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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number
December 31, 1999 1-11352
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DYNAGEN, INC.
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(Exact name of Registrant as specified in its Charter)
DELAWARE 04-3029787
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1000 WINTER STREET, SUITE 2700 02451
WALTHAM, MA (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number: (781) 890-0021
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Class on which registered
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Common stock, $.01 par value Boston Stock Exchange
Securities Registered pursuant to Section 12(g) of the Act:
TITLE OF CLASS
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Common stock, $.01 par value
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ].
Check if no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year : $29,139,553
The aggregate market value of the registered common stock, $0.01 par
value per share held by non-affiliates, based on the closing price of the Common
Stock on March 20, 2000 as reported on the OTC Bulletin Board, was approximately
$66,851,626
As of March 20, 2000, there were 67,526,895 outstanding shares of
common stock.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Definitive Proxy Statement for its 2000 Annual
Meeting of stockholders are incorporated by reference into Items 9, 10, 11 and
12 of this Report.
<PAGE>
PART I
ITEM 1. BUSINESS
INTRODUCTION
DynaGen, Inc., referred to in this Report as the "Company," "we" or "us,"
develops, makes and sells generic drugs. From our inception in 1988 until 1996,
we focused primarily on developing new drugs and licensing the resulting
products and technologies to others. Beginning in 1996, we began shifting our
business focus, and now we are in the generic drug manufacturing and
distribution business. This is a highly competitive business and there are
several companies with substantially greater resources that compete with us.
In the section of this Report entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Certain Factors
That May Affect Future Results," we have described several risk factors that we
believe to be significant. We consider each of these risks specific to us,
although some are industry or sector related issues which could also impact to
some degree other businesses in our market sector. You should give very careful
consideration to these risks when you evaluate DynaGen, Inc.
MULTISOURCE GENERIC DRUG BUSINESS
Generic drugs are the chemical and therapeutic equivalents of brand-name
drugs. They must meet the same governmental standards as the brand-name drugs
they replace, and they must meet all FDA guidelines before they can be made or
sold. We may manufacture and market a generic drug only if the patent or other
government-mandated market exclusivity period for the brand-name equivalent has
expired. Generic drugs are typically sold under their generic chemical names at
prices significantly below those of their brand-name equivalents. We estimate
that the U.S. generic or multisource drug market approximates $13 billion in
annual sales. We believe that this market has grown due to a number of factors,
including:
o a significant number of widely prescribed brand-name drugs are at or near
the end of their period of patent protection, making it legally
permissible for generic manufacturers to produce and market competing
generic drugs;
o managed care organizations, which typically prefer lower-cost generic
drugs to brand-name products, continue to grow in importance and impact in
the U.S. health care market; and
o physicians, pharmacists and consumers increasingly accept generic drugs.
OUR STRATEGY
We intend to compete with other generic drug companies by integrating of
two key elements of the business: manufacturing and distribution. We have
acquired three operating subsidiaries to effect this integration:
o in August 1996, we acquired Able Laboratories, Inc., including its
46,000-square foot tablet and suppository manufacturing facility in South
Plainfield, New Jersey;
o in June 1997, we acquired Superior Pharmaceutical Company, a generic drug
distributor based in Cincinnati,Ohio; and
o in March 1998, we acquired Generic Distributors Limited Partnership, or
GDI, a generic drug distributor of based in Monroe, Louisiana.
PRODUCT LINE INFORMATION
We manufacture and distribute generic drugs. Our manufacturing subsidiary,
Able Laboratories, produces tablets and suppositories. Our distribution
subsidiaries, GDI and Superior, sell products manufactured by almost all of the
major generic drug manufacturers. In addition, they provide sales and marketing
support for all of Able's
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products. As part of our acquisition of Able, we obtained rights to market
several generic drug products the sale of which had already been approved by the
FDA. We are currently marketing three of these products.
We currently manufacture the following products:
<TABLE><CAPTION>
<S> <C> <C>
Equivalent
Product Indication Brand Name Product(1)
------- ---------- ---------------------
Clorazepate tablets (three dosages) Anxiolytic Tranxene
Nitroglycerine Sublingual tablets Anti-angina Nitrostat(R)
(three dosages)
Phenazopyridine HCL tablets
(two dosages) Urinary Tract Analgesic Pyridium(R)
Salsalate tablets (two dosages) Anti-inflammatory Disalcid(R)
Hydrocortisone Suppository Anti-inflammatory Anucol(R)
</TABLE>
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(1) All brand names are trademarks, or registered trademarks of their
respective manufacturers.
While we are primarily a generic drug company, we have also developed a
brand product, ZotrimTM, for the complete treatment of urinary tract infection.
We have entered into an agreement with MOVA Laboratories, Inc., under which we
will manufacture and supply the product to MOVA. In February 1999, we filed a
New Drug Application, or NDA, with the U.S. Food and Drug Administration, or
FDA, for Zotrim(TM).
Zotrim is a specialty product aimed at providing complete treatment of
urinary tract infection, a condition primarily afflicting women. Current
treatments require two separate drugs to be taken in a specific sequence over
several days. This requires two separate prescriptions which result in higher
costs, including higher co-payments for the patient, and increased time for
pharmacists to dispense. In addition, patients are prone to make errors in
taking both medications in proper sequence. Zotrim(TM) combines the two most
commonly used drugs in an easy-to-use package which is designed to enhance
compliance by providing standardized medication instructions on the package.
RESEARCH AND DEVELOPMENT
At Able Laboratories, our manufacturing subsidiary, we are developing
generic products in the form of tablets, capsules and suppositories. The
research, development, clinical testing and FDA review process leading to
approvals takes approximately two years for each product. As discussed in the
section titled "Government Regulation," some of the products require no review
or limited laboratory testing, in which case the time required to complete the
process can be less than two years. Typically, our research and development
activities consist of (i) identifying brand name drugs for which patent
protection has expired or is to expire in the near future, (ii) conducting
research (including patent and market research) and developing new product
formulations based upon such drugs, (iii) developing and testing our formulation
in laboratory and human clinical studies as necessary, (iv) compiling and
submitting all the information to the FDA; and (v) obtaining approval from the
FDA for such new product formulations. As part of the approval process, we
contract with outside laboratories to conduct biostudies that are required for
FDA approval. We use biostudies to demonstrate that the rate and extent of
absorption of a generic drug are not significantly different from that achieved
by the corresponding brand-name drug. These biostudies are subject to rigorous
standards set by the FDA. They can cost up to $500,000 each and are a major part
of the overall cost of drug development.
For the fiscal year ended December 31, 1999, we expended $1,713,416 on
research and development activities compared to $814,108 in the fiscal year
ended December 31, 1998. This increase is due primarily to our decision to focus
on generic drug manufacturing and conducting three clinical studies during the
year.
We currently have 6 ANDAs pending approval at the FDA.
SALES AND MARKETING
Our products are sold primarily through direct sales efforts to drug
wholesalers, distributors and retail drug chains and other pharmaceutical
companies. We market our generic drug products under our "Able Laboratories"
name, as well as under private label arrangements. The majority of Able's sales
are to customers who purchase under firm purchase order commitments. These
purchase orders range from $25,000 to $400,000 and are filled within one to
three months from the time we receive them.
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Our distribution subsidiaries, Superior and GDI, have over 5,000 customers,
the majority of whom are independent pharmacies. These customers purchase
products via telephone orders depending on their needs from time to time, but
are not obligated to purchase any products from us. We compete with other
generic distributors on the basis of price and service to attract and retain
such customers. Superior and GDI also sell in significant amount of products
under long-term contracts, which are typically for a term of twelve months.
These arrangements include contracts with federal, state or local agencies.
Superior and GDI bid on a fixed price basis for these contracts.
Superior employs approximately 38 telemarketers who have been trained in
product knowledge and sales techniques. Superior has developed a database of
independent pharmacies as potential customers. The pharmacies routinely purchase
from several wholesalers and distributors. Superior's sales personnel use
competitive price, service, delivery, accuracy of shipment and selling technique
as competitive factors in getting business. Superior allocates territories and
accounts to its telemarketers, who develop relationships with the pharmacists.
Superior supports its sales staff through marketing and promotional events
including mass mailings, price specials, and general advertising. Superior
compensates sales personnel based on their performance.
GDI's marketing organization is similar to that of Superior. Almost 80% of
GDI's sales are to independent pharmacies in the southern United States, with
minimal sales to chains and institutional pharmacies. Both Superior and GDI
generate approximately 75% of their business from existing customers.
BACKLOG
We derive approximately 90% of our sales from operations of Superior and
GDI. Both Superior and GDI generally ship orders within 24 to 48 hours of
receipt. Therefore, the order backlog does not bear a significant relationship
to their overall sales. The dollar amount of backlog orders for Able as of
December 31, 1999 was approximately $300,000. Although orders at Superior and
GDI are subject to cancellation without penalty, management expects to fill
substantially all of them in the near future.
MANUFACTURING AND SUPPLIERS
We manufacture our generic products at our Able Laboratories facility in
South Plainfield, New Jersey. The principal components used in the manufacture
of generic products are active and inactive pharmaceutical ingredients and
certain packaging materials. The FDA must approve our sources for certain
materials, and in many instances only one source may have been approved. We
purchase active raw material ingredients primarily from United States
distributors of bulk pharmaceutical materials manufactured by the U.S. or
foreign companies. If raw materials from a specified supplier were to become
unavailable, we would have to file a supplement to the applicable regulatory
authority for approval, and revalidate the manufacturing process using any new
supplier's materials. Delays in revalidating the manufacturing process or in
obtaining new materials could result in the loss of revenues and could have a
material adverse effect on our business, financial condition and results of
operations.
Superior Pharmaceutical Company stocks and sells over 2,000 different items
such as tablets, capsules, injectables, vaccines, over-the-counter products,
vitamins and hospital supplies. Superior must carry a broad product line of this
nature in order to service its customer base of independent pharmacies, pharmacy
chains and institutional pharmacies. Superior negotiates and issues purchase
orders, normally at the beginning of each year, to vendors and manufacturers for
these items. The supply agreements are complex, as they normally provide for
volume discounts (rebates), shelf stock adjustments for lower prices, and
returns of unsold goods. Competition among generic drug manufacturers is intense
and the pressure has resulted in steadily declining prices and margins. If
multiple vendors are not available (i.e., if a sole generic approval is granted
by the FDA), then suppliers may feel less pressure to offer the traditional
discounts. In general, however there are almost always multiple suppliers
available for most products. Superior has traditionally enjoyed good
relationships with its suppliers.
GDI's agreements with its suppliers, most of whom are common to Superior,
are similar in nature. The two companies are now combining their purchasing
functions wherever possible, and are jointly issuing purchase orders to vendors
to take advantage of higher volume. Both Superior and GDI consider their
relationship with the vendors satisfactory.
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COMPETITION
We compete primarily with other generic manufacturers and distributors.
Many of our competitors have substantially greater resources than we have,
including the greater financial and other resources, such as expertise in
clinical trials, FDA submissions and marketing, that are needed to commercialize
a pharmaceutical product.
In the generic drug market, we compete with:
o off-patent drug manufacturers;
o brand-name pharmaceutical companies that also manufacture off-patent
drugs;
o the original manufacturers of brand-name drugs; and
o manufacturers of new drugs that may be used for the same indications as
our products.
Revenues and gross profit derived from generic drugs tend to follow a
pattern based on regulatory and competitive factors unique to the generic
pharmaceutical industry. As patents for brand-name products and related
exclusivity periods mandated by regulatory authorities expire, the first generic
manufacturer to receive regulatory approval for generic equivalents of such
products is usually able to achieve relatively high revenues and gross profit.
As other generic manufacturers receive regulatory approvals on competing
products, prices and revenues typically decline. Accordingly, the level of
revenues and gross profit we can achieve from developing and manufacturing
generic products depends, in part, on our ability to develop and introduce new
generic products, the timing of regulatory approval of such products, and the
number and timing of regulatory approvals of competing products. In addition,
competition in the United States generic pharmaceutical market continues to
intensify as the pharmaceutical industry adjusts to increased pressures to
contain health care costs. Brand-name drug manufacturers are increasingly
selling their products into the generic market directly by acquiring or forming
strategic alliances with generic pharmaceutical companies. No regulatory
approvals are required for a brand-name manufacturer to sell directly or through
a third party to the generic market, nor do such manufacturers face any other
significant barriers to entry into such market. These competitive factors may
have a material adverse effect on our ability to sell our generic products.
Superior and GDI compete with other distributors and wholesalers of generic
drugs. The wholesalers are much larger, have a national network of warehouse and
distribution centers, and carry a full line of products, including brand-name
pharmaceuticals. The wholesalers are also better capitalized and obtain the best
(or lowest) price from the vendors. Other distributors are small, privately-held
companies that distribute generic drugs to regional pharmacies. Major
wholesalers include Cardinal Health, Inc., McKesson Corp., and Andox
Corporation.
We believe that size of a company and price are not the only factors in
achieving sales. Superior and GDI employ a direct telemarketing force
(comprising approximately 71 persons currently). The telemarketers call upon
customers, assist them in providing critical product information, and supply
substantially on a "just in time" basis. Several customers, mostly the
independent pharmacies, order product at least two or three times each week to
minimize inventory cost. The telemarketing force and an efficient shipping
operation provide a competitive advantage for Superior and GDI. We believe that
several other distributors with whom we compete, that are smaller, less
automated, and have a smaller telemarketing force, are not as efficient as
Superior and GDI.
There can be no assurance that we will be able to successfully compete in
the generic drug business or market any of our current or proposed products. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Certain Factors That May Affect Future Results."
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GOVERNMENT REGULATION
Our products are highly regulated, principally by the FDA, the Drug
Enforcement Administration, state governments and governmental agencies of other
countries. Federal and state regulations and statutes impose certain
requirements on the testing, manufacture, labeling, storage, recordkeeping,
approval, advertising and promotion of our products. Noncompliance with
applicable requirements can result in judicially and administratively imposed
sanctions, including seizures of adulterated or misbranded products, injunction
actions, fines and criminal prosecutions. Administrative enforcement measures
can also involve product recalls and the refusal by the government to approve
new drug applications, known as NDAs, or abbreviated new drug applications,
known as ANDAs. In order to conduct clinical tests and produce and market
products for human diagnostic and therapeutic use, we must comply with mandatory
procedures and safety standards established by the FDA and comparable state and
foreign regulatory agencies. Typically, standards require that products be
approved by the FDA as safe and effective for their intended use prior to being
marketed for human applications.
To obtain an NDA, or FDA approval for a new drug or generic equivalent, a
prospective manufacturer must, among other things, comply with the FDA's current
Good Manufacturing practices, or cGMP, regulations. The FDA may inspect the
manufacturer's facilities to assure such compliance prior to approval or at any
other reasonable time. Our Able manufacturing subsidiary must follow cGMP
regulations at all times during the manufacture and other processing of drugs.
To comply with the requirements set forth in these regulations, we must continue
to expend significant time and resources in the areas of development,
production, quality control and quality assurance.
We must obtain FDA approval in the form of an ANDA before we can market a
generic equivalent of a previously approved drug. The process for obtaining an
ANDA approval is as follows:
Abbreviated New Drug Application (ANDA) - The Waxman-Hatch Act of 1984
established a statutory procedure for the submission and FDA review and approval
of ANDAs for generic versions of drugs previously approved by the FDA. Under the
ANDA procedure, the FDA waives the requirement of conducting complete clinical
studies of safety and efficacy, and instead typically requires the applicant to
submit data illustrating that the generic drug formulation is "bioequivalent" to
a previously approved drug. "Bioequivalence" means that the rate of absorption
and the levels of concentration of a generic drug in the body needed to produce
a therapeutic effect are substantially equivalent to those of the previously
approved drug. For some drugs, the FDA may require other means of demonstrating
that the generic drug is bioequivalent to the original drug. The NDA and ANDA
approval processes both generally take a number of years and involve the
expenditure of substantial resources.
The Waxman-Hatch Act establishes certain statutory protections for
FDA-approved drugs, which could preclude submission or delay the approval of a
competing ANDA. One such provision allows a five-year market exclusivity period
for NDAs involving new chemical compounds and a three-year market exclusivity
period for NDAs (including different dosage forms) containing data from new
clinical investigations essential to the approval of the application. Both
patented and non-patented drug products are subject to these market exclusivity
provisions. Another provision of the act extends patents for up to five years as
compensation for reduction of the effective market life of the patent resulting
from the time involved in the federal regulatory review process.
The Prescription Drug User Fee Act of 1992, enacted to expedite drug
approval by providing the FDA with resources to hire additional medical
reviewers, imposes three types of user fees on manufacturers of NDA-approved
prescription drugs. Applicants submitting only ANDAs and most other off-patent
drug manufacturers, including DynaGen, are not currently subject to any of the
three user fees. If we submit NDAs for non-ANDA products, we may be subject to
user fees.
Penalties for wrongdoing in connection with the development or submission
of an ANDA were established by the Generic Drug Enforcement Act of 1992,
authorizing the FDA to permanently or temporarily bar companies or individuals
from submitting or assisting in the submission of an ANDA. They may also
temporarily deny approval and suspend applications to market generic drugs. The
FDA may also suspend the distribution of all drugs approved or developed in
connection with certain wrongful conduct, and under certain circumstances also
has authority to withdraw approval of an ANDA and to seek civil penalties. We do
not expect the law to have a material impact on the review or approval of our
ANDAs.
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Reimbursement legislation such as Medicaid, Medicare, Veterans
Administration and other programs govern reimbursement levels. All
pharmaceutical manufacturers rebate to individual states a percentage of their
revenues arising from Medicaid-reimbursed drug sales. Generic drug manufacturers
currently rebate 11% of average net sales price for products marketed under
ANDAs. Makers of NDA-approved products are required to rebate the greater of
15.2% of average net sales price or the difference between average net sales
price and the lowest net sales price during a specified period. We believe that
the federal and state governments may continue to enact measures in the future
aimed at reducing the cost of drugs and devices to the public. We cannot predict
the nature of such measures or their impact on our profitability.
Our manufacturing subsidiary, Able, currently manufactures several products
which are regulated as "old drugs" and subject to the requirements of the
Over-the-Counter Drug Review regulations promulgated by the FDA. This class of
drugs requires no prior approval from FDA before marketing, but such products
must comply with applicable FDA monographs which specify, among other things,
required ingredients, dosage levels, label contents and permitted uses. These
monographs may be changed from time to time, in which case we might be required
to change the formulation, packaging or labeling of any affected product.
Changes to monographs normally have a delayed effective date, so while we may
have to incur costs to comply with any such changes, disruption of distribution
is not likely.
The FDA can also significantly delay the approval of a pending NDA or ANDA
under its "Fraud, Untrue Statements of Material Facts, Bribery, and Illegal
Gratuities Policy." Manufacturers of drugs and devices must also comply with the
FDA's cGMP standards or risk sanctions such as the suspension of manufacturing
approval, the seizure of drug products or the FDA's refusal to approve
additional applications.
There can be no assurance that the requisite approvals from the FDA will be
granted for any of our proposed products or processes, that the process to
obtain such approvals will not be excessively expensive or lengthy, or that we
will have sufficient funds to pursue such approvals. The failure to receive the
requisite approvals for our products or processes, when and if developed, or
significant delays in obtaining such approvals, would prevent us from
commercializing our products as anticipated and would have a materially adverse
effect on our business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Certain Factors That May Affect Future Results."
Able is subject to a consent decree entered by the court on April 9, 1992
in United States v. Able Laboratories, Inc., Civ. No. 91-4916 (D.N.J.) for
failure to comply with FDA cGMP. Able has been operating under this consent
decree since April 1992. The principals involved in the issuance of that order
are no longer employed by Able, DynaGen or any of their affiliates. Since we
acquired it, Able has made substantial commitments (both operational and
financial) to improve the plant, personnel, and equipment in order to effect an
improvement in its operations. We have made key management changes to retain
individuals who have knowledge and commitment for cGMP in order to ensure
continued cGMP compliance. We have also provided cGMP training on a regularly
scheduled basis to Able's employees.
As generic drug distributors, Superior Pharmaceutical Company and GDI sell
products in almost every state in the U.S. They are each required to have a
wholesale distributor's license as well as a license for controlled substances
for the states of Ohio and Louisiana, respectively. The licenses that a
distributor is required to carry for other states varies from state to state.
For example, Kentucky, Massachusetts, Nebraska, New York and New Jersey, among
others, do not require that an out-of-state distributor obtain any licenses as a
condition to conducting trade in their states. Other states, such as Idaho,
Illinois, Maryland, Oregon and Montana, among others, require that an
out-of-state distributor obtain a wholesale distribution license as well as a
controlled substance license from that particular state in order to conduct
business. Thus, the distributor is required to ascertain which licenses are
required from each state and then obtain them accordingly. The licenses, once
obtained, need to be renewed periodically including the payment of fees which
vary from state to state. Furthermore, since several products carried by our
distribution subsidiaries are controlled substances, the subsidiaries are each
required to detail and hold a federal license for controlled substances from the
Drug Enforcement Agency.
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PRODUCT LIABILITY AND INSURANCE COVERAGE
We presently maintain product liability insurance in the amount of
$10,000,000 for the products we market. We also maintain product liability
insurance for those products in clinical investigations. Although we intend to
obtain product liability insurance prior to the commercialization of certain
products which are not presently insured, there can be no assurance that we will
obtain such insurance at favorable rates or, even if obtained, that any
insurance will be adequate to cover potential liabilities.
In the event of a successful suit against us, insufficient insurance
coverage could have a materially adverse impact on our operations and financial
condition. Also, the costs of defending or settling a product liability claim
and any attendant negative publicity may materially adversely affect us, even if
we ultimately prevailed. Furthermore, certain food and drug retailers require
minimum product liability insurance coverage as a precondition to purchasing or
accepting products for commercial distribution. Failure to satisfy these
insurance requirements could impede our efforts to achieve broad commercial
distribution of our proposed products, which could have a materially adverse
effect upon our business and financial condition.
PATENTS AND PROPRIETARY TECHNOLOGY
Our generic business relies upon unpatented trade secrets and proprietary
technologies and processes. There is no assurance that others will not
independently develop substantially equivalent proprietary information and
techniques, or gain access to our trade secrets or proprietary technology, or
that we can meaningfully protect unpatented trade secrets. We require employees,
consultants and other advisors to execute confidentiality agreements. However,
these agreements may not provide meaningful protection for our trade secrets, or
adequate remedies in the event of unauthorized use or disclosure of such
information. The manufacture and sale of certain products will involve the use
of processes, products or information, including some owned by others.
EMPLOYEES
As of February 28, 2000, DynaGen and its subsidiaries had 160 full-time
employees, of whom 107 were employed in selling, general and administrative
activities and 53 were employed in research and development and manufacturing of
its products. None of our employees are represented by a union. We believe our
relationship with our employees is good.
ITEM 2. PROPERTIES
We maintain our principal executive offices at 1000 Winter Street, Waltham,
Massachusetts 02451. The premises, which consist of approximately 2,700 square
feet of space, are sub-leased from BioTrack, Inc. for a term expiring on January
31, 2001.
Able Laboratories is located in a 46,000 square foot leased manufacturing
facility in South Plainfield, New Jersey. The premises are leased from an
unaffiliated party for a term expiring on March 31, 2015.
Superior is located in a 37,300 square foot facility in Cincinnati, Ohio.
The property is leased from a partnership of three of Superior's former
stockholders for a term expiring on March 31, 2015.
GDI is located in a 11,000 square foot leased facility in Monroe,
Louisiana. The property is leased from an unaffiliated party for a term expiring
on a month-to-month basis.
We believe that our present facilities are adequate to meet our current
needs. If new or additional space is required, we believe that adequate
facilities are available at competitive prices in the respective areas.
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ITEM 3. LEGAL PROCEEDINGS
On March 12, 1999, we commenced a civil lawsuit against Kali Laboratories,
Inc., its principal officer, and two of its employees in the Superior Court of
New Jersey, Chancery Division, in Middlesex County. The litigation arises out of
the Company's 1997 agreement with Kali for the development and marketing of
seven products. The Complaint sought to 1) recover monetary damages for
defendants' breaches of contract and confidentiality, misappropriation of
DynaGen's intellectual property, and unfair dealing and 2) enjoin the defendants
from using DynaGen's intellectual property for their purposes. In May of 1999,
the defendants filled counterclaims against DynaGen and three of our corporate
officers. In its counterclaim, Kali claims monetary damages for breach of
contract, and alleges ownership of the intellectual property. The employee
defendants, who are former employees of DynaGen, claim to have been defamed and
wrongfully terminated. DynaGen and its officers share a common legal defense to
these counterclaims, and we intend vigorously to defend against them.
We are also involved in certain other legal proceedings from time to time
incidental to our normal business activities. While the outcome of any such
proceedings cannot be accurately predicted, we do not believe the ultimate
resolution of any existing matters should have a material adverse effect on our
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, whether through
the solicitation of proxies or otherwise, during the fourth quarter of 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Price of Common Stock
Our common stock is traded on the Boston Stock Exchange under the symbol
"DYG" and is quoted on the OTC Bulletin Board under the symbol "DYGN." On March
20, 2000, based upon information from American Stock Transfer & Trust Company,
our transfer agent, there were approximately 2,312 holders of record of common
stock. We believe that there are a substantial number of additional beneficial
owners that hold common stock in "street name" through brokerage firms. The
following table sets forth, for the periods indicated, the range of quarterly
high and low sale prices as reported on the OTC Bulletin Board for the common
stock.
Common Stock(1)
High Low
---- ---
Fiscal 1998:
January 1 to March 31, 1998 $0.94 $0.13
April 1 to June 30, 1998 0.78 0.31
July 1 to September 30, 1998 0.69 0.19
October 1 to December 31, 1998 0.22 0.10
Fiscal 1999:
January 1 to March 31, 1999 $0.36 $0.13
April 1 to June 30, 1999 0.75 0.31
July 1 to September 30, 1999 0.66 0.38
October 1 to December 31, 1999 0.53 0.30
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(1) Prices have been adjusted to reflect a one-for-ten reverse split of the
outstanding shares of common stock effective March 10, 1998.
We have never paid dividends to common stockholders since inception and
do not plan to pay dividends to common stockholders in the foreseeable future.
We intend to retain any earnings to finance our operations.
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(b) Sales of Unregistered Securities During the Year Ended December 31, 1999
During the fiscal year ended December 31, 1999, we sold the following
securities pursuant to one or more exemptions from registration under the
Securities Act of 1933, as amended, including the exemption provided by Section
4(2) thereof:
On January 7, 1999, we issued a warrant to purchase 45,000 shares of
common stock at an exercise price of $0.25, in connection with the sale of three
units to an accredited investor, each unit consisting of a $25,000 12% unsecured
promissory note and a warrant to purchase 15,000 shares of common stock. We
received $75,000 in proceeds from the sale of the units.
On February 26, 1999, we issued a warrant to purchase 35,500 shares of
common stock at an exercise price of $0.05 per share, and a Warrant to purchase
2,000 shares of common stock at an exercise price of $0.30 per share. On January
26, 1999, we also issued a Warrant to purchase 500,000 shares of common stock at
an exercise price of $0.05 per share. These three warrants were issued in
connection with a 10% unsecured promissory note for $500,000 we issued on
January 27, 1999. We received $500,000 in aggregate proceeds from the sale of
the promissory note on January 27, 1999.
On February 26, 1999, we issued several warrants to purchase a total of
195,000 shares of common stock at an exercise price of $0.25 per share in
connection with the sale to accredited investors of units, each unit consisting
of a $25,000 12% unsecured promissory note and a warrant to purchase 15,000
shares of common stock. We received $325,000 on February 26, 1999, from the
proceeds of the notes. We also become obligated to issue to the placement agent
a warrant to purchase 32,500 shares of common stock at an exercise price of
$0.02 per share in connection with this transaction.
On March 29, 1999, we issued a 7% Convertible Debenture in the principal
amount of $250,000 to a private investor. We 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 a future financing. We
repaid this note from the proceeds of its sale in May 1999 of 9% subordinated
convertible debentures.
On March 30, 1999, we 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, we issued approximately
5,330,000 non-qualified stock options to various employees at Able Laboratories.
The stock options were issued at an exercise price of $0.25 and are exercisable
for a period of ten years. The vesting period of these options is between twelve
and thirty-six months.
During the quarter ended March 31, 1999, we 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.
From April 1999 through June 1999, we sold 9% subordinated Convertible
Debentures in the aggregate principal amount of $980,000 to accredited
investors. The debentures are convertible into a number of shares of common
stock equal to in the aggregate, 4.9% of our issued and outstanding common stock
on the date of conversion. We received proceeds of $980,000 in this transaction.
On April 27, 1999, we issued 500,000 shares of common stock to an
employee who advanced a bridge loan to us in October 1997. The entire balance of
$175,000 with accumulated interest was settled with the issuance of the common
stock.
In May and June 1999, we received $3,000,000 from the issuance of 3,000
shares of Series I Preferred Stock to various unaffiliated investors. Shares of
Series I Preferred Stock are convertible into common stock at 80% of the average
of the closing bid price of common stock for three of the five (5) trading days
immediately preceding any conversion date, as selected by the stockholder. We
issued 165,662 warrants at an exercise price of $0.91 per share, and 34,722
warrants at an exercise price of $0.396 per share in connection with this
financing.
On May 27, 1999, we issued 1,500,000 shares of common stock to the former
shareholders of Superior together with a warrant to purchase 1,000,000 shares at
an exercise price of $0.86 per share and a warrant to purchase 300,000 shares of
common stock at an exercise price of $0.01 per share as part of the settlement
of all of our acquisition obligations to the former shareholders of Superior.
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On June 14, 1999, we issued 2,750,000 shares to a consultant retained to
provide investor relations services and strategic business planning, pursuant to
our agreement with the consultant.
On June 15, 1999, we issued a warrant to purchase 100,000 shares at an
exercise price of $0.125 per share to an unaffiliated investor in connection
with financing raised for us.
During the quarter ended June 30, 1999, we issued an aggregate of
8,754,125 shares of common stock upon the exercise of options and warrants and
conversion of convertible debt and equity securities.
In July 1999, we received $1,000,000 from the issuance of 10,000 shares
of Series J Preferred Stock to a single unaffiliated investor. Shares of Series
J Preferred Stock are convertible into common stock at 80% of the average
closing bid price of common stock for the five trading days immediately
preceding the conversion notice from the investor. The conversion can take place
on the earlier of (1) 90 days from original issue date of the Series J Preferred
Stock; or (2) the date which a registration statement is declared effective by
the Securities and Exchange Commission.
In August and September 1999, we received $1,150,000 from the issuance of
11,150 shares of Series K Preferred Stock to various unaffiliated investors. The
holders of Series K Preferred Stock have the right to convert during any five
trading day period up to 20% of their holding into our common stock at 80% of
the three-day average quoted price for three days immediately preceding the
conversion notice from the holder. The discount of 80% to the market price
increases to 75% and then 70% if the investor retains his investment in the
Series K Preferred Stock for longer periods.
In August 1999, we issued a warrant to purchase 168,750 shares of common
stock at an exercise price of $.01 per share and a warrant to purchase 200,000
shares of common stock at an exercise price of $0.40 per share in connection
with negotiations of term of repayments of certain long term debt obligations.
During the quarter ending September 30, 1999, we issued an aggregate of
1,359,368 shares of common stock upon the exercise of options and warrants and
conversion of convertible debt and equity securities.
In October and November 1999, we received $850,000 from issuances of
8,500 shares of Series K Preferred Stock to various unaffiliated investors.
In November 1999, we issued 10,000 shares of Series L Preferred Stock to
reduce certain long term debt obligations in the amount of $750,000. The Series
L Preferred Stock is convertible in the aggregate into common stock valued at
$750,000 plus accrued dividends of 13.5% per annum at the average closing bid
price for the common stock for the three days immediately preceding the
conversion date. We issued warrants to purchase 400,000 shares of common stock
at an exercise price of $0.38 per share for consulting services rendered in
connection with the renegotiation of our long term loan debt obligation.
In November 1999, we issued four warrants to purchase 500,000 shares of
common stock at an exercise price of $0.38 per share in connection with a new
line of credit with BankBoston. We also issued three warrants to purchase an
aggregate of 400,000 shares of common stock at an exercise priced of $0.01 per
share to secure this line of credit.
In December 1999, we issued 50,000 shares of common stock to an
investment banking firm in connection with securing the new line of credit with
BankBoston.
During the quarter ended December 31,1999 we issued an aggregate of
6,241,190 shares of common stock upon exercise of stock options and warrants and
conversion of convertible debt and securities.
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We relied on one or more exemptions from registration under the
Securities Act of 1933, as amended (the "Securities Act"), for each of the
foregoing transactions, including without limitation the exemption provided by
Section 4(2) of the Securities Act. We used all of the net cash proceeds raised
by the sale of unregistered securities to repay indebtedness and for working
capital.
See Note 13 to the financial statements included in this Report, entitled
"Subsequent Events," for information relating to sales of unregistered
securities during the first quarter of fiscal 2000.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The selected financial data set forth below has been derived from our
audited financial statements. The information set forth below should be read in
connection with the financial statements and notes thereto, as well as other
information contained in this Report which could have a material adverse effect
on our financial condition and results of operations. In particular, refer to
the matters described under the heading "Certain Factors That May Affect Future
Results" contained elsewhere in this Report.
We acquired Generic Distributors on March 2, 1998. The acquisition
affects the comparability of the data presented below, in that the results of
Generic Distributors are included only after the acquisition date. The
acquisition was accounted for a purchase. See Note 3 to the Financial
Statements, entitled "Business Acquisitions."
Years Ended December 31,
1999 1998
------------ ------------
STATEMENT OF OPERATIONS DATA
Sales $ 29,139,553 $ 24,980,294
Cost of sales 24,377,890 21,283,289
------------ ------------
Gross profit 4,761,663 3,697,005
Operating expenses 11,025,790 14,226,697
------------ ------------
Operating loss (6,264,127) (10,529,692)
Other income (expense), net (1,887,191) (2,082,317)
------------ ------------
Net loss (8,151,318) (12,612,009)
Less returns on preferred stock including
beneficial conversion features (1,913,780) (883,859)
------------ ------------
Net loss applicable to common stock $(10,065,098) $(13,495,868)
============ ============
Net loss per share - basic $ (0.20) $ (0.67)
------------ ------------
Weighted average number of shares outstanding 51,221,275 20,059,286
============ ============
BALANCE SHEET DATA: December 31,
----------------------------
1999 1998
------------ ------------
Current assets $ 13,784,905 $11,167,790
Total assets 21,229,627 21,445,450
Current liabilities 14,911,706 21,671,563
Long-term debt 4,190,000 1,510,813
Warrant put liability 984,769 858,435
Total liabilities 20,554,064 24,040,811
Working capital (deficit) (1,126,801) (10,503,773)
Stockholders' equity (deficit) $ 675,563 $(2,595,361)
OVERVIEW
DynaGen makes and sells generic drugs for the human health care market.
In 1996, 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. In August 1996, we acquired
the tablet business of Able Laboratories, Inc., a generic pharmaceutical product
subsidiary of Alpharma, Inc. In addition, we acquired Superior Pharmaceutical
Company, a
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distributor of generic pharmaceuticals, in June 1997. In March 1998, we acquired
Generic Distributors Limited Partnership through our wholly-owned subsidiary,
Generic Distributors, Incorporated.
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 may not be sufficient to fund our current operations
and produce an operating profit in fiscal 2000. We have incurred losses since
inception and may incur additional losses in the future.
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 will have to curtail or suspend research and development and other
business activities. Our independent auditors issued an opinion on our financial
statements as of December 31, 1999 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."
RESULTS OF OPERATIONS
REVENUE: Revenues for the year ended December 31, 1999 were $29,139,553,
compared to $24,980,294 for the year ended December 31, 1998. This increase of
$4,159,259 is primarily the result of improved new product sales at our Able
Laboratories.
COST OF SALES: Cost of sales was approximately 84% of product sales for
the year ended December 31, 1999 compared to 85% for the year ended December 31,
1998. The high percentage cost in 1999 and 1998 was due to low production and
sales levels at Able, which did not support the fixed manufacturing costs of the
Able facility. Cost of sales for Superior and GDI for 1999 and 1998 were 79% of
product sales.
RESEARCH AND DEVELOPMENT: Research and development expenses for the year
ended December 31, 1999 were $1,713,416 or 5.9% of revenue compared to $814,108
or 3.3% of revenue for the year ended December 31, 1998. All of these expenses
relate to research and biostudies conducted by Able Laboratories. The increase
was primarily due to the larger number of biostudies undertaken during 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses for the year ended December 31, 1999 were $8,912,374,
compared to $10,912,589 for the year ended December 31, 1998. The decrease in
expenses was primarily attributable to the cutbacks and reduction of staff at
our headquarters and streamlining our administrative expenses.
OTHER INCOME: Investment income was $23,011 for the year ended December
31, 1999 as compared to $174,188 for the year ended December 31, 1998. Interest
and financing expenses of $2,425,730 for the year ended December 31, 1999,
compared to $2,517,881 for the year ended December 31, 1998, relate primarily to
private placements of debt financing and bank loans related to the Superior and
GDI acquisitions.
NET LOSS: We incurred a net loss of $10,065,098 in 1999, compared to a
net loss of $13,495,868 in 1998. The change in net loss was primarily due
to losses of $400,000 in 1999, and $2,500,000 in 1998, on impairment of
Superior's customer lists, based on our projections of Superior's future cash
flows. We plan to continue to monitor and evaluate the accuracy of these
projections during 2000. If cash flows do not occur as projected, we may be
required to recognize additional impairment losses.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, we had a working capital deficit of $1,126,801,
compared to a working capital deficit of $10,503,773 at December 31, 1998. Cash
was $310,549 December 31, 1999 compared to $97,045 at December 31, 1998. Working
capital increased primarily as a result of our equity placements in 1999 and the
settlement with the former stockholders of Superior. We expect our cash needs
for the next 12 months to be approximately $4,000,000. We expect to generate the
needed cash through additional financing activities. If we are not able to raise
the needed financing, we will be forced to curtail or suspend our research and
development and other business activities. See "Certain Factors That May Affect
Future Results."
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In May 1999, we settled all issues between us and the former stockholders
of Superior relating to our acquisition of Superior. 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 a price
of $0.86 per share;
o issuing warrants to purchase 300,000 shares of common stock at a price of
$0.01 per share; and
o amending Superior's commercial lease agreement.
We recorded a liability of $539,783 for the present value of the
additional rent payable under the lease and wrote off all our other obligations
to the former Superior shareholders, consisting of the acquisition obligation of
$4,083,000, the notes payable obligation of $3,766,667 and accrued interest.
Accordingly, we decreased the carrying value of the customer list by $3,756,162
and the goodwill balance by $329,047 due to the reduction in the purchase price.
On June 23, 1999, Able Laboratories, Inc., completed an Industrial
Development Revenue Bond offering through the New Jersey Economic Development
Authority. The bonds consist of series 1999A $1,700,000, 8% non-taxable and
series 1999B $300,000, 8.25% taxable. Series 1999A bonds will mature in 15 years
and series 1999B bonds will mature in 4 years. The total cost of the bond issue
was $216,000. Able used the net proceeds for the acquisition, installation and
commissioning of equipment and machinery. In connection with these bonds, we
entered into various agreements with the New Jersey Economic Development
Authority and the bondholders, including an escrow agreement pursuant to which
we have deposited into escrow amounts intended to cover our obligations under
the bond documents for periods of between two and six months.
In November 1999, we secured a line of credit for working capital from
BankBoston N.A. Borrowings under the line are secured by substantially all the
assets of Company and its subsidiaries. Under this agreement, we can borrow up
to 85% of our eligible accounts receivable and 60% of our eligible inventory.
The bank has also extended a term loan secured by the equipment at Able. This
loan is being amortized over 12 months and the BankBoston credit facility has
replaced the three separate lenders (Huntington National Bank, Fleet Bank and K
& L Financial) that were providing credit separately to our three different
operating facilities. Consolidating this borrowing has removed the cash flow
restrictions we were under, so that now cash can be transferred between DynaGen
and the operating subsidiaries. We use this line of credit primarily for our
working capital needs. As of March 28, 2000, we had borrowed the maximum
available amount of approximately $6,900,000 under this facility.
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, 1998 and 1999, has limited our ability to raise
capital in a conventional sale of our securities. However, we continue to pursue
additional sources of capital in order to fund the growth of Able's generic drug
business and its product development efforts. If we are unable to obtain such
additional financing, our ability to maintain our current level of operations
would be materially and adversely affected and we would be required to reduce or
eliminate certain expenditures, including research and development activities
with respect to certain proposed products. 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."
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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 but not limited to, statements contained in Item 1
of this Report "Business" relating to our strategy with respect to the
development and marketing of our products, and statements contained in Item 6 of
this Report ("Management's Discussion and Analysis of Financial Condition and
Results of Operations") 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 Report, 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 AUDITORS HAVE EXPRESSED DOUBT ABOUT OUR ABILITY TO CONTINUE AS A
GOING CONCERN
Our independent auditors issued an opinion on our financial statements as
of December 31, 1999 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:
o we have incurred recurring losses from operations resulting in a
working capital deficiency at December 31, 1999; and
o we have defaulted on conditions placed upon us by our banks and
other lenders.
IF WE CANNOT RAISE SIGNIFICANT ADDITIONAL FUNDS, THEN WE WILL HAVE TO
SUBSTANTIALLY CURTAIL OUR OPERATIONS AND INVESTORS COULD LOSE THEIR
INVESTMENT
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 continue to renegotiate our agreements with our
existing creditors as necessary, then we will have to curtail or suspend our
research and development activities and other business activities. If that
happens, the value of our common stock will likely decline and investors could
lose their entire investment.
IF WE CONTINUE TO INCUR LOSSES, THEN THE VALUE OF OUR COMMON STOCK WILL
LIKELY DECLINE
We have incurred operating losses in every operating period since our
inception. We had an accumulated deficit of $58,304,871 as of December 31, 1999.
We incurred a net loss of $8,151,318 in the year ended December 31, 1999. We
anticipate future losses, and we can give no assurance that we will ever
generate substantial revenues from our business, or achieve profitability. If we
continue to incur operating losses, then the value of our common stock will
likely decline and our stockholders could lose their investment.
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 its revenues have not equaled its
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 and expand our 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 marketing efforts.
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WE FACE INTENSE COMPETITION FROM OTHER MANUFACTURERS OF GENERIC DRUGS
In order to succeed in the generic drug business, we need to achieve a
significant share of the market for each generic drug we market. The generic
drug manufacturing and distribution business is highly competitive. We compete
with several companies that are better capitalized than we are and that have
financial and human resources significantly greater than ours. Because we
manufacture generic drugs, our products by their very nature are chemically and
biologically equivalent to the products of our larger and profitable
competitors. Also, we believe that, as a rule, the first one or two companies to
bring a generic alternative to the market will capture the highest market share
for that product. These larger companies, with their greater resources, could
bring products to market before us, and could capture a significant share of the
market at our expense.
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IF THE BOSTON STOCK EXCHANGE DELISTS OUR COMMON STOCK, WE WILL HAVE
GREATER DIFFICULTY RAISING THE CAPITAL WE NEED TO CONTINUE OPERATIONS
Our common stock has been delisted from the Nasdaq Stock Market and is
listed on the Boston Stock Exchange. The common stock is also quoted on the OTC
Bulletin Board. If the common stock was delisted by the Boston Stock Exchange,
then public perception of the value of the common stock could be materially
adversely affected. Security holders could lose their investment and we could be
unable to raise capital necessary for our continued operations.
We received a notice from the Boston Stock Exchange on April 12, 1999
informing us that our common stock did not meet the requirements for continued
listing. The Boston Stock Exchange requires a minimum of $500,000 in
stockholders' equity for continued listing. As of March 31, 1999, we had a
stockholders' deficit of approximately $4,024,000, a shortfall of approximately
$4,524,000, and therefore we did not meet the listing requirements. We responded
to the Boston Stock Exchange, explaining our plan for regaining compliance with
this requirement by June 30, 1999. On July 8, 1999, we advised the Boston Stock
Exchange that we expected our stockholders' equity as of June 30, 1999 would
exceed $500,000. Stockholders' equity as of June 30, 1999 was approximately
$848,000 and as of December 31, 1999 was approximately $675,563. Therefore, as
of that date we met the requirement and so our common stock remains listed on
the Boston Stock Exchange. Our common stock could face delisting action again,
however, if we do not maintain the minimum stockholders equity or other listing
requirements.
IF OUR COMMON STOCK BECOMES SUBJECT TO PENNY STOCK RULES, STOCKHOLDERS
MAY HAVE GREATER DIFFICULTY SELLING THEIR SHARES
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 stocks in connection with trades in any stock
defined as a 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 than $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
net tangible assets of at least $2,000,000, if the issuer has
been in continuous operation for at least three years;
net tangible assets of at least $5,000,000, if the issuer has
been in continuous operation for less than three years; or
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 associated risks.
If our common stock is delisted from the Boston Stock Exchange, then
trading in the common stock will 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 their
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 purchasers of common stock to sell
their securities in the secondary market. The market liquidity for the common
stock could be severely affected.
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WE ARE OBLIGATED TO ISSUE A LARGE NUMBER OF SHARES OF COMMON STOCK
We are obligated to issue a large number of shares of common stock 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 December 31, 1999,
63,854,946 shares of common stock were 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 December 31, 1999, we were obligated to issue up to
approximately 47,000,000 additional shares of common stock upon the conversion
or exercise of convertible securities, warrants and options. Because our
certificate of incorporation authorizes a maximum of 75,000,000 shares of common
stock, if all of the holders of these convertible securities exercised their
rights to acquire common stock, we would not be able to honor all of our
obligations. We intend to seek the approval of our stockholders for an increase
in our authorized shares, but we can give no assurance that we will obtain such
approval. If we are unable to meet our obligations to issue additional shares of
common stock, we would face material adverse consequences. Also, 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. 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.
THE VALUE OF THE COMMON STOCK FLUCTUATES WIDELY AND INVESTORS COULD
LOSE MONEY ON THEIR INVESTMENT IN OUR STOCK
The price of our common stock has fluctuated widely in the past, and it
is likely that it will continue to do so 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.
The market price of our common stock has fluctuated between $70.00 and
$.05 from January 1, 1993 to December 31, 1999. Over the past twelve months, the
common stock has fluctuated between approximately $.89 and approximately $.05,
and was approximately $.82 on March 28, 2000. These broad market fluctuations
could adversely affect the market price of our common stock, in that at the
current price, any fluctuation in the dollar price per share could constitute a
significant percentage decrease in the value of our stockholders' investments.
Also, when the market price of a stock has been volatile, holders of that stock
have often instituted securities class action litigation against the company
that issued the stock. If any of our stockholders brought such a lawsuit against
us, we could incur substantial costs defending the lawsuit and we would have to
divert management time and attention away from operations. A lawsuit based on
the volatility of the stock price in whole or in part could seriously harm our
business and our stockholders' investments.
WE MAY FACE PRODUCT LIABILITY FOR WHICH WE ARE NOT ADEQUATELY INSURED
The testing, marketing and sale of drug products for human use is
inherently risky. Liability might result from claims made directly by consumers
or by pharmaceutical companies or others selling our products. Superior, Generic
Distributors and Able presently carry product liability insurance in amounts
that we believe to be adequate, but we can give no assurance that such insurance
will remain available at a reasonable cost or that any insurance policy would
offer coverage sufficient to meet any liability arising as a result of a claim.
We can give no assurance that we will be able to obtain or maintain adequate
insurance on reasonable terms or that, if obtained, such insurance
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will be sufficient to protect us against such potential liability or at a
reasonable cost. The obligation to pay any product liability claim or a recall
of a product could have a material adverse affect on our business, financial
condition and future prospects.
INTENSE REGULATION BY GOVERNMENT AGENCIES MAY DELAY OUR EFFORTS TO
COMMERCIALIZE OUR PROPOSED DRUG PRODUCTS
Before we can market any generic drug, we must first obtain FDA approval
of the proposed drug and of the active drug raw materials that we use. In many
instances, our approvals cover only one source of raw materials. If raw
materials from a specified supplier were to become unavailable, we would be
required to file a supplement to our Abbreviated New Drug Application to use a
different manufacturer and revalidate the manufacturing process using a new
supplier's materials. This could cause a delay of several months in the
manufacture of the drug involved and the consequent loss of potential revenue
and market share. For example, for a period of time we were unable to acquire
the active drug for our clorazapate dipotassium product, and so we had to
discontinue production of the product. The active drug ingredient has since
become available again and we have resumed manufacturing the product.
ITEM 7. FINANCIAL STATEMENTS
DynaGen's Consolidated Financial Statements and related Independent
Auditors' Report are presented in the following pages. The financial statements
filed in this Item 7 are as follows:
Independent Auditors' Report
Financial Statements:
Consolidated Balance Sheets - December 31, 1999 and 1998
Consolidated Statements of Loss - Years Ended December 31, 1999
and 1998
Consolidated Statements of Changes in Stockholders' Equity -
Years Ended December 31, 1999 and 1998
Consolidated Statements of Cash Flows - Years Ended December 31,
1999 and 1998
Notes to Consolidated Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
19
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
DynaGen, Inc.
Waltham, Massachusetts
We have audited the accompanying consolidated balance sheets of DynaGen, Inc.
and subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of loss, changes in stockholders' equity (deficit) and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of DynaGen's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
DynaGen, Inc. and subsidiaries as of December 31, 1999 and 1998 and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred recurring losses
from operations resulting in a working capital deficiency at December 31, 1999,
and as discussed in Note 6 is in default on certain debt obligations. These
circumstances raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also
described in Note 2. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/WOLF & COMPANY, P.C.
- -----------------------
Boston, Massachusetts
February 11, 2000, except for
Note 13 as to which the date is
March 20, 2000
20
<PAGE>
DYNAGEN, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION>
December 31,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 310,549 $ 97,045
Accounts receivable, net of allowance for
doubtful accounts of $270,025 and $68,133 5,582,646 3,673,472
Rebates receivable 262,380 398,724
Inventory 7,148,604 6,647,079
Notes receivable 85,000 150,000
Prepaid expenses and other current assets 395,726 201,470
----------- -----------
Total current assets 13,784,905 11,167,790
----------- -----------
Property and equipment, net 3,852,842 1,685,010
----------- -----------
Other assets:
Customer lists, net of accumulated
amortization 2,385,098 7,636,072
Goodwill, net of accumulated amortization -- 337,652
Debt financing costs, net of accumulated
amortization 885,988 277,325
Deposits and other assets 320,794 341,601
----------- -----------
Total other assets 3,591,880 8,592,650
----------- -----------
$21,229,627 $21,445,450
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
DYNAGEN, INC.
CONSOLIDATED BALANCE SHEETS - (Continued)
<TABLE><CAPTION>
December 31,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank overdraft $ -- $ 621,313
Notes payable and current portion of
long-term debt 9,826,615 13,162,041
Accounts payable and accrued expenses 5,070,285 3,805,209
Settlement obligation, current portion 14,806 --
Acquisition obligation -- 4,083,000
----------- -----------
Total current liabilities 14,911,706 21,671,563
Warrant put liability 984,769 858,435
Long term debt, less current portion 4,190,000 1,510,813
Settlement obligation, less current potion 467,589 --
----------- -----------
Total liabilities 20,554,064 24,040,811
----------- -----------
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $.01 par value,
10,000,000 shares authorized, 55,924 and
52,152 shares of Series A through L
outstanding, (liquidation value $6,468,214
and $5,212,977) 559 521
Common stock, $.01 par value, 75,000,000 shares
authorized, 63,854,946 and 37,612,612 shares
issued and outstanding 638,549 376,126
Additional paid-in capital 58,341,326 47,181,545
Accumulated deficit (58,304,871) (50,153,553)
----------- -----------
Total stockholders' equity (deficit) 675,563 (2,595,361)
----------- -----------
$21,229,627 $21,445,450
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
DYNAGEN, INC.
CONSOLIDATED STATEMENTS OF LOSS
<TABLE><CAPTION>
Years Ended December 31,
--------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Sales, net $ 29,139,553 $ 24,980,294
Cost of sales 24,377,890 21,283,289
------------ ------------
Gross profit 4,761,663 3,697,005
------------ ------------
Operating expenses:
Selling, general and administrative 8,912,374 10,912,589
Research and development 1,713,416 814,108
Loss on impairment of customer lists 400,000 2,500,000
------------ ------------
Total operating expenses 11,025,790 14,226,697
------------ ------------
Operating loss (6,264,127) (10,529,692)
------------ ------------
Other income (expense):
Investment income, net 23,011 174,188
Interest and financing expense (2,425,730) (2,517,881)
Miscellananeous income 515,528 261,376
------------ ------------
Other income (expense), net (1,887,191) (2,082,317)
------------ ------------
Net loss (8,151,318) (12,612,009)
Less returns to preferred stockholders:
Beneficial conversion feature 1,745,377 733,000
Dividends paid and accrued 168,403 150,859
------------ ------------
Net loss applicable to common stock $(10,065,098) $(13,495,868)
============ ============
Net loss per share-basic $ (0.20) $ (0.67)
============ ============
Weighted average shares outstanding 51,221,275 20,059,286
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
DYNAGEN, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Years Ended December 31, 1999 and 1998
<TABLE><CAPTION>
Preferred Stock Common Stock
--------------------- --------------------- Paid In Accumulated
Shares Amount Shares Amount Capital Deficit Total
---------- -------- ---------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,1997 63,522 $ 635 4,315,137 $ 43,151 $ 40,122,386 $(37,541,544) $ 2,624,628
Exercise of stock options -- -- 30,000 300 8,700 -- 9,000
Stock issued for GDI acquisition 12,000 120 -- -- 1,199,880 -- 1,200,000
Shares issued in private placement 34,000 340 -- -- 3,249,492 -- 3,249,832
Delayed registration penalty -- -- -- -- (175,000) -- (175,000)
Stock options and warrants issued
for services -- -- -- -- 303,996 -- 303,996
Conversion of debt -- -- 8,281,362 82,814 1,077,186 -- 1,160,000
Conversion of preferred stock (57,370) (574) 20,230,295 202,303 (201,729) -- --
Conversion of related party loans -- -- 1,893,333 18,933 276,067 -- 295,000
Common stock issued for interest -- -- 733,214 7,332 169,407 -- 176,739
Common stock issued for services -- -- 1,829,271 18,293 576,672 -- 594,965
Common stock issued for bonus -- -- 300,000 3,000 128,400 -- 131,400
Beneficial conversion feature of
convertible note and debentures -- -- -- -- 175,000 -- 175,000
Adjustment due to change in
ownership of former subsidiary -- -- -- -- 271,088 -- 271,088
Net loss -- -- -- -- -- (12,612,009) (12,612,009)
---------- -------- ---------- -------- ------------ ------------ ------------
Balance at December 31, 1998 52,152 521 37,612,612 376,126 47,181,545 (50,153,553) (2,595,361)
Stock options and warrants
exercised -- -- 363,172 3,632 (3,532) -- 100
Shares issued in private placements 33,000 330 -- -- 5,684,655 -- 5,684,985
Conversion of preferred stock (39,228) (392) 17,856,521 178,565 (178,173) -- --
Conversion of debt 10,000 100 3,407,641 34,076 1,766,709 -- 1,800,885
Common stock issued for bonus -- -- 125,000 1,250 27,500 -- 28,750
Common stock issued for services -- -- 2,990,000 29,900 1,069,350 -- 1,099,250
Common stock and warrants issued
for Superior settlement -- -- 1,500,000 15,000 1,982,000 -- 1,997,000
Stock options and warrants issued
for services -- -- -- -- 811,272 -- 811,272
Net loss -- -- -- -- -- (8,151,318) (8,151,318)
---------- -------- ---------- -------- ------------ ------------ ------------
Balance at December 31, 1999 55,924 $ 559 63,854,946 $638,549 $ 58,341,326 $(58,304,871) $ 675,563
========== ======== ========== ======== ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
DYNAGEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
Years Ended December 31,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (8,151,318) $(12,612,009)
Adjustments to reconcile net loss to net
cash used for operating activities:
Loss on impairment of customer lists 400,000 2,500,000
Beneficial conversion feature of convertible note -- 175,000
Stock, stock options and warrants issued for services 1,939,272 1,030,161
Depreciation and amortization 1,784,440 3,438,497
Adjustment due to change in ownership
of former subsidiary -- 271,088
Stock issued for interest obligation -- 176,739
Write-off of patent costs -- 224,984
(Increase) decrease in operating assets:
Accounts receivable (1,909,174) 198,561
Rebates receivable 136,344 315,252
Inventory (501,525) 3,516,029
Prepaid expenses and other current assets (194,256) (45,518)
Deposits and other assets (933) 50,636
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses 1,629,786 (3,008,549)
------------ ------------
Net cash used for operating activities (4,867,364) (3,769,129)
------------ ------------
Cash flows from investing activities:
Purchase of wholly-owned subsidiary -- (1,296,205)
Purchase of property and equipment (2,586,232) (192,005)
(Increase) decrease in notes receivable 65,000 (40,000)
------------ ------------
Net cash used for investing activities (2,521,232) (1,528,210)
------------ ------------
Cash flows from financing activities:
Net proceeds from stock warrants and options 100 9,000
Net proceeds from private stock placements 5,684,985 3,249,832
Net proceeds from debt placements 4,321,740 3,557,000
Debt financing costs paid (723,212) --
Payment of debt obligations (2,443,104) (335,748)
Repayments on settlement obligations (57,388) --
Net change in lines of credit 3,125,122 (2,029,606)
Net change in accounts receivable factoring (184,830) 184,830
Increase (decrease) in bank overdraft (621,313) 478,697
Payment of Superior notes payable (1,500,000) (416,666)
------------ ------------
Net cash provided by financing activities 7,602,100 4,697,339
------------ ------------
Net change in cash and cash equivalents 213,504 (600,000)
Cash and cash equivalents at beginning of year 97,045 697,045
------------ ------------
Cash and cash equivalents at end of year $ 310,549 $ 97,045
============ ============
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
25
<PAGE>
<TABLE><CAPTION>
<S> <C> <C>
Supplemental cash flow information:
Interest paid $ 1,890,770 $ 1,279,820
Conversion of debt and accrued interest
into common stock 1,050,885 1,160,000
Conversion of related party loans into
common stock -- 295,000
Debt issued for delayed registration penalty -- 175,000
Common stock and warrants issued for
Superior settlement 1,997,000 --
Conversion of debt into preferred stock 750,000 --
</TABLE>
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 (1,200,000)
Preferred stock issued (1,150,000)
Liabilities assumed (658,274)
------------
Customer lists (exclusive of other acquisition
costs of $96,205) $ 633,000
============
Additional cash flow information is included in Notes 3 and 6.
See accompanying notes to consolidated financial statements.
26
<PAGE>
DYNAGEN, INC.
NOTES TO 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,
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. as described below. All significant intercompany balances and transactions
have been eliminated in consolidation.
During 1998, the Company sold 300,000 shares of its BioTrack subsidiary's
common stock, recognizing a gain of $150,000, which is included in investment
income. In April 1998, BioTrack redeemed 3,930,000 shares of its common stock
held by the Company for a $1,000,000 promissory note. This note receivable has
not been recognized in the accompanying financial statements because of the
uncertainty and risks inherent in technology start-up companies. As a result of
the ownership changes in BioTrack described above, the Company adjusted its
investment in BioTrack in 1998 by $271,088 which was added to additional paid-in
capital. The Company's ownership interest in BioTrack at December 31, 1998 was
approximately 26% and this interest at December 31, 1999 was approximately 17%.
Accordingly, BioTrack's financial statements are not included in the
accompanying consolidated financial statements. The Company's remaining
investment in BioTrack was written off in 1998. In February 1999, the Company
granted options to various individuals, including each of its directors, to
purchase an aggregate 1,045,000 shares at $.50 per share of the BioTrack stock
owned by the Company. The options expire in February 2004.
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 from those estimates.
RECLASSIFICATIONS
Certain amounts have been reclassified in the 1998 consolidated financial
statements to conform to the 1999 presentation.
CASH EQUIVALENTS
Cash equivalents include interest-bearing deposits with original maturities
of three months or less.
REBATES RECEIVABLE
Rebates receivable represent incentives provided by pharmaceutical
suppliers based on purchases. Management has estimated its rebates based upon
agreements and purchases during the year. Actual rebates could be different due
to market volatility and whether the Company continues to use these suppliers.
INVENTORY
Inventory is valued at the lower of average cost or market on a first-in
first-out (FIFO) method.
27
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation expense is provided
over the estimated useful lives of the assets using the straight-line method.
Leasehold improvements are amortized on the straight-line method over the
shorter of the estimated useful life of the asset or the life of the related
lease term.
CUSTOMER LISTS
Customer lists are amortized over estimated lives of five years.
PATENTS, TRADEMARKS AND DEFERRED DEBT FINANCING COSTS
Patent and trademark costs, included in deposits and other assets, are
amortized over a five-year period on a straight-line basis commencing on the
earlier of the date placed in service or the date the patent or trademark is
granted. Debt financing costs are being amortized on a straight-line basis over
the term of the debt. The related amortization expense for the years ended
December 31, 1999 and 1998 was $136,289 and $99,627, respectively.
In December 1998, patents and trademarks with a net carrying value of
$224,984 were written off as management is no longer actively marketing the
underlying products.
REVENUE RECOGNITION
Revenues from product sales are recognized when products are shipped.
ADVERTISING COSTS
Advertising costs are charged to expense when incurred.
INCOME TAXES
Deferred tax assets and liabilities are recorded for temporary differences
between the financial statement and tax bases of assets and liabilities using
the currently enacted income tax rates expected to be in effect when the taxes
are actually paid or recovered. A deferred tax asset is also recorded for net
operating loss, capital loss and tax credit carry forwards to the extent their
realization is more likely than not. The deferred tax expense for the period
represents the change in the deferred tax asset or liability from the beginning
to the end of the period.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation" encourages all entities to adopt a fair value
based method of accounting for employee stock compensation plans, whereby
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period.
However, it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees," whereby
compensation cost is the excess, if any, of the quoted market price of the stock
at the grant date (or other measurement date) over the amount an employee must
pay to acquire the stock. Stock options issued under the Company's stock option
plans generally have no intrinsic value at the grant date, and under Opinion No.
25 no compensation cost is recognized for them. The Company has elected to
remain with the accounting prescribed in Opinion No. 25 and as a result, has
provided pro forma disclosures of net income and earnings per share and other
disclosures, as if the fair value based method of accounting had been applied.
The pro forma disclosures include the effects of all awards granted on or after
July 1, 1995.
28
<PAGE>
EARNINGS PER SHARE
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, put warrants, convertible
debt and convertible preferred stock were anti-dilutive and excluded from the
diluted earnings per share computations.
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.
COMPREHENSIVE INCOME
Accounting principles generally require that recognized revenue, expenses,
gains and losses be included in net income. Certain statements, however, require
entities to report specific changes in assets and liabilities, such as
unrealized gains and losses on available-for-sale securities, as a separate
component of the equity section of the balance sheet. Such items, along with net
income, are components of comprehensive income. There were no other items of
comprehensive income during 1999 and 1998.
SEGMENT INFORMATION
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for the way that public business enterprises
report information about operating segments in annual and interim financial
statements. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. Generally, financial
information is required to be reported on the basis that it is used internally
for evaluating segment performance and deciding how to allocate resources to
segments. The statement also requires descriptive information about the way that
the operating segments were determined, the products and services provided by
the operating segments, differences between the measurements used in reporting
segment information and those used by the enterprise in its general-purpose
financial statements, and changes in the measurement of segment amounts from
period to period.
2. GOING CONCERN
The Company has incurred recurring losses from operations resulting in an
accumulated deficit of $58,304,871 and a working capital deficiency of
$1,126,801 at December 31, 1999. The Company is also in default on certain debt
obligations, as discussed in Note 6. These circumstances raise substantial doubt
about the Company's ability to continue as a going concern.
MANAGEMENT PLANS
The following represents management's plans to improve the financial
condition of the Company including curing certain financial covenant defaults
and obtaining waivers wherever applicable. These plans are targeted to the
specific areas listed below.
BANKBOSTON WORKING CAPITAL LOAN
In November 1999 the Company received a working capital loan from
BankBoston. The loan agreement requires the Company to achieve certain financial
performance. As of December 31, 1999, the Company had not met some of the
conditions and is therefore in default of certain loan covenants. Specifically,
the Company has failed to meet the tangible net worth and operating cash to debt
service ratios.
Management has plans to raise additional equity to increase its
stockholders' equity which is expected to cure the tangible net worth covenant.
With the improvement in sales and further reduction in expenses due to the
consolidation of certain general and administrative functions the Company also
expects to improve its financial condition so that it can meet the covenant
requirements.
BRIDGE LOANS AND UNSECURED SUBORDINATED DEBT
During 1998 and 1999 the Company received approximately $1.0 million from
certain officers, directors, consultants and unaffiliated third parties. The
Company is in default of certain terms related to these borrowings.
Management is negotiating with the unaffiliated third parties to convert
the debt to equity. The officers, directors and consultants have agreed to
continue to forbear from exercising their rights under their loan documents.
ADDITIONAL CAPITAL
To date, the Company has met substantially all of its capital requirements
through the sale of securities and loans convertible into common stock. The
Company had three separate lenders for each of its three subsidiaries and could
not consolidate its cash flows. With the completion of the BankBoston working
capital line, the Company has consolidated its borrowing. This allows the
Company to allocate its capital resources as needed. Management expects the
capital needs for the year 2000 to be approximately $4.0 million and is
currently negotiating with investors for a portion of this investment with the
balance to be obtained at a future date. The Company has received initial
interest from an investor and will continue to seek additional sources of
capital.
29
<PAGE>
The Company has also been working with its trade creditors to reduce its
obligations. Several creditors have accepted payment plans, which include
periodic payments, discounts of amounts outstanding, and acceptance of shares of
common stock.
3. BUSINESS ACQUISITIONS
SUPERIOR PHARMACEUTICAL COMPANY
On June 18, 1997, the Company acquired all of the outstanding stock of
Superior Pharmaceutical Company ("Superior"). The Company paid the shareholders
of Superior $6,250,000 in cash, $4,600,000 in three year secured promissory
notes, as adjusted and 166,667 shares of DynaGen's common stock with a
guaranteed value of $5,000,000. DynaGen was obligated to issue to the
shareholders up to an additional 1,666,667 shares of its common stock on June
18, 1998 if its common stock was not trading at an average of at least $30.00
per share and pay to the former Superior stockholders the difference between
$5,000,000 and the current aggregate market value of the shares issued. The
Company recorded a $4,083,000 acquisition obligation at December 31, 1997 based
on the difference between the current estimated fair value of the 1,833,334
shares of common stock issued and issuable and the guaranteed value of
$5,000,000.
On July 31, 1998 DynaGen entered into a contingent settlement agreement to
reduce the remaining purchase price to approximately $4,000,000. During 1998,
the Company issued the former shareholders of Superior 416,167 shares of common
stock in connection with a forbearance agreement which has expired. The shares
were valued at $143,700 and charged to expense.
On December 17, 1998, the former Superior stockholders commenced a civil
action against the Company. In May, 1999, we settled all issues between us and
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 a price
of $0.86 per share expiring March 31, 2009;
- issuing warrants to purchase 300,000 shares of common stock at a price of
$.01 per share expiring March 31, 2009; and
- modifying the commercial lease agreement between Superior and a company
controlled by the former stockholders.
The Superior acquisition has been accounted for as a purchase. The results
of operations of Superior have been included in the Company's consolidated
financial statements since the date of acquisition. The purchase price
allocation as adjusted, has been based on the estimated fair values at the date
of acquisition. The Company initially allocated $13,612,000 of the purchase
price to customer lists based on an independent appraisal, which was being
amortized on a straight-line basis over five years. In addition the Company
initially recorded goodwill of $386,219, which was being amortized over 15
years.
In the fourth quarter of 1998, the Company recorded a $2,500,000 loss on
impairment of the Superior customer lists based on the Company's projection of
future discounted cash flows of Superior. In the first quarter of 1999, the
Company recorded an additional $400,000 loss on impairment based on a revised
projection of the future discounted cash flows.
Under the settlement the Company valued the modification of its lease
agreement for additional rent, using discounted cash flows, at $539,783, to be
amortized over 15 years. The Company wrote off all of its remaining obligations
to the Superior shareholders. This transaction resulted in a reduction of
$3,756,162 in the customer list. In addition, the goodwill balance of $329,047
was adjusted due to the settlement of the purchase price.
30
<PAGE>
Amortization of customer lists amounted to $948,972 and $2,722,400 for the
years ended December 31, 1999 and 1998 respectively. Amortization of goodwill
amounted to $8,605 and $25,816 for the years ended December 31, 1999 and 1998
respectively.
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 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 at the then prevailing market
prices. 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, which is being amortized on a straight line basis over
five years. Amortization of customer lists amounted to $145,840 and $121,533 for
the years ended December 31, 1999 and 1998, respectively.
Unaudited pro forma consolidated operating results for the Company,
assuming the acquisition of GDI had been made as of the beginning of the fiscal
year ended December 31, 1998 are as follows:
Revenues $ 26,160,317
==============
Net loss $ (12,621,376)
==============
Net loss per share - basic $ ( 0.67)
==============
The unaudited pro forma information is not necessarily indicative either of
the actual results of operations that would have occurred had the purchase of
GDI been made as of the beginning of the fiscal year ended December 31, 1998 or
of future results of operations of the combined companies.
4. INVENTORY
Inventory consists of the following:
December 31,
-----------
1999 1998
---- ----
Raw materials $ 752,627 $ 401,531
Work-in-progress 35,345 66,372
Finished goods 6,360,632 6,179,176
------------ ------------
$ 7,148,604 $ 6,647,079
============ ============
31
<PAGE>
5. PROPERTY AND EQUIPMENT
December 31, Estimated
----------- Useful
1999 1998 Lives
----------- ----------- -----
Machinery and equipment $ 2,811,296 $1,270,477 7 years
Furniture,fixtures and computers 1,146,223 1,171,638 2-7 years
Leasehold improvements 1,266,846 375,058 2 years
----------- -----------
5,224,365 2,817,173
Less accumulated depreciation
and amortization (1,371,523) (1,132,163)
----------- -----------
$ 3,852,842 $ 1,685,010
=========== ===========
Depreciation and amortization expense for the years ended December 31,
1999 and 1998 was $418,400 and $361,280, respectively.
6. DEBT
Notes payable consist of the following:
December 31
-----------
1999 1998
---- ----
Convertible note payable $ - $ 155,000
Bridge loans 1,006,389 725,000
Accounts receivable factoring - 184,830
Machinery & equipment financing 150,000 586,333
7% convertible debenture - 250,000
8% convertible debenture (see note 10) - 328,500
9% convertible debenture 980,000 -
Secured debt - Fleet Bank - 1,171,420
Loan payable-- Huntington - 4,505,104
Notes payable - Superior acquisition - 3,766,667
NJEDA bonds 2,000,000 -
Working capital loan - BankBoston 7,630,226 -
Senior subordinated debt 2,250,000 3,000,000
----------- -----------
Total 14,016,615 14,672,854
Less current portion 9,826,615 13,162,041
----------- -----------
Long-term debt $ 4,190,000 $ 1,510,813
=========== ===========
CONVERTIBLE NOTE PAYABLE
On February 7, 1996, the Company issued a $2,000,000 convertible note
payable in connection with a private placement. The note matured on February 7,
1998 and bears interest at 8% per annum, with interest payable quarterly in cash
or the Company's common stock. The note is convertible into shares of common
stock at any time at the option of the investor at a rate of 67% of the five-day
average of the closing bid price per share of the Company's common stock. The
value of the beneficial conversion feature at the date of issuance, based on the
market value of the Company's common stock was approximately $985,000. This
discount has been charged as additional interest expense and added to paid-in
capital in the year ended June 30, 1996. In the year ended December 31, 1998,
$380,000 of the note payable was converted for 5,452,535 shares of common stock
leaving a balance of $155,000 on December 31, 1998. On January 13, 1999, the
$155,000 balance of the convertible note and accrued interest of $14,914 were
converted into 1,163,571 shares of common stock.
32
<PAGE>
Interest expense on the convertible note payable for the years ended
December 31, 1999 and 1998 was $ 917 and $47,952, respectively. Amortization
expense on deferred debt financing costs for the year ended December 31, 1998
was $3,060.
BRIDGE LOANS
On December 19, 1997 the Company sold a subordinated note in the principal
amount of $155,000 to a lender with an interest rate of 7% per annum. This
unsecured note was payable in full with interest on January 18, 1998. In
connection with this bridge loan, DynaGen agreed to issue 15,000 shares of
common stock to the investor as additional consideration for the loan. This note
and accrued interest of $5,924 was converted into 1,040,949 shares of common
stock on March 25, 1998.
On October 3, 1997, the Company received $250,000 in a subordinated note
from an employee at an interest rate of 18% per annum due on November 30, 1997.
The due date on this note was extended to June 30, 1999. This investor also
received 20,000 shares of BioTrack common stock valued at $1,000 as additional
consideration for the loan. During 1998, $75,000 was paid back to the employee
and during 1999, the balance of $175,000 was converted to 500,000 shares of
common stock. In 1999, this employee advanced $75,000 under a 10% note of which
$40,000 was paid off leaving a balance of $35,000 payable to him on December 31,
1999.
During 1999, the Chief Executive Officer periodically advanced personal
funds to the Company towards working capital requirements as needed. On December
31, 1999, the Company had a balance payable of $120,000 to this executive.
Additionally, the Chief Executive Officer and the Executive Vice President
pledged 164,025 shares and 135,125, shares, respectively, of their DynaGen
common stock to secure a note payable of the Company. These shares were
subsequently sold by the creditor and a payable of $53,043 and $43,697 was
recorded to these executives for the pledge of their personal shares of the
Company.
Four investors loaned $175,000 to BioTrack in December 1997 at 10% interest
per annum due on February 12, 1998. In February 1998, $75,000 of these
short-term loans were repaid in full with interest. These investors also
purchased 35,000 shares of BioTrack common stock for $1,750. During 1998, the
Company sold its majority interest in BioTrack and these loans are no longer
included in the Company's consolidated financial statements.
In October 1997, Apex Pharmaceuticals Inc. received a $50,000 bridge loan
at an interest rate of 12% per annum from a consultant. The term of the loan was
renegotiated and $35,000 was paid off during 1999. On December 31, 1999, there
was a balance of $15,000 included in notes payable.
In November 1998, the Company received $500,000 from an unaffiliated
investor at an interest rate of 12% due on March 20, 1999, to be repaid from the
proceeds of any senior debt financing. A warrant to purchase one million shares
of common stock at $.05 per share expiring on November 20, 2000, valued at
$97,490, was also issued in connection with this loan. During 1999, $400,000 was
repaid towards the loan, leaving a balance of $100,000 on December 31, 1999. The
Company issued a warrant to purchase 200,000 shares of common stock at an
exercise price of $0.40 per share for an extension of this loan. The warrant was
valued at $17,438 and charged to expense. Interest accrued on this debt was
$4,767 on December 31, 1998 and $61,283 on December 31, 1999.
On January 26, 1999, the Company received $500,000 from an accredited
investor by executing a 10% Promissory Note to be repaid on April 15, 1999. The
terms of the note required an increased interest rate from 12% to 18% if the
note was not paid on the due date. This note was partially paid during 1999 and
the balance on December 31, 1999 was $139,649. Two executives of the Company
pledged their shares of DynaGen common stock to repay this loan (see above). Two
warrants to purchase a total of 535,500 shares of common stock at an exercise
price of $0.05 per share were issued in connection with this note.
33
<PAGE>
In January and February 1999, the Company sold to unaffiliated accredited
investors unsecured 12% promissory notes due in ninety days in the aggregate
principal amount of $400,000. The Company issued five year warrants to purchase
a total of 240,000 shares of Common Stock at an exercise price of $0.25 per
share to the investors and a warrant to purchase 32,500 shares of Common Stock
at an exercise price of $0.02 per share to the placement agent in connection
with this investment. These notes are past due. The Company had accrued interest
payable on December 31, 1999 of $41,625 relating to these notes. The Company
charged $12,253 to expense in connection with the issuance of these warrants.
In August 1999, the Company received $100,000 from an accredited investor
by executing a 10% promissory note to be repaid on demand. Interest accrued as
of December 31, 1999 for this note was $3,333.
ACCOUNTS RECEIVABLE FACTORING
In July 1998, Able entered into a short-term financing agreement with
Porter Capital ("Porter") whereby Able financed its outstanding accounts
receivable through Porter. In October 1998, Able replaced its existing
short-term financing agreement with Porter by entering into a short-term
financing agreement with K&L Financial, Inc. ("K & L"). K&L advanced funds equal
to 80% of invoice value upon receipt of invoices from Able. Upon payment in full
from Able's customers, K&L remitted the balance due Able less K&L's net charge
of 1% for each 10 days outstanding. The balance due K&L for accounts receivable
factoring at December 31, 1998 was $184,830. This agreement has expired.
Interest for the years ended December 31, 1999 and 1998 for accounts receivable
factoring was $49,761 and $81,178, respectively.
MACHINERY & EQUIPMENT FINANCING
In July 1998, Able entered into a machinery and equipment financing
agreement with Porter and the spouse of the Chief Executive Officer of the
Company whereby Able borrowed $300,000 at an annual interest rate of 15%. In
October 1998, the Company paid off Porter's $150,000 share of this loan. The
balance of $150,000 due to the executive's spouse is included in notes payable
on December 31, 1999. Interest expense under this agreement for the years ended
December 31, 1999 and 1998 was $22,500 and $12,250, respectively.
In October 1998, Able borrowed $462,000 under a machinery and equipment
financing agreement with Triple L, Ltd. for a period of 3 years at an effective
interest rate of 21%. This agreement was terminated in November, 1999 when a new
working capital line with BankBoston was completed. Interest expense for the
year ended December 31, 1999 was $81,893. The balance at December 31, 1998 was
$436,333 and interest for the year ended December 31, 1998 was $13,004.
CONVERTIBLE DEBENTURES
In April and May 1998, the Company sold two 5% convertible debentures in
the aggregate amount of $450,000 to an unaffiliated investor. In June 1998,
these notes were amended and made convertible into common stock at a 20%
discount to the average market price of the common stock based on the closing
bid for five days preceding the date of the conversion. The Company issued
1,363,636 shares in connection with this conversion in August 1998 and recorded
$112,500 of interest expense for the beneficial conversion feature.
In September 1998, the Company received $250,000 from an investor in the
form of a convertible debenture bearing interest at 7% per annum. This debenture
is convertible into common stock at 80% of the average trading price of the
common stock for five trading days immediately preceding the conversion date.
During 1999, this debenture was converted into 491,426 shares of common stock.
The beneficial conversion discount of $62,500 was fully amortized in 1998.
Interest accrued on the debenture at December 31, 1998 was $4,375.
In 1999, the Company received $980,000 by issuing 9% Convertible
Subordinated Debentures. The debentures mature in thirteen months 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. The debentures are convertible into 4.9% of the
shares of Common Stock of DynaGen that are issued and outstanding on the date of
conversion. During 1999, the Company recorded interest expense of $41,629
related to these 9% convertible debentures.
34
<PAGE>
SECURED DEBT - FLEET BANK
In March 1998, the Company received $1,200,000 in a five-year term loan
from Fleet Bank to finance the acquisition of GDI. The loan carried an interest
rate of LIBOR plus 3%, was payable in quarterly installments of $42,860 plus
interest and matured on April 26, 2003. The Fleet Bank also established a
revolving line of credit for working capital in the amount of $300,000 with
interest at LIBOR plus 2 1/2%. The loans were secured by all of the assets of
GDI and Able and a pledge by the Company of all of the common stock of Able and
GDI. During 1999, the company repaid the loan from proceeds of its new working
capital loan. Interest expense for the years ended December 31, 1999 and 1998
was $85,391 and $85,272 respectively.
LOAN PAYABLE - HUNTINGTON NATIONAL BANK
Superior had a secured revolving line of credit of $4,800,000 from a bank
with interest at prime plus 2% (9.75% at December 31, 1998) that matured on
January 31, 1999. Advances under the line of credit were subject to a borrowing
base consisting of the sum of (i) 80% of Superior's eligible accounts
receivable, plus (ii) 60% of Superior's eligible inventory.
The advances under the line were secured by a first-lien security interest
in all of the assets of Superior and were guaranteed by DynaGen. Superior could
not make distributions to the Company, other than distributions to pay principal
and interest on the notes payable to the former Superior stockholders, without
the prior written consent of the bank. In the event of a default Superior could
not make any distributions to the Company. Superior was not in compliance with
various loan covenants at December 31, 1998 and had not received a waiver from
the bank. During 1999, the Company repaid the loan from the proceeds of its new
working capital loan.
NOTES PAYABLE - SUPERIOR ACQUISITION
In connection with the acquisition of Superior, the Company issued
$4,600,000 (as adjusted) in secured promissory notes payable to the former
Superior stockholders. The notes were payable in quarterly installments of
principal of $416,667 plus interest over three years at an interest rate of 9.5%
and were secured by a pledge of the Superior common stock. During the year ended
December 31, 1998, the Company made principal payments of $416,666. The Company
classified the notes payable as a current liability on December 31, 1998 due to
its default under certain loan covenants. This note and accrued interest were
settled in 1999 (see note 3).
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY BONDS
On June 23, 1999, Able Laboratories, Inc., completed the Industrial
Development Revenue Bond offering issued by the New Jersey Economic Development
Authority ("NJEDA"). The bonds consist of series 1999A $1,700,000, 8%
non-taxable and series 1999B $300,000, 8.25% taxable. Series 1999A bonds will
mature in 15 years and series 1999B bonds will mature in 4 years. The total cost
of the bond issue was $216,140 and the net proceeds are being used for the
acquisition, installation and commissioning of equipment and machinery. The bond
cost is being amortized over 15 years. Amortization expense for the year ended
December 31, 1999 was $7,142. At December 31, 1999, maturities of the bonds are
as follows: $60,000 in 2000, $70,000 in 2001, $80,000 in 2002, $90,000 in 2003,
$95,000 in 2004 and $1,605,000 in years 2005 through 2014.
In connection with these bonds, the Company has entered into various
agreements with NJEDA and the bondholders, including an escrow agreement
pursuant to which the Company has deposited into escrow amounts intended to
cover the Company's obligations under the bond documents for periods of between
two and six months. The bonds are primarily secured by the equipment and
fixtures financed with the proceeds of the bonds. The interest expense relating
to these bonds for the year ended December 31, 1999 was $37,318.
35
<PAGE>
WORKING CAPITAL LOAN - BANK BOSTON
On November 30, 1999, we completed a loan transaction with BankBoston, N.A.
The loan agreement provides us with a revolving line of credit in the maximum
amount of $14,000,000, secured by a first lien on substantially all of our
assets. The total amount available for borrowing under the loan agreement is
based on 85% of eligible accounts receivable and 60% of eligible inventory. We
have borrowed $7,630,226 under this credit arrangement. With money borrowed
under the BankBoston loan transaction, we repaid Superior's secured loan from
Huntington Bank, GDI's secured loan from Fleet Bank and Able's obligations under
an accounts receivable factoring and equipment financing arrangement. In
connection with the BankBoston loan, we renegotiated certain provisions of our
existing subordinated loan arrangement. The interest rate for this revolving
loan (plus margin) was 9.75% at December 31, 1999.
The Company issued a warrant to purchase 250,000 shares of Common Stock at
an exercise price of $0.38, in connection with this loan. The value of the
warrant was charged to deferred debt financing cost in January 2000. The
interest expense for the year ended December 31, 1999 was $56,582 and related
bank fees was $6,437. The Company was in default at December 31, 1999 with
respect to certain financial covenants.
SENIOR SUBORDINATED DEBT AND WARRANT PUT LIABILITY
In June 1997, DynaGen obtained senior subordinated debt financing of
$3,000,000 from two private investors bearing interest at 13.5% payable in
monthly installments. The principal is payable upon maturity at the end of five
years. The loan was secured by a first-lien security interest on the assets of
DynaGen, a second-lien security interest on the assets of Superior and a
second-lien interest in the pledge of the Superior common stock and a guarantee
of payment by Superior. In November 1999, the senior subordinated debt holders
agreed to subordinate their debt to BankBoston.
In June 1997, DynaGen also issued to the investors warrants to purchase
40,000 shares of common stock of DynaGen at an exercise price of $.10 per share
exercisable for five years. These warrants are subject to put features under
certain circumstances. Proceeds of $702,000 from this financing were allocated
to the warrants, based on their estimated fair value. This amount is reflected
in the accompanying financial statements as a warrant put liability because the
warrants give the holders the choice of a cash settlement under certain
conditions. The put allows the holders to sell two-thirds of the warrants to the
Company after three years for $667,000 and all of the warrants after five years
for $1,500,000 unless the market value of the shares issuable pursuant to the
warrant is equal to or greater than the put value. The Company is accruing the
put value of the warrants to their redemption amounts over their respective
terms. The warrants contain a provision which allows the warrant holder to
substitute their warrants for warrants issued by Superior, unless the market
value of the shares issuable pursuant to the original warrants is equal to or
greater than the put value. The substitute warrants allow the warrant holders to
purchase 15% of Superior's common stock at an exercise price of $.01 per share.
The remaining proceeds from this offering of $2,298,000 were allocated to
the subordinated debt. The debt discount of $702,000 was being amortized, using
the interest method, over the term of the debt. At December 31, 1997, the
Company amortized the entire debt discount as the Company was in default under
the terms of the debt agreement and the debt had been classified as a current
liability.
In 1999, as a result of securing a new working capital loan the Company
exchanged $750,000 of this senior debt for 10,000 shares of Series L Preferred
Stock. The Series L Preferred Stock is convertible into common stock at an
average of the closing bid prices of Common Stock for three days immediately
preceding the conversion date. The Series L Preferred Stock has a stated
dividend of 13.5% per annum. When the proceeds of the conversion of Series L
Preferred Stock reach $750,000 plus accrued dividends, the balance of the Series
L Preferred Stock will be canceled. The Company issued 400,000 warrants to
purchase Common Stock at an exercise price of $0.38 per share and 168,750
warrants to purchase Common Stock at an exercise price of $0.01 per share in
connection with the negotiations of terms of the loan with senior lenders. The
value of these warrants totaling $122,344 was charged to expense for the year
ended December 31,1999. Interest expense for the years ended December 31, 1999
and 1998 was $396,562 and $405,000, respectively.
36
<PAGE>
7. INCOME TAXES
There was no provision for income taxes for the years ended December 31,
1999 and 1998, due to the Company's net operating losses. The difference between
the statutory Federal income tax rate of 34% and the Company's effective tax
rate is primarily due to net operating losses incurred by the Company and the
valuation reserve against the Company's deferred tax asset.
The components of the net deferred tax asset are as follows:
December 31,
------------
1999 1998
---- ----
Deferred tax asset:
Federal $ 15,221,000 $ 13,819,000
State 2,745,000 2,986,000
------------ ------------
17,966,000 16,805,000
Valuation reserve (17,966,000) (16,805,000)
------------ ------------
Net deferred tax asset $ -- $ --
============ ============
The following differences give rise to deferred income taxes:
December 31,
-----------
1999 1998
---- ----
Net operating loss carry forward $ 16,084,000 $ 15,324,000
Research tax credit carry forward 640,000 620,000
Other 1,242,000 861,000
------------ ------------
17,966,000 16,805,000
Valuation reserve (17,966,000) (16,805,000)
------------ ------------
Net deferred tax asset $ -- $ --
============ ============
The increases in the valuation reserve are due to the Company's net
operating losses.
As of December 31, 1999, the Company has Federal and state net operating
loss carry forwards of approximately $42,700,000 and $25,000,000, respectively.
Federal and state net operating loss carry forwards expire in varying amounts
beginning in 2003 and 2000, respectively, In addition, the Company has Federal
and state research tax credit carry forwards of approximately $590,000 and
$74,000, respectively, available to reduce future tax liabilities. The Federal
and state research tax credit carry forwards expire in varying amounts beginning
in 2003 and 2006, respectively.
Use of net operating loss and tax credit carry forwards is subject to
annual limitations based on ownership changes in the Company's common stock as
defined by the Internal Revenue Code.
8. RELATED PARTY TRANSACTIONS
RECEIVABLES
In October 1996, the Company granted a $250,000 line-of-credit to each of
two officer/directors which bear interest at 6.07% per annum and which matured
on October 4, 1998. These lines-of-credit are secured by common stock of the
Company held by the officer/directors. At December 31, 1997, borrowings of
$110,000 were outstanding under the lines-of-credit. In December 1998, a $55,000
note together with accumulated interest of $6,955 was written off leaving an
outstanding balance of $55,000.
37
<PAGE>
The Company recognized interest income on notes receivable of $3,338 and
$6,400 during the years ended December 31, 1999 and 1998, respectively. At
December 31, 1999 and 1998, accrued interest receivable of $10,850 and $7,512,
respectively, is included in other current assets.
In September 1998, the Company loaned $250,000 to its affiliate, BioTrack,
Inc. under notes receivable which bear an interest rate of 7% per annum due on
March 31, 1999. On December 31, 1999 and December 31, 1998, the outstanding
balance on this note was $30,000 and $95,000 respectively. No interest income
has been recognized on this note receivable as of December 31, 1999. The Company
charged BioTrack $60,000 in management fees for both 1999 and 1998. At December
31, 1999, accounts receivable includes $120,000 due from BioTrack.
CONSULTING FEES
In January 1998, the Company entered into a consulting agreement with one
of its directors for corporate development and financial planning. In 1998, the
Company accrued $90,000 towards these consulting fees all of which was included
in accounts payable on December 31, 1998. During 1999, the Company recorded
$90,000 in forgiveness of debt related to the agreement.
ACCOUNTS PAYABLE
On November 3, 1998, an officer/director of the Company advanced $50,000 to
meet short-term working capital requirements. The entire amount was outstanding
as of December 31, 1998. This amount was repaid during 1999.
OTHER
In February 1998, the Company sold 100,000 shares of BioTrack, Inc., its
subsidiary at the time, to the spouse of one of its directors for $50,000.
9. COMMITMENTS AND CONTINGENCIES
LEASE AGREEMENTS
The Company leases offices and warehouse facilities under operating leases
expiring in various years through 2015 that require the Company to pay certain
costs such as maintenance and insurance. The main facility at Superior is rented
from a related party. The related party rent was $340,000 and $300,000 for 1999
and 1998, respectively.
The following is a schedule of future minimum lease payments for all
operating leases (with initial or remaining terms in excess of one year) as of
December 31, 1999:
Years Ending December 31, Amount
- ------------------------- ------
2000 $753,230
2001 690,218
2002 683,580
2003 683,580
2004 683,580
Thereafter 8,087,395
-----------
Total minimum future lease payments $11,581,583
===========
Rent expense, net of subleases for the years ended December 31, 1999 and
1998 was $703,681 and $960,827, respectively.
38
<PAGE>
EMPLOYMENT AGREEMENTS
As of December 31, 1999, the Company has employment agreements with certain
of its officers that provide for minimum annual salaries, reimbursement of
business related expenses and participation in other employee benefit programs.
The agreements also include confidentiality, non-disclosure, severance,
automatic renewal and non-competition provisions. Salary levels are subject to
periodic review by the Board of Directors.
CONTINGENCIES
Legal claims arise from time to time in the normal course of business
which, in the opinion of management, will have no material effect on the
Company's financial position or results of operations.
10. PREFERRED STOCK, COMMON STOCK, OPTIONS AND WARRANTS
PREFERRED STOCK
A summary of preferred stock outstanding is as follows:
<TABLE><CAPTION>
December 31, 1999 December 31, 1998
-------------------------------------------------
Liquidation Liquidation
Par Value Value Par Value Value
-------------------------------------------------
<S> <C> <C> <C> <C>
Preferred stock, $.01 par value, 10,000,000 shares
authorized:
Series A convertible, 50,000 shares authorized,
0 and 1,520 shares issued and outstanding $ - $ - $ 15 $ 152,000
Series B convertible, 12,515 shares authorized,
2,300 and 7,500 shares issued and outstanding 23 229,310 75 747,750
Series C convertible 7,500 shares authorized,
0 and 2,882 shares issued and outstanding - - 29 288,227
Series D convertible, 60,000 shares authorized,
0 and 5,000 shares issued and outstanding - - 50 500,000
Series E convertible, 10,500 shares authorized,
10,500 shares issued and outstanding 105 1,050,000 105 1,050,000
Series F convertible, 5,000 shares authorized,
1,500 shares issued and outstanding 15 150,000 15 150,000
Series G convertible, 10,000 shares authorized,
0 and 5,500 shares issued and outstanding - - 55 550,000
Series H convertible, 20,000 shares authorized,
650 and 17,750 shares issued and outstanding 6 65,000 177 1,775,000
Series I Convertible, 3,000 shares authorized,
974 and 0 shares issued and outstanding 10 973,904 - -
Series J Convertible, 10,000 shares authorized,
10,000 and 0 shares issued and outstanding 100 1,000,000 - -
Series K Convertible, 20,000 shares authorized,
20,000 and 0 shares issued and outstanding 200 2,000,000 - -
Series L Convertible, 10,000 shares authorized,
10,000 and 0 shares issued and outstanding 100 1,000,000 - -
----- ----------- ----- -----------
$ 559 $ 6,468,214 $ 521 $ 5,212,977
===== =========== ===== ===========
</TABLE>
During 1997, the Company sold 48,450 shares of Series A Preferred Stock for
$4,845,000 and issued two year warrants to purchase 38,760 shares of Common
Stock at $3.87 per share. No value was assigned to the warrants. The Series A
Preferred Stock has a stated dividend of $5.00 per share per annum. DynaGen
registered the shares of common stock issuable upon conversion of the Series A
Preferred Stock and exercise of the warrants. The warrants expired during 1999.
The holders of Series A Preferred Stock have certain rights of first refusal on
future equity financings.
39
<PAGE>
The Series A Preferred Stock may be converted into common stock at a
conversion price equal to the lesser of 120% of the average closing bid price,
as defined (the Series A Effective Price) or discounted percentages of the
Series A Effective Price decreasing from 80% to 74% over time. During 1998,
35,487 shares of Series A Preferred with accumulated dividends were converted
into 9,903,733 shares of common stock. During 1999, 1,520 shares of the Series A
Preferred Stock were converted into 350,000 shares of Common Stock.
The Series B Preferred Stock has a stated dividend of $7.00 per share per
annum. Upon liquidation, the Series B Preferred Stock ranks junior to the Series
A Preferred Stock. DynaGen registered the shares of common stock issuable upon
conversion of the Series B Preferred Stock.
The Series B preferred stock may be converted into Common Stock at a
conversion price equal to the lesser of 125% of the average closing bid price,
as defined (the "Series B Effective Price") or discounted percentages of the
Series B Effective Price decreasing from 80% to 75% over time. Any outstanding
shares of the Series B Preferred Stock will be automatically converted to common
stock two years from the issue date. During 1998, 5,015 shares of Series B
Preferred Stock with accumulated dividends were converted into 1,649,864 shares
of common stock. During 1999, 5,200 shares of Series B with accumulated
dividends were converted to 1,888,639 shares of Common Stock.
On August 21, 1997, the Company sold 7,500 shares of Series C Preferred
Stock for $750,000 and issued a common stock purchase warrant to purchase 25,000
shares of common stock to a private investor. No value was assigned to the
warrants. The exercise price of the warrants is $7.4609 per share. The Series C
Preferred Stock may be converted into common stock at a conversion price equal
to the lesser of 125% of the five day average of the closing bid price of the
common stock or discounted percentages, ranging from 80% to 74% over time, of
the current five day average closing bid price of the common stock. The Series C
Preferred Stock has a stated dividend of $7.00 per share per annum. During 1998,
4,618 shares of Series C Preferred Stock with accumulated dividends were
converted into 5,569,341 shares of common stock and during 1999 the balance of
2,882 shares was converted into 2,145,219 shares of Common Stock.
Effective December 31, 1997, the Company issued an 8% Debenture due April
19, 2009 for $328,500 to settle certain penalties related to delayed
registration of the Series C Preferred Stock. The Debenture is repayable solely
in common stock and may be converted at the average trading value of common
stock, for the five trading days preceding the conversion date. In 1999, this
debenture was converted into 952,644 shares of Common Stock.
In March 1998, the Company sold 15,000 shares of Series D convertible
Preferred Stock for $1,500,000 and also issued a warrant to purchase a number of
shares of common stock equal to 1% of the issued and outstanding common stock on
the date of exercise of the warrant for $150,000 expiring March 2001. The Series
D Preferred Stock does not carry any dividend and may be converted into common
stock at any time. The conversion price shall be equal to 85% of the average
closing bid price of the common stock for five trading days prior to the
conversion. In June 1998, 10,000 shares of Series D were converted into
2,678,570 shares of common stock. During 1999, the balance of 5,000 shares of
Series D was converted into 1,955,999 shares of Common Stock.
In connection with the Series D, two investors received 8% convertible
debentures in the aggregate original principal amount of $175,000 as delayed
registration penalties. These debentures were convertible into common stock at
the market price of the common stock on the date of the conversion. In June
1998, the investors converted these debentures into 424,242 shares of common
stock.
In March 1998, the Company issued 10,500 shares of Series E Convertible
Preferred Stock and 5,000 shares of Series F Convertible Preferred Stock in
connection with its acquisition of GDI. (Note 2.) The Series E and F Preferred
Shares are convertible into common stock at the prevailing market prices on the
date of conversion.
In 1997, the Company issued 6,500 shares of Series G Preferred stock in
settlement of $650,000 of accrued expenses. These shares may be converted into
common stock at the market price. In 1998, 1,000 shares of Series G Preferred
Stock were converted into 50,000 shares of common stock. The balance of 5,500
shares were converted into 300,000 shares of Common Stock in 1999.
40
<PAGE>
In June and July 1998, the Company sold 19,000 shares of Series H Preferred
Stock and received aggregate proceeds of $1,900,000 from the sale. The Series H
Preferred Stock may be converted after a twelve month holding period into shares
of common stock based on 67% the average closing bid price for the preceding
five days. In August 1998, the Company allowed one investor to convert 1,250
shares of Series H, at 80% of the average closing bid price for the preceding
five days, into 378,787 shares of common stock. During 1999, 17,100 shares were
further converted into 4,807,104 shares of Common Stock.
In May and June 1999, the Company received $3,000,000 from the issuance of
3,000 shares of Series I to various unaffiliated investors. Shares of Series I
are convertible into Common Stock at 80% of the average of the closing bid price
of Common stock for the three (3) selected, closing bids of past five (5)
trading days immediately preceding any conversion date. The Company issued
165,652 Common Stock warrants at an exercise price of $0.91 per share and 34,722
Common Stock warrants at an exercise price of $0.396 per share as placement fees
in connection with this financing. During 1999, 2,026 shares of Preferred Series
I were converted and 6,409,560 shares of common stock were issued. The company
has registered the shares of Common Stock issuable upon conversion of Series I
Preferred Stock.
In July 1999, the Company received $1,000,000 from the issuance of 10,000
shares of Series J Preferred Stock to a single unaffiliated investor. Shares of
Series J Preferred Stock are convertible into Common Stock at 80% of the average
closing bid price of Common Stock for the five trading days immediately
preceding the conversion notice from the investor. The conversion can take place
on the earlier of (1) 90 days from original issue date of the Series J Preferred
Stock; or (2) the date on which a registration statement is declared effective
by the Securities and Exchange Commission.
In August, September and November, 1999, the Company received $2,000,000
from the issuance of 20,000 shares of Series K Preferred Stock to various
unaffiliated investors. Holders of the Series K Preferred Stock have the right
to convert during any five trading day period up to 20% of their holdings, into
Common Stock of the Company at 80% of the three day average quoted price for
three days immediately proceeding the conversion notice from the holder. The
discount at 80% to the market price increases to 75%, and then to 70%, if the
investor retains his investment in the Series K Preferred Stock for longer
periods.
In November 1999, the Company issued 10,000 shares of Series L Preferred
Stock in exchange for the cancellation of $750,000 of senior subordinated debt.
The Series L Preferred Stock is convertible into common stock having a value
upon conversion of $750,000 plus dividends accruing at the rate of 13.5% per
annum. See Note 6.
Certain series of the convertible preferred stock have conversion features
that were "in the money" at the date of issue ("beneficial conversion feature").
These securities may be convertible into common stock at the discount
percentages specified above. The beneficial conversion features were recognized
and measured in the financial statements by allocating a portion of the proceeds
equal to the intrinsic value of the conversion feature to additional paid-in
capital. The intrinsic value was calculated at the date of issue of the
convertible preferred stock as the difference between the conversion price and
the face value of the common stock into which the securities are convertible,
multiplied by the number of shares into which the security is convertible. A
summary of the amounts allocated to the beneficial conversion feature is as
follows:
Years Ended December 31
----------------------------
Convertible Preferred Stock 1999 1998
--------------------------- ---- ----
Series D $ - $ 265,000
Series H 245,377 468,000
Series I 750,000 -
Series J 250,000 -
Series K 500,000 -
----------- ---------
$ 1,745,377 $ 733,000
=========== =========
The discount resulting from the allocation of proceeds to the beneficial
conversion feature is analogous to a dividend and has been recognized as a
return to the preferred shareholders from the date of issuance through the date
the security is first convertible. The discounts for 1999 and 1998 were
amortized by a charge against additional paid-in capital because the Company had
no accumulated earnings at those dates. The amortization of the discount has
been reflected as a return to the preferred shareholders in the calculation of
basic earnings per share.
41
<PAGE>
COMMON STOCK
In April 1998, the Company issued 1,893,333 shares of common stock with a market
value of $295,000 to various family members of several officer/directors,
including 400,000 shares to an officer/director, in payment of $295,000 of
loans.
STOCK OPTION PLANS
The Company adopted the 1989 Stock Option Plan (the "1989 Plan") and
reserved 60,000 shares of common stock for issuance to employees, officers,
directors and consultants. Under the 1989 Plan, the Board of Directors will
grant options and establish the terms of the options in accordance with plan
provisions. The 1989 Plan options are exercisable for a period of ten years from
the date of issuance. The following table summarizes the activity of options
granted under the 1989 plan:
<TABLE><CAPTION>
Year Ended December 31,
-----------------------
1999 1998
------------------------- -------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding at beginning of year 8,700 $9.18 20,800 $8.80
Canceled (2,500) 7.50 (12,100) 7.50
---------- -------
Outstanding at end of year 6,200 9.90 8,700 9.18
========== =======
Exercisable at end of year 6,200 9.90 8,700 9.18
========== =======
Reserved for future grants at end of year 14,600 12,100
========== =======
</TABLE>
Information pertaining to options outstanding under the 1989 Plan at
December 31, 1999 is as follows:
<TABLE><CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Exercise Prices Outstanding Life Exercise Price Exercisable Exercise Price
- --------------- ------------ ---- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
$7.50-$8.50 6,000 2.2 Years $8.30 6,000 $8.30
$58.70 200 1.6 Years 58.70 200 58.70
----- -----
6,200 2.0 Years $9.90 6,200 $9.90
===== =====
</TABLE>
The Company adopted the 1991 Stock Plan (the "1991 Plan") and reserved
260,000 shares of common stock for issuance to employees, officers, directors
and consultants. Under the 1991 Plan, the Board of Directors may grant options,
stock awards and purchase rights, and establish the terms of the grant in
accordance with the provisions of the plan. The 1991 Plan options are
exercisable for a period of seven years from the date of issuance and certain
options contain a net exercise provision. As of December 31, 1999, no stock
awards or purchase rights have been granted under the 1991 Plan. The following
table summarizes the activity of options granted under the 1991 Plan:
42
<PAGE>
<TABLE><CAPTION>
Years Ended December 31,
------------------------
1999 1998
---- ----
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding at beginning of year 47,100 $4.70 78,246 $8.70
Granted - - 50,000 0.30
Canceled (22,300) 7.90 (31,146) 7.54
Exercised 3,500 0.10 (50,000) 0.30
------ -------
Outstanding at end of year 21,300 2.40 47,100 4.70
====== =======
Exercisable at end of year 21,300 2.40 36,710 4.20
====== =======
Reserved for future grants at end of year 168,530 146,230
======= =======
Weighted average fair value of options
granted during the year - $0.49
</TABLE>
Information pertaining to options outstanding under the 1991 Plan at
December 31, 1999 is as follows:
<TABLE><CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Exercise Prices Outstanding Life Exercise Price Exercisable Exercise Price
- --------------- ------------ ---- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
$.10 12,000 4.0 Years $0.10 12,000 $0.10
$5.00 - $7.50 9,300 3.5 Years 5.30 9,300 5.30
------ ------
21,300 2.40 21,300 2.40
====== ======
</TABLE>
The Company adopted the 1998 Stock Option Plan (the "1998 Plan") and
reserved 2,500,000 shares of common stock for issuance to employees, officers,
directors and consultants. Under the 1998 Plan, the Board of Directors may grant
options, and establish the terms of the grant in accordance with the provisions
of the plan. The 1998 Plan options are exercisable for a period of up to ten
years from the date of issuance and certain options contain a net exercise
provision. The following table summarizes the activity of options granted under
the 1998 Plan:
<TABLE><CAPTION>
Years Ended December 31
-----------------------
1999 1998
---- ----
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding at beginning of year 1,150,000 $0.13 - $ -
Granted 245,000 0.17 3,350,000 0.31
Canceled - - (2,200,000) 0.41
Exercised (25,000) 0.20 - -
Outstanding at end of year 1,370,000 0.13 1,150,000 0.13
========= =========
Exercisable at end of year 1,370,000 0.13 -
========= =========
Reserved for future grants at end of year 1,105,000 1,350,000
========= =========
Weighted average fair value of options
granted during the year 0.10 $0.12
</TABLE>
Information pertaining to options outstanding under the 1998 plan at
December 31, 1999 is as follows:
43
<PAGE>
<TABLE><CAPTION>
Options Outstanding and Exercisable
-----------------------------------
Weighted Average Weighted Average
Exercise Prices Number Outstanding Remaining Life Exercise Prices
- --------------- ------------------ -------------- ---------------
<S> <C> <C> <C>
$0.01 40,000 7 years $ 0.01
$0.10 - 0.20 1,330,000 6.6 years 0.14
---------
1,370,000 0.13
=========
</TABLE>
CONSULTANT STOCK PLAN
The Company adopted the Consultant Stock Plan in June 1998 which provides
for stock grants for services rendered to the Company. The Company reserved
2,500,000 shares of common stock for issuance and registered the shares. During
1999 and 1998, the Company issued 240,000 and 1,386,500 shares of common stock
under this Plan. The Company recorded expenses in 1999 and 1998 based on the
fair value of the common stock issued.
OTHER STOCK OPTIONS AND WARRANTS
On September 6, 1990, the Company's Board of Directors granted non-qualified
stock options to purchase 45,000 shares of common stock at a price of $8.75 per
share through September 2000, all of which are currently exercisable by a former
director of the Company.
On November 20, 1995, the Company entered into a one-year investment
banking agreement with the underwriter of the Company's prior public offerings.
As compensation for services, the Company granted a warrant to purchase 40,000
shares of common stock at an exercise price of $25 per share. The warrant is
exercisable through November 20, 2000. The shares underlying the warrant were
registered on a Form S-3 registration statement declared effective on March 29,
1996.
On July 24, 1996, the Company's Board of Directors granted non-qualified
stock options to two directors of the Company to purchase an aggregate of 66,000
shares of common stock at an exercise price of $19.40 per share. These options
are exercisable by the directors until July 24, 2003. On October 28, 1996, the
Company's Board of Directors granted a non-qualified stock option to a director
of the Company to purchase 33,000 shares of common stock at an exercise price of
$13.10 per share. This option is exercisable by the director until October 28,
2003.
On December 10, 1996, the Company granted warrants to purchase an aggregate
of 10,000 shares of common stock at an exercise price of $14.40 per share. These
warrants are exercisable through December 31, 2003.
On August 28, 1997, the Company issued a warrant expiring on July 31, 2004,
to purchase 100,000 shares of Common Stock at an exercise price of $1.50 per
share as consideration of investment banking services rendered to the Company by
an investment banker.
On June 1, 1998, the Company granted the Chairman and Chief Executive
Officer of the Company, a non-qualified stock option expiring June 1, 2005, to
purchase up to 2,000,000 shares of common stock at a price of $0.33 per share.
This option was canceled on November 19, 1998 and repriced at $0.125.
On June 30, 1998, the Company issued a warrant expiring June 30, 2001, to
purchase up to 350,000 shares of Common Stock at an exercise price of $.01 per
share to an unaffiliated individual in consideration of investment banking
services rendered. The Company valued this warrant at $140,000 and charged it to
expense in 1998. These warrants were exercised during 1999 and 344,480 shares
were issued to the individual in a cashless exercise.
On August 1, 1998, the Company issued a warrant to purchase up to 200,000
shares of Common Stock at a purchase price of $.15 per share to an unaffiliated
company in connection with investment banking services rendered. This warrant
expired on December 31, 1998 without being exercised. The $4,000 value of this
warrant was charged to expense in 1998. On the same date, the Company issued a
warrant expiring June 30, 1999 to
44
<PAGE>
purchase up to 750,000 shares of Common Stock at a purchase price of $.15 per
share to an unaffiliated company in consideration of services rendered. This
warrant was valued at $25,000 and charged to expense in 1998.
On August 18, 1998, the Company issued a warrant to purchase up to 37,500
shares of Common Stock at a purchase price of $.40 per share, to the spouse of
the Chairman and Chief Executive Officer for making a loan of $150,000 to the
Company at 15% interest. On the same date, the Company issued a warrant to
purchase up to 37,500 shares of Common Stock at a purchase price of $0.40 per
share to an unaffiliated company, in consideration of making a loan of $150,000
at 15% interest. These warrants expire on August 18, 2001. The warrants were
valued at $12,400 which was charged to expense in 1998.
On August 26, 1998, the Company issued a warrant expiring December 31, 1999
to purchase 150,000 shares of common stock at a purchase price of $.50 per share
to a former director of the Company, in settlement of amounts owed. This warrant
was valued at $13,500 which was charged to expense in 1998.
On December 29, 1998, the Company issued a warrant to purchase 1,200,000
shares of common stock at $.375 per share through December 29, 2003 in
consideration of future services to be rendered by an investment banker. These
warrants were valued at $4,664 and charged to expense in 1999.
On January 7, 1999 the Company issued a warrant to purchase 45,000 shares
of Common Stock at an exercise price of $0.25 per share, in connection with the
purchase by an accredited investor of units each consisting of a $25,000 12%
unsecured promissory note and a warrant to purchase 15,000 shares of Common
Stock. The value of these warrants, $2,153, was charged to expense in 1999.
On January 26, 1999, the Company issued a warrant to purchase 35,500 shares
of Common Stock at an exercise price of $0.05 per share, a Warrant to purchase
2,000 shares of Common Stock at an exercise price of $0.30 per share and a
Warrant to purchase 500,000 shares of Common Stock at an exercise price of $0.05
per share. 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
value of these warrants, $117,344, was charged to expense in 1999.
In February 1999, the Company granted a total of 1,500,000 non qualified
stock options at an exercise price of $.01 per share to three directors which
vested during 1999 in twelve equal installments. These stock options expire in
five years. These options were valued at $330,000 and charged to expense in
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 per
share in connection with the sale to accredited investors of units each
consisting of a $25,000 12% unsecured promissory note and a warrant to purchase
15,000 shares of Common Stock. The Company valued these warrants at $10,100 and
charged this amount to expense.
During the first quarter of 1999 the Company issued approximately 5,330,000
non-qualified stock options to various employees at Able Laboratories. The stock
options were issued at an exercise price of $0.25 per share and are exercisable
for a period of ten years. The vesting period of these options is between twelve
and thirty-six months. The fair value of these options was $0.12 per share on
the date of grant.
In May and June 1999, the Company issued 165,652 warrants at an exercise
price of $.91 per share and 34,722 warrants at an exercise price of $0.396 per
share in connection with the issuance of its Series I Preferred Stock to various
unaffiliated investors. The value of these warrants, $56,978 was charged to
additional paid-in capital.
On May 27, 1999, the Company issued to the former shareholders of Superior
a warrant to purchase 1,000,000 shares at an exercise price of $0.86 per share
valued at $650,000 and a warrant to purchase 300,000 shares at an exercise price
of $0.01 per share valued at $222,000 as part of the settlement of all its
acquisition obligations of Superior.
In August 1999, the Company issued two warrants to purchase 168,750 shares
of Common Stock at an exercise price of $.01 per share to the senior lenders in
connection with negotiating terms of the senior subordinated debt. The warrants
were valued at $69,331 and charged to expense in 1999.
45
<PAGE>
In September 1999, the Company granted 9,750,000 non-statutory stock
options to four directors at an exercise price of $0.25 per share which vest in
three installments in September 1999, January 2000 and April 2000. These stock
options expire in ten years. The Company also granted a non-statutory stock
option to purchase 500,000 shares of Common Stock at an exercise price of $0.25
per share to a director, which becomes exercisable upon fulfillment of certain
terms and conditions. The fair value of these warrants was $0.13 per share on
the date of grant.
In November 1999, the Company issued 200,000 warrants at an exercise price
of $0.40 per share that expire during the third quarter of 2001. These warrants
were issued in connection with extension of a $500,000 note which was due in
March 1999 and were valued at $17,438 and charged to expense during 1999.
In November 1999, the Company issued four warrants to purchase 500,000
shares of Common Stock at an exercise price of $0.38 per share in connection
with a new line of credit with BankBoston. The Company also issued three
warrants to purchase 400,000 shares of Common Stock at an exercise price of $.01
per share in connection with this refinancing. The value of all these warrants
totaling $188,562 was capitalized as debt financing cost.
STOCK-BASED COMPENSATION
At December 31, 1999, the Company has three stock-based compensation plans
and stock options issued outside of the plans, which are described above. The
Company applies APB Opinion No. 25 and related Interpretations in accounting for
stock options issued to employees and directors. Had compensation cost for the
Company's stock options issued to employees and directors been determined based
on the fair value at the grant dates consistent with SFAS No. 123, the Company's
net loss and net loss per share would have been adjusted to the pro forma
amounts indicated below:
Years Ended December 31,
------------------------
1999 1998
---- ----
Net loss:
As reported $ (8,151,318) $(12,612,009)
Pro forma (8,781,397) (13,119,784)
Net loss per share:
As reported $ (0.20) $ (0.67)
Pro forma $ (0.21) $ (0.70)
Common stock equivalents have been excluded from all calculations of net
loss per share because the effect of including them would be anti-dilutive.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants during the years ended December 31, 1999 and 1998,
respectively; dividend yield of 0%; risk-free interest rates of 5%; expected
volatility of 87% and 263%; and expected lives of 0.5 years.
46
<PAGE>
COMMON STOCK RESERVED
The Company has reserved common stock at December 31, 1999 as follows:
Number of Shares
Stock option plans 2,685,630
Preferred stock conversion 15,456,159
Other stock options and warrants 25,261,267
Consultants Stock Plan 873,500
Convertible Debt 3,128,892
-----------
Total 47,405,448
===========
At December 31, 1999 the Company has 75,000,000 shares of authorized common
stock of which 63,854,946 shares are outstanding. The Company only has
11,145,054 shares available which is less than the total common stock reserved.
The number of shares of common stock reserved in connection with the convertible
debt and convertible preferred stock is subject to adjustment (see Notes 6 and
10.) The Company also has an outstanding warrant which allows the holder to
purchase shares equal to 1% of the outstanding stock on the date of exercise of
the warrant (see Note 10.)
11. REVENUES AND SEGMENT INFORMATION
The Company operates in one principal business segment, the manufacturing
and distribution of generic pharmaceuticals which accounts for over 90% of the
Company's consolidated assets, revenues and operating losses. There were no
major customers for the years ended December 31, 1999 and 1998.
LICENSE FEES
In July 1998, the Company and MOVA Laboratories, Inc. entered into a
licensing, manufacturing, supply, and distribution agreement. Under the terms of
the agreement, the Company will continue development and seek FDA new drug
application approval to commercialize a branded pharmaceutical product. At
December 31, 1999, the Company has received $100,000 which was recorded as
deferred revenue included in accounts payable and accrued expenses, as this
money was refundable under certain conditions. During 1999, the Company
recognized the revenue associated with this agreement.
12. EMPLOYEE BENEFIT PLAN
The Company has a Section 401(k) Profit Sharing Plan (the "401(k) Plan")
for all employees. Employees who have attained the age of 21 may elect to reduce
their current compensation, subject to certain limitations, and have that amount
contributed to the 401(k) Plan. The Company matches up to 25% of employee
contributions not to exceed 6% of employee compensation, subject to certain
limitations. Employee contributions to the 401(k) Plan are fully vested at all
times and all Company contributions become vested over a period of five years.
For the year ended December 31, 1999, the Company matched $29,606 and
contributed $0 in profit sharing. For the year ended December 31, 1998, Superior
matched $11,353 and contributed $25,000 in profit sharing.
13. SUBSEQUENT EVENTS
During February 2000, the Company issued 197,500 warrants to purchase
common stock at an exercise price of $0.25 to various individuals in connection
with consulting services.
During January 2000, 572 shares of Series I Preferred Stock were converted
into 2,695,752 shares of common stock. During February 2000, 800 shares of
Series B Preferred Stock were converted into to 267,447 shares of common stock.
In February 2000, the Company issued 668,750 shares of common stock upon
exercise of stock options and warrants.
In February 2000, the Company issued 40,000 shares of common stock under
the consultants plan in connection with services rendered.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1999 and 1998, the Company's financial instruments include
notes receivable (see Note 8) and debt obligations (see Note 6). The carrying
value of the notes receivable approximate their fair value as these instruments
bear interest and mature in less than one year. The fair value of the
outstanding balance of
47
<PAGE>
the convertible note payable is approximately $231,000 at December 31, 1998,
respectively, based on the fair value of the common stock issuable on conversion
of the note. The fair value of the 7% convertible debenture at December 31, 1998
is $312,500 based on the fair value of the common stock issuable on conversion
of the debt. The fair value of the 9% convertible debentures at December 31,
1999 is $1,063,825 based on the fair value of the common stock issuable on
conversion. The carrying value of other debt obligations approximate fair values
based on their maturities and interest rates.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT
The information required by this item in connection with directors and
officers is hereby incorporated by reference to the information set forth under
the caption "Directors and Executive Officers" in our definitive proxy statement
for the annual meeting of stockholders, which we expect to file on or before
April 29, 2000 (the "2000 Annual Meeting Proxy Statement").
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item with respect to executive
compensation is hereby incorporated by reference to the information set forth
under the caption "Executive Compensation" in the 2000 Annual Meeting Proxy
Statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item with respect to security ownership of
certain beneficial owners and management is hereby incorporated by reference to
the information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the 2000 Annual Meeting Proxy Statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item with respect to certain relationships
and related transactions is hereby incorporated by reference to the information
set forth under the caption "Certain Relationships and Related Transactions" in
the 2000 Annual Meeting Proxy Statement.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements:
The following financial statements are filed as part of this report:
Independent Auditors' Report
Financial Statements:
Consolidated Balance Sheets - December 31, 1999 and 1998
Consolidated Statements of Loss - Years Ended December 31, 1999
and 1998
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) -Years Ended December 31, 1999 and 1998
Consolidated Statements of Cash Flows - Years Ended December 31,
1999 and 1998
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
No financial statement schedules have been included as part of this
report because they are either not required or the information is otherwise
included.
(3) Exhibits
The following exhibits are filed as part of this report:
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1 Restated Certificate of Incorporation (filed as Exhibit 3a to the
Company's Report on Form 10-Q for the Quarter ended June 30, 1998, as
amended on September 14, 1998, and incorporated herein by reference).
3.2 By-laws, as amended (filed as Exhibit 3b to Registrant's Registration
Statement on Form S-1, No. 33-46445, and incorporated by reference).
48
<PAGE>
3.3 Certificate of Designations, Preferences, and Rights of Series J
Preferred Stock (filed as Exhibit 3.3 to the Company's Report on Form
10-QSB for quarter ended September 30, 1999).
3.4 Certificate of Designations, Preferences, and Rights of Series K
Preferred Stock (filed as Exhibit 3.4 to the Company's Report on Form
10-QSB for quarter ended September 30, 1999).
3.5 Certificate of Designations, Preferences, and Rights of Series L
Preferred Stock
4.1 Specimen common stock certificate (filed as Exhibit 4a to Registrant's
Registration Statement on Form S-18, No. 33-31836-B, and incorporated
by reference).
4.2 Stock Purchase Warrant for 56,250 shares of common stock dated august
1999 in the name of Argosy Investment Partners, L.P. (filed as Exhibit
4.1 to the Company's Report on Form 10-QSB for quarter ended September
30,1999).
4.3 Stock purchase warrant for 112,500 shares of common stock dated August
1999 in the name of Sirrom Capital Corporation . (filed as Exhibit 4.2
to the Company's Report on Form 10-QSB for quarter ended September
30,1999).
4.4 Stock purchase warrant for 33,334 shares of common stock dated June
1999 in the name of Kenilworh LLC. (filed as Exhibit 4.3 to the
Company's Report on Form 10-QSB for quarter ended September 30,1999).
10.1* 1989 Stock Option Plan, as amended (filed as Exhibit 10c to
Registrant's Registration Statement on Form S-18, No. 33-31836-B, and
incorporated by reference).
10.2* Form of Incentive Stock Option Agreement under 1989 Stock Option Plan
of the Registrant (filed as Exhibit 4.6 to Registrant's Registration
Statement on Form S-8, No. 33-66826, and incorporated by reference).
10.3* Form of Incentive Stock Option Agreement under 1989 Stock Option Plan
of the Registrant (filed as Exhibit 4.6 to Registrant's Registration
Statement on Form S-8, No. 33-66826, and incorporated by reference).
10.4* 1991 Stock Plan, as amended (filed as Exhibit 10d* to Registrant's
Transition Report on Form 10-K for the period ended December 31, 1996,
and incorporated by reference).
10.5* Form of Incentive Stock Option Agreement under 1991 Plan (filed as
Exhibit 10aa to Registrant's Registration Statement on Form S-18, No.
33-31836-B, and incorporated by reference).
10.6* Form of Non-Qualified Stock Option Agreement under 1991 Plan (filed as
Exhibit 10bb to Registrant's Registration Statement on Form S-18, No.
33-31836-B, and incorporated by reference).
10.7* 1998 Stock Option Plan ((filed as Appendix A to the Registrant's
definitive proxy materials for the Special Meeting of Stockholders on
March 4, 1998, and incorporated by reference)
10.8* Non-Qualified Stock Option Agreement dated July 24, 1996 granting a
stock option to Steven Georgiev (filed as Exhibit 10d to Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1996,
and incorporated by reference).
10.9* Employment Agreement dated November 1, 1991 by and between the Company
and Dhananjay G. Wadekar (filed as Exhibit 10d to Registrant's
Registration Statement on Form S-18, No. 33-31836-B, and incorporated
by reference).
49
<PAGE>
10.10* Amendment 1 to Key Employment Agreement by and between DynaGen, Inc.
and Dhananjay G. Wadekar (filed as Exhibit 10c to Registrant's
Registration Statement on Form S-1, No. 33-71416, and incorporated by
reference).
10.11 Secured Promissory Note dated June 18, 1997 issued by DynaGen to
Sirrom Capital Corporation (filed as Exhibit 4.6 to Registrant's
Current Report on Form 8-K dated June 18, 1997 and incorporated by
reference)
10.12 Secured Promissory Note dated June 18, 1997 issued by DynaGen to
Odyssey Investment Partners (filed as Exhibit 4.7 to Registrant's
Current Report on Form 8-K dated June 18, 1997, and incorporated by
reference).
10.13 Stock Purchase Warrant dated June 18, 1997 issued by DynaGen to Sirrom
Capital Corporation (filed as Exhibit 4.9 to Registrant's Current
Report on Form 8-K dated June 19, 1997, and incorporated by
reference).
10.14 Stock Purchase Warrant dated June 18, 1997, issued by DynaGen to
Odyssey Investment Partners, LP (filed as Exhibit 4.8 to Registrant's
Current Report on Form 8-K dated June 18, 1997, and incorporated by
reference).
10.15 Pledge and Security Agreement dated June 18, 1997 issued by DynaGen to
Sirrom Capital Corporation (filed as Exhibit 4.10 to Registrant's
Current Report on Form 8-K dated June 18, 1997, and incorporated by
reference).
10.16 Stock Purchase Warrant dated June18, 1997 issued by DynaGen to
Superior to Sirrom Capital Corporation (filed as Exhibit 4.20 to
Registrant's Current Report on Form 8-K dated June 18, 1997, and
incorporated by reference).
10.17 Stock Purchase Warrant dated June 18, 1997 issued by Superior to
Odyssey Investment Partners (filed as Exhibit 4.21 to Registrant's
Current Report on Form 8-Kj dated June 18, 1997, and incorporated by
reference).
10.18 Lease Agreement dated November 29, 1984 between Hollywood Court
Associates and Able Laboratories, Inc. with respect to the Company's
facility at 6 Hollywood Court, South Plainfield, New Jersey (filed as
Exhibit 10d to Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996, and incorporated by reference).
10.19 Space Expansion and Term Extension Agreement dated April 1988 between
Hollywood Court Associates and Able Laboratories, Inc. with respect to
the Company's facility at 6 Hollywood Court, South Plainfield, New
Jersey (files as Exhibit 10d to Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1996, and incorporated by
reference).
10.20 Assignment of Lease dated April 1989 between Hollywood Court
Associates and CVN Associates L.P. with respect to the Company's
facility at 6 Hollywood Court, South Plainfield, New Jersey (filed as
Exhibit 10d to Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996, and incorporated by reference).
10.21 Space Expansion Agreement dated June 1993 between CVN Associates, L.P.
and Able Laboratories, Inc. with respect to the Company's facility at
6 Hollywood Court, South Plainfield, New Jersey (filed as Exhibit 10v
to Registrant's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996, and incorporated by reference).
10.22 Term Extension Agreement dated June 1993 between CVN Associates, L.P.
and Able Laboratories, Inc. with respect to the Company's facility at
6 Hollywood Court, South Plainfield, New Jersey (filed as Exhibit 10d
to Registrant's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996 and incorporated by reference).
50
<PAGE>
10.23 Assignment of Lease dated August 19, 1996 between Able Laboratories,
Inc. and Able Acquisition Corp. (predecessor corporation to Able) with
respect to the Company's facility at 6 Hollywood Court, South
Plainfield, New Jersey (filed as Exhibit 10d to Registrant's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996, and
incorporated by reference).
10.24 Guaranty of Lease dated August 19, 1996 between the Company and Able
Laboratories, Inc. with respect to the Company's facility at 6
Hollywood Court, South Plainfield, New Jersey (filed as Exhibit 10d to
Registrant's Annual Report on Form 10-K for the fiscal year ended June
30, 1996, and incorporated by reference).
10.25 Loan Agreement dated June 18, 1997 among DynaGen, Sirrom, and Odyssey
(filed as Exhibit 99.1 to Registrant's Current Report on Form 8-K
dated June 17, 1997, and incorporated by reference).
10.26 Security Agreement dated June 18, 1997 among DynaGen, Sirrom and
Odyssey (filed as Exhibit 99.2 to Registrant's Current Report on from
8-K dated June 1997, and incorporated by reference).
10.27 Term Extension Agreement dated August 28, 1997 between CVN Associated,
Inc., and Able Laboratories, Inc. with respect to the Company's
facility at 6 Hollywood Court, South Plainfield, New Jersey (filed as
Exhibit 10ii to the Registrant's Report on Form 10-K for the Year
Ended December 31, 1997, and incorporated by reference).
10.28 Warrant Dated March 19, 1998 in the name of Endeavour Capital Fund
S.A. (filed as Exhibit 4f to the Company' Report on Form 10-Q for the
quarter ended March 31, 1998 and incorporated herein by reference).
10.29 Warrant to Purchase 350,000 shares of Common Stock, dated June 30,
1998 (file as Exhibit 4d to the Company's Report on From 10-Q for the
quarter ended June 30, 1998 and incorporated herein by reference).
10.30 Warrant to Purchase 400,000 shares of Common Stock, dated April 1,
1998 (filed as Exhibit 4d to the Company's Report on Form 10-Q for the
quarter ended June 30, 1998 ad incorporated herein by reference).
10.31 Warrant to Purchase 250,000 shares of Common Stock, dated April 1,
1998 (filed as Exhibit 4e to the Company's Report on Form 10-Q for the
quarter ended June 30, 1998 and incorporated herein by reference).
10.32 $250,000 Note dated April 30, 1998 (filed as Exhibit 4f to the
Company's Report on Form 10-Q for the quarter ended June 30, 1998 and
incorporated herein by reference).
10.33 $200,000 Noted dated May 13, 1998 (filed as Exhibit 4g to the
Company's Report on Form 10-Q for the quarter ended June 30, 1998 and
incorporated herein by reference).
10.34 Letter Agreement dated June 25, 1998 amending terms of Notes (filed as
Exhibit 4h to the Company's Report on From 10-Q for the quarter ended
June 30, 1998 and incorporated herein by reference.
10.35 Form of Subscription Agreement for Series H Convertible Preferred
Stock (filed as Exhibit 4i to the Company's Report on Form 10-Q for
the quarter ended June 30, 1998 and incorporated herein by reference).
10.36 Warrant dated August 26, 1998 in the name of Michael Sorrell to
purchase 150,000 shares of Common Stock. (filed as Exhibit 4a to the
Company's Report on Form 10-Q for the quarter ended September 30, 1998
and incorporated herein by reference).
10.37 Warrant dated August 1, 1998 in the name of Fortress Financial to
purchase 200,000 shares of
51
<PAGE>
Common Stock (filed as Exhibit 4b to the Company's Report on Form 10-Q
for the quarter ended September 30, 1998 and incorporated herein by
reference).
10.38 Warrant dated August 18, 1998 in the name of Carolyn Cusick to
purchase 37,500 shares of Common Stock (filed as Exhibit 4d to the
Company's Report on from 10-Q for the quarter ended September 30, 1998
and incorporated by reference).
10.39 Warrant dated August 18, 1998 in the name of Porter Capital
Corporation to purchase 37,500 shares of Common Stock (filed as
Exhibit 4d to the Company's Report on Form 10-Q for the quarter ended
September 30, 1998 and incorporated herein by reference).
10.40 $250,000 7% Convertible Debenture in the name of Sovereign Partners
dated September 29, 1998 (filed as Exhibit 4e to the Company's Report
on From 10-Q for the quarter ended September 30, 1998 and incorporated
herein by reference).
10.41 Factoring Agreement dated October 2, 1998 with K & L Financial, Inc
(filed as Exhibit 10a to the Company's Report on From 10-Q for the
quarter ended September 30, 1998 and incorporated herein by
reference).
10.42 Asset Purchase Agreement and exhibits thereto dated October 2, 1998
with Triple L, Ltd. (filed as Exhibit 10b to the Company's Report on
From 10-Q for the quarter ended September 30, 1998 and incorporated
herein by reference).
10.43 Financial Consulting and Investment Banking Agreement with Schneider
Securities, Inc. dated December 29, 1998.
10.44 Warrant to purchase 1,200,000 shares of Common Stock, dated December
29, 1998 in the name of Schneider Securities, Inc.
10.45 12% $500,000 Subordinated Promissory Note, dated November 20, 1998 in
the name of Project Capital Finance LLP
10.46 Warrant to Purchase 1,000,000 shares of Common Stock, dated November
20, 1998 in the name of Project Capital Finance LLP
10.47 Consulting Agreement with C. Robert Cusick dated May 11, 1998
10.48 Sock Option in the name of Dhananjay G. Wadekar, dated November 19,
1998.
10.49 Stock Option in the name of C. Robert Cusick, dated November 19, 1998.
10.50 Consultant Stock Plan (filed as Exhibit 4.3 to the Company's
Registration Statement on From S-8, File No. 33-57249, filed on June
19, 1998 and incorporated hereby by reference)
10.51 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.
(filed as Exhibit 10.1 to the Company's Report on From 10-QSB for
quarter ended March 31,1999).
10.52 $500,000 Promissory Note Dated January 26, 1999 in the name of Antonio
Fernandez (filed as Exhibit 10.2 to the Company's Report on Form
10-QSB for the quarter ended March 31, 1999).
10.53 Warrant to purchase 2,000 shares of Common Stock for $0.30 per share,
dated January 26, 1999 In the name of Alvin Alfonso (filed as Exhibit
10.3 to the Company's Report on From 10-QSB dated March 31, 1999).
10.54 Warrant to purchase 35,500 shares of Common Stock for $0.05 per share,
dated January 26, 1999 in
52
<PAGE>
the name of Global Holdings LLP (filed as Exhibit 10.4 to the
Company's Report on Form 10-QSB for quarter ended March 31, 1999).
10.55 Form of 12% Note Due May 28, 1999 issued in connection with the
Company's private placement of Units, each consisting of $25,000 Note
and a warrant to purchase 15,00 shares of Common Stock (filed as
Exhibit 10.5 to the Company's Report on Form 10-QSB for quarter ended
March 31, 1999).
10.56 Warrant to purchase 500,000 shares of Common tock, dated January 26,
1999 issued in connection with the Company's private placement of
nits, each consisting of a $25,000 Note and a warrant to purchase
15,000 shares of Common Stock (filed as Exhibit 10.6 to the Company's
Report on Form 10-QSB for quarter ended March 31, 1999).
10.57 Warrant to purchase 200,000 shares of Common Stock for $0.22 per
share, dated February 18, 1999 in the name of David Slavny (filed as
Exhibit 10.7 to the Company's Report on Form 10-QSB for quarter ended
March 31, 1999).
10.58 Stock Option in the name of C. Robert Cusick, dated February 4, 1999*
(filed as Exhibit 10.7 to the Company's Report on Form 10-QSB for
quarter ended March 31, 1999).
10.59 Stock Option in the mane of Dhananjay Wadekar, dated February 4, 1999*
(filed as Exhibit 10.8 to the Company's Report on the Form 10-QSB for
quarter ended March 31, 1999).
10.60 Stock Option in the name of Steven Georgiev, dated February 4, 1999*
(filed as Exhibit 10.9 to the Company's Report on the Form 10-QSB for
quarter ended March 31, 1999).
10.61 Stock Option in the name of Howard Schneider, dated November 19, 1998*
(filed as Exhibit 10.10 to the Company's Report for quarter ended
March 31, 1999).
10.62 Stock Option in the name of Steven Georgiev, dated November 19, 1998*
(filed as Exhibit 10.11 to the Company's Report for the quarter ended
March 31, 1999).
10.63 From of 9% Subordinated Convertible Debenture (filed as Exhibit 4.2 to
the Company's Registration Statement on Form S-3, File No. 333-82785,
and incorporated herein by reference).
10.64 Securities Purchase Agreement dated May 13, 1999 by and among the
Company and the several purchasers name therein (filed as Exhibit 4.3
to the Company's Registration Statement on Form S-3, File No.
333-82785, and incorporated herein by reference).
10.65 Form of Debenture issued in connection with the Mary 13, 1999
Securities Purchase Agreement (filed as Exhibit 4.4 to the Company's
Registration Statement on Form S-3, File No. 333-82785, and
incorporated herein by reference).
10.66 Form of Common Stock Purchase Warrant issued in connection with the
May 13, 1999 (filed as Exhibit 4.5 to the Company's Registration
Statement on Form S-3, File No. 333-82785, and incorporated herein by
reference).
10.67 Registration Rights Agreement dated May 13, 1999 (filed as Exhibit 4.5
to the Company's Registration Statement on Form S-3, File No.
333-82785, and incorporated herein by reference).
10.68 Form of Exchange Agreement dated June 29, 1999 (filed as Exhibit 4.6
to the Company's Registration Statement on Form S-3, File No.
333-82785, and incorporated herein by reference).
10.69 Certificate of Designations, Preferences, and Rights of Series I
Preferred Stock (filed as Exhibit 4.7 to the Company's Registration
Statement on Form S-3, File No. 333-82785, and incorporated herein by
reference).
10.70 Loan Agreement between Able Laboratories, Inc. and New Jersey Economic
Development Authority
53
<PAGE>
dated June 1, 1999 (filed as Exhibit 10.8 to the Company's Report on
From 10-QSB for quarter ended June 30, 1999).
10.71 $2,000,000 Promissory Note of Able Laboratories, Inc. dated June 1,
1999 (filed as Exhibit 10.9 to the Company's Report on Form 10-QSB for
quarter ended June 30, 1999).
10.72 Leasehold Mortgage Security Agreement, Assignment of Rents and
Financing Statement dated June 1, 1999 (filed as Exhibit 10.10 to the
Company's Report on Form 10-QSB for quarter ended June 30, 1999).
10.73 Guaranty of DynaGen, Inc. dated June 1, 1999 in favor of New Jersey
Economic Development Authority (filed as Exhibit 10.11 to the
Company's Report on Form 10-QSB for quarter ended June 30, 1999)
10.74 Warrant to Purchase 100,000 shares of Common Stock in the name of
Project Capital Partners, LLC (field as Exhibit 10.12 to the Company's
Report on Form 10-QSB for quarter ended June 30, 1999).
10.75 Consulting Agreement with Investors Relations Services, Inc. dated
April 1, 1999 (filed as Exhibit 10.13 to the Company's Report on Form
10-QSB for quarter ended June 30, 1999)
10.76 Subscription Agreement for Series J Preferred Stock dated July 1999
(filed as Exhibit 10.1 to the Company's Report on form 10-QSB for
quarter ended September 30, 1999)
10.77 Registration Rights Agreement for Series J Preferred Stock dated July,
199 (filed as Exhibit 10.2 to the Company' Report on form 10-QSB for
quarter ended September 30, 1999)
10.78 Form of Subscription Agreement for Series K Preferred Stock dated
November, 1999 (filed as Exhibit 10.3 to the Company's Report on from
10-QSB for quarter ended September 30, 1999).
10.79 Form of Registration Rights Agreement for Series K Preferred Stock
dated November, 1999 (filed as Exhibit 10.4 to the Company's Report on
form 10-QSB for quarter ended September 30, 1999).
10.80 Loan and Security Agreement with BankBoston, NA dated November 30,
1999 (filed as Exhibit 10.1 to the Company's Report S-3, File No.
333-94583, dated January 12, 2000 and incorporated by reference).
10.81 Warrant dated November 29, 1999 to purchase 250,000 shares of Common
Stock in the name of FSC Corp.
10.82 Amendment and Agreement between the Company, Finova Mezzanine Capital
Inc. f/k/a Sirrom Capital Corporation and Argosy Investment Partners,
L.P
10.83 Warrant dated November 29, 1999 to purchase 266,667 shares of Common
Stock in the name of Finova Mezzanine Capital Inc.
10.84 Warrant dated November 29, 1999 to purchase 133,333 shares of Common
Stock in the name of Argosy Investment Partners, L.P.
10.85 Guaranty of GDI dated November 29, 1999 in favor of Finova Mezzanine
Capital Inc. for itself and in its capacity as Collateral Agent
10.86 Security Agreement dated November 29, 1999 between GDI and Finova
Mezzanine Capital Inc. for itself and in its capacity as Collateral
Agent
10.87 Form of Warrant to purchase common stock issued to Project Capital
Partners
54
<PAGE>
10.88 Form of Warrant dated November 30, 1999 to purchase common stock
issued for services rendered in connection with BankBoston loan
agreement
10.89 Option to purchase 450,000 shares of common stock at $0.25 per share,
in the name of Steven Georgiev
10.90 Option to purchase 4,600,000 shares of common stock at $0.25 per
share, in the name of Dhananjay Wadekar
10.91 Option to purchase 4,100,000 shares of common stock at $0.25 per
share, in the name of C. Robert Cusick
10.92 Option to purchase 600,000 shares of common stock at $0.25 per share,
in the name of F. Howard Schneider
10.93 Option to purchase 500,000 shares of common stock at $0.25 per share,
in the name of Steven Georgiev
21.1 Subsidiaries of the Registrant
23.1 Consent of Wolf & Co., P.C.
24.1 Power of Attorney (contained on the signature page of this Annual
Report on Form 10-KSB).
27.1 Financial Data Schedule
- ---------------------------
* Indicates a management contract or any compensatory plan, contract or
arrangement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1999.
(c) Exhibits
The Company hereby file as part of this Form 10-KSB the exhibits listed
in Item 13 (a) (3) above.
55
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DYNAGEN, INC.
By: /s/ C. Robert Cusick
----------------------------------
C. Robert Cusick
President, Chief Executive Officer
and Treasurer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated; and each of the undersigned officers and directors of
DynaGen, Inc. hereby severally constitutes and appoints C. Robert Cusick and
Dhananjay G. Wadekar, and each of them singly, his true and lawful
attorneys-in-fact and agents, with full power to them, and each of them singly,
to sign for him, in his name in the capacity indicated below, all amendments to
such report on Form 10-KSB, hereby ratifying and confirming his signature as it
may be signed by his attorneys to such report and any and all amendments
thereto.
<TABLE><CAPTION>
Signature Date Title
<S> <C> <C>
/S/ C. ROBERT CUSICK March 30, 2000 President, Chief Executive Officer, Treasurer and
- --------------------------------------------------------------- Director (PRINCIPAL EXECUTIVE OFFICER)
C. ROBERT CUSICK
/S/ DHANANJAY G. WADEKAR March 30, 2000 Executive Vice President and Director
- --------------------------------------------------------------- (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
DHANANJAY G. WADEKAR
/S/ F. HOWARD SCHNEIDER March 30, 2000 Director
- ---------------------------------------------------------------
F. HOWARD SCHNEIDER
</TABLE>
56
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1 Restated Certificate of Incorporation (filed as Exhibit 3a to the
Company's Report on Form 10-Q for the Quarter ended June 30, 1998, as
amended on September 14, 1998, and incorporated herein by reference).
3.2 By-laws, as amended (filed as Exhibit 3b to Registrant's Registration
Statement on Form S-1, No. 33-46445, and incorporated by reference).
3.3 Certificate of Designations, Preferences, and Rights of Series J
Preferred Stock (filed as Exhibit 3.3 to the Company's Report on Form
10-QSB for quarter ended September 30, 1999).
3.4 Certificate of Designations, Preferences, and Rights of Series K
Preferred Stock (filed as Exhibit 3.4 to the Company's Report on Form
10-QSB for quarter ended September 30, 1999).
3.5 Certificate of Designations, Preferences, and Rights of Series L
Preferred Stock
4.1 Specimen common stock certificate (filed as Exhibit 4a to Registrant's
Registration Statement on Form S-18, No. 33-31836-B, and incorporated
by reference).
4.2 Stock Purchase Warrant for 56,250 shares of common stock dated august
1999 in the name of Argosy Investment Partners, L.P. (filed as Exhibit
4.1 to the Company's Report on Form 10-QSB for quarter ended September
30,1999).
4.3 Stock purchase warrant for 112,500 shares of common stock dated August
1999 in the name of Sirrom Capital Corporation . (filed as Exhibit 4.2
to the Company's Report on Form 10-QSB for quarter ended September
30,1999).
4.4 Stock purchase warrant for 33,334 shares of common stock dated June
1999 in the name of Kenilworh LLC. (filed as Exhibit 4.3 to the
Company's Report on Form 10-QSB for quarter ended September 30,1999).
10.1* 1989 Stock Option Plan, as amended (filed as Exhibit 10c to
Registrant's Registration Statement on Form S-18, No. 33-31836-B, and
incorporated by reference).
10.2* Form of Incentive Stock Option Agreement under 1989 Stock Option Plan
of the Registrant (filed as Exhibit 4.6 to Registrant's Registration
Statement on Form S-8, No. 33-66826, and incorporated by reference).
10.3* Form of Incentive Stock Option Agreement under 1989 Stock Option Plan
of the Registrant (filed as Exhibit 4.6 to Registrant's Registration
Statement on Form S-8, No. 33-66826, and incorporated by reference).
10.4* 1991 Stock Plan, as amended (filed as Exhibit 10d* to Registrant's
Transition Report on Form 10-K for the period ended December 31, 1996,
and incorporated by reference).
10.5* Form of Incentive Stock Option Agreement under 1991 Plan (filed as
Exhibit 10aa to Registrant's Registration Statement on Form S-18, No.
33-31836-B, and incorporated by reference).
10.6* Form of Non-Qualified Stock Option Agreement under 1991 Plan (filed as
Exhibit 10bb to Registrant's Registration Statement on Form S-18, No.
33-31836-B, and incorporated by reference).
10.7* 1998 Stock Option Plan ((filed as Appendix A to the Registrant's
definitive proxy materials for the Special Meeting of Stockholders on
March 4, 1998, and incorporated by reference)
10.8* Non-Qualified Stock Option Agreement dated July 24, 1996 granting a
stock option to Steven Georgiev (filed as Exhibit 10d to Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 1996,
and incorporated by reference).
10.9* Employment Agreement dated November 1, 1991 by and between the Company
and Dhananjay G. Wadekar (filed as Exhibit 10d to Registrant's
Registration Statement on Form S-18, No. 33-31836-B, and incorporated
by reference).
10.10* Amendment 1 to Key Employment Agreement by and between DynaGen, Inc.
and Dhananjay G. Wadekar (filed as Exhibit 10c to Registrant's
Registration Statement on Form S-1, No. 33-71416, and incorporated by
reference).
10.11 Secured Promissory Note dated June 18, 1997 issued by DynaGen to
Sirrom Capital Corporation (filed as Exhibit 4.6 to Registrant's
Current Report on Form 8-K dated June 18, 1997 and incorporated by
reference)
10.12 Secured Promissory Note dated June 18, 1997 issued by DynaGen to
Odyssey Investment Partners (filed as Exhibit 4.7 to Registrant's
Current Report on Form 8-K dated June 18, 1997, and incorporated by
reference).
10.13 Stock Purchase Warrant dated June 18, 1997 issued by DynaGen to Sirrom
Capital Corporation (filed as Exhibit 4.9 to Registrant's Current
Report on Form 8-K dated June 19, 1997, and incorporated by
reference).
10.14 Stock Purchase Warrant dated June 18, 1997, issued by DynaGen to
Odyssey Investment Partners, LP (filed as Exhibit 4.8 to Registrant's
Current Report on Form 8-K dated June 18, 1997, and incorporated by
reference).
10.15 Pledge and Security Agreement dated June 18, 1997 issued by DynaGen to
Sirrom Capital Corporation (filed as Exhibit 4.10 to Registrant's
Current Report on Form 8-K dated June 18, 1997, and incorporated by
reference).
10.16 Stock Purchase Warrant dated June18, 1997 issued by DynaGen to
Superior to Sirrom Capital Corporation (filed as Exhibit 4.20 to
Registrant's Current Report on Form 8-K dated June 18, 1997, and
incorporated by reference).
10.17 Stock Purchase Warrant dated June 18, 1997 issued by Superior to
Odyssey Investment Partners (filed as Exhibit 4.21 to Registrant's
Current Report on Form 8-Kj dated June 18, 1997, and incorporated by
reference).
10.18 Lease Agreement dated November 29, 1984 between Hollywood Court
Associates and Able Laboratories, Inc. with respect to the Company's
facility at 6 Hollywood Court, South Plainfield, New Jersey (filed as
Exhibit 10d to Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996, and incorporated by reference).
10.19 Space Expansion and Term Extension Agreement dated April 1988 between
Hollywood Court Associates and Able Laboratories, Inc. with respect to
the Company's facility at 6 Hollywood Court, South Plainfield, New
Jersey (files as Exhibit 10d to Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1996, and incorporated by
reference).
10.20 Assignment of Lease dated April 1989 between Hollywood Court
Associates and CVN Associates L.P. with respect to the Company's
facility at 6 Hollywood Court, South Plainfield, New Jersey (filed as
Exhibit 10d to Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1996, and incorporated by reference).
10.21 Space Expansion Agreement dated June 1993 between CVN Associates, L.P.
and Able Laboratories, Inc. with respect to the Company's facility at
6 Hollywood Court, South Plainfield, New Jersey (filed as Exhibit 10v
to Registrant's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996, and incorporated by reference).
10.22 Term Extension Agreement dated June 1993 between CVN Associates, L.P.
and Able Laboratories, Inc. with respect to the Company's facility at
6 Hollywood Court, South Plainfield, New Jersey (filed as Exhibit 10d
to Registrant's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996 and incorporated by reference).
10.23 Assignment of Lease dated August 19, 1996 between Able Laboratories,
Inc. and Able Acquisition Corp. (predecessor corporation to Able) with
respect to the Company's facility at 6 Hollywood Court, South
Plainfield, New Jersey (filed as Exhibit 10d to Registrant's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996, and
incorporated by reference).
10.24 Guaranty of Lease dated August 19, 1996 between the Company and Able
Laboratories, Inc. with respect to the Company's facility at 6
Hollywood Court, South Plainfield, New Jersey (filed as Exhibit 10d to
Registrant's Annual Report on Form 10-K for the fiscal year ended June
30, 1996, and incorporated by reference).
10.25 Loan Agreement dated June 18, 1997 among DynaGen, Sirrom, and Odyssey
(filed as Exhibit 99.1 to Registrant's Current Report on Form 8-K
dated June 17, 1997, and incorporated by reference).
10.26 Security Agreement dated June 18, 1997 among DynaGen, Sirrom and
Odyssey (filed as Exhibit 99.2 to Registrant's Current Report on from
8-K dated June 1997, and incorporated by reference).
10.27 Term Extension Agreement dated August 28, 1997 between CVN Associated,
Inc., and Able Laboratories, Inc. with respect to the Company's
facility at 6 Hollywood Court, South Plainfield, New Jersey (filed as
Exhibit 10ii to the Registrant's Report on Form 10-K for the Year
Ended December 31, 1997, and incorporated by reference).
10.28 Warrant Dated March 19, 1998 in the name of Endeavour Capital Fund
S.A. (filed as Exhibit 4f to the Company' Report on Form 10-Q for the
quarter ended March 31, 1998 and incorporated herein by reference).
10.29 Warrant to Purchase 350,000 shares of Common Stock, dated June 30,
1998 (file as Exhibit 4d to the Company's Report on From 10-Q for the
quarter ended June 30, 1998 and incorporated herein by reference).
10.30 Warrant to Purchase 400,000 shares of Common Stock, dated April 1,
1998 (filed as Exhibit 4d to the Company's Report on Form 10-Q for the
quarter ended June 30, 1998 ad incorporated herein by reference).
10.31 Warrant to Purchase 250,000 shares of Common Stock, dated April 1,
1998 (filed as Exhibit 4e to the Company's Report on Form 10-Q for the
quarter ended June 30, 1998 and incorporated herein by reference).
10.32 $250,000 Note dated April 30, 1998 (filed as Exhibit 4f to the
Company's Report on Form 10-Q for the quarter ended June 30, 1998 and
incorporated herein by reference).
10.33 $200,000 Noted dated May 13, 1998 (filed as Exhibit 4g to the
Company's Report on Form 10-Q for the quarter ended June 30, 1998 and
incorporated herein by reference).
10.34 Letter Agreement dated June 25, 1998 amending terms of Notes (filed as
Exhibit 4h to the Company's Report on From 10-Q for the quarter ended
June 30, 1998 and incorporated herein by reference.
10.35 Form of Subscription Agreement for Series H Convertible Preferred
Stock (filed as Exhibit 4i to the Company's Report on Form 10-Q for
the quarter ended June 30, 1998 and incorporated herein by reference).
10.36 Warrant dated August 26, 1998 in the name of Michael Sorrell to
purchase 150,000 shares of Common Stock. (filed as Exhibit 4a to the
Company's Report on Form 10-Q for the quarter ended September 30, 1998
and incorporated herein by reference).
10.37 Warrant dated August 1, 1998 in the name of Fortress Financial to
purchase 200,000 shares of Common Stock (filed as Exhibit 4b to the
Company's Report on Form 10-Q for the quarter ended September 30, 1998
and incorporated herein by reference).
10.38 Warrant dated August 18, 1998 in the name of Carolyn Cusick to
purchase 37,500 shares of Common Stock (filed as Exhibit 4d to the
Company's Report on from 10-Q for the quarter ended September 30, 1998
and incorporated by reference).
10.39 Warrant dated August 18, 1998 in the name of Porter Capital
Corporation to purchase 37,500 shares of Common Stock (filed as
Exhibit 4d to the Company's Report on Form 10-Q for the quarter ended
September 30, 1998 and incorporated herein by reference).
10.40 $250,000 7% Convertible Debenture in the name of Sovereign Partners
dated September 29, 1998 (filed as Exhibit 4e to the Company's Report
on From 10-Q for the quarter ended September 30, 1998 and incorporated
herein by reference).
10.41 Factoring Agreement dated October 2, 1998 with K & L Financial, Inc
(filed as Exhibit 10a to the Company's Report on From 10-Q for the
quarter ended September 30, 1998 and incorporated herein by
reference).
10.42 Asset Purchase Agreement and exhibits thereto dated October 2, 1998
with Triple L, Ltd. (filed as Exhibit 10b to the Company's Report on
From 10-Q for the quarter ended September 30, 1998 and incorporated
herein by reference).
10.43 Financial Consulting and Investment Banking Agreement with Schneider
Securities, Inc. dated December 29, 1998.
10.44 Warrant to purchase 1,200,000 shares of Common Stock, dated December
29, 1998 in the name of Schneider Securities, Inc.
10.45 12% $500,000 Subordinated Promissory Note, dated November 20, 1998 in
the name of Project Capital Finance LLP
10.46 Warrant to Purchase 1,000,000 shares of Common Stock, dated November
20, 1998 in the name of Project Capital Finance LLP
10.47 Consulting Agreement with C. Robert Cusick dated May 11, 1998
10.48 Sock Option in the name of Dhananjay G. Wadekar, dated November 19,
1998.
10.49 Stock Option in the name of C. Robert Cusick, dated November 19, 1998.
10.50 Consultant Stock Plan (filed as Exhibit 4.3 to the Company's
Registration Statement on From S-8, File No. 33-57249, filed on June
19, 1998 and incorporated hereby by reference)
10.51 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.
(filed as Exhibit 10.1 to the Company's Report on From 10-QSB for
quarter ended March 31,1999).
10.52 $500,000 Promissory Note Dated January 26, 1999 in the name of Antonio
Fernandez (filed as Exhibit 10.2 to the Company's Report on Form
10-QSB for the quarter ended March 31, 1999).
10.53 Warrant to purchase 2,000 shares of Common Stock for $0.30 per share,
dated January 26, 1999 In the name of Alvin Alfonso (filed as Exhibit
10.3 to the Company's Report on From 10-QSB dated March 31, 1999).
10.54 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 (filed as
Exhibit 10.4 to the Company's Report on Form 10-QSB for quarter ended
March 31, 1999).
10.55 Form of 12% Note Due May 28, 1999 issued in connection with the
Company's private placement of Units, each consisting of $25,000 Note
and a warrant to purchase 15,00 shares of Common Stock (filed as
Exhibit 10.5 to the Company's Report on Form 10-QSB for quarter ended
March 31, 1999).
10.56 Warrant to purchase 500,000 shares of Common tock, dated January 26,
1999 issued in connection with the Company's private placement of
nits, each consisting of a $25,000 Note and a warrant to purchase
15,000 shares of Common Stock (filed as Exhibit 10.6 to the Company's
Report on Form 10-QSB for quarter ended March 31, 1999).
10.57 Warrant to purchase 200,000 shares of Common Stock for $0.22 per
share, dated February 18, 1999 in the name of David Slavny (filed as
Exhibit 10.7 to the Company's Report on Form 10-QSB for quarter ended
March 31, 1999).
10.58 Stock Option in the name of C. Robert Cusick, dated February 4, 1999*
(filed as Exhibit 10.7 to the Company's Report on Form 10-QSB for
quarter ended March 31, 1999).
10.59 Stock Option in the mane of Dhananjay Wadekar, dated February 4, 1999*
(filed as Exhibit 10.8 to the Company's Report on the Form 10-QSB for
quarter ended March 31, 1999).
10.60 Stock Option in the name of Steven Georgiev, dated February 4, 1999*
(filed as Exhibit 10.9 to the Company's Report on the Form 10-QSB for
quarter ended March 31, 1999).
10.61 Stock Option in the name of Howard Schneider, dated November 19, 1998*
(filed as Exhibit 10.10 to the Company's Report for quarter ended
March 31, 1999).
10.62 Stock Option in the name of Steven Georgiev, dated November 19, 1998*
(filed as Exhibit 10.11 to the Company's Report for the quarter ended
March 31, 1999).
10.63 From of 9% Subordinated Convertible Debenture (filed as Exhibit 4.2 to
the Company's Registration Statement on Form S-3, File No. 333-82785,
and incorporated herein by reference).
10.64 Securities Purchase Agreement dated May 13, 1999 by and among the
Company and the several purchasers name therein (filed as Exhibit 4.3
to the Company's Registration Statement on Form S-3, File No.
333-82785, and incorporated herein by reference).
10.65 Form of Debenture issued in connection with the Mary 13, 1999
Securities Purchase Agreement (filed as Exhibit 4.4 to the Company's
Registration Statement on Form S-3, File No. 333-82785, and
incorporated herein by reference).
10.66 Form of Common Stock Purchase Warrant issued in connection with the
May 13, 1999 (filed as Exhibit 4.5 to the Company's Registration
Statement on Form S-3, File No. 333-82785, and incorporated herein by
reference).
10.67 Registration Rights Agreement dated May 13, 1999 (filed as Exhibit 4.5
to the Company's Registration Statement on Form S-3, File No.
333-82785, and incorporated herein by reference).
10.68 Form of Exchange Agreement dated June 29, 1999 (filed as Exhibit 4.6
to the Company's Registration Statement on Form S-3, File No.
333-82785, and incorporated herein by reference).
10.69 Certificate of Designations, Preferences, and Rights of Series I
Preferred Stock (filed as Exhibit 4.7 to the Company's Registration
Statement on Form S-3, File No. 333-82785, and incorporated herein by
reference).
10.70 Loan Agreement between Able Laboratories, Inc. and New Jersey Economic
Development Authority dated June 1, 1999 (filed as Exhibit 10.8 to the
Company's Report on From 10-QSB for quarter ended June 30, 1999).
10.71 $2,000,000 Promissory Note of Able Laboratories, Inc. dated June 1,
1999 (filed as Exhibit 10.9 to the Company's Report on Form 10-QSB for
quarter ended June 30, 1999).
10.72 Leasehold Mortgage Security Agreement, Assignment of Rents and
Financing Statement dated June 1, 1999 (filed as Exhibit 10.10 to the
Company's Report on Form 10-QSB for quarter ended June 30, 1999).
10.73 Guaranty of DynaGen, Inc. dated June 1, 1999 in favor of New Jersey
Economic Development Authority (filed as Exhibit 10.11 to the
Company's Report on Form 10-QSB for quarter ended June 30, 1999)
10.74 Warrant to Purchase 100,000 shares of Common Stock in the name of
Project Capital Partners, LLC (field as Exhibit 10.12 to the Company's
Report on Form 10-QSB for quarter ended June 30, 1999).
10.75 Consulting Agreement with Investors Relations Services, Inc. dated
April 1, 1999 (filed as Exhibit 10.13 to the Company's Report on Form
10-QSB for quarter ended June 30, 1999)
10.76 Subscription Agreement for Series J Preferred Stock dated July 1999
(filed as Exhibit 10.1 to the Company's Report on form 10-QSB for
quarter ended September 30, 1999)
10.77 Registration Rights Agreement for Series J Preferred Stock dated July,
199 (filed as Exhibit 10.2 to the Company' Report on form 10-QSB for
quarter ended September 30, 1999)
10.78 Form of Subscription Agreement for Series K Preferred Stock dated
November, 1999 (filed as Exhibit 10.3 to the Company's Report on from
10-QSB for quarter ended September 30, 1999).
10.79 Form of Registration Rights Agreement for Series K Preferred Stock
dated November, 1999 (filed as Exhibit 10.4 to the Company's Report on
form 10-QSB for quarter ended September 30, 1999).
10.80 Loan and Security Agreement with BankBoston, NA dated November 30,
1999 (filed as Exhibit 10.1 to the Company's Report S-3, File No.
333-94583, dated January 12, 2000 and incorporated by reference).
10.81 Warrant dated November 29, 1999 to purchase 250,000 shares of Common
Stock in the name of FSC Corp.
10.82 Amendment and Agreement between the Company, Finova Mezzanine Capital
Inc. f/k/a Sirrom Capital Corporation and Argosy Investment Partners,
L.P
10.83 Warrant dated November 29, 1999 to purchase 266,667 shares of Common
Stock in the name of Finova Mezzanine Capital Inc.
10.84 Warrant dated November 29, 1999 to purchase 133,333 shares of Common
Stock in the name of Argosy Investment Partners, L.P.
10.85 Guaranty of GDI dated November 29, 1999 in favor of Finova Mezzanine
Capital Inc. for itself and in its capacity as Collateral Agent
10.86 Security Agreement dated November 29, 1999 between GDI and Finova
Mezzanine Capital Inc. for itself and in its capacity as Collateral
Agent
10.87 Form of Warrant to purchase common stock issued to Project Capital
Partners
10.88 Form of Warrant dated November 30, 1999 to purchase common stock
issued for services rendered in connection with BankBoston loan
agreement
10.89 Option to purchase 450,000 shares of common stock at $0.25 per share,
in the name of Steven Georgiev
10.90 Option to purchase 4,600,000 shares of common stock at $0.25 per
share, in the name of Dhananjay Wadekar
10.91 Option to purchase 4,100,000 shares of common stock at $0.25 per
share, in the name of C. Robert Cusick
10.92 Option to purchase 600,000 shares of common stock at $0.25 per share,
in the name of F. Howard Schneider
10.93 Option to purchase 500,000 shares of common stock at $0.25 per share,
in the name of Steven Georgiev
21.1 Subsidiaries of the Registrant
23.1 Consent of Wolf & Co., P.C.
24.1 Power of Attorney (contained on the signature page of this Annual
Report on Form 10-KSB).
27.1 Financial Data Schedule
- ---------------------------
* Indicates a management contract or any compensatory plan, contract or
arrangement.
EXHIBIT 3.5
-----------
DYNAGEN, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES L PREFERRED STOCK
The undersigned officer of DynaGen, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that, pursuant to authority conferred by the
Certificate of Incorporation, as amended to date, and pursuant to the provisions
of Section 151 of the General Corporation Law of the State of Delaware, the
Board of Directors of the Corporation, by unanimous written consent dated
October 1, 1999, adopted a resolution providing for certain powers,
designations, preferences and relative, participating, optional or other rights,
and the qualifications, limitations or restrictions thereof, of certain shares
of Series L Preferred Stock, $.01 par value, of the Corporation, which
resolution is as follows:
RESOLVED: That, pursuant to the authority vested in the Board of
Directors of the Corporation and in accordance with the General Corporation Law
of the State of Delaware and the provisions of the Corporation's Certificate of
Incorporation, a series of 10,000 shares of the class of authorized Preferred
Stock, par value $.01 per share, of the Corporation is hereby created as the
Series L Preferred Stock, and that the designation and number of shares thereof
and the voting powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof, are as set forth on Exhibit A attached
hereto.
EXECUTED as of this 23rd day of November, 1999.
DynaGen, Inc.
By: /s/ Dhananjay G. Wadekar
----------------------------
Dhananjay G. Wadekar,
Executive Vice President and
Chairman of the Board
<PAGE>
EXHIBIT A
A. Description and Designation of Series L Preferred Stock
1. Designation. A total of 10,000 shares of the Corporation's
previously undesignated Preferred Stock, $.01 par value, shall be designated as
the "Series L Preferred Stock."
2. Non-transferability. Series L Preferred Stock shall be
non-transferable because there does not exist an established trading market for
said stock, and the Series L Preferred Stock may only be converted by the
original holder of stock certificates evidencing ownership of such shares.
3. Dividends
Holders of shares of Series L Preferred Stock shall not be entitled to
participate in any dividends which may be declared or paid on the Common Stock,
any other class or series of Preferred Stock or otherwise.
4. Liquidation, Dissolution or Winding Up
(a) Treatment at Liquidation, Dissolution or Winding Up. In the event
of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, or in the event of its insolvency, before any
distribution or payment is made to any holders of Common Stock or any other
class or series of capital stock of the Corporation designated to be junior to
the Series L Preferred Stock (if any), and subject to the liquidation rights and
preferences of any class or series of preferred stock issued in the future and
designated by the Board of Directors to be senior to, or on a parity with the
Series L Preferred with respect to liquidation preferences, the holders of each
share of Series L Preferred Stock shall be entitled to be paid first out of the
assets of the Corporation available for distribution to holders of the
Corporation's capital stock of all classes, whether such assets are capital,
surplus or earnings, an aggregate amount equal to: $750,000, plus an amount
equal to the interest that would be payable on $750,000 if it had earned simple
interest at 13.5% per annum from the date if this Certificate of Designations
until the record date for determining the amount of payment due to the
Corporation's stockholders in liquidation, less the aggregate amount of all
actual cash proceeds received from the sale of the Converted Shares of Common
Stock as that term is defined in Section 6(c)(i) (the "Liquidation Value"). The
Liquidation Value shall be distributed pro rata to the holders of the Series L
Preferred Stock in proportion to the number of shares held by each such holder
of Series L Preferred Stock. The Series L Preferred Stock will rank junior to
all classes of preferred stock currently outstanding but senior to the Common
Stock.
If, upon liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation available for distribution to its stockholders shall
be insufficient to pay the holders of the Series L Preferred Stock the full
amounts to which they otherwise would be entitled, the holders of Series L
Preferred Stock shall share ratably in any distribution of available assets PRO
RATA in proportion to the respective liquidation preference amounts which would
otherwise be payable upon liquidation with respect to the outstanding shares of
the Series L Preferred Stock if all liquidation preference amounts with respect
to such shares were paid in full, based upon the aggregate Liquidation Value
payable upon all shares of Series L Preferred Stock then outstanding.
After such payment shall have been made in full to the holders of the
Series L Preferred Stock, or funds necessary for such payment shall have been
set aside by the Corporation in trust for the account of holders of the Series L
Preferred Stock so as to be available for such payment, the remaining assets
available for distribution shall be distributed ratably among the holders of the
Common Stock and any other class or series of capital stock designated to be
junior to the Series L Preferred Stock (if any) in right of payment upon any
liquidation, dissolution or winding up of the Corporation.
(b) Distributions Other Than Cash. Whenever the distributions provided
for in this Section 4 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors. All distributions (including
distributions other than cash) made hereunder shall be made PRO RATA to the
holders of Series L Preferred Stock.
<PAGE>
5. Voting Power.
(a) General. Except as otherwise expressly provided in this Section 5
or as otherwise required by the General Corporation Law of the State of
Delaware, each holder of Series L Preferred Stock shall be entitled to vote on
all matters and shall be entitled to that number of votes equal to the largest
number of whole shares of Common Stock into which such holder's shares of Series
L Preferred Stock could be converted, pursuant to the provisions and limitations
of Section 5 hereof, at the record date for the determination of stockholders
entitled to vote on any matter or, if no such record date is established, at the
date such vote is taken or any written consent of stockholders is solicited.
Except as otherwise required by law, the holders of shares of Series L Preferred
Stock and Common Stock shall vote together (or render written consents in lieu
of a vote) as a single class on all matters submitted to the stockholders of the
Corporation.
Such determination of "whole shares" shall be based upon the aggregate
number of shares of Series L Preferred Stock held by each holder, and not upon
each share of Series L Preferred Stock so held by the holder.
6. Conversion Rights. The holders of the Series L Preferred Stock shall
have the following rights with respect to the conversion of such shares into
shares of Common Stock:
(a) Optional Conversion. Each holder of Series L Preferred Stock shall
have the right, at such holder's option, to convert during any five (5) trading
day period up to a maximum of 500 shares of Series L Preferred Stock held by
such holder into such number of fully paid and nonassessable shares of Common
Stock as shall be determined by multiplying the number of shares of Series L
Preferred Stock to be converted by a fraction, the numerator of which is 100 and
the denominator of which is the applicable Conversion Price (as defined below).
(b) "Conversion Price" shall equal the average of the closing bid price
of the Common Stock of the Corporation as reported on the OTC Bulletin Board for
the three (3) trading days immediately prior to the day of the conversion.
(c) Automatic Cancellation of Preferred Stock.
(i) Automatic Cancellation. Subject to the limitations set forth in
Section 6(a) above, if a Series L Preferred Stock holder converts Series L
Preferred Stock into Common Stock (the "Converted Shares of Common Stock")
pursuant to this Section 6 and thereafter sells the Converted Shares of Common
Stock within two (2) trading days of the "Conversion Date," as defined in
Section 6(f), the dollar amount of the net proceeds from the sale (after
brokers' commissions and expenses but before payment of any tax liabilities
resulting from the sale) will be added to an account of the selling Series L
Preferred Stock holder, that for purposes of this section shall be called the
"Stockholder's Total Value Account." If a Series L Preferred Stock holder
converts Series L Preferred Stock into Common Stock pursuant to Section 6 and
thereafter does not sell the Converted Shares of Common Stock within two (2)
trading days of the Conversion Date, a dollar amount, equal to the Conversion
Price applicable to such Converted Shares of Common Stock multiplied by the
number of such Converted Shares of Common Stock held in excess of two (2)
trading days, will be added to the Stockholder's Total Value Account. On the
Conversion Date (the "Final Conversion Date") on which the aggregate dollar
amount of all Stockholders' Total Value Accounts exceeds: (a) $750,000; (b)
multiplied by a percentage equal to the percentage of the issued and outstanding
Series L Preferred Stock held by the holder; (c) plus the additional amount that
would have accrued on the resulting product if such amount had earned simple
interest at the rate of 13.5 per annum from the date that this Certificate of
Designations is filed until the Final Conversion Date, any and all remaining,
unconverted shares of Series L Preferred Stock held by such holder will be
automatically canceled by the Corporation without consideration. The amount
obtained by the calculation set forth in the immediately preceding sentence is
referred to in this Certificate of Designations sometimes as the "Maximum
Conversion Value."
(ii) Example. By way of example and illustration of the foregoing
conversion mechanics, if a holder of Series L Preferred Stock converts 500
shares of Series L Preferred Stock on the first day possible under Section 6(a)
above, at a Conversion Price of $1.00 (thereby receiving 50,000 shares of Common
Stock) and resells all of those shares within the next two (2) trading days at a
sale price of $0.75 per share, $37,500 (a sale price of $0.75
<PAGE>
multiplied by 50,000 shares sold), less any costs of the transaction (that is,
broker's commissions and expenses but not payment of any tax liability resulting
from the sale) will be added to the Stockholder's Total Value Account. If, after
waiting two (2) trading days the holder of Series L Preferred Stock converts
another 500 shares of Series L Preferred Stock, at a Conversion Price of $2.00
(thereby receiving 25,000 shares of Common Stock) and resells only 10,000 shares
within the next two (2) trading days at a sale price of $1.50 per share, $15,000
(a sale price of $1.50 multiplied by 10,000 shares sold) less any costs of the
transaction will be added to the Stockholder's Total Value Account.
Additionally, $30,000 will be added to the Stockholder's Total Value Account
reflecting the 15,000 unsold shares of Common Stock valued at the $2.00
Conversion Price. This value applies because the shares of Common Stock were
held for more than two (2) trading days. Once the aggregate amount of the
holder's Total Value Account reaches or exceeds the Maximum Conversion Value,
all the remaining shares of unconverted Series L Preferred Stock held by such
holder will be automatically canceled by the Corporation without any further
action by the holder.
(iii) Surrender of Certificates Upon Automatic Cancellation. Upon the
occurrence of a cancellation event specified in the preceding paragraph (i), the
holder of the cancelled Series L Preferred Stock shall, upon notice from the
Corporation, surrender the certificates representing such shares at the office
of the Corporation or of its transfer agent for the Common Stock.
(d) Capital Reorganization or Reclassification. If the Common Stock
issuable upon the conversion of the Series L Preferred Stock shall be changed
into the same or different number of shares of any class or classes of capital
stock, whether by capital reorganization, recapitalization, reclassification or
otherwise, then and in each such event the holders of Series L Preferred Stock
shall have the right thereafter to convert such shares in accordance with this
Section 6 into the kind and amount of shares of capital stock and other
securities and property receivable upon such reorganization, recapitalization,
reclassification or other change by the holders of the number of shares of
Common Stock into which such shares of Series L Preferred Stock might have been
converted immediately prior to such reorganization, recapitalization,
reclassification or change, all subject to further adjustment as provided herein
and not exceeding the Maximum Conversion Value.
(e) Merger or Sale of Assets. If at any time or from time to time there
shall be a merger or consolidation of the Corporation with or into another
corporation (other than a merger or reorganization involving only a change in
the state of incorporation of the Corporation or the acquisition by the
Corporation of other businesses where the Corporation survives as a going
concern), or the sale of all or substantially all of the Corporation's capital
stock or assets to any other person, then, as a part of such merger,
consolidation or sale, provision shall be made so that the holders of the Series
L Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series L Preferred Stock the total number of shares of stock or other securities
or property (including cash) of the Corporation, or of the successor corporation
resulting from such merger, consolidation or sale, to which such holder would
have been entitled if such holder had converted all of their shares of Series L
Preferred Stock into Common Stock at the Conversion Price in effect immediately
prior to the effective time of such merger, consolidation or sale, not to exceed
the Maximum Conversion Value (notwithstanding the limitations on conversion set
forth in Section 6(a) above).
(f) Exercise of Conversion Privilege. To exercise its conversion
privilege in accordance with the time limitations of Section 6(a), a holder of
Series L Preferred Stock shall surrender the certificate(s) representing the
shares being converted to the Corporation at its principal office, and shall
give written notice to the Corporation at that office that such holder elects to
convert such shares. Such notice shall also state the name or names (with
address or addresses) in which the certificate(s) for shares of Common Stock
issuable upon such conversion shall be issued. The certificate(s) for shares of
Series L Preferred Stock surrendered for conversion shall be accompanied by
proper assignment thereof to the Corporation or in blank. The date when such
written notice is actually received by the Corporation, together with the
certificate(s) representing the shares of Series L Preferred Stock being
converted, shall be the "Conversion Date." As promptly as practicable after the
Conversion Date, the Corporation shall issue and shall deliver to the holder of
the shares of Series L Preferred Stock being converted, or on its written order,
such certificate(s) as it may request for the number of whole shares of Common
Stock issuable upon the conversion of such shares of Series L Preferred Stock in
accordance with the provisions of this Section 6, and cash, as provided in
Section 6(g), in respect of any fraction of a share of Common Stock issuable
upon such conversion. Such conversion shall be deemed to have been effected
immediately prior to the close of business on the Conversion Date, and at such
<PAGE>
time the rights of the holder as holder of the converted shares of Series L
Preferred Stock shall cease and the person(s) in whose name(s) any
certificate(s) for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder(s) of record of the shares of Common
Stock represented thereby.
(g) Cash in Lieu of Fractional Shares. No fractional shares of Common
Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series L Preferred Stock. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
Series L Preferred Stock, the Corporation shall pay to the holder of the shares
of Series L Preferred Stock which were converted a cash adjustment in respect of
such fractional shares in an amount equal to the same fraction of the market
price per share of the Common Stock (as determined in a reasonable manner
prescribed by the Board of Directors) at the close of business on the Conversion
Date. The determination as to whether or not any fractional shares are issuable
shall be based upon the aggregate number of shares of Series L Preferred Stock
being converted at any one time by any holder thereof, not upon each share of
Series L Preferred Stock being converted.
(h) Partial Conversion. In the event some but not all of the shares of
Series L Preferred Stock represented by a certificate(s) surrendered by a holder
are converted, the Corporation shall execute and deliver to or on the order of
the holder, at the expense of the Corporation, a new certificate representing
the number of shares of Series L Preferred Stock which were not converted.
(i) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Series L Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series L Preferred Stock (including any shares of Series L
Preferred Stock represented by any warrants, options, subscription or purchase
rights for the Series L Preferred Stock), and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series L Preferred Stock
(including any shares of Series L Preferred Stock represented by any warrants,
options, subscriptions or purchase rights for the Series L Preferred Stock), the
Corporation shall use all reasonable efforts and take such action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
(j) No Reissuance of Preferred Stock. Until the cancellation of all
issued and outstanding shares of Series L Preferred Stock as set forth in
Section 6(c) above, no share or shares of Series L Preferred Stock acquired by
the Corporation by reason of redemption, purchase, conversion or otherwise shall
be reissued, and all such shares shall be canceled, retired and eliminated from
the shares of Series L Preferred Stock which the Corporation shall be authorized
to issue. The Corporation shall from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of shares
of the Series L Preferred Stock. Any shares of Series L Preferred Stock so
canceled or retired may be added to the Corporation's reserve of authorized but
undesignated Preferred Stock.
7. Notices of Record Date. In the event of any:
(a) taking by the Corporation of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of capital stock of any
class or any other securities or property, or to receive any other right, or
(b) capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, or any transfer of all or substantially all of
the assets of the Corporation to any other Corporation, or any other entity or
person, or
(c) voluntary or involuntary dissolution, liquidation or winding up of
the Corporation, then and in each such event the Corporation shall mail or cause
to be mailed to each holder of Series L Preferred Stock a notice specifying (i)
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right and a description of such dividend, distribution
or right, (ii) the date on which any such reorganization,
<PAGE>
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up is expected to become effective, and
(iii) the time, if any, that is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other property deliverable
upon such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up. Such notice shall
be mailed by first class mail, postage prepaid, or by express overnight courier
service, at least ten (10) days prior to the date specified in such notice on
which such action is to be taken.
EXHIBIT 10.81
-------------
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 November 29, 2004.
WARRANT TO PURCHASE COMMON STOCK
OF
DYNAGEN, INC.
FOR VALUE RECEIVED, DYNAGEN, INC., a Delaware corporation (the "Company"),
hereby certifies that FSC Corp. ("FSC") or its permitted designee or assignee,
is entitled to purchase from the Company, at any time or from time to time
commencing on November 29, 1999 and prior to 5:00 P.M., Eastern Standard Time,
on November 29, 2004, a total of 250,000 fully paid and nonassessable shares of
the common stock, par value $.01 per share, of the Company for an aggregate
purchase price of $0.38 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 November 29, 1999 and prior to 5:00 P.M.,
Eastern Standard Time on November 29, 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 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.
<PAGE>
No warrant granted herein shall be exercisable after 5:00 p.m. Eastern
Standard Time on the fifth 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 November 29,
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 mean of the last sale price of a share of Common Stock
on the ten consecutive trading days before the conversion
date, as reported by Bloomberg, L.P. or if not so
reported, on a consolidated transaction reporting system
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, 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
<PAGE>
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 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. (a) Shelf Registration. The Company shall, no later than ninety (90)
days after the date hereof or as soon as is practicable, file a registration
statement on the appropriate form with the U.S. Securities and Exchange
Commission (the "SEC") covering the resale of the Warrant Shares by the Holder
(the "Registration Statement"). The Registration Statement shall register the
Warrant Shares for resale by Holder on a delayed or continuous basis pursuant to
<PAGE>
Rule 415 under the Securities Act of 1933, as amended (the "Act"). The Company
shall use its best efforts cause the Registration Statement to become effective
under the Act as soon as is practicable thereafter following the filing thereof,
and thereafter shall use its best efforts to keep the Registration Statement
continuously effective under the Act in order to permit the prospectus included
therein to be lawfully delivered by Holder until the date on which Holder can
lawfully sell the Warrant Shares pursuant to Rule 144 under the Act (the
"Effectiveness Period"); provided, that, except as provided below with respect
to any Blackout Period (as defined), the Company shall be deemed not to have
used its best efforts to keep the Registration Statement effective during the
requisite period if it voluntarily takes any action or omits to take any action,
the taking or omission of which would result in Holder not being able to offer
and sell the Warrant Shares under the Registration Statement during that period,
unless such action or omission is required by applicable law; provided, further,
that the Company shall not be required to amend or supplement the Registration
Statement, any related prospectus or any document incorporated therein by
reference in the event that, and for a period (a "Blackout Period") not to
exceed, until the end of the Effectiveness Period, an aggregate of sixty (60)
days if (x) an event occurs and is continuing as a result of which the
Registration Statement, any related prospectus or any document incorporated
therein by reference as then amended or supplemented would, in the Company's
good faith judgment, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made not misleading, and (y)(1)
the Company determines in good faith that the disclosure of such event at such
time would have a material adverse effect on the business, operations or
prospects of the Company or (2) the disclosure otherwise relates to a pending
material business transaction which has not yet been publicly disclosed.
Notwithstanding any other provision of this Warrant or the Loan and Security
Agreement dated as of even date herewith by and between the Company and
BankBoston, N.A. (the "Loan Agreement"), and without limiting or diminishing any
remedy available to the Holder, the failure of the Company to comply with the
provisions of this Section 6(a) shall not constitute a default under the Loan
Agreement.
(b) Registration Procedure.
(i) The Company shall cause the Registration Statement and the related
prospectus and any amendments or supplements thereto, as of the effective date
of the Registration Statement, (subject to paragraph (a) above), at all times
during the Effectiveness Period (i) to comply in all material respects with the
applicable requirements of the Act and the rules and regulations of the SEC and
(ii) not to contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(ii) The Company shall give prompt written notice to Holder:
(A) on the date(s) when the Registration Statement or any
post-effective amendments thereto have become effective;
(B) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation or threatening of
any proceedings for that purpose;
(C) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the Warrant
Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose;
(D) of the happening of any event that requires the Company to make
changes in the Registration Statement or prospectus in order to make the
statements therein not misleading;
<PAGE>
(E) of the commencement and termination of any Blackout Period; and
(F) thirty (30) days prior to the end of the Effectiveness Period.
(iii) The Company shall use its best efforts to prevent the issuance or
obtain the withdrawal of any order suspending the effectiveness of the
Registration Statement at the earliest possible time.
(iv) Upon the occurrence of any event contemplated by clauses (ii)(D)
or (E) of this Section 6(b) the Company shall promptly prepare a post-effective
amendment to the Registration Statement or a supplement to the related
prospectus or file any other required document so that, as thereafter delivered
to Holders of the Warrant Shares, the prospectus will not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading and will contain the current information required by the
Act.
(v) The Company shall register or qualify the Warrant Shares under the
securities or blue sky laws of such states of the United States as Holder
reasonably requests and do any and all other acts or things necessary or
advisable to enable such exercise in such jurisdictions; provided that the
Company shall not be required to (A) qualify to do business in any jurisdiction
where it is not then so qualified or (B) take any action which would subject it
to general service of process or to taxation in any jurisdiction where it is not
then so subject.
(vi) The Company shall bear all expenses incurred by it in connection
with the performance of its obligations under this Section 6, other than
underwriting discounts and commissions, if any and fees of Holder's professional
advisors, if any).
(vii) The Company shall deliver to the Holder, without charge, a
reasonable number of copies of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and all
exhibits (including those, if any, incorporated by reference).
(viii) The Company shall cause all Warrant Shares covered by the
Registration Statement to be listed on each securities exchange and/or
inter-dealer quotation system on which similar securities issued by the Company
are then listed.
(c) Indemnification
<PAGE>
(i) The Company will indemnify Holder and each of its officers,
directors and partners, and each person controlling such Holder against all
claims, losses, expenses, damages and liabilities (or actions in respect
thereto) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in the Registration Statement and any
post-effective amendment thereto and any prospectus or other document incident
thereto and any registration or qualification materials filed under any
applicable state securities or blue sky law, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statement therein not misleading, or any violation or
alleged violation by the Company of the Act, the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder ("Exchange Act") or
any state securities or blue sky law applicable to the Company or any rule or
regulation promulgated any such state law and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse Holder, each of its officers, directors and
partners, and each person controlling such Holder, within a reasonable amount of
time after incurred for any reasonable legal and any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action; provided, however, that the indemnity agreement
contained in this Section 6(c)(i)) shall not apply to amounts paid in settlement
of any such claim, loss, damage, liability, or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld or delayed); and provided further, that the Company will
not be liable in any such case to the extent that any such claim, loss, damage
or liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by an instrument duly executed
by Holder r specifically for use therein.
(ii) Holder will indemnify the Company, each of its directors and
officers, and each person who controls the Company within the meaning of the
Act, against all claims, losses, expenses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in the Registration Statement and
any post-effective amendment thereto and any prospectus or other document
incident thereto and any registration or qualification materials filed under any
applicable state securities or blue sky law, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, such directors, officers, partners, and persons for any reasonable
legal or any other expenses incurred in connection with investigating, defending
or settling any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, or other document in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by
Holder specifically for use therein; provided, however, that the indemnity
agreement contained in this Section 6(c)(ii) shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or action if such
settlement is effected without the consent of Holder, (which consent shall not
be unreasonably withheld or delayed); and provided further, that the total
amount for which Holder shall be liable under this Section 6(c)(ii)) shall not
in any event exceed the aggregate proceeds received by Holder from the sale of
Warrant Shares pursuant to such registration.
(iii) Each party entitled to indemnification under this Section 6(c)
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense; and provided further, that the
<PAGE>
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations hereunder, unless such failure
resulted in prejudice to the Indemnifying Party; and provided further, that an
Indemnified Party (together with all other Indemnified Parties which may be
represented without conflict by one counsel) shall have the right to retain one
separate counsel, with the fees and expenses to be paid by the Indemnifying
Party, if representation of such Indemnified Party by the counsel retained by
the Indemnifying Party would be inappropriate due to actual or potential
differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
(d) Rule 144 Reporting. With a view to making available to Holder the benefits
of certain rules and regulations of the SEC which may permit the sale of the
Warrant Shares to the public without registration, the Company agrees at all
times to:
(i)make and keep public information available, as those terms are
understood and defined in SEC Rule 144;
(ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Exchange Act; and
(iii) so long as Holder owns the Warrant and/or any Warrant Shares, to
furnish to Holder forthwith upon request a written statement by the Company as
to its compliance with the reporting requirements of said Rule 144 and of the
Act and the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the Company as
Holder may reasonably request in complying with any rule or regulation of the
SEC allowing Holder to sell any such securities without registration.
7. Regulatory Restrictions
(a)Definitions. For the purpose of this Section 7, the following terms
shall have the following respective meanings:
"Affiliate" shall mean any Person directly or indirectly controlling,
controlled by or under direct or indirect common control with FSC (or other
specified Person).
"Person" shall mean an individual, partnership, corporation, limited
liability company, association, trust, joint venture, unincorporated
organization and any government, governmental department or agency or any
political subdivision thereof.
"Small Business Act" shall mean the Small Business Investment Act of
1958, as amended, or any successor federal statute, and the rules and
regulations of the Small Business Administration thereunder, as the same shall
be in effect from time to time.
(b)No Person which is a bank holding company or a subsidiary of a bank
holding company (a "Bank Affiliate") as defined in the Bank Holding Company Act
of 1956, as amended, or other applicable banking laws of the United States of
America and the rules and regulations promulgated thereunder (the "Bank Holding
Company Act") shall acquire Common Stock, if, after giving effect to such
acquisition, the Bank Affiliate, together with its Affiliates, together with its
Affiliates, would own more than five percent (5%) of the outstanding voting
securities of the Company. Notwithstanding the foregoing, shares of Common Stock
may otherwise be acquired or held by FSC or any Affiliate of FSC which is a
Small Business Investment Company consistent with and subject to the limitations
<PAGE>
contained in the Small Business Act and, to the extent not inconsistent with the
Bank Holding Company Act, shares of Common Stock may be acquired in the event
that:
(i) the Company shall vote to merge or consolidate with or into any
other Person and after giving effect to such merger or consolidation FSC or
Affiliate of FSC would not own more than five percent (5%) of the outstanding
voting securities of the surviving corporation; or
(ii) the Registration Statement is effective.
8. Representations and Warranties of the Company. The Company represents and
warrants to the Holder as follows:
(a) Organization and Good Standing. The Company is duly organized and
existing as a corporation in good standing ion the State of Delaware and is duly
qualified as a foreign corporation and authorized to do business in all other
jurisdictions in which the nature of its business or property makes such
qualification necessary. The Company has the corporate power to own its
properties and to carry on its business as now conducted or as proposed to be
conducted.
(b) Authorization. The execution, delivery and performance by the
Company of this Warrant (including without limitation the provisions of Section
6 above) and the issuance and sale by the Company of the Warrant Shares
hereunder (a) are within the Company's corporate power and authority, (b) have
been duly authorized by all necessary corporate action and (c) do not conflict
with or result in any breach of any provision of, or the creation of any lien
upon any of the property of the Company or any law, regulation, order, judgment,
writ, injunction, license, permit, agreement or instrument applicable to the
Company.
(c) The execution and delivery of this Warrant and the issuance and
sale by the Company of the Warrant Shares hereunder will result in legally
binding obligations of the Company enforceable against the Company in accordance
with the terms hereof except to the extent that (a) such enforceability is
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting generally the enforcement of creditors' rights and (b)
the availability of the remedy of specific performance or in injunctive or other
equitable relief is subject to the discretion of the court before which any
proceeding therefore may be brought.
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, overnight delivery service, or sent by
facsimile, addressed to:
(a) the Company at 1000 Winter Street, Waltham, Massachusetts 02451, 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 100 Federal Street, Boston, MA 02110, or such other
address as the Holder has designated in writing to the Company, with a copy to
David S. Berman, Esq., Riemer & Braunstein LLP, Three Center Plaza, Boston, MA
02108.
Any notice given hereunder shall be effective upon the earlier of (i)
receipt, or (ii) a date three days from the date of mailing.
9. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof
<PAGE>
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.
* * *
<PAGE>
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: /s/ Dhananjay Wadekar
- --------------------------- -----------------------
Dhananjay Wadekar
Executive Vice President
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 10.82
-------------
AMENDMENT AND AGREEMENT
THIS AMENDMENT AND AGREEMENT (this "Agreement"), dated November 30,
1999 by and between DynaGen, Inc., a Delaware corporation ("Borrower"), Finova
Mezzanine Capital Inc. f/k/a Sirrom Capital Corporation, a Tennessee corporation
("Sirrom") and Argosy Investment Partners, L.P., a Pennsylvania limited
partnership ("Argosy") (Sirrom and Argosy are sometimes referred to herein
collectively as the "Investors").
WITNESSETH:
WHEREAS, pursuant to a Loan Agreement dated June 18, 1997 by and
between Borrower and the Investors (the "Loan Agreement"), the Investors have
made loans to Borrower in the original principal amount of $3,000,000 (the
"Loan");
WHEREAS, the Loan is evidenced by a Secured Promissory Note dated as of
June 18, 1997 in the principal amount of $2,000,000, made and executed by
Borrower, payable to the order of Sirrom (herein referred to, together with any
extensions, modifications, renewals and/or replacements thereof, as the "Sirrom
Note") and a Secured Promissory Note dated as of June 18, 1997 in the principal
amount of $1,000,000, made and executed by Borrower, payable to the order of
Argosy (herein referred to, together with any extensions, modifications,
renewals and/or replacements thereof, as the "Argosy Note") (the Sirrom Note and
the Argosy Note are sometimes referred to herein collectively as the "Notes");
WHEREAS, the parties desire to make certain agreements relating to the
Loan and the Notes, as well as other agreements, as hereinafter set forth:
NOW THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, Borrower agrees as follows:
1. Acquisition of Series L Preferred Stock. Sirrom hereby elects to
surrender and cancel $500,000 in principal amount of the Sirrom Note, and Argosy
hereby elects to surrender and cancel $250,000 in principal amount of the Argosy
Note, in exchange for shares of Series I Preferred Stock, $0.01 par value per
share, of the Company ("Series L Preferred Stock"). In consideration thereof,
the Company hereby agrees to issue to Sirrom 6,667 shares of Series L Preferred
Stock and 3,333 shares of Series L Preferred Stock to Argosy. Each of Sirrom and
Argosy hereby tenders to the Company the portion of its Note to be canceled in
payment of the purchase price for the Series L Preferred Stock. The portion of
the Note surrendered and the debt evidenced thereby shall be canceled on the
books of the Company as of the date hereof.
<PAGE>
In connection with its acquisition of shares of Series L Preferred
Stock, each Investor represents and warrants to the Company that it is acquiring
the Series L Preferred Stock for its own account for investment only and not
with a present view towards the public sale or distribution thereof and must
bear the risk of the investment indefinitely, that it is an "accredited
investor" as defined under the Securities Act, that it has reviewed all of the
Company's periodic and other filings with the Securities and Exchange Commission
including, without limitation, under the heading "Certain Factors That May
Affect Future Results" in such filings, that it has been given the opportunity
to ask questions of the Company, that it understands that the investment in
Series L Preferred Stock involves a HIGH DEGREE OF RISK and that the Company's
independent auditors have included an explanatory paragraph in their opinion on
the Company's financial statements expressing substantial doubt about the
Company's ability to continue as a going concern.
The certificates for the Series L Preferred Stock and any shares of
Common Stock issued upon conversion thereof may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for such securities):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be sold, transferred or assigned in
the absence of an effective registration statement for the securities
under said Act, or an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, that
registration is not required under said Act or unless the Company is
provided with reasonable assurances that the securities were sold
pursuant to Rule 144 under said Act.
2. Conversion of Remainder of Notes. The Loan Agreement and the Notes
are hereby amended in all necessary respects to provide as follows:
The Holder of a Note shall be entitled, at its option, subject to the
following provisions of this Section, to convert all or a portion of the
principal and accrued interest on the Note into shares of common stock of the
Company, $0.01 par value per share ("Common Stock") at any time until the
Maturity Date, at a conversion price for each share of Common Stock (the
"Conversion Rate") equal to the Current Market Price (as defined below).
For purposes of this Agreement, the following terms have the meanings
indicated below:
(i) "Market Price of the Common Stock" means the closing bid price
of the Common Stock for the period indicated in the relevant provision, as
reported by Bloomberg, LP or, if not so reported, as reported on the
over-the-counter market.
(ii) "Current Market Price" means the average Market Price of the
Common Stock for the three (3) trading days ending on the trading day
immediately before the relevant Conversion Date (as defined below).
To convert all or part of the Notes, the holder shall surrender the
Note to be converted to the Company accompanied or preceded by facsimile or
other delivery to the Company of written notice ("Notice of Conversion")
executed by the holder evidencing the holder's irrevocable election to convert
the Note or a specified portion thereof as specified in the notice and
accompanied, if required by the Company, by proper assignment thereof in blank.
Interest accrued or accruing under the Note from the date hereof to the
Conversion Date shall, at the option of the Company, be paid upon conversion in
cash or Common Stock at the Conversion Rate applicable to such conversion (this
sentence applies only to interest accrued over a partial interest period ending
on a Conversion Date and does not render any other ordinary interest payments as
being payable in stock). No fractional shares of Common Stock or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded to the nearest whole share. The date on which
the Notice of Conversion is received by the Company shall be the "Conversion
Date," provided that the Holder shall deliver to the Company the original Note
being converted
<PAGE>
within five (5) business days thereafter (and if not so delivered with such
time, the Conversion Date shall be the date on which the later of the Notice of
Conversion and the original Debentures being converted is received by the
Company). Facsimile delivery of the Notice of Conversion shall be accepted by
the Company at facsimile number (781) 890-0118, Attn: Dhananjay Wadekar. The
Company shall deliver certificates representing Common Stock issuable upon
conversion ("Conversion Shares") not later than three (3) business days from the
Conversion Date.
Each Investor agrees not to convert any part of the Notes or sell any
Conversion Shares before January 1, 2001. Each Investor agrees, beginning
January 1, 2001, not to sell in any calendar quarter, more than the number of
Conversion Shares as are issued upon conversion of $250,000 of principal amount
of the Investor's Note. This restriction will be in addition to any restrictions
on resale or transfer of the shares of Common Stock issuable upon conversion of
the Note as may be imposed by law.
3. Events of Default Under Note. The Company agrees that any of the
following will constitute a covenant default under Section 5.1 of the Loan
Agreement, provided that no such event will constitute a default unless and
until the affected Investor notifies the Company of its election to treat such
event as an event of default and the Company does not cure such default within
thirty (30) days after receiving such notice:
(a) An Investor is unable to sell shares of common stock upon
conversion of the Series L Preferred Stock in an amount equal to the Investor's
"Maximum Conversion Value," as defined in the terms of the Series L Preferred
Stock, solely because of the Company's failure to obtain effectiveness of the
registration statement referred to in paragraph 5.
(b) An Investor exercises the put feature of the Stock Purchase
Warrants dated June 18, 1997, and the Company fails to pay the amount due on
exercise of the put option within sixty (60) days of the due date.
In the case of a default under (a) or (b) above, or upon the occurrence
of any other Event of Default under the Loan Agreement (it being acknowledged
that a defaulted payment shall be considered an Event of Default for this
purpose even though the Investors may be prohibited from making demand for
monetary payment thereof pursuant to an agreement with the Company's senior
secured creditor) then the Investor with respect to whom the Company has
defaulted will have the right to convert the remaining portion of the Investor's
Note into shares of Common Stock in accordance with the terms of the Note, and
will have the right sell such shares of Common Stock in any amount in and any
manner allowed by law, notwithstanding any provision of Section 2 above or of
any other agreement between the Investor and the Company. An Investor wishing to
exercise this right on account of a default other than for the nonpayment of
money shall give the Company at least ten (10) days prior written notice of the
Investor's intention to convert; provided, that the Company shall be entitled to
cure such defaults within such ten (10) day period, and if the Company does cure
the default the Investor shall not be entitled to exercise the right of
conversion with respect to such default. This special notice, if applicable,
must be given after the event or condition causing the default has become an
"Event of Default" under the Loan Agreement (i.e., after all notice and cure
requirements of the Loan Agreement have been satisfied).
4. Issuance of Warrant. The Company hereby agrees to issue to Sirrom a
warrant substantially in the form of Exhibit A hereto to purchase 266,667 shares
of Common Stock at a purchase price per share equal to the Market Price of the
Common Stock as of the date hereof. The Company hereby agrees to issue to Argosy
a warrant substantially in the form of Exhibit A to purchase 133,333 shares of
Common Stock at a purchase price per share equal to the Market Price of the
Common Stock as of the date hereof.
5. Registration. The Company shall prepare and file with the SEC at its
own a registration statement on form S-3 or Form SB-2 (a "Registration
Statement") registering for resale by the Investors a sufficient number of
shares of Common Stock for the Investors to sell (a) shares of Common Stock
issuable upon conversion of Series L Preferred Stock and (b) shares of Common
Stock issuable upon exercise of the common stock purchase warrants issued to
Sirrom and Argosy dated August 31, 1999. The Company will use its reasonable
best efforts to cause such Registration Statement to be declared effective no
later than February 28, 2000 and to keep the registration statement in effect
for a sufficient time to allow the Investors to sell shares of Common Stock
yielding proceeds equal to each Investor's "Maximum Conversion Value" as defined
in the Certificate of Designations, Preferences and Rights of Series L Preferred
Stock. In the event of a default under Section 3(a) or 3(b) above, or
<PAGE>
upon the occurrence of any other Event of Default under the Loan Agreement, at
the request of an Investor that has established its right to convert shares of
Common Stock under Section 3 above the Company shall prepare and file a
Registration Statement registering for resale by the Investor shares of Common
Stock issued or issuable to the Investor upon conversion of the Notes, and shall
use its reasonable best efforts to cause such Registration Statement to be
declared effective as soon as practicable thereafter.
If at any time or from time to time after the date of effectiveness of
the Registration Statement, the Company notifies the Investors in writing of the
existence of a "Potential Material Event," (as hereinafter defined) the
Investors shall not offer or sell any securities under the Registration
Statement or engage in any other transaction utilizing, involving or relating to
the Registration Statement, from the time of the giving of notice with respect
to a Potential Material Event until such Investor receives written notice from
the Company that such Potential Material Event either has been disclosed to the
public or no longer constitutes a Potential Material Event. A "Potential
Material Event" means any of the following: (i) the possession by the Company of
material information not ripe for disclosure in a registration statement, which
shall be evidenced by determinations in good faith by the Board of Directors of
the Company that disclosure of such information in the registration statement
would be detrimental to the business and affairs of the Company; or (ii) any
material engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information.
Each Investor agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, including furnishing to the Company such
information regarding itself, the registrable securities held by it, and its
intended method of disposition of the registrable securities held by it.
6. Intercreditor Agreement; Pledge of Superior Stock. In connection
with this Amendment and Agreement, each Investor is simultaneously entering into
that certain Intercreditor Agreement dated as of even date herewith by and among
the Investors and BankBoston, N.A. (the "Bank"), pursuant to which, among other
things, each Investor at the Bank's request is subordinating its right, title
and interest in that certain pledge of the shares of stock of Superior
Pharmaceutical Company and tenders such shares of stock herewith to the Company
for delivery to the Bank, whose possession thereof shall perfect the senior
security interest of the Bank and the junior security interest of the Company.
The Company shall instruct the Bank to return the pledged certificate(s) to
Sirrom as agent for the Investors if the Bank wishes to release its security
interest in such shares due to its having received payment in full or otherwise.
7. Loan Agreement. As amended hereby, the Loan Agreement and each of
the Notes shall remain in effect hereafter. Each Investor hereby, by executing
and delivering this Amendment and Agreement, confirms that (i) it has
voluntarily refrained from exercising its remedies in connection with any past
obligations under the Loan, the Loan Agreement or the applicable Note from June
18, 1997 to the date hereof, (ii) it is not aware of any default thereunder that
has not been cured, other than (i) certain payments being past due for October
and November of 1999, which payments the Company agrees to pay, and the
Investors agree to accept, within five (5) days of the date hereof with no
resulting acceleration, assessment of default rate or other penalty or
consequence, and (ii) certain financial reports being past due, which the
Investors agree to accept on or before December 10, 1999 with no resulting
acceleration, assessment of default rate or other penalty or consequence. The
Company acknowledges and agrees that the Investors' past voluntary forbearance
does not evidence or create any obligation on their part to similarly forbear
upon the occurrence of any future Event of Default. Capitalized terms used but
not defined herein shall have the meanings given them in the Loan Agreement.
8. Additional Agreements. The Company agrees (i) to pay the fees and
expenses of counsel to Investors in an amount not exceeding $30,000 within five
(5) days of receipt of an invoice therefor generally summarizing the basis for
the charges, and (ii) to cause to be delivered to Sirrom as Agent for the
Investors within five (5) business days following the date hereof an opinion
letter of the Company's counsel in customary form relating to this Agreement and
the transactions contemplated hereby. The Company further agrees to deliver to
the Investors, concurrently with delivery to BankBoston, N.A., all financial
reports and information required under
<PAGE>
Sections 10.5, 10.6 and 10.7 of the Loan and Security Agreement of this date (or
of approximately this date) between BankBoston, N.A. and the Company, as such
requirements may be amended from time to time.
EXHIBIT 10.83
-------------
STOCK PURCHASE WARRANT
----------------------
This STOCK PURCHASE WARRANT ("Warrant") is issued this 29th day of
November, 1999, by DYNAGEN, INC., a Delaware corporation (the "Company"), to
FINOVA MEZZANINE CAPITAL INC. f/k/a SIRROM CAPITAL CORPORATION, a Tennessee
corporation (FINOVA MEZZANINE CAPITAL INC. and any subsequent assignee or
transferee hereof are hereinafter referred to collectively as "Holder" or
"Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM. In conjunction with that Amendment and
Agreement (the "Agreement") dated November 29, 1999, and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company hereby grants to Holder the right to purchase 266,667 shares of the
Company's common stock (the "Common Stock"). The shares of Common Stock issuable
upon exercise of this Warrant are hereinafter referred to as the "Shares." This
Warrant shall be exercisable at any time and from time to time from the date
hereof until November 29, 2002 (the "Expiration Date").
2. EXERCISE PRICE. The exercise price (the "Exercise Price") per share
for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be $.38 per share.
3. EXERCISE. This Warrant may be exercised by the Holder hereof (but
only on the conditions hereinafter set forth) in whole or in part, upon delivery
of written notice of intent to exercise to the Company in the manner at the
address of the Company set forth in Section 10 hereof, together with this
Warrant and payment to the Company of the aggregate Exercise Price of the Shares
so purchased. The Exercise Price shall be payable, at the option of the Holder,
(i) by certified or bank check; (ii) by the surrender of that Secured Promissory
Note in the name of the Holder dated June 18, 1997 or portion thereof having an
outstanding principal balance equal to the aggregate Exercise Price; or (iii) by
the surrender of a portion of this Warrant where the Shares subject to the
portion of this Warrant that is surrendered have a fair market value equal to
the aggregate Exercise Price. In the absence of an established public market for
the Common Stock, fair market value shall be established by the Company's board
of directors in a commercially reasonable manner. Upon exercise of this Warrant
as aforesaid, the Company shall as promptly as practicable, and in any event
within fifteen (15) days thereafter, execute and deliver to the Holder of this
Warrant a certificate or certificates for the total number of whole Shares for
which this Warrant is being exercised in such names and denominations as are
requested by such Holder. If this Warrant shall be exercised with respect to
less than all of the Shares, the Holder shall be entitled to receive a new
Warrant covering the number of Shares in respect of which this Warrant shall not
have been exercised, which new Warrant shall in all other respects be identical
to this Warrant. The Company covenants and agrees that it will pay when due any
and all state and federal issue taxes which may be payable in respect of the
issuance of this Warrant or the issuance of any Shares upon exercise of this
Warrant.
4. COVENANTS AND CONDITIONS. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered under
the Securities Act of 1933, as amended ("Securities Act"), or any state
securities laws ("Blue Sky Laws"). This Warrant has been acquired for
investment purposes and not with a view to distribution or resale and
may not be sold or otherwise transferred without (i) an effective
registration statement for such Warrant under the Securities Act and
such applicable Blue Sky Laws, or (ii) an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to the Company and
its counsel, that registration is not required under the Securities Act
or under any applicable Blue Sky Laws (the Company hereby acknowledges
that Boult, Cummings, Conners & Berry, PLC is acceptable counsel).
Transfer of the Shares shall be restricted in the same manner and to
the same extent as the Warrant and the certificates representing such
Shares shall bear substantially the following legend:
<PAGE>
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW
AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT
UNDER THE ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION
UNDER SUCH SECURITIES ACTS AND SUCH APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other documents
and instruments as counsel for the Company reasonably deems necessary
to effect the compliance of the issuance of this Warrant and any shares
of Common Stock issued upon exercise hereof with applicable federal and
state securities laws.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive
rights, if any, with respect thereto or to the issuance thereof. The
Company shall at all times reserve and keep available for issuance upon
the exercise of this Warrant such number of authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in
full of this Warrant.
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4 hereof,
this Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the Warrant to the Company with written instructions
for such transfer. Upon such presentation for transfer, the Company shall
promptly execute and deliver a new Warrant or Warrants in the form hereof in the
name of the assignee or assignees and in the denominations specified in such
instructions. The Company shall pay all expenses incurred by it in connection
with the preparation, issuance and delivery of Warrants under this Section 5.
6. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein,
this Warrant does not confer upon the Holder, as such, any right whatsoever as a
shareholder of the Company. Notwithstanding the foregoing, if the Company should
offer to all of the Company's shareholders the right to purchase any securities
of the Company, then all shares of Common Stock that are subject to this Warrant
shall be deemed to be outstanding and owned by the Holder and the Holder shall
be entitled to participate in such rights offering.
7. OBSERVATION RIGHTS. The Holder of this Warrant shall receive notice
of and be entitled to attend or may send a representative to attend all meetings
of the Company's Board of Directors in a non-voting observation capacity and
shall receive a copy of all correspondence and information delivered to the
Company's Board of Directors, from the date hereof until such time as the
indebtedness evidenced by the Note has been paid in full.
8. ADJUSTMENT UPON CHANGES IN STOCK.
(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization,
combination of shares of the Company, or other similar event, occurring
after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate Exercise Price, the aggregate number and
class of shares which such Holder would have received if this Warrant
had been exercised immediately prior to such stock split, stock
dividend, recapitalization, combination of shares, or other similar
event. If any adjustment under this Section 8(a), would create a
fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and
the number of shares subject to this Warrant shall be the next higher
number of shares, rounding all fractions upward. Whenever there shall
be an adjustment pursuant to this Section 8(a), the Company shall
forthwith notify the Holder or Holders of this Warrant of such
adjustment, setting forth in
<PAGE>
reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares,
separation, reorganization or liquidation of the Company, or other
similar event, occurring after the date hereof, as a result of which
shares of Common Stock shall be changed into the same or a different
number of shares of the same or another class or classes of securities
of the Company or another entity, or the holders of Common Stock are
entitled to receive cash or other property, then the Holder exercising
this Warrant shall receive, for the aggregate Exercise Price, the
aggregate number and class of shares, cash or other property which such
Holder would have received if this Warrant had been exercised
immediately prior to such merger, consolidation, exchange of shares,
separation, reorganization or liquidation, or other similar event. If
any adjustment under this Section 8(b) would create a fractional share
of Common Stock or a right to acquire a fractional share of Common
Stock, such fractional share shall be disregarded and the number of
shares subject to this Warrant shall be the next higher number of
shares, rounding all fractions upward. Whenever there shall be an
adjustment pursuant to this Section 8(b), the Company shall forthwith
notify the Holder or Holders of this Warrant of such adjustment,
setting forth in reasonable detail the event requiring the adjustment
and the method by which such adjustment was calculated.
8. CERTAIN NOTICES. In case at any time the Company shall propose to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock or
make any special dividend or other distribution to the holders of its
Common Stock;
(c) offer for subscription to the holders of any of its Common
Stock any additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell of all or
substantially all of its assets to, another corporation;
(e) voluntarily or involuntarily dissolve, liquidate or wind up of
the affairs of the Company; or
(f) redeem or purchase any shares of its capital stock or
securities convertible into its capital stock;
then, in any one or more of said cases, the Company shall give to the
Holder of the Warrant, by certified or registered mail, (i) at least
twenty (20) days' prior written notice of the date on which the books
of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights
to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up,
and (ii) in the case of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at
least twenty (20) days' prior written notice of the date when the same
shall take place. Any notice required by clause (i) shall also specify,
in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled
thereto, and any notice required by clause (ii) shall specify the date
on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be.
9. ARTICLE AND SECTION HEADINGS. Numbered and titled article and
section headings are for convenience only and shall not be construed as
amplifying or limiting any of the provisions of this Warrant.
<PAGE>
10. NOTICE. Any and all notices, elections or demands permitted or
required to be made under this Warrant shall be in writing, signed by the party
giving such notice, election or demand and shall be delivered personally,
telecopied, or sent by certified mail or overnight via nationally recognized
courier service (such as Federal Express), to the other party at the address set
forth below, or at such other address as may be supplied in writing and of which
receipt has been acknowledged in writing. The date of personal delivery or
telecopy or two (2) business days after the date of mailing (or the next
business day after delivery to such courier service), as the case may be, shall
be the date of such notice, election or demand. For the purposes of this
Warrant:
The Address of Holder is: Finova Mezzanine Capital Inc.
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Tim McCarthy
Telecopy No. 615/726-1208
with a copy to: Boult, Cummings, Conners & Berry, PLC
Suite 1600
414 Union Street
Nashville, TN 37219
Attention: Roger G. Jones, Esq.
Telecopy No. 615/252-6323
The Address of Company is: DynaGen, Inc.
1000 Winter Street
Suite 2700
Waltham, MA 02154
Attention: Dhananjay G. Wadekar
Fax: 781-890-0118
with a copy to: Foley, Hoag & Eliot LLP
One Post Office Square
Boston, MA 02109
Attention: David A. Broadwin, Esq.
11. SEVERABILITY. If any provisions(s) of this Warrant or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Warrant and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
12. ENTIRE AGREEMENT. This Warrant between the Company and Holder
represents the entire agreement between the parties concerning the subject
matter hereof, and all oral discussions and prior agreement are merged herein.
13. GOVERNING LAW AND AMENDMENTS. This Warrant shall be construed and
enforced under the laws of the State of Tennessee applicable to contracts to be
wholly performed in such State. No amendment or modification hereof shall be
effective except in a writing executed by each of the parties hereto.
14. COUNTERPARTS. This Warrant may be executed in any number of
counterparts and be different parties to this Warrant in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same Warrant.
15. CONSENT TO JURISDICTION; EXCLUSIVE VENUE. The Company hereby
irrevocably consents to the jurisdiction of the United States District Court for
the Middle District of Tennessee and of all Tennessee state
<PAGE>
courts sitting in Davidson County, Tennessee, for the purpose of any litigation
to which Holder may be a party and which concerns this Warrant. It is further
agreed that venue for any such action shall lie exclusively with courts sitting
in Davidson County, Tennessee, unless Holder agrees to the contrary in writing.
16. WAIVER OF TRIAL BY JURY. HOLDER AND THE COMPANY HEREBY KNOWINGLY
AND VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE TRIAL BY JURY IN ANY ACTIONS,
PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT OR OTHERWISE,
AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS WARRANT.
17. EQUITY PARTICIPATION. This Warrant is issued in connection with the
Agreement. It is intended that this Warrant constitute an equity participation
under and pursuant to T.C.A. ss.47-24-101, et seq. and that equity participation
be permitted under said statutes and not constitute interest on the Note. If
under any circumstances whatsoever, fulfillment of any obligation of this
Warrant, the Agreement, or any other agreement or document executed in
connection with the Agreement, shall violate the lawful limit of any applicable
usury statute or any other applicable law with regard to obligations of like
character and amount, then the obligation to be fulfilled shall be reduced to
such lawful limit, such that in no event shall there occur, under this Warrant,
the Agreement, or any other document or instrument executed in connection with
the Agreement, any violation of such lawful limit, but such obligation shall be
fulfilled to the lawful limit. If any sum is collected in excess of the lawful
limit, such excess shall be applied to reduce the principal amount of the
Secured Promissory Note dated June 18, 1997.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
COMPANY:
DYNAGEN, INC.,
a Delaware corporation
By: /s/ Dhanamjay Wadekar
---------------------------
Title: Executive Vice President
HOLDER:
FINOVA MEZZANINE CAPITAL INC.,
a Tennessee corporation
By:
---------------------------
Title:
-------------------------
<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:__________________________
==================================
<PAGE>
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
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:__________________________
==================================
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
DYNAGEN, INC. FINOVA MEZZANINE CAPITAL INC.
By: /s/ Dhananjay Wadekar By: /s/ Tim McCarthy
-------------------------- ------------------------
Name: Dhananjay Wadekar Name: Tim McCarthy
Title: Executive Vice President Title:
ARGOSY INVESTMENT PARTNERS
By: /s/ Kirk S. Groswold
------------------------
Name: Kirk S. Groswold
Title: Vice President
EXHIBIT 10.85
-------------
GUARANTY AGREEMENT
------------------
THIS GUARANTY AGREEMENT ("Guaranty"), dated as of November 29, 1999, is
made and entered into upon the terms hereinafter set forth by GENERIC
DISTRIBUTORS, INCORPORATED, a Delaware corporation("Guarantor"), in favor of
FINOVA MEZZANINE CAPITAL INC., Tennessee corporation formerly known as SIRROM
CAPITAL CORPORATION ("FMC"), for itself and in its capacity as Collateral Agent
pursuant to that Collateral Agent Agreement dated June 18, 1997, (the "Agency
Agreement") by and between FMC and Argosy Investment Partners, L.P., a
Pennsylvania limited partnership ("Argosy") (FMC and Argosy individually and
collectively referred to herein as "Creditor").
RECITALS:
1. Pursuant to a Loan Agreement dated as of June 18, 1997, by and between
DynaGen, Inc. a Delaware corporation and sole shareholder of Guarantor
("Debtor"), and Creditor (the "Loan Agreement"), Creditor has made loans to
Debtor in the aggregate initial principal amount of $3,000,000 (the "Loans").
The Loans are evidenced by a Secured Promissory Note dated June 18, 1997, in the
original principal amount of $2,000,000 made and executed by Debtor, payable to
the order of FMC ("FMC Note") and a Secured Promissory Note dated June 18, 1997,
in the original principal amount of $1,000,000 made and executed by Debtor,
payable to the order of Argosy ("Argosy Note") (the FMC Note and the Argosy Note
are collectively herein referred to, together with any extensions,
modifications, renewals and/or replacements thereof, including the "Amendment,"
as defined below, as the "Note").
1. Debtor and Creditor desire to enter into that Amendment and Agreement of even
date herewith (the "Amendment") with respect to the Loan and the Loan Agreement.
2. It is a condition of Creditor's execution of the Amendment that Guarantor
execute and deliver this Guaranty to Creditor.
3. Guarantor desires to execute and deliver this Guaranty to Creditor in order
to induce Creditor to enter into the Amendment, which will be to the direct
interest, advantage and benefit of Guarantor.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by Guarantor, and to induce Creditor to enter into the Amendment,
Guarantor hereby agrees as follows:
1. Gantor hereby guarantees to Creditor the full and prompt payment and
performance of (a) the indebtedness evidenced by the Note, principal and any and
all interest accrued or to accrue thereon and (b) the obligations of Debtor to
Creditor pursuant to the Note, the Loan Agreement and any and all other
instruments, documents and/or agreements now or hereafter further evidencing,
securing or otherwise related to the indebtedness evidenced by the Note
(collectively, the "Guaranteed Obligations"). Guarantor hereby agrees that if
the Guaranteed Obligations are not timely paid and/or performed, as the case may
be, in accordance with the terms thereof, Guarantor immediately will pay and/or
perform such Guaranteed Obligations. If for any reason any payment or obligation
in respect of the Guaranteed Obligations shall be determined at any time to be a
voidable preference or otherwise shall be set aside or required to be returned
or repaid, this Guaranty nevertheless shall remain in full force and effect and
shall be fully enforceable against Guarantor for the payment or obligation set
aside, returned or repaid, as well as any other Guaranteed Obligations still
outstanding, notwithstanding the fact that this Guaranty may have been canceled,
released and/or returned to Guarantor by Creditor. This Guaranty is irrevocable.
<PAGE>
2. In addition to the obligations of Guarantor to Creditor pursuant to Paragraph
1 hereof, Guarantor further agrees to pay any and all expenses (including
without limitation attorney's fees) reasonably incurred by Creditor in
endeavoring to collect and/or enforce the obligations of Guarantor under this
Guaranty.
3. Guarantor hereby waives notice of any breach or default by Debtor, and hereby
further waives presentment, demand, notice of dishonor and protest with respect
to any instrument now or hereafter evidencing any of the Guaranteed Obligations.
4. Guarantor's guarantee of the Guaranteed Obligations is absolute and
unconditional. The validity of this Guaranty and Guarantor's absolute obligation
to pay hereunder shall not be impaired by any event whatsoever, including, but
not limited to, the financial decline of Debtor; the filing by or against Debtor
of a proceeding under any chapter of the Bankruptcy Code (as used in this
Guaranty, "Debtor" shall include Debtor's reorganizing or liquidating estate in
any bankruptcy proceeding); the merger, consolidation, dissolution, cessation of
business or liquidation of Debtor; the failure of any other party to guarantee
the Guaranteed Obligations or to provide collateral therefor; Creditor's
compromise or settlement with or without release of Debtor or any other party
liable for the Guaranteed Obligations; Creditor's failure to perfect any
security interest in any property now or hereafter intended to secure the
Guaranteed Obligations; Creditor's release of any collateral for the Guaranteed
Obligations; Creditor's failure to file suit against Debtor (regardless of
whether Debtor is becoming insolvent, is believed to be about to leave the
state, or any other circumstance); Creditor's failure to give Guarantor notice
of default by Debtor; the unenforceability of the Guaranteed Obligations against
Debtor, due to bankruptcy discharge, counterclaim or for any other reason;
Creditor's acceleration of the Guaranteed Obligations at any time; the
extension, modification or renewal of the Guaranteed Obligations, with or
without notice to Guarantor; Creditor's failure to undertake or exercise
diligence in collection efforts against any party or property; the termination
of any relationship of Guarantor with Debtor, including, but not limited to, any
relationship of employment, ownership or commerce; Debtor's change of name or
use of any name other than the name used to identify Debtor in this Guaranty;
Debtor's use of the credit extended by Creditor for any purpose whatsoever; or
any other event that might otherwise constitute a legal or equitable discharge
of, or defense available to, a guarantor or surety. All Guaranteed Obligations
arising after the execution hereof shall be deemed incurred by Creditor in
reliance upon the continued operation of this Guaranty and shall constitute
additional consideration for Guarantor's execution of this Guaranty. Guarantor
agrees that this Guaranty shall be valid and binding upon Guarantor upon the
delivery of this executed Guaranty to Creditor by any party whomsoever.
5. Creditor may, in its sole discretion, with or without consideration and with
no impairment of Guarantor's obligations under this Guaranty, release any
collateral securing the Guaranteed Obligations or release any party liable
therefor. Guarantor hereby waives the defenses of impairment of collateral and
impairment of recourse and any requirement of diligence on Creditor's part in
collecting the Guaranteed Obligations.
6. Should the liability of Guarantor hereunder for the entire amount of the
Guaranteed Obligations be subject to avoidance or limitation, notwithstanding
the contrary agreement and intention of Guarantor and Creditor, under any state
or federal fraudulent transfer laws, laws regarding corporate distributions or
other law, then the liability of Guarantor for the Guaranteed Obligations shall
be limited to the maximum amount for which Guarantor may be liable without legal
impairment.
7. Guarantor warrants to Creditor that Guarantor is not insolvent and that
Guarantor's execution hereof does not render Guarantor insolvent for the purpose
of state or federal fraudulent transfer laws or other avoidance laws, laws
regarding corporate distributions or any other law.
8. Guarantor acknowledges and represents that, in connection with Guarantor's
decision to enter into this Guaranty, Guarantor has not relied upon any
financial projection, budget, assessment or other analysis by Creditor or upon
any representation by Creditor as to the risks, benefits or prospects of
Debtor's business activities or present or future capital needs incidental
thereto or the present or future provisions of documents with Debtor that
evidence the Guaranteed Obligations, all such considerations having been
examined fully and independently by Guarantor. Guarantor represents that
Guarantor has made such arrangements as Guarantor desires for the obtaining of
information regarding Debtor, and agrees that Creditor is not obligated to
provide Guarantor with any present or ongoing information about the financial
condition, operations or prospects of Debtor.
<PAGE>
9. If proceedings are instituted by Debtor under any state insolvency law or
under any federal bankruptcy law, or if such proceedings are instituted against
Debtor and are not dismissed within forty-five (45) days, Creditor may, at its
option, without notice and notwithstanding any limitation on Creditor's ability
to use such proceedings as the basis of a default or acceleration against
Debtor, declare all the Guaranteed Obligations presently due and payable by
Guarantor. The term "Debtor," as used in this Guaranty, includes Debtor's estate
in any bankruptcy, reorganization or other debtor relief proceeding.
10. Guarantor's obligation under this Guaranty is independent of any other
obligations among Creditor, Debtor and Guarantor. No setoff, counterclaim,
reduction or diminution of any obligation, or defense of any kind or nature that
Guarantor or Debtor has or may have against Creditor, shall be effective against
Creditor in the enforcement of this Guaranty.
11. Guarantor acknowledges that the terms and conditions of the extension of
credit from Creditor to Debtor are set forth entirely in agreements between
Creditor and Debtor. It shall not be a defense to Guarantor's liability
hereunder if Creditor fails to extend credit to Debtor or accelerates the
Guaranteed Obligations in accordance with the terms and conditions of the
documents between Creditor and Debtor from time to time.
12. Guarantor acknowledges and agrees that the statute of limitation applicable
to this Guaranty shall begin to run only upon Creditor's accrual of a cause of
action against Guarantor hereunder caused by Guarantor's refusal to honor a
demand for performance hereunder made by Creditor in writing; provided, however,
if, subsequent to the demand upon Guarantor, Creditor reaches an agreement with
Debtor on any terms causing Creditor to forbear in the enforcement of its demand
upon Guarantor, the statute of limitation shall be reinstated for its full
duration until Creditor subsequently again makes written demand upon Guarantor.
13. Until all of the covenants, terms and conditions of Debtor with respect to
the Guaranteed Obligations are fully paid, performed, kept and/or observed,
Guarantor: (a) shall have no rights of reimbursement or subrogation against
Debtor of any of its property by reason of any payment or acts of performance by
Guarantor in compliance with the obligations of Guarantor hereunder, (b) waives
any right to enforce any remedy that Guarantor now or hereafter shall have
against Debtor by reason of any one or more payments or acts of performance in
compliance with the obligations of Guarantor hereunder, and subordinates any
liability or indebtedness of Debtor now or hereafter held by Guarantor to the
obligations of Debtor to Creditor under the Guaranteed Obligations.
14. This is a guaranty of payment and performance and not of collection. The
liability of Guarantor hereunder shall be direct and immediate and not
conditional or contingent upon the pursuit of any remedies against Debtor or any
other person, not against any collateral available to Creditor. Guarantor hereby
waives any right to require that an action be brought against Debtor or any
other person or to require that resort be had to any collateral in favor of
Creditor prior to discharging its obligations hereunder. Guarantor further
waives any right of Guarantor to require that an action be brought against
Debtor under the provisions of Title 47, Chapter 12, Tennessee Code Annotated,
as the same may be amended from time to time.
15. Guarantor hereby consents and agrees that all payments and credits received
from Debtor or Guarantor or realized from any collateral may be applied by
Creditor to the Guaranteed Obligations in such priority as Creditor in its sole
judgment shall see fit.
16. This Guaranty shall be construed in accordance with and governed by the laws
of the State of Tennessee applicable to contracts to be performed within said
state. No amendment or modification hereby shall be effective unless evidenced
by a writing signed by Guarantor and Creditor. When used herein, the singular
shall include the plural, and vice versa, and the use of any gender shall
include all other genders, as appropriate.
17. Guarantor hereby waives notice of acceptance of this Guaranty by Creditors.
18. CREDITOR AND GUARANTOR HEREBY WAIVE TRIAL BY JURY IN ANY ACTIONS,
PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT, AT LAW OR IN
EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT.
<PAGE>
19. Guarantor warrants that it is and shall remain a duly organized corporation
in good standing under the laws of the state of its incorporation, and that
Guarantor is and shall remain duly qualified to do business in each state in
which qualification is necessary. Guarantor warrants that its execution and
delivery of and performance under this Guaranty and all related documents are
permitted under and will not violate any provision of Guarantor's Charter or
By-Laws. Guarantor further warrants that the execution of all necessary
resolutions and other prerequisites of corporate action have been duly performed
so that the individual executing this Guaranty and related documents on behalf
of Guarantor is duly authorized to bind Guarantor by his or her signature.
20. Following the occurrence and during the continuation of an Event of Default
under the Loan Agreement, Guarantor covenants to furnish to Creditor, upon
demand, copies of Guarantor's tax returns and additional financial statements in
form and substance acceptable to Creditor in the same manner and form as
required of Debtor in the Loan Agreement.
21. Guarantor warrants and agrees that the recitals set forth at the beginning
of this Guaranty are true.
22. Guarantor warrants that the execution, delivery and performance of this
Guaranty will not violate any judicial or administrative order or governmental
law or regulation, and that this Guaranty is valid, binding and enforceable in
every respect according to its terms.
23. Guarantor warrants that Guarantor's execution, delivery and performance of
this Guaranty do not require the consent of or the giving of notice to any third
party including, but not limited to, any other Creditor, governmental body or
regulatory authority.
24. Guarantor hereby irrevocably consents to the jurisdiction of the United
States District Court for the Middle District of Tennessee and of all Tennessee
state courts sitting in Davidson County, Tennessee, for the purpose of any
litigation to which Creditor may be a party and which concerns this Guaranty or
the Secured Indebtedness. It is further agreed that venue for any such action
shall lie exclusively with courts sitting in Davidson County, Tennessee, unless
Creditor, in its discretion, elects the venue of another appropriate
jurisdiction.
25. Nothing contained herein or in any related document shall be deemed to
render Creditor a partner of Guarantor for any purpose. This Guaranty has been
executed for the sole benefit of Creditor, and no third party is authorized to
rely upon Creditor's rights hereunder or to rely upon an assumption that
Creditor has or will exercise its rights under this Guaranty or under any
document referred to herein.
26. Any notices concerning this Guaranty shall be addressed as follows: As to
Guarantor:
GENERIC DISTRIBUTIONS, INCORPORATED
Attn: President
99 Erie Street
Cambridge, Massachusetts 02139
Telecopier: 617/354-3902
With a copy to:
David A. Broadwin
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Telecopier: 617/248-7100
<PAGE>
As to Creditor:
FINOVA MEZZANINE CAPITAL INC.
Attn: Tim McCarthy
Vice President
500 Church Street Suite 200
Nashville, TN 37219
Telecopier: (615) 726-1208
With a copy to:
Boult, Cummings, Conners & Berry
Attn: Roger G. Jones
414 Union Street, Suite 1600
P.O. Box 198062
Nashville, Tennessee 37219
Telecopier: (615) 252-2323
Notices shall only be effective when set forth in writing and delivered (by mail
or otherwise) as indicated above. A party may change that party's address for
receipt of notices by submitting the change in writing in accordance with this
Section.
27. Creditor's indulgence in any departure from the terms of this Guaranty or
any other document shall not prejudice Creditor's rights to make demand and
recover from Guarantor in accordance with this Guaranty, or otherwise demand
strict compliance with this Guaranty.
28. The remedies provided Creditor in this Guaranty are not exclusive of any
other remedies that may be available to Creditor under any other document or at
law or equity.
29. This Guaranty shall be binding upon and inure to the benefit of the
respective heirs, successors and assigns of Guarantor and Creditor, except that
Guarantor shall not assign any rights or delegate any obligations arising
hereunder without the prior written consent of Creditor. Any attempted
assignment or delegation by Guarantor without the required prior consent shall
be void.
30. Should any provision of this Guaranty be invalid or unenforceable for any
reason, the remaining provisions hereof shall remain in full effect.
31. Words used herein indicating gender or number shall be read as context may
require.
32. Captions and headings have been included in this Guaranty for the
convenience of the parties, and shall not be construed as affecting the content
of the respective Sections.
33. GUARANTOR AND CREDITOR HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
PROCEEDING ARISING FROM OR RELATED TO THIS AGREEMENT, WITH THE EFFECT THAT ANY
SUCH MATTER SHALL BE DETERMINED BY A JUDGE AS TO ISSUES OF LAW AND OF FACT.
34. GUARANTOR ACKNOWLEDGES CREDITOR'S INTENTION TO ENFORCE THIS GUARANTY TO THE
FULLEST EXTENT POSSIBLE AND GUARANTOR ACKNOWLEDGES THAT CREDITOR HAS MADE NO
ORAL STATEMENTS TO GUARANTOR THAT COULD BE CONSTRUED AS A WAIVER OF CREDITOR'S
RIGHT TO ENFORCE THIS GUARANTY BY ALL AVAILABLE LEGAL MEANS.
IN WITNESS WHEREOF, the undersigned Guarantor has executed this
Guaranty, or has caused this Guaranty to be executed by its duly authorized
representative, as of the date first above written.
<PAGE>
GENERIC DISTRIBUTORS, INCORPORATED
By: /s/ Dhananjay Wadekar
--------------------------
Title: Secretary
FINOVA MEZZANINE CAPITAL INC., for itself and in
its capacity as Agent under the Agency Agreement
By: /s/ Tim McCarthy
--------------------------
Title: Vice President
EXHIBIT 10.86
-------------
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT ("Agreement") is made as of the 29th day of
November 1999, by and between GENERIC DISTRIBUTORS, INCORPORATED, a Delaware
corporation ("Guarantor"), and FINOVA MEZZANINE CAPITAL INC., Tennessee
corporation formerly known as SIRROM CAPITAL CORPORATION, for itself and in its
capacity as Collateral Agent pursuant to that Collateral Agent Agreement dated
June 18, 1997, (the "Agency Agreement") by and between FMC and Argosy Investment
Partners, L.P., a Pennsylvania limited partnership ("Argosy") (FMC and Argosy
are collectively referred to herein as "Creditor").
RECITALS:
--------
WHEREAS, FMC and Argosy have extended credit to DynaGen, Inc., a
Delaware corporation ("Parent"), and Guarantor has guaranteed the obligations of
Parent pursuant to a Guaranty Agreement of even date herewith executed by
Guarantor (the "Guaranty"); and
WHEREAS, in connection with the amendment of the Loan, FMC desires to
obtain from Guarantor and Guarantor desires to grant to FMC a security interest
in certain collateral more particularly described below.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. Guarantor hereby grants to FMC, as agent
for itself and Argosy, a security interest in the following described
property (collectively, the "Collateral"):
(a) presently existing and hereafter arising accounts, contract
rights, and all other forms of obligations owing to Guarantor arising
out of the sale or lease of goods or the rendition of services by
Guarantor, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Guarantor and Guarantor's Books
relating to any of the foregoing (collectively, "Accounts");
(b) present and future general intangibles and other personal
property (including choses or things in action, goodwill, patents,
trade names, trademarks, servicemarks, copyrights, blueprints,
drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, monies due under any royalty or
licensing agreements, infringement claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims) other
than goods and Accounts, and Guarantor's Books relating to any of the
foregoing (collectively, "General Intangibles");
(c) present and future letters of credit, notes, drafts,
instruments, certificated and uncertificated securities, documents,
leases, and chattel paper, and Guarantor's Books relating to any of the
foregoing (collectively, "Negotiable Collateral");
<PAGE>
(d) present and future inventory in which Guarantor has any
interest, including goods held for sale or lease or to be furnished
under a contract of service and all of Guarantor's present and future
raw materials, work in process, finished goods, and packing and
shipping materials, wherever located, and any documents of title
representing any of the above, and Guarantor's Books relating to any of
the foregoing (collectively, "Inventory");
(e) present and hereafter acquired machinery, machine tools,
motors, equipment, furniture, furnishings, fixtures, vehicles
(including motor vehicles and trailers), tools, parts, dies, jigs,
goods (other than consumer goods or farm products), and any interest in
any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing, wherever located (collectively, "Equipment");
(f) books and records including: ledgers; records indicating,
summarizing, or evidencing Guarantor's assets or liabilities, or the
collateral; all information relating to Guarantor's business operations
or financial condition; and all computer programs, disc or tape files,
printouts, funds or other computer prepared information, and the
equipment containing such information (collectively, "Guarantor's
Books");
(g) substitutions, replacements, additions, accessions, proceeds,
products to or of any of the foregoing, including, but not limited to,
proceeds of insurance covering any of the foregoing, or any portion
thereof, and any and all Accounts, General Intangibles, Negotiables,
Collateral, Inventory, Equipment, money, deposits, accounts, or other
tangible or intangible property resulting from the sale or other
disposition of the accounts, general Intangibles, Negotiable
Collateral, Inventory, Equipment, or any portion thereof or interest
therein and the proceeds thereof.
2. Secured Indebtedness. The security interest granted hereby shall secure
the payment of the Obligations (as defined in the Guaranty) and the
prompt performance of each of the covenants and duties under the Loan
Documents (as defined in the "Loan Agreement," as defined in the
Guaranty).
3. Representations and Warranties of Guarantor. Guarantor represents,
warrants and agrees as follows:
(a) Except as set forth on Schedule 3(a) hereto (the "Permitted
Encumbrances"), Guarantor is the owner of the Collateral free and
clear of any liens and security interests. Guarantor will defend
the Collateral against the claims and demands of all persons other
than the holders of the Permitted Encumbrances.
(b) The address set forth on Schedule 3(b) hereto is Guarantor's
principal places of business and the location(s) of all tangible
Collateral and the place(s) where the records concerning all
intangible Collateral are kept and/or maintained.
(c) Guarantor will pay all costs of filing of financing,
continuation and termination statements with respect to the
security interests created hereby, and FMC is authorized to do all
things that it deems necessary to perfect and continue perfection
of the security interests created hereby and to protect the
Collateral.
4. Agreements With Respect to the Collateral. Guarantor covenants and
agrees with FMC as follows:
<PAGE>
(a) Guarantor will not permit any of the Collateral to be removed
from the location specified herein, except for temporary periods in
the normal and customary use thereof, without the prior written
consent of FMC.
(b) Guarantor shall notify FMC in writing of any change in the
location of Guarantor's principal place of business (or residence)
or the location of any tangible Collateral or the place(s) where
the records concerning all intangible Collateral are kept or
maintaine
(c) Guarantor will keep the Collateral in good condition and repair
and will pay and discharge all taxes, levies and other impositions
levied thereon as well as the cost of repairs to or maintenance of
same, and will not permit anything to be done that may impair the
value of any of the Collateral. If Guarantor fails to pay such
sums, FMC may do so for Guarantor's account and add the amount
thereof to the Obligations.
(d) Until the occurrence of an Event of Default, Guarantor shall be
entitled to possession of the Collateral and to use the same in any
lawful manner, provided that such use does not cause excessive wear
and tear to the Collateral, cause it to decline in value at an
excessive rate, or violate the terms of any policy of insurance
thereon.
(e) Guarantor will not sell, exchange, lease or otherwise dispose
of any of the Collateral or any interest therein without the prior
written consent of FMC. Notwithstanding the foregoing, so long as
an Event of Default has not occurred, Guarantor shall have the
right to process and sell Guarantor's inventory in the regular
course of business. FMC's security interest hereunder shall attach
to all proceeds of all sales or other dispositions of the
Collateral. If at any time any such proceeds shall be represented
by any instruments, chattel paper or documents of title, then such
instruments, chattel paper or documents of title shall be promptly
delivered to FMC and subject to the security interest granted
hereby. If at any time any of Guarantor's inventory is represented
by any document of title, such document of title will be delivered
promptly to FMC and subject to the security interest granted
hereby.
(f) Guarantor will not allow the Collateral to be attached to real
estate in such manner as to become a fixture or a part of any real
estate.
(g) Guarantor will at all times keep the Collateral insured against
all insurable hazards in amounts equal to the full cash value of
the Collateral. Such insurance shall be in such companies as may be
acceptable to FMC, with provisions satisfactory to FMC for payment
of all losses thereunder to FMC as its interests may appear. If
required by FMC, Guarantor shall deposit the policies with FMC
unless the possession of such policy is required by a senior
lender, in which case Guarantor shall deposit the policy with the
senior lender. If an Event of Default (as defined in the Loan
Agreement) has occurred and is continuing, any money received by
FMC under said policies may be applied to the payment of the
Obligations, whether or not due and payable, or at FMC's option may
be delivered by FMC to Guarantor for the purpose of repairing or
restoring the Collateral. Guarantor assigns to FMC all right to
receive proceeds of insurance not exceeding the amounts secured
hereby, directs any insurer to pay all proceeds directly to FMC,
and appoints FMC Guarantor's attorney-in-fact to endorse any draft
or check made payable to Guarantor in order to collect the benefits
of such insurance. If Guarantor fails to keep the Collateral
insured as
<PAGE>
required by FMC, FMC shall have the right to obtain such insurance
at Guarantor's expense and add the cost thereof to the Obligations.
(h) Guarantor will not permit any liens or security interests other
than those created by this Agreement and the Permitted Encumbrances
to attach to any of the Collateral, nor permit any of the
Collateral to be levied upon under any legal process, nor permit
anything to be done that may impair the security intended to be
afforded by this Agreement, nor permit any tangible Collateral to
become attached to or commingled with other goods without the prior
written consent of FMC.
5. Remedies Upon Default. Upon an Event of Default under and as defined in
the Loan Agreement, FMC may pursue any or all of the following
remedies, without any notice to Guarantor except as required below:
(a) FMC may give written notice of default to Guarantor, following
which Guarantor shall not dispose of, conceal, transfer, sell or
encumber any of the Collateral (including, but not limited to, cash
proceeds) without FMC's prior written consent, even if such
disposition is otherwise permitted hereunder in the ordinary course
of business. Any such disposition, concealment, transfer or sale
after the giving of such notice shall constitute a wrongful
conversion of the Collateral. FMC may obtain a temporary
restraining order or other equitable relief to enforce Guarantor's
obligation to refrain from so impairing FMC's Collateral.
(b) FMC may take possession of any or all of the Collateral.
Guarantor hereby consents to FMC's entry into any of Guarantor's
premises to repossess Collateral, and specifically consents to
FMC's forcible entry thereto as long as FMC causes no significant
damage to the Premises in the process of entry (frilling of locks,
cutting of chains and the like do not in themselves cause
"significant" damage for the purposes hereof) and provided that FMC
accomplishes such entry without a breach of the peace.
(c) FMC may dispose of the Collateral at private or public sale.
Any required notice of sale shall be deemed commercially reasonable
if given at least five (5) days prior to sale. FMC may adjourn any
public or private sale to a different time or place without notice
or publication of such adjournment, and may adjourn any sale either
before or after offers are received. The Collateral may be sold in
such lots as FMC may elect, in its sole discretion. FMC may take
such action as it may deem necessary to repair, protect, or
maintain the Collateral pending its disposition.
(d) FMC may recover any or all proceeds of accounts from any bank
or other custodian who may have possession thereof. Guarantor
hereby authorizes and directs all custodians of Guarantor's assets
to comply with any demand for payment made by FMC pursuant to this
Agreement, without the need of confirmation from Guarantor and
without making any inquiry as to the existence of an Event of
Default or any other matter. FMC may engage a collection agent to
collect accounts for a reasonable percentage commission or for any
other reasonable compensation arrangement.
(e) FMC may notify any or all account debtors that subsequent
payments must be made directly to FMC or its designated agent. Such
notice may be made over FMC's signature or over Guarantor's name
with no signature or both, in FMC's discretion. Guarantor hereby
authorizes and directs all existing or future account debtors to
comply with any such notice given by FMC, without the need of
confirmation from Guarantor and without making any inquiry as to
the existence of an Event of Default or as to any other matter.
<PAGE>
(f) FMC may, but shall not be obligated to, take such measures as
FMC may deem necessary in order to collect any or all of the
accounts. Without limiting the foregoing, FMC may institute any
administrative or judicial action that it may deem necessary in the
course of collecting and enforcing any or all of the accounts. Any
administrative or judicial action or other action taken by FMC in
the course of collecting the accounts may be taken by FMC in its
own name or in Guarantor's name. FMC may compromise any disputed
claims and may otherwise enter into settlements with account
debtors or obligors under the accounts, which compromises or
settlements shall be binding upon Guarantor. FMC shall have no duty
to pursue collection of any account, and may abandon efforts to
collect any account after such efforts are initiated.
(g) FMC may, with respect to any account involving uncompleted
performance by Guarantor, and with respect to any general
intangible or other Collateral whose value may be preserved by
additional performance on Guarantor's part, take such action as FMC
may deem appropriate including, but not limited, to performing or
causing the performance of any obligation of Guarantor thereunder,
the making of payments to prevent defaults thereunder, and the
granting of adequate assurances to other parties thereto with
respect to future performance. FMC's action with respect to any
such accounts or general intangibles shall not render FMC liable
for further performance thereunder unless FMC so agrees in writing.
(h) FMC may exercise its lien upon and right of setoff against any
monies, items, credits, deposits or instruments that FMC may have
in its possession and that belong to Guarantor or to any other
person or entity liable for the payment of any or all of the
Obligations.
(i) FMC may exercise any right that it may have under any other
document evidencing or securing the Obligations or otherwise
available to FMC at law or equity.
6. Audits and Examinations. FMC shall have the right, at any time, by its
own auditors, accountants or other agents, to examine or audit any of
the books and records of Guarantor, or the Collateral, all of which
will be made available upon request. Such accountants or other
representatives of FMC will be permitted to make any verification of
the existence of the Collateral or accuracy of the records that FMC
deems necessary or proper. Any reasonable expenses incurred by FMC in
making such examination, inspection, verification or audit shall be
paid by Guarantor promptly on demand and shall constitute part of the
Obligations.
7. Termination Statement. Upon receipt of proper written demand following
the payment in full of the Obligations and termination of any
commitment of FMC to make any future advances to Guarantor, FMC at its
option, shall send a termination statement with respect to any
financing statement filed to perfect Creditor's security interests in
any of the Collateral to Guarantor, or cause such termination statement
to be filed with the appropriate filing officer(s).
<PAGE>
8. Power of Attorney. Guarantor hereby constitutes FMC or its designee, as
Guarantor's attorney-in-fact with power, upon the occurrence and during
the continuance of an Event of Default, to endorse Guarantor's name
upon any notes, acceptances, checks, drafts, money orders, or other
evidences of payment or Collateral that may come into either its or
FMC's possession; to sign the name of Guarantor on any invoice or bill
of lading relating to any of the accounts receivable, drafts against
customers, assignments and verifications of accounts receivable and
notices to customers; to send verifications of accounts receivable; to
notify the Post Office authorities to change the address for delivery
of mail addressed to Guarantor to such address as FMC may designate; to
execute any of the documents referred to in Section 3(c) hereof in
order to perfect and/or maintain the security interests and liens
granted herein by Guarantor to FMC; to do all other acts and things
necessary to carry out the purposes of and remedies provided under this
Agreement. All acts of said attorney or designee are hereby ratified
and approved, and said attorney or designee shall not be liable for any
acts of commission or omission (other than acts of gross negligence or
willful misconduct), nor for any error of judgment or mistake of fact
or law. This power being coupled with an interest is irrevocable until
all of the Obligations are paid in full and any and all promissory
notes executed in connection therewith are terminated and satisfied.
9. Binding Effect. This Agreement shall inure to the benefit of FMC's
successors and assigns and shall bind Guarantor's heirs,
representatives, successors and assigns.
10. Severability. If any provision of this Agreement is held invalid, such
invalidity shall not affect the validity or enforceability of the
remaining provisions of this Agreement.
11. Governing Law and Amendments. This Agreement shall be construed and
enforced under the laws of the State of Tennessee applicable to
contracts to be wholly performed in such State. No amendment or
modification hereof shall be effective except in a writing executed by
each of the parties hereto.
12. Survival of Representations and Warranties. All representations and
warranties contained herein or made by or furnished on behalf of
Guarantor in connection herewith shall survive the execution and
delivery of this Agreement.
13. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same Agreement.
14. Construction and Interpretation. Should any provision of this Agreement
require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption
that the terms hereof shall be more strictly construed against one
party by reason of the rule of construction that a document is to be
more strictly construed against the party that itself or through its
agent prepared the same; it being agreed that Guarantor, FMC and their
respective agents have participated in the preparation hereof.
15. Consent to Jurisdiction; Exclusive Venue. Guarantor hereby irrevocably
consents to the Jurisdiction of the United States District Court for
the Middle District of Tennessee and of all Tennessee state courts
sitting in Davidson County, Tennessee, for the purpose of any
litigation to which FMC may be a party and which concerns this
Agreement or the Obligations. It is further agreed that venue for any
such action shall lie exclusively with courts sitting in Davidson
County, Tennessee, unless FMC agrees to the contrary in writing.
<PAGE>
16. Waiver of Trial by Jury. CREDITOR AND GUARANTOR HEREBY KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE TRIAL BY JURY IN ANY
ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR
TORT OR OTHERWISE, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY
RELATING TO THIS AGREEMENT OR THE LOAN DOCUMENTS.
<PAGE>
IN WITNESS WHEREOF, Guarantor and FMC have executed this Agreement, or
have caused this Agreement to be executed as of the date first above written.
GUARANTOR:
----------
GENERIC DISTRIBUTORS, INCORPORATED,
a Delaware corporation
By: /s/ Dhnanjay Wadekar
---------------------------
Title: Secretary
AGENT:
------
FINOVA MEZZANINE CAPITAL INC.,
a Tennessee corporation
By: /s/ Tim McCarthy
------------------------
Title: Vice President
EXHIBIT 10.87
-------------
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 June 1, 2001.
WARRANT TO PURCHASE COMMON STOCK
OF
DYNAGEN, INC.
FOR VALUE RECEIVED, DYNAGEN, INC., a Delaware corporation (the "Company"),
hereby certifies that Project Capital Partners, LLC, or its permitted assigns,
is entitled to purchase from the Company, at any time or from time to time
commencing on June 1, 1999 and prior to 5:00 P.M., Eastern Standard Time, on
June 1, 2001, 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.___ 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 June 1, 1999 and prior to 5:00 P.M.,
Eastern Standard Time on June 1, 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 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.
<PAGE>
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 June 1, 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, 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
<PAGE>
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 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
applicable 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 50 Federal Street, Boston, MA 02109, 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:__________________________
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 10.88
-------------
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 November 30, 2001.
WARRANT TO PURCHASE COMMON STOCK
OF
DYNAGEN, INC.
FOR VALUE RECEIVED, DYNAGEN, INC., a Delaware corporation (the "Company"),
hereby certifies that Venture Partners Capital LLC, or its permitted assigns, is
entitled to purchase from the Company, at any time or from time to time
commencing on November 30, 1999 and prior to 5:00 P.M., Eastern Standard Time,
on November 30, 2001, 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.___ 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 November 30, 1999 and prior to 5:00 P.M.,
Eastern Standard Time on November 30, 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 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.
<PAGE>
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 November 30,
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, 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
<PAGE>
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 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
applicable 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 1000 Winter Street, Suite 2700, Waltham,
Massachusetts 02154, 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 Mill Crossing, P.O. Drawer 9, Kensington, CT
06037, 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 State of Delaware 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:__________________________
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 10.89
STOCK OPTION
GRANTED BY
DYNAGEN, INC.
(hereinafter called the "Company")
-------
TO
STEVEN GEORGIEV
(hereinafter called the "Holder")
------
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 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, 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 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
<PAGE>
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 this option. 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 that may then be required by the Company
in its sole discretion. 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 such 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.
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
<PAGE>
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 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 (which term shall
"emploment" include service as a director" with the Company or any subsidiary is
terminated by the Company without
<PAGE>
"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 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
<PAGE>
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.
<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: /s/ Dhananjay G. Wadekar
------------------------------
Name: Dhananjay G. Wadekar
Title: Executive Vice President
Acknowledgment
The undersigned Holder acknowledges receipt of this Stock Option
Agreement, including Schedule A hereto, 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 24, 1999
-----------------------
Name of Holder: Steven Georgiev
-----------------------
Address:
-----------------------
-----------------------
Social Security Number:
-----------------------
Maximum number of shares for which
this Option is exercisable: 450,000
-----------------------
Exercise (purchase) price per share: $0.25
-----------------------
Expiration date of this Option: February 24, 2009
-----------------------
Vesting rate: Option vests in equal
installments at end of
October 1, 1999, January 1,
2000 and April 1, 2000
-----------------------
Other terms and conditions: none
----
EXHIBIT 10.90
STOCK OPTION
GRANTED BY
DYNAGEN, INC.
(hereinafter called the "Company")
-------
TO
DHANANJAY G. WADEKAR
(hereinafter called the "Holder")
------
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 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, 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 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
<PAGE>
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 this option. 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 that may then be required by the Company
in its sole discretion. 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 such 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.
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
<PAGE>
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 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 (which term shall
"emploment" include service as a director" with the Company or any subsidiary is
terminated by the Company without
<PAGE>
"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 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
<PAGE>
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.
<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: /s/ Dhananjay G. Wadekar
------------------------------
Name: Dhananjay G. Wadekar
Title: Executive Vice President
Acknowledgment
The undersigned Holder acknowledges receipt of this Stock Option
Agreement, including Schedule A hereto, 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 24, 1999
------------------------
Name of Holder: Dhananjay G. Wadekar
------------------------
Address:
------------------------
------------------------
Social Security Number:
------------------------
Maximum number of shares for which
this Option is exercisable: 4,600,000
------------------------
Exercise (purchase) price per share: $0.25
------------------------
Expiration date of this Option: February 24, 2009
------------------------
Vesting rate: Option vests in equal
installments at end of
October 1, 1999, January 1,
2000 and April 1, 2000
------------------------
Other terms and conditions: none
----
EXHIBIT 10.91
STOCK OPTION
GRANTED BY
DYNAGEN, INC.
(hereinafter called the "Company")
-------
TO
C. ROBERT CUSICK
(hereinafter called the "Holder")
------
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 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, 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 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
<PAGE>
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 this option. 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 that may then be required by the Company
in its sole discretion. 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 such 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.
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
<PAGE>
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 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 (which term shall
"emploment" include service as a director" with the Company or any subsidiary is
terminated by the Company without
<PAGE>
"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 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
<PAGE>
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.
<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: /s/ Dhananjay G. Wadekar
-----------------------------
Name: Dhananjay G. Wadekar
Title: Executive Vice President
Acknowledgment
The undersigned Holder acknowledges receipt of this Stock Option
Agreement, including Schedule A hereto, 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 24, 1999
------------------------
Name of Holder: C.Robert Cusick
------------------------
Address:
------------------------
------------------------
Social Security Number:
------------------------
Maximum number of shares for which
this Option is exercisable: 4,100,000
------------------------
Exercise (purchase) price per share: $0.25
------------------------
Expiration date of this Option: February 24, 2009
------------------------
Vesting rate: Option vests in equal
installments at end of
October 1, 1999, January 1,
2000 and April 1, 2000
------------------------
Other terms and conditions: none
----
EXHIBIT 10.92
STOCK OPTION
GRANTED BY
DYNAGEN, INC.
(hereinafter called the "Company")
-------
TO
F. HOWARD SCHNEIDER
(hereinafter called the "Holder")
------
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 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 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
<PAGE>
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 this option. 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 that may then be required by the Company
in its sole discretion. 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 such 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.
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
<PAGE>
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 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 (which term shall
"emploment" include service as a director" with the Company or any subsidiary is
terminated by the Company without
<PAGE>
"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 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
<PAGE>
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.
<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: /s/ Dhananjay G. Wadekar
------------------------------
Name: Dhananjay G. Wadekar
Title: Executive Vice President
Acknowledgment
The undersigned Holder acknowledges receipt of this Stock Option
Agreement, including Schedule A hereto, 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 24, 1999
----------------------
Name of Holder: F. Howard Schneider
----------------------
Address:
----------------------
----------------------
Social Security Number:
----------------------
Maximum number of shares for which
this Option is exercisable: 600,000
----------------------
Exercise (purchase) price per share: $0.25
----------------------
Expiration date of this Option: February 24, 2009
----------------------
Vesting rate: Option vests in equal
installments at end of
October 1, 1999, January 1,
2000 and April 1, 2000
----------------------
Other terms and conditions: none
----
EXHIBIT 10.93
STOCK OPTION
GRANTED BY
DYNAGEN, INC.
(hereinafter called the "Company")
-------
TO
STEVEN GEORGIEV
(hereinafter called the "Holder")
------
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 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, 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 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
<PAGE>
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 this option. 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 that may then be required by the Company
in its sole discretion. 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 such 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.
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
<PAGE>
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 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 (which term shall
"emploment" include service as a director" with the Company or any subsidiary is
terminated by the Company without
<PAGE>
"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 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
<PAGE>
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.
<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: Dhananjay G. Wadekar
Title: Executive Vice President
Acknowledgment
The undersigned Holder acknowledges receipt of this Stock Option
Agreement, including Schedule A hereto, 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 24, 1999
------------------------
Name of Holder: Steven Georgiev
------------------------
Address:
------------------------
------------------------
Social Security Number:
------------------------
Maximum number of shares for which
this Option is exercisable: 500,000
------------------------
Exercise (purchase) price per share: $0.25
------------------------
Expiration date of this Option: April 1, 2000
------------------------
Vesting rate: Option becomes fully
exercisable if, on or before
April 1, 2000;
(1) BioTrack, Inc. completes
an ititial public offering;
(2) BioTrack repays to DynaGen,
Inc. $250,000 of the
amounts loaned by DynaGen
to BioTrack; or
(3) BioTrack files a 510(k)
application with the U.S.
Food and Drug Administration.
------------------------
Other terms and conditions: none
----
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
Number 33-66826 (dated August 2, 1993 on Form S-8), Number 33-78546 (dated May
2, 1994 on Form S-8), Number 33-71416 (Post-Effective Amendment No. 3 to Form
S-1 on Form S-3 dated May 16, 1995), Number 33-95432 (dated August 4, 1995 on
Form S-8), Number 333-1748 (dated March 28, 1996 on Form S-3), Number 333-19471
(dated January 9, 1997 on Form S-3), File No. 333-33321 (dated August 8, 1997 on
Form S-3), File No. 333-47077 (dated February 27, 1998 on Form S-3) and File No.
333-57249 (Dated June 19, 1998 on Form S-8), File No. 333-82785 (dated July 13,
1999 on Form S-3) and File No. 333-94583 (dated January 13, 2000 on Form S-3) of
DynaGen, Inc., of our report dated February 11, 2000, except for Note 13 as to
which the date is March 20, 2000, which included an explanatory paragraph about
the Company's ability to continue as a going concern, appearing in this Annual
Report on Form 10-KSB of DynaGen, Inc. for the year ended December 31, 1999.
/s/ Wolf & Company, P.C.
Boston, Massachusetts
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 310,549
<SECURITIES> 0
<RECEIVABLES> 5,852,671
<ALLOWANCES> 270,025
<INVENTORY> 7,148,604
<CURRENT-ASSETS> 13,784,905
<PP&E> 5,224,364
<DEPRECIATION> 1,371,522
<TOTAL-ASSETS> 21,229,627
<CURRENT-LIABILITIES> 14,911,706
<BONDS> 5,642,358
0
559
<COMMON> 638,549
<OTHER-SE> 36,455
<TOTAL-LIABILITY-AND-EQUITY> 21,229,627
<SALES> 29,139,553
<TOTAL-REVENUES> 29,139,553
<CGS> 24,377,890
<TOTAL-COSTS> 11,025,790
<OTHER-EXPENSES> (538,539)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,425,730
<INCOME-PRETAX> (8,151,318)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,151,318)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,151,318)
<EPS-BASIC> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
