EXHIBIT 4.3
ANNEX I
TO
SECURITIES PURCHASE AGREEMENT
FORM OF DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED
OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR
EXEMPTION OR SAFE HARBOR THEREFROM.
No. 99-5 US $ 1,000,000
----------- -----------
DYNAGEN INC.
8% CONVERTIBLE DEBENTURE DUE APRIL 30, 2002
THIS DEBENTURE is one of a duly authorized issue of up to $3,000,000 in
Debentures of DYNAGEN INC., a corporation organized and existing under the laws
of the State of Delaware (the "Company"), designated as its 8% Convertible
Debentures. Such Debentures may be issued in series, each of which may have a
different maturity date, but which otherwise have substantially similar terms.
FOR VALUE RECEIVED, the Company promises to pay to THE ENDEAVOUR FUND S.A.,
the registered holder hereof (the "Holder"), the principal sum of ONE MILLION
and 00/100 Dollars (US $1,000,000) on April 30, 2002 (the "Maturity Date") and
to pay interest in Common Stock on the principal sum outstanding from time to
time in arrears (i) prior to the Maturity Date at the Market Price of the Common
Stock, semi-annually each year, (ii) upon conversion as provided herein or (iii)
on the Maturity Date, at the rate of 8% per annum accruing from May 13, 1999,
the date of initial issuance of this Debenture. Accrual of interest shall
commence on the first such business day to occur after the date hereof and shall
continue to accrue on a daily basis until payment in full of the principal sum
has been made or duly provided for.
This Debenture is subject to the following additional provisions:
1. The Debentures are issuable in denominations of Ten Thousand Dollars
(US$10,000) and integral multiples thereof. The Debentures are exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration or transfer or exchange.
2. The Company shall be entitled to withhold from all payments of principal
of, and interest on, this Debenture any amounts required to be withheld under
the applicable provisions of the United States income tax laws or other
applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.
3. This Debenture has been issued subject to investment representations of
the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws. In the event of any proposed
transfer of this Debenture, the Company may require, prior to issuance of a new
Debenture in the name of such other person, that it receive reasonable transfer
documentation including legal opinions that the issuance of the Debenture in
such other name does not and will not cause a violation of the Act or any
applicable state or foreign securities laws. Prior to due presentment for
transfer of this Debenture, the Company and any agent of the Company may treat
the person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture be
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
4. A. The Holder of this Debenture is entitled, at its option, subject to
the following provisions of this Section 4, to convert all or a portion of the
principal and accrued interest on this Debenture 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)
multiplied by eighty percent (80%); provided that the principal amount being
converted is the lower of (x) US $2,000 (unless if at the time of such election
to convert the aggregate principal amount of all Debentures registered to the
Holder is less than Two Thousand Dollars US $2,000, then the whole amount
thereof) or (y) the maximum amount which the Holder can then convert pursuant to
the terms of Section 4(D) hereof .
B. For purposes of this Debenture, the following terms have the meanings
indicated below:
(i) "Market Price of the Common Stock" means (x) 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 or (y) if the Common Stock is listed on a stock
exchange, the closing price on such exchange, as reported in The Wall Street
Journal.
(ii) "Current Market Price" means the average Market Price of the Common
Stock for the three (3) trading days (which need not be consecutive) selected by
the Holder from the five (5) trading days ending on the trading day immediately
before the relevant Conversion Date (as defined below).
C. Conversion shall be effectuated by surrendering the Debentures to be
converted to the Company's transfer agent, American Stock Transfer & Trust Co.,
accompanied by or preceded by facsimile or other delivery to the Company of the
form of conversion notice attached
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hereto as Exhibit A, executed by the Holder of the Debenture evidencing such
Holder's intention to convert this Debenture or a specified portion hereof, and
accompanied, if required by the Company, by proper assignment hereof in blank.
Subject to the provisions of Section 4(E) hereof, interest accrued or accruing
from the date of issuance to the date of conversion shall, at the option of the
Company, be paid in cash or Common Stock upon conversion at the Conversion Rate
applicable to such conversion. 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
notice of conversion is given (the "Conversion Date") shall be deemed to be the
date on which the Holder faxes or otherwise delivers the conversion notice
("Notice of Conversion"), substantially in the form annexed hereto as Exhibit A,
duly executed, to the Company, provided that the Holder shall deliver to the
Company's transfer agent or the Company the original Debentures being converted
within five (5) business days thereafter (and if not so delivered with such
time, the Conversion Date shall be the date on whic 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 (000) 000-0000, ATTN: Xxxxxxxxx Xxxxxxx.
Certificates representing Common Stock upon conversion will be delivered within
three (3) business days from the date the Notice of Conversion is delivered to
the Company as contemplated in the first sentence of this paragraph C or the
original Debenture is delivered to the Company's transfer agent or the Company.
D. Conversion Limitation. In no event (except (i) with respect to a
Mandatory Conversion or (ii) if the Company is in default under any provision of
the Debentures or of any of the Transaction Agreements, as defined in the
Securities Purchase Agreement to which these Debentures are issued) shall the
holder be entitled to convert any Debentures to the extent that, after such
conversion, the sum of (1) the number of shares of Common Stock beneficially
owned by the Purchaser and its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of the unconverted
portion of the Debentures or unexercised portion of the Warrants), and (2) the
number of shares of Common Stock issuable upon the conversion of the Debentures
or exercise of the Warrants with respect to which the determination of this
proviso is being made, would result in beneficial ownership by the Purchaser and
its affiliates of more than 9.99% of the outstanding shares of Common Stock. For
purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), except as otherwise provided
in clause (1) of such proviso.
E. Anything herein to the contrary notwithstanding, in the event the
Company breaches the provisions of Section 7.3 or 7.4 of the Securities Purchase
Agreement, the Conversion Rate shall be amended to be equal to (i) 90% of (ii)
the Conversion Rate determined in accordance with the other provisions of this
Debenture without regard to this Section 4(E), and the Holder may require the
Company to immediately redeem the outstanding portion of this Debenture in
accordance with clause (y of Section 6A hereof.
5. All principal and interest outstanding under any Debentures not
converted as of the Maturity Date, shall be automatically converted, without
further action of any kind by the Company
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or any of its agents, employees or representatives, as of the Maturity Date at
the Conversion Rate applicable on the Maturity Date ("Mandatory Conversion").
6. A. The Holder recognizes that the Company may be limited in the number
of shares of Common Stock it may issue by (i) reason of its authorized shares,
or (ii) the applicable rules and regulations of the principal securities market
on which the Common Stock is listed or traded (collectively, the"Cap
Regulations"). Without limiting the other provisions hereof, (i) the Company
will take all steps reasonably necessary to be in a position to issue shares of
Common Stock on conversion of the Debentures without violating the Cap
Regulations and (ii) if, despite taking such steps, the Company still can not
issue such shares of Common Stock without violating the Cap Regulations, the
Holder of this Debenture (to the extent the same can not be converted in
compliance with the Cap Regulations (an "Unconverted Debenture"), shall have the
option, exercisable in the Holder's sole and absolute discretion, to elect any
one of the following remedies:
(x) require the Company to issue shares of Common Stock in accordance
with such Holder's Notice of Conversion relating to the Unconverted Debenture at
a conversion purchase price equal to the average of the closing bid price per
share of Common Stock for any three (3) consecutive trading days (subject to the
equitable adjustments for certain events occurring during such period as
provided in this Debenture) during the five (5) trading days immediately
preceding the date of the Notice of Conversion; or
(y) require the Company to redeem each Unconverted Debenture for an
amount (the "Cap Redemption Amount"), payable in cash, equal to:
V x 125%
where:
"V" means the outstanding principal plus accrued interest through the
Cap Redemption Date (as defined below) of an Unconverted Debenture;
The holder of an Unconverted Debenture may elect one of the above remedies with
respect to a portion of such Unconverted Debenture and the other remedy with
respect to other portions of the Unconverted Debenture.
B. Notwithstanding any other provision hereof to the contrary, at any
time prior to the Conversion Date, the Company shall have the right to redeem
all or any portion of the then outstanding principal amount of the Debentures
then held by the Holder in cash for an amount (the "Redemption Amount") equal to
the product of (a) such outstanding principal of the Debentures plus all accrued
but unpaid interest thereon through the date the Redemption Amount is paid to
the Holder (the " Redemption Payment Date"), times (b) 125%.
The Company shall give at least ten (10) business days' written notice
of such redemption to the Holder (the "Notice of Redemption"). Anything in the
preceding provisions of
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this Section 5 to the contrary notwithstanding, the Redemption Amount shall,
unless otherwise agreed to in writing by the Holder after receiving the Notice
of Redemption, be paid to the Holder in good funds at least five (5) but not
more than ten (10) business days from the date of the Notice of Redemption,
except that, with respect to any Debentures for which a Notice of Redemption is
given, the Holder shall have the right, exercisable by submitting a Notice of
Conversion to the Company within five (5) business days of the Holder's receipt
of the Company's Notice of Redemption, to convert any or all of the Debentures
sought to be redeemed (a "Redemption Notice Conversion") and the Redemption
Notice Conversion shall take precedence over the redemption contemplated by the
Notice of Redemption. Such Debentures shal be converted in accordance with the
terms hereof. Furthermore, in the event such Redemption Amount is not timely
made, any rights of the Company to redeem outstanding Debentures shall
terminate, and the Notice of Redemption shall be null and void. Any redemption
contemplated by this Debenture shall be made only in cash by the payment of
immediately available good funds to the Holder.
7. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part o the consideration for the issue hereof,
expressly waived and released.
8. If the Company merges or consolidates with another corporation or sells
or transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that the Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable. In the event of any proposed
merger, consolidation or sale or transfer of all or substantially all of the
assets of the Company (a "Sale"), the Holder hereof shall have the right to
convert by delivering a Notice of Conversion to the Company within fifteen (15)
days of receipt of notice of such Sale from the Company. In the event the Holder
hereof shall elect not to convert, the Company may prepay all outstanding
principal and accrued interest on this Debenture by paying the Redemption Amount
contemplated by Section 5(A) hereof, less all amounts required by law to be
deducted, upon which tender of payment followin such notice, the right of
conversion shall terminate.
9. If, for any reason, prior to the Conversion Date or the Redemption
Payment Date, the Company spins off or otherwise divests itself of a part of its
business or operations or disposes all or of a part of its assets which
represents 40% of its gross assets or 40% of its gross revenue for the prior
twelve months in a transaction (the "Spin Off") in which the Company does not
receive compensation for such business, operations or assets, but causes
securities of another entity (the "Spin Off Securities") to be issued to
security holders of the Company, then the Company shall
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cause (i) to be reserved Spin Off Securities equal to the number thereof which
would have been issued to the Holder had all of the Holder's Debentures
outstanding on the record date (the "Record Date") for determining the amount
and number of Spin Off Securities to be issued to security holders of the
Company (the "Outstanding Debentures") been converted as of the close of
business on the trading day immediately before th Record Date (the "Reserved
Spin Off Shares"), and (ii) to be issued to the Holder on the conversion of all
or any of the Outstanding Debentures, such amount of the Reserved Spin Off
Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction,
of which (I) the numerator is the principal amount of the Outstanding Debentures
then being converted, and (II) the denominator is the principal amount of the
Outstanding Debentures.
10. The Holder agrees that any payments of money (and not of stock or other
securities) as payment of principal and interest under this Debenture shall be
subordinated in right of payment to the prior payment in full of all
indebtedness of the Company for money borrowed from banks or other institutional
lenders (including but not limited to Argosy Investment Partners, L.P., Sirrom
Capital Corporation, and Finova Mezzanine Capital, Inc.) and their successors
and assigns, whether outstanding o the date hereof or hereafter incurred, which
is not by its terms subordinate and junior to or on a parity with this Debenture
("Senior Debt"). The Holder hereby designates and appoints the holders of Senior
Debt as its agent and attorney-in-fact to demand, xxx for, collect and receive
such Senior Debt holder's ratable share of all payments of money and to file any
necessary proof of claim therefor and to take all such other action in the name
of the Holder as such Senior Debt holder may determine to be necessary or
appropriate for the enforcement of this Section. If any payment of money shall
be made to the Holder before all Senior Debt shall have been paid in full,
despite or in violation of this subordination, such payment shall be held in
trust for and paid and delivered ratably to the holders of Senior Debt until all
Senior Debt shall have been paid in full.
11. All payments contemplated hereby to be made "in cash" shall be made in
immediately available good funds in such coin or currency of the United States
of America as at the time of payment is legal tender for payment of public and
private debts. All payments of cash and each delivery of shares of Common Stock
issuable to the Holder as contemplated hereby shall be made to the Holder at the
address last appearing on the Debenture Register of the Company as designated in
writing by the Holder from time to time; except that the Holder can designate,
by notice to the Company, a different delivery address for any one or more
specific payments or deliveries.
12. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
13. This Debenture shall be governed by and construed in accordance with
the laws of the State of Delaware. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of Wilmington or the state courts of the State of Delaware sitting in the
City of Wilmington in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection
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based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions. To the extent determined by such court, the Company shall
reimburse the Holder for any reasonable legal fees and disbursements incurred by
the Holder in enforcement of or protection of any of its rights under any of
this Debenture.
14. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal or interest
on this Debenture and same shall continue for a period of ten
(10) days; or
b. Any of the representations or warranties made by the Company
herein, in the Securities Purchase Agreement, the Registration
Rights Agreement or in any certificate or financial or other
written statements heretofore or hereafter furnished by the
Company in connection with the execution and delivery of this
Debenture or the Securities Purchase Agreement shall be false or
misleading in any material respect at the time made; or
c. The Company fails to issue shares of Common Stock to the Holder
or to cause its Transfer Agent to issue shares of Common Stock
upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Debenture, fails to
transfer or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the Holder upon
conversion of this Debenture and when required by this Debenture
or the Registration Rights Agreement, and such transfer is
otherwise lawful, or fails to remove any restrictive legend or to
cause its Transfer Agent to transfer on any certificate or any
shares of Common Stock issued to the Holder upon conversion of
this Debenture as and when required by this Debenture, the
Agreement or the Registration Rights Agreement and such legend
removal is otherwise lawful, and any such failure shall continue
uncured for five (5) business days.
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition,
agreement or obligation of any Debenture in this series and such
failure shall continue uncured for a period of thirty (30) days
after written notice from the Holder of such failure; or
e. The Company shall fail to perform or observe, in any material
respect, any covenant, term, provision, condition, agreement or
obligation of the Company under the Securities Purchase Agreement
or the Registration Rights Agreement and such failure shall
continue uncured for a period of thirty (30) days after written
notice from the Holder of such failure (other than a failure to
cause the Registration Statement to become effective no later
than the Required Effective Date, as defined and provided in the
Registration Rights Agreement, as to which no such cure period
shall apply); or
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f. The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the
benefit of creditors or commence proceedings for its dissolution;
or (3) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its
property or business; or
g. A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within sixty (60)
days after such appointment; or
h. Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties
or assets of the Company and shall not be dismissed within sixty
(60) days thereafter; or
i. Any money judgment, writ or warrant of attachment, or similar
process in excess of Two Hundred Thousand ($200,000) Dollars in
the aggregate shall be entered or filed against the Company or
any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of sixty (60) days
or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or
j. Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against
the Company and, if instituted against the Company, shall not be
dismissed within sixty (60) days after such institution or the
Company shall by any action or answer approve of, consent to, or
acquiesce in any such proceedings or admit the material
allegations of or default in answering a petition filed in any
such proceeding; or
k. The Company shall have its Common Stock suspended or delisted
from any exchange or the over-the-counter market from trading for
in excess of five (5) consecutive trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law.
15. Nothing contained in this Debenture shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect
8
of any meeting of shareholders or any rights whatsoever as a shareholder of the
Company, unless and to the extent converted in accordance with the terms hereof.
16. In the event for any reason, any payment by or act of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, the ipso facto the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section 16
or otherwise, such excess shall be deemed to be an interest-free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section 16 shall control every other
provision of this Debenture.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: __________________, 1999
DYNAGEN INC.
By:_______________________________________
------------------------------------------
(Print Name)
__________________________________________
(Title)
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________ of
the principal amount of the above Debenture No. ___ into Shares of Common Stock
of DYNAGEN INC. (the "Company") according to the conditions hereof, as of the
date written below.
Conversion Date*
___________________________________________________________
Applicable Conversion Price
___________________________________________________________
Signature
___________________________________________________________
[Name]
Address:
___________________________________________________________
___________________________________________________________
* This original Debenture must be received by the Company or its transfer agent
by the fifth business date following the Conversion Date.
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