Exhibit 4a
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "AGREEMENT"), dated as of
______________, 1997, is entered into by and between the parties listed on
Schedule I hereto (individually, a "PURCHASER" and collectively, the
"PURCHASERS") and DYNAGEN, INC., a Delaware corporation (the "COMPANY").
The parties hereto agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS. Upon the basis
of the representations and warranties, and subject to the terms and conditions
set forth in this Agreement, the Company covenants and agrees to sell to each
Purchaser on the Closing Date (as hereinafter defined) (i) the number of shares
(the "PREFERRED SHARES") of its Series A Preferred Stock (the "PREFERRED STOCK")
set forth opposite the name of such Purchaser under the heading "The Number of
Preferred Shares to be Purchased," each such Preferred Share convertible in
accordance with the terms and conditions of the Company's Certificate of
Designation for the Preferred Stock filed with the Secretary of State of
Delaware on June 16, 1997, attached hereto as EXHIBIT A (the "CERTIFICATE OF
DESIGNATION"), on the dates set forth in the Certificate of Designation (any
such date of conversion, the "CONVERSION DATE") into shares of the Company's
Common Stock (the "CONVERSION SHARES") and (ii) a warrant in substantially the
form of EXHIBIT B hereto (the "WARRANT") to purchase the number of shares of the
Company's Common Stock (the "WARRANT SHARES") set forth opposite the name of
such Purchaser under the heading "Number of Warrant Shares." The Preferred
Shares (together with the Warrant Shares, the "SHARES"), and the Warrants shall
be purchased at the aggregate purchase price (the "PURCHASE PRICE") set forth
opposite the name of such Purchaser under the heading "Aggregate Purchase
Price." The Preferred Shares and Warrants are sometimes hereinafter collectively
referred to as the "SECURITIES."
2. CLOSING. The closing of the purchase and sale of the Preferred
Shares and the Warrants pursuant to Section 1 hereof shall take place at the
offices of Morse, Zelnick, Rose & Lander LLP, located at 000 Xxxx Xxxxxx, Xxxxx
000, Xxx Xxxx, Xxx Xxxx 00000 on such date as the Purchasers and the Company may
agree upon, or at such other time at which the Escrow Agent (as hereinafter
defined) shall have received all documents and instructions as it shall in its
sole judgment deem necessary and appropriate to consummate the transactions
contemplated hereby (such time and date for the closing, the "CLOSING DATE").
The certificates representing the Preferred Shares and the executed Warrants to
be purchased by the Purchasers shall be delivered by, or on behalf of, the
Company at the closing against payment of the Purchase Price therefor in
immediately available funds by, or on behalf of, the Purchasers to the attorney
trust account of Morse, Zelnick, Rose & Lander, LLP, (the "ESCROW AGENT") (Chase
Manhattan Bank, Account No. 967086639, ABA Routing Number 000000000). The Escrow
Agent shall receive from the Purchasers and the Company written instructions of
the Purchasers and the Company in substantially the form of EXHIBIT C hereto
instructing the Escrow Agent with respect to the closing and settlement
procedures, subject, however, to the terms and conditions of this
Agreement on the date the Purchasers deliver the Purchase Price to the Escrow
Agent. Commencing on the fifth business day after delivery to the Escrow Agent
of the Purchase Price, the Purchasers, if the purchase and sale transaction
contemplated hereby has not been consummated in accordance with the terms of
this Agreement, may terminate the proposed transaction by notice to the Company
and the Escrow Agent, whereupon the Escrow Agent shall promptly redeliver the
Purchase Price to the Purchasers in accordance with the written instructions of
the Purchasers.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS. Each
Purchaser understands, and represents and warrants to, and agrees with, the
Company, that:
(a) The Preferred Shares (including the Conversion Shares) and
the Warrants (including the Warrant Shares) have not been and, unless registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), in
accordance with the Registration Rights Agreement (as defined in Section 6(b)),
will not be registered under the Securities Act, or any other applicable
securities law, and, accordingly, may not be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of ("TRANSFERRED") unless registered
under the Securities Act or Transferred in a transaction exempt from
registration under the Securities Act and any other applicable securities law
(in which event, each Purchaser shall be required to provide the Company with an
opinion of counsel that registration is not required, in form and substance
reasonably satisfactory to the Company and its counsel).
Each Purchaser acknowledges and agrees that the certificates
representing the Preferred Shares and the Warrants and, prior to the effective
date of the registration thereof under the Securities Act pursuant to the
Registration Rights Agreement, the Conversion Shares and the Warrant Shares,
will bear a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR,
UNLESS, IN THE OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER, SUCH OFFER, SALE, OR TRANSFER IS EXEMPT FROM
REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH LAWS.
(b) Each Purchaser is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act, was not organized for the
specific purpose of acquiring the Securities, and is acquiring or will acquire
the Securities for its own account. The Purchaser has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Securities. The Purchaser is aware
that it may be
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required to bear the economic risk (including the possible loss of the entire
investment) of an investment in the Securities for an indefinite period, and it
is able to bear such risk for an indefinite period.
(c) Each Purchaser is acquiring or will acquire the Preferred
Shares and the Warrant for its own account for investment purposes and not with
a view to, or for offer or sale in connection with, any distribution thereof,
except in compliance with applicable securities laws (including exemptions
thereunder) or pursuant to an effective registration statement under the
Securities Act. Each Purchaser agrees to Transfer the Preferred Shares
(including the Conversion Shares) and the Warrant (including the Warrant Shares)
only (i) in accordance with the terms of this Agreement and the Warrant, as
applicable, and (ii) pursuant to registration under the Securities Act or an
exemption from registration under the Securities Act and any other applicable
securities law.
(d) The Company has furnished or made available to each
Purchaser all material information relating to the business, finances and
operations of the Company and material information relating to the offer and
sale of the Securities and which have been requested by each Purchaser. Each
Purchaser and/or its advisors, if any, in each case, have been afforded the
opportunity to ask questions of the Company and have received satisfactory
answers to any such inquiries. Without limiting the generality of the foregoing,
each Purchaser has had the opportunity to obtain and to review the Company's (1)
Transition Report on Form 10-K for the six-month period ended December 31, 1996,
as amended by Amendment No. 1 to Transition Report on Form 10-K/A, as filed with
the Securities and Exchange Commission (the "SEC"), (2) Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1997 and June 30, 1997, (3)
definitive Proxy Statement of the Company dated December 27, 1996 for its Annual
Meeting of Stockholders held on January 30, 1997, (4) Current Report on Form 8-K
filed with the SEC on July 3, 1997, as amended by Amendment No. 1 to Current
Report on Form 8-K/A filed with the SEC on July 11, 1997 and Amendment No. 2 to
Current Report on Form 8-K/A filed with the SEC on August 29, 1997, and (5) the
Company's Registration Statement on Form S-3 filed with the SEC on August 11,
1997, as amended by Amendment No. 1 to Registration Statement on Form S-3 filed
with the SEC on September 11, 1997 (collectively, the "SEC DOCUMENTS"), which
the Company has filed pursuant to the Securities Act or the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"). Each Purchaser has had an
opportunity to discuss in depth the Company's business, management and financial
affairs with the Company's management, and has been provided access to material
contracts and other documents it has requested and various informational
brochures regarding the Company.
(e) Each Purchaser, in electing to subscribe for the
Securities hereunder, has relied upon an independent investigation made by it
and its representative, if any. Each Purchaser has been given no oral or written
representations or assurances from the Company or any representative of the
Company other than as set forth in this Agreement or in a document executed by a
duly authorized representative of the Company making reference to this
Agreement.
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(f) Each Purchaser has no existing short position with respect
to the Common Stock.
(g) Each Purchaser acknowledges that, except for the
historical material contained herein or in the SEC Documents, the matters
disclosed herein and therein are forward-looking statements under the federal
securities laws that involve risks and uncertainties, including, but not limited
to, the Company's ability to obtain future financing, the management and
integration of acquired businesses and possible future acquisitions, product
demand and market acceptance risks, the effect of economic conditions, the
impact of competitive products and pricing, product development,
commercialization and technological difficulties, capacity and supply
constraints or difficulties, the results of financing efforts, actual purchases
under agreements, and other risks detailed in the Company's SEC Documents.
Actual results could differ materially from those estimated or anticipated in
these forward-looking statements.
(h) Each Purchaser is a resident of the state or country set
forth under its name on the signature page hereto.
(i) The foregoing representations and warranties are true and
accurate as of the date hereof and unless otherwise informed in writing may be
relied upon by the Company as being true and correct as of the Closing Date and
the date of each Purchaser's purchase of the Securities subscribed for herein,
and such representations and warranties shall survive such purchase.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Purchasers that, except as
disclosed in the Disclosure Schedule attached hereto:
(a) The Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations under the laws of their
respective states of incorporation and have the requisite corporate powers to
own their properties and to carry on their businesses as now being conducted.
(b) This Agreement, the Certificate of Designation, the
Warrants and the Registration Rights Agreement (as defined in Section 6(b)) have
been duly authorized, executed and delivered by the Company and constitute valid
and binding agreements, enforceable in accordance with their respective terms
(except to the extent that enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights generally), and the
Company has full corporate power and authority necessary to enter into such
agreements and to perform its obligations thereunder.
(c) No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company
or any of its affiliates or of any third party or of the stockholders of the
Company is required for execution of this Agreement, the Warrants or the
Registration Rights Agreement or the performance of its obligations under such
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agreements, including, without limitation, the issuance and sale of the
Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares
(except for the registration of the Conversion Shares and Warrant Shares under
the Securities Act pursuant to the Registration Rights Agreement, the listing of
the Conversion Shares and the Warrant Shares on the NASDAQ SmallCap Market and
any notices of sale required to be filed with the SEC pursuant to Regulation D
promulgated under the Securities Act or any state securities law authority
pursuant to applicable blue sky laws may be filed within the applicable periods
therefor).
(d) Neither the sale of the Preferred Shares and Warrants
pursuant to this Agreement, nor the performance of its obligations under this
Agreement, the Certificate of Designation (including the issuance of the
Conversion Shares thereunder), the Warrants (including the issuance of the
Warrant Shares thereunder) or the Registration Rights Agreement by the Company
will:
(i) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or the lapse
of time or both would be reasonably likely to constitute a default) under (A)
the Certificate of Incorporation or By-laws of the Company, (B) any decree,
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,
the violation, conflict, breach or default of which would have a material
adverse effect on the Company and its subsidiaries considered as a whole, (C)
the terms of any bond, debenture, 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,
the violation, conflict, breach or default of which would have a material
adverse effect on the Company and its subsidiaries considered as a whole, or (D)
the terms of any "lockup" or similar provision of any underwriting or similar
agreement to which the Company is a party; or
(ii) result in the creation or imposition of any
lien, claim or other encumbrance upon any of the assets of the Company.
(e) As of the Closing Date, the Preferred Shares will be duly
and validly authorized and (i) will be free and clear of any security interests,
liens, claims or other encumbrances, (ii) will be duly and validly issued, (iii)
will be fully paid and nonassessable, (iv) will not be issued or sold in
violation of any preemptive or other similar rights of the holders of any
securities of the Company, and (v) will not subject the holders thereof to
personal liability by reason of being such holders. The Warrants have been duly
and validly authorized and when issued and delivered pursuant to this Agreement
will have been duly executed, issued and delivered and will constitute a legal,
valid, binding and enforceable obligation of the Company (except to the extent
that enforceability thereof may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights generally).
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(f) As of the Closing Date, the Conversion Shares and Warrant
Shares will be duly and validly authorized and when issued in accordance with
the terms of this Agreement, the Certificate of Designation (as to the
Conversion Shares) and the Warrants (as to the Warrant Shares) (i) will be free
and clear of any security interests, liens, claims or other encumbrances, (ii)
will be duly and validly issued, (iii) will be fully paid and nonassessable,
(iv) will not have been issued or sold in violation of any preemptive or other
similar rights of the holders of any securities of the Company, and (v) will not
subject the holders thereof to personal liability solely by reason of being such
holders.
(g) Except as set forth in the SEC Documents, there is no
pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or any of its affiliates that
would materially adversely affect the results of operations of the Company or
adversely affect the execution by the Company of, or materially adversely affect
the performance by the Company of its obligations under, this Agreement, the
Certificate of Designation, the Warrants or the Registration Rights Agreement,
or the transactions contemplated hereby or thereby.
(h) Neither the Company, nor any authorized representative of
the Company, has made any written or oral communication in connection with the
offer or sale of the securities offered hereby which contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements, in the light of the circumstances under which they
were made, not misleading.
(i) None of the Company, any affiliate of the Company, or any
person acting on behalf of the Company or any such affiliate has engaged, or
will engage, in any general solicitation or general advertising with respect to
the Preferred Shares or the Warrants.
(j) The Company is 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 the Exchange
Act, and the Common Stock is listed and currently trades on the NASDAQ SmallCap
Market. The Company is not in violation of the applicable listing agreement
between the Company and any securities exchange or market on which the Company's
securities are listed. The Company has timely filed all materials required to be
filed pursuant to all reporting obligations under either Section 13(a) or 15(d)
of the Exchange Act for at least twelve (12) months immediately preceding the
date hereof, and has received no notice, either oral or written, with respect to
the continued eligibility for such listing. The Company has timely made all
filings required under the Exchange Act during the twelve month period preceding
the date hereof and is eligible to use Form S-3 to register the Conversion
Shares and Warrant Shares. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have
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been prepared in accordance with generally accepted accounting principles,
consistently applied during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). Prior to the
date hereof, the Company has corrected all statements in the SEC Documents which
have required correction and has filed all necessary amendments to the SEC
Documents, in each case as required by applicable law.
(k) As of the date hereof and as of the Closing Date, the
authorized capital stock of the Company consists of (i) 75,000,000 shares of
Common Stock $.01 par value per share, of which _____________ shares are issued
and outstanding, and (ii) 10,000,000 shares of preferred stock, $.01 par value
per share, of which (A) 50,000 shares have been designated Series A Preferred
Stock, of which __________ shares are issued and outstanding and ____ have been
converted into Common Stock, (B) 12,515 shares have been designated as Series B
Preferred Stock, all of which are issued and outstanding, (C) 7,500 shares have
been designated Series C Preferred Stock, $.01 par value per share, all of which
are issued and outstanding and (D) 60,000 shares have been designated Series D
Preferred Stock, $.01 par value per share, _______ of which are issued and
outstanding, and (iii) the Company has reserved for issuance no more than
_____________ shares of Common Stock with respect to the Derivative Securities.
All outstanding shares of Common Stock, Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock have been validly issued and are fully paid
and nonassessable. No shares of Common Stock, Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company. Except as disclosed in the SEC Documents, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of capital stock of the Company
or any of its subsidiaries, or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries (all such securities and rights
contained in this subsection (i) are hereinafter collectively referred to as
"DERIVATIVE SECURITIES"), and (ii) there are no outstanding debt securities of
the Company. The Company has made available to the Purchaser true and correct
copies of the Company's Certificate of Incorporation, as amended, as in effect
on the date hereof, and the Company's By-laws.
(l) The Company undertakes and agrees to make all necessary
filings in connection with the sale of the securities offered hereby as required
by the United States laws and the regulations or any domestic securities
exchange or trading market.
(m) Except as set forth in the SEC Documents, since December
31, 1996, there has been no material adverse development in the assets,
liabilities, business properties, operations, financial condition or results of
operations of the Company and its subsidiaries taken as a whole, other than
continued losses.
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(n) None of the filings of the Company with the SEC since
December 31, 1996 contained, at the time they were filed, any untrue statement
of a material fact or omitted to state any 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. The Company has since
December 31, 1996 timely filed all requisite forms, reports and exhibits thereto
with the SEC. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents.
Prior to the date hereof, the Company has corrected all statements in the SEC
Documents which have required correction and has filed all necessary amendments
to the SEC Documents, in each case as required by applicable law.
(o) Except as set forth in the SEC Documents, there is no
known fact to the Company or any subsidiary (other than general economic
conditions generally known to the public) that has not been disclosed in writing
to the Purchasers that (i) could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise) or in the earnings,
business affairs, properties or assets of the Company or any subsidiary, or (ii)
could reasonably be expected to adversely affect the ability of the Company or
any subsidiary to perform its obligations pursuant to this Agreement, the
Certificate of Designation, the Registration Rights Agreement or the Warrants.
(p) The Company acknowledges and agrees that Purchasers are
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the Registration Rights Agreement and the transactions
contemplated hereby and thereby. The Company further acknowledges that
Purchasers are not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the Registration
Rights Agreement and the transactions contemplated hereby and thereby and any
advice given by the Purchasers or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereby and
thereby is merely incidental to the Purchasers' purchase of the Securities. The
Company further represents to the Purchasers that the Company's decision to
enter into this Agreement and the Registration Rights Agreement has been based
solely on the independent evaluation by the Company and its representatives.
(q) Neither the Company, nor any of its affiliates, has,
directly or indirectly, made any offers or sales of any securities or solicited
any offers to buy any security, under circumstances that would require
registration of the Preferred Shares or the Warrants under the Securities Act.
(r) Except as set forth within this Agreement or in the SEC
Documents, the Company and its subsidiaries own, have obtained or possess rights
to use the trademarks, trade names, service marks, service xxxx registrations,
patents, copyrights, licenses, approvals, governmental authorizations, trade
secrets and other rights necessary to conduct their respective businesses as now
conducted, the Company does not have any knowledge of any material infringement
by the Company or its subsidiaries of any trademark, trade name rights, patent
rights,
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copyrights, licenses, service marks, service xxxx registrations, trade secrets
or other similar rights of others, and there is no claim being made against the
Company or its subsidiaries regarding trademark, trade name, patent, copyright,
license, service marks, service xxxx registrations, trade secret or other
infringement which could have a material adverse effect on the Company. The
Company and its subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties.
(s) The Company understands and acknowledges the potentially
dilutive effect to the Common Stock of the issuance of the Conversion Shares and
the Warrant Shares.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Purchaser:
(a) To comply with all requirements of Section 4(2) and
Section 3(a)(9), as applicable, and to the extent applicable Regulation D under
the Securities Act, with respect to the sale of the Preferred Shares, the
Conversion Shares, the Warrants and the Warrant Shares, respectively.
(b) To notify the Purchasers promptly if at any time during
the period beginning on the date of this Agreement and ending on the Closing
Date any event shall have occurred as a result of which any written or oral
communication made by the Company or any authorized person representing the
Company, would include an untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(c) To cause the Conversion Shares and Warrant Shares to be,
upon delivery, fully paid, nonassessable, free of preemptive rights and free
from all taxes, liens, charges, security interests or other encumbrances.
(d) To have at all times authorized and reserved for issuance,
free from preemptive rights, a sufficient number of shares of Common Stock
solely for the purpose of satisfying the conversion rights of the Purchasers
pursuant to the terms and conditions of the Certificate of Designation and the
Warrants and to satisfy the issuance of any other shares of Common Stock which
are reserved for issuance or which are issuable upon the exercise, conversion,
exchange or satisfaction of any outstanding securities or obligations or rights
of the Company. The Company shall not issue any shares of Common Stock, or any
securities convertible into, or warrants, options and the like exercisable for,
shares of Common Stock, if as a result thereof the Company may reasonably not
have sufficient shares of authorized but unissued Common Stock sufficient to
satisfy in full the conversion rights of the Purchasers pursuant to the terms
and conditions of the Certificate of Designation and the Warrants.
(e) Each party shall use its best efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
including without limitation, timely to satisfy
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the conditions to be satisfied as provided in Section 6 and 7 of this Agreement,
to consummate the transactions contemplated hereby.
(f) Until the earlier of (i) the date which is one year after
the date as of which the Holders (as that term is defined in Section 8(b)) may
sell all of the Conversion Shares without restriction pursuant to Rule 144(k)
promulgated under the Securities Act (or successor thereto) or (ii) the date on
which (a) the Holders shall have sold all the Conversion Shares and Warrant
Shares and (b) none of the Preferred Shares or Warrants are outstanding, the
Company shall file all reports required to be filed with the SEC pursuant to the
Exchange Act, and the Company shall not voluntarily terminate its status as a
Company required to file reports under the Exchange Act even if the Exchange Act
or the rules and regulations thereunder would permit such termination.
(g) The Company will use the proceeds from the sale of the
Securities for working capital and general corporate purposes.
(h) The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed or quoted (subject to official notice of issuance) and shall maintain the
listing of all such shares from time to time issuable under the terms of this
Agreement, the Certificate of Designation and the Registration Rights Agreement.
During the period that the Company is required to maintain effective a
registration statement covering the Conversion Shares and Warrant Shares, the
Company shall maintain the Common Stock's authorization for listing on the
NASDAQ SmallCap Market and any such other national securities exchange.
6. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS. The obligations
of the Purchasers hereunder are subject to the performance by the Company of its
obligations hereunder and to the satisfaction of the following additional
conditions precedent:
(a) The representations and warranties made by the Company in
this Agreement shall, unless waived by the Purchasers, be true and correct in
all material respects as of the date hereof and at the Closing Date, with the
same force and effect as if they had been made on and as of the Closing Date.
The Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date.
(b) The Company and the Purchasers shall have entered into the
Master Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT"), in
substantially the form annexed hereto as EXHIBIT D.
(c) The Company will provide to the Purchasers an opinion or
opinions of counsel in substantially the form annexed hereto as EXHIBIT E.
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(d) The Company shall have filed the Certificate of
Designation with the Secretary of the State of Delaware.
(e) None of the following shall have occurred: (i) any general
suspension of trading in, or limitation on prices listed for, the Common Stock
on the NASDAQ, (ii) a declaration of a banking moratorium or any suspension of
payments in respect to banks in the United States, (iii) a commencement of a
war, armed hostilities or other international or national calamity directly or
indirectly involving the United States, (iv) in the case of the foregoing
existing at the date of this Agreement, a material acceleration or worsening
thereof, or (v) any limitation by the federal or state authorities on the
extension of credit by lending institutions that materially and adversely
affects the Purchasers.
(f) The Company shall have executed and delivered to the
Escrow Agent the certificates representing the Preferred Shares and the
Warrants.
(g) No action, suit, investigation or proceeding before or by
any governmental authority shall have been commenced or threatened against the
Company or any of the officers, directors or affiliates of the Company, which
seeks to restrain, prevent or challenge the transactions contemplated by this
Agreement or the Registration Rights Agreement or which seeks damages in
connection with such transactions.
7. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS.
(a) The obligations of the Company hereunder are subject to
the performance by the Purchasers of their obligations hereunder and to the
satisfaction of the condition precedent that the representations and warranties
made by the Purchasers in this Agreement shall, unless waived by the Company, be
true and correct in all material respects as of the date hereof and at the
Closing Date, with the same force and effect as if they had been made on and as
of the Closing Date.
(b) The Purchasers shall have delivered to the Escrow Agent by
wire transfer the Purchase Price for the Securities.
8. TRANSFER OF SECURITIES.
(a) Securities Act Legend. Each certificate evidencing the
Preferred Shares and the Warrants, and, prior to the effective date of the
registration thereof pursuant to the Registration Rights Agreement, the
Conversion Shares and the Warrant Shares, and any certificates issued upon
transfer or exchange of the foregoing, shall be stamped or imprinted with the
legend substantially as set forth in Section 3(a). The legend set forth in
Section 3(a) shall be removed and the Company shall issue a certificate without
such legend to the holder of the Preferred Shares, the Conversion Shares, the
Warrant and the Warrant Shares as applicable upon which it is stamped, if,
unless otherwise required by state securities laws, (a) with respect to the
Conversion Shares and the Warrant Shares, the sale of the Conversion Shares or
the Warrant
-11-
Shares, as the case may be, is registered under the Securities Act, or (b) in
connection with a Transfer, such holder provides the Company with an opinion of
counsel, in form, substance and scope reasonably acceptable to the Company, to
the effect that a Transfer thereof may be made without registration under the
Securities Act, or (c) such holder provides the Company with reasonable
assurances that the Preferred Shares, the Conversion Shares, the Warrant and the
Warrant Shares, as applicable, can be sold pursuant to Rule 144 under the
Securities Act (or a successor rule thereto). Notwithstanding the removal of any
such legend, each Purchaser agrees to Transfer the Preferred Shares, the
Conversion Shares, its Warrant and the Warrant Shares, including those
represented by certificate(s) from which the legend has been removed, in
compliance with all applicable securities laws and, if, in connection with any
Transfer, a legend would be appropriate under applicable securities laws, each
Purchaser shall, in connection with any such Transfer ensure that the
certificates representing shares so Transferred shall bear the foregoing legend.
(b) Securities Act Compliance. Each holder (a "HOLDER") of a
certificate evidencing the Preferred Shares, the Conversion Shares, the Warrants
and the Warrant Shares which bears the restrictive legend set forth in Section
8(a) above (the "RESTRICTED SECURITIES"), and who proposes to Transfer any
Restricted Securities (other than pursuant to an effective registration
statement under the Securities Act or pursuant to Rule 144 under the Securities
Act), shall give written notice to the Company of such Holder's intention to
effect such Transfer. Each such notice shall describe the manner and
circumstances of the proposed sale or other disposition in sufficient detail and
shall be accompanied by an opinion of legal counsel to the Holder. Promptly upon
receipt of such notice, the Company shall present a copy thereof (together with
any accompanying opinion of legal counsel to the Holder) to its legal counsel,
and the following provisions shall apply:
(i) If, in the opinion of legal counsel to such
Holder, reasonably satisfactory in form and substance to the Company and its
legal counsel, or if such notice was not accompanied by an opinion of legal
counsel to the Holder, then, if, in the opinion of legal counsel to the Company,
the proposed sale or other disposition may be effected without registering the
Restricted Securities involved under the Securities Act or under state
securities laws, such Holder shall be entitled to so Transfer such Restricted
Securities in accordance with the terms of such notice delivered to the Company
pursuant to this paragraph (b). The Company will advise the Holder, within three
(3) business days after submission of such notice, whether the Company believes
such Holder is entitled to so Transfer the Restricted Securities in accordance
with the foregoing. If the Holder is entitled to so Transfer, he shall submit
the stock certificate or certificates evidencing the Restricted Securities to be
Transferred to the Company in proper form for Transfer and accompanied by
appropriate instruments of Transfer and the Company shall promptly issue new
certificates giving effect to such Transfer. Certificates for Restricted
Securities thus Transferred (and each of the certificates evidencing any
untransferred balance of the Conversion Shares or the Warrant Shares not so
transferred) shall bear the restrictive legend set forth in Section 8(a),
unless, in the opinion of such Holder's legal counsel, which opinion shall be
reasonably satisfactory in form and substance to counsel for the Company (or
legal counsel to
-12-
the Company if the Holder did not present an opinion of its legal counsel), such
legend is not required by the applicable provisions of the Securities Act or
state securities laws; and
(ii) If in the reasonable opinion of either of such
legal counsel (or legal counsel to the Company if the Holder did not present an
opinion of its legal counsel), the proposed Transfer cannot be effected without
registering the Restricted Securities involved under the Securities Act or state
securities laws, such Holder shall not offer to Transfer or Transfer such
Restricted Securities unless and until such Restricted Securities have been
registered under the Securities Act or state securities laws for such purpose or
an exemption from such registration becomes available. Upon the consummation of
the transactions contemplated by this Agreement, the Company shall have agreed
to register the Conversion Shares and the Warrant Shares pursuant to the terms
of the Registration Rights Agreement.
(c) Subject to the restrictions set forth in Sections 8(a) and
(b) above, upon the valid conversion of the Preferred Shares or exercise of the
Warrants, the Company shall instruct its transfer agent to issue certificates,
registered in the name of each Purchaser or its nominee, for the Conversion
Shares and the Warrant Shares in such amounts as specified from time to time by
the respective Purchasers to the Company. The Company shall provide instructions
and opinions of counsel to its transfer agent in accordance the Registration
Rights Agreement and this Section 8. Upon the effectiveness of the registration
of the Conversion Shares and the Warrant Shares pursuant to the Registration
Rights Agreement and thereafter, any Conversion Shares or Warrant Shares
theretofore issued bearing a restrictive legend of any kind may be submitted to
the Company for removal of such legend, and within three (3) business days of
receipt thereof the Company shall cause to be issued and delivered to the Holder
submitting the certificates for such shares new certificates representing the
same number of shares that bear no restrictive legend and that are freely
transferable on the books and records of the Company and its transfer agent,
subject to such Holder's compliance with applicable securities laws, including
but not limited to such Holder's obligation pursuant to the Securities Act to
provide a prospectus to buyers of such shares and further subject to Sections
3(e) and 4(c) of the Registration Rights Agreement. Nothing in this Section
shall affect in any way Purchasers' obligations and agreement to comply with all
applicable securities laws upon resale of the Conversion Shares and the Warrant
Shares.
9. FEES AND EXPENSES. Each of the Purchasers and the Company agrees to
pay its respective expenses incident to the performance of its obligations
hereunder, including, but not limited to, the fees, expenses, due diligence
costs and disbursements of such party's counsel.
10. SURVIVAL OF THE REPRESENTATIONS, WARRANTIES, ETC. The respective
agreements, representations, warranties, indemnities and other statements made
by or on behalf of the Company and the Purchaser, respectively, pursuant to this
Agreement, shall remain in full force and effect for a period of one year,
regardless of any investigation made by or on behalf of the other party to this
Agreement or any officer, director or employee of, or person controlling or
under common control with, such party and will survive delivery of any payment
for the Preferred Shares, the Conversion Shares, the Warrants and the Warrant
Shares.
-13-
11. NOTICES. All notices, requests and other communications hereunder
must be in writing and delivered to the parties at the following addresses or
facsimile numbers:
If to the Purchasers, to:
The addresses listed on Schedule I attached hereto.
If to the Company, to:
DynaGen, Inc.
00 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: President
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
All such notices, requests and other communications will (i) if delivered
personally (including, without limitation, by reputable overnight courier
service) to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon telecopy generated confirmation
of receipt, and (iii) if delivered by mail in the manner described above to the
address as provided in this Section, be deemed given upon receipt (in each case
regardless of whether such notice, request or other communication is received by
any other Person to whom a copy of such notice is to be delivered pursuant to
this Section). Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that party by giving
notice specifying such change to the other parties hereto.
12. THIRD PARTY BENEFICIARY. Any permitted transferee of any part of
the principal amount of the Preferred Shares, the Conversion Shares, the
Warrants and the Warrant Shares shall be a third party beneficiary of the
Company's obligations under this Agreement, the Warrants and the Registration
Rights Agreement. Such person shall have all the rights of a third party
beneficiary with respect to the enforcement against the Company of any provision
of this Agreement, the Warrants and the Registration Rights Agreement.
13. MISCELLANEOUS.
(a) This Agreement may be executed in one or more counterparts
and it is not necessary that signatures of all parties appear on the same
counterpart, but such counterparts together shall constitute but one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
-14-
(b) This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their respective successors and permitted
assigns.
(c) This agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without giving effect to
conflicts of laws principles). 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.
(d) The headings of the sections of this document have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.
(e) The provisions of this Agreement are severable, and if any
clause or provision shall be held invalid, illegal or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect in that jurisdiction only such clause or provision, or part thereof, and
shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
(f) This Agreement, including the schedules and exhibits
hereto, constitutes the sole and entire agreement of the parties with respect to
the subject matter hereof.
(g) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
(h) Notwithstanding any of the representations, warranties,
acknowledgments or agreements made herein by the Company and Purchaser, the
Company and Purchasers do not thereby or in any manner waive any rights granted
to it or him under U.S. Federal or state securities laws.
(i) The provisions of this Agreement, other than Sections
5(i), 8, 10 and 12, shall terminate when all Preferred Shares and Warrants have
been converted into shares of the Company's Common Stock that are unlegended,
unrestricted and are freely transferable on the books and records of the Company
and its transfer agent, subject to each Holder's compliance with applicable
securities laws, including but not limited to such Holder's obligation pursuant
to the Securities Act to provide a prospectus to buyers of such shares, and
further subject to Sections 3(e) and 4(c) of the Registration Rights Agreement.
14. TIME OF ESSENCE. Time shall be of the essence in this Agreement.
-15-
15. DELIVERY OF STOCK; DIVIDEND PAYMENTS.
(a) The Company will permit each Purchaser to exercise its
right to convert the Preferred Shares and exercise the Warrants by telecopying a
notice of conversion in accordance with the Certificate of Designation (a
"NOTICE OF CONVERSION") or Form of Subscription annexed to the Warrant,
respectively, to the Company and delivering thereafter, as the case may be, (i)
the original Notice of Conversion and certificate representing the Preferred
Shares being converted, or (ii) (A) Form of Subscription, (B) cash or certified
or official bank check payable to the Company and (C) Warrant (the "ORIGINAL
DOCUMENTATION"), by express courier. Each date on which a Notice of Conversion
or Form of Subscription is telecopied to and received by the Company in
accordance with the provisions hereof shall be deemed a Conversion Date or
Exercise Date, as the case may be. The Company will transmit the certificates
representing the Conversion Shares and the Warrant Shares and the newly issued
Preferred Stock certificate representing the number of Preferred Shares that
remain unconverted, or the newly issued Warrant representing the portion of the
Warrant that remains unexercised, to such Purchaser via express courier within
three (3) trading days after the date on which the Company receives the Original
Documentation or make such securities available to such Purchaser at the
Company's transfer agent within such time period (the "DELIVERY DATE").
(b) The Company and the Purchasers agree that the Company will comply
with its applicable federal or other tax withholding obligations.
16. LIQUIDATED DAMAGES FOR FAILURE TO DELIVER. The Company understands
that a delay beyond the deadline for delivery, specified in Section 15, could
result in economic loss to the Purchaser. As compensation to the Purchaser for
such loss, the Company agrees to pay late payments to the Purchaser for the late
issuance of shares issuable at conversion or exercise in accordance with the
following schedule (where "No. Business Days Late" is defined as the number of
business days beyond three business days after receipt by the Company of the
Original Documentation):
Late Payment for Each $5,000 of
No. Business Days Late Original Investment Being Converted
---------------------- -----------------------------------
2 $ 50.00
3 $ 100.00
4 $ 150.00
5 $ 200.00
6 $ 250.00
7 $ 300.00
8 $ 350.00
9 $ 400.00
9 $400.00 + $100.00 for each Business
Day Late Beyond 9 Days
The Company shall make any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit a
Purchaser's right to actual damages for the Company's failure to issue and
deliver the Conversion Shares and the Warrant Shares to the
-16-
Purchaser. Furthermore, in addition to any other remedy which may be available
to the Purchaser, in the event that the Company fails for any reason to effect
delivery of Conversion Shares or Warrant Shares within five (5) business days
after the date on which the Company has received the Original Documentation, the
Purchaser will be entitled to elect to be deemed to be treated as not having
exercised the relevant Notice of Conversion or Notice of Exercise by delivering
a notice to such effect to the Company whereupon the Company and the Purchaser
shall each be restored to their respective positions immediately prior to such
Notice of Conversion or Notice of Exercise; provided that no such election shall
constitute waiver of any right or remedy Purchaser may have and the Company
shall still be obligated notwithstanding any such election to make penalty
payments hereunder and for any actual damages.
17. NON-DELIVERY OF THE SHARES. If, within ten (10) business days of
the date after receipt by the Company of the Original Documentation, the Company
shall fail to (i) issue the Conversion Shares or the Warrant Shares, and (ii)
deliver to a Purchaser the Conversion Shares or the Warrant Shares as required
by the Warrant or Certificate of Designation, as the case may be, for any reason
other than failure by such Purchaser to comply with its obligations under this
Agreement, then the Company shall:
(a) hold such Purchaser harmless against any loss, claim or
damage arising from or as a result of such failure by the Company (including,
without limitation, any such loss, claim or damage resulting from an obligation
to resell the Conversion Shares or the Warrant Shares); and
(b) reimburse the Purchaser for all of its out-of-pocket
expenses reasonably incurred, including fees and disbursements of its counsel,
incurred by the Purchaser in connection with this Agreement and the transactions
contemplated herein; provided however, that the Company shall not have further
liability to the Purchaser except as provided for in this Section 17.
18. ESCROW AGENT. The Escrow Agent shall not be liable for any action
taken or omitted by it in good faith and its liability hereunder shall be
limited to liability for gross negligence or willful misconduct on its part. The
Company and the Purchasers agree to save harmless, and the Company agrees to
indemnify and defend, the Escrow Agent for, from and against their respective
share of any loss, damage, liability, judgment, cost and expense whatsoever, by
reason of, or on account of, any misrepresentation made to it or its status or
activities as Escrow Agent under this Agreement except for any loss, damage,
liability, judgment, cost or expense resulting from gross negligence or willful
misconduct on the part of the Escrow Agent.
The Escrow Agent shall not be responsible for any failure or
inability of any of the parties to perform or comply with the provisions of this
Agreement, or the agreements delivered in connection herewith.
In the performance of its duties hereunder, the Escrow Agent
shall be entitled to rely in good faith upon any document (including facsimile
transmitted copies of documents),
-17-
instrument or signature believed by it in good faith to be genuine and to be
signed by any party hereto or an authorized officer or agent thereof, and shall
not be required to investigate the truth or accuracy of any statement contained
in any such document or instrument. The Escrow Agent may assume in good faith
that any person purporting to give any notice in accordance with the provisions
hereof has been duly authorized to do so.
Each party hereto acknowledges that (a) the Escrow Agent is
not acting as legal counsel to such party in any manner or respect in connection
with the transactions contemplated by this Agreement, and (b) the Escrow Agent
is serving as an accommodation to the parties hereto.
It is understood and further agreed that the Escrow Agent
shall:
(a) be under no duty to enforce payment of any subscription
that is to be paid to and held by it hereunder;
(b) promptly notify the Purchasers and the Company of any
discrepancy between the amounts set forth on any statement delivered by the
Purchasers and/or the Company and the sum or sums delivered to it therewith;
(c) be under no duty to accept funds, checks, drafts or
instruments for the payment of money from anyone other than the Company or the
Purchasers, or to give any receipt therefor except to the Company or the
Purchasers, with a copy in each case to the Company;
(d) be protected in acting upon any notice, request,
certificate, approval, consent or other paper reasonably believed by it to be
genuine and to be signed by the proper party or parties (including, but not
limited to, copies of documents transmitted by facsimile);
(e) be permitted to consult with counsel of its choice, and
shall not be liable for any action taken, suffered, or omitted by it in
accordance with the advice of such counsel; provided, however, that nothing in
this subsection (e), nor any action taken by the Escrow Agent, or suffered or
omitted by it in accordance with the advice of any counsel, shall relieve the
Escrow Agent from liability for any claims that are occasioned by its gross
negligence or willful misconduct;
(f) not be bound by any modification, amendment, termination,
cancellation, or rescission of this Agreement, unless the same shall be in
writing and signed by it;
(g) be entitled to refrain from taking any action other than
to keep all property held in escrow if it (i) shall be uncertain concerning its
duties or rights hereunder, or (ii) shall have received claims or demands from
any party, or (iii) shall have received instructions from the Purchasers and/or
the Company that, in the Escrow Agent's opinion, are in conflict with any of the
provisions of this Agreement, until it shall have received a final judgment by a
court of competent jurisdiction;
-18-
(h) have no liability for following the instructions herein or
expressly provided for herein, or the written instructions given jointly by the
Purchasers and/or the Company; and/or
(i) have the right, at any time, to resign hereunder by giving
written notice of its resignation to all other parties hereto at least three (3)
business days prior to the date specified for such resignation to take effect,
and upon the effective date of such resignation all cash and other payments and
all other property then held by the Escrow Agent hereunder shall be delivered by
it to such person as may be designated in writing by the other parties executing
this Agreement, whereupon the Escrow Agent's obligations hereunder shall cease
and terminate. If no such person has been designated by such date, all
obligations of the Escrow Agent hereunder shall, nevertheless, cease and
terminate. The Escrow Agent's sole responsibility thereafter shall be to keep
safely all property then held by it and to deliver the same to a person
designated by the other parties executing this Agreement or in accordance with
the directions of a final order or judgment of a court of competent
jurisdiction.
[REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK.]
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DYNAGEN, INC.
SECURITIES PURCHASE AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
DYNAGEN, INC.
By:______________________________________
Title: __________________________________
DYNAGEN, INC.
SECURITIES PURCHASE AGREEMENT
Counterpart Signature Page
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this Agreement and return the same to
the Company, whereupon, this Agreement shall become a binding Agreement among
us.
Very truly yours,
_______________________________________
(exact name of Purchaser)
By:____________________________________
Print Name: ___________________________
Title:_________________________________
Address: ______________________________
_______________________________________
_______________________________________
