EXHIBIT 10.3
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REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (this "Agreement"), made and entered
into as of December 6, 2004, by and among Innovative Drug Delivery Systems,
Inc., a Delaware corporation (the "Company"), and the purchasers signatory
hereto (each such purchaser, a "Purchaser" and collectively, the "Purchasers").
This Agreement is made pursuant to and in connection with (i) the
Subscription Agreements between the Company and each Purchaser dated as of the
date hereof (collectively, the "Purchase Agreements"), (ii) the Private
Placement Memorandum dated November 18, 2004 relating to the offering of
securities of the Company pursuant to which the Purchasers purchased the
Registrable Securities (the "Memorandum") and (iii) the proposed merger (the
"Merger") of a wholly-owned subsidiary of Intrac, Inc., a Nevada corporation
("MergerCo"), with and into the Company.
The Company and the Purchasers hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
"Advice" shall have the meaning set forth in Section 6(d).
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other
governmental action to close.
"Commission" shall mean the Securities and Exchange Commission.
"Common Stock" shall mean shares of Common Stock of MergerCo.
"Effectiveness Date" means, with respect to the Registration Statement
required to be filed hereunder, the earlier of (a) the 150th calendar day
following the effective date of the Merger, or 180 days following the
effective date of the Merger if the Registration Statement is subject to
review and comment from the Commission, provided that if such day is not a
Business Day, then the next Business Day thereafter, and (b) the fifth
Trading Day following the date on which the Company is notified by the
Commission that the Registration Statement will not be reviewed or is no
longer subject to further review and comments.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Event" shall have the meaning set forth in Section 2(b).
"Event Date" shall have the meaning set forth in Section 2(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means, with respect to the Registration Statement
required to be filed hereunder, the 45th calendar day following the
effective date of the Merger, provided that if such day is not a Business
Day, then the Filing Date shall be the next Business Day thereafter.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"Registrable Securities" means (i) the Shares, (ii) the shares of
Common Stock issuable upon exercise of the warrants issued to the Placement
Agent or its designees in connection with the transactions contemplated by
the Memorandum and the Merger (the "Placement Agent's Warrants"), and (iii)
together with any shares of Common Stock issued or issuable upon any stock
split, dividend or other distribution, recapitalization or similar event
with respect to the foregoing or in connection with any anti-dilution
provisions in the Placement Agent's Warrants.
"Registration Statement" means the registration statements required to
be filed by MergerCo hereunder, including (in each case) the Prospectus,
amendments and supplements to the registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by
reference in the registration statement.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
"Shares" means the shares of Common Stock issued or issuable to each
Purchaser pursuant to the Merger Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not listed on a Trading
Market, a day on which the Common Stock is traded on the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock
is not quoted on the OTC Bulletin Board, a day on which the Common Stock is
quoted in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding to
its functions of reporting prices); provided, that in the event that the
Common Stock is not listed or quoted as set forth in (i), (ii) and (iii)
hereof, then Trading Day shall mean a Business Day.
"Trading Market" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market or the OTC Bulletin Board.
"Transaction Documents" means this Agreement and the Purchase
Agreement and any other documents or agreements executed in connection with
the transactions contemplated hereunder and thereunder.
2. Registration.
(a) On or prior to the Filing Date, the Company shall cause MergerCo
to prepare and file with the Commission the Registration Statement covering
the resale of all of the Registrable Securities for an offering to be made
on a continuous basis pursuant to Rule 415. The Registration Statement
required hereunder shall be on Form SB-2 (or another appropriate form in
accordance herewith). The Registration Statement required hereunder shall
contain (except if otherwise directed by the Holders) substantially the
"Plan of Distribution" attached hereto as Annex A. Subject to the terms of
this Agreement, the Company shall cause MergerCo to use its best efforts to
cause the Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event not later than the Effectiveness Date, and shall use its best efforts
to keep the Registration Statement continuously effective under the
Securities Act until the date when all Registrable Securities covered by
the Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144(k) as determined by counsel to the
Company or MergerCo pursuant to a written opinion letter to such effect,
addressed and acceptable to MergerCo's transfer agent and the affected
Holders (the "Effectiveness Period").
(b) If: (i) a Registration Statement is not filed on or prior to the
Filing Date (if the Registration Statement is filed without affording the
Holder the opportunity to review and comment on the same as required by
Section 3(a), MergerCo shall not be deemed to have satisfied this clause
(i)), or (ii) the Company fails to cause MergerCo to file with the
Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act, within five Trading Days of the date
of notification (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or is not
subject to further review, or (iii) prior to the date when such
Registration Statement is first declared effective by the Commission, the
Company fails to cause MergerCo to file a pre-effective amendment and
otherwise respond in writing to comments made by the Commission in respect
of such Registration Statement within 21 calendar days after the receipt of
comments by or notice from the Commission that such amendment is required
in order for a Registration Statement to be declared effective (or within
ten calendar days after MergerCo's accountants furnish the requisite
financial statements, if later), or (iv) a Registration Statement filed or
required to be filed hereunder is not declared effective by the Commission
on or before the Effectiveness Date, or (v) after a Registration Statement
is first declared effective by the Commission, it ceases for any reason to
remain continuously effective as to all Registrable Securities for which it
is required to be effective, or the Holders are not permitted to utilize
the Prospectus therein to resell such Registrable Securities, for in any
such case 15 calendar consecutive days but no more than an aggregate of 30
Trading Days during any 12 month period (which need not be consecutive
Trading Days)(any such failure or breach being referred to as an "Event,"
and for purposes of clause (i) or (iv) the date on which such Event occurs,
or for purposes of clause (ii) the date on which such five Trading Day
period is exceeded, or for purposes of clause (iii) the date which such 21
calendar days is exceeded, or for purposes of clause (v) the date on which
such 30 calendar day or 15 Trading Day period, as applicable, is exceeded
being referred to as "Event Date"), then in addition to any other rights
the Holders may have hereunder or under applicable law: (x) on each such
Event Date the Company shall pay to each Holder an amount in cash, as
partial liquidated damages and not as a penalty, equal to 1.5% of the
aggregate purchase price paid by such Holder pursuant to the Purchase
Agreement for any Registrable Securities then held by such Holder; and (y)
on each monthly anniversary of each such Event Date (if the applicable
Event shall not have been cured by such date) until the applicable Event is
cured, the Company shall pay to each Holder an amount in cash, as partial
liquidated damages and not as a penalty, 1.5% of the aggregate purchase
price paid by such Holder pursuant to the Purchase Agreement for any
Registrable Securities then held by such Holder. If the Company fails to
pay any partial liquidated damages pursuant to this Section in full within
seven days after the date payable, the Company will pay interest thereon at
a rate of 18% per annum (or such lesser maximum amount that is permitted to
be paid by applicable law) to the Holder, accruing daily from the date such
partial liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. The partial liquidated damages pursuant
to the terms hereof shall apply on a daily pro-rata basis for any portion
of a month prior to the cure of an Event.
3. Registration Procedures.
In connection with the registration obligations in Section 2 hereof,
the Company or MergerCo shall:
(a) Not less than five Trading Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or
supplement thereto (i) furnish to the Holders copies of all such documents
proposed to be filed (including documents incorporated or deemed
incorporated by reference to the extent requested by such Person) which
documents will be subject to the review of such Holders and (ii) cause its
officers, directors, counsel and independent certified public accountants
to respond to such inquiries as shall be necessary, in the reasonable
opinion of respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act. MergerCo shall not file the Registration
Statement or any such Prospectus or any amendments or supplements thereto
to which the Holders of a majority of the Registrable Securities shall
reasonably object in good faith, provided that the Company or MergerCo is
notified of such objection in writing no later than three Trading Days
after the Holders have been so furnished copies of such documents.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the
Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii)
cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement and, as so supplemented or amended, to be filed
pursuant to Rule 424; (iii) respond as promptly as reasonably possible to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and, as promptly as reasonably possible,
upon request, provide the Holders true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of
the Securities Act and the Exchange Act with respect to the disposition of
all Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by
the Holders thereof set forth in the Registration Statement as so amended
or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities as promptly as
reasonably possible and confirm such notice in writing promptly following
the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be
filed; (B) when the Commission notifies MergerCo whether there will be a
"review" of the Registration Statement and whenever the Commission comments
in writing on the Registration Statement (the Company shall cause MergerCo,
upon request, to provide true and complete copies thereof and all written
responses thereto to each of the Holders); and (C) with respect to the
Registration Statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority during the period of effectiveness
of the Registration Statement for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii)
of the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of
the Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) of
the receipt by MergerCo of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (v) of the occurrence
of any event or passage of time that makes the financial statements
included in the Registration Statement ineligible for inclusion therein or
any statement made in the Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case
of the Registration Statement or the Prospectus, as the case may be, it
will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; (vi) the occurrence or existence of any pending
corporate development with respect to MergerCo that the Company or MergerCo
believes may be material and that, in the determination of the Company,
makes it not in the best interest of MergerCo to allow continued
availability of the Registration Statement or Prospectus; provided that any
and all of such information shall remain confidential to each Holder until
such information otherwise becomes public, unless disclosure by a Holder is
required by law; provided, further, notwithstanding each Holder's agreement
to keep such information confidential, the Holders make no acknowledgement
that any such information is material, non-public information.
(d) Use commercially reasonable efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable
moment.
(e) Furnish to each Holder, without charge, at least one conformed copy
of the Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to
be incorporated therein by reference to the extent requested by such
Holder, and all exhibits to the extent requested by such Holder (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(f) Promptly deliver to each Holder, without charge, as many copies of
the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Holder may reasonably request in
connection their resales. Subject to the terms of this Agreement, the
Company and MergerCo hereby consent to the use of such Prospectus and each
amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered
by such Prospectus and any amendment or supplement thereto, except after
the giving on any notice pursuant to Section 3(c).
(g) Prior to any resale of Registrable Securities by a Holder, use its
commercially reasonable efforts to register or qualify or cooperate with
the selling Holders in connection with the registration or qualification
(or exemption from the Registration or qualification) of such Registrable
Securities for the resale by the Holder under the securities or Blue Sky
laws of such jurisdictions within the United States as any Holder
reasonably requests in writing, to keep each such Registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things reasonably necessary to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the Registration Statement; provided, that neither Company nor
MergerCo shall be required to qualify generally to do business in any
jurisdiction where it is not then so qualified if qualification would
subject the Company or MergerCo to any material tax in any such
jurisdiction where it is not then qualified or subject it to file a general
consent to service of process in any such jurisdiction.
(h) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to the
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement and applicable law, of all restrictive
legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may request.
(i) Upon the occurrence of any event contemplated by Section 3(c)(v),
as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration
Statement nor such Prospectus will contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Company or
MergerCo notifies the Holders in accordance with clauses (ii) through (v)
of Section 3(c) above to suspend the use of any Prospectus until the
requisite changes to such Prospectus have been made, then the Holders shall
suspend use of such Prospectus. The Company shall cause MergerCo to use its
best efforts to ensure that the use of the Prospectus may be resumed as
promptly as is practicable. The Company and MergerCo shall be entitled to
exercise their right under this Section 3(i) to suspend the availability of
a Registration Statement and Prospectus, subject to the payment of
liquidated damages pursuant to Section 2(b), for a period not to exceed 60
days (which need not be consecutive days) in any 12 month period.
(j) Comply with all applicable rules and regulations of the Commission.
(k) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction, at the earliest practicable moment.
(l) MergerCo may require each Holder to furnish to MergerCo or the
Company a certified statement as to (i) the number of shares of Common
Stock beneficially owned by such Holder, (ii) if required by the
Commission, the holder thereof or the person that has voting and
dispositive control over such shares, (iii) any relationship between such
Holder and MergerCo and (iv) such other information regarding such Holder
as shall be required by the Commission or the National Association of
Securities Dealers. If any such Holder fails to furnish such information
within three Trading Days of MergerCo's request, MergerCo or the Company
shall furnish written notice of such non-compliance to such Holder, the
Placement Agent and the Placement Agent's counsel. If, for a period of two
Trading Days after such notice is given, such Holder continues to fail to
furnish such information, then (i) MergerCo shall no longer be obligated to
include any of such Holder's Registrable Securities as part of the
Registration Statement (provided, however, in the event such Holder
provides such information to MergerCo prior to the time when MergerCo files
a request for acceleration, the Company shall cause MergerCo to register
such Holder's Registrable Securities as part of the Registration Statement)
and (ii) the Company shall have no obligation to pay any liquidated damages
to such Holder with respect to any Event. In the event that (i) the
immediately preceding sentence applies, (ii) subsequent to the filing of
the above-mentioned request for acceleration such Holder provides such
information to MergerCo or the Company and (iii) thereafter the Company
causes MergerCo to file another registration statement in which MergerCo
may include such Holder's securities without significant cost to the
Company or MergerCo and with the consent of any applicable underwriter,
then the Company shall cause MergerCo to use its best efforts to include
such Holder's Registrable Securities in such registration statement in
accordance with customary arrangements applicable to piggyback registration
rights.
(m) Notwithstanding anything contained in this Agreement, the right of
any Holder to request or demand inclusion in any registration hereunder
shall terminate if all shares of Registrable Securities held by such Holder
maybe immediately sold under Rule 144(k).
4. Registration Expenses. All fees and expenses incident to the performance
of or compliance with this Agreement by the Company shall be borne by the
Company whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.
5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder,
the officers, directors, agents and employees of each of them, each Person
who controls any such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the
fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
reasonable attorneys' fees) and expenses (collectively, "Losses"), as
incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to
any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the
extent, but only to the extent, that (i) such untrue statements or
omissions are based solely upon information regarding such Holder furnished
in writing to the Company by such Holder expressly for use therein, or to
the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed
and expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in
any amendment or supplement thereto (it being understood that the Holder
has approved Annex A hereto for this purpose) or (ii) in the case of an
occurrence of an event of the type specified in Section 3(c)(ii)-(v), the
use by such Holder of an outdated or defective Prospectus after the Company
has notified such Holder in writing that the Prospectus is outdated or
defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d). The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the
Company is aware in connection with the transactions contemplated by this
Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and
against all Losses, as incurred, to the extent arising out of or based
solely upon: (x) such Holder's failure to comply with the prospectus
delivery requirements of the Securities Act or (y) any untrue or alleged
untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment
or supplement thereto or in any preliminary prospectus, or arising out of
or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein not
misleading (i) to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in
writing by such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus or (ii) to the extent that (1)
such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates
to such Holder or such Holder's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing
by such Holder expressly for use in the Registration Statement (it being
understood that the Holder has approved Annex A hereto for this purpose),
such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (2) in the case of an occurrence of an event of the
type specified in Section 3(c)(ii)-(v), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder
in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(d). In no
event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the net proceeds received by such Holder
upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. (i) If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing,
and the Indemnifying Party shall have the right to assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have prejudiced the Indemnifying
Party.
(ii) An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall reasonably believe that a material
conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the
defense thereof and the reasonable fees and expenses of one separate
counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party,
unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter
of such Proceeding.
(iii) Subject to the terms of this Agreement, all reasonable fees and
expenses of the Indemnified Party (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to
defend such Proceeding in a manner not inconsistent with this Section)
shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party; provided, that
the Indemnified Party shall promptly reimburse the Indemnifying Party for
that portion of such fees and expenses applicable to such actions for which
such Indemnified Party is not entitled to indemnification hereunder,
determined based upon the relative faults of the parties.
(d) Contribution. (i) If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a
party as a result of any Losses shall be deemed to include, subject to the
limitations set forth in this Agreement, any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in this section was
available to such party in accordance with its terms.
(ii) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such Holder
from the sale of the Registrable Securities subject to the Proceeding
exceeds the amount of any damages that such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission, except in the case of fraud by such Holder.
(iii) The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may
have to the Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder,
of any of its obligations under this Agreement, each Holder or the Company,
as the case may be, in addition to being entitled to exercise all rights
granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder each agrees that monetary damages
would not provide adequate compensation for any losses incurred by reason
of a breach by it of any of the provisions of this Agreement and hereby
further agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law
would be adequate.
(b) No Piggyback on Registrations. Except as set forth on Schedule 6(b)
attached hereto, neither the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities
of the Company in a Registration Statement other than the Registrable
Securities. No Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company. The
Company shall not file any other registration statement (other than on Form
S8) until after the Effective Date.
(c) Compliance. Each Holder covenants and agrees that it will comply
with the Prospectus delivery requirements of the Securities Act as
applicable to it in connection with offers and sales of Registrable
Securities pursuant to the Registration Statement.
(d) Discontinued Disposition. Each Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the Company
of the occurrence of any event of the kind described in Section 3(c), such
Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of
the copies of the supplemented Prospectus and/or amended Registration
Statement or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. The Company will use its best efforts
to ensure that the use of the Prospectus may be resumed as promptly as it
practicable. The Company agrees and acknowledges that any periods during
which the Holder is required to discontinue the disposition of the
Registrable Securities hereunder shall be subject to the provisions of
Section 2(b).
(e) PiggyBack Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file
with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of
its equity securities, other than on Form S4 or Form S8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection with the
stock option or other employee benefit plans, then the Company shall send
to each Holder a written notice of such determination and, if within
fifteen days after the date of such notice, any such Holder shall so
request in writing, the Company shall include in such registration
statement all or any part of such Registrable Securities such Holder
requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights.
(f) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Company and Holders of not less than twothirds (2/3) of the then
outstanding Registrable Securities.
(g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be made in accordance
with the provisions of the Purchase Agreement.
(h) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. Notwithstanding
anything contained herein or in any document relating to the Merger or the
offering of securities pursuant to the Memorandum to the contrary, the
Company hereby agrees not to consummate the Merger unless MergerCo agrees
in writing to be bound by, and comply in all respects with, all the terms
and conditions set forth herein to the same extent that the Company is
bound. Each Holder may assign their respective rights hereunder only in the
manner and to the Persons as permitted under the Purchase Agreement.
(i) Execution and Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to
be an original and, all of which taken together shall constitute one and
the same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
(j) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof.
(k) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(n) Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be
responsible in any way for the performance of the obligations of any other
Holder hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Holder
pursuant hereto or thereto, shall be deemed to constitute the Holders as a
partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Holders are in any way acting in concert
with respect to such obligations or the transactions contemplated by this
Agreement. Each Holder shall be entitled to protect and enforce its rights,
including without limitation the rights arising out of this Agreement, and
it shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such purpose.
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxxxxxxx
--------------------------------
Name: Xxxx X. Xxxxxxxxxxx, Ph.D.
Title: President and Chief Executive Officer
PURCHASER'S SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
Name of Investing Entity: __________________________
Signature of Authorized Signatory of Investing entity: ________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
ANNEX A
Plan of Distribution
The Selling Stockholders (the "Selling Stockholders") of the common stock
("Common Stock") of Innovative Drug Delivery Systems, Inc. (the "Company") and
any of their pledgees, assignees and successors-in-interest may, from time to
time, sell any or all of their shares of Common Stock on any stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. The Selling
Stockholders may use any one or more of the following methods when selling
shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales entered into after the date of this
prospectus;
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise; or
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Each Selling Stockholder does not expect these commissions and
discounts relating to its sales of shares to exceed what is customary in the
types of transactions involved.
In connection with the sale of our common stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the
delivery to such broker-dealer or other financial institution of shares offered
by this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has informed the
Company that it does not have any agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock.
The Company is required to pay certain fees and expenses incurred by the
Company incident to the registration of the shares. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus. Each Selling
Stockholder has advised us that they have not entered into any agreements,
understandings or arrangements with any underwriter or broker-dealer regarding
the sale of the resale shares. There is no underwriter or coordinating broker
acting in connection with the proposed sale of the resale shares by the Selling
Stockholders.
We agreed to keep this prospectus effective until the earlier of (i) the
date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(e) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange Act of
1934, as amended, any person engaged in the distribution of the resale shares
may not simultaneously engage in market making activities with respect to our
common stock for a period of two business days prior to the commencement of the
distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of our common stock by the Selling Stockholders or any other
person. We will make copies of this prospectus available to the Selling
Stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale.
SCHEDULE 6(B)
PIGGYBACK REGISTRATIONS
1. Pursuant to the terms of a Subscription Agreement in September 2000, the
Company completed a private placement of 160.65 units ($100,000 per unit). Each
unit consisted of 25,000 shares of Series A Preferred Stock (convertible into
25,404 shares of common stock) with a stated value of $4.00 per share and a
conversion price of $3.94 per share and 2,540 warrants which entitled the
purchaser to purchase one share of common stock at a purchase price of $3.94 per
share. The Company granted piggyback registration rights to the holders of such
securities.
2. Pursuant to the terms of a Subscription Agreement in December 2001, the
Company completed a private placement of 10.9887 units ($500,000 per unit). Each
unit consisted of 90,090 shares of Series B Preferred Stock (convertible into
approximately 1,005,973 shares of common stock) with a stated value of $5.55 per
share and a conversion price of $5.46 per share. The Company granted piggyback
registration rights to the holders of such securities.
3. Pursuant to the terms of a Subscription Agreement in August 2003, the
Company completed a private placement of 2,954,346 shares of Series C Preferred
Stock. The Company granted piggyback registration rights to the holders of such
securities.
4. Pursuant to the terms of a Securities Purchase Agreement in November
2004, the Company issued a 10% Senior Subordinated Debenture together with
warrants to purchase 222,222 shares of common stock. The Company granted
piggyback registration rights to the holders of such securities.
