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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between SALIVA DIAGNOSTIC
SYSTEMS, INC., a Delaware corporation, with headquarters located at ▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (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 accordance with and in reliance upon the exemption
from securities registration afforded, inter alia, by Rule 506 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 1998-A Convertible
Preferred Stock (the "Preferred Stock"), of the Company which will be
convertible into shares of Common Stock, $.01 par value per share of the
Company (the "Common Stock"), upon the terms and subject to the conditions of
the such Preferred Stock, 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; CERTAIN DEFINITIONS. (i) The undersigned
hereby agrees to purchase from the Company the Preferred Stock in the principal
amount set forth on the signature page of this Agreement (the "Initial
Preferred Stock"), and having the terms and conditions and being in the form
attached hereto as ANNEX I (the "Certificate of Designations"). The purchase
price for the Initial Preferred Stock shall be as set forth on the signature
page hereto and shall be payable in United States Dollars.
(i) As used herein, the term "Preferred Stock" means the
Initial Preferred Stock unless the context otherwise requires.
(ii) As used herein, the term "Securities" means the
Preferred Stock, the Warrants and the Common Stock issuable upon conversion of
the Preferred Stock or the exercise of the Warrants.
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(iii) As used herein, the term "First Closing Date" means
the date of the closing of the purchase and sale of the Initial Preferred
Stock, as provided herein.
(iv) As used herein the term "Additional Closing Date"
means the date of the closing of the purchase and sale of the Additional
Preferred Stock, as provided herein.
(v) As used herein, the term "Closing Date" means the
relevant First Closing Date or Additional Closing Date, as the case may be.
b. FORM OF PAYMENT. The Buyer shall pay the purchase
price for the Initial Preferred Stock by delivering immediately available good
funds in United States Dollars to the Company or in accordance with its written
instructions. No later than the relevant Closing Date, but in any event
promptly following payment by the Buyer of the purchase price of the relevant
Preferred Stock, the Company shall deliver the relevant Preferred Stock duly
executed on behalf of the Company to the Buyer.
c. METHOD OF PAYMENT. Payment of the purchase price for
the Initial Preferred Stock shall be made to or at the direction of the
Company. Not later than 1:00 p.m., New York time, on the date which is one (1)
New York Stock Exchange trading days after the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Company or
its counsel/Placement Agent by facsimile, the Buyer shall deposit the aggregate
purchase price for the Initial Preferred Stock, in currently 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 Buyer's right to sell the Common
Stock pursuant to the Registration Statement (as that term is defined in the
Registration Rights Agreement defined below), the Buyer is purchasing the
Preferred Stock and the Warrants and will be acquiring the shares of Common
Stock issuable upon conversion of the Preferred Stock (the "Converted Shares")
and the Warrant Shares for its own account for investment only and not with a
view towards the 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
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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 Securities.
c. All subsequent offers and sales of the Preferred
Stock and the shares of Common Stock representing the Converted Shares [and the
Warrant Shares] (such Common Stock sometimes referred to as the "Shares") by
the Buyer shall be made pursuant to registration of the Shares under the 1933
Act or pursuant to an exemption from registration.
d. The Buyer understands that the Preferred Stock are
being offered and sold 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, 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.
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. No representations or
warranties have been made to the Buyer by the Company, its officers or
directors, or any agent, employee or affiliate of any of them, except as set
forth herein. 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-KSB for the fiscal year ended December 31, 1996, (2)
Quarterly Report on Form 10-QSB for the fiscal quarters ended March 31, 1997,
June 30, 1997, and September 31, 1997, and (3) Forms 8-K, dated May 30, 1997
and June 5,1997, (the "Company's SEC Documents").
f. The Buyer understands that its investment in the
Securities involves a high degree of risk. In making the decision to invest in
the Securities, the Buyer has not relied on any representations or information
made by or from third parties.
g. The Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on
the fairness of an investment in, 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.
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i. Notwithstanding the provisions hereof to the
contrary, to the extent that the offering and sale of the Initial Preferred
Stock and the offering and sale of the Additional Preferred Stock (as defined
in Section 4 hereof) are deemed to be integrated for purposes of the rules or
regulations of the Nasdaq SmallCap Market, in the event that upon conversion of
the Preferred Stock the Company would be obligated to issue an aggregate amount
of shares of Common Stock which exceeds 19.99% of the number of shares of
Common Stock outstanding on the First Closing Date (such amount to be
proportionately adjusted from time to time in the even of stock dividends,
subdivisions, combinations, reclassifications, capital reorganizations and
similar events) (the "Exchange Cap") and such issuance would constitute a
breach of the Company's obligations under the rules or regulations of the
Nasdaq SmallCap Market, or any other principal securities exchange or market
upon which the Common Stock is or becomes traded, the Company may elect to
redeem at the Redemption Amount (defined below) only that amount of Preferred
Stock which, if converted, would result in the issuance of more than the
Exchange Cap.
The "Redemption Amount" with respect to any
redemption of a share of Preferred Stock means an amount equal to:
1,000 x M
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CP
where:
"CP" means the then current conversion price; and
"M" means the highest closing bid price of the
Company's Common Stock during the period beginning on the date of the
Redemption Notice and ending on the date of the redemption, as reported by The
Nasdaq Stock Market (or the principal securities exchange or trading market on
which the Common Stock is then traded).
j. The Buyer understands that the securities have not
been registered under the 1933 Act, and that it can not dispose of any or all
of the Securities until such shares are registered under the 1933 Act or
exemption from such registration are available.
k. Neither the Buyer nor any of its affiliates nor any
person acting on its or their behalf will at any time use Shares acquired upon
conversion of the Preferred Stock to settle/cover any put option, short
position or other similar instrument or position.
l. The Buyer is not a registered broker-dealer and is
not engaged in the business of a broker-dealer (whether or not registered).
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3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. CONCERNING THE PREFERRED STOCK AND THE SHARES. The
Preferred Stock has been duly authorized, and when issued, 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 of any stockholder of the Company, as such, to acquire the
Preferred Stock, the Warrants or the Shares.
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 has the requisite corporate power to own its
properties and to carry on its business as now being conducted. The Company is
duly qualified as a foreign corporation to do business and is in good standing
in each jurisdiction where the nature of the business conducted or property
owned by it makes such qualification necessary, other than those jurisdictions
in which the failure to so qualify would not have a material adverse effect on
the business, operations or condition (financial or otherwise) of the Company.
The Company has registered its Common Stock pursuant to Section 12 of the 1934
Act, and the Common Stock is currently listed and traded on The NASDAQ/SmallCap
Market. The Company has received notice from NASDAQ of its delisting as of
January 27, 1998 and makes no representations as to its ability to maintain its
NASDAQ 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 and to issue the Warrant Shares. The
Converted Shares and the Warrant Shares have been duly authorized and, when
issued upon conversion of, or as interest on, the Preferred Stock or upon
exercise of the Warrants, each in accordance with its respective terms, 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. SECURITIES PURCHASE AGREEMENT; REGISTRATION RIGHTS
AGREEMENT AND STOCK. This Agreement and the Registration Rights Agreement, the
form of which is attached hereto as ANNEX IV (the "Registration Rights
Agreement"), and the transactions contemplated thereby, 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 Warrants 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 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 authorized and, when executed and delivered on
behalf of the Company in accordance with this Agreement, will be a valid and
binding obligation of the Company in accordance with its terms, subject to
general principles of equity and to
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bankruptcy, insolvency, moratorium, or other similar laws affecting the
enforcement of creditors' rights generally.
e. NON-CONTRAVENTION. Except as provided in ANNEX V
hereto, 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 (i) the articles of
incorporation or by-laws of the Company, each as currently in effect, (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, including any listing agreement for the Common Stock except
as herein set forth, (iii) to its knowledge, any existing applicable law, rule,
or regulation or any applicable decree, judgment, or 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, or (iv) the Company's listing agreement for its Common Stock, except
such conflict, breach or default which would not have a material adverse effect
on the Company or on the transactions contemplated herein.
f. APPROVALS. Except as provided in ANNEX V hereto, 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 Company's SEC Documents
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 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 since January 1, 1997 timely filed all requisite forms,
reports and exhibits thereto with the SEC.
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, condition (financial or otherwise), or
results of operations of the Company, except as disclosed in ANNEX V or in the
Company's SEC Documents. Since January 1, 1997, except as provided in the
Company's SEC Documents, the Company has not (i) incurred or become subject to
any material liabilities (absolute or contingent) except liabilities incurred
in the ordinary course of business consistent with past practices; (ii)
discharged or satisfied any material lien or encumbrance or paid any material
obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business consistent with past
practices; (iii) declared or made any payment or distribution of cash or other
property to stockholders with respect to its capital stock, or purchased or
redeemed, or made any agreements to purchase or
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redeem, any shares of its capital stock; (iv) sold, assigned or transferred any
other tangible assets, or canceled any debts or claims, except in the ordinary
course of business consistent with past practices; (v) suffered any substantial
losses or waived any rights of material value, whether or not in the ordinary
course of business, or suffered the loss of any material amount of existing
business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii)
experienced any material problems with labor or management in connection with
the terms and conditions of their employment.
i. FULL DISCLOSURE. There is no fact known to the
Company (other than general economic conditions known to the public generally
or as disclosed in the Company's SEC Documents) that has not been disclosed in
writing to the Buyer that (i) would reasonably be expected to have a material
adverse effect on the business or financial condition of the Company or (ii)
would reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement or any of the
agreements contemplated hereby (collectively, including this Agreement, the
"Transaction Agreements").
j. ABSENCE OF LITIGATION. Except as set forth in ANNEX
V hereto, and in the Company's SEC Documents, 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, threatened against or
affecting the Company, wherein an unfavorable decision, ruling or finding would
have a material adverse effect on the properties, business or financial
condition, or results of operation of the Company and its subsidiaries taken as
a whole or the transactions contemplated by any of the Transaction Agreements
or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, any of
the Transaction Agreements.
k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in
ANNEX V hereto and Section 3(e) hereof, no Event of Default (or its equivalent
term), 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 (or its equivalent term) (as so defined in
such agreement), has occurred and is continuing, which would have a material
adverse effect on the Company's financial condition or results of operations.
l. PRIOR ISSUES. Except as set forth in ANNEX V, during
the twelve (12) months preceding the date hereof, the Company has not issued
any convertible securities. The presently outstanding unconverted principal
amount of each such issuance as of the date of this Agreement are set forth in
ANNEX V.
m. NO UNDISCLOSED LIABILITIES OR EVENTS. Except as set
forth in ANNEX V hereto, the Company has no liabilities or obligations other
than those disclosed in the Company's SEC Documents or those incurred in the
ordinary course of the Company's business since January 1, 1997, and which
individually or in the aggregate, do not or would not have a material adverse
effect on the properties, business, condition (financial or otherwise), or
results of
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operations of the Company. No event or circumstances has occurred or exists
with respect to the Company or its properties, business, condition (financial
or otherwise), or results of operations, which, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed.
n. NO DEFAULT. The Company is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any material 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.
o. REGULATION D. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since September 1, 1996, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under Rule
506 of Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
p. DILUTION. The number of Shares issuable upon
conversion of the Preferred Stock may increase substantially in certain
circumstances, including, but not necessarily limited to, the circumstance
wherein the trading price of the Common Stock declines prior to the conversion
of the Preferred Stock. The Company's executive officers and directors have
studied and fully understand the nature of the Securities being sold hereby and
recognize that they have a potential dilutive effect. The board of directors
of the Company has concluded, in its good faith business judgment, that such
issuance is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Shares upon conversion of the
Preferred Stock and upon exercise of the Warrants is binding upon the Company
and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Buyer acknowledges that
(1) the Preferred Stock have not been and are 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 not be transferred unless (A) subsequently registered thereunder
or (B) the Buyer shall have delivered to the Company and opinion of counsel,
reasonably satisfactory in form, scope and substance to the Company, to the
effect that the Shares to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; (2) any sale of the Shares
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 Shares 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
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and regulations of the SEC thereunder; and (3) neither the Company nor any
other person is under any obligation to register the Shares (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 the Warrants, and certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
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.
Within one day after the Shares have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the Company shall cause to
be delivered to its transfer agent an opinion to the effect that the Shares may
be transferred without such restrictive legend upon presentation of a valid
prospectus and share certificate.
c. REGISTRATION RIGHTS AGREEMENT. The parties hereto
agree to enter into the Registration Rights Agreement on or before the First
Closing Date.
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 applicable to the Company,
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 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination. The Company will take all reasonable action
under its control to continue the listing and trading of its Common Stock on
The NASDAQ SmallCap Market and will comply in all material respects with the
Company's reporting, filing and other obligations under the by-laws or rules of
the National Association of Securities Dealers, Inc. ("NASD") or The NASDAQ
SmallCap Market.
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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, finder's fees and escrow 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. 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 one hundred fifty percent (150%) of the
number of shares of Common Stock issuable (i) at conversion as may be required
to satisfy the conversion rights of the Buyer pursuant to the terms and
conditions of the Preferred Stock and (ii) upon exercise as may be required to
satisfy the exercise rights of the Buyer pursuant to the terms and conditions
of the Warrants
h. WARRANTS. The Company agrees to issue to the Buyer
on the First Closing Date transferable, divisible warrants (the "Warrants") for
the purchase of 1,000,000 shares of Common Stock. The Warrants shall bear an
exercise price equal to the Market Price of the Common Stock for the five (5)
trading days ending on the day before the First Closing Date. The Warrants
shall be exercisable as follows: (i) Warrants for the purchase of 750,000
shares of Common Stock will be exercisable immediately and (ii) Warrants for
the remaining 250,000 shares will be exercisable commencing ten (10) calendar
days after the Additional Closing Date. The Warrants will expire on the fifth
anniversary of the First Closing Date. The Warrants shall be in the form
annexed hereto as ANNEX VI, together with registration rights as provided in
the Registration Rights Agreement.
i. HEDGING TRANSACTIONS. The Company understands that
the Buyer may be a so-called "hedge" fund, and the Company hereby expressly
agrees that the Buyer shall not in any way be prohibited or restricted from any
purchases or sales of any securities or other instruments of, or related to,
the Company or any of its securities, including, but not necessarily limited
to, puts, calls, futures contracts, short sales and hedging and arbitrage
transactions. The Buyer acknowledges that such purchases, sales and other
transactions may be subject to various federal and state securities laws and
agrees to comply with all such applicable securities laws.
j. Notwithstanding the provisions hereof or of the
Preferred Stock, in no event (except (i) with respect to an automatic
conversion, if any, of a Preferred Stock as provided in the Preferred Stock and
(ii) if the Company is in default under any Preferred Stock or any of the
Transaction Agreements, as defined below) shall the holder be entitled to
convert any Preferred Stock to the extent that, after such conversion, 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 4.99% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately
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preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), except as otherwise provided in clause (1) of such proviso.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the
aggregate purchase price for the Initial 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, 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 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 and to the extent provided in this 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 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 Converted Shares or the Warrant Shares, as the case may be,
promptly instruct the Company's transfer agent to issue one or more
certificates for Common Stock without legend in such name and in such
denominations as specified by the Buyer.
b. (i) The Company will permit the Buyer to exercise
its right to convert the Preferred Stock by telecopying an executed and
completed Notice of Conversion to the Company and delivering within two (2)
business days thereafter, the original Notice of Conversion and the Preferred
Stock being converted to the Company by express courier, with a copy to the
transfer agent.
(ii) The term "Conversion Date" means, with respect
to any conversion elected by the holder of the Preferred Stock, the date
specified in the Notice of Conversion, provided the copy of the Notice of
Conversion is telecopied to or otherwise delivered to the Company in accordance
with the provisions hereof so that is received by the Company on or before such
specified date, and the original certificate representing the Preferred Stock
is received within two (2) business days. The Conversion Date for the
mandatory conversion at maturity shall be the Maturity Date of the Preferred
Stock.
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(iii) The Company will request that the transfer
agent transmit the certificates representing the Converted Shares issuable upon
conversion of any Preferred Stock (together with Preferred Stock not being so
converted) to the Buyer via express courier, by electronic transfer or
otherwise, within three (3) business days after receipt by the Company of the
original Notice of Conversion and the Preferred Stock being converted (the
"Delivery Date").
d. 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 that if same is due to any fault of the Company, to pay late payments to
the Buyer for late issuances of Shares upon Conversion in accordance with the
following schedule (where "No. Business Days Late" is defined as the number of
business days beyond five (5) business days from Delivery Date):
Late Payment For Each $10,000
of Preferred Stock Principal
No. Business Days Late 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 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 the Buyer's right to
pursue actual damages for the Company's failure to direct the transfer agent to
issue and deliver the Common Stock to the Buyer. Furthermore, in addition to
any other remedies which may be available to the Buyer, in the event that the
transfer agent fails to effect delivery of such shares of Common Stock within
five (5) business days after the Delivery Date, and such failure is due to any
fault of the Company, 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.
e. If, by the relevant Delivery Date, the transfer agent
fails to cause to be delivered the Shares to be issued upon conversion of a
Preferred Stock and such failure is due to any fault of the Company, and after
such Delivery Date, the holder of the Preferred Stock being
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converted (a "Converting Holder") purchases, in an open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Converting Holder
(the "Sold Shares"), which delivery such Converting Holder anticipated to make
using the Shares to be issued upon such conversion (a "Buy-In"), the Company
shall pay to the Converting Holder, in addition to all other amounts
contemplated in other provisions of the Transaction Agreements, and not in lieu
thereof, the Buy-In Adjustment Amount (as defined below). The "Buy-In
Adjustment Amount" is the amount equal to the excess, if any, of (x) the
Converting Holder's total purchase price (including brokerage commissions, if
any) for the Covering Shares over (y) the net proceeds (after brokerage
commissions, if any) received by the Converting Holder from the sale of the
Sold Shares. The Company shall pay the Buy-In Adjustment Amount to the Company
in immediately available funds immediately upon demand by the Converting
Holder. By way of illustration and not in limitation of the foregoing, if the
Converting Holder purchases shares of Common Stock having a total purchase
price (including brokerage commissions) of $11,000 to cover a Buy-In with
respect to shares of Common Stock it sold for net proceeds of $10,000, the
Buy-In Adjustment Amount which Company will be required to pay to the
Converting Holder will be $1,000.
f. The Company will authorize its transfer agent to give
public information relating to the Company directly to the Buyer or the Buyer's
representatives upon the request of the Buyer or any such representative. The
Company will provide the Buyer with a copy of the authorization so given to the
transfer agent.
6. DELIVERY INSTRUCTIONS.
The Initial Preferred Stock or the Additional Preferred Stock,
as the case may be, shall be delivered by the Company to the Buyer pursuant to
Section 1(b) hereof, no later than on the relevant Closing Date.
7. CLOSING DATE.
(i) The First Closing Date for the issuance and sale of
the Initial Preferred Stock shall occur on the date which is the first Nasdaq
trading day after the fulfillment or waiver of all closing conditions pursuant
to Sections 8 and 9 hereof or such other date and time as is mutually agreed
upon by the Company and the Buyer. The date of the Additional Closing Date
shall be the date specified by the Buyer on at least five (5) business days'
advance notice to the Company; provided, however, that it shall be a condition
of the Additional Closing Date that each of the conditions contemplated by
Sections 8 and 9 hereof shall have been satisfied or waived on or before such
date.
(ii) Each closing of the purchase and issuance of
Preferred Stock shall occur on the relevant Closing Date, and shall take place
no later than 12:00 Noon, New York time, on such day or such other time as is
mutually agreed upon by the Company and the Buyer.
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8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Preferred Stock to the Buyer pursuant to this Agreement on the relevant
Closing Date is conditioned upon:
a. The execution and delivery of this Agreement by the
Buyer;
b. Delivery by the Buyer of good funds as payment in
full of an amount equal to the purchase price for the relevant Preferred Stock
in accordance with this Agreement;
c. The accuracy on such Closing Date of the
representations and warranties of the Buyer contained in this Agreement, each
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; and
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 relevant Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Company;
b. Delivery by the Company of the relevant Preferred
Stock in accordance with this Agreement;
c. The accuracy in all material respects on such Closing
Date of the representations and warranties of the Company contained in this
Agreement. each as if made on such date, and the performance by the Company on
or before such date of all covenants and agreements of the Company required to
be performed on or before such date;
d. On such Closing Date, the Registration Rights
Agreement shall be in full force and effect and the Company shall not be in
default thereunder; and
e. On such Closing Date, the Buyer shall have received
an opinion of counsel for the Company, dated such Closing Date, in form, scope
and substance reasonably satisfactory to the Buyer, substantially to the effect
set forth in ANNEX III attached hereto.
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10. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Delaware for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. 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.
b. A facsimile transmission of this signed Agreement
shall be legal and binding on all parties hereto.
c. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original.
d. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
e. 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.
f. This Agreement may be amended only by an instrument
in writing signed by both parties hereto.
g. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
11. NOTICES. Unless otherwise specified herein, any
notice required or permitted hereunder shall be given in writing and shall be
deemed effectively given on the earliest of
(i) the date delivered, if delivered by personal delivery as
against written receipt therefor or by confirmed facsimile
transmission,
(ii) the seventh business day after deposit, postage prepaid,
in the United States Postal Service by registered or certified
mail, or
(iii) the third business day after mailing by international
express courier, with delivery costs and fees prepaid,
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in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: SALIVA DIAGNOSTIC SYSTEMS, INC.
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
ATTN: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
BUYER: At the address set forth on the signature page of
this Agreement.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
Company's and the Buyer's representations and warranties herein shall survive
the execution and delivery of this Agreement and the delivery of the Preferred
Stock and the Purchase Price for a period of one (1) year from the Initial
Closing Date or the Additional Closing Date, as applicable, and shall inure to
the benefit of the Buyer and the Company and their respective successors and
assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
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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.
AGGREGATE PURCHASE PRICE OF INITIAL PREFERRED STOCK: $1,500,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 26th day of January, 1998.
▇▇▇▇▇▇▇▇▇ ▇▇▇. ▇▇ BISCOUNT OVERSEAS LTD.
---------------------------------------- ------------------------------------------------
Address Printed Name of Subscriber
▇▇-▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
----------------------------------------
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------------
Telecopier No. ▇▇-▇▇▇▇▇▇▇ (Signature of Authorized Person)
-------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
---------------------------------------------------
Printed Name and Title
----------------------------------------
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its
behalf.
SALIVA DIAGNOSTIC SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------------
Title: President and Chief Executive Officer
------------------------------------------
Date: January 26, 1998
------------------------------------------
18
ANNEX I (A) CERTIFICATE OF DESIGNATION FOR INITIAL
PREFERRED STOCK
ANNEX II [INTENTIONALLY OMITTED]
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE MATERIALS
ANNEX VI FORM OF WARRANT