EXHIBIT 4.6
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TERMS OF SERIES M PREFERRED STOCK
Section 1. Designation, Amount and Par Value. The series of
preferred stock shall be designated as its 4% Series M Convertible Preferred
Stock (the "Series M Preferred Stock") and the number of shares so designated
shall be 25,600 (which shall not be subject to increase without the consent of
the holders of the Series M Preferred Stock (each, a "Holder" and collectively,
the "Holders")). Each share of Series M Preferred Stock shall have a par value
of $.01 per share and a stated value equal to the sum of $100 plus all unpaid
and accrued dividends to the date of determination to the extent not previously
paid in cash in accordance with the terms hereof (the "Stated Value").
Section 2. Dividends.
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(a) Holders shall be entitled to receive, out of funds legally
available therefor, and the Company shall pay, cumulative dividends at the rate
per share (as a percentage of the Stated Value per share) of 4% per annum,
payable on each Conversion Date (as defined herein) for such share, in cash or
by accretion of the Stated Value. Subject to the terms and conditions herein,
the decision whether to accrete dividends hereunder to the Stated Value or to
pay for dividends in cash shall be at the discretion of the Company. The Company
shall provide the Holders written notice of its intention to accrete dividends
hereunder to the Stated Value or pay dividends in cash not less than ten days
prior to each Conversion Date for so long as shares of Series M Preferred Stock
are outstanding (the Company may indicate in such notice that the election
contained in such notice shall continue for later periods until revised).
Failure to timely provide such written notice shall be deemed (if permitted
hereunder) an election by the Company to accrete dividends hereunder to the
Stated Value. Dividends on the Series M Preferred Stock shall be calculated on
the basis of a 360-day year, shall accrue daily commencing on the Original Issue
Date (as defined in Section 8), and shall be deemed to accrue from such date
whether or not earned or declared and whether or not there are profits, surplus
or other funds of the Company legally available for the payment of dividends.
Except as otherwise provided herein, if at any time the Company pays less than
the total amount of dividends then accrued on account of the Series M Preferred
Stock, such payment shall be distributed ratably among the Holders based upon
the number of shares of Series M Preferred Stock held by each Holder. Any
dividends to be paid in cash hereunder that are not paid within three Trading
Days (as defined in Section 8) following a Dividend Payment Date shall continue
to accrue and shall entail a late fee, which must be paid in cash, at the rate
of 18% per annum or the lesser rate permitted by applicable law (such fees to
accrue daily, from the date such dividend is due hereunder through and including
the date of payment).
(b) Notwithstanding anything to the contrary contained herein,
the Company must pay dividends in cash if:
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(i) the number of shares of Common Stock (as defined
in Section 8) at the time authorized, unissued and unreserved for all purposes
is insufficient to accrete such dividends to the Stated Value to permit
conversion in full of all outstanding Stated Value;
(ii) after the Dividend Effectiveness Date (as
defined in Section 8), Underlying Shares (as defined in Section 8) (x) are not
registered for resale pursuant to an effective Underlying Shares Registration
Statement (as defined in Section 8) and (y) may not be sold without volume
restrictions pursuant to Rule 144 promulgated under the Securities Act (as
defined in Section 8), as determined by counsel to the Company pursuant to a
written opinion letter, addressed to the Company's transfer agent in the form
and substance acceptable to the applicable Holder and such transfer agent;
(iii) the Common Stock is not then eligible for
quotation on the OTC Bulletin Board (the "OTC") or listed for trading on the
Nasdaq National Market, the New York Stock Exchange, the American Stock Exchange
or the Nasdaq SmallCap Market (each, a "Subsequent Market"); or
(iv) the accretion of such dividends to the Stated
Value and subsequent conversions of all then outstanding Stated Value would
result in a violation of any rules and regulations governing any Subsequent
Market on which the Common Stock is then listed or quoted for trading.
(c) So long as any Series M Preferred Stock shall remain
outstanding, neither the Company nor any subsidiary thereof shall redeem,
purchase or otherwise acquire directly or indirectly any Junior Securities (as
defined in Section 8), nor shall the Company directly or indirectly pay or
declare any dividend or make any distribution (other than a dividend or
distribution described in Section 5 or dividends due and paid in the ordinary
course on preferred stock of the Company at such times when the Company is in
compliance with its payment and other obligations hereunder) upon, nor shall any
distribution be made in respect of, any Junior Securities, nor shall any monies
be set aside for or applied to the purchase or redemption (through a sinking
fund or otherwise) of any Junior Securities or shares pari passu with the Series
M Preferred Stock.
Section 3. Voting Rights. Except as otherwise provided herein
and as otherwise required by law, the Series M Preferred Stock shall have no
voting rights. However, so long as any shares of Series M Preferred Stock are
outstanding, the Company shall not, without the affirmative vote of the Holders
of a majority of the shares of the Series M Preferred Stock then outstanding,
(a) alter or change adversely the powers, preferences or rights given to the
Series M Preferred Stock or alter or amend this Certificate of Designation, (b)
authorize or create any class of stock ranking as to dividends or distribution
of assets upon a Liquidation (as defined in Section 4) senior to the Series M
Preferred Stock, (c) amend its certificate or articles of incorporation or other
charter documents so as to affect adversely any rights of the Holders, (d)
increase the authorized number of shares of Series M Preferred Stock, or (e)
enter into any agreement with respect to the foregoing.
Section 4. Liquidation. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a "Liquidation"),
the Holders shall be entitled to receive out of the assets of the Company,
whether such assets are capital or surplus, for each share
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of Series M Preferred Stock an amount equal to the Stated Value per share before
any distribution or payment shall be made to the holders of any Junior
Securities, and if the assets of the Company shall be insufficient to pay in
full such amounts, then the entire assets to be distributed to the Holders shall
be distributed among the Holders ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were
paid in full. A Change of Control (as defined in Section 8) shall not be treated
as a Liquidation, but instead shall be subject to the provisions of Sections 5
and 7. The Company shall mail written notice of any such Liquidation, not less
than 45 days prior to the payment date stated therein, to each record Holder.
Section 5. Conversion.
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(a)(i) Conversions at Option of Holder. Each share of Series M
Preferred Stock shall be convertible into shares of Common Stock (subject to the
limitations set forth in Section (a)(ii)) at the Conversion Ratio (as defined in
Section 8), at the option of the Holder, at any time and from time to time from
and after the Original Issue Date. Holders shall effect conversions by
surrendering the certificate or certificates representing the shares of Series M
Preferred Stock to be converted to the Company, together with the form of
conversion notice attached hereto as Exhibit A (a "Conversion Notice"). Each
Conversion Notice shall specify the number of shares of Series M Preferred Stock
to be converted and the date on which such conversion is to be effected, which
date may not be prior to the date the Holder delivers such Conversion Notice by
facsimile (the "Conversion Date"). If no Conversion Date is specified in a
Conversion Notice, the Conversion Date shall be the date that such Conversion
Notice is deemed delivered hereunder. If the Holder is converting less than all
shares of Series M Preferred Stock represented by the certificate or
certificates tendered by the Holder with the Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the Company
shall promptly deliver to such Holder (in the manner and within the time set
forth in Section 5(b)) a certificate representing the number of shares of Series
M Preferred Stock as have not been converted.
(ii) Certain Conversion Restrictions.
(A) A Holder may not convert shares of Series M
Preferred Stock or receive shares of Common Stock as payment of dividends
hereunder to the extent such conversion or receipt of such dividend payment
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act (as
defined in Section 8) and the rules promulgated thereunder) in excess of 4.999%
of the then issued and outstanding shares of Common Stock, including shares
issuable upon conversion of, and payment of dividends on, the shares of Series M
Preferred Stock held by such Holder after application of this Section. Since the
Holder will not be obligated to report to the Company the number of shares of
Common Stock it may hold at the time of a conversion hereunder, unless the
conversion at issue would result in the issuance of shares of Common Stock in
excess of 4.999% of the then outstanding shares of Common Stock without regard
to any other shares which may be beneficially owned by the Holder or an
affiliate thereof, the Holder shall have the authority and obligation to
determine whether the restriction contained in this Section will limit any
particular conversion hereunder and to the extent that the Holder determines
that the limitation contained in this Section applies, the determination of
which portion of the shares of Series M Preferred Stock are convertible shall be
the responsibility
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and obligation of the Holder. If the Holder has delivered a Conversion Notice
for shares of Series M Preferred Stock that, without regard to any other shares
that the Holder or its affiliates may beneficially own, would result in the
issuance in excess of the permitted amount hereunder, the Company shall notify
the Holder of this fact and shall honor the conversion for the maximum number of
shares of Series M Preferred Stock permitted to be converted on such Conversion
Date in accordance with the periods described in Section 5(b) and, at the option
of the Holder, either retain shares of Series M Preferred Stock tendered for
conversion in excess of the permitted amount hereunder for future conversions or
return such excess shares of Series M Preferred Stock permitted to the Holder.
The provisions of this Section may be waived by a Holder (but only as to itself
and not to any other Holder) upon not less than 61 days prior notice to the
Company. Other Holders shall be unaffected by any such waiver.
(B) A Holder may not convert shares of Series M
Preferred Stock or receive shares of Common Stock as payment of dividends
hereunder to the extent such conversion or receipt of such dividend payment
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act and
the rules promulgated thereunder) in excess of 9.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon conversion
of, and payment of dividends on, the shares of Series M Preferred Stock held by
such Holder after application of this Section. Since the Holder will not be
obligated to report to the Company the number of shares of Common Stock it may
hold at the time of a conversion hereunder, unless the conversion at issue would
result in the issuance of shares of Common Stock in excess of 9.999% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the shares of Series M Preferred
Stock are convertible shall be the responsibility and obligation of the Holder.
If the Holder has delivered a Conversion Notice for shares of Series M Preferred
Stock that, without regard to any other shares that the Holder or its affiliates
may beneficially own, would result in the issuance in excess of the permitted
amount hereunder, the Company shall notify the Holder of this fact and shall
honor the conversion for the maximum number of shares of Series M Preferred
Stock permitted to be converted on such Conversion Date in accordance with the
periods described in Section 5(b) and, at the option of the Holder, either
retain shares of Series M Preferred Stock tendered for conversion in excess of
the permitted amount hereunder for future conversions or return such excess
shares of Series M Preferred Stock permitted to the Holder. The provisions of
this Section may be waived by a Holder (but only as to itself and not to any
other Holder) upon not less than 61 days prior notice to the Company. Other
Holders shall be unaffected by any such waiver.
(b)(i) Not later than three Trading Days after each Conversion
Date, the Company will deliver to the Holder (A) a certificate or certificates
which shall be free of restrictive legends and trading restrictions (other than
those required by Section 3.1(b) of the Purchase Agreement) representing the
number of shares of Common Stock being acquired upon the conversion of shares of
Series M Preferred Stock, (B) one or more certificates representing the number
of shares of Series M Preferred Stock not converted and (C) a bank check in the
amount of accrued and unpaid
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dividends (if the Company has elected or is required to pay accrued dividends in
cash). Notwithstanding the foregoing or anything to the contrary contained
herein, the Company shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon conversion of any shares of Series M
Preferred Stock until one Trading Day after certificates evidencing such shares
of Series M Preferred Stock are delivered for conversion to the Company, or the
Holder of such Series M Preferred Stock notifies the Company that such
certificates have been lost, stolen or destroyed and provides a bond (or other
adequate security) reasonably satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection therewith. The Company shall,
upon request of the Holder, if available, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this
Section electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions. If in the case of
any Conversion Notice such certificate or certificates are not delivered to or
as directed by the applicable Holder by the third Trading Day after the
Conversion Date, the Holder shall be entitled to elect by written notice to the
Company at any time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company shall
immediately return the certificates representing the shares of Series M
Preferred Stock tendered for conversion.
(ii) If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 5(b)(i), by the third Trading
Day after the Conversion Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, $5,000 for each Trading Day after such
third Trading Day until such certificates are delivered. Nothing herein shall
limit a Holder's right to pursue actual damages for the Company's failure to
deliver certificates representing shares of Common Stock upon conversion within
the period specified herein and such Holder shall have the right to pursue all
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.
(iii) In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 5(b)(i), by the third Trading Day after the Conversion Date,
and if after such third Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction of a sale by
such Holder of the Underlying Shares which the Holder was entitled to receive
upon such conversion (a "Buy-In"), then the Company shall (A) pay in cash to the
Holder the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the aggregate number of shares of Common Stock that such Holder
was entitled to receive from the conversion at issue multiplied by (2) the
market price of the Common Stock at the time of the sale giving rise to such
purchase obligation and (B) at the option of the Holder, either return the
shares of Series M Preferred Stock for which such conversion was not honored or
deliver to such Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its conversion and delivery
obligations under Section 5(b)(i). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of shares of Series M Preferred Stock with respect to
which the market price of the Underlying Shares on the date of conversion
totaled $10,000, under clause (A) of the immediately preceding sentence the
Company shall be required to pay the Holder $1,000. The Holder shall provide the
Company written notice indicating
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the amounts payable to the Holder in respect of the Buy-In. Nothing herein shall
limit a Holder's right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company's failure to
timely deliver certificates representing shares of Common Stock upon conversion
of the shares of Series M Preferred Stock as required pursuant to the terms
hereof. Notwithstanding anything herein to the contrary, upon receipt of payment
pursuant to this Section 5(b)(iii) in connection with a particular conversion, a
Holder shall not be entitled to receive payment pursuant to Section 5(b)(ii) in
connection with such conversion.
(c)(i) The conversion price for each share of Series M
Preferred Stock in effect on any Conversion Date (the "Conversion Price") shall
be 80% of the average of the three lowest Per Share Market Values during the
period of five consecutive Trading Days preceding the applicable Conversion Date
(which may include Trading Days prior to the Original Issue Date), provided,
that such five Trading Day period shall be extended for the number of Trading
Days during such period in which (A) trading in the Common Stock is suspended by
OTC or a Subsequent Market on which the Common Stock is then listed, or (B)
after the date declared effective by the Commission, the Underlying Shares
Registration Statement is either not effective, or the Prospectus included in
the Underlying Shares Registration Statement may not be used by the Holder for
the resale of Underlying Shares.
(ii) [Intentionally Left Blank].
(iii) If the Company, at any time while any shares of
Series M Preferred Stock are outstanding, shall issue rights, warrants or
options to all holders of Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the Per Share
Market Value at the record date mentioned below, then each Holder shall receive
such rights, warrants or options in an amount equal to such amount which would
have been distributed to such Holder had such Holder, on the date of such
issuance, converted all of the shares of Series M Preferred Stock then held by
it into shares of Common Stock.
(iv) [Intentionally Left Blank].
(v) If the Company, at any time while shares of
Series M Preferred Stock are outstanding, shall distribute to all holders of
Common Stock (and not to Holders) evidences of its indebtedness or assets or
rights or warrants to subscribe for or purchase any security (excluding those
referred to in Section 5(c)(iii) above), then in each such case each Holder
shall receive such assets, rights or warrants in an amount equal to such amount
which would have been distributed to such Holder had such Holder, on the date of
such distribution, converted all of the shares of Series M Preferred Stock then
held by it into shares of Common Stock.
(vi) All calculations under this Section 5 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
The number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or sale of Common
Stock.
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(vii) [Intentionally Left Blank].
(viii) In case of any reclassification of the Common
Stock, or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property (other than compulsory share
exchanges which constitute Change of Control Transactions), the Holders of the
Series M Preferred Stock then outstanding shall have the right thereafter to
convert such shares only into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
following such reclassification or share exchange, and the Holders of the Series
M Preferred Stock shall be entitled upon such event to receive such amount of
securities, cash or property as a holder of the number of shares of Common Stock
of the Company into which such shares of Series M Preferred Stock could have
been converted immediately prior to such reclassification or share exchange
would have been entitled. This provision shall similarly apply to successive
reclassifications or share exchanges.
(ix) In case of any (1) merger or consolidation of
the Company with or into another Person, or (2) sale by the Company of more than
one-half of the assets of the Company (on an as valued basis) in one or a series
of related transactions, a Holder shall have the right thereafter to (A) convert
its shares of Series M Preferred Stock into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger, consolidation or sale, and such Holder shall
be entitled upon such event or series of related events to receive such amount
of securities, cash and property as the shares of Common Stock into which such
shares of Series M Preferred Stock could have been converted immediately prior
to such merger, consolidation or sales would have been entitled, or (B) in the
case of a merger or consolidation, (x) require the surviving entity to issue
shares of convertible preferred stock or convertible debentures with such
aggregate stated value or in such face amount, as the case may be, equal to the
Stated Value of the shares of Series M Preferred Stock then held by such Holder,
plus all accrued and unpaid dividends and other amounts owing thereon, which
newly issued shares of preferred stock or debentures shall have terms identical
(including with respect to conversion) to the terms of the Series M Preferred
Stock (except, in the case of debentures, as may be required to reflect the
differences between debt and equity) and shall be entitled to all of the rights
and privileges of a Holder of Series M Preferred Stock set forth herein and the
agreements pursuant to which the Series M Preferred Stock was issued (including,
without limitation, as such rights relate to the acquisition, transferability,
registration and listing of such shares of stock other securities issuable upon
conversion thereof), and (y) simultaneously with the issuance of such
convertible preferred stock or convertible debentures, shall have the right to
convert such instrument only into shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
following such merger or consolidation. In the case of clause (B), the
conversion price applicable for the newly issued shares of convertible preferred
stock or convertible debentures shall be based upon the amount of securities,
cash and property that each share of Common Stock would receive in such
transaction, the Conversion Ratio immediately prior to the effectiveness or
closing date for such transaction and the Conversion Price stated herein. The
terms of any such merger, sale or consolidation shall include such terms so as
continue to give the Holders the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption following
such event. This provision shall similarly apply to successive such events.
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The rights set forth in this Section 5(c)(ix) shall not alter the rights of a
Holder set forth in Section 7, provided, that, a Holder may only exercise the
rights set forth in this Section 5(c)(ix) or the rights set forth in Section 7
with respect to a single event giving rise to such rights.
(x) If (a) the Company shall declare a dividend (or
any other distribution) on the Common Stock, (b) the Company shall declare a
special nonrecurring cash dividend on or a redemption of the Common Stock, (c)
the Company shall authorize the granting to all holders of Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights, (d) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share of exchange whereby the Common Stock is converted into other
securities, cash or property, or (e) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company; then the Company shall notify the Holders at their last addresses as
they shall appear upon the stock books of the Company, at least 30 calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange. Holders are entitled to convert shares of
Series M Preferred Stock during the 30-day period commencing the date of such
notice to the effective date of the event triggering such notice.
(d) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of Common Stock
solely for the purpose of issuance upon conversion of Series M Preferred Stock
and payment of dividends on Series M Preferred Stock, each as herein provided,
free from preemptive rights or any other actual contingent purchase rights of
persons other than the Holders, not less than such number of shares of Common
Stock as shall be issuable (taking into account the provisions of Section 5(a)
and Section 5(c)) upon the conversion of all outstanding shares of Series M
Preferred Stock. The Company covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized, issued
and fully paid, nonassessable.
(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time. If
any fraction of an Underlying Share would, except for the provisions of this
Section, be issuable upon a conversion hereunder, the Company shall pay an
amount in cash equal to the Conversion Ratio multiplied by such fraction.
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(f) The issuance of certificates for Common Stock on
conversion of Series M Preferred Stock shall be made without charge to the
Holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such shares of Series M
Preferred Stock so converted.
(g) Shares of Series M Preferred Stock converted into Common
Stock or redeemed in accordance with the terms hereof shall be canceled and may
not be reissued.
(h) Any and all notices or other communications or deliveries
to be provided by the Holders of the Series M Preferred Stock hereunder,
including, without limitation, any Conversion Notice, shall be in writing and
delivered personally, by facsimile or sent by a nationally recognized overnight
courier service, addressed to the attention of the Chief Financial Officer of
the Company addressed to 1000 Winter Street, 2700 Suite, Waltham, MA 02451,
Facsimile No.: (781) 900-0118, or to such other address or facsimile number as
shall be specified in writing by the Company for such purpose. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile or sent by
a nationally recognized overnight courier service, addressed to each Holder at
the facsimile telephone number or address of such Holder appearing on the books
of the Company, or if no such facsimile telephone number or address appears, at
the principal place of business of the Holder. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
6:30 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) upon receipt, if sent by a nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.
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Section 6. Optional Redemption.
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(a) Subject to the provisions of this Section 6, from and
after the Original Issue Date, the Company shall have the right, upon 10
calendar days' notice (an "Optional Redemption Notice"and the date such Optional
Redemption Notice is received by a Holder, an "Optional Redemption Date") to the
Holders, to redeem, from funds available to the Company pursuant to a financing
entered into the between the Company and the Holders subsequent to the Original
Issue Date in accordance with the term sheet between the Company and the
original Holders, dated May 26, 2000, all or any portion of the shares of Series
M Preferred Stock which have not previously been redeemed or for which
Conversion Notices shall not have been delivered, at a price equal to the
Optional Redemption Price (as defined in Section 8). The Company may only
deliver an Optional Redemption Notice if: (i) the number of shares of Common
Stock at the time authorized, unissued and unreserved for all purposes is
sufficient to satisfy the Company's conversion obligations of all shares of
Series M Preferred Stock then outstanding, (ii) the Underlying Shares then
outstanding are registered for resale pursuant to an effective Underlying Shares
Registration Statement pursuant to which the Holders are permitted to sell
Underlying Shares or the Underlying Shares may be resold without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act, and
(iii) the Common Stock is listed for trading on the OTC or on a Subsequent
Market. In order for an Optional Redemption Date to remain in effect subsequent
to the Optional Redemption Notice, each of clauses (i) - (iii) of the
immediately preceding sentence must be true during the entire 10 calendar days
between an Optional Redemption Date and the date of payment of the Optional
Redemption Notice. The entire Optional Redemption Price shall be paid in cash. A
Holder may convert (and the Company shall honor such conversions in accordance
with the terms hereof) any or all of the shares of Series M Preferred Stock
subject to an Optional Redemption Notice delivered for conversion on or prior to
the 10th calendar day following the Optional Redemption Date.
(b) Failure by the Company to pay any portion of the Optional
Redemption Price by the 10th calendar day following an Optional Redemption Date
shall, at the option of the Holder subject thereto, result in the invalidation
ab initio of the unpaid portion of such optional redemption, and,
notwithstanding anything herein to the contrary, the Company shall thereafter
have no further rights to optionally redeem any shares of Series M Preferred
Stock. In such event, the Company shall, at the option of the Holder, either,
(i) not later than three Trading Days from receipt of Holder's request for such
election, return to the Holder all of the shares of Series M Preferred Stock for
which such Optional Redemption Price has not been paid in full (the "Unpaid
Redemption Shares") or (ii) convert all or any portion of the Unpaid Redemption
Shares in which event the Per Share Market Value for such shares shall be the
lower of the Per Share Market Value calculated on the date the Optional
Redemption Price was originally due and the Per Share Market Value as of the
Holder's written demand for conversion. If the Holder elects option (ii) above,
the Company shall within three Trading Days of its receipt of such election
deliver to the Holder the shares of Common Stock issuable upon conversion of the
Unpaid Redemption Shares subject to such Holder conversion demand and otherwise
perform its obligations hereunder with respect thereto.
Section 7. Redemption Upon Triggering Events.
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(a) Upon the occurrence of a Triggering Event, each Holder
shall (in addition to all other rights it may have hereunder or under applicable
law), have the right, exercisable at the sole option of such Holder, to require
the Company to redeem all or a portion of the Series M Preferred Stock then held
by such Holder for a redemption price, in cash, equal to the sum of (i) the
Mandatory Redemption Amount (as defined in Section 8) plus (ii) the product of
(A) the number of Underlying Shares issued in respect of conversions hereunder
and then held by the Holder and (B) the Per Share Market Value on the date such
redemption is demanded or the date the redemption price hereunder is paid in
full, whichever is greater (such sum, the "Redemption Price"). The Redemption
Price shall be due and payable within five Trading Days of the date on which the
notice for the payment therefor is provided by a Holder. If the Company fails to
pay the Redemption Price hereunder in full pursuant to this Section on the date
such amount is due in accordance with this Section, the Company will pay
interest thereon at a rate of 18% per annum (or the lesser amount permitted by
applicable law), accruing daily from such date until the Redemption Price, plus
all such interest thereon, is paid in full. For purposes of this Section, a
share of Series M Preferred Stock is outstanding until such date as the Holder
shall have received Underlying Shares upon a conversion (or attempted
conversion) thereof that meets the requirements hereof.
A "Triggering Event" means any one or more of the following
events (whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
(i) the failure of an Underlying Shares Registration
Statement to be declared effective by the Commission on or prior to the 180th
day after the Original Issue Date;
(ii) if, during the Effectiveness Period, the
effectiveness of the Underlying Shares Registration Statement lapses for any
reason for more than an aggregate of 15 Trading Days (which need not be
consecutive Trading Days), or the Holder shall not be permitted to resell
Registrable Securities under the Underlying Shares Registration Statement for
more than an aggregate of 15 Trading Days (which need not be consecutive Trading
Days);
(iii) the Common Stock is not then eligible for
quotation on the OTC or listed for trading on Subsequent Market at the voluntary
approval of the Company;
(iv) the Company shall fail for any reason to deliver
certificates representing Underlying Shares issuable upon a conversion hereunder
that comply with the provisions hereof prior to the tenth Trading Day after the
Conversion Date or the Company shall provide notice to any Holder, including by
way of public announcement, at any time, of its intention not to comply with
requests for conversion of any shares of Series M Preferred Stock in accordance
with the terms hereof;
(v) the Company shall be a party to any Change of
Control Transaction, shall agree to sell (in one or a series of related
transactions) more than 75% of its assets or shall redeem more than a de minimis
number of Common Stock or other Junior Securities (other than redemptions of
Underlying Shares);
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(vi) an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the satisfaction of the Holders prior to
the expiration of 60 days from the Event Date (as defined in the Registration
Rights Agreement) relating thereto (other than an Event resulting from a failure
of an Underlying Shares Registration Statement to be declared effective by the
Commission on or prior to the 180th day after the Original Issue Date, which
shall be covered by Section 7(a)(i));
(vii) the Company shall fail for any reason to pay in
full the amount of cash due pursuant to a Buy-In within seven Business Days
after notice therefor is delivered hereunder or shall fail to pay all amounts
owed on account of an Event within seven Business Days of the date due);
(viii) the Company shall fail to have available a
sufficient number of authorized and unreserved shares of Common Stock to issue
to such Holder upon a conversion hereunder; or
(ix) the Company shall fail to observe or perform any
other covenant, agreement or warranty contained in, or otherwise commit any
breach of the Transaction Documents (as defined in Section 8) that shall
reasonably be determined to be within the control of the Company, and such
failure or breach shall not, if subject to the possibility of a cure by the
Company, have been remedied within ten Business Days after the date on which
written notice of such failure or breach shall have been given.
Section 8. Definitions. For the purposes hereof, the
following terms shall have the following meanings:
"Change of Control Transaction" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 50% of the
voting securities of the Company that it is approved by the board of directors
of the Company, (ii) a replacement at one time or over time of more than
one-half of the members of the Company's board of directors which is not
approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), (iii) the merger of the Company with or into
another entity that is not wholly-owned by the Company, consolidation or sale of
75% or more of the assets of the Company in one or a series of related
transactions, or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
"Commission" means the Securities and Exchange Commission.
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"Common Stock" means the Company's common stock, $.01 par
value per share, and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, the
numerator of which is Stated Value and the denominator of which is the
Conversion Price at such time.
"Dividend Effectiveness Date" means the earlier to occur of
(x) the Effectiveness Date (as defined in the Registration Rights Agreement) and
(y) the date that an Underlying Shares Registration Statement is declared
effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Junior Securities" means the Common Stock and all other
equity securities of the Company other than: (i) those securities that are
outstanding on the Original Issue Date and which are explicitly senior in rights
or liquidation preference to the Series M Preferred Stock and (ii) all series of
the Company's preferred stock which are outstanding on the Original Issue Date.
"Mandatory Redemption Amount" for each share of Series M
Preferred Stock means the sum of (i) the greater of (A) 120% of the Stated Value
and (B) the product of (a) the Per Share Market Value on the Trading Day
immediately preceding (x) the date of the Triggering Event or the Conversion
Date, as the case may be, or (y) the date of payment in full by the Company of
the applicable redemption price, whichever is greater, and (b) the Conversion
Ratio calculated on the date of the Triggering Event, or the Conversion Date, as
the case may be, and (ii) all other amounts, costs, expenses and liquidated
damages due in respect of such share of Series M Preferred Stock.
"Optional Redemption Price " shall be the sum of (i) (1) if
the Optional Redemption Date occurs between the Original Issue Date and 120th
day following the Original Issue Date, 105% of the Stated Value of the shares of
Series M Preferred Stock to be redeemed (pursuant to Section 6), (2) if the
Optional Redemption Date occurs between the 121st day and the 180th day
following the Original Issue Date, 107.5% of the Stated Value of the shares of
Series M Preferred Stock to be redeemed (pursuant to Section 6), or (3) if the
Optional Redemption Date occurs at any time after the 181st day following the
Original Issue Date, 110% of the Stated Value of the shares of Series M
Preferred Stock to be redeemed (pursuant to Section 6), and (ii) all other
amounts, costs, expenses and liquidated damages due in respect of such shares of
Series M Preferred Stock.
"Original Issue Date" shall mean the date of the first
issuance of any shares of the Series M Preferred Stock regardless of the number
of transfers of any particular shares of Series M Preferred Stock and regardless
of the number of certificates which may be issued to evidence such Series M
Preferred Stock.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of Common Stock on such date on the Subsequent
Market on which the Common Stock is then listed or quoted, or if there is no
such price on such date, then the closing bid price on the Subsequent Market on
the date nearest preceding such date, or (b) if the Common Stock is not then
listed or quoted on a Subsequent Market, the closing bid price for a shares of
Common Stock in the
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OTC, as reported by the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (c) if the Common Stock is not then reported
by the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" quotes for the relevant conversion period, as determined in good faith by
the Holder, or (d) if the Common Stock is not then publicly traded the fair
market value of a share of Common Stock as determined by an Appraiser selected
in good faith by the Holders of a majority of the shares of Series M Preferred
Stock.
"Person" means a corporation, an association, a partnership,
an organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Purchase Agreement" means the Convertible Series M Preferred
Stock Purchase Agreement, dated as of the Original Issue Date, to which the
Company and the original Holders are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, to which the Company and the
original Holders are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means (a) a day on which the Common Stock is
traded on a Subsequent Market on which the Common Stock is then listed or
quoted, as the case may be, or (b) if the Common Stock is not listed on a
Subsequent Market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC, or (c) if the Common Stock is
not quoted on the OTC, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); provided, however, that in the event that the Common Stock is
not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day
shall mean any day except Saturday, Sunday and any day which shall be a legal
holiday or a day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
"Underlying Shares" means, collectively, the shares of Common
Stock into which the shares of Series M Preferred Stock are convertible in
accordance with the terms hereof.
"Underlying Shares Registration Statement" means a
registration statement that meets the requirements of the Registration Rights
Agreement and registers the resale of all Underlying Shares by the Holder, who
shall be named as a "selling stockholder" thereunder.
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert shares of Series M Preferred Stock)
The undersigned hereby elects to convert the number of shares of 4% Series M
Convertible Preferred Stock indicated below, into shares of common stock, $.01
par value per share (the "Common Stock"), of DynaGen, Inc., a Delaware
corporation (the "Company"), according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
Holder for any conversion, except for such transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion
Number of shares of Series M Preferred Stock to be
Converted
Stated Value of shares of Series M Preferred Stock
to be Converted
Number of shares of Common Stock to be Issued
Applicable Conversion Price
[ ] Check this box if resales of the shares of
Common Stock to be issued hereunder will not be
made pursuant to the Underlying Shares
Registration Statement in which case such shares
shall contain a restrictive legend pursuant to the
Purchase Agreement. Unless this box is checked,
the undersigned will deliver a prospectus in
connection with sales of such shares.
Signature
Name
Address
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