EXHIBIT 10.1
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9% CONVERTIBLE SUBORDINATED DEBENTURE
$----------- Cambridge, Massachusetts
April 8, 1999
On May 8, 2000 (the "Maturity Date"), for value received, the
undersigned DynaGen, Inc., a Delaware corporation (the "Maker"), promises to pay
to _______________ (the "Payee"), the principal sum of _____________________
United States Dollars ($--------) or the then outstanding principal amount
hereof, together with interest on any and all principal amounts remaining unpaid
hereunder from time to time outstanding from the date hereof until payment in
full. This Debenture is one of a series of Debentures of like tenor issued on or
about the date hereof.
1. INTEREST AND PRINCIPAL
1.01 Interest. The Maker shall pay interest on the outstanding
principal amount of this Debenture from the date hereof until such principal
amount is paid in full at the rate of Nine percent (9%) per annum. Interest
payments shall be made, at the option of the Maker, in cash or in shares of
common stock, $.01 par value per share ("Common Stock") of Maker valued at the
closing price on the last trading before payment on June 30, 1999, September 30,
1999 December 31, 1999, and March 31, 2000 (the "Payment Dates").
1.02 Principal. The entire outstanding principal together with interest
accrued thereon on amount of this Debenture shall be automatically converted
into shares of Common Stock at the Conversion Rate (as defined in Section 2.01
hereof) applicable on the Maturity date and shall be due and payable on May 8,
2000.
2. CONVERSION
2.01 Optional Conversion. Subject only to the mandatory conversion
provisions and special conversion provisions of section 2.02 and 2.03, this
Debenture shall be convertible into fully paid and nonassessable shares of
Common Stock at the Conversion Rate (as hereinafter defined) at any time prior
to Maturity at the discretion of the Payee. Conversion Rate shall mean a number
of shares determined by (x) multiplying (a) the then issued and outstanding
shares of Common Stock (primary) by (b) .05 (assuming an entire issuance of
$1,000,000 of Debentures in this series of Debentures or a pro rata increase or
decrease in such .05 to the extent that the aggregate issuance of Debentures
exceeds or falls short of $1,000,000) and (y) multiplying the product of (a) and
(b) by a fraction the numerator of which shall be the principal amount of
Debenture proposed to be converted and the denominator of which shall be the
aggregate principal amount of all Debentures issued in this series of
Debentures.
2.02 Mandatory Conversion. The entire principal and accrued interest of
the Debenture shall be automatically converted (1) at the then applicable
Conversion Rate immediately prior to the closing of a firm commitment
underwritten public offering in which the aggregate public offering price to the
public equals or exceeds $10,000,000, (2) immediately prior to the closing of a
sale of all or substantially all of the assets of Maker or a merger of Maker
with or into another entity in which Maker is not the surviving entity into a
number of shares of Common Stock with a value equal to 5% of the consideration
received by Maker or its stockholders in such a transaction (assuming an entire
issuance of $1,000,000 in this series of Debentures and otherwise adjusted as
set forth in Section 2.01) multiplied by a fraction the numerator of which is
the principal amount of this Debenture and the denominator of which is the
aggregate principal amount of all Debentures in this series of Debentures, (3)
upon the exercise by ▇▇. ▇▇▇▇▇▇ of at least half of any options to purchase
shares of Common Stock of Maker granted to him during 1999, and (4) upon
Maturity.
2.03 Special Conversion. The entire principal and accrued interest of
the Debenture shall be automatically converted into the number of New Issue
Securities (as hereinafter defined) as could have been acquired in a New Issue
(as hereinafter defined) for outstanding principal amount plus accrued interest
on this Debenture; provided that the conversion rate of the New Issue Securities
is equal to or better than that of the Debentures. New Issue shall mean a
private placement of convertible preferred stock or debentures taking place
within 4 months of the date hereof and with a conversion rate calculation method
similar to that set forth in Section 2.01 of this Debenture. New Issue
Securities shall mean the preferred stock or debentures issued in the New Issue.
3. SUBORDINATION
3.01 Subordinated Debt. The indebtedness evidenced by this instrument
("Subordinated Debt") is subordinate and junior in right of payment, to the
extent and in the manner set forth below, to all Superior Debt (as defined in
Section 3.02 ) of the Maker to the extent provided in this section.
3.02 Superior Debt. For the purpose of these subordination provisions
the term "Superior Debt" shall mean all principal, interest, charges, expenses,
and attorneys' fees arising out of or relating to all indebtedness of Maker
owing to the First National Bank of Boston or any other bank or institutional
lender ("Bank") whether outstanding on the date of this Debenture or
subsequently incurred unless under the instrument evidencing the same or under
which the same is outstanding, it is expressly provided that such indebtedness
is junior and subordinate to other indebtedness and obligations of the Maker
(such indebtedness of the Maker to which this instrument is subordinate and
junior being referred to as "Superior Debt").
3.03 Permitted Payments. Maker shall not make any regularly scheduled
payment of accrued interest on any Subordinated Debt unless at the time of such
scheduled interest payment there exists no event of default under the Superior
Debt and so long as such payment would not thereby result in such an event of
default.
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3.04 Default on Superior Debt.
(a) In the event the Maker shall default in the payment of any
principal or interest on any Superior Debt when the same becomes due
and payable, whether at maturity or at a date fixed for prepayment or
by declaration or otherwise, then, unless and until such default shall
have been cured or waived or shall have ceased to exist, no direct or
indirect payment (in cash, property or securities or by set-off or
otherwise) shall be made or agreed to be made on account of the
principal or interest on any Subordinated Debt, or as a sinking fund
for the Subordinated Debt, or in respect of any redemption, retirement,
purchase or other acquisition of any of the Subordinated Debt.
(b) Upon the happening of an event of default with respect to any
Superior Debt, as defined in the instrument under which the same is
outstanding, which occurs at the maturity of same or which permits Bank
to accelerate the maturity of the Superior Debt (other than under
circumstances when the terms of SECTION 3.04(A) are applicable), then,
unless and until such event of default shall have been cured or waived
or shall have ceased to exist, no direct or indirect payment (in cash,
property or securities or by set-off or otherwise) shall be made or
agreed to be made on account of the principal of, or premium, if any,
or interest on any Subordinated Debt, or as a sinking fund for the
Subordinated Debt, or in respect of any redemption, retirement,
purchase or other acquisition of any of the Subordinated Debt.
3.05 Further Assurances. Payee shall sign any agreement which may be
required by a Bank to either (a) evidence this subordination or (b) extend this
subordination to meet the requirements of the Bank.
4. DEFAULTS AND REMEDIES.
4.01 Events of Default. An "Event of Default" shall occur if:
(a) the Maker defaults in the payment of interest on this
Debenture when the same becomes due and payable and such Default
continues for a period of 30 days;
(b) the Maker defaults in the payment of principal on this
Debenture when the same becomes due and payable, at maturity or
otherwise;
(c) the Maker fails to comply with any of the other agreements
contained in this Debenture, and the Default continues for the period
and after the notice specified below; and
(d) the Maker pursuant to or within the meaning of any Bankruptcy
Law (as defined below):
(i) commences a voluntary case;
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(ii) consents to the entry of an order against it for
relief in an involuntary case; or
(iii) makes a general assignment for the benefit of its
creditors; or
(e) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Maker in an involuntary
case;
(ii) appoints a Custodian (as hereinafter defined) for
all or substantially all of the assets of the Company; or
(iii) orders a liquidation of the Company.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law. The term "Custodian" means any receiver, trustee,
assignee, liquidator, or similar official under any Bankruptcy Law.
A default under clause (c) above shall not constitute an Event of
Default until Payee notifies the Maker of the Default and the Maker does not
cure the Default within 60 days of such notice. The notice must specify the
Event of Default, demand that it be remedied, and state that it is a notice of
Event of Default.
4.2 Acceleration. If an Event of Default occurs and is continuing, the
holder of this Debenture may, by notice to the Maker, declare the principal of
and accrued interest on this Debenture to be immediately due and payable.
4.3 Other Remedies. Subject to SECTION 2.02, if an Event of Default
occurs and is continuing, the holder of this Debenture may pursue any available
remedy to collect the payment of interest, principal or premium, if any, on this
Debenture or to enforce any provision of this Debenture. A delay or omission by
the holder of this Debenture in exercising any right or remedy accruing upon an
Event of Default shall not impair the right or remedy or constitute a waiver or
acquiesce in the Event of Default. All remedies are cumulative to the extent
permitted by law.
5. USURY.
It is the intention of the parties hereto to conform strictly to
applicable usury laws now or hereafter in effect. In the event that any of the
terms or provisions of this Debenture are in conflict with applicable usury law
this SECTION 5 shall govern as to such terms or provisions, and this Debenture
shall in all other respects remain in full force and effect. If any transaction
contemplated hereby would be usurious, it is agreed that the aggregate of all
consideration which constitutes interest under applicable law that is contracted
for, charged or received under this Debenture shall
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under no circumstances exceed the maximum interest allowed by applicable law.
Accordingly, if interest in excess of the legal maximum is contracted for,
charged or received: (i) this Debenture shall be automatically reformed so that
the effective rate of interest shall be reduced to the maximum rate of interest
permitted by applicable law, for the purpose of determining said rate and to the
extent permitted by applicable law, all interest contracted for, charged or
received shall be amortized, prorated and spread throughout the full term of
this Debenture so that the effective rate of interest is uniform throughout the
life of this Debenture, and (ii) any excess of interest over the maximum amount
allowed under applicable law shall be applied as a credit against the then
unpaid principal amount hereof.
6. MISCELLANEOUS
The undersigned hereby waives presentment, demand for payment, notice
of dishonor, and any and all other notices or demands in connection with the
delivery, acceptance, performance, default or enforcement of this Debenture, and
hereby consents to any extensions of time, renewals, releases of any party to
this Debenture, waivers or modifications that may be granted or consented to by
the Payee in respect to the time of payment or any other provision of this
Debenture. THIS DEBENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS (EXCLUSIVE OF THE LAWS GOVERNING CONFLICTS OF LAWS) OF THE STATE OF
MASSACHUSETTS.
DYNAGEN, INC.
By: ___________________________________
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Executive Vice President
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