EXHIBIT 4.2
COMMON STOCK SUBSCRIPTION AGREEMENT
OF SALIVA DIAGNOSTIC SYSTEMS, INC.
THIS COMMON STOCK SUBSCRIPTION AGREEMENT (the "Agreement") is made and
entered into as of this 30th day of June, 1997 by and between SALIVA DIAGNOSTIC
SYSTEMS, INC., a Delaware corporation (the "Company"), and the individuals and
entities listed on Schedule A to this Agreement (individually, an "Investor" and
collectively, the "Investors") providing for the purchase and sale of shares of
common stock, par value $.01 per share (the "Shares"), of the Company. Each of
the parties represents, warrants, covenants and agrees as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(i) Investor hereby subscribes for the number of Shares as set
forth on Schedule A attached hereto at a purchase price per share of $0.72656.
(ii) Investor shall pay the purchase price for the Shares
subscribed for by it by delivering same-day funds in United States dollars
against counter-delivery of certificates (the "Certificates") representing the
Shares 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 A to
this Agreement. The closing of the purchase and sale of the Shares (the
"Closing") shall take place promptly following the deposit into escrow of the
Shares 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 June 30, 1997.
2. INVESTOR'S REPRESENTATIONS AND COVENENANTS
Each Investor represents, warrants and covenants, severally
and not jointly, 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 creditor's rights;
(ii) Investor is purchasing the Shares 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), the press release issued by
the Company on June 25, 1997 and the Supplemental Disclosure Memorandum dated
June 30, 1997. Investor understands that the offer and sale of the Shares 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 Shares 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 Shares 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
Shares subscribed for, has relied upon independent investigations
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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 Shares, will continue to have significant assets exclusive of
the Shares. Investor has not been organized for the purpose of acquiring the
Shares;
(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 Shares 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 the Shares have not been
registered under the Securities Act and therefore it cannot dispose of any or
all of the Shares until such Shares are subsequently registered 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 or until the Shares are eligible for sale pursuant to Rule
144(k), promulgated under the Securities Act, a legend substantially as follows
will be placed on the Certificates representing 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 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.
(a) The Company represents and warrants to each of the Investors
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;
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(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 and the registration statement on Form SB-2 filed
under the Securities Act and declared effective June 13, 1997 (collectively, the
"Public Documents"), the press release issued by the Company on June 25, 1997
and the Supplemental Disclosure Memorandum dated June 30, 1997. 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 22,925,133 shares of common stock issued and outstanding.
(v) Upon issuance and delivery and payment therefor in
accordance with the terms hereof, the Shares shall be duly authorized, validly
issued, fully paid and nonassessable, and the Additional Shares (as defined
below), if and when issued and delivered, will be duly authorized, validly
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 the holders thereof
to personal liability by reason of being such holders. The Additional Shares
have been duly reserved for issuance. There are no preemptive rights of any
stockholder of the Company with respect to the Shares of the Additional 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 Shares, the issuance of the Additional
Shares, and the transactions contemplated by this Agreement, will not be in
conflict with or in breach of any of the terms of provisions of, or in default
under, the Company's Certificate 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 Shares or the
Additional Shares, as contemplated by this Agreement;
(ix) [Intentionally omitted];
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(x) Subject in part to the truth and accuracy of the
Investors' representations and warranties in Section 2, the offer, sale and
issuance of the Shares 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 be reasonably expected to result in any material adverse change in the
condition (financial or otherwise) or in the earnings, revenues, business
affairs or business prospects of the Company, or which could be reasonably
expected to 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; and
(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.
(b) The Company covenants to each of the Investors as follows:
(i) The Company will comply with all applicable securities
laws and regulations with respect to the sale and issuance of the Shares and
Additional Shares 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;
(ii) The Company shall: (i) use all reasonable efforts to
maintain the inclusion of the Shares and Additional 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 the issuance of the Additional Shares; and
(iii) The Company agrees that it will not issue a press
release to the public containing an Investor's name or other identifying
information without the Investor's prior written 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 and Additional Shares held by or to be issued to the 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 B
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(the "Registration Rights Agreement"). In the event the registration of the
Shares and Additional Shares 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 this Agreement entitling each 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 for each $1,000 of
Shares purchased hereunder for each calendar day following the Registration Date
by which the registration of the Shares (and the Additional 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.
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 C 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.
[INTENTIONALLY OMITTED.]
7. RESTRICTIONS ON SALES OF SHARES.
The Investors shall not sell any of the Shares purchased hereunder
during the 90-day period immediately following the Closing Date; however, each
Investor may sell, at its option, up to (i) Thirty-Three and One-Third percent
(33 A%) of the number of Shares purchased hereunder at any time from and after
the ninetieth (90th) day following the Closing Date, (ii) an aggregate of
Sixty-Six and Two-Thirds percent (66 B%) of the Shares purchased hereunder at
any time from and after the one hundred twentieth (120th) day following the
Closing Date, and (iii) One Hundred percent (100%) of the Shares purchased
hereunder at any time from and after the one hundred fiftieth (150th) day
following the Closing Date.
8. ISSUANCE OF ADDITIONAL SHARES BASED UPON PRICE RESET.
(i) In the event that the Current Market Price (as defined below) as of
any single five-day period designated by the Investor (no more than one time) in
a written notice to the Company during the 150-day period succeeding the date of
effectiveness of a Registration Statement covering resales of the Shares ("Reset
Market Price") is less than 133.33% of the purchase price per share (the
"Purchase Price Per Share") for the Shares paid by the Investor hereunder, then
the Company shall issue to the Investor giving such notice additional shares of
Common Stock (the "Additional Shares") determined as follows: the difference
between (I) the number of Shares which the Investor would have acquired for its
aggregate investment hereunder if calculated at a purchase price equal to 75% of
the Reset Market Price, and (II) the number of Shares purchased hereunder by
such Investor. By way of illustration, assuming an aggregate purchase price
hereunder of $300,000 (and thus the acquisition of a total of 412,905 Shares),
if the Reset Market Price is $.9375, the number of Additional Shares would equal
$300,000 divided by the
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product of $.9375 and .75 (i.e., $.703125), or 426,667, less 412,905, resulting
in a total of 13,762 Additional Shares.
(ii) The Company shall not issue any fractional shares of Common Stock
as a result of this Section 8. Instead, the Company shall pay in lieu of any
fractional shares the cash value thereof at the then Current Market Price of the
Common Stock as determined under subparagraph (v) below.
(iii) The Company shall pay any documentary, stamp or similar issue or
transfer tax due on the issue of Additional Shares. However, the Holder shall
pay any such tax which is due because such shares are issued in a name other
than its name.
(iv) The Company shall reserve out of its authorized but unissued
Common Stock enough shares of Common Stock to permit the issuance of all of the
Additional Shares required to be issued hereunder. All Additional Shares shall
be, when issued in accordance herewith, duly authorized, validly issued,
fully-paid and nonassessable.
(v) As used herein, the "Current Market Price" per share of Common
Stock on any date is the average of the quoted bid prices of the Common Stock
for the five (5) consecutive trading days ending on the trading day immediately
prior to the date in question. As used in this subparagraph (v), the term
"quoted bid price" shall mean the closing bid price thereof on any such trading
date, as reported by the Nasdaq Stock Market.
9. 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 9.
if to the Company:
Saliva Diagnostic Systems, Inc.
00000 XX 00xx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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if to the Investor, at such address as is listed for such
Investor on the signature page hereto.
All such notice 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.
(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.
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 X. XxXxxxxxx
-------------------------------------
President and Chief Executive Officer
-----------------------------------------
Print Name and Title
INVESTOR:
By: /s/ The Tail Wind Fund, Ltd.
-------------------------------------
Name: /s/ Xxxxxxxx Xxxxxxxxx
Title: Authorized Signatory
Name: /s/Xxxxxx X. Xxxxx
Title: Director
Address: MessPierson (Bahamas) Ltd.
Attn: Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx Xxxxx
000 Xxxx Xxx Xx.
PO Box SS 5539
Nassau, Bahamas
Telephone:
Fax:
Amount Invested: $300,000
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SCHEDULE A
SCHEDULE OF INVESTORS
--------------------------------------------------------------------------------
NAME AND ADDRESS AMOUNT INVESTED NUMBER OF SHARES
--------------------------------------------------------------------------------
The Tail Wind Fund Ltd. $300,000 412,905
MessPierson (Bahamas) Ltd.
Attn: Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx Xxxxx
000 Xxxx Xxx Xx.
PO Box SS 5539
Nassau, Bahamas
--------------------------------------------------------------------------------
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SCHEDULE 3(II)
LATE FILING PURSUANT TO SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
None
SCHEDULE 3(XI)
PENDING OR THREATENED ACTIONS, SUITS OR PROCEEDINGS
1. Hardy v. Saliva Diagnostic Systems, Inc., Xxxxxx X. Xxxxxx, Xxxxxx Xxxxxxx
and Xxxxxxx X. Xxxxx was filed in Xxxxxx Xxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx of
Connecticut.
2. Merrixell Ltd. v. Saliva Diagnostic Systems, Inc. was filed in United States
District Court for the Southern District of New York.
3. Lealos v. Saliva Diagnostic Systems, Inc. was filed in Superior Court in
Xxxxx County in the State of Washington. This suit was dismissed without
prejudice as a prerequisite to a settlement agreement currently in the
process of being documented.
See pages 25 and 26 of the Prospectus dated June 13, 1997 for complete
description.
