EXHIBIT 10a
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of the date of acceptance set
forth below, is entered into by and between DYNAGEN, INC., a Delaware
corporation, with headquarters located at 00 Xxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxxxxxx 00000 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon exemptions from securities registration afforded
under Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act") and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, Series C Convertible Preferred Stock, $.01 par
value per share and Series D Convertible Preferred Stock $.01 par value
(collectively the "Preferred Stock"), of the Company which will be convertible
into shares of Common Stock, $.01 par value per share (the "Common Stock"), of
the Company upon the terms and subject to the conditions of such Preferred Stock
(the Common Stock and Preferred Stock sometimes referred to herein as
"Securities"), and a Warrant to purchase 250,000 shares of Common Stock (the
"Warrant") and subject to acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
A. PURCHASE. The undersigned hereby agrees to purchase from the Company
Series C Preferred Stock of the Company, in the amount set forth on the
signature page of this Agreement, and having the terms and conditions set forth
in the Certificate of Designations attached hereto as ANNEX I. The purchase
price for the Series C Preferred Stock shall be as set forth on the signature
page hereto and shall be payable in United States Dollars.
B. FORM OF PAYMENT. The Buyer shall pay the purchase price for the
Preferred Stock by delivering immediately available good funds in United States
Dollars to the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as ANNEX II (the "Joint Escrow Instructions") as
set forth below. Promptly following payment by the Buyer to the Escrow Agent of
the purchase price of the Preferred Stock, the Company shall deliver a
Certificate for the Preferred Stock duly executed on behalf of the Company, to
the Escrow Agent. By signing this Agreement, the Buyer and the Company, and
subject to acceptance by the Escrow Agent, each agrees to all of the terms and
conditions of, and becomes
a party to, the Joint Escrow Instructions, all of the provisions of which are
incorporated herein by this reference as if set forth in full.
C. METHOD OF PAYMENT. Payment into escrow of the purchase price for the
Preferred Stock shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx, Esqs.
Account No. 105
Not later than 1:00 p.m., New York time, on the date which is two (2) NASD
trading days after the Company shall have accepted this Agreement and returned a
signed counterpart of this Agreement to the Escrow Agent by facsimile, the Buyer
shall deposit with the Escrow Agent the aggregate purchase price for the
Preferred Stock, in immediately available funds. Time is of the essence with
respect to such payment, and failure by the Buyer to make such payment shall
allow the Company to cancel this Agreement.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. Without limiting its right to resell the Common Stock under the
Registration Rights Agreement, the Buyer is purchasing the Preferred Stock and
will be acquiring the shares of Common Stock issuable upon conversion of the
Preferred Stock for its own account for investment only and not with a view
towards the resale, public sale or distribution thereof and not with a view to
or for sale in connection with any distribution thereof;
b. The Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
Preferred Stock:
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c. All subsequent offers and sales of the Preferred Stock and the
shares of Common Stock issuable upon conversion of, or issued as dividends on,
the Preferred Stock by the Buyer shall be made pursuant to registration of the
Shares under the 1933 Act or with respect to the Preferred Stock pursuant to an
exemption from registration;
d. The Buyer understands that the Preferred Stock is being offered and
sold, and the Shares are being offered, to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, the and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Preferred Stock and to receive an offer of the Shares;
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Preferred Stock and the offer of
the Shares which have been requested by the Buyer, including ANNEX V hereto. The
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and have received complete and satisfactory answers to
any such inquiries. Without limiting the generality of the foregoing, the Buyer
has also had the opportunity to obtain and to review the Company's (1) Annual
Report on Form 10-K for the fiscal year ended June 30, 1996; (2) Transition
Report on Form 10-K for the six-month period from July 1, 1996 to December 31,
1996, as amended; (3) Quarterly Reports on Form 10-Q for the fiscal quarters
ended September 30, 1996, March 31, 1997 and June 30, 1997; (4) The Company's
Proxy Statement for its Annual Meeting of Stockholders held on January 30, 1997;
(5) The Company's Current Reports on Form 8-K filed on August 23, 1996,
September 23, 1996, January 15, 1997, February 3, 1997, March 24, 1997 and July
3, 1997, as amended, and (6) The Company's Form S-3 Registration Statement filed
with the Securities and Exchange Commission on August 11, 1997 (the "Company's
SEC Documents").
f. The Buyer understands that its investment in the Securities involves
a high degree of risk;
g. The Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities;
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. Notwithstanding the provisions hereof, in no event (except with
respect to an Event of Mandatory Conversion) shall the holder be entitled to
convert any preferred Stock in excess of
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that number of shares upon conversion of which the sum of (1) the number of
shares of Common Stock beneficially owned by the Buyer and its affiliates (other
than shares of common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Preferred Stock), and (2) the number
of shares of Common Stock issuable upon the conversion of the Preferred Stock
with respect to which the determination of this proviso is being made, would
result in beneficial ownership by the Buyer and its affiliates of more than 4.9%
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, and Regulation 13 D-G thereunder, except as otherwise provided in
clause (1) of such proviso.
3. COMPANY REPRESENTATIONS, ETC.
Except as disclosed in Annex V, delivered in writing to the Buyer, the
Company represents and warrants to the Buyer that:
A. CONCERNING THE SHARES. The Common Shares have been duly authorized
and, when issued upon conversion of, or as dividends on, the Preferred Stock,
will be duly and validly issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of being such holder.
There are no preemptive rights except that the holders of the Company's Series A
Preferred Stock have the right to acquire a portion of the Common Shares which
rights have been waived or otherwise provided for.
B. REPORTING COMPANY STATUS. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified as a foreign corporation in all jurisdictions in
which the failure to so qualify would have a material adverse effect on the
Company and its subsidiaries taken as a whole. The Company has registered its
Common Stock pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Common Stock is listed and traded on the
NASDAQ/Small Cap Market. The Company has timely filed all material required to
be filed pursuant to all reporting obligations under either Section 13(a) or
15(d) of the Exchange Act for a period of at least twelve (12) months
immediately preceding the offer or sale of the Preferred Stock, and has received
no notice, either oral or written, with respect to the continued eligibility of
the Common Stock for such listing.
C. AUTHORIZED SHARES. The Company has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the conversion of the
Preferred Stock. The Common Shares have been duly authorized and, when issued
upon conversion of, or as interest on, the Preferred Stock, will be duly and
validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder.
D. STOCK PURCHASE AGREEMENT; REGISTRATION RIGHTS AGREEMENT
AND STOCK. This Agreement and the Registration Rights Agreement, the form
of which is
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attached hereto as ANNEX IV (the "Registration Rights Agreement"), have been
duly and validly authorized by the Company, this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the
Registration Rights Agreement, when executed and delivered by the Company, will
be, valid and binding agreements of the Company enforceable in accordance with
their respective terms, subject as to enforceability to general principles of
equity, the indemnification provisions of the Registration Rights Agreement, and
to bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally; and the Preferred Stock will be duly
and validly issued, fully paid and non-assessable when delivered on behalf of
the Company upon payment therefor in accordance with this Agreement, subject to
general principles of equity and to bankruptcy, insolvency, moratorium, or other
similar laws affecting the enforcement of creditors' rights generally.
E. NON-CONTRAVENTION. The execution and delivery of this Agreement and
the Registration Rights Agreement by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Preferred Stock do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under, the
(i) certificate of incorporation or by-laws of the Company, (ii) any indenture,
mortgage, deed of trust, or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
(iii) any material existing applicable law, rule, or regulation or any
applicable decree, judgment, or (iv) order of any court, United States federal
or state regulatory body, administrative agency, or other governmental body
having jurisdiction over the Company or any of its properties or assets, except
such conflict, breach or default which would not have a material adverse effect
on the transactions contemplated herein.
F. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the Stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
G. SEC FILINGS. None of the SEC Filings with the Securities and
Exchange Commission at the time they were filed, contained any untrue statement
of a material fact or omitted to any state material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Except as set forth on
ANNEX V hereto, the Company has timely filed all requisite forms, reports and
exhibits thereto with the Securities and Exchange Commission.
H. ABSENCE OF CERTAIN CHANGES. Since January 1, 1997, there has been
no material adverse change and no material adverse development in the business,
properties, operations, financial condition, or results of operations of the
Company, except as disclosed in ANNEX V or in the Company's SEC Documents.
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I. FULL DISCLOSURE. There is no fact known to the Company (other than
general economic conditions known to the public generally), and other than facts
disclosed in the Company's SEC Documents, that has not been disclosed in writing
to the Buyer that (i) could reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), earnings, business affairs,
properties or assets of the Company or (ii) could reasonably be expected to
materially and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement.
J. ABSENCE OF LITIGATION. Except as set forth in ANNEX V hereto, and in
the Company's SEC Documents, which the Buyer has reviewed, there is no action,
suit, proceeding, inquiry or investigation before or by any court, public board
or body pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company or any of its subsidiaries, wherein
an unfavorable decision, ruling or finding would have a material adverse effect
on the properties, business, condition (financial or otherwise), results of
operations or prospects of the Company and its subsidiaries taken as a whole or
the transactions contemplated by this Agreement or any of the documents
contemplated hereby or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of such other documents.
K. ABSENCE OF EVENTS OR DEFAULT. Except as set forth in ANNEX V hereto
and Section 3(e), no Event of Default, as defined in the respective agreement to
which the Company is a party, and no event which, with the giving of notice or
the passage of time or both, would become an Event of Default (as so defined),
has occurred and is continuing, which would have a material adverse effect on
the Company's financial condition or results of operations.
L. NO DEFAULT. To its knowledge, the Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it or its property is
bound, and neither the execution of, nor the delivery by the Company of, nor the
performance by the Company of its obligations under, this Agreement or the
Preferred Stock, other than the conversion provision thereof, will conflict with
or result in the breach or violation of any of the terms or provisions of, or
constitute a default or result in the creation or imposition of any lien or
charge on any assets or properties of the Company under, (i) any material
indenture, mortgage deed of trust or other material agreement applicable to the
Company or instrument to which the Company is a party or by which it is bound,
(ii) any statute applicable to the Company or its property, (iii) the
Certificate of Incorporation or By-Laws of the Company, (iv) any decree,
judgment, order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or its properties, or (v) the Company's
listing agreement for its Common Stock.
M. PRIOR ISSUES. During the twelve (12) months preceding the date
hereof, the Company has not issued any securities other than (i) as reflected in
the Company's SEC Documents, of which 44,700 shares of Series A Preferred Stock
and 7,500 shares of Series B
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Preferred Stock, remain unconverted, and (ii) options and warrants to purchase
shares of Common Stock which have been granted to directors, employees,
consultants and advisers of the Company, as further set forth on Annex 3(m).
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) Preferred
Stock has not been and is not being registered under the provisions of the 1933
Act and, except as provided in the Registration Rights Agreement, the Shares
have not been and are not being registered under the 1933 Act, and may no be
transferred unless (A) subsequently registered thereunder or (B) the Buyer shall
have delivered to the Company an opinion of counsel, reasonably satisfactory in
form, scope and substance to the Company, to the effect that the Securities to
be sold or transferred may be sold or transferred pursuant to an exemption from
such registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
B. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that the
Preferred Stock, and, until such time as the Common Stock has been registered
under the 1933 Act as contemplated by the Registration Rights Agreement and sold
in accordance with such Registration Statement, the shares of Common Stock
issued to the Buyer upon conversion of the Preferred Stock shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the Preferred Stock and such shares of
Common Stock):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
C. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter
into the Registration Rights Agreement, in substantially the form attached
hereto as ANNEX IV, on or before the Closing Date (as defined in Section 7).
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D. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Preferred Stock to the Buyer under
any United States laws and regulations, or by any domestic securities exchange
or trading market, and to provide a copy thereof to the Buyer promptly after
such filing.
E. REPORTING STATUS. So long as the Buyer beneficially owns any of the
Preferred Stock, the Company shall file all reports required to be filed with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and the Company
shall no terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
F. USE OF PROCEEDS. The Company will use the proceeds from the sale of
the Preferred Stock (excluding amounts paid by the Company for legal fees and
finder's fees in connection with the sale of the Preferred stock) for internal
working capital purposes, and shall not, directly or indirectly, use such
proceeds for any loan to or investment in any other corporation, partnership
enterprise or other person.
G. CERTAIN AGREEMENTS. (i) Except as provided herein with respect to
Acquisition Financing or in 4(g)(ii)(d) hereof, and the sale of up to 5,300
additional shares of Series A Preferred Stock, the Company covenants and agrees
that it will not, without the prior written consent of the Buyer, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock with any third party until the expiration of thirteen (13)
months after the effective date of the Registration Statement (the "Effective
Date").
(II) SPECIAL PROVISION RELATING TO ACQUISITION FINANCING.
(a) Following the issuance of the Series C Preferred Stock to the
Buyer, and until the expiration of the thirteen (13) month period following the
Expiration Date, the Company shall provide the Buyer with the following rights
to participate in any private placement financing of equity securities (or
securities convertible into Equity Securities of the Company) by the Company
(exempt from the registration requirements of the Securities Act of 1993) where
at least 90% of the proceeds of such financing are intended to be used by the
Company to acquire the capital stock or assets of another business enterprise
(including, within the context of such Acquisition Financing, the working
capital requirements of the acquired entity) (an "Acquisition Financing"). This
right of first refusal is granted to the Buyer subject to, and subordinate to,
the prior rights of first refusal of the holders of the Series A Preferred Stock
with respect to private placement of securities by the Company, and is granted
to Buyer after the holders of Series A Preferred Stock either waive or decline
to exercise their rights of first refusal, or if such rights of first refusal of
the holders of Series A Preferred Stock are otherwise terminated. If the Company
obtains Acquisition Financing from a third party during the thirteen-month
period following the first issuance of shares of Series D Preferred Stock, then
the Buyer's obligations under Section 4(i) below to purchase additional tranches
of Series D Preferred Stock shall be suspended until the earlier of (x) such
time that the Company provides
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written notice that all equity securities issued by the Company in such
Acquisition Financing have been converted to Common Stock, or (y) the conclusion
of the thirteen (13) month period.
(b) Notice to Participate. Subject to the prior exercise or
waiver of the rights of the holders of the Series A Preferred Stock, the Company
shall, prior to any issuance by the Company of any of its securities to be
issued in an Acquisition Financing, offer to the Buyer by written notice the
right, for a period of five (5) business days, to purchase all of such
securities for cash at an amount equal to the price or other consideration for
which such securities proposed to be issued. The Company's written notice to the
Buyer shall describe the securities proposed to be issued by the Company and
specify the number, price and payment terms. Except as may be necessary with
respect to potential designees, the Buyer agrees to keep the terms and existence
of such securities issuance confidential. The Buyer, or its designee, may accept
the company's offer as to the full number of securities offered to it, by
written notice thereof given by it to the Company prior to the expiration of the
aforesaid five (5) day period, in which event the Company shall promptly sell
and such Buyer shall buy, upon the terms specified, the number of securities
agreed to be purchased by such Buyer, or its designee. The rights contained in
this Section are not transferable by the Buyer except as provided herein.
(c) Options of Buyer. Following the exercise or waiver of the
rights of first refusal of the Series A Preferred Stock, the Buyer shall have
the following rights: (i) to participate, or have its designee participate, or
decline to participate in the Acquisition Financing by delivering notice (or
fail to deliver notice) during the five-day period; (ii) continue to exercise
its rights to purchase shares of Series D Preferred Stock as provided in Section
4i; or (iii) accelerate its right to purchase shares of Series D Preferred Stock
up to an aggregate of 48,000 shares of Series D Preferred Stock.
(d) Exceptions to Right to Participate. The first refusal rights
of the Buyer pursuant to this Section shall not apply to securities issued by
the Company (i) upon conversion of any of the shares of any series of Preferred
Stock or the exercise of Warrants to purchase Common Stock, (ii) as a stock
dividend or upon any subdivision of shares of Common Stock, provided that the
securities issued pursuant to such stock dividend or subdivision are limited to
additional shares of Common Stock, (iii) pursuant to subscriptions, warrants,
options, convertible securities, or other rights which are outstanding on the
date of this Agreement, (iv) as non-cash consideration for the acquisition
(whether by merger or otherwise) by the Company or any of its subsidiaries of
all or substantially all of the stock or assets of any other entity, (v)
pursuant to exercise or warrants or options to purchase Common Stock granted to
directors, officers, employees, investment bankers, advisers or consultants of
the Company in connection with their service to the Company, (vi) pursuant to
any other transaction by the Company in connection with the financing of the
acquisition of Superior Pharmaceutical, (vii) pursuant to the licensing of
technology by the Company or from the Company, or pursuant to any corporate
partnership, strategic alliance or joint venture entered into by the Company,
and (viii) upon the exercise of any right which was not itself in violation of
the terms of this Section.
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(e) Offering of Securities to Third Parties. The Company shall be
free at any time prior to sixty (60) days after the expiration of its notice to
offer to the Buyer, to offer and sell to any third party or parties the number
of such securities not agreed by the Buyer, or its designee, to be purchased by
it, at a price and on payment terms no less favorable to the Company than those
specified in such notice of offer to the Buyer. However, if such third party
sale or sales are not consummated within such sixty (60) day period, the Company
shall not sell such securities as shall not have been purchased within such
period without again complying with this Section 5. No Registration Statement
with respect to any Acquisition Financing with any third party shall be made
effective until 45 days after the Effective Date as defined above.
H. WARRANTS. The Company agrees to issue to the Buyer at the Closing,
transferable divisible warrants (the "Warrants") for 250,000 shares of Common
Stock. Such Warrants shall bear an exercise price per share of Common Stock as
follows: 125% of the Market Price, as defined in the Certificate of Designation,
on the Closing Date, and shall be exercisable immediately upon issuance, and for
a period of three (3) years after issuance, in the form annexed hereto as
Exhibit VI, together with piggy-back registration rights, and demand
registration rights.
I. SERIES D PREFERRED STOCK. The Buyer irrevocably agrees to purchase
up to $4,800,000, and the Company irrevocably agrees to sell the Buyer up to
$2,400,000 of Series D Preferred Stock (the "Series D Preferred Stock") in a
series of tranches, commencing thirty (30) days after the Effective Date of the
Registration Statement contemplated by the Registration Rights Agreement
attached hereto as ANNEX IV (the "Effective Date"). Buyer's obligation to
purchase the Series D Preferred Stock on each Additional Closing Date (which
shall occur not less than thirty (30 ) calendar days apart), shall be contingent
upon the satisfaction of the following conditions:
(a) The Company shall give the Buyer five (5) days prior written
notice;
(b) The Series D Preferred Stock issued in each tranche shall be
not less than $200,000 nor in excess of $400,000 principal amount;
(c) On each Additional Closing Date;
(i) the Registration Statement required to be filed under the
Registration Rights Agreement, is effective;
(ii) The representations and warranties contained in Section 3
shall be true and correct in all material respects;
(iii) The average daily trading volume for the previous thirty
(30) trading days must exceed $100,000;
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(iv) The average daily share price of the common stock for the
ten trading days prior thereto, must exceed 60% of the price per share on the
Closing Date of the Series C Preferred Stock, or on the immediately preceding
Additional Closing Date as applicable; and
(d) In the event that (x) the Company does not exercise its
option to require the Buyer to purchase at least $2,400,000 of Series D
Preferred Stock, or (y) the Buyer does not purchase at least $2,400,000 of
Series D Preferred Stock because (A) the Buyer in its discretion, refuses to
purchase such amount because of the failure to satisfy the conditions set forth
in Paragraph 4i(c)(iii) or Paragraph 4i(c)(iv) hereof, or (B) the Buyer's
obligation to purchase is suspended under Paragraph 4g(i)(a), the Company will,
not later than thirteen (13) months after the Effective Date issue to the Buyer
an additional 300,000 Warrants upon the terms and conditions of Paragraph 4(h)
hereof.
(e) Notwithstanding anything to the contrary contained herein, in
the event the Buyer does not purchase a tranche, or at least $200,000 of a
tranche, of Series D Preferred Stock because the conditions preceded in
Paragraph 4(i)(c)(iii) or (c)(iv) have not been met, the Company may offer to
sell a tranche not exceeding $400,000 of such Series D Preferred Stock to a
third party, free of any other restrictions, provided however, that such refusal
by Buyer shall not be deemed a waiver of the right by Buyer to purchase
subsequent tranches, or its entitlement to the Warrants in Paragraph 4(i)(d).
J. AVAILABLE SHARES. The Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield the number of Common Stock issuable at conversion as may be
required to satisfy the conversion rights of the Buyer pursuant to the terms and
conditions of the Preferred Stock.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the aggregate
purchase price for the Preferred Stock in accordance with Section 1(c) hereof,
the Company will irrevocably instruct its transfer agent to issue Common Stock
from time to time upon conversion of the Preferred Stock in such amounts as
specified from time to time by the Company to the transfer agent, bearing the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Buyer in
connection with each conversion of the Preferred Stock. The Company warrants
that no instruction other than such instructions referred to in this Section 5.
The Registration Rights Agreement, and stop transfer instructions to give effect
to Section 4(a) hereof prior to registration and sale of the Shares under the
1933 Act will be given by the Company to the transfer agent and that the Shares
shall otherwise be freely transferable on the books and records of the Company
as to the extent provided in the Agreement, the Registration Rights Agreement,
and applicable law. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement to comply with all
-11-
applicable securities laws upon resale of the Securities. If the Buyer provides
the Company with an opinion of counsel reasonably satisfactory to the Company
that registration of a resale by the Buyer of any of the Securities in
accordance with clause (1)(B) of Section 4(a) of this Agreement is not required
under the 1933 Act, the Company shall (except as provided in clause (2) of
Section 4(a) of this Agreement) permit the transfer of the Securities and, in
the case of the Shares, promptly instruct the Company's transfer agent to issue
one or more certificates for Common Stock in such name and in such denominations
as specified by the Buyer.
b. The Company will permit the Buyer to exercise its right to convert
the Preferred Stock and exercise the Warrants by telecopying an executed and
completed Notice of Conversion or Notice of Exercise to the Company and
delivering within three business days thereafter, the original Notice of
Conversion or Notice of Exercise and the certificate for the Preferred Stock
representing the Shares or the Warrant to the Company by express courier. Each
date on which a Notice of Conversion or Notice of Exercise is telecopied to and
received by the Company in accordance with the provisions hereof shall be deemed
a Conversion Date. The company will immediately confirm receipt of such notice
by telecopy and transmit the certificates representing the Shares of Common
Stock issuable upon conversion of any Preferred Stock (together with the
Preferred Stock representing the Shares not so converted) to the Buyer via
express courier, within three business days after receipt by the company of the
original Notice of Conversion and the certificate for the Preferred Stock
representing the Shares to be converted (the "Delivery Date").
c. The Company understands that a delay in the issuance of the Shares
of Common Stock beyond the Delivery Date could result in economic loss to the
Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments, [not exceeding $200,000 per tranche], to the Buyer for late
issuance of Shares upon Conversion in accordance with the following schedule
(where "No. Business Days Late" is defined as the number of business days beyond
three (3) business days from Delivery Date:
Late Payment for Each $10,000 of Preferred Stock
No. Business Days Late Principal Amount Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
10 $1,000 +$200 for each
-12-
Business Day Late beyond
10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit a Buyer's right to
pursue actual damages for the Company's failure to issue and deliver Common
Stock to the Buyer. Furthermore, in addition to any other remedies which may be
available to the Buyer, in the event that the Company fails for any reason to
effect delivery of such shares of Common Stock within five business days after
the Delivery Date, the Buyer will be entitled to revoke the relevant Notice of
Conversion by delivering a notice to such effect to the Company whereupon the
Company and the Buyer shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion (and in such event,
the late payments described above shall not be due and payable).
6. DELIVERY INSTRUCTIONS.
The Series C Preferred Stock shall be delivered by the Company to the
Escrow Agent pursuant to Section 1(b) hereof on a delivery against payment basis
at the closing.
7. CLOSING DATE
The date and time of the issuance and sale of the Series C Preferred
Stock (the "Closing Date") and the date and time of the issuance and sale of the
Additional Preferred Stock (an "Additional Closing Date") shall occur no later
than 12:00 Noon, New York time on the second NYSE trading day after the
fulfillment or waiver of all Closing conditions pursuant to Sections 8 and 9, or
such other mutually agreed to time. The closing shall occur on such date at the
offices of the Escrow Agent. Notwithstanding anything to the contrary contained
herein, the Escrow Agent will be authorized to release the funds representing
the Purchase Price for the Preferred Stock or Additional Preferred Stock (as the
case may be), and to release the Preferred Stock or Additional Preferred Stock
(as the case may be) only upon satisfaction of the conditions set forth in
Section 8 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The Buyer understands that the Company's obligation to sell the
Preferred Stock on the Closing Date and any Series D Preferred Stock on an
Additional Closing Date pursuant to this Agreement is conditioned upon:
A. The receipt and acceptance by the Company of Buyer's agreement, as
evidenced by its execution of this Agreement, to purchase at least Seven Hundred
Fifty Thousand ($750,000.00) Dollars in liquidation value of Series C Preferred
Stock (or such lesser amount as the Company, in its sole discretion, shall
determine);
-13-
B. Delivery by the Buyer to the Escrow Agent of good funds as payment
in full of an amount equal to the purchase price for the Series C Preferred
Stock or Series D Preferred Stock (as the case may be) in accordance with
Section 1(c) hereof;
C. The accuracy on the Closing Date or Additional Closing Date (as the
case may be) of the representations and warranties of the Buyer contained in
this Agreement as if made on such date, and the performance by the Buyer on or
before such date of all covenants and agreements of the Buyer required to be
performed on or before such date;
D. There shall not be in effect any law, rule or regulation prohibiting
or restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Stock on the Closing Date and any Series D Preferred Stock on an
Additional Closing Date is conditioned upon:
A. Acceptance by Buyer of an Agreement for the sale of Preferred Stock,
as indicated by execution of this Agreement, and Buyer's and Company's execution
of the Registration Rights Agreement;
B. Delivery by the Company to the Escrow Agent of the Preferred Stock,
the Warrants, and the Series D Preferred Stock (as the case may be) in
accordance with this Agreement;
C. The accuracy in all material respects on the Closing Date or
Additional Closing Date (as the case may be) of the representations and
warranties of the Company contained in this Agreement as if made on such date,
and the performance by the Company on or before such date (as the case may be)
of all covenants and agreements of the Company required to be performed on or
before such date; and
D. On the Closing Date or Additional Closing Date the Buyer having
received an opinion of counsel for the Company, dated such date, in form, scope
and substance reasonably satisfactory to the Buyer, to the effect set forth in
ANNEX III attached hereto.
10. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance with
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 New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based
-14-
on forum non convenients, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
11. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given upon, (a) personal delivery, or (b) if advance copy is given by fax, upon
(i) seven business days after deposit in the United states Postal Service by
regular or certified mail, or (ii) three business days mailing by international
express courier, with postage and fees prepaid, addressed to each of the other
parties thereunto entitled at the following addresses, or at such other
addresses as a party may designate by ten days advance written notice to each of
the other parties hereto.
COMPANY: DynaGen, Inc.
00 Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Telecopier No. (000) 000-0000
with a copy to:
Xxxx X. Xxxxxxx, Esq.
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopier No. (000) 000-0000
PURCHASER: At the address set forth on the signature page of this Agreement.
ESCROW AGENT: Xxxxxxx & Prager, Esqs.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Purchaser's
representations and warranties shall survive the execution and delivery hereof
of this Agreement and the delivery of the preferred Stock.
-15-
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-16-
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
NUMBER OF SHARES OF PREFERRED STOCK TO BE PURCHASED:
AGGREGATE PURCHASE PRICE OF SUCH PREFERRED STOCK: $750,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Stock Purchase
Agreement to be duly executed on its behalf this 21st day of August, 1997
C/O Endeavour Management Inc. ENDEAVOUR CAPITAL FUND S. A.
Address By: [illegible]
00/00 Xxxxxx Xxxxx Xxxxxx
Xxxxxxxxx 00000, Xxxxxx Xxxxxx Xxxxxxxxx -- Director
Telecopier: 972 2 582 4443 ----------------------------
Printed Name of Subscriber
British Virgin Islands
----------------------
Jurisdiction of Incorporation
or Organization.
This Agreement has been accepted as of the date set forth below.
DYNAGEN, INC.
By: /s/ Xxxx X. Xxxx
-------------------------------
Xxxx X. Xxxx
Title: President
Date: August 21, 1997
-17-
ANNEX I
DYNAGEN, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES C PREFERRED STOCK
The undersigned officer of DynaGen, Inc., a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify 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 DynaGen, Inc., on August 13, 1997, 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 C 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 7,500 shares of the class of authorized Preferred
Stock, par value $.01 per share, of the Corporation is hereby created as the
Series C 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 14th day of August, 1997.
DYNAGEN, INC.
By: /s/ Xxxx X. Xxxx
-------------------------------
Xxxx X. Xxxx
President
-1-
DESCRIPTION AND DESIGNATION OF SERIES C PREFERRED STOCK
1. DESIGNATION AND DEFINITIONS.
(a) DESIGNATION. A total of 7,500 shares of the Corporation's
previously undesignated Preferred Stock, $.01 par value, shall be designated as
the "Series C Preferred Stock." The original issue price per share of the Series
C Preferred Stock shall be $100.00 (the "ORIGINAL ISSUE PRICE").
(b) CERTAIN DEFINITIONS. As used herein, the following terms,
unless the context otherwise requires, have the following respective meanings:
(i) "AVERAGE QUOTED PRICE" means the average of the closing
bid price of the Common Stock of the Corporation as reported by the Nasdaq
SmallCap Market or Nasdaq National Market or, if the Corporation's Common Stock
is no longer traded on a Nasdaq market, such other exchange on which the
Corporation's Common Stock is then traded, for the five (5) Trading Days
immediately preceding any holder's Conversion Date, the Mandatory Conversion
Date (as defined in Section 5(c) below) or the date of the consummation or
closing of a Fundamental Change, as the case may be.
(ii) "COMMON STOCK" means the common stock, par value $.01
per share, of the Corporation.
(iii) "CONVERSION DATE" means each date on which the
Corporation receives by telecopy written notice in accordance with Section 5(i)
hereof from a holder of Series C Preferred Stock that such holder elects to
convert shares of its Series C Preferred Stock.
(iv) "FUNDAMENTAL CHANGE" means: (i) any sale, lease,
exchange or other transfer of all or substantially all of the assets of the
Corporation; or (ii) any merger or consolidation to which the Corporation is a
party. Notwithstanding the foregoing, the following shall not be a Fundamental
Change: A merger or consolidation (a) to which the Corporation is a party; (b)
in which it is the surviving corporation and there is no resulting
reclassification of the outstanding Common Stock; and (c) after giving effect to
which, persons who were, immediately before the consummation or closing of such
merger or consolidation, holders of outstanding Common Stock will be the direct
or indirect owners of securities of the Corporation possessing, on a fully
diluted basis, at least seventy-five percent (75%) of the voting power of all
voting securities of the Corporation (excluding, for purposes of such
computation, any such person who also is a party to such merger or
consolidation).
(v) "ISSUE DATE" means, with respect to each share of
Series C Preferred Stock held by any holder, the date on which the Corporation
originally issued such share to such holder (regardless of the number of times
transfer of such share is made on the stock transfer books maintained by or for
the Corporation, and regardless of the number of certificates
-2-
which may be issued to evidence such share, and irrespective of any subsequent
transfer or other disposition of such share to any other holder).
(vi) "TRADING DAY" means a day on which the principal
national securities exchange on which the Common Stock is listed or admitted to
trading is open for the transaction of business; or, if the Common Stock is not
listed or admitted to trading on any national securities exchange but is listed
on the Nasdaq system (or such other trading system then in use by the National
Association of Securities Dealers, Inc.), a day on which such system is open for
the transaction of business; or, if the foregoing does not apply, any Business
Day.
2. DIVIDENDS.
(a) PREFERRED DIVIDEND - CASH AND/OR IN-KIND. When and as
declared by the Board of Directors and to the extent permitted by the General
Corporation Law of the State of Delaware, the Corporation shall pay preferential
dividends to the holders of the Series C Preferred Stock as provided in this
Section 2(a).
(i) PREFERRED DIVIDEND. Except as otherwise provided
herein, dividends on each share of Series C Preferred Stock shall accrue,
cumulatively, at the rate of seven percent (7.0%) per annum of the Original
Issue Price, from and including the Issue Date of such share to and including
the date on which the Liquidation Value of such share is paid or such share is
converted in accordance with the provisions hereof (the "PREFERRED DIVIDEND").
Such Preferred Dividend will accrue whether or not it has been declared and
whether or not there are profits, surplus or other funds of the Corporation
legally available for its payment.
(ii) SEMI-ANNUAL PAYMENTS. Commencing on July 31, 1998, the
Preferred Dividend shall be payable in cash (subject to Section 2(a)(v) below)
semi-annually, for the actual number of days elapsed, on each July 31 and
January 31, to the holders of record of shares of Series C Preferred Stock as of
the tenth (10th) trading day preceding the applicable dividend payment date.
(iii) NO INTEREST. Accrued but unpaid Preferred Dividends
shall not bear interest. Preferred Dividends paid in cash in an amount less than
the total amount of such dividends at the time accrued and payable shall be
allocated on a share-by-share basis among all shares of Series C Preferred Stock
at the time outstanding.
(iv) PAYMENT UPON CONVERSION. On the date on which any
holder's shares of Series C Preferred Stock are converted into Common Stock
pursuant to Section 5 hereof, the accrued Preferred Dividend with respect to the
shares so converted shall be paid to such holder. All accrued Preferred
Dividends also shall be payable upon the liquidation, dissolution or winding up
of the Corporation.
-3-
(v) PAYMENT IN COMMON STOCK. The Corporation, at its sole
discretion, may pay the Preferred Dividends in cash or in shares of Common Stock
at the then fair market value per share of Common Stock as of the date on which
the Preferred Dividend is payable. For purposes of this Section 2(a)(v), fair
market value shall be the average of the closing bid price of the Common Stock
of the Corporation as reported by the Nasdaq SmallCap Market or Nasdaq National
Market or, if the Corporation's Common Stock is no longer traded on a Nasdaq
market, such other exchange on which the Corporation's Common Stock is then
traded, for the ten (10) Trading Days immediately preceding the date on which
the Preferred Dividend is payable.
(vi) FRACTIONAL SHARES. Notwithstanding anything herein to
the contrary, no fractional shares shall be issued pursuant to this Section 2,
and the number of shares of Common Stock issued upon the payment of the
Preferred Dividend shall be rounded up or down to the nearest whole share.
(b) DECLARED DIVIDENDS ON COMMON STOCK. If the Board of
Directors shall declare a cash dividend payable upon the then outstanding shares
of Common Stock (other than a stock dividend on the Common Stock distributed
solely in the form of additional shares of Common Stock), the holders of the
Series C Preferred Stock shall be entitled to the amount of dividends on the
Series C Preferred Stock as would be declared payable on the largest number of
whole shares of Common Stock into which the shares of Series C Preferred Stock
held by each holder thereof could be converted pursuant to the provisions of
Section 5 hereof, such number determined as of the record date for the
determination of holders of Common Stock entitled to receive such dividend. Such
determination of "whole shares" shall be based upon the aggregate number of
shares of Series C Preferred Stock held by each holder, and not upon each share
of Series C Preferred Stock so held by the holder.
(c) DIVIDENDS ON OTHER SECURITIES. Subject to the foregoing
provisions of this Section 2, the Board of Directors may declare and the
Corporation may pay or set apart for payment, or cause the accrual of, stated or
cumulative dividends and other distributions on the Series A Preferred Stock or
the Series B Preferred Stock of the Corporation, or any other series of
preferred stock hereafter designated, and may purchase or otherwise redeem any
of the same (or any warrants, rights, options or other securities exercisable
therefor or convertible or exchangeable thereinto), and the holders of Series C
Preferred Stock shall not be entitled to share therein.
3. 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 C Preferred Stock, and subject to the liquidation rights and
-4-
preferences of any class or series of Preferred Stock designated by the Board of
Directors in the future to be senior to or on a parity with the Series C
Preferred Stock with respect to liquidation preferences, the holder of each
share of Series C 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 amount equal to the Original Issue Price per share of
Series C Preferred Stock held by any holder, plus the Preferred Dividend
accruing to the Series C Preferred Stock pursuant to Section 2 above (the
"LIQUIDATION VALUE"). For purposes hereof, the Series C Preferred Stock shall
rank on liquidation junior to the Series A Preferred Stock and on parity with
the Series B Preferred 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 C Preferred
Stock the full amount to which they otherwise would be entitled, the holders of
Series C 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 C 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 C Preferred Stock then
outstanding.
After such payment shall have been made in full to the
holders of the Series C 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 C 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 class or series of capital stock
designated to be junior to the Series C Preferred Stock (if any) in right of
payment upon any liquidation, dissolution or winding up of the Corporation.
The amounts set forth above shall be subject to equitable
adjustment by the Board of Directors whenever there shall occur a stock
dividend, stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the capital
structure of the Series C Preferred Stock.
(b) DISTRIBUTIONS OTHER THAN CASH. Whenever the
distributions provided for in this Section 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 C Preferred Stock.
(c) EVENTS NOT DEEMED A LIQUIDATION. Neither the merger or
consolidation of the Corporation into or with any other corporation(s), nor the
sale or transfer by the Corporation of all or any part of its assets, nor the
reduction of the capital stock of the Corporation, will be deemed to be a
liquidation, dissolution or winding up of the Corporation
-5-
under this Section 3.
4. VOTING POWER.
(a) GENERAL. Except as otherwise expressly provided in this
Section 4 or as otherwise required by the General Corporation Law of the State
of Delaware, each holder of Series C 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 C Preferred Stock could be converted, pursuant to the provisions 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 expressly required by law, the holders of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C 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 C Preferred Stock held by each holder, and
not upon each share of Series C Preferred Stock so held by the holder.
(b) AMENDMENTS TO CHARTER. For so long as there are any
shares of Series C Preferred Stock outstanding, the Corporation shall not amend
its Certificate of Incorporation or this Certificate of Designation without the
approval, by vote or written consent, of the holders of at least a majority of
the then outstanding shares of Series C Preferred Stock, voting together as a
class, each share of Series C Preferred Stock to be entitled to one vote in each
instance, if such amendment would adversely affect the rights of the holders of
Series C Preferred Stock. Without limiting the generality of the foregoing, the
creation, or increase in the authorized number of shares, of any class or series
of stock ranking prior to or on a parity with the Series C Preferred Stock
either as to dividends or upon liquidation shall be deemed to adversely affect
the rights of the holders of Series C Preferred Stock for purposes of this
Section 4(b).
5. CONVERSION RIGHTS.
(a) CONVERSION AT THE OPTION OF HOLDERS. Each holder of
Series C Preferred Stock shall have the right, at such holder's option, to
convert at any time any of the shares of Series C 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 C Preferred
Stock to be converted by a fraction, the numerator of which is the Original
Issue Price, and the denominator of which is the applicable Conversion Price (as
defined below).
(b) CONVERSION PRICE. The conversion price per share (the
"CONVERSION PRICE") shall be equal to the lesser of subsections (i) and (ii)
below.
-6-
(i) One hundred twenty-five percent (125%) of the
average of the closing bid price of the Common Stock of the Corporation as
reported by the Nasdaq SmallCap Market or Nasdaq National Market or, if the
Corporation's Common Stock is no longer traded on a Nasdaq market, such other
exchange on which the Corporation's Common Stock is then traded, for the five
(5) Trading Days immediately preceding the Issue Date.
(ii) (A) Beginning on the 60th day after the Issue Date
and ending on the 150th day after the Issue Date, eighty percent (80%) of the
Average Quoted Price;
(B) Beginning on the 151st day after the Issue Date
and ending on the 210th day after the Issue Date, seventy-eight percent (78%) of
the Average Quoted Price;
(C) Beginning on the 211th day after the Issue Date
and ending on the 365th day after the Issue Date, seventy-six percent (76%) of
the Average Quoted Price; and
(D) Beginning on the 366th day after the Issue
Date, seventy- four (74%) of the Average Quoted Price.
(c) CONVERSION AT OPTION OF CORPORATION. At any time after the
close of business on the one (1) year anniversary of the date on which the
Securities and Exchange Commission declares effective the registration statement
registering the shares of Common Stock issuable upon conversion of the Series C
Preferred Stock, all of the shares of Series C Preferred Stock shall be
convertible, at the option of the Corporation, into such number of fully paid
and nonassessable shares of Common Stock as shall be determined by multiplying
the number of shares of Series C Preferred Stock outstanding on the Mandatory
Conversion Date (as defined below) by a fraction, the numerator of which is the
Original Issue Price, and the denominator of which is the applicable Conversion
Price.
The Corporation shall give notice of its exercise of such
conversion option to all holders of Series C Preferred Stock no later than five
(5) Trading Days before the date as of which the Corporation has elected to make
such conversion effective (such effective date of the conversion, the "MANDATORY
CONVERSION DATE"). Each holder of Series C Preferred Stock as of the Mandatory
Conversion Date shall, promptly after such date, surrender for conversion to the
Corporation at its principal office or to any transfer agent for the Series C
Preferred Stock or the Common Stock all certificates representing all shares of
Series C Preferred Stock held by such holder, accompanied by a written notice
specifying the name or names in which such holder wishes the certificate(s) for
shares of Common Stock to be issued.
Effective as of the close of business on the Mandatory
Conversion Date, each share of Series C Preferred Stock then outstanding shall
be (and be deemed to have been) converted automatically, without any further
action by the holders thereof, into shares of Common Stock. Such conversion
shall be deemed to have occurred whether or not the certificates representing
such shares are surrendered to the Corporation or its transfer agent.
-7-
(d) LIMITATION ON NUMBER OF SHARES. Additionally,
notwithstanding anything set forth in this Section 5 to the contrary, in no
event shall any holder of Series C Preferred Stock, prior to earlier to occur of
the Mandatory Conversion Date or the date of the consummation or closing of a
Fundamental Change, be entitled to convert Series C Preferred Stock into shares
of Common Stock to the extent that (x) the number of shares of the Corporation's
Common Stock beneficially owned by such holder and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the shares of Series C Preferred Stock
held by such holder) plus (y) the number of shares of Common Stock issuable upon
such conversion would result in beneficial ownership by the holder and its
affiliates of more than 4.9% of the shares of Common Stock then outstanding. For
purposes of this Section 5(d), beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D and 13G promulgated thereunder, except as otherwise
provided in clause (x) of this Section 5(d). Each holder shall, upon delivering
to the Corporation a notice of election to convert shares of Series C Preferred
Stock in accordance with Section 5(i) hereof, be required to provide the
Corporation with a certification in form and substance reasonably satisfactory
to the Corporation, that the conversion of the Series C Preferred Stock being
converted will not result in such holder and its affiliates beneficially holding
more than 4.9%, determined as heretofore provided, of the outstanding shares of
Common Stock on such Conversion Date. If the holder cannot make such
certification, the shares of Series C Preferred Stock to be converted shall not
be convertible. Notwithstanding the foregoing, upon the Mandatory Conversion
Date or upon the consummation or closing of a Fundamental Change, all such
shares of Series C Preferred Stock then outstanding shall be converted into
Common Stock in accordance with Section 5(c) or 5(g), as applicable.
(e) DIVIDENDS OTHER THAN COMMON STOCK DIVIDENDS. In the event
the Corporation shall make or issue, or shall fix a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution (other than a distribution in liquidation or other distribution
otherwise provided for herein) with respect to the Common Stock payable in (i)
securities of the Corporation other than shares of Common Stock, or (ii) other
assets (excluding cash dividends or distributions), then and in each such event
provision shall be made so that the holders of the Series C Preferred Stock
shall receive upon conversion thereof in addition to the number of shares of
Common Stock receivable thereupon, the number of securities or such other assets
of the Corporation which they would have received had their Series C Preferred
Stock been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
Conversion Date, retained such securities or such other assets receivable by
them during such period, giving application to all other adjustments called for
during such period under this Section 5 with respect to the rights of the
holders of the Series C Preferred Stock.
(f) CAPITAL REORGANIZATION OR RECLASSIFICATION. If the Common
Stock issuable upon the conversion of the Series C Preferred Stock shall be
changed into the same or different number of shares of any class or classes of
capital stock, whether by capital
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reorganization, recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend provided for elsewhere in
this Section 5, or the sale of all or substantially all of the Corporation's
capital stock or assets to any other person), then and in each such event the
holders of Series C Preferred Stock shall have the right thereafter to convert
such shares 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 C Preferred Stock might have been
converted immediately prior to such reorganization, recapitalization,
reclassification or change, all subject to further adjustment as provided
herein.
(g) MANDATORY CONVERSION - FUNDAMENTAL CHANGE. If any
Fundamental Change shall occur, then each share of Series C Preferred Stock
outstanding as of the date of the consummation or closing thereof shall be (and
be deemed to have been) converted automatically, without any further action by
the holders thereof, into such number of fully paid and nonassessable shares of
Common Stock as shall be determined by multiplying the number of shares of
Series C Preferred Stock outstanding on the on the date of such consummation or
closing date by a fraction, the numerator of which is the Original Issue Price,
and the denominator of which is the applicable Conversion Price. Such conversion
shall be deemed to have occurred whether or not the certificates representing
such shares are surrendered to the Corporation or its transfer agent.
The Corporation shall give notice of a proposed or anticipated
Fundamental Change to all holders of the Series C Preferred Stock not later than
thirty (30) days before the expected closing or consummation of such Fundamental
Change, provided that at all times during such thirty-day period a registration
statement shall be in effect to permit the registration of the Common Stock
issuable upon conversion of the Series C Preferred Stock under the Securities
Act of 1933, as amended. The Corporation also shall give prompt notice of the
closing or consummation of such Fundamental Change to all holders of record of
the Series C Preferred Stock as of the date of such closing or consummation.
Each holder of Series C Preferred Stock shall thereupon promptly surrender for
conversion, to the Corporation at its principal office or to any transfer agent
for the Series C Preferred Stock or the Common Stock, all certificates
representing all shares of Series C Preferred Stock held by such holder,
accompanied by a written notice specifying the name or names in which such
holder wishes the certificate(s) for shares of Common Stock to be issued.
(h) CERTIFICATE AS TO ADJUSTMENTS; NOTICE BY CORPORATION. In
each case of an adjustment or readjustment of the Original Issue Price, the
Corporation at its expense will furnish each holder of Series C Preferred Stock
so affected with a certificate prepared by an officer of the Corporation,
showing such adjustment or readjustment, and stating in detail the facts upon
which such adjustment or readjustment is based.
(i) EXERCISE OF CONVERSION PRIVILEGE. To exercise its
conversion privilege, a holder of Series C Preferred Stock shall give written
notice by telecopy to the
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Corporation at its principal office that such holder elects to convert shares of
its Series C Preferred Stock and shall thereafter surrender the original
certificate(s) representing the shares being converted to the Corporation at its
principal office together with an originally executed copy of such notice. Such
notice shall also state the name or names (with its address or addresses, as
well as the address(es) for delivery) in which the certificate(s) for shares of
Common Stock issuable upon such conversion shall be issued. The certificate(s)
for the shares of Series C Preferred Stock surrendered for conversion shall be
accompanied by proper assignment thereof to the Corporation or in blank. As
promptly as practicable after the Corporation receives the original
certificate(s) for the shares of Series C Preferred Stock surrendered for
conversion, the proper assignment thereof to the Corporation or in blank and the
original notice of conversion (collectively, the "ORIGINAL DOCUMENTATION"), but
in no event more than three (3) Trading Days after the Corporation's receipt of
the Original Documentation, the Corporation shall issue and shall deliver to the
holder of the shares of Series C Preferred Stock being converted, at the
addresses set forth therefor by the holder, 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 C Preferred Stock in accordance with the
provisions of this Section 5, and cash, as provided in Section 5(j), 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 time the rights of the holder as
holder of the converted shares of Series C 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. If the Corporation
fails to issue and deliver to such holder such certificate(s) for shares of
Common Stock within three (3) Trading Days after the Corporation's receipt of
the Original Documentation, the Corporation shall pay the liquidated damages set
forth in the Stock Purchase Agreement between the Corporation and the initial
purchasers of the Series C Preferred Stock.
(j) 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 C Preferred Stock. Instead of any fractional
shares of Common Stock that would otherwise be issuable upon conversion of
Series C Preferred Stock, the Corporation shall pay to the holder of the shares
of Series C Preferred Stock being 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 C Preferred Stock being
converted at any one time by any holder thereof, not upon each share of Series C
Preferred Stock being converted.
(k) PARTIAL CONVERSION. In the event some but not all of the
shares of Series C 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 C Preferred Stock
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which were not converted. Such new certificate shall be so delivered on or prior
to the date set forth in Section 5(i) for the delivery of certificates for
shares of Common Stock.
(l) 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 C 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 C Preferred Stock (including any shares of
Series C Preferred Stock represented by any warrants, options, subscription or
purchase rights for the Series C 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 C Preferred
Stock (including any shares of Series C Preferred Stock represented by any
warrants, options, subscriptions or purchase rights for the Series C Preferred
Stock), then the Corporation shall be deemed to be in breach and default of its
obligations hereunder, and in addition to all charges, claims and rights at law
or in equity that each holder shall be entitled to, the Corporation shall use
all means reasonably available to it, and promptly take any and all actions 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.
6. REDEMPTION AND REPURCHASE RIGHTS. The Corporation shall have no
right to redeem, and holders of shares of Series C Preferred Stock shall have no
right to cause the Corporation to redeem, any or all of the outstanding shares
of Series C 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
telecopy and thereafter mail or cause to be mailed to each holder of Series C
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, 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
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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 telecopied and thereafter 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.
8. GENERAL.
(a) REPLACEMENT OF CERTIFICATES. Upon the Corporation's
receipt, from the holder of any certificate evidencing shares of Series C
Preferred Stock, of evidence reasonably satisfactory to the Corporation (an
affidavit of such holder will be satisfactory) of the ownership and the loss,
theft, destruction or mutilation of such certificate, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation, and in the case of any such mutilation, upon
surrender of such certificate, the Corporation (at its expense) shall execute
and deliver to such holder, in lieu of such certificate, a new certificate that
represents the number of shares represented by, is dated the date of, is issued
in the name of the holder of, and is substantially identical in form of, such
lost, stolen, destroyed or mutilated certificate.
(b) PAYMENT OF TAXES. The Corporation shall pay all taxes
(other than taxes based upon income) and other governmental charges that may be
imposed in connection with the issuance or delivery of any shares of Common
Stock (or other of the Corporation's securities) that results from (i) the
conversion of shares of Series C Preferred Stock pursuant to this Certificate of
Designations or (ii) the application of Section 2(a)(v) hereof. Notwithstanding
the foregoing, if the Corporation, pursuant to a notice from a holder of any
shares of Series C Preferred Stock, effects the issuance or delivery of any
shares of Common Stock (or other of the Corporation's securities) in any name(s)
other than such holder's name, then such holder shall deliver to the Corporation
with the aforesaid notice (A) all transfer taxes and other governmental charges
payable upon the issuance or delivery of securities in such other name(s) or (B)
evidence satisfactory to the Corporation that such taxes and charges have been
or shall be paid in full.
(c) STATUS OF REDEEMED OR CONVERTED SHARES. Shares of Series C
Preferred Stock that are redeemed, converted or otherwise acquired by the
Corporation in any manner (including by purchase or exchange) shall be canceled
and upon cancellation (i) shall no longer be deemed to be outstanding, (ii)
shall become authorized but unissued shares of preferred stock undesignated as
to series and (iii) may be reissued as part of another series of preferred
stock.
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ANNEX II
JOINT ESCROW INSTRUCTIONS
Dated as of the date of the Securities
Purchase Agreement to
Which These Joint Escrow
Instructions Are Attached
Xxxxxxx & Xxxxxx, Esqs.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Dear Xx. Xxxxxxx:
As escrow agent for both DynaGen, Inc., a Delaware corporation (the
"Company"), and the Purchaser (the "Purchaser") of Series C and the Series D
Preferred Stock of the Company (the "Series C Preferred Stock" and the "Series D
Preferred Stock"), who is named in the Securities Purchase Agreement between the
Company and the Purchaser to which a copy of these Joint Escrow Instructions is
attached as Annex II (the "Agreement"), you (hereafter the "Escrow Agent") are
hereby authorized and directed to hold the documents and funds (together with
any interest thereon, the "Escrow Funds") delivered to the Escrow Agent pursuant
to the terms of the Agreement in accordance with the following instructions:
1. The Escrow Agent shall, as promptly as feasible, notify the
Company of receipt of the purchase price from the Purchaser, and notify the
Purchaser (or such agent as the Purchaser may designate in writing) of receipt
of the Series C Preferred Stock and Series D Preferred Stock being purchased for
such purchase price. Within not more than two (2) days of receipt of written
notice from the Company and the Purchase that the respective conditions
precedent to the purchase and sale have been satisfied (which notice shall not
be unreasonably withheld), the Escrow Agent shall, after reduction by the
amounts referred to in the next succeeding sentence of this paragraph, release
the Escrow Funds to or upon the order of the Company, and shall release the
Preferred Stock to the Purchaser. After receipt of such notice, a portion of the
Escrow Funds shall be released by the Escrow Agent as follows: an amount equal
to nine (9%) percent of the purchase price of the Preferred Stock shall be
released to Jesup and Xxxxxx, and $5,000 for tranche I and $500 for each
additional tranche of the Escrow Funds to the Escrow Agent. If a certificate
representing such Preferred Stock is not deposited with the Escrow Agent with
ten (10) days after receipt by the Company of notice of receipt by the Escrow
Agent of the funds from the Purchaser, Escrow Agent shall notify the Purchase
and Purchaser shall be entitled to cancel the subscription and demand repayment
of the funds. If such funds are not deposited with the Escrow Agent within ten
(10) days after receipt by the Purchaser of notice
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of receipt by the Escrow Agent of such stock certificate from the Company,
Escrow Agent shall notify the Company and the Company shall be entitled to
cancel the subscription and demand return of such stock certificate. If the
Company or the Purchaser notifies the Escrow Agent that on the Closing Date or
Additional Closing Date (as defined in the Agreement) the conditions precedent
to the obligations of the Company or the Purchaser, as the case may be, under
the Agreement were not satisfied or waived, then the Escrow Agent shall return
the Escrow Funds to the Purchaser and shall return the such stock certificate to
the Company. Prior to return of the Escrow Funds to the Purchaser, the Purchaser
shall furnish such tax reporting or other information as shall be appropriate
for the Escrow Agent to comply with applicable United States law. The Escrow
Agent shall deposit all funds received hereunder in the Escrow Agent's attorney
escrow account at The Bank of New York.
2. The Escrow Agent's duties hereunder may be altered, amended,
modified or revoked only by a writing signed by the Company, the Purchaser and
the Escrow Agent.
3. The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed by the Escrow Agent to be genuine and to have been signed or presented
by the proper party or parties. The Escrow Agent shall not be personally liable
for any act the Escrow Agent may do or omit to do hereunder as Escrow Agent
while acting in good faith, except for fraud, willful misconduct, or gross
negligence, and any act done or omitted by the Escrow Agent pursuant to the
advice of the Escrow Agent's attorney-at-law shall be evidence of such good
faith.
4. The Escrow Agent is hereby expressly authorized to disregard any
and all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
5. The Escrow Agent shall not be liable in any respect on account of
the identity, authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
6. The Escrow Agent shall be entitled to employ such legal counsel
and other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor. The Escrow Agent has acted as legal counsel for Purchase
(as that term is defined in the Agreement) in connection with the Agreement and
may continue to act as legal counsel for Purchaser, from time to time,
notwithstanding its duties as Escrow Agent hereunder.
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7. The Escrow Agent's responsibilities as Escrow Agent hereunder
shall terminate if the Escrow Agent shall resign by written notice to the
Company and the Purchaser. In the event of any such resignation, the Purchaser
and the Company shall appoint a successor Escrow Agent.
8. If the Escrow Agent reasonably requires other or further
instruments in connection with these Joint Escrow Instructions or obligations in
respect hereto, the necessary parties hereto shall join in furnishing such
instruments.
9. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the documents
or Escrow Funds held by the Escrow Agent hereunder, the Escrow Agent is
authorized and directed in the Escrow Agent's sole discretion (1) to retain in
the Escrow Agent's possession without liability to anyone all or any part of
said documents or Escrow Funds until such disputes shall have been settled
either by mutual written agreement of the parties concerned or by a final order,
decree or judgment of a court of competent jurisdiction after the time for
appeal has expired and no appeal has been perfected, but the Escrow Agent shall
be under not duty whatsoever to institute or defend any such proceedings or (2)
to deliver the Escrow Funds and any other property and documents held by the
Escrow Agent hereunder to a state or federal court having competent subject
matter jurisdiction and located in the State and City of New York in accordance
with the applicable procedure therefor.
10. The Company and the Purchaser agree jointly and severally to
indemnify and hold harmless the Escrow Agent from any and all claims,
liabilities, costs or expenses in any way arising from or relating to the duties
or performance of the Escrow Agent hereunder other than any such claim,
liability, cost or expense to the extent the same shall have been determined by
final, unappealable judgment of a court of competent jurisdiction to have
resulted from fraud, gross negligence or willful misconduct of the Escrow Agent.
11. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given upon personal delivery or three business days after deposit in the United
States Postal Service, by registered or certified mail with postage and fees
prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
days advance written notice to each of the other parties hereto.
COMPANY: DynaGen, Inc.
00 Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Telecopier No. (000) 000-0000
with a copy to:
Xxxx X. Xxxxxxx, Esq.
Xxxxx, Hurwitz, Thibeault, LLP
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High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopier No. (000) 000-0000
PURCHASER: At the address set forth on the signature page of the
Agreement.
ESCROW AGENT: Xxxxxxx & Xxxxxx, Esqs.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No. (000) 000-0000
12. By signing these Joint Escrow Instructions, the Escrow Agent
becomes a party hereto only for the purpose of these Joint Escrow Instructions;
the Escrow Agent does not become a party to the Agreement. The Company and the
Purchaser have become parties hereto by their execution and delivery of the
Agreement, as provided therein.
13. This instrument shall be binding upon and inure to thebenefit of
the parties hereto, and their respective successors and permitted assigns and
shall be governed by the laws of the State of New York without giving effect to
principles governing the conflicts of laws. A facsimile transmission of these
instructions signed by the Escrow Agent shall be legal and binding on all
parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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14. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings provided in the Agreement.
ACCEPTED BY ESCROW AGENT: DYNAGEN, INC.
XXXXXXX & PRAGER
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxxxxxxx X. Xxxxxxx
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ANNEX III
To the Purchaser (the "Purchaser")
listed on the signature page to the
Stock Purchase Agreement dated as of
August 2l, l997 between DynaGen,
Inc.and the Purchaser
We have acted as counsel to DynaGen, Inc., a Delaware corporation (the
"Company"), the connection with the Stock Purchase Agreement, dated as of August
2l, l997 between you and the Company (the "Purchase Agreement"), relating to the
issuance and sale by the Company of up to 7,500 shares f its Series C Preferred
Stock (the "Series C Stock"), up to 60,000 shares of its Series D Preferred
Stock (the "Series D Stock") and a warrant to purchase 250,000 shares f the
Company's Common Stock (the "Initial Warrant"). Such shares of Series C Stock
and Series D Stock are sometimes hereinafter referred to collectively as the
"Preferred Shares." This opinion is furnished to you pursuant to Section 9(d) of
the Purchase Agreement. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to them in the Purchase Agreement.
We have made such inquiry of the officers of the Company and have
examined such corporate and other records, documents, agreements and
instruments, certificates of officers of the Company and of public officials and
have examined such question so flaw as we have deemed necessary or appropriate
for the purpose of this opinion. In rendering this opinion, we have relied, as
to all questions of fact material to this opinion, upon certificates of public
officials, the Company's transfer agent and officers of the Company and upon the
representations and warranties may by the Purchaser and the Company in the
Purchase Agreement. We have assumed the genuineness of all signatures (other
than those on behalf of the Company) and the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as copies, whether certified or not, the authenticity
of the originals of such latter documents and the legal capacity of all natural
persons.
For purposes of this opinion, we have also assumed:
(A) the due and proper authorization, execution, acknowledgment
and delivery by the Purchaser of the Purchase Agreement and
all other documents executed by the Purchaser in connection
therewith (collectively, the "Operative Agreements");
(B) that the Purchaser is duly organized, validly existing and in
good standing in its country of formation;
(C) that the Purchaser has full power, authority and legal right
under the laws of its country of formation to execute and
deliver the Operative Agreements and to consummate the
transactions contemplated thereby; and
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(D) that the Operative Agreements and the transactions evidenced
thereby are valid, binding and enforceable against the
Purchaser in accordance with their terms, and that the
consummation of the transactions and the funding contemplated
by the Operative Agreements comply with all laws applicable to
the Purchaser.
Whenever in this opinion we use the term "to our knowledge," we are
referring to the attorneys in our firm who have given substantive legal
attention to representation of the Company in connection with the transaction
contemplated pursuant to the Purchase Agreement. Our opinions given herein are
qualified by the above limits to the scope of our representation and due
diligence and the subsequent assumptions, limitations and qualification s
contained herein.
This opinion is based upon our knowledge of the facts as of the date
hereof and assumes no event will take place in the future which would affect the
opinions set forth herein other than future events contemplated by the Operative
Agreements, the Initial Warrant and the additional warrant issuable pursuant to
Section 4(i) of the Purchase Agreement (the "Additional Warrant," and together
with the Initial Warrant, the "Warrants"). We assume no duty to communicate with
you with respect to any change in law or facts which comes to our attention
hereafter..
We have not made an independent review of the laws of any state or
jurisdiction other than those of the Commonwealth of Massachusetts and the
United States, and the General Corporation Law of the State of Delaware.
Accordingly, we express no opinion herein with respect to the laws of any state
or jurisdiction other than those of the Commonwealth of Massachusetts, the
United States and the General Corporation Law of the State of Delaware. For the
purposes of this opinion, we have assumed that the facts and law governing the
performance by the Company under the Operative Agreements and the Warrants will
be identical to the facts and law governing such performance as of the date of
this opinion.
The opinions hereinafter expressed are qualified to the extent that the
validity or enforceability of any of the agreements, documents or obligations
referred to herein may be subject to or affected by (i) statutory or decisional
law (including but not limited to Sections l60, l70 and l74 of the General
Corporation Law of the State of Delaware) that may prohibit or restrict the
payment of any dividends on, or redemption or purpose by the Company of, the
Common Stock or any series of Preferred Stock, if such payment of dividends or
purchase or redemption would impair the capital of the Company, be paid out of
funds other than surplus or net profits, or render the Company insolvent, or if
the Company is insolvent or is capital is impaired at the time of such desired
payment, purchase or redemption; (ii) applicable bankruptcy, insolvency,
fraudulent conveyance and transfer, reorganization, moratorium or similar laws
affecting the rights and remedies of creditors general; (iii) principles
affording traditional equitable defenses (e.g., waiver, duress, laches and
estoppel) as applied to a party seeking enforcement, and (iv) requirements of
good faith and fair dealing in the performance and enforcement of an agreement
on the part of a party seeking enforcement after the agreement has been entered
into. The
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opinions hereinafter expressed are also qualified to the extent that the
availability of the remedy of specific performance or of injunctive or other
equitable relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
The opinions hereinafter expressed are also subject to the
qualification that we render no opinion as to the validity or enforceability of
(i) any provisions of the Operative Documents or the Warrants regarding any
choice of law or consent to jurisdiction clauses and (ii) any liquidated damages
provisions contained in the Purchase Agreement, in the Company's Certificate of
Designations, Preferences and Rights of Series C Preferred Stock or Certificate
of Designations, Preference and Rights of Series D Preferred Stock or in any of
the Operative Documents.
We express no opinion as to compliance by the Company with the
so-called "blue sky" or state securities laws in connection with the issuance
and sale of the Series C Stock, the Series D Stock or the Warrants or the
issuance of shares of Common Stock upon the conversion of the Series C Stock or
Series D Stock or exercise of the Warrants, as the case may be.
In rendering the opinion expressed in paragraph l below with respect to
the legal existence and good standing of the Company in Delaware and
Massachusetts, we have relied solely upon a certificate received from the
Secretary of State of each such state. In rendering the opinion expressed in
paragraph 6 below with respect to the timely filing of the Company's periodic
reports on Forms l0-Q and l0-K, we have relied solely on a review of the XXXXX
database maintained by the Securities and Exchange Commission (the "SEC") as t
the timing of such filings with the SEC. With respect to our opinion in
Paragraph 7 below, we call your attention to the fact that we have not caused
any search to be made of any court or other governmental records.
We express no opinion as to the validity or enforceability of the
indemnification and contribution provisions contained in Section 6 and 7 or the
Registration Rights Agreement and, with respect to the performance by the
Company of its obligations under the Registration Rights Agreement, we assume
compliance by the Company at such time with the registration requirements of the
Securities Act and with applicable state securities laws.
Based upon and subject to the foregoing, we are of the opinion that:
l. The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of
Delaware and is duly qualified to do business as a foreign
corporation in the Commonwealth of Massachusetts.
2. The authorized capital stock of the Company consists of
75,000,000 shares of Common Stock, $.0l par value per share
(the "Common Stock:), and l0,000,000 shares of preferred
stock, 50,000 of which shares have been designated Series A
Preferred Stock, $.0l par value per share, 7,500 of which
shares have been designated Series B Preferred Stock, $.0l par
value per share, 7,500 shares of which shares have been
designated Series C Preferred Stock, $.0l par value per
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share and 60,000 of which shares have been designated Series D
Preferred Stock, $.0l par value per share.
3. The Common Stock is registered pursuant to Section l2 of the
Securities Exchange Act of l934, as amended (the "Exchange
Act") and, to our knowledge, the Company has timely filed with
the SEC its periodic reports on Forms l0-Q and l0- K pursuant
to Section l3(a) of the Exchange Act for a period of at least
twelve months preceding the date hereof.
4. When delivered to you or upon your order against payment of
the agreed consideration therefor in accordance with the
provisions of the Purchase Agreement, the Company's
Certificate of Incorporation (as to the shares of Common Stock
issuable upon conversion of the Preferred Shares) and the
Warrants (as to the shares of Common Stock issuable upon
exercise of the Warrants), the Series C Stock, the Series D
Stock, the share of Common Stock issuable upon conversion of
the Preferred Shares and the shares of Common Stock issuable
upon conversion of the Preferred Shares and the shares f
Common Stock issuable upon exercise of the Warrants (i) will
be duly authorized and validly issued, (ii) will be fully paid
and nonassessable, (iii) to our knowledge, will not have been
issued or sold in violation of any preemptive or other similar
rights of the holder of any securities of the Company, and
(iv) will not subject the holders thereof to personal
liability by reason of being such holders.
5. The Company has the requisite corporate power and authority
necessary to enter into the Operative Agreements and to issue
the Series C Stock, the Series D Stock, and the Warrants; each
of the Operative Agreements and the Warrants have been duly
and validly authorized by all corporate action by the Company
and, to our knowedge, no approval, consent, authorization or
order of any court, governmental agency or body or arbitrator
having juristiction over the Company or any of its
subsidiaries is required for the execution and delivery of
each of the Operative Agreements and the Warrants by the
Company or the consummation of the transactions contemplated
thereby; each of the Operative Agreements and the Initial
Warrant has been duly and validly executed and delivered by
and on behalf of the Company, and is a valid, legal
enforceable and binding obligation of the Company, enforceable
in accordance with its terms.
6. Neither the sale of the Series C Stock, the Series D Stock and
the Warrants, nor the performance of the Company's obligations
under the Operative Agreements and the Warrants by the
Company, will, except where such violation, conflict, breach
or default, singly or in the aggregate, would not have a
material adverse effect on the financial condition or business
of the Company and such violation, conflict, breach or default
would have no effect on the Company's the Certificate of
Incorporation or By-laws of the Company, (B) to our knowlege,
any decree,
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judgment, order, law, treaty, rule, regulation or
determination applicable to the Company of any court,
governmental agency or body, or arbitrator having jurisdiction
over the Company or over the properties or assets of the
Company, (C) to our knowledge, the terms of any bond,
debenture, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which
the Company is a party, by which the Company is bound, or to
which any of the properties of the Company is subject, or (D)
to our knowledge, the terms of any "lock-up" or similar
provision of any underwriting or similar agreement to which
the Company is a party.
7. To the best of our knowledge after due inquiry of the
executive officers of the Company, except as disclosed in the
Company's quarterly and annual reports under the Exchange Act,
there is no pending or threatened action, suit, proceeding or
investigation before any court, governmental agency or body,
or arbitrators having jurisdiction over the Company which
would adversely affect or prevent the performance by the
Company of its obligations under any of the Operative
Agreements and the Warrants.
8. Assuming the accuracy of, and compliance with, the
representations, warranties and covenants of the Purchaser in
the Operative Agreements, the Company may issue the Series C.
stock, the Series D Stock and the Initial Warrant pursuant to
the Purchase Agreement without registration under the
Securities Act.
9. Assuming (i) the accuracy of, and compliance with, the
representations, warranties and covenants of the Purchaser in
the Operative Agreements an (ii) that the Additional Warrant
was issuable as of the date hereof, the Company may issue the
Additional Warrant as of the date hereof pursuant to the
Purchase Agreement without registratin under the Securities
Act.
This opinion is limited to the matters expressly stated herein and is
rendered solely for your benefit and may not be quoted or relied upon for any
other purpose or by any other person for any reason.
Yours very truly,
XXXXX, XXXXXXX & XXXXXXXXX, LLP
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ANNEX IV
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of August 21,
1997 (this "Agreement") is made by and between DYNAGEN, INC., a Delaware
corporation (the "Company"), and the person named on the signature page hereto
(the "Initial Investor").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Stock Purchase Agreement, dated as of August 21, 1997, between the Initial
Investor and the Company (the "Stock Purchase Agreement"), the Company has
agreed to issue and sell to the initial investor Shares of Series C Preferred
Stock and Series D Preferred Stock of the Company (collectively the "Preferred
Stock"), and warrants to purchase up to 250,000 shares of Common Stock (the
"Warrants") (which may be increased by an additional 300,000 warrants upon
certain circumstances (the "Additional Warrants") which Preferred Stock will be
convertible into shares of the common stock, $.01 par value (the "Common
Stock"), of the Company (the "Conversion Shares") upon the terms and subject to
the conditions of such Preferred Stock, and the Warrants will be exercisable for
shares of Common Stock (the "Warrant Shares"); and
WHEREAS, to induce the Initial Investor to execute and deliver
the Stock Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Conversion Shares and Warrant Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agrees as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have
the following meanings:
(i) "Additional Warrant Shares" means the shares of Common
Stock issuable upon exercise of the Additional Warrants.
(ii) "Investor" means the Initial Investor and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
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(iii) "Potential Material Event" means any of the following:
(a) 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 affirms of the Company; or (b) 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.
(iv) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(v) "Registerable Securities" means the Conversion Shares and
the Warrant Shares.
(vi) "Registration Statement" means a registration statement
of the Company under the Securities Act.
(b) Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Stock Purchase
Agreement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare and file
with the SEC, no later than forty-five (45) days following the initial Closing
Date under the Stock Purchase Agreement, and the issuance of the Additional
Warrants, if issued, either a Registration Statement on Form S-3 registering for
resale by the Investor a sufficient number of shares of Common Stock for the
Initial Investors (or such lesser number as may be required by the SEC, but in
no event less than the number of shares into which the Preferred Stock would be
convertible and the Warrants exercisable at the time of filing of the Form S-3,
or an amendment to any pending Company Registration Statement on Form S-3, and
such Registration Statement or amended Registration Statement shall state that,
in accordance with Rule 416 and 457 under the Securities Act, it also covers
such indeterminate number of additional shares of Common Stock as may become
issuable upon conversion of the Preferred Stock and the Exercise of the Warrants
resulting from adjustment in the Conversion Price, or to prevent dilution
resulting from stock splits, or stock dividends). If at any time the number of
shares of Common Stock into which the Preferred Stock may be converted or the
Warrants or Additional Warrants, if issued, are exercisable, exceeds the
aggregate number of shares of Common Stock then
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registered, the Company shall, within fifteen (15) business days after receipt
of a written notice from any Investor, either (i) amend the Registration
Statement filed by the Company pursuant to the preceding sentence, if such
Registration Statement has not been declared effective by the SEC at that time,
to register all shares of Common Stock into which the Preferred Stock may be
converted, or the Warrants or Additional Warrants if issued are exercisable, or
(ii) if such Registration Statement has been declared effective by the SEC at
that time, file with the SEC an additional Registration Statement on Form S-3 to
register the shares of Common Stock into which the preferred Stock may be
converted, or the Warrants or Additional Warrants, if issued, are exercisable,
that exceed the aggregate number of shares of Common Stock already registered.
If the state of the SEC determines that all of the Conversion Shares cannot be
registered by the Company for resale by the Investor because, in the view of the
staff, such registration would constitute a primary offering the Company, then
the Company shall have an additional sixty (60) days in which to amend such
registration statement to another available form.
(B) PAYMENTS BY THE COMPANY.
(i) If the Registration Statement covering the
Registrable Securities is not filed in proper form with the Securities and
Exchange Commission with forty-five (45) days after the Closing, the Company
will make payment to the Initial Investor in the amount of $500 per day for each
$10,000 in principal amount of Preferred Stock outstanding for each day
thereafter until such Registration Statement, in proper form, is filed with the
Securities and Exchange Commission.
(ii) If the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not effective (x) on the earlier of (i) five days after notice
from the Securities and Exchange Commission that the Registration Statement may
be declared effective, or (ii) ninety (90) days following the initial Closing
Date (the "Initial Date"), (except as provided by the last sentence of Section
2a), or (y) on the conclusion of a Suspension Period as defined in P. 3f, then
the Company will make payments to the Initial Investor in such amounts and at
such times as shall be determined pursuant to this Section 2(b). The amount to
be paid by the Company to the Initial Investor shall be determined as of each
Computation Date, and such amount shall be equal to two and one-half (2 1/2%)
percent of the purchase price paid by the Initial Investor for all Preferred
Stock then purchased and outstanding pursuant to the Stock Purchase Agreement
for any period fro the Initial Date to the first Computation Date, and to each
Computation date thereafter, to the date the Registration Statement is declared
effective by the SEC (pro rated for partial periods) (the "Periodic Amount").
The full Periodic Amount shall be paid by the Company in immediately available
funds within three business days after each Computation Date. Notwithstanding
the foregoing, the amounts payable by the Company pursuant to this provision
shall not be payable to the extent any delay in the effectiveness of the
Registration Statement occurs because of an act of, or a failure to act or to
act timely by the Initial Investor
-3-
or its counsel, or in the event all of the Registrable Securities may be sold
pursuant to Rule 144 or another available exemption under the Act.
As used in this Section 2(b), the following terms shall have
the follow meanings:
"Computation Date" means the date which is the earlier of (i)
five days after notice from the Securities and Exchange Commission that the
Registration Statement may be declared effective, or (ii) ninety (90) days after
the initial Closing Date (except as provided by the last sentence of Section
2(a)), and, if the Registration Statement required to be filed by the Company
pursuant to Section 2(a) has not theretofore been declared effective by the SEC
or a Suspension Period is in effect, each date which is thirty (30) days after
the previous Computation Date (pro rated for partial periods) until such
Registration Statement is so declared effective.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following.
(a) Prepare promptly, and file with the SEC by forty-five (45)
days after the initial Closing Date, a Registration Statement with respect to
not less than the number of Registrable Securities provided in Section 2(a),
above, and thereafter used its best efforts to cause each Registration Statement
relating to Registrable Securities to become effective on the earlier of (i)
five days after notice from the Securities and Exchange Commission that the
Registration Statement may be declared effective, or (b) ninety (90) days after
the Closing Date, and keep the Registration Statements effective at all times
until the earliest (the "Registration Period") of (i) the date that is two years
after the Closing Date (ii) the date when the Investors may sell all Registrable
Securities under Rule 144 or (iii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a materiel fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;
(c) The Company shall permit a single firm of counsel
designated by the Initial Investors to review the Registration Statement and all
amendments and supplements thereto as
-4-
reasonable period of time prior to their filing with the SEC, and not file any
document in a form to which such counsel reasonably objects;
(d) Furnish to each Investor whose Registrable Securities are
included in the Registration Statement and its legal counsel identified to the
Company (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one (1) copy of the Registration
Statement, each preliminary prospectus and prospectus, and each amendment or
supplement thereto, and (ii) such number of copies of a prospectus, and all
amendments and supplements thereto and such other documents, as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;
(e) As promptly as practicable after becoming aware of such
event, notify each investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;
(f) Notwithstanding the foregoing, 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, the Investors shall not offer or sell any Registerable Shares,
or engage in any other transaction involving or relating to the Registrable
Shares, 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; provided, however, that the
Company may not so suspend the right to such holders of Registrable Shares for
more than two (2) twenty (20) day periods in the aggregate during any 12-month
period with at least a ten (10) business day interval between such periods,
during the period the Registration Statement is required to be in effect;
(g) As promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold (or, in
the event of an underwritten offering, the managing underwriters) of the
issuance by the SEC of a Notice of Effectiveness or any stop order or other
suspension of the effectiveness of the Registration Statement at the earliest
possible time;
(h) Use its commercially reasonable efforts to secure
designation of all the Registrable Securities covered by the Registration
Statement as a National Association of Securities Dealers Automated Quotations
System ("NASDAQ") "Small Capitalization" within
-5-
the meaning of Rule 11Aa2-1 of the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the quotation of the Registrable
Securities of the NASDAQ Small Cap Market; or if, despite the Company's
commercially reasonable efforts to satisfy the preceding clause, the Company is
unsuccessful in doing so, to secure NASDAQ/OTC Bulletin Board authorization and
quotation for such Registrable Securities and, without limiting the generality
of the foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc. ("NASD") as such with respect
to such Registrable Securities;
(i) Provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement;
(j) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within three (3) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel; and
(k) Take all other reasonable actions necessary to expedite
and facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration the Registrable Securities, the Investors shall have the following
obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the company may reasonably request. At
least five (5) days prior to the first anticipated filing date of the
Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor (the "Requested
Investment") if such Investor elects to have any of such Investor's Registrable
Securities included in the Registration Statement. If at least two (2) business
days prior to the filing date the Company has not received the Requested
Information from an Investor (a "Non-Responsive
-6-
Investor"), then the company may file the Registration Statement without
including Registrable Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the company as reasonably
requested by the company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(e)
or 3(f), above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or 3(f) and, if
so directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
5. EXPENSES OF REGISTRATION. All reasonable expenses (other
that underwriting discounts and commissions incurred in connection with
registrations, filings or qualification pursuant to Section 3, and fees and
expenses of counsel for the Investors), but including, without limitation, all
registration, listing, and qualifications fees, printers and accounting fees,
the fees and disbursements of counsel for the Company, shall be borne by the
Company.
6. INDEMNIFICATION. In the event any Registrable Securities
are included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the company will indemnify
and hold harmless each Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers, if any, of such Investor,
each person, if any, who controls any Investor within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person"), against any
losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Claims") to which any of them may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or
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supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). The
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigation or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a) shall not (I) apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
3(b) hereof; (II) be available to the extent such Claim is based on a failure of
the Investor to deliver or cause to be delivered the prospectus made available
by the Company; or (III) apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Each Investor will indemnify
the Company and its officers, directors and agents against any claims arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company, by or on behalf of such
Investor, expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company to this Section 6.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In such event, the Company shall pay for only one
separate legal counsel for
-8-
the Investors; such legal counsel shall be selected by the Investors holding a
majority in interest of the Registrable Securities included in the Registration
Statement to which the Claim relates. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available
to the Investors the benefits of Rule 144 promulgated under the Securities Act
or any other similar rule or regulation of the SEC that may at any time permit
the Investors to sell securities of the Company to the public without
registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange act;
and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of at least 30% of the
Registrable Securities
-9-
(excluding the Additional Warrant Shares) only if: (a) the Investor agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (b) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (i) the name and address of such
transferee or assignee and (ii) the securities with respect to which such
registration rights are being transferred or assigned, (c) immediately following
such transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the Securities act and applicable
state securities laws, and (d) at or before the time the Company received the
written notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein. In the event of any delay in filing or effectiveness of the
Registration Statement as a result of such assignment, the Company shall not be
liable for any damages arising from such delay, or the payments set forth in
Section 2(c) hereof.
10. (A) AMENDMENT OF REGISTRATION RIGHTS. Any provision of
this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold an eighty (80%) percent interest of the Registrable Securities. Any
amendment or waiver effective in accordance with this Section 10 shall be
binding upon each Investor and the Company.
(B) ADDITIONAL WARRANT SHARES. The obligation of the
Company hereunder including the time period set forth herein shall apply, mutis
mutandis, to the Additional Warrant Shares upon issuance of the Additional
Warrants.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission,
receipt confirmed, or other means) or sent by certified mail, return receipt
requested, properly addressed and with proper postage pre-paid (i) if to the
Company, DYNAGEN, INC., 00 Xxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000, with a
copy to Xxxx X. Xxxxxxx, Esq., Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, High Street
Tower, 000 Xxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000; (ii) if to the Initial
Investor, at the address set forth under its name in the Stock Purchase
Agreement, with a xxx to Xxxxxx Xxxxxxx, Esq., Xxxxxxx & Prager, 000 Xxxxx
Xxxxxx, Xxxxx Xxxxx, Xxx Xxxx, XX 00000 and (iii) if to any other
-10-
Investor, at such address as such Investor shall have provided in writing to the
Company, or at such other address as each such party furnishes by notice given
in accordance with this Section 11(b), and shall be effective, when personally
delivered, upon receipt and, when so sent by certified mail, four (4) calendar
days after deposit with the United States Postal Service.
(c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties consents
to the jurisdiction of the federal courts whose districts encompass any part of
the City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement.
-11-
This Agreement, once executed by a party, may be delivered to the other party
hereto by telephone line facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
(j) The Company acknowledges that any failure by the Company
to perform its obligations under Section 3(a), or any delay in such performance
could result in to the Investors and the Company agrees that, in addition to any
other liability of the Company may have by reason of any such failure or delay,
the Company shall be liable for all direct damages caused by any such failure or
delay, unless same is the result of force majeure. Neither party shall be liable
for consequential damages.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-12-
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
DYNAGEN, INC.
By: /s/ Xxxx X. Xxxx
-----------------------
Name: Xxxx X. Xxxx
Title: President
ENDEAVOUR CAPITAL FUND S.A.
By: [illegible]
-------------------------
Name:
Title:
-13-
ANNEX V
COMPANY DISCLOSURE
[TO BE SUPPLIED]
-1-
Exercise
Number Date of Price Per Expiration
No. Name and Address of Shares Grant Share Date
--- ---------------- --------- ----- ----- ----
---------------------------------------------------------------------------------------------------------------------
00 Xxxxxxxx Xxxxxxx (XX) 83,000 5/19/96 $ .50 5/19/00
Able Laboratories 20750
8 Hollywood Court 00000
X. Xxxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------
88 Mahendra 83,000 5/19/95 $ .50 5/19/03
Xxxxxx,Ph.D. (QO) 20760
8018 Daytona St., 29060
N.W. 33200
Xxxxxxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------
88 Xxxxxxx X. Xxxxxxx 50,000 9/1/96 $1.94 9/1/03
(NQ) 3845 shares
00 Xxxxxx Xxxxxx per qtr over 3
Xxxxx, XX 00000 years
---------------------------------------------------------------------------------------------------------------------
90 Xxxx X. Xxxxxx (NQ) 10,000 9/3/96 $1.94 9/3/03
X.X. Xxx 0000
Xxxxxxx Xxxxx, XX
00000
---------------------------------------------------------------------------------------------------------------------
91 Xxxxx X. Xxxxxxx (?) 100,000 11/11/96 $1.31 11/11/03
0 Xxxx Xxxxx 00000
Xxxxxxxxxx, XX 00000 35000
40000
---------------------------------------------------------------------------------------------------------------------
92 Ewapan 50,000 7/15/97 $ .94 7/15/04
Xxxxxxxxxxxx 12500
17500
20000
-2-
