EXHIBIT 10.13
CONVERTIBLE SECURITIES SUBSCRIPTION AGREEMENT
OF SALIVA DIAGNOSTIC SYSTEMS, INC.
THIS CONVERTIBLE SECURITIES SUBSCRIPTION AGREEMENT (the Agreement") is
made and entered into as of this 11th day of March, 1997 by and between SALIVA
DIAGNOSTIC SYSTEMS, INC., a Delaware corporation (the "Company") and The Tail
Wind Fund Ltd. (the "Investor") providing for the purchase and sale of certain
debentures having an aggregate principal amount of One Million Five Hundred
Thousand Dollars ($1,500,000) (the "Debentures"), convertible into shares of
common stock, par value $.01 per share (the "Shares"), of the Company. The
Company and the Investor (collectively, the "Parties") hereby represent,
warrant, covenant and agree as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(i) Investor hereby subscribes for the Debentures having a
principal amount of One Million Five Hundred Thousand Dollars
($1,500,000). The Debentures shall be convertible into Shares in
accordance with the terms set forth in the form of Debenture attached
as Exhibit A to this Agreement.
(ii) Investor shall pay the aforesaid principal amount as the
purchase price for the Debentures subscribed for by it by delivering
same-day funds in United States dollars against counter-delivery of
Investors Debentures by the Company, each in accordance with the terms
of the Escrow Agreement of even date herewith and substantially in the
form attached as Exhibit B to this Agreement. The closing of the
purchase and sale of the Debentures (the "Closing") shall take place
promptly following the deposit into escrow of the Debentures subscribed
for and the purchase price therefor and the satisfaction of all of the
conditions set forth in Section 5 hereof. The Parties anticipate that
the date of the Closing (the "Closing Date") shall be March 11, 1997.
2. INVESTOR'S REPRESENTATIONS AND COVENANTS.
Investor represents, warrants and covenants to the Company as
follows:
(i) This Agreement has been duly authorized, validly executed
and delivered on behalf of Investor and is a valid and binding
agreement of Investor in accordance with its terms, subject to general
principles of equity and of bankruptcy or other laws affecting the
enforcement of creditors' rights;
(ii) Investor is purchasing the Debentures for its own account
for investment purposes and not with a view towards distribution.
Investor understands and agrees that it must bear the economic risks of
its investment for an indefinite period of time. Investor has received
and carefully reviewed copies of the Public Documents (as defined
below).
Investor understands that the offer and sale of the Debentures are
being made only by means of this Agreement. No representations or
warranties have been made to Investor by the Company, the officers or
directors of the Company, or any agent, employee or affiliate of any of
them except as set forth herein. Investor is aware that the purchase of
the Debentures involves a high degree of risk and that it may sustain,
and has the financial ability to sustain, the loss of its entire
investment. Investor has had the opportunity to ask questions of, and
receive answers satisfactory to it from, the Company's management
regarding the Company. Investor understands that no federal or state
governmental authority has made any finding or determination relating
to the fairness of an investment in the Debentures and that no federal
or state governmental authority has recommended or endorsed, or will
recommend or endorse, the investment herein. Investor, in making the
decision to purchase the Debentures subscribed for, has relied upon
independent investigations made by it and has not relied on any
information or representations made by third parties. Investor has
significant assets, and upon consummation of the purchase of the
Debentures, will continue to have significant assets exclusive of the
Debentures. Investor has not been organized for the purpose of
acquiring the Debentures;
(iii) Investor is an "accredited investor" within the meaning
of Rule 501, promulgated under the Securities Act of 1933, as amended
(the "Securities Act");
(iv) Investor understands that the Debentures are being
offered and sold to it in reliance on specific provisions of federal
and state securities laws and that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of Investor set forth herein in
order to determine the applicability of such provisions; and
(v) Investor understands that neither the Debentures nor the
Shares have been registered under the Securities Act and therefore it
cannot dispose of any or all of the Debentures or the Shares until such
Debentures or Shares are subsequently registered, as the case may be,
under the Securities Act or exemptions from such registration are
available. Investor acknowledges that, until an effective registration
statement relating to the Shares is effective, a legend substantially
as follows will be placed on the certificates representing the
Debentures and the Shares:
THE SECURITIES REPRESENTED HEREBY ARE RESTRICTED SECURITIES WITHIN THE MEANING
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH SUCH ACT AND THE
RULES AND REGULATIONS THEREUNDER AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS. THE ISSUER OF THESE SECURITIES WILL NOT RECOGNIZE A TRANSFER OF
SUCH SECURITIES EXCEPT UPON RECEIPT OF EVIDENCE SATISFACTORY TO THE ISSUER THAT
THE REGISTRATION
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PROVISIONS OF SUCH ACT HAVE BEEN COMPLIED WITH OR THAT SUCH REGISTRATION IS NOT
REQUIRED AND THAT SUCH TRANSFER WILL NOT VIOLATE ANY APPLICABLE STATE SECURITIES
LAWS.
3. THE COMPANY'S REPRESENTATIONS AND COVENANTS.
The Company represents, warrants and covenants to the Investor as
follows:
(i) The Company has been duly incorporated and is validly
existing and in good standing under the laws of the state of Delaware,
with full corporate power and authority to own, lease and operate its
properties and to conduct its business as currently conducted, and is
duly registered and qualified to conduct its business and is in good
standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does
not have a material adverse effect on the condition (financial or
other), business, properties, net worth or operations of the Company.
(ii) The Company has registered its common stock pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), is in full compliance with all reporting requirements
of the Exchange Act, and the Company's common stock is quoted on the
Nasdaq SmallCap Market (trading symbol SALV). The Company has been
subject to the requirements of Section 12 of the Exchange Act for at
least 12 months, and except as disclosed on Schedule 3(ii) hereto, has
filed in a timely manner all reports required to be filed during the
preceding 12 months;
(iii) The Company has furnished Investor with copies of the
Company's most recent Annual Report on Form 10-K filed with the U.S.
Securities and Exchange Commission ("SEC"), all Forms 10-Q and 8-K
filed thereafter and all other filings required under the Exchange Act
made with the SEC after the filing of the most recent Form 10-K
(collectively, the "Public Documents"). The Public Documents at the
time of their filing did not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which
they were made, not misleading;
(iv) The authorized capital stock of the Company solely
consists of 33,000,000 shares of common stock, par value $.01 per
share. The Company currently has 22,040,785 shares of common stock
issued and outstanding;
(v) The Debentures shall be duly authorized, validly issued
and enforceable in accordance with their respective terms, and the
Shares, when issued and delivered upon conversion thereof, will be duly
and validly authorized and issued, fully paid and nonassessable, free
from all encumbrances and restrictions other than restrictions on
transfer imposed by applicable securities laws and/or this Agreement,
and will not subject
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the holders thereof to personal liability by reason of being such
holders. The Shares have been duly reserved for issuance upon
conversion of the Debentures. There are no preemptive rights of any
shareholder of the Company with respect to the Debentures or the
Shares;
(vi) This Agreement has been duly authorized, validly executed
and delivered on behalf of the Company and is a valid and binding
agreement of the Company enforceable in accordance with its terms,
subject to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally, and the
Company has full corporate power and authority to execute and deliver
this Agreement and the other agreements and documents contemplated
hereby and to perform its obligations hereunder and thereunder;
(vii) The Company is not and, upon the execution and delivery
of this Agreement, the issuance of the Debentures, the issuance of
Shares upon conversion thereof, and the transactions contemplated by
this Agreement, will not be in conflict with or in breach of any of the
terms or provisions of, or in default under, the Company's Articles of
Incorporation or Bylaws, or 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, any law,
statute, rule, regulation, or any existing applicable decree, judgment
or order of any court, federal or state regulatory body, administrative
agency or other governmental body having jurisdiction over the Company
or any of its properties, or assets or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries pursuant to the terms
of any agreement or instrument to which any of them is a party or by
which any of them may be bound or to which any of the property or
assets of any of them is subject;
(viii) No authorization, approval, filing with or consent of
any governmental body is required for the issuance and sale of the
Debentures, or the Shares upon conversion thereof, as contemplated by
this Agreement;
(ix) [Intentionally omitted];
(x) Subject in part to the truth and accuracy of the
Investor's representations and warranties in Section 2, the offer, sale
and issuance of the Debentures are exempt from the registration
requirements of the Securities Act and applicable state securities
laws;
(xi) Except as disclosed on Schedule 3(xi) hereto, there is no
action, suit or proceeding before or by any court or governmental
agency or body, domestic or foreign, now pending or, to the knowledge
of the Company, threatened, against or affecting the Company, or any of
its properties, which could result in any material adverse change in
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the condition (financial or otherwise) or in the earnings, revenues,
business affairs or business prospects of the Company, or which could
materially and adversely affect its properties or assets;
(xii) To the best knowledge of the Company, the Company is not
in default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture, mortgage,
deed of trust or other instrument or agreement to which it is a party
or by which it or its property is bound;
(xiii) To the best knowledge of the Company, there is no fact
known to the Company (other than general economic conditions known to
the public generally) that has not been disclosed in writing to the
Investor that (i) could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise) or in the
earnings, revenues, business affairs, business prospects, properties or
assets of the Company, or (ii) could reasonably be expected to
materially and adversely affect the ability of the Company to perform
its obligations pursuant to this Agreement;
(xiv) The Company shall issue the Debentures in the name of
Investor in the amount specified in Section 1(i) above in denominations
of $100,000. Upon conversion of the Debentures, the Company will issue
one or more certificates representing the Shares in the name of
Investor, with a legend substantially in the form specified by Section
2(v) above, and in such denominations to be specified by Investor prior
to conversion;
(xv) The Company will comply with all applicable securities
laws and regulations with respect to the sale and issuance of the
Debentures (and the Shares into which they are convertible) to the
Investor, including but not limited to the timely filing of all reports
required to be filed in connection therewith with the SEC or Nasdaq or
any other regulatory authority, and shall remain in full compliance
with all of the requirements (including reporting) of the Exchange Act;
(xvi) The Company shall: (i) maintain the inclusion of the
Shares on the Nasdaq Stock Market; and (ii) reserve immediately prior
to the Closing and shall continue to reserve from its authorized common
stock a sufficient number of shares of common stock to permit
conversion in full of all outstanding Debentures in accordance with
their respective terms;
(xvii) Until such time as Investor has converted one hundred
percent (100%) of the Debentures into Shares, the Company shall not
redeem or repurchase more than a de minimis number of shares of its
capital stock; and
(xviii) The Company agrees that it will not issue a press
release to the public containing Investor's name or other identifying
information without the Investor's written
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consent except as may be necessary in connection with the Company's
fulfilling its obligations under the Registration Rights Agreement (as
defined in Section 4). Investor acknowledges that this Agreement and
the related documents may be filed with the SEC.
4. REGISTRATION.
Within 30 days following the Closing, the Company shall, at the
Company's expense, file a registration statement to effect the registration of
all of the Shares issuable upon conversion of the Debentures held by Investor
under the Securities Act, and relevant Blue Sky laws. Such registration shall be
effected in accordance with the terms of the Registration Rights Agreement
attached hereto as Exhibit C (the "Registration Rights Agreement"). In the event
the registration of the Shares issuable upon conversion of the Debentures is not
declared effective by the SEC within 90 days of the Closing Date (the
"Registration Date"), then such failure shall constitute a breach of the
Debentures entitling Investor to be paid by the Company such Investor's pro rata
portion of the "Damage Amount," as liquidated damages and not as a penalty. The
Damage Amount shall mean $1,000 for each $1 million of Debentures for each
calendar day following the Registration Date by which the registration of the
Shares is not effective with the SEC. The Damage Amount shall be payable in cash
as of the end of each calendar week following the Registration Date, and shall
be payable whether or not an Event of Default (as defined in the Debenture) has
occurred.
5. CONDITIONS TO CLOSING.
(i) The Company shall furnish to the Investors a legal opinion
addressed to the Investors and dated as of the Closing Date from Xxxxx
Xxxx LLP substantially in the form of Exhibit D attached hereto.
(ii) The Company shall have delivered a certificate executed
by its President, dated the Closing Date, and certifying that all of
the Company's representations and warranties made in this Agreement are
true and correct as of the date of this Agreement and as of the Closing
Date.
6. CERTAIN AGREEMENTS.
The Company covenants and agrees that during the seventy-five days (75)
days immediately following the Closing Date, neither the Company, nor any
affiliate of the Company, nor any person acting on behalf of the Company, shall,
without the prior written consent of the Investor, agree to enter, enter into,
or consummate any subsequent equity securities offering (including any debt
offering convertible into equity securities of the Company) except for: (i) the
issuance of stock or stock options, the purpose of which is not to raise equity
capital; (ii) the issuance of stock options pursuant to the Company's existing
stock option plans and the issuance of Common Stock pursuant to presently
outstanding stock options and convertible securities; (iii) the firmly
underwritten public offering of its equity or debt securities; (iv) the issuance
of equity
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securities in connection with any strategic partnership or joint venture; and
(v) the issuance of shares of its capital stock in consideration in whole or in
part for one or more acquisitions made by the Company. For purposes of this
Section 6, the Investor (whose management company is advised by European
American Securities) and European American Securities clients shall be
considered as one entity.
7. MISCELLANEOUS.
(i) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware.
(ii) This Agreement may be executed by facsimile signature and
in counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Facsimile
signatures of this Agreement shall be binding on all parties hereto.
(iii) Each of the Parties agrees to pay its own expenses
incident to this Agreement and the performance of its obligations
hereunder, including, but not limited to, the fees and expenses of each
Party's legal counsel.
(iv) All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, overnight courier, or
telecopied, initially to the address set forth below, and thereafter at
such other address, notice of which is given in accordance with the
provisions of this Section 7.
if to the Company:
Saliva Diagnostic Systems, Inc.
00000 XX 00xx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Chief Executive Officer
Telephone: 000-000-0000
Telecopier: 000-000-0000
if to the Investor, at such address as is listed for
such Investor on the signature page hereto.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; three (3)
business days after being deposited in the mail, postage prepaid, if
mailed; the next business day after being deposited with an overnight
courier, if deposited with an overnight courier service; when receipt
is acknowledged, if telecopied.
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(v) This Agreement constitutes the entire agreement of the
Parties with respect to the subject matter hereof and supersedes all
prior oral or written proposals or agreements relating thereto. This
Agreement may not be amended or any provision hereof waived, in whole
or in part, except by a written amendment signed by both of the
Parties.
(vi) Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration
in accordance with the commercial rules of arbitration of the American
Arbitration Association (the "AAA") and this subparagraph (vi). Both
parties shall endeavor to select by mutual agreement an arbitrator
qualified and approved by the AAA. If the parties shall fail to agree
on an arbitrator, then the AAA shall be requested to submit a list of
five qualified and approved arbitrators. The arbitrator shall then be
selected by each party alternately striking one name at a time from the
list until only one name remains. That person shall be the arbitrator
and it shall be his or her duty promptly to issue a written decision
confined to the issues presented, which shall be final and binding on
all parties to the dispute; provided, however, that the arbitrator
shall have no authority to alter the terms of this Agreement. The
arbitration shall take place in New York, New York. Judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. In any such arbitration, the prevailing party
shall be entitled to recover all reasonable costs, including reasonable
attorneys' fees, incurred in pursuing or defending any claim in
arbitration.
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IN WITNESS WHEREOF, this Agreement was duly executed on the date first
written above.
Official Signatory of Company:
SALIVA DIAGNOSTIC SYSTEMS, INC.
By: /S/ XXXXXXX XXXXXXXXX
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Xxxxxxx XxXxxxxxx, President
Print Name and Title
INVESTOR:
ON BEHALF OF BRIGHTON HOLDINGS LTD. AS
SOLE DIRECTOR
By: /s/ XXXXX X. XXXXXXXXX
/s/ XXXXXXX X. XXXXXXXX
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Name: Xxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxx
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Title: Directors
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Address:
--------------------------------
--------------------------------
Telephone:
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Fax:
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