Exhibit 10.7
Form of Subscription Agreement for Preferred Stock Investors
During Fiscal 2000
SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (the "Act"), AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID
ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
COMMISSION OR ANY OTHER REGULATORY AUTHORITY. NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS
OFFERING OR THE ACCURACY OR ADEQUACY OF THE DISCLOSURE DOCUMENTS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
AGREEMENT, dated as of ______________________, by and between Avitar, Inc., a
Delaware corporation (the "Company"), and the undersigned investor (the
"Purchaser").
WITNESSETH: WHEREAS, the Company is seeking to raise up to $3,000,000 from a
targeted group of potential investors to be used for general purposes within the
Company and for initiating the development of oral fluid diagnostic disease
tests, an effort which the Company estimates will cost approximately $4,000,000
during the first two years of the program;
WHEREAS, in order to effectuate such financing, the Company is offering (the
"Offering") for sale 500,000 shares of its Series C Redeemable Convertible
Preferred Stock, par value $.01 (the "Preferred Stock"), in an aggregate amount
up to $3,000,000 (the "Maximum Amount");
WHEREAS, the Company is making the Offering pursuant to Regulation D promulgated
under the Securities Act of 1933, as amended; and
WHEREAS, in order to comply with the requirements of Regulation D, the Company
requires the Purchaser to make the representations, warranties and agreements
contained herein to, and for the reliance of, the Company.
NOW, THEREFORE, in consideration of the mutual agreements contained herein, and
subject to the terms and conditions set forth herein, the Company and the
Purchaser hereby agree as follows:
1. Subscription. The Purchaser, intending to be legally bound, hereby
irrevocably agrees to purchase from the Company the number of shares of
Preferred Stock (the "Shares") set forth on the signature page hereof, at a
per share purchase price of $6.00 (the "Offering Price"), together with
warrant in the form attached hereto as Exhibit A with a right to purchase
on the terms set forth therein ________________________________ shares of
the Company's Common Stock at an exercise price of $ ____ per share. The
Purchaser hereby acknowledges and agrees that the minimum subscription
amount for Shares is $25,000 (subject to the right of the Company, in its
sole discretion, to reduce such minimum subscription amount).
2. Rights and Preferences. The following rights and preferences have been
determined by the Company for the Preferred Stock:
a. Voting Rights. On all matters submitted to a vote of the holders of
the Company's Common Stock, the holders of the Preferred Stock shall
be entitled to exercise one vote per share of Preferred Stock.
b. Royalties. The holders of the Preferred Stock shall be entitled to
receive royalties pro-rata in the amount of five percent (5%) of the
revenues received by the Company during the immediately preceding
fiscal year in respect of any products for disease diagnostic testing
using oral fluids as the testing medium developed the Company or
Avitar Diagnostics, Inc. Such royalties are payable so long as the
Preferred Stock has not been converted or redeemed as provided herein;
provided, however, that the holders shall be entitled to receive
pro-rata royalties for a minimum of five (5) years from the purchase
date of the Preferred Stock in the event the Company redeems the
Preferred Stock as provided herein. These royalties shall be payable
within ninety (90) days after the anniversary date of the investment
upon which the royalties are based.
c. Liquidation Preference. Upon any voluntary liquidation, dissolution or
winding-up of the Company, the holders of the Preferred Stock shall be
entitled to receive out of the assets of the Company which remain
after satisfaction in full of all valid claims of creditors of the
Company, liquidating distributions of an amount per share equal to the
amount of unpaid royalties due to the holder on the date of
liquidation. Should these liquidation distributions not be paid in
full, the holders of the Preferred Stock shall share ratably in any
distribution of assets in proportion to the full respective
preferential amount to which they are entitled. The Company may issue
shares of other preferred stock which have liquidation, dividend,
voting, and/or redemption rights which are senior or junior to, or
pari passu with, the Preferred Stock.
d. Conversion. A holder of the Preferred Stock shall be entitled, on the
anniversary date of the investment to cause any or all such shares to
be converted into the number of shares of the Company's Common Stock
derived from dividing the purchase price paid for each share of the
Preferred stock by the average closing price of the Company's Common
Stock for the five trading days prior to the date defined below,
subject to adjustment as set forth below. The issuance by the Company
of shares of Common Stock upon any conversion of shares of the
Preferred Stock made at the option of the holder thereof, shall be
effective as of the earlier of (i) the delivery to such holder or such
holders' designee of certificates representing the shares of Common
Stock issued upon Conversion thereof or (ii) the commencement of
business on the second business day after the surrender of the
certificate or certificates for the shares of Preferred Stock to be
converted, duly assigned or endorsed for transfer to the Company (or
accompanied by duly executed stock powers relating thereto) as
provided hereby. On or after the effective date of any Conversion, the
converted shares of the Preferred Stock shall no longer be deemed to
be outstanding and all rights whatsoever with respect thereto shall
terminate, and the person or persons entitled to receive the Common
Stock issuable upon such Conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock. All
shares of the Preferred Stock upon Conversion shall be restored to the
status of authorized but unissued shares of preferred stock without
designation as to Class, and may be issued thereafter. The Conversion
Price shall be subject to adjustment in the event of (i) any
subdivision or combination of the Company's outstanding Common Stock,
or (ii) any payment by the Company of a stock dividend to the holders
of the Company's Common Stock holders or holders of any other of stock
convertible into Common Stock (exclusive of the Company's Series B
Redeemable Convertible Preferred Stock). In no event, however, shall
the number of shares of the Company's Common Stock issuable upon
conversion by all holders of the Preferred Stock exceed 4,899,000
shares without the approval of the Company's shareholders entitled to
vote on this matter.
2. Redemption. In the event of a change of control of the Company or on the
anniversary date of the investment, the Company shall have the right to
redeem all, or any portion of, the Preferred Stock at the price set forth
below:
Years Redemption Price*
2 200
6 185
7 170
8 155
9 130
10 & Thereafter 100
* Expressed as a percentage of the price paid by the holders for
each share of the Preferred Stock.
Such redemption shall be made by the issuance of the Company's Common
Stock, the number of shares of which shall be derived by dividing the
redemption price by the average closing price of the Company's Common Stock
for the five (5) trading days prior to the redemption date. Notice of any
redemption shall be sent to the holders of the Preferred Stock at the
address shown on the books of the Company or its transfer agent by first
class mail, postage prepaid, mailed not less than thirty (30) days prior to
the redemption date.
3. Payment. The Purchaser encloses herewith a check payable to the order of,
or will immediately make a wire transfer payment to, "Avitar, Inc." in the
full amount of the purchase price of the Shares being subscribed for. To
request wire transfer instructions, please contact Xxx Xxxxxxxxxx, Xx.,
Chief Financial Officer of the Company, at (781) 821- 2440. Such funds will
be held for the Purchaser's benefit, and will be returned promptly, without
interest, penalty, expense or deduction if this Subscription Agreement is
not accepted by the Company, or the Offering is terminated pursuant to its
terms or by the Company.
4. Acceptance of Subscription. The Purchaser understands and agrees that the
Company, in its sole discretion, reserves the right to accept or reject
this or any other subscription for Shares, in whole or in part and in any
order, notwithstanding prior receipt by the Purchaser of notice of
acceptance of this subscription. The Company shall have no obligation
hereunder until the Company shall execute and deliver to the Purchaser an
executed copy of this Subscription Agreement. If this subscription is
rejected in whole or the Offering is terminated, all funds received from
the Purchaser will be returned without interest, penalty, expense or
deduction, and this Subscription Agreement shall thereafter be of no
further force or effect. If this subscription is rejected in part, the
funds for the rejected portion of this subscription will be returned
without interest, penalty, expense or deduction, and this Subscription
Agreement will continue in full force and effect to the extent this
subscription was accepted. The Company reserves the right to, in its sole
discretion and without notice to the Purchaser or any other subscribers,
increase or decrease the Maximum Amount.
5. Representations, Warranties and Agreements of the Company. The Company
hereby represents and warrants to the Purchaser, and covenants and agrees
with the Purchaser, as follows:
a. The Company has been duly organized, is validly existing and is in
good standing under the laws of the State of Delaware.
b. This Agreement and the issuance of the Shares have been duly
authorized by the Company.
c. The Company is in compliance in all material respects with the Federal
securities laws applicable to the issuance of the Shares to the
Purchaser; provided, however, that in making such representation and
warranty, the Company is relying upon the truth and accuracy of the
Purchaser's representations and warranties set forth in this
Agreement.
d. The Shares, when issued upon payment of the appropriate purchase
price, will be validly issued, fully paid and non-assessable and free
from preemptive rights.
e. (i) The Common Stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii)
the Company files periodic reports pursuant to the Exchange Act and
has filed all reports required to be filed thereunder and (iii) the
Common Stock is quoted on the NASD OTC Bulletin Board.
6. Representations, Warranties and Agreements of the Purchaser. The Purchaser
hereby represents and warrants to the Company, and covenants and agrees
with the Company, as follows:
a. The Purchaser understands and acknowledges that none of the Shares
offered by the Company pursuant to the Offering are registered under
the Securities Act of 1933, as amended (the "Securities Act"), or any
state securities laws. The Purchaser understands that the offering and
sale of the Shares is intended to be exempt from registration under
the Securities Act, by virtue of Section 4(2) and/or Section 4(6)
thereof and the provisions of Regulation D promulgated thereunder,
based, in substantial part, upon the representations, warranties and
agreements of the Purchaser contained in this Subscription Agreement.
b. The Purchaser and the Purchaser's attorney, accountant, purchaser
representative and/or tax advisor, if any (collectively, the
"Advisors") have received, or had made available to it, copies of the
following documents of the Company (the "Disclosure Documents"): the
Annual Report on Form 10-KSB of the Company for its fiscal year ended
September 30, 1999, the Quarterly Report on Form 10-QSB of the Company
for the fiscal quarter ended December 31, 1999 and all other documents
reasonably requested by the Purchaser. The Purchaser has carefully
reviewed the Disclosure Documents and understands the information
contained therein.
c. Neither the Securities and Exchange Commission ("Commission") nor any
state securities commission has approved the Shares or the Offering,
or passed upon or endorsed the merits of the Offering or confirmed the
accuracy or determined the adequacy of this Subscription Agreement.
This Subscription Agreement has not been reviewed by any Federal,
state or other regulatory authority.
d. The Purchaser acknowledges that all documents, records, and books
pertaining to an investment in the Shares have been made available for
inspection by such Purchaser and the Advisors, if any.
e. The Purchaser and the Advisors, if any, have had a reasonable
opportunity to ask questions of and receive satisfactory answers from
a person or persons acting on behalf of the Company concerning the
Offering, the Shares and the Company and all such questions have been
answered to the full satisfaction of the Purchasers and the Advisors,
if any.
f. In evaluating the suitability of an investment in the Company, the
Purchaser has not relied upon any representation or other information
(oral or written) other than as stated in this Subscription Agreement
and/or as contained in the Disclosure Documents.
g. The Purchaser is unaware of, is no way relying on, and did not become
aware of the Offering of the Shares through or as a result of any form
of general solicitation or general advertising, including, without
limitation, any article, notice, advertisement or other communication
published in any newspaper, magazine or similar media or broadcast
over television or radio, in connection with the Offering and is not
subscribing for the Shares and did not become aware of the Offering
through or as a result of any seminar or meeting to which the
Purchaser was invited by, or any solicitation of a subscription by, a
person not previously known to the Purchaser in connection with
investments in securities generally.
h. The Purchaser has taken no action which would give rise to any claim
by any person for brokerage commissions, finders' fees or the like
relating to this Subscription Agreement or the transactions
contemplated hereby.
i. The Purchaser, together with the Advisors, have such knowledge and
experience in financial, tax, and business matters, and, in
particular, investments in securities, so as to enable them to utilize
the information made available to them in connection with the Offering
to evaluate the merits and risks of an investment in the Shares and to
make an informed investment decision with respect thereto.
j. The Purchaser is not relying on the Company or any of its officers,
directors, employees or agents with respect to the legal, tax,
economic and related considerations of an investment in the Shares,
and the Purchaser has relied on the advice of, or has consulted with,
only his own Advisors (if any).
k. The Purchaser is acquiring the Shares solely for such Purchaser's own
account for investment and not with a view to resale or distribution
thereof, in whole or in part. The Purchaser has no agreement or
arrangement, formal or informal, with any person to sell or transfer
all or any part of the Shares, and the Purchaser has no plans to enter
into any such agreement or arrangement.
l. The Purchaser must bear the substantial economic risks of an
investment in the Shares indefinitely because the Shares may not be
sold, hypothecated or otherwise disposed of unless subsequently
registered under the Securities Act and applicable state securities
laws or an exemption from such registration is available. The
Purchaser acknowledges that legends shall be placed on the shares of
Common Stock, issued pursuant to the conversion of the Preferred
Stock, to the effect that they have not been registered under the
Securities Act or applicable state securities laws and appropriate
notations thereof will be made in the Company's stock books. Stop
transfer instructions will be placed with the transfer agent of the
Company.
m. The Purchaser has adequate means of providing for such Purchaser's
current financial needs and foreseeable contingencies and has no need
for liquidity of the investment in the Shares for an indefinite period
of time.
n. The Purchaser is aware that an investment in the Shares involves a
number of very significant risks and investment considerations.
o. The Purchaser meets the requirements of at least one of the
suitability standards for an "accredited investor" under Regulation D
promulgated under the Securities Act and as set forth on the
Accredited Investor Certification contained herein.
p. The Purchaser: (i) if a natural person represents that the Purchaser
has reached the age of 21 and has full power and authority to execute
and deliver this Subscription Agreement and all other related
agreements or certificates and to carry out the provisions hereof and
thereof and has adequate means for providing for his or her current
financial needs and anticipated future needs and possible personal
contingencies and emergencies and has no need for liquidity in the
investment in the Shares; (ii) if a corporation, partnership, limited
liability company or partnership, association, joint stock company,
trust, unincorporated organization or other entity represents that
such entity was not formed for the specific purpose of acquiring the
Shares, such entity is duly organized, validly existing and in good
standing under the laws of the state of its organization, the
consummation of the transactions contemplated hereby is authorized by,
and will not result in a violation or breach of any law, regulation,
agreement to which it is a party or is otherwise bound or of its
charter or other organizational documents; such entity has full power
and authority to execute and deliver this Subscription Agreement and
all other related agreements or certificates and to carry out the
provisions hereof and thereof and to purchase and hold the Shares; the
execution and delivery of this Subscription Agreement has been duly
authorized by all necessary action; this Subscription Agreement has
been duly executed and delivered on behalf of such entity and is a
legal, valid and binding obligation of such entity; and (iii) if
executing this Subscription Agreement in a representative or fiduciary
capacity, represents that it has full power and authority to execute
and deliver this Subscription Agreement in such capacity and on behalf
of the subscribing individual, xxxx, partnership, trust, estate,
corporation, limited liability company or partnership, or other entity
for whom the Purchaser is executing this Subscription Agreement, and
such individual, xxxx, partnership, trust, estate, corporation,
limited liability company or partnership, or other entity has full
right and power to perform pursuant to this Subscription Agreement and
make an investment in the Company; and that this Subscription
Agreement constitutes a legal, valid and binding obligation of such
entity. The execution and delivery of this Subscription Agreement will
not violate or be in conflict with any order, judgment, injunction,
agreement or document to which the Purchaser is a party or by which it
is bound.
q. Any information which the Purchaser has heretofore furnished or
furnishes herewith to the Company is complete and accurate and may be
relied upon by the Company in determining the availability of an
exemption from registration under Federal and state securities laws in
connection with the Offering. The Purchaser will notify and supply
corrective information to the Company immediately (and without a
specific request therefor) upon the occurrence of any change therein
occurring prior to the Company's issuance of the Shares.
r. The Purchaser has significant prior investment experience, including
investment in non- registered securities. The Purchaser has a
sufficient net worth to sustain a loss of its entire investment in the
Company in the event such a loss should occur. The Purchaser's overall
commitment to investments which are not readily marketable is not
excessive in view of his/its net worth and financial circumstances and
the purchase of the Shares will not cause such commitment to become
excessive. The investment is a suitable one for the Purchaser.
s. No oral or written representations have been made, or oral or written
information furnished, to the Purchaser in connection with the
Offering which are in any way inconsistent with the information
contained herein.
t. The Purchaser acknowledges that, even if the Maximum Amount is raised
from the sale of the Shares, the net proceeds thereof will provide the
Company with the funds to meet only its most immediate needs and that
additional funds will be required by the Company (with the consequent
dilution of value and/or ownership) through additional equity and/or
debt financing(s), and no assurance can be given as to the
availability or adequacy of terms of any such financing(s). In the
event that the Company does not obtain the requisite funds, it may be
necessary for the Company to reduce, suspend or cease certain of its
operations. The Purchaser acknowledges that the Company intends to use
the net proceeds of the offering for general purposes within the
Company and which includes initiating the development of oral fluid
diagnostic disease tests, an effort the Company estimates will cost
approximately $4,000,000 during the first two years of the development
program.
u. Blue Sky Information:
FOR RESIDENTS OF ALL STATES:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1993, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID
ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS
OFFERING OR THE ACCURACY OR ADEQUACY OF THE MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
FOR CONNECTICUT RESIDENTS:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SECTION 36-485 OF THE
CONNECTICUT UNIFORM SECURITIES ACT AND THEREFORE CANNOT BE RESOLD
UNLESS THEY ARE REGISTERED UNDER THE CONNECTICUT UNIFORM SECURITIES
ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR FLORIDA RESIDENTS:
IF SALES OF THESE SECURITIES ARE CONSUMMATED WITH FIVE OR MORE
OFFEREES IN THE STATE OF FLORIDA, ANY SUCH OFFEREE MAY, AT SUCH
OFFEREE'S OPTION, VOID ANY PURCHASE HEREUNDER WITHIN THREE DAYS AFTER
THE FIRST TENDER OF CONSIDERATION IS MADE BY THE PURCHASER TO THE
COMPANY, AN AGENT OF THE COMPANY OR AN ESCROW AGENT, OR WITHIN THREE
DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO THE
PURCHASER, WHICHEVER OCCURS LATER.
FOR VERMONT RESIDENTS:
EACH PERSON WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES DIRECTLY FROM
THE ISSUER OR AN AFFILIATE OF THE ISSUER SHALL HAVE THE RIGHT TO
WITHDRAW HIS ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE SELLER,
UNDERWRITER (IF ANY) OR ANY OTHER PERSON WITHIN THREE BUSINESS DAYS
AFTER HE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED.
7. Indemnification. The Purchaser hereby agrees to indemnify and hold harmless
the Company and its officers, directors, employees, agents, control persons
and affiliates against all losses, liabilities, claims, damages, and
expenses whatsoever (including, but not limited to, any and all expenses
incurred in investigating, preparing, or defending against any litigation
commenced or threatened) based upon or arising out of any actual or alleged
false acknowledgment, representation or warranty, or misrepresentation or
omission to state a material fact, or breach by the Purchaser of any
covenant or agreement made by the Purchaser herein or any other document
delivered in connection with this Subscription Agreement.
8. Irrevocability; Binding Effect. The Purchaser hereby acknowledges and
agrees that the subscription hereunder is irrevocable by the Purchaser,
except as required by applicable law, and that this Subscription Agreement
shall survive the death, disability or bankruptcy, as the case may be, of
the Purchaser and shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators,
successors, legal representatives, and permitted assigns. If the Purchaser
is more than one person, the obligations of the Purchaser hereunder shall
be joint and several and the agreements, representations, warranties, and
acknowledgments herein shall be deemed to be made by and be binding upon
each such person and such person's heirs, executors, administrators,
successors, legal representatives, and permitted assigns.
9. Modification. This Subscription Agreement shall not be modified or waived
except by an instrument in writing signed by the party against whom any
such modification or waiver is sought.
10. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom
it is to be given (a) if to Company, at 00 Xxx Xxxx, Xxxxxx, Xxxxxxxxxxxxx
00000, Attn.: Xxxxx X. Xxxxxxxx, Chairman of the Board, or (b) if to the
Purchaser, at the address set forth on the signature page hereof (or, in
either case, to such other address as the party shall have furnished in
writing in accordance with the provisions of this Section 10). Any notice
or other communication given by certified mail shall be deemed given at the
time of certification thereof, except for a notice changing a party's
address which shall be deemed given at the time of receipt thereof.
11. Assignability. This Subscription Agreement and the rights, interests and
obligations hereunder are not transferable, assignable or delegable by the
Purchaser and the transfer or assignment of the Shares shall be made only
in accordance with all applicable laws and this Subscription Agreement.
12. Applicable Law. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of New York without
regard to its conflicts of laws principles. The Purchaser hereby
irrevocably submits to the non-exclusive jurisdiction of any New York State
court or United States Federal court sitting in New York County over any
action or proceeding arising out of or relating to this Subscription
Agreement or any agreement contemplated hereby, and the Purchaser hereby
irrevocably agrees that all claims in respect of such action or proceeding
may be heard and determined in such New York State or Federal court. The
Purchaser further waives any objection to venues in such State on the basis
of a non-convenient forum. The Purchaser further agrees that any action or
proceeding brought against the Company shall be brought only in New York
State or United States Federal courts sitting in New York County.
THE PURCHASER HEREBY AGREES TO WAIVE ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SUBSCRIPTION AGREEMENT OR ANY
DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.
13. Blue Sky Qualification. The purchase of the Shares under this Subscription
Agreement is expressly conditioned upon the exemption from registration
and/or qualification of the offer and sale of the Shares from applicable
Federal and state securities laws. The Company shall not be required to
qualify this transaction under the securities laws of any jurisdiction and,
should qualification be necessary, the Company shall be released from any
and all obligations to maintain the Offering, and may rescind any sale
contracted, in the jurisdiction.
14. Use of Pronouns. All pronouns and any variations thereof used herein shall
be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or persons referred to may require.
15. Miscellaneous.
a. This Agreement constitutes the entire agreement between the Purchaser
and the Company with respect to the subject matter hereof and
supersedes all prior oral or written agreements and understandings, if
any, relating to the subject matter hereof. The terms and provisions
of this Agreement may be waived, or consent for the departure
therefrom granted, only by a written document executed by the party
entitled to the benefits of such terms or provisions.
b. The Purchaser's representations and warranties made in this Agreement
shall survive the execution and delivery hereof and the sale and
delivery of the Shares.
c. Each of the parties hereto shall pay its own fees and expenses
(including the fees of any attorneys, accountants, advisors,
appraisers or others engaged by such party) in connection with this
Agreement and the transactions contemplated hereby whether or not the
transactions contemplated hereby are consummated.
d. This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
e. Paragraph titles are for descriptive purposes only and shall not
control or alter the meaning of this Subscription Agreement as set
forth in the text.
Accredited Investor Certification
(Check the appropriate line(s)
(i) I am a natural person who had individual income of more than $200,000
in each of the most recent two years or joint income with my spouse in excess
of $300,000 in each of the most recent two years and reasonably expect to
reach that same income level for the current year ("income", for purposes
hereof, should be computed as follows: individual adjusted gross income, as
reported (or to be reported) on a Federal income tax return, increased by (1)
any deduction of long-term capital gains under section 1202 of the Internal
Revenue Code of 1986, as amended (the "Code"),(2) any deduction for depletion
under Section 611 et seq. of the Code, (3) any exclusion for interest under
Section 103 of the Code and (4) any losses of a partnership as reported on
Schedule E of Form 1040);
(ii) I am a natural person whose individual net worth (i.e.,
total assets in excess of total liabilities), or joint net worth
with my spouse, will at the time of purchase of the Shares be in
excess of $1,000,000;
(iii) The Purchaser is an investor satisfying the requirements of Section
501(a)(1), (2) or (3) of Regulation D promulgated under the Securities Act,
which includes but is not limited to, a self-directed employee benefit plan
where investment decisions are made solely by persons who are "accredited
investors" as otherwise defined in Regulation D;
(iv) The Purchaser is a trust, which trust has total assets in excess of
$5,000,000, which is not formed for the specific purpose of acquiring the
Shares offered hereby and whose purchase is directed by a sophisticated person
as described in Rule 506(b)(ii) of Regulation D and who has such knowledge and
experience in financial and business matters that he is capable of evaluating
the risks and merits of an investment in the Shares;
(v) I am a director or executive officer of the Company; or
(vi) The Purchaser is an entity (other than a trust) in which all of the
equity owners meet the requirements of at least one of the above
subparagraphs.
FOR MASSACHUSETTS RESIDENTS:
MY INVESTMENT IN THE SHARES DOES NOT EXCEED 25% OF MY AND MY SPOUSE'S
JOINT NET WORTH (EXCLUDING OUR PRINCIPAL RESIDENCE AND FURNISHINGS).
IN WITNESS WHEREOF, the Purchaser has executed this Subscription Agreement
this day of _____________________, 2000.
____ _ x $6.00 __ ___ ___
(Shares being (Share Price) (Subscription Amount
purchased) -Minimum of $25,000)
If the purchaser is an INDIVIDUAL, and if purchased as JOINT TENANTS, as
TENANTS IN COMMON, or as COMMUNITY PROPERTY:
Print Name(s) Social Security Number
Signature(s) of Purchaser(s)
Date
If the purchaser is a PARTNERSHIP, CORPORATION, or TRUST:
Name of Partnership, Federal Taxpayer
Corporation or Trust Indemnification Number
Date
By:______________________
Name State of Organization
Title:
Address
SUBSCRIPTION ACCEPTED AND AGREED TO this day of
, 2000.
AVITAR, INC.
By: ___________________________
Title: Chief Executive Officer
EXHIBIT A
Void after 5:00 p.m. New York City Time,
on __________________
Warrant to Purchase an Aggregate of _____ Shares
of Common Stock
WARRANT TO PURCHASE COMMON STOCK
OF
AVITAR, INC.
a Delaware Corporation
THIS WARRANT AND THE SHARES OF COMMON STOCK UNDERLYING THIS WARRANT
(collectively, the "Securities") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (the "Act") OR THE SECURITIES
LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS.
THIS WARRANT MAY NOT BE EXERCISED UNLESS THE SECURITIES ARE
REGISTERED UNDER THE ACT OR EXEMPTION FROM SUCH REGISTRATION UNDER
THE ACT IS APPLICABLE. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES COMMISSION OR ANY OTHER
REGULATORY AUTHORITY. NOR HAVE ANY OF THE FOREGOING AUTHORITIES
PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY
OR ADEQUACY OF THE DISCLOSURE DOCUMENTS. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
This is to certify that, FOR VALUE RECEIVED, _________________________ or
assigns (the "Holder"), is entitled to purchase, subject to the provisions of
this Warrant, from AVITAR, INC. a Delaware Corporation (the "Company"), _____
________ _____ ______________________ fully paid, validly issued and
non-assessable shares of Common Stock, $0.01 par value, of the Company
("Common Stock") at any time or from time to time from the date hereof,
through and including, _________________, (the "Termination Date") but not
later than 5:00 p.m. New York City, New York Time on the Termination Date (the
"Exercise Period") at an initial exercise price equal to $_____ per share. The
number of shares of Common Stock to be received upon the exercise of this
Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common
Stock deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price
of a share of Common Stock in effect at any time and as adjusted from time to
time is hereinafter sometimes referred to as the "Exercise Price".
(a) Exercise of Warrant. This Warrant may be exercised in whole or in part at
any time during the Exercise Period. This Warrant, subject to the provisions
hereof, may be exercised by presentation and surrender hereof to the Company at
its principal office, or at the office of its stock transfer agent, if any, with
the Purchase Form annexed hereto duly executed and accompanied by payment of the
Exercise Price for the number of Warrant Shares specified in such exercise. The
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
(b) Reservation of Shares. The Company shall at all times reserve for issuance
and/or delivery upon exercise of this Warrant such number of shares of its
Common Stock as shall be required for issuance and delivery upon exercise of
this Warrant.
(c) Fractional Shares. No fractional shares or script representing fractional
shares shall be issued upon the exercise of this Warrant. All fractional shares
shall be eliminated by rounding any fraction up to the nearest whole number of
shares of Common Stock.
(d) Exchange, Transfer, Assignment or Loss of Warrant. Subject to the legend
first appearing above, this Warrant is exchangeable, without expense, at the
option of the Holder, upon presentation and surrender hereof to the Company or
at the office of its stock transfer agent, if any, for other warrants of
different denominations entitling the Holder thereof to purchase in the
aggregate the same number of shares of Common Stock purchasable hereunder.
Subject to the legend first appearing above, upon surrender of this Warrant to
the Company at is principal office or at the office of its stock transfer agent,
if any, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant in the name of the assignee named in such instrument
of assignment and this Warrant shall promptly be canceled. This Warrant may be
divided or combined with other Warrants which carry the same rights upon
presentation hereof at the principal office of the Company or at the office of
its stock transfer agent, if any, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by the
Holder hereof. The term "Warrant" as used herein includes any Warrant into which
this Warrant may be divided or exchanged. Upon receipt by the Company of
evidence satisfactory to it of the loss, destruction of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will execute and deliver a new Warrant of like tenor and
date.
(e) Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to
any rights of a shareholder in the Company, either at law or equity, and the
rights of the Holder are limited to those expressed in this Warrant and are not
enforceable against the Company except to the extent set forth herein.
(f) Anti-Dilution Provisions. The Exercise Price in effect at any time and the
number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
(1) In case the Company shall (i) declare a dividend or make a distribution on
its outstanding shares of Common Stock in shares of Common Stock, or (ii)
subdivide or reclassify its outstanding shares of Common Stock into a greater
number of shares of Common Stock or into a smaller number of shares, the
Exercise Price immediately prior to such adjustment shall be adjusted by
multiplying it by a fraction, the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall be made successively
whenever any event listed above shall occur.
(2) Whenever the Exercise Price payable upon exercise of each Warrant is
adjusted pursuant to Subsection (1) above, the number of shares purchasable
upon exercise of this Warrant shall simultaneously be adjusted by multiplying
the number of shares initially issuable upon exercise of this Warrant by the
Exercise Price in effect on the date hereof and dividing the product so
obtained by Exercise Price, as adjusted.
(3) Whenever the Exercise Price is adjusted, as herein provided, the Company
shall promptly cause a notice setting forth the adjusted Exercise Price and
adjusted number of shares issuable upon exercise of each Warrant to be mailed
to the Holders, at their last addresses appearing in the Warrant Register, and
shall cause a certified copy thereof to be mailed to its transfer agent, if
any. The Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants
employed shall be conclusive evidence of the correctness of such adjustment.
(g) Officer's Certificate. Whenever the Exercise Price shall be adjusted as
required by the provisions of Section (f), the Company shall forthwith file in
the custody of its Secretary or an Assistant Secretary at its principal office
and with its stock transfer agent, if any, an officer's certificate showing the
adjusted Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of additional shares of Common Stock, if any, and such other facts as
shall be necessary to show the reason for and the manner computing such
adjustment.
(h) Notices to Warrant Holders. So long as this Warrant shall be outstanding,
(1) if the Company shall pay any dividend or make any distribution upon the
Common Stock or (2) if the Company shall offer to the holders of Common Stock
for subscription or purchase by them any share of any class or any other rights
or (3) if the capital reorganization of the Company, reclassification or merger
of the Company with or into another corporation, sale of all or substantially
all of the property and assets of the Company or voluntary or involuntary
dissolution, liquidation or winding up of the Company shall be effected, then in
any such case, the Company shall cause to be mailed by certified mail to the
Holder, at least ten (10) days prior to the date specified in (x) or (y) below,
as the case may be, a notice containing a brief description of the proposed
action and stating the date on which (x) a record is to be taken for the purpose
of such dividend, distribution or rights, or (y) such reclassification,
reorganization, consolidation, merger, conveyance, lease, dissolution,
liquidation or winding up is to take place and the date, if any, is to be fixed,
as of which the holders of Common Stock or other securities shall receive cash
or other property deliverable upon such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up.
(i) Piggyback Registration. If, at any time commencing after the date hereof
until such time as the Holder has sold or otherwise disposed all of the Warrant
Shares, the Company proposes to register any of its equity securities under the
Act (other than in connection with a merger or consolidation or pursuant to a
Registration Statement on Form S-3 or S-4 or comparable registration statement)
it will give written notice, at least thirty (30)days prior to the filing of
such registration statement, to the Holder and to all other holders of Warrants
and Warrant Shares (collectively, "Warrant Securities") of its intention to do
so. If the Holder and/or other holders of Warrant Securities notify the Company
within twenty (20) days after receipt of such notice of its or their desire to
include any Warrants (including the shares of Common Stock underlying any such
Warrants) and/or Warrant Shares (whether issued or issuable) in such proposed
registration statement, the Company shall, subject to the provisions set forth
below, afford the Holder and such holders of Warrant Securities the opportunity
to have any such securities registered under such registration statement. If
such registration is an underwritten registration, and the managing underwriters
advise the Company that in their opinion the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering without materially adversely affecting such underwriters' ability to
effect an orderly distribution of such securities, the Company will include in
such registration first, the securities proposed to be sold thereunder and,
second, the Warrant Securities and such other securities of the Company having
registration rights requested to be included in such registration registered on
a pro-rata basis. The Company shall have the right at any time thereafter it
shall give written notice to elect not to file any such proposed registration
statement or to withdraw the same after filing but prior to the effective date
thereof. The Company shall pay all such expenses relating to registration except
sales commissions attributable to Warrant Securities requested to be offered by
the holders thereof and except expenses incurred by the holders such as counsel
for the holders. Such sales commissions and other such expenses will be borne by
the holders requesting inclusion in such registration.
(j) Indemnification. In the event Warrant Securities are included in a
registration statement by the Company, the Company will indemnify and hold
harmless each holder of registered Warrant Securities against all claims and
losses arising out of securities law violations by the Company and each holder
of registered Warrant Securities will indemnify and hold harmless the Company
against all claims and losses arising out of the information supplied to the
Company by such holder for use in connection with such registration.
(k) Reclassification, Reorganization or Merger. In case of any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the Company, or in case of any consolidation or merger of the Company with or in
which merger the Company is the continuing corporation and which does not result
in any reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the class issuable upon exercise of this Warrant or in
case of any sale to another corporation of the property of the Company as an
entirety, the Company shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the right
thereafter by exercising this Warrant at any time prior to the expiration of the
Warrant, to purchase the kind and amount of shares upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger or
sale. Any such transaction shall include provision for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for in
this Warrant. The foregoing provisions of this Section (k) shall similarly apply
to successive reclassifications, capital reorganizations and changes of shares
of Common Stock and to successive consolidations, mergers or sales. In the event
that in connection with any such capital reorganization, a share of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of
Subsection (1) of Section (f) hereof.
(l) Redemption.
(1) Commencing one year after the date hereof (the "Initial Warrant Redemption
Date") the Company may, on 30 days prior written notice redeem all the
Warrants at $0.01 provided, however, that before any such call for redemption
of Warrants can take place, the (A) high closing bid price for the Common
Stock in the over-the-counter market as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") or (B) the closing
sale price on the primary exchange on which the Common Stock is traded, if the
Common Stock is traded on a national securities exchange or if the Common
Stock is a National Market Security on NASDAQ, shall have for five (5)
consecutive trading days within a period of thirty (30) consecutive trading
days ending on the fifth trading day prior to the date on which the notice
contemplated by (2)and (3) below is given, equaled or exceeded $0.75 per share
(subject to adjustment in the event of any stock splits or other similar
events as provided in Section (f) hereof).
(2) In case the Company shall exercise its right to redeem all of the
Warrants, it shall give or cause to be given notice to the registered Holders
of the Warrants by mailing to such registered Holders a notice of redemption,
first class, postage prepaid, at their last address as shall appear on the
records of the Company. Any notice mailed in the manner provided herein shall
be conclusively presumed to have been duly given whether or not the registered
Holder receives such notice.
(3) The notice of redemption shall specify (i) the redemption price, (ii) the
date fixed for redemption, which shall in no event be less than thirty (30)
days after the date of mailing of such notice, (iii) the place where the
Warrant Certificate shall be delivered and the redemption price shall be paid
and (iv) that the right to exercise the Warrant shall terminate at 5:00 p.m.
(New York time) on the business day immediately preceding the date fixed for
redemption. The date fixed for the redemption of the Warrants shall be the
Redemption Date. No failure to mail such notice nor any defect therein or in
the mailing thereof shall affect the validity of the proceedings for such
redemption except as to a Holder (a) to whom notice was not mailed or (b) w of
the Company that notice of redemption has been mailed shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
(4) Any right to exercise a Warrant shall terminate at 5:00 p.m. (New York
time) on the business day immediately preceding the Redemption Date. The
redemption price payable to the registered Holders shall be mailed to such
persons at their addresses of record.
(m) Addresses for Notices. Any notices to be given to the Company or to the
Holder pursuant hereto shall be delivered personally or sent by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
(1) If to the Company, until another address is supplied by the Company
to the Holder, in accordance with the provisions of this Section (m):
Avitar, Inc.
00 Xxx Xxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn.: Secretary
(2) If to the Holder, until another address is supplied by the Holder to
the Company, in accordance with the provisions of this Section (k), at
the address specified on the transfer books of the Company.
(n) Governing Law. This Warrant shall be governed by and construed in accordance
with the law of the State of New York, without reference to any choice of law
provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by the undersigned, each being duly authorized, as of the date below.
AVITAR, INC.,
a Delaware
Corporation
By:___________________
Chief Executive Officer
Dated: , 2000
Attest:
By:_______________________
Secretary
PURCHASE FORM
Dated: , 2000
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing , Shares of Common Stock and hereby makes payment of
$ ____ in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name:
(Please typewrite or print in block letters)
Address:
Signature:
ASSIGNMENT FORM
FOR VALUE RECEIVED,
--------------------------------------
hereby sells, assigns and transfers unto
Name: _________________________________________________
(Please typewrite or print in block letters)
Social Security or Taxpayer I.D. No.: _________________
Address: _______________________________________________
the right to purchase Common Stock represented by this Warrant to the extent
of shares as to which such right is exercisable and does irrevocably
constitute and appoint _______________ , Attorney, to transfer the same on the
books of the Company with full power of substitution in the premises.
Date: , 200_
Signature: ___________________________________
