the Board; or
(c) this Option may be canceled by the Board as of the
effective date of the Transaction, provided that (i) notice of such
cancellation shall have been given to the Holder and (ii) the Holder
shall have the right to exercise this Option to the extent the same is
then exercisable or, if the Board shall have accelerated the time for
exercise of this Option, in full during the thirty-day period preceding
the effective date of the Transaction.
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to this Option.
FIFTH: Neither the Holder nor any other person shall, by virtue of the
granting of this Option, be deemed for any purpose to be the owner of any shares
of Common Stock subject to
-3-
<PAGE>
this Option or to be entitled to the rights or privileges of a holder of such
shares unless and until this Option has been exercised pursuant to the terms
hereof with respect to such shares and the Company has issued and delivered the
shares to the Holder.
SIXTH: This Option is not transferable by the Holder or by operation of
law, otherwise than by will or under the laws of descent and distribution. This
Option is exercisable, during the Holder's lifetime, only by the Holder.
In the event that the Holder's employment with the Company or any
subsidiary is terminated by the Company without "Cause" (as defined
hereinafter), the Holder shall have the right to exercise this Option within
thirty days after the latest date on which the Holder so ceases to be an
employee of the Company or any subsidiary or parent (but not later than the
expiration date of this Option) with respect to the shares which were
purchasable by the Holder by exercise of this Option on such date.
In the event that the Holder's employment is terminated by the Holder
for any reason or by the Company for Cause, this Option shall terminate
immediately. As used in this Option, "Cause" shall mean a determination by the
Company (including the Board) or a subsidiary or parent that the Holder's
employment with the Company or such subsidiary or parent should be terminated as
a result of (i) a material breach by the Holder of any agreement to which the
Holder and the Company (or such subsidiary or parent) are both parties, (ii) any
act (other than retirement) by the Holder that may have a material and adverse
effect on the business of the Company or any subsidiary or on the ability to
perform services for the Company or such subsidiary, including the proven or
admitted commission of any crime (other than an ordinary traffic violation), or
(iii) any material misconduct or material neglect of duties by the Holder in
connection with the business or affairs of the Company or such subsidiary or
parent.
In the event of the death or permanent and total disability of the
Holder prior to termination of the Holder's employment with the Company and all
subsidiaries or parents and prior to the date of expiration of this Option, this
Option shall terminate on the earlier of the expiration date of this Option or
one year following the date of such death or disability.
In the event of the death of the Holder prior to termination of the
Holder's employment with the Company and all subsidiaries or parents and prior
to the date of expiration of this Option, the Holder's executors, administrators
or any individual or individuals to whom this Option is transferred by will or
under the laws of descent and distribution, as the case may be, shall have the
right to exercise this Option with respect to the number of shares purchasable
by the Holder at the date of death.
SEVENTH: The Holder agrees that, during the 180-day period commencing
with the closing date of any public offering by the Company of shares of Common
Stock pursuant to a registration statement filed under the Securities Act of
1933, as amended, or any successor act, the Holder will not, without the prior
written consent of the representative or representatives of the underwriters of
such offering, directly or indirectly, sell, offer to sell, contract to sell,
grant any option for the sale of, assign, transfer, pledge, hypothecate or
otherwise dispose of or encumber any shares of Common Stock acquired upon
exercise of this Option, other than such
-4-
<PAGE>
shares, if any, as shall be covered by such registration statement or as shall
be consented to by the Company and such representative or representatives. The
Holder further agrees that, in order to facilitate any such public offering, (a)
the agreements in this Paragraph Seventh shall be for the benefit of such
underwriters as well as the Company and (b) upon request of such representative
or representatives, the Holder will execute a separate written instrument to the
effect set forth in the preceding sentence, with such changes therein as such
representative or representatives may request, provided that such changes are
not materially adverse to the interest of the Holder.
EIGHTH: If the Company in its discretion determines that it is
obligated to withhold tax with respect to shares of Common Stock received on
exercise of this Option, the Holder agrees that the Company may withhold from
the Holder's wages the appropriate amount of federal, state or local withholding
taxes attributable to the Holder's exercise of such Option. At the Company's
discretion, the amount required to be withheld may be withheld in cash from such
wages or (with respect to compensation income attributable to the exercise of
this Option) in kind from the Common Stock otherwise deliverable to the Holder
on exercise of this Option. The Holder further agrees that, if the Company does
not withhold an amount from the Holder's wages sufficient to satisfy the
Company's withholding obligation, the Holder will remit to the Company on
demand, in cash, the amount estimated by the Company to be underwithheld.
NINTH: Any notice to be given to the Company hereunder shall be deemed
sufficient if addressed to the Company and delivered at the office of the Chief
Financial Officer of the Company, or to such other officer or at such other
address as the Company may hereafter designate, or when deposited in the mail,
postage prepaid, addressed to the attention of the Chief Financial Officer of
the Company at such office or other address.
Any notice to be given to the Holder hereunder shall be deemed
sufficient if addressed to and delivered in person to the Holder at his address
furnished to the Company or when deposited in the mail, postage prepaid,
addressed to the Holder at such address.
TENTH: This Option is subject to all laws, regulations and orders of
any governmental authority which may be applicable thereto and, notwithstanding
any of the provisions hereof, the Holder agrees that he will not exercise the
Option granted hereby nor will the Company be obligated to issue any shares of
stock hereunder if the exercise thereof or the issuance of such shares, as the
case may be, would constitute a violation by the Holder or the Company of any
such law, regulation or order or any provision thereof.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in its name and on its behalf as of the effective date.
DYNAGEN, INC.
By:___________________________________________
Name:
Title:
Acknowledgment
The undersigned Holder acknowledges receipt of this Stock Option
Agreement, including Schedule A hereto, and a copy of the 1998 Stock Option
Plan, and agrees to be bound by all obligations of the Holder as set forth in
such Stock Option Agreement.
HOLDER
______________________________________________
Name
<PAGE>
SCHEDULE A
DYNAGEN, INC.
INCENTIVE STOCK OPTION
----------------------
Date of Grant: November 19, 1998
---------------------
Name of Holder: F. Howard Schneider
---------------------
Address: 64 Avon Road
---------------------
Yarmouthport, MA 02675
----------------------
Social Security Number: ###-##-####
---------------------
Maximum number of shares for which
this Option is exercisable: 100,000
---------------------
Exercise (purchase) price per share: $0.125
---------------------
Expiration date of this Option: November 19, 2005
---------------------
Vesting rate: Four equal quarterly installments
---------------------------------
---------------------------------------
---------------------------------------
Other terms and conditions: ---------------------
EXHIBIT 10.12
INCENTIVE STOCK OPTION
GRANTED BY
DYNAGEN, INC.
(hereinafter called the "Company")
TO
Steven Georgiev
-------------------------------
(hereinafter called the "Holder")
UNDER THE
1998 STOCK OPTION PLAN
For valuable consideration, the receipt of which is hereby
acknowledged, the Company hereby grants to the Holder the following option:
FIRST: Subject to the terms and conditions hereinafter set forth, the
Holder is hereby given the right and option to purchase from the Company shares
of the common stock, $.01 par value per share, ("Common Stock"), of the Company.
Schedule A hereto, the provisions of which are incorporated by reference herein,
sets forth (a) the maximum number of shares that the Holder may purchase upon
exercise of this Option, (b) the exercise price per share of Common Stock
purchasable hereunder, (c) the expiration date of this Option, (d) the vesting
rate and (e) certain other terms and conditions applicable to this Option.
This Option is and shall be subject in every respect to the provisions
of the Company's 1998 Stock Option Plan, as the same may be amended from time to
time (the "Plan"). A copy of the Plan is being delivered herewith, and the Plan
is hereby incorporated herein by reference and made a part hereof. In the event
of any conflict or inconsistency between the terms of this Option and those of
the Plan, the terms of the Plan shall govern.
This Option shall be exercised in whole or in part by the Holder's
delivery to the Company of written notice (the "Notice of Exercise") setting
forth the number of shares with respect to which this Option is to be exercised,
together with (a) cash in an amount, or a check, bank draft or postal or express
money order payable in an amount, equal to the aggregate exercise price for the
shares being purchased, (b) with the consent of the Board (which term shall
herein include the "Committee," as that term is defined in the Plan), shares of
Common Stock having a fair market value equal to such aggregate exercise price;
(c) with the consent of the Board, a personal recourse note issued by the Holder
to the Company in a principal amount equal to such
<PAGE>
aggregate exercise price and with such other terms, including interest rate and
maturity, as the Board may determine in its discretion, provided that the
interest rate borne by such note shall not be less than the lowest applicable
federal rate, as defined in Section 1274(d) of the Internal Revenue Code of
1986, as amended; (d) with the consent of the Board, such other consideration
that is acceptable to the Board and that has a fair market value, as determined
by the Board, equal to such aggregate exercise price; or (e) with the consent of
the Board, any combination of the foregoing. The "fair market value" of the
Common Stock shall equal (i) the closing price per share on the date of grant of
the Option as reported by the National Market System or another automated
quotation system of the National Association of Securities Dealers, Inc.,
including the OTC Bulletin Board, (ii) if the Common Stock is not quoted on any
such system, as reported by a national stock exchange or (iii) if the Common
Stock is not listed on such an exchange, the fair market value as determined by
the Board.
SECOND: The Company, in its discretion, may file a registration
statement on Form S- 8 under the Securities Act of 1933, as amended, to register
shares of Common Stock reserved for issuance under the Plan. At any time at
which such a registration statement is not in effect, it shall be a condition
precedent to any exercise of this Option that the Holder shall deliver to the
Company a customary "investment letter" satisfactory to the Company and its
counsel in which, among other things, the Holder shall (a) state that he or she
is acquiring shares of Common Stock subject to the Option for his or her own
account for investment and not with a view to the resale or distribution thereof
and (b) acknowledge that those shares are not freely transferable except in
compliance with federal and state securities laws.
THIRD: In order to exercise this option in whole or in part, the Holder
shall deliver to the Company the Notice of Exercise and related investment
letter, payment of exercise price pursuant to Paragraphs First and Second hereof
and any agreement not inconsistent with the provisions of Section 7 of the Plan
that may then be required by the Company in its sole discretion, including
without limitation an executed counterpart of the Stockholder Agreement entered
into by and among certain stockholders of the Company, or any amendment thereto,
or successor agreement. As promptly as practicable after receipt by the Company,
such materials, the Company shall deliver to the Holder (or if any other
individual or individuals are exercising this Option, to such individual or
individuals) a certificate registered in the name of the Holder (or the names of
the other individual or individuals exercising this Option) and representing the
number of shares with respect to which this Option is then being exercised;
provided, however, that if any law or regulation or order of the Securities and
Exchange Commission or any other body having jurisdiction in the premises shall
require the Company or the Holder (or the individual or individuals exercising
this Option) to take any action in connection with the shares then being
purchased, the date for the delivery of the certificate for such shares shall be
extended for the period necessary to take and complete such action. The Company
may imprint upon said certificate the legend contemplated by Section 9.2 of the
Plan and such other legends as counsel for the Company may consider appropriate.
Delivery by the Company of the certificates for such shares shall be deemed
effected for all purposes when the Company or a stock transfer agent of the
Company shall have deposited such certificates in the United States mail,
addressed to the Holder, at the address specified in the Notice. The Company
will pay all fees or expenses necessarily incurred by the Company in connection
with the issuance and delivery of shares pursuant to the exercise of this
Option.
-2-
<PAGE>
The Company will, at all times while any portion of this Option is
outstanding, reserve and keep available, out of shares of its authorized and
unissued Common Stock or shares of Common Stock held in treasury, a sufficient
number of shares of its Common Stock to satisfy the requirements of this Option.
FOURTH: If the Company shall effect any subdivision or consolidation of
shares of its stock or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares outstanding, in
any such case without receiving compensation therefor in money, services or
property, then the number, class and per share price of shares of stock subject
to this Option shall be appropriately adjusted in such a manner as to entitle
the Holder to receive upon exercise of this Option, for the same aggregate cash
consideration, the same total number and class of shares as he or she would have
received as a result of the event requiring the adjustment had he or she
exercised this Option in full immediately prior to such event.
If the Company shall be a party to a reorganization or merger with one
or more other corporations (whether or not the Company is the surviving or
resulting corporation), shall consolidate with or into one or more other
corporations, shall be liquidated, or shall sell or otherwise dispose of
substantially all of its assets to another corporation (each a "Transaction"),
then:
(a) subject to the provisions of clauses (b) and (c) below,
after the effective date of the Transaction, the Holder of this Option
shall be entitled, upon exercise hereof and at no additional cost, to
receive shares of Common Stock or, if applicable, shares of such other
stock or other securities, cash or property as the holders of shares of
Common Stock received pursuant to the terms of the Transaction;
(b) the Board may accelerate the time for exercise of this
Option to a date prior to the effective date of the Transaction, as
specified by the Board; or
(c) this Option may be canceled by the Board as of the
effective date of the Transaction, provided that (i) notice of such
cancellation shall have been given to the Holder and (ii) the Holder
shall have the right to exercise this Option to the extent the same is
then exercisable or, if the Board shall have accelerated the time for
exercise of this Option, in full during the thirty-day period preceding
the effective date of the Transaction.
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to this Option.
FIFTH: Neither the Holder nor any other person shall, by virtue of the
granting of this Option, be deemed for any purpose to be the owner of any shares
of Common Stock subject to
-3-
<PAGE>
this Option or to be entitled to the rights or privileges of a holder of such
shares unless and until this Option has been exercised pursuant to the terms
hereof with respect to such shares and the Company has issued and delivered the
shares to the Holder.
SIXTH: This Option is not transferable by the Holder or by operation of
law, otherwise than by will or under the laws of descent and distribution. This
Option is exercisable, during the Holder's lifetime, only by the Holder.
In the event that the Holder's employment with the Company or any
subsidiary is terminated by the Company without "Cause" (as defined
hereinafter), the Holder shall have the right to exercise this Option within
thirty days after the latest date on which the Holder so ceases to be an
employee of the Company or any subsidiary or parent (but not later than the
expiration date of this Option) with respect to the shares which were
purchasable by the Holder by exercise of this Option on such date.
In the event that the Holder's employment is terminated by the Holder
for any reason or by the Company for Cause, this Option shall terminate
immediately. As used in this Option, "Cause" shall mean a determination by the
Company (including the Board) or a subsidiary or parent that the Holder's
employment with the Company or such subsidiary or parent should be terminated as
a result of (i) a material breach by the Holder of any agreement to which the
Holder and the Company (or such subsidiary or parent) are both parties, (ii) any
act (other than retirement) by the Holder that may have a material and adverse
effect on the business of the Company or any subsidiary or on the ability to
perform services for the Company or such subsidiary, including the proven or
admitted commission of any crime (other than an ordinary traffic violation), or
(iii) any material misconduct or material neglect of duties by the Holder in
connection with the business or affairs of the Company or such subsidiary or
parent.
In the event of the death or permanent and total disability of the
Holder prior to termination of the Holder's employment with the Company and all
subsidiaries or parents and prior to the date of expiration of this Option, this
Option shall terminate on the earlier of the expiration date of this Option or
one year following the date of such death or disability.
In the event of the death of the Holder prior to termination of the
Holder's employment with the Company and all subsidiaries or parents and prior
to the date of expiration of this Option, the Holder's executors, administrators
or any individual or individuals to whom this Option is transferred by will or
under the laws of descent and distribution, as the case may be, shall have the
right to exercise this Option with respect to the number of shares purchasable
by the Holder at the date of death.
SEVENTH: The Holder agrees that, during the 180-day period commencing
with the closing date of any public offering by the Company of shares of Common
Stock pursuant to a registration statement filed under the Securities Act of
1933, as amended, or any successor act, the Holder will not, without the prior
written consent of the representative or representatives of the underwriters of
such offering, directly or indirectly, sell, offer to sell, contract to sell,
grant any option for the sale of, assign, transfer, pledge, hypothecate or
otherwise dispose of or encumber any shares of Common Stock acquired upon
exercise of this Option, other than such
-4-
<PAGE>
shares, if any, as shall be covered by such registration statement or as shall
be consented to by the Company and such representative or representatives. The
Holder further agrees that, in order to facilitate any such public offering, (a)
the agreements in this Paragraph Seventh shall be for the benefit of such
underwriters as well as the Company and (b) upon request of such representative
or representatives, the Holder will execute a separate written instrument to the
effect set forth in the preceding sentence, with such changes therein as such
representative or representatives may request, provided that such changes are
not materially adverse to the interest of the Holder.
EIGHTH: If the Company in its discretion determines that it is
obligated to withhold tax with respect to shares of Common Stock received on
exercise of this Option, the Holder agrees that the Company may withhold from
the Holder's wages the appropriate amount of federal, state or local withholding
taxes attributable to the Holder's exercise of such Option. At the Company's
discretion, the amount required to be withheld may be withheld in cash from such
wages or (with respect to compensation income attributable to the exercise of
this Option) in kind from the Common Stock otherwise deliverable to the Holder
on exercise of this Option. The Holder further agrees that, if the Company does
not withhold an amount from the Holder's wages sufficient to satisfy the
Company's withholding obligation, the Holder will remit to the Company on
demand, in cash, the amount estimated by the Company to be underwithheld.
NINTH: Any notice to be given to the Company hereunder shall be deemed
sufficient if addressed to the Company and delivered at the office of the Chief
Financial Officer of the Company, or to such other officer or at such other
address as the Company may hereafter designate, or when deposited in the mail,
postage prepaid, addressed to the attention of the Chief Financial Officer of
the Company at such office or other address.
Any notice to be given to the Holder hereunder shall be deemed
sufficient if addressed to and delivered in person to the Holder at his address
furnished to the Company or when deposited in the mail, postage prepaid,
addressed to the Holder at such address.
TENTH: This Option is subject to all laws, regulations and orders of
any governmental authority which may be applicable thereto and, notwithstanding
any of the provisions hereof, the Holder agrees that he will not exercise the
Option granted hereby nor will the Company be obligated to issue any shares of
stock hereunder if the exercise thereof or the issuance of such shares, as the
case may be, would constitute a violation by the Holder or the Company of any
such law, regulation or order or any provision thereof.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in its name and on its behalf as of the effective date.
DYNAGEN, INC.
By:___________________________________________
Name:
Title:
Acknowledgment
The undersigned Holder acknowledges receipt of this Stock Option
Agreement, including Schedule A hereto, and a copy of the 1998 Stock Option
Plan, and agrees to be bound by all obligations of the Holder as set forth in
such Stock Option Agreement.
HOLDER
______________________________________________
Name
<PAGE>
SCHEDULE A
DYNAGEN, INC.
INCENTIVE STOCK OPTION
----------------------
Date of Grant: November 19, 1998
---------------------
Name of Holder: Steven Georgiev
---------------------
Address: 142 Arlington Street
---------------------
Winchester, MA 01890
---------------------
Social Security Number: ###-##-####
---------------------
Maximum number of shares for which
this Option is exercisable: 350,000
---------------------
Exercise (purchase) price per share: $0.125
---------------------
Expiration date of this Option: November 19, 2005
---------------------
Vesting rate: Four equal quarterly installments
---------------------------------
---------------------------------------
---------------------------------------
Other terms and conditions: ---------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 704,773
<SECURITIES> 0
<RECEIVABLES> 4,173,257
<ALLOWANCES> 62,490
<INVENTORY> 6,983,933
<CURRENT-ASSETS> 12,054,371
<PP&E> 3,034,777
<DEPRECIATION> 1,214,086
<TOTAL-ASSETS> 21,810,987
<CURRENT-LIABILITIES> 23,776,644
<BONDS> 0
0
460
<COMMON> 430,197
<OTHER-SE> (4,024,317)
<TOTAL-LIABILITY-AND-EQUITY> 21,810,987
<SALES> 7,024,798
<TOTAL-REVENUES> 7,024,798
<CGS> 5,616,657
<TOTAL-COSTS> 8,183,828
<OTHER-EXPENSES> 291,753
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 446,227
<INCOME-PRETAX> (1,897,010)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,897,010)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,897,010)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
