Exhibit 4.8
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of the date set forth
on the signature page hereof between Innovative Drug Delivery Systems, Inc. (the
"Company"), and the undersigned (the "Subscriber").
WITNESSETH
WHEREAS, the Company has retained Paramount Capital, Inc. ("Paramount")
to act as a non-exclusive finder, on a "best efforts" basis, in a private
offering (the "Offering") of "Units" consisting of 25,000 shares of Series A
Convertible Preferred Stock, par value $.001 per share, stated value $4.00 per
share (the "Units") of the Company;
WHEREAS, the Company desires to issue a minimum of 50 Units (the
"Minimum Offering") and a maximum of 100 Units (the "Maximum Offering") with an
option in favor of the Company to offer up to an additional 50 Units to cover
over-allotments, each "Unit" consisting of shares of 25,000 shares of Preferred
Stock. Each share of Preferred Stock is convertible at the option of the holder
thereof into one (1) share of common stock, par value $.001 per share, of the
Company (the "Common Stock"), initially at a conversion price equal to $4.00 per
share of Common Stock (the Preferred Stock and the Common Stock issuable upon
conversion of the Preferred Stock are sometimes hereinafter collectively
referred to as the "Securities");
WHEREAS, the Subscriber desires to purchase that number of Units set
forth on the signature page hereof on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company such
number of Units, or fractions thereof, and the Company agrees to sell such
number of Units to the Subscriber as is set forth on the signature page hereof *
at a price per Unit equal to $100,000 per Unit (the "Initial Offering Price").
The purchase price is payable by personal or business check or money order made
payable to "State Street Bank and Trust Company, N.A., Escrow Agent, F/B/O
Innovative Drug Delivery System, Inc." contemporaneously with the execution and
delivery of this Agreement by the Subscriber. Subscribers may also pay the
subscription amount by wire transfer of immediately available funds to:
State Street Bank & Trust Company, N.A.
Corporate Trust Dept.
00 Xxxxxxxx, 00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
ABA Routing Number:
Account Name: State Street Bank Corporate Trust
Account Number:
Sub Account Name: Innovative Drug Delivery Systems Inc.
Sub Account Number (SEI#):
Name of Subscriber: [Insert Investor Name]
The certificates representing the Units shall be delivered by the Company within
10 business days following the consummation of the Offering. The Subscriber
understands, however, that this purchase of the Units is contingent upon the
Company making sales of the Minimum Offering amount prior to the Final Closing
Date (as defined below) of the Offering.
1.2 The Subscriber recognizes that the purchase of the Units involves a
high degree of risk including, but not limited to, the following: (a) the
Company remains a development stage business with limited operating history and
requires substantial funds in addition to the proceeds of the Offering; (b) an
investment in the Company is highly speculative, and only investors who can
afford the loss of their entire investment should consider investing in the
Company and the Units; (c) the Subscriber may not be able to liquidate its
investment; (d) transferability of the Securities is extremely limited; (e) in
the event of a disposition, the Subscriber could sustain the loss of its entire
investment; and (f) the Company has not paid any dividends since its inception
and does not anticipate paying any dividends, even if declared by the Board of
Directors pursuant to the terms of the Preferred Stock. Such risks are more
fully set forth in the Confidential Private Placement Memorandum dated August
10, 2000, as supplemented and amended, and the attachments and exhibits thereto,
all of which constitute an integral part thereof furnished by the Company to the
Subscriber (the "Memorandum").
1.3 The Subscriber represents that the Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D ("Regulation D")
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
as indicated by the Subscriber's responses to the questions contained in Article
VII hereof, and that the Subscriber is able to bear the economic risk of an
investment in the Unit
1.4 The Subscriber hereby acknowledges and represents that (a) the
Subscriber has knowledge and experience in business and financial matters, prior
investment experience, including investment in securities that are non-listed,
unregistered and/or not traded on a national securities exchange nor on the
National Association of Securities Dealers, Inc. (the "NASD") automated
quotation system ("NASDAQ"), or the Subscriber has employed the services of a
"purchaser representative" (as defined in Rule 501 of Regulation
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D) attorney and/or accountant to read all of the documents furnished or made
available by the Company both to the Subscriber and to all other prospective
investors in the Units and to evaluate the merits and risks of such an
investment on the Subscriber's behalf; (b) the Subscriber recognizes the highly
speculative nature of this investment; and (c) the Subscriber is able to bear
the economic risk that the Subscriber hereby assumes.
1.5 The Subscriber hereby acknowledges receipt and careful review of
the Memorandum, including, without limitation, the "Risk Factors" included
therein, the form of Certificate of Designations attached thereto and this
Agreement (collectively referred to as the "Offering Materials") and hereby
represents that the Subscriber has been furnished by the Company during the
course of the Offering with all information regarding the Company that the
Subscriber has requested or desired to know, has been afforded the opportunity
to ask questions of and receive answers from duly authorized officers or other
representatives of the Company concerning the terms and conditions of the
Offering and has received any additional information that the Subscriber has
requested.
1.6 (a) In making the decision to invest in the Units the Subscriber
has relied solely upon the information provided by the Company in the Offering
Materials. To the extent necessary, the Subscriber has retained, at its own
expense, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and the
purchase of the Units hereunder. The Subscriber disclaims reliance on any
statements made or information provided by any person or entity in the course of
Subscriber's consideration of an investment in the Units other than the Offering
Materials. The Subscriber acknowledges and agrees that (i) the Company has
prepared the Memorandum and that no other person, including without limitation,
Paramount, has supplied any information for inclusion in the Memorandum other
than information furnished in writing to the Company by Paramount specifically
for inclusion in such parts of the Memorandum relating specifically to
Paramount, (ii) Paramount has no responsibility for the accuracy or completeness
of the Memorandum and (iii) the Subscriber has not relied upon the independent
investigation or verification, if any, that may have been undertaken by
Paramount.
(b) The Subscriber represents that (i) the Subscriber was contacted
regarding the sale of the Units by the Company (or an authorized agent or
representative thereof) with whom the Subscriber had a prior substantial
pre-existing relationship and (ii) no Units were offered or sold to it by means
of any form of general solicitation or general advertising and in connection
therewith, the Subscriber did not (A) receive or review any advertisement,
article, notice or other communication published in a newspaper or magazine or
similar media or broadcast over television or radio, whether closed circuit, or
generally available; or (B) attend any seminar meeting or industry investor
conference whose attendees were invited by any general solicitation or general
advertising.
1.7 The Subscriber hereby represents that the Subscriber, either by
reason of the Subscriber's business or financial experience or the business or
financial experience of the Subscriber's professional advisors (who are
unaffiliated with and not compensated by the Company or any affiliate or selling
agent of the Company, including Paramount, directly or
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indirectly), has the capacity to protect the Subscriber's own interests in
connection with the transaction contemplated hereby.
1.8 The Subscriber hereby acknowledges that the Offering has not been
reviewed by the United States Securities and Exchange Commission (the "SEC") nor
any state regulatory authority since the Offering is intended to be exempt from
the registration requirements of Section 5 of the Securities Act pursuant to
Regulation D promulgated under the Securities Act. The Subscriber understands
that the Securities have not been registered under the Securities Act and agrees
not to sell or otherwise transfer the Securities unless they are registered
under the Securities Act or unless an exemption from such registration is
available.
1.9 The Subscriber understands that the Securities comprising the Units
have not been registered under the Securities Act by reason of a claimed
exemption under the provisions of the Securities Act that depends, in part, upon
the Subscriber's investment intention. In this connection, the Subscriber hereby
represents that the Subscriber is purchasing the Securities for the
Subscriber's own account for investment and not with a view toward the resale or
distribution to others. The Subscriber, if an entity, further represents that it
was not formed for the purpose of purchasing the Securities.
1.10 The Subscriber understands that there is no public market for the
Units nor the Securities comprising the Units and that no market may develop for
any of such Securities. The Subscriber understands that even if a public market
develops for such securities, Rule 144 ("Rule 144") promulgated under the
Securities Act requires for non-affiliates, among other conditions, a one-year
holding period prior to the resale (in limited amounts) of securities acquired
in a non-public offering without having to satisfy the registration requirements
under the Securities Act. The Subscriber understands and hereby acknowledges
that the Company is under no obligation to register any of the Units or any of
the Securities comprising the Units under the Securities Act or any state
securities or "blue sky" laws other than as set forth in Article V. The
Subscriber agrees to hold the Company and its directors, officers, employees,
affiliates, controlling persons and agents (including Paramount and its
officers, directors, employees, counsel, controlling persons and agents) and
their respective heirs, representatives, successors and assigns harmless and to
indemnify them against all liabilities, costs and expenses incurred by them as a
result of (a) any misrepresentation made by the Subscriber contained in this
Agreement (including the Confidential Investor Questionnaire contained in
Articles VII herein); (b) any sale or distribution by the Subscriber in
violation of the Securities Act or any applicable state securities or "blue sky"
laws; or (c) any untrue statement of a material fact made by the Subscriber and
contained herein.
1.11 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Securities that such Securities
have not been registered under the Securities Act or any state securities or
"blue sky" laws and setting forth or referring to the restrictions on
transferability and sale thereof contained in this Agreement. The Subscriber is
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aware that the Company will make a notation in its appropriate records with
respect to the restrictions on the transferability of such Securities.
1.12 The Subscriber understands that the Company will review this
Agreement and is hereby given authority by the Subscriber to call Subscriber's
bank or place of employment or otherwise review the financial standing of the
Subscriber; and it is further agreed that the Company, at its sole discretion,
reserves the unrestricted right, without further documentation or agreement on
the part of the Subscriber, to reject or limit any subscription, to accept
subscriptions for fractional Units and to close the Offering to the Subscriber
at any time and will issue stop transfer instructions to its transfer agent with
respect to such Securities.
1.13 The Subscriber hereby represents that the address of the
Subscriber furnished by Subscriber on the signature page hereof is the
Subscriber's principal residence if Subscriber is an individual or its principal
business address if it is a corporation or other entity.
1.14 The Subscriber represents that the Subscriber has full power and
authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Units and the Securities underlying the Units.
This Agreement constitutes the legal, valid and binding obligation of the
Subscriber, enforceable against the Subscriber in accordance with its terms.
1.15 If the Subscriber is a corporation, partnership, limited liability
company, trust, employee benefit plan, individual retirement account, Xxxxx
Plan, or other tax-exempt entity, it is authorized and qualified to invest in
the Company and the person signing this Agreement on behalf of such entity has
been duly authorized by such entity to do so.
1.16 The Subscriber acknowledges that if he or she is a Registered
Representative of an NASD member firm, he or she must give such firm the notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm in Section 7.4 below.
1.17 The Subscriber acknowledges that at such time, if ever, as the
Securities are registered, sales of the Securities will be subject to state
securities laws.
1.18 (a) Subject to the provision below and Section 1.18(b), the
Subscriber hereby agrees that from the earlier to occur of (i) the date of the
initial public offering of the Common Stock (the "IPO") or (ii) the first date
(the "Trading Date") on which the Common Stock (or securities received in
exchange for Common Stock) trades on a national securities exchange or on
the NASDAQ (a "Trading Event") and continuing for a period of six months
thereafter or such longer period as may be requested by the underwriter or
underwriters, in the case of an IPO (the "Lock-Up Period"), the Subscriber will
not, without the prior written consent of Paramount, offer, pledge, sell,
contract to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, the Registrable Securities (as defined in Section 5.1)
purchased or acquired by the Subscriber. In addition, the Subscriber agrees that
during the
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period from the date that Subscriber was first contacted with respect to the
potential purchase of the Units through the last date upon which Subscriber
holds any Securities or Registrable Securities, the Subscriber will not directly
or indirectly, through related parties, affiliates or otherwise sell "short" or
"short against the box" (as those terms are generally understood) any equity
security of the Company; provided, however, that it shall not be a violation of
this Section 1.18, if the Subscriber places a sell order for Registrable
Securities prior to the conversion of the Units.
(b) In connection with any subsequent public offering of the Company's
securities, the Holder hereby agrees to be subject to a lock-up for a period of
60 days or such longer period following such public offering as required by the
underwriter or underwriters of such public offering. The foregoing lock-ups
shall be applicable regardless of whether the securities are then registered for
re-sale under the Securities Act. This Section 1.18 shall be binding upon any
transferee of the Securities.
(c) In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities (as
defined below) of each Holder (as defined below) (and the shares or securities
of every other person subject to the foregoing restriction) until the end of
such period.
1.19 (a) The Subscriber agrees not to issue any public statement with
respect to the Subscriber's investment or proposed investment in the Company or
the terms of any agreement or covenant between them and the Company without the
Company's prior written consent, except such disclosures as may be required
under applicable law or under any applicable order, rule or regulation.
(b) The Company agrees not to disclose the names, addresses or any
other information about the Subscriber, except as required by law; provided,
that the Company may use the name (but not the address) of the Subscriber in any
registration statement filed pursuant to Article V in which the Subscriber's
shares are included.
1.20 The Subscriber represents and warrants that it has not engaged,
consented to or authorized any broker, finder or intermediary to act on its
behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. The Subscriber
hereby agrees to indemnify and hold harmless the Company from and against all
fees, commissions or other payments owing to any such person or firm acting on
behalf of such Subscriber hereunder.
II. REPRESENTATIONS BY AND COVENANTS OF THE COMPANY
The Company hereby represents and warrants to the Subscriber that:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of
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Delaware and has full corporate power and authority to conduct its business as
described in the Memorandum.
2.2 Capitalization and Voting Rights. The authorized, issued and
outstanding capital stock of the Company is as set forth in the Memorandum and
all issued and outstanding shares of the Company are validly issued, fully paid
and nonassessable. The Securities comprising the Units, when issued and paid for
in accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable. The Company shall at all times during the period that
any of the shares of Preferred Stock remain outstanding and unexercised have
authorized and reserved for issuance a sufficient number of shares of Common
Stock to provide for conversion of the Preferred Stock. Except as set forth in
the Memorandum, there are no outstanding options, warrants, agreements,
convertible securities, preemptive rights or other rights to subscribe for or to
purchase any shares of capital stock of the Company. Except as set forth in the
Offering Materials and as otherwise required by law, there are no restrictions
upon the voting or transfer of any of the shares of capital stock of the Company
pursuant to the Company's Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), By-Laws or other governing documents or any
agreement or other instruments to which the Company is a party or by which the
Company is bound.
2.3 Authorization; Enforceability. The Company has all corporate right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization (i)
proposed merger with Pain Management, Inc. with and into the Company, (ii)
execution, delivery and performance of this Agreement by the Company, (iii) the
authorization, sale, issuance and delivery of the Securities contemplated hereby
and the performance of the Company's obligations hereunder has been taken. This
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy. Upon the issuance and delivery of the Units
as contemplated by this Agreement, such Units will be validly issued, fully paid
and nonassessable. Upon the issuance and delivery of the Common Stock issuable
upon conversion of the Preferred Stock (including the Preferred Stock issuable
upon exercise of the Paramount Warrants (as defined in the Memorandum)), and
upon compliance by the Subscriber with the terms hereof, the Common Stock will
be validly issued, fully paid and nonassessable. The issuance and sale of the
Units contemplated hereby and the issuance and sale of the Common Stock
underlying the Preferred Stock (including the Preferred Stock issuable upon
exercise of the Paramount Warrants), will not give rise to any preemptive rights
or rights of first refusal on behalf of any person.
2.4 Certificate of Designations of Preferred Stock. The Preferred Stock
has all of the rights, preferences and privileges substantially as set forth in
the Form of Certificate of Designations attached as Exhibit A to the Memorandum.
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2.5 No Conflict; Governmental Consents.
(a) The execution and delivery by the Company of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
violation of any material law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or governmental authority to or by
which the Company is bound, or of any provision of the Certificate of
Incorporation or By-Laws of the Company, and will not conflict with, or result
in a material breach or violation of, any of the terms or provisions of, or
constitute (with due notice or lapse of time or both) a default under, any
lease, loan agreement, mortgage, security agreement, trust indenture or other
agreement or instrument to which the Company is a party or by which it is bound
or to which any of its properties or assets is subject, nor result in the
creation or imposition of any lien upon any of the properties or assets of the
Company.
(b) No consent, approval, authorization or other order of any
governmental authority is required to be obtained by the Company in connection
with the authorization, execution and delivery of this Agreement or with the
authorization, issue and sale of the Units or the Securities comprising the
Units, except such filings as may be required to be made with the SEC, the NASD,
NASDAQ and with any state or foreign blue sky or securities regulatory
authority.
2.6 Licenses. Except as otherwise set forth in the Memorandum, the
Company has sufficient licenses, permits and other governmental authorizations
currently required for the conduct of its business or ownership of properties
and is in all material respects complying therewith.
2.7 Litigation. The Company knows of no pending or threatened legal or
governmental proceedings against the Company that would materially adversely
affect the business, property, financial condition or operations of the Company.
2.8 Memorandum, Disclosure. The information set forth in the Memorandum
as of the date thereof contains no untrue statement of a material fact nor omits
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
2.9 Investment Company. The Company is not an "investment company"
within the meaning of such term under the Investment Company Act of 1940, as
amended, and the rules and regulations of the SEC thereunder.
2.10 Finder. The Company has engaged, consented to and authorized
Paramount to act as finder for the Company in connection with the transactions
contemplated by this Agreement. The Company will pay Paramount a commission as
set forth in the Memorandum and will reimburse Paramount's reasonable
out-of-pocket expenses incurred in connection with the Offering, and the Company
agrees to indemnify and hold harmless the Subscribers from and against all fees,
commissions or other payments owing by the Company to Paramount or any other
person or firm acting on behalf of the Company hereunder.
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III. TERMS OF SUBSCRIPTION
3.1 The Company desires to issue at least the Minimum Offering amount
and at most the Maximum Offering amount with an option in favor of Paramount to
offer up to an additional 50 Units to cover over-allotments. Each share of
Preferred Stock is convertible at the option of the holder thereof into one
shares of Common Stock of the Company, initially at a conversion price equal to
$4.00 per share of Common Stock. Upon receipt of the Minimum Offering amount,
the Company may conduct a closing (the "Initial Closing Date") and may conduct
subsequent closings on an interim basis (each a "Closing") until the Maximum
Offering amount has been reached (the "Final Closing Date").
3.2 Placement of the Units will be made by the Company, who will remit
certain compensation to Paramount for introduction to investors and other
services described in the Memorandum.
3.3 Pending the sale of the Units, all funds paid hereunder shall be
deposited by the Company in escrow with State Street Bank and Trust Company,
N.A., having a branch at 00 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, 00000. If the Company
shall not have obtained subscriptions (including this subscription) for
purchases of the Minimum Offering amount on or before the Final Closing Date,
then this subscription shall be void and all funds paid hereunder by the
Subscriber shall be promptly returned to the Subscriber.
3.4 The Subscriber hereby authorizes and directs the Company to deliver
the certificates representing the shares of Units to be issued to the Subscriber
pursuant to this Agreement directly to the Subscriber's account maintained by
Paramount, if any, or, if no such account exists, to the residential or business
address indicated on the signature page hereto.
3.5 The Subscriber hereby Authorizes and directs the Company to return
any funds for unaccepted subscriptions to the same account from which the funds
were drawn, including any customer account maintained with Paramount.
IV. CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS
4.1 The Subscriber's obligation to purchase the Units at the Closings
is subject to the fulfillment on or prior to each Closing of the following
conditions, which said conditions may be waived at the option of each Subscriber
to the extent permitted by law:
(a) Representations and Warranties Correct. The representations and
warranties made by the Company in Article II hereof shall be true and correct in
all material respects when made, and shall be true and correct in all material
respects on each Closing with the same force and effect as if they had been made
on and as of said date.
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(b) Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to such purchase shall
have been performed or complied with in all material respects.
(c) No Legal Order Pending. There shall not then be in effect any legal
or other order enjoining or restraining the transactions contemplated by this
Agreement.
(d) No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law, rule or regulation prohibiting or restricting such sale or
requiring any consent or approval of any person, which shall not have been
obtained, to issue the Securities (except as otherwise provided in this
Agreement).
(e) Minimum Subscriptions. The Company shall have received binding
subscriptions for at least the Minimum Offering amount.
(f) License Agreement. The Company shall have executed a valid and
binding definitive agreement, relating to the acquisition by the Company of the
world wide rights to certain compounds as described in the Memorandum, with West
Pharmaceutical Services, Inc.
(g) Merger. A duly authorized Certificate of Merger, relating to the
merger of the Company with Pain Management, Inc., shall have been filed with the
Secretary of State of the State of Delaware.
V. REGISTRATION RIGHTS
5.1 Definitions. As used in this Agreement, the following terms shall
have the following meanings.
(a) The term "Holder" shall mean any person owning or having the right
to acquire Registrable Securities or any permitted transferee of a Holder.
(b) The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
order of effectiveness of such registration statement or document.
(c) The term "Registrable Securities" shall mean (i) the shares of
Common Stock issuable upon conversion of the Preferred Stock underlying the
Units; (ii) the shares of Common Stock issuable upon conversion of the Preferred
Stock underlying the Paramount Warrants; and (iii) any shares of Common Stock
issued (or issuable upon the conversion or exercise of any warrant, right or
other security that is issued) pursuant to this Agreement or issuable pursuant
to a dividend or other distribution with respect to or in replacement of the
Units; provided, however, that securities shall only be treated as Registrable
Securities if and only for so long as they (A) have not been disposed of
pursuant to
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a registration statement declared effective by the SEC, (B) have not been sold
in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale and (C) are held by a Holder or a permitted transfers of a Holder
pursuant to Section 5.11.
5.2 Piggyback Registration.
(a) The Company agrees that if, at any time, and from time to time,
after the earlier to occur of (i) an IPO and (ii) a Trading Event, and ending on
the date that is five years from the date hereof, the Board of Directors of the
Company (the "Board") shall authorize the filing of a registration statement
under the Securities Act (other than the initial public offering of the
Company's Common Stock or a registration statement on Form X-0, Xxxx X-0 or any
other form that does not include substantially the same information as would be
required in a form for the general registration of securities) in connection
with the proposed offer of any of its securities by it or any of its
stockholders, the Company shall: (A) promptly notify the Holder that such
registration statement will be filed and that the Registrable Securities then
held by the Holder will be included in such registration statement at the
Holder's request; (B) cause such registration statement to cover all of such
Registrable Securities issued to the Holder for which the Holder requests
inclusion; (C) use its reasonable best efforts to cause such registration
statement to become effective as soon as practicable; and (D) take all other
action necessary under any Federal or state law or regulation of any
governmental authority to permit all such Registrable Securities that have been
issued to the Holder to be sold or otherwise disposed of, and will maintain such
compliance with each such Federal and state law and regulation of any
governmental authority for the period necessary for the Holder to effect the
proposed sale or other disposition.
(b) Notwithstanding any other provision of this Article V, the Company
may at any time, abandon or delay any registration commenced by the Company. In
the event of such an abandonment by the Company, the Company shall not be
required to continue registration of shares requested by the Holder for
inclusion and the Holder shall retain the right to request inclusion of shares
as set forth above.
(c) Each Holder shall have the right to request inclusion of any of its
Registrable Securities in a registration statement as described in this Section
5.2, up to four times.
5.3 Demand Registration.
(a) Registration on Request. (1) The Company further agrees that if, at
any time, and from time to time, but at least 180 days after the earlier to
occur of (i) an IPO and (ii) a Trading Event, and ending on the date that is
five years from the date hereof, the Holders desire to effect the registration
under the Securities Act of outstanding Registrable Securities, the Holders may
make a written request that the Company effect such registration; provided that
such registration covers at least 51% of the Registrable Securities owned by the
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Holders at such time. Such request will specify the number of shares of
Registrable Securities proposed to be sold and will also specify the intended
method of disposition thereof. The Company will use its best efforts to file,
within 30 days of such demand, the registration under the Securities Act of the
Registrable Securities which the Company has been so requested to register by
such Holders pursuant to this Section 5.3(a)(i), to the extent necessary to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities to be registered; provided, further,
that the Holders shall be only one demand registration.
(ii) Notwithstanding Sections 5.3(a)(i),
(A) the Company shall not be obligated to file a registration
statement relating to a registration request pursuant to this Section
5.3 at any time during the six-month period immediately following the
effective date of another registration statement filed by the Company
(other than a registration statement on Form S-4 or Form S-8 or any
successor or similar form);
(B) the Company shall not be obligated to file pursuant to
this Section 5.3 more than one registration statement on Form X-0, X-0
or S-3 initiated by the Holders, it being understood that the aggregate
price to the public with respect to each such registration statement on
Form S-3 must be expected to be not less than $1 million; and
(C) if the Board determines, in its good faith reasonable
judgment, that the Company should not file any registration statement
otherwise required to be filed pursuant to Section 5.3(a) or should
withdraw any such previously filed registration statement because the
Company is engaged in or in good faith plans to engage in any
financing, acquisition or other material transaction which would be
adversely affected by the filing or maintenance of a registration
statement otherwise required to be filed or maintained pursuant to this
Section 5.3, or that the Company is in the possession of material
nonpublic information required to be disclosed in such registration
statement or an amendment or supplement thereto, the disclosure of
which in such registration statement would be materially
disadvantageous to the Company (a "Disadvantageous Condition"), the
Company shall be entitled to postpone for the r shortest reasonable
period of time (but not exceeding 180 days from the date of the
determination), the filing of such registration statement or, if such
registration statement has already been filed, may withdraw such
registration statement and shall promptly give the Holders written
notice of such determination, containing a general statement of the
reasons for such postponement and an approximation of the anticipated
delay. If the Company shall so postpone the filing or effect the
withdrawal of the registration statement, the Holders who made the
request for registration shall have the right to withdraw the request
for registration by giving written notice to the Company within 30 days
after receipt of the notice of postponement. The Company's right to
delay a
12
request for registration or to withdraw a registration statement
pursuant to this Section 5.3 may not be exercised more than once in any
one-year period.
(b) Pursuant to Section 5.2, after the receipt of a registration
request hereunder, the Company shall notify the Holders of any other Person
requesting shares of Registrable Securities to be included therein and the
number of shares of Common Stock requested to be included therein. If the
Company determines to take any action pursuant to clause (D) above, the Company
shall deliver a notice to the Holders to such effect. Upon the receipt of any
such notice, such Holders shall forthwith discontinue use of the prospectus
contained in such registration statement and, if so directed by the Company,
shall deliver to the Company all copies of the prospectus then covering such
Registrable Securities current at the time of receipt of such notice (or, if no
registration statement has yet been filed, all drafts of the prospectus covering
such Registrable Securities). If any Disadvantageous Condition shall cease to
exist, the Company shall promptly notify the Holders to such effect. If any
registration statement shall have been withdrawn, the Company shall, if
requested by the Holders who made the request for registration, at such time as
it is possible or, if earlier, at the end of the 180-day period following such
withdrawal, file a new registration statement covering the Registrable
Securities that were covered by such withdrawn registration statement, and the
effectiveness of such registration statement shall be maintained for such time
as may be necessary so that the period of effectiveness of such new registration
statement, when aggregated with the period during which such withdrawn
registration statement was effective, if any, shall be such time as may be
otherwise required by this Agreement.
5.3 Whenever required under this Article V to include Registrable
Securities in a Company registration statement, the Company shall, as
expeditiously as reasonably possible:
(a) Use its best efforts to (i) cause such registration statement to
become effective, and, and (ii) cause such Registration Statement to remain
effective until such date as the holders of the Shares have completed the
distribution described in the Registration Statement or until such time that all
of such Shares are no longer, by reason of Rule 144(k) under the Act, required
to be registered for the sale thereof by such holders. The Company will also use
its best efforts to, during the period that such Registration Statement is
required to be maintained hereunder, file such post-effective amendments and
supplements thereto as may be required by the Securities Act and the rules and
regulations thereunder or otherwise to ensure that the Registration Statement
does not contain any untrue statement of material fact or omit to state a fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading; provided, however, that if applicable rules under the Securities Act
governing the obligation to file a post-effective amendment permits, in lieu of
filing a post-effective amendment that (i) includes any prospectus required by
Section 10(a) of the Securities Act or (ii) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the Company may incorporate by reference information
required to be included in (i) and (ii) above to the extent such information is
contained in periodic reports filed pursuant to Section 13 or 15(d) of the
Exchange Act in the registration statement.
13
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement, and the prospectus used in connection with such
registration statement, as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus as amended or supplemented from time to time,
in conformity with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to facilitate the disposition
of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered
by such registration statement under such other federal or state securities laws
of such jurisdictions as shall be reasonably requested by the Holders; provided,
however, that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, (i) when the registration
statement or any post-effective amendment and supplement thereto has become
effective; (ii) of the issuance by the SEC of any stop order or the initiation
of proceedings for that purpose (in which event the Company shall make every
effort to obtain the withdrawal of any order suspending effectiveness of the
registration statement at the earliest possible time or prevent the entry
thereto); of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose; and (iv) of
the happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(g) Cause all such Registrable Securities registered hereunder to be
listed on each securities exchange or quotation service on which similar
securities issued by the Company are then listed or quoted.
14
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
5.5 Furnish Information. It shall be a condition precedent to the
obligation of the Company to take any action pursuant to this Article V with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding the Holder, the
Registrable Securities held by the Holder, and the intended method of
disposition of such securities as shall be reasonably required by the Company to
effect the registration of such Holder's Registrable Securities.
5.6 Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 5.2 for each Holder, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto, but excluding underwriting discounts and
commissions relating to Registrable Securities; provided, however, that the
Company shall not bear the cost of any professional fees or costs of accounting,
financial or legal advisors to any of the Holders. Notwithstanding the
foregoing, each Holder shall pay all registration expenses that such Holder is
required to pay under applicable law.
5.7 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 5.2 to include any of the Holders'
Registrable Securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters), and then only in
such quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders). For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder who is a holder of
Registrable Securities and is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder", as defined in this sentence.
15
5.8 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Article.
5.9 Indemnification. In the event that any Registrable Securities are
included in a registration statement under this Article V.
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, or the Exchange Act, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, or any rule or
regulation promulgated under the Securities Act, or the Exchange Act, and the
Company will pay to each such Holder, underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
Section 5.9(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers, each
person, if any, who controls the Company within the meaning of the Securities
Act, any underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or other Holder,
against any losses, claims, damages, or liabilities (joint or several) to which
any of the foregoing persons may become subject, under the Securities Act, or
the Exchange Act, insofar as such losses, claims, damages, or liabilities (or
action in respect thereto) arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this Section 5.9(b), in
connection with investigating or defending any such loss, claim,
16
damage, liability, or action; provided, however, that the indemnity agreement
contained in this Section 5.9(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the Consent of the Holder, which consent shall not be
unreasonably withheld; provided, further, that, in no event shall any indemnity
under this Section 5.9(b) exceed the greater of the cash value of the (i) gross
proceeds from the offering received by such Holder or (ii) Holder's investment
pursuant to this Agreement as set forth on the signature page attached hereto.
(c) Promptly after receipt by an indemnified party under this Section
5.9 of notice of the commencement of any action (including any governmental
action), such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under this Section 5.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel selected by the
indemnifying party and approved by the indemnified party (whose approval shall
not be unreasonably withheld); provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
5.9, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 5.9.
(d) If the indemnification provided for in this Section 5.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the alleged omission to state a material
fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in
17
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
(f) The obligations of the Company and Holders under this Section 5.9
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Article V, and otherwise.
5.10 Reports Under Securities Exchange Act of 1934 . With a view to
making available to the Holders the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after 90 days after the
effective date of the registration statement filed in connection with an IPO by
the Company;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a copy of the nest recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (ii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
5.11 Permitted Transferees. The rights to cause the Company to register
Registrable Securities granted to the Holders by the Company under this Article
5 may be assigned in full by a Holder in connection with a transfer by such
Holder of its Registrable Securities if: (a) such Holder gives prior written
notice to the Company; (b) such transferee agrees to comply with the terms and
provisions of this Agreement; (c) such transfer is otherwise in compliance with
this Agreement and (d) such transfer is otherwise be effected in accordance with
applicable securities laws. Except as specifically permitted by this Section
5.11, the rights of a Holder with respect to Registrable Securities as set out
herein shall not be transferable to any other Person, and any attempted transfer
shall cause all rights of such Holder therein to be forfeited.
5.12 Termination of Registration Rights. The right of any Holder to
request or demand inclusion in any registration pursuant to Section 5.2 and
Section 5.3 shall terminate if all shares of Registrable Securities held by such
Holder may immediately be sold under Rule 144(k).
VI. MISCELLANEOUS
18
6.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested. or delivered by hand against written receipt therefor,
addressed to: c/o Innovative Drug Delivery Systems, Inc., 000 Xxxxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, XX 00000, Attn: Xxxxx X. Xxxxx, with a copy to x/x
Xxxxxxxxx Xxxxxxx, Inc. 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000,
Attn: Xxxxxxx X. Xxxxxxxxx, and to the Subscriber at the Subscriber's address
indicated on the signature page of this Agreement. Notices shall be deemed to
have been given or delivered on the date of mailing, except notices of change of
address, which shall be deemed to have been given or delivered when received.
6.2 Except as otherwise provided herein, this Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
6.3 Subject to the provisions of Section 5.11 and 6.13, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and to
their respective heirs, legal representatives, successors and assigns. This
Agreement sets forth the entire agreement and understanding between the parties
as to the subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
6.4 Upon the execution and delivery of this Agreement by the
Subscriber, this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Units as herein provided, subject, however, to
the right hereby reserved by the Company to enter into the same agreements with
other subscribers and to add and/or delete other persons as subscribers.
6.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY
ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO SUCH STSTES PRINCIPLES OF CONFLICTS
OF LAW. IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR
RESOLVING DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT IS THE SUPREME
COURT OF THE STATE OF NEW YORK IN AND FOR THE COUNTY OF NEW YORK OR THE FEDERAL
COURTS FOR SUCH STATE AND COUNTY, AND ALL RELATED APPELLATE COURTS. THE PARTIES
HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID
VENUE.
6.6 In order to discourage frivolous claims the parties agree that
unless a claimant in any proceeding arising out of this Agreement succeeds in
establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other parties
to the action), then the other party shall be entitled to recover
19
from such claimant all of its/their reasonable legal costs and expenses relating
to such proceeding and/or incurred in preparation therefor.
6.7 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.
6.8 It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
6.9 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
6.10 This Agreement may be executed in two or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
6.11 Nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement, except (a) for the
holders of Registrable Securities and (b) for Paramount pursuant to Sections
1.6(a) and 2.10 hereto
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
VII. CONFIDENTIAL INVESTOR QUESTIONNAIRE
7.1 The Subscriber represents and warrants that he, she or it comes
within one category marked below, and that for any category marked, he, she or
it has truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish
any additional information which the Company deems necessary in order to verify
the answers set forth below.
Category A __ The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or
joint net worth with his or her spouse, presently
exceeds $1,000,000.
Explanation. In calculating net worth you may include
equity in personal property and real estate,
including your principal residence, cash, short-term
investments, stock and securities. Equity in personal
property and real estate should be based on the fair
market value of such property, less debt secured by
such property.
Category B __ The undersigned is an individual (not a partnership,
corporation, etc.) who had an income in excess of
$200,000 in each of the two most recent years, or
joint income with his or her spouse in excess of
$300,000 in each of those years (in each case
including foreign income, tax exempt income and full
amount of capital gains and losses but excluding any
income of other family members and any unrealized
capital appreciation) and has a reasonable
expectation of reaching the same income level in the
current year.
Category C __ The undersigned is a director or executive officer of
the Company which is issuing and selling the Units.
Category D __ The undersigned is a bank; a savings and loan
association; insurance company; registered investment
company; registered business development company;
licensed small business investment company ("SBIC");
or employee benefit plan within the meaning of Title
1 of ERISA and (a) the investment decision is made by
a plan fiduciary which is either a bank, savings and
loan association, insurance company or registered
investment advisor, or (b) the plan has total assets
in excess of $5,000,000 or (c) is a self directed
plan with investment decisions made solely by persons
that are accredited investors. (describe entity)
-----------------------------------------------------
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21
Category E __ The undersigned is a private business development
company as defined in section 202(a)(22) of the
Investment Advisors Act of 1940. (describe entity)
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-----------------------------------------------------
Category F __ The undersigned is either a corporation, partnership,
Massachusetts business trust, or non-profit
organization within the meaning of Section 501(c)(3)
of the Internal Revenue Code, in each case not formed
for the specific purpose of acquiring the Units and
with total assets in excess of $5,000,000. (describe
entity)
-----------------------------------------------------
-----------------------------------------------------
Category G __ The undersigned is a trust with total assets in
excess of $5,000,000, not formed for the specific
purpose of acquiring the Units, where the purchase is
directed by a "sophisticated investor" as defined in
Regulation 506(b)(2)(ii) under the Act.
Category H __ The undersigned is an entity (other than a trust) in
which all of the equity owners are "accredited
investors" within one or more of the above
categories. If relying upon this Category alone, each
equity owner must complete a separate copy of this
Agreement. (describe entity)
-----------------------------------------------------
Category I __ The undersigned is not within any of the categories
above and is therefore not an accredited investor.
The undersigned agrees that the undersigned will
notify the Company at any time on or prior to the
Closing Date in the event that the representations
and warranties in this Agreement shall cease to be
true, accurate and complete.
7.2 SUITABILITY (please answer each question)
(a) For an individual Subscriber, please describe your current
employment, including the company by which you are employed and its principal
business:
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22
(b) For an individual Subscriber, please describe any college or
graduate degrees held by you:
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(c) For all Subscribers, please list types of prior investments:
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(d) For all Subscribers, please state whether you have you participated
in other private placements before:
YES _____ NO _____
(e) If your answer to question (d) above was "YES", please indicate
frequency of such prior participation in private placements of:
Public Private Public or Private
Companies Companies Biotechnology Companies
--------- --------- -----------------------
Frequently _________ __________ __________
Occasionally _________ __________ __________
Never _________ __________ __________
(f) For individual Subscribers, do you expect your current level of
income to significantly decrease in the foreseeable future:
YES _____ NO _____
(g) For trust, corporate, partnership and other institutional
Subscribers, do you expect your total assets to significantly decrease in the
foreseeable future:
YES _____ NO _____
(h) For all Subscribers, do you have any other investments or
contingent liabilities which you reasonably anticipate could cause you to need
sudden cash requirements in excess of cash readily available to you:
YES _____ NO _____
23
(i) For all Subscribers, are you familiar with the risk aspects and
the non-liquidity of investments such as the securities for which you seek to
subscribe?
YES _____ NO _____
(j) For all Subscribers, do you understand that there is no guarantee
of financial return on this investment and that you run the risk of losing your
entire investment?
YES _____ NO _____
7.3 MANNER IN WHICH TITLE IS TO BE HELD. (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of Survivorship
(both parties must sign)
(d) Partnership*
(e) Tenants in Common
(f) Company*
(g) Trust*
(h) Other
* If Units are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.
24
7.4 NASD AFFILIATION.
Are you affiliated or associated with an NASD member firm (please check one):
YES _____ NO _____
If Yes, please describe:
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*If Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
------------------------------------
Name of NASD Member Firm
By:
---------------------------------
Authorized Officer
Date:
--------------------------------
7.5 The undersigned is informed of the significance to the Company of
the foregoing representations and answers contained in the Confidential Investor
Questionnaire contained in this Article VII and such answers have been provided
under the assumption that the Company will rely on them.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25
NUMBER OF UNITS ______ X $100,000 = _______ (the "Purchase Price")
------------------------------------ --------------------------------------
Signature Signature (if purchasing jointly)
------------------------------------ --------------------------------------
Name Typed or Printed Name Typed or Printed
------------------------------------ --------------------------------------
Entity Name Entity Name
------------------------------------ --------------------------------------
Address Address
------------------------------------ --------------------------------------
City, State and Zip Code City, State and Zip Code
------------------------------------ --------------------------------------
Telephone-Business Telephone-Business
------------------------------------ --------------------------------------
Telephone-Residence Telephone-Residence
------------------------------------ --------------------------------------
Facsimile-Business Facsimile-Business
------------------------------------ --------------------------------------
Facsimile-Residence Facsimile-Residence
------------------------------------ --------------------------------------
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued:
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Dated: ________________, 2000
This Subscription Agreement is agreed to and accepted as of
_______________, 2000
INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
By:
----------------------------------
Name: Xxxx X. Xxxxxxxxxxx, Ph.D
Title:
CERTIFICATE OF SIGNATORY
(To be completed if Units are
being subscribed for by an entity)
I, ___________________________, am the____________________________ of
_____________________________________ (the "Entity").
I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Subscription Agreement and to purchase and hold the
Units, and certify further that the Subscription Agreement has been duly and
validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this ____ day of ________________, _____.
---------------------------------
(Signature)
