FORM OF SUBSCRIPTION AGREEMENT
FORM
OF
00-00
Xxxxxxx Xxxxx
Xxxxxxxx,
XX 00000
Ladies
and Gentlemen:
1. Subscription. The
undersigned (the “Purchaser”, which term for greater certainty shall include any
beneficial person for whom it is acting), intending to be legally bound, hereby
irrevocably agrees to purchase from Vyteris, Inc., a Nevada corporation (the
“Company”) the number of units (the “Units”) set forth on the signature page
hereof at a purchase price of $100,000 per Unit. This subscription is
submitted to you in accordance with and subject to the terms and conditions
described in this Subscription Agreement and the Confidential Private Placement
Memorandum of the Company dated November 4, 2009, as may amended or supplemented
from time to time, including all attachments, schedules and exhibits thereto
(the “Memorandum”), relating to the offering (the “Offering”) by the Company of
a minimum (the “Minimum Amount”) of 10 Units ($1,000,000) and a maximum (the
“Maximum Amount”) of 70 Units ($7,000,000) with an overallotment of up to 30
Units ($3,000,000). Each Unit consists of (i) a $100,000 principal
amount of 0% Senior Subordinated Convertible Promissory Note due three (3) years
from the initial closing date (each, a “Note” and collectively, the “Notes”) and
(ii) a five (5) year warrant (each, a “Warrant” and collectively, the
“Warrants”), with each Warrant entitling the holder to purchase such number of
shares of the Company’s common stock, par value $0.001 per share (the “Common
Stock”) equal to one hundred percent (100%) of the shares of Common Stock that
the Note is initially convertible into, at an initial exercise price equal to
the 125% of the initial Note Conversion Price (as defined in the Memorandum);
provided, however, that the initial
exercise price of the Warrant shall be 100% of the initial Note Conversion Price
for purchasers that participate in the First Closing (as hereinafter
defined).
The terms
of the Offering are more completely described in the Memorandum and such terms
are incorporated herein in their entirety.
2. Payment. The
Purchaser encloses herewith a check payable to, or will immediately make a wire
transfer payment to, “Signature Bank, Escrow Agent for Vyteris, Inc.” in the
full amount of the purchase price of the Units being subscribed for (“Purchase
Price”). To request wire transfer instructions, please contact
Xx. XxXxx Xxxxx, Xxxxxxx Xxxxx Ventures, Inc., telephone no. (000)
000-0000, ext. 672. Such funds will be held for the Purchaser's
benefit, and will be returned promptly, without interest or offset if this
Subscription Agreement is not accepted by the Company, the Offering is
terminated pursuant to its terms or by the Company or Xxxxxxx Xxxxx Ventures,
Inc. (in its capacity as the “Placement Agent”), prior to the First Closing or
the Minimum Amount is not sold. Together with a check for, or wire
transfer of, the full Purchase Price, the Purchaser is delivering two completed and
executed Omnibus Signature Pages to this Subscription Agreement, the Warrant, in
the form of Annex
C to the Memorandum (the “Warrant”) and the Security Agreement in the
form of Annex D to the Memorandum (the “Security Agreement”).
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3. Deposit of
Funds. All payments made as provided in Section 2 hereof shall
be deposited by the Placement Agent as soon as practicable with Signature Bank
(the “Escrow Agent”), in a non-interest-bearing escrow account (the “Escrow
Account”) until the earliest to occur of (a) the closing of the sale of the
Minimum Amount (the “First Closing”), (b) the rejection of such subscription,
and (c) the termination of the Offering by the Company or the Placement
Agent. The Company and the Placement Agent may continue to offer and
sell the Units and conduct additional closings (each, a “Closing”) for the sale
of additional Units after the First Closing and until the termination of the
Offering.
4. Acceptance of
Subscription. The Purchaser understands and agrees that the
Company in its sole discretion reserves the right to accept or reject this or
any other subscription for Units, in whole or in part, notwithstanding prior
receipt by the Purchaser of notice of acceptance of this
subscription. The Company shall have no obligation hereunder until
the Company shall execute and deliver to the Purchaser an executed copy of this
Subscription Agreement. If this subscription is rejected in whole, or
this Offering of Units is terminated or the Minimum Amount is not raised, all
funds received from the Purchaser will be returned without interest or offset,
and this Subscription Agreement shall thereafter be of no further force or
effect. If this subscription is rejected in part, the funds for the
rejected portion of this subscription will be returned without interest or
offset, and this Subscription Agreement will continue in full force and effect
to the extent this subscription was accepted.
5. Representations and
Warranties.
The Purchaser hereby acknowledges, represents, warrants, and agrees as
follows:
(a) None
of the Units, Notes, Warrants, Common Stock issuable upon exercise of the
Warrants or conversion of the Notes (the “Conversion Shares”), offered pursuant
to the Memorandum is registered under the Securities Act of 1933, as amended
from time to time (the “Securities Act”), or any state securities
laws. The Purchaser understands that the offering and sale of the
Units is intended to be exempt from registration under the Securities Act, by
virtue of Section 4(2) thereof and the provisions of Regulation D, promulgated
under the Securities Act and as amended from time to time (“Regulation D”) as
promulgated by the U. S. Securities and Exchange Commission (the “SEC”), based,
in part, upon the representations, warranties and agreements of the Purchaser
contained in this Subscription Agreement;
(b) The
Purchaser and the Purchaser's attorney, accountant, purchaser representative
and/or tax adviser, if any (collectively, the “Advisers”), have received the
Memorandum, as well as copies of reports, schedules, forms, statements and other
documents required to be filed by the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended from time to time (the “Exchange
Act”), including pursuant to Section 13(a) or 15(d) thereof (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the “SEC
Documents”), that have been made available in hard copy or electronically
through the SEC’s XXXXX system and all other documents requested by the
Purchaser, have carefully reviewed them and understand the information contained
therein;
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(c) Neither
the SEC nor any state securities commission or other regulatory body has
approved the Units, any of the Notes, Warrants or the Conversion Shares, or
passed upon or endorsed the merits of the offering of Units or confirmed the
accuracy or determined the adequacy of the Memorandum. The Memorandum
has not been reviewed by any federal, state or other regulatory
authority;
(d) All
documents, records, and books pertaining to the investment in the Units
(including, without limitation, the Memorandum) which have reasonably been
requested have been made available for inspection by such Purchaser and its
Advisers, if any;
(e)
The Purchaser and its Advisers, if any, have had a reasonable opportunity
to ask questions of and receive answers from a person or persons acting on
behalf of the Company concerning the offering of the Units and the business,
financial condition, results of operations of the Company, and all such
questions have been answered to the full satisfaction of the Purchaser and its
Advisers, if any;
(f) In
evaluating the suitability of an investment in the Company, the Purchaser has
not relied upon any representation or information (oral or written) other than
those included in the Memorandum.
(g) The
Purchaser is unaware of, is in no way relying on, and did not become aware of
the Offering of the Units through or as a result of, any form of general
solicitation or general advertising including, without limitation, any article,
notice, advertisement or other communication published in any newspaper,
magazine or similar media or broadcast over television, radio or the Internet
(including, without limitation, internet “blogs”, bulletin boards, discussion
groups and social networking sites) in connection with the Offering and sale of
the Units and is not subscribing for the Units and did not become aware of the
Offering of the Units through or as a result of any seminar or meeting to which
the Purchaser was invited by, or any solicitation of a subscription by, a person
not previously known to the Purchaser in connection with investments in
securities generally;
(h) The
Purchaser has taken no action that would give rise to any claim by any person
for brokerage commissions, finders’ fees or the like relating to this
Subscription Agreement or the transactions contemplated hereby (other than
commissions to be paid by the Company to the Placement Agent or as otherwise
described in the Memorandum) and, in turn, to be paid to its selected
dealers;
(i) The
Purchaser, together with its Advisers, as the case may be, has such knowledge
and experience in financial, tax, and business matters, and, in particular,
investments in high risk securities, so as to enable it to utilize the
information made available to it in connection with the Offering to evaluate the
merits and risks of an investment in the Units and the Company and to make an
informed investment decision with respect thereto.
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(j) The
Purchaser is not relying on the Company, the Placement Agent or any of their
respective employees or agents with respect to the legal, tax, economic and
related considerations of an investment in the Units, and the Purchaser has
relied on the advice of, or has consulted with, only its own
Advisers;
(k)
The Purchaser is acquiring the Units solely for such Purchaser's own account for
investment purposes only and not with a view to or intent of resale or
distribution thereof, in whole or in part. The Purchaser has no
agreement or arrangement, formal or informal, with any person to sell or
transfer all or any part of the Units, the Notes, Warrants or the Conversion
Shares, and the Purchaser has no plans to enter into any such agreement or
arrangement;
(l) The
Purchaser must bear the substantial economic risks of the investment in the
Units indefinitely because none of the securities included in the Units may be
sold, hypothecated or otherwise disposed of unless subsequently registered under
the Securities Act and applicable state securities laws or an exemption from
such registration is available. Legends shall be placed on the
securities included in the Units to the effect that they have not been
registered under the Securities Act or applicable state securities laws and
appropriate notations thereof will be made in the Company's stock
books. Stop transfer instructions will be placed with the transfer
agent, if any, of the Units. There can be no assurance that there
will be any market for resale of the securities included in the Units, nor can
there be any assurance that such securities will be freely transferable at any
time in the foreseeable future;
(m) The
Purchaser has adequate means of providing for such Purchaser's current financial
needs and foreseeable contingencies and has no need for liquidity of its
investment in the Units for an indefinite period of time;
(n) The
Purchaser is aware that an investment in the Units is high-risk and involves a
number of very significant risks and has carefully read and considered the
matters set forth under the caption “Risk Factors” in the Memorandum, and, in
particular, acknowledges that the Company has experienced significant losses
since inception, is experiencing a severe, continuing cash shortage and will be
required to raise additional capital until it generates revenues to cover its
working capital deficit and the Company’s consolidated financial statements for
the fiscal year ended December 31, 2008 contains an opinion from its independent
registered public accountants regarding the Company’s potential inability to
continue as a going concern due to its operating losses and need for additional
capital;
(o) The
Purchaser meets the requirements of at least one of the suitability standards
for an “accredited investor,” as the term is defined Regulation D under the
Securities Act and as set forth on the Accredited Investor Certification
contained herein;
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(p) The
Purchaser (i) if a natural person, represents that the Purchaser has reached the
age of 21 and has full power and authority to execute and deliver this
Subscription Agreement and all other related agreements or certificates and to
carry out the provisions hereof and thereof; (ii) if a corporation, partnership,
or limited liability company or partnership, or association, joint stock
company, trust, unincorporated organization or other entity, represents that
such entity was not formed for the specific purpose of acquiring the Units, such
entity is duly organized, validly existing and in good standing under the laws
of the state of its organization, the consummation of the transactions
contemplated hereby is authorized by, and will not result in a violation of
state law or its charter or other organizational documents, such entity has full
power and authority to execute and deliver this Subscription Agreement and all
other related agreements or certificates and to carry out the provisions hereof
and thereof and to purchase and hold the securities constituting the Units, the
execution and delivery of this Subscription Agreement has been duly authorized
by all necessary action, this Subscription Agreement has been duly executed and
delivered on behalf of such entity and is a legal, valid and binding obligation
of such entity; or (iii) if executing this Subscription Agreement in a
representative or fiduciary capacity, represents that it has full power and
authority to execute and deliver this Subscription Agreement in such capacity
and on behalf of the subscribing individual, xxxx, partnership, trust, estate,
corporation, or limited liability company or partnership, or other entity for
whom the Purchaser is executing this Subscription Agreement, and such
individual, partnership, xxxx, trust, estate, corporation, or limited liability
company or partnership, or other entity has full right and power to perform
pursuant to this Subscription Agreement and make an investment in the Company,
and represents that this Subscription Agreement constitutes a legal, valid and
binding obligation of such entity. The execution and delivery of this
Subscription Agreement will not violate or be in conflict with any order,
judgment, injunction, agreement or controlling document to which the Purchaser
is a party or by which it is bound;
(q) The
Purchaser and its Advisers, if any, have had the opportunity to obtain any
additional information, to the extent the Company had such information in its
possession or could acquire it without unreasonable effort or expense and
subject to certain confidentiality restrictions, necessary to verify the
accuracy of the information contained in the Memorandum and all documents
received or reviewed in connection with the purchase of the Units and have had
the opportunity to have representatives of the Company provide them with such
additional information regarding the terms and conditions of this particular
investment and the financial condition, results of operations, business of the
Company deemed relevant by the Purchaser or the Advisers, if any, and all such
requested information, to the extent the Company had such information in its
possession or could acquire it without unreasonable effort or expense, has been
provided to the full satisfaction of the Purchaser and its Advisers, if
any;
(r) Any
information which the Purchaser has heretofore furnished or is furnishing
herewith the Company or the Placement Agent is complete and accurate and may be
relied upon by the Company and the Placement Agent in determining the
availability of an exemption from registration under federal and state
securities laws in connection with the offering of securities as described in
the Memorandum. The Purchaser further represents and warrants that it
will notify and supply corrective information to the Company and the Placement
Agent immediately upon the occurrence of any change therein occurring prior to
the Company's issuance of the securities contained in the Units;
(s) The
Purchaser has significant prior investment experience, including investment in
non-registered and high risk securities. The Purchaser has a
sufficient net worth to sustain a loss of its entire investment in the Company
in the event such a loss should occur. The Purchaser's overall
commitment to investments which are not readily marketable is not excessive in
view of the Purchaser’s net worth and financial circumstances and the purchase
of the Units will not cause such commitment to become excessive. The
investment is a suitable one for the Purchaser;
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(t) The
Purchaser is satisfied that the Purchaser has received adequate information with
respect to all matters which it or its Advisers, if any, consider material to
its decision to make this investment;
(u) The
Purchaser acknowledges that any estimates or forward-looking statements or
projections included in the Memorandum were prepared by the Company in good
faith but that the attainment of any such projections, estimates or
forward-looking statements cannot be guaranteed by the Company and should not be
relied upon;
(v) No
oral or written representations have been made, or oral or written information
furnished, to the Purchaser or its Advisers, if any, in connection with the
Offering which are in any way inconsistent with the information contained in the
Memorandum;
(w) Within
five (5) days after receipt of a request from the Company or the Placement
Agent, the Purchaser will provide such information and deliver such documents as
may reasonably be necessary to comply with any and all laws and ordinances to
which the Company or the Placement Agent is subject;
(x) The
Purchaser's substantive relationship with the Placement Agent or subagent
through which the Purchaser is subscribing for Units predates the Placement
Agent's or such subagent's contact with the Purchaser regarding an investment in
the Units;
(y) THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD IN
RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH
LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID
ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY
OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED
UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE
MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL;
(z) The
Purchaser acknowledges that none of the Units, the Notes, Warrants or the
Conversion Shares have been recommended by any federal or state securities
commission or regulatory authority. In making an investment decision,
investors must rely on their own examination of the Company and the terms of the
Offering, including the merits and risks involved. Furthermore, the
foregoing authorities have not confirmed the accuracy or determined the adequacy
of this Subscription Agreement or the Memorandum. Any representation
to the contrary is a criminal offense. The Units, the Notes, Warrants
and the Conversion Shares, are subject to restrictions on transferability and
resale and may not be transferred or resold except as permitted under the
Securities Act, and the applicable state securities laws, pursuant to
registration or exemption therefrom. The Purchaser should be aware
that it will be required to bear the financial risks of this investment for an
indefinite period of time;
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(aa) (For Employee Retirement Income
Security Act (“ERISA”) plans only) The fiduciary
of the ERISA plan (the “Plan”) represents that such fiduciary has been informed
of and understands the Company’s investment objectives, policies and strategies,
and that the decision to invest “plan assets” (as such term is defined in ERISA)
in the Company is consistent with the provisions of ERISA that require
diversification of plan assets and impose other fiduciary
responsibilities. The Purchaser fiduciary or Plan (a) is responsible
for the decision to invest in the Company; (b) is independent of the Company or
any of its affiliates; (c) is qualified to make such investment decision; and
(d) in making such decision, the Purchaser fiduciary or Plan has not relied
primarily on any advice or recommendation of the Company or any of its
affiliates;
(bb) The Purchaser should check the Office
of Foreign Assets Control (“OFAC”) website at <xxxx://xxx.xxxxx.xxx/xxxx>
before making the following representations. The Purchaser
represents that the amounts invested by it in the Company in the Offering were
not and are not directly or indirectly derived from activities that contravene
federal, state or international laws and regulations, including anti-money
laundering laws and regulations. Federal regulations and Executive
Orders administered by OFAC prohibit, among other things, the engagement in
transactions with, and the provision of services to, certain foreign countries,
territories, entities and individuals. The lists of OFAC prohibited
countries, territories, persons and entities can be found on the OFAC website at
<xxxx://xxx.xxxxx.xxx/xxxx>. In
addition, the programs administered by OFAC (the “OFAC Programs”) prohibit
dealing with individuals1
or entities in certain countries regardless of whether such individuals or
entities appear on the OFAC lists;
(cc) To
the best of the Purchaser’s knowledge, none of: (1) the Purchaser; (2) any
person controlling or controlled by the Purchaser; (3) if the Purchaser is a
privately-held entity, any person having a beneficial interest in the Purchaser;
or (4) any person for whom the Purchaser is acting as agent or nominee in
connection with this investment is a country, territory, individual or entity
named on an OFAC list, or a person or entity prohibited under the OFAC
Programs. Please be advised that the Company may not accept any
amounts from a prospective investor if such prospective investor cannot make the
representation set forth in the preceding paragraph. The Purchaser
agrees to promptly notify the Company and the Placement Agent should the
Purchaser become aware of any change in the information set forth in these
representations. The Purchaser understands and acknowledges that, by
law, the Company may be obligated to “freeze the account” of the Purchaser,
either by prohibiting additional subscriptions from the Purchaser, declining any
redemption requests and/or segregating the assets in the account in compliance
with governmental regulations, and the Placement Agent may also be required to
report such action and to disclose the Purchaser’s identity to
OFAC. The Purchaser further acknowledges that the Company may, by
written notice to the Purchaser, suspend the redemption rights, if any, of the
Purchaser if the Company reasonably deems it necessary to do so to comply with
anti-money laundering regulations applicable to the Company and the Placement
Agent or any of the Company’s other service providers. These
individuals include specially designated nationals, specially designated
narcotics traffickers and other parties subject to OFAC sanctions and embargo
programs;
____________________________
1
These individuals include specially designated nationals,
specially designated narcotics traffickers and other parties subject to OFAC
sanctions and embargo programs.
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(dd) To
the best of the Purchaser’s knowledge, none of: (1) the Purchaser; (2) any
person controlling or controlled by the Purchaser; (3) if the Purchaser is a
privately-held entity, any person having a beneficial interest in the Purchaser;
or (4) any person for whom the Purchaser is acting as agent or nominee in
connection with this investment is a senior foreign political figure1, or
any immediate family2
member or
close associate3 of a
senior foreign political figure, as such terms are defined in the footnotes
below; and
(ee) If
the Purchaser is affiliated with a non-U.S. banking institution (a “Foreign
Bank”), or if the Purchaser receives deposits from, makes payments on behalf of,
or handles other financial transactions related to a Foreign Bank, the Purchaser
represents and warrants to the Company that: (1) the Foreign Bank has a fixed
address, other than solely an electronic address, in a country in which the
Foreign Bank is authorized to conduct banking activities; (2) the Foreign Bank
maintains operating records related to its banking activities; (3) the Foreign
Bank is subject to inspection by the banking authority that licensed the Foreign
Bank to conduct banking activities; and (4) the Foreign Bank does not provide
banking services to any other Foreign Bank that does not have a physical
presence in any country and that is not a regulated affiliate.
6. Public Information
Failure. At any time during the period commencing the six (6)
month anniversary of the First Closing date and ending at such time that all of
the shares of Common Stock issuable upon conversion of the Notes and exercise of
the Warrants (hereinafter “Underlying Shares”) can be
sold either pursuant to a registration statement, or if a registration statement
is not available for the resale of all of such securities, may be sold without
the requirement for the Company to be in compliance with Rule 144(c)(1) and
otherwise without restriction or limitation pursuant to Rule 144, if the Company
shall fail for any reason or no reason to satisfy the current public information
requirement under Rule 144(c) (a “ Public Information Failure ”)
then, as a remedy for the damages to any holder of such securities by reason of
any such delay in or reduction of its ability to sell the Underlying Shares
(which remedy shall not be exclusive of any other remedies available),
including, without limitation, specific performance), the Company shall pay to
each holder of Underlying Shares who is not eligible to sell all of his, her or
its Underlying Shares pursuant to Rule 144 as a result of such Public
Information Failure an amount in cash, as liquidated damages and not as a
penalty equal to one and one half (1.5%) percent of the aggregate Purchase Price
on the day of a Public Information Failure and on every thirtieth (30th) day
(pro rated for periods totaling less than thirty (30) days) thereafter until the
earlier of (i) the date such Public Information Failure is cured and (ii) such
time that such public information is no longer required pursuant to Rule 144.
The payments to which a holder shall be entitled pursuant to this Section 6 are
referred to herein as “Public Information Failure Payments.” Public Information
Failure Payments shall be paid on the earlier of (I) the last day of the
calendar month during which such Public Information Failure Payments are
incurred and (II) the fifth (5th) Business Day after the event or failure giving
rise to the Public Information Failure Payments is
cured. Notwithstanding the foregoing, no Public Information
Failure Payments shall be required to be made to any such Subscriber who is an
officer, director or 10% shareholder of the Company.
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1
A “senior foreign political figure” is defined as a senior
official in the executive, legislative, administrative, military or judicial
branches of a foreign government (whether elected or not), a senior official of
a major foreign political party, or a senior executive of a foreign
government-owned corporation. In addition, a “senior foreign political figure”
includes any corporation, business or other entity that has been formed by, or
for the benefit of, a senior foreign political figure.
2
“Immediate family” of a senior foreign political figure
typically includes the figure’s parents, siblings, spouse, children and
in-laws.
3
A “close associate” of a senior foreign political figure is
a person who is widely and publicly known to maintain an unusually close
relationship with the senior foreign political figure, and includes a person who
is in a position to conduct substantial domestic and international financial
transactions on behalf of the senior foreign political
figure.
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7.
Piggyback Registration
Rights. If at any time prior to the expiration of the 24
months from the date of this Agreement (“Registration Period”) the Company shall
determine to file with the SEC a Registration Statement relating to an offering
for its own account or the account of others under the 1933 Act of any of its
equity securities (other than on Form S-4 or Form S-8 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 stock option or other employee benefit plans), the Company shall
send to Purchaser written notice of such determination and, if within fifteen
(15) days after the effective date of such notice, the Purchaser shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Common Stock being purchased hereunder the Purchaser requests
to be registered (“Registrable Securities”), except that if, in connection with
any underwritten public offering for the account of the Company, the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which the Purchaser has
requested inclusion hereunder as the underwriter shall permit.
8.
Appointment of Collateral
Agent.
(a) The
Purchaser hereby authorizes Collateral Agents, LLC, a New York limited liability
company, to act as collateral agent (“Collateral Agent”) on behalf of the
Purchaser and any other purchasers of the Notes, and in such capacity to enter
into the Security Agreement and to exercise for the benefit of the Purchaser all
rights, powers and remedies provided to it, under or pursuant to the Security
Agreement including, without limitation, those available upon an Event of
Default (as defined in the Security Agreement), subject always to the terms,
conditions, limitations and restrictions provided in the Security
Agreement. The Purchaser has carefully reviewed the Security
Agreement and understands the information contained therein.
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9. Indemnification. The
Purchaser agrees to indemnify and hold harmless the Company, the Placement
Agent, the Collateral Agent and their respective officers, directors, employees,
agents, control persons and affiliates from and against all losses, liabilities,
claims, damages, costs, fees and expenses whatsoever (including, but not limited
to, any and all expenses incurred in investigating, preparing or defending
against any litigation commenced or threatened) based upon or arising out of any
actual or alleged false acknowledgment, representation or warranty, or
misrepresentation or omission to state a material fact, or breach by the
Purchaser of any covenant or agreement made by the Purchaser herein or in any
other document delivered in connection with this Subscription
Agreement.
10. Irrevocability; Binding
Effect. The Purchaser hereby acknowledges and agrees that the
subscription hereunder is irrevocable by the Purchaser, except as required by
applicable law, and that this Subscription Agreement shall survive the death or
disability of the Purchaser and shall be binding upon and inure to the benefit
of the parties and their heirs, executors, administrators, successors, legal
representatives, and permitted assigns. If the Purchaser is more than
one person, the obligations of the Purchaser hereunder shall be joint and
several and the agreements, representations, warranties, and acknowledgments
herein shall be deemed to be made by and be binding upon each such person and
such person's heirs, executors, administrators, successors, legal
representatives, and permitted assigns.
11. Modification. This
Subscription Agreement shall not be modified or waived except by an instrument
in writing signed by the party against whom any such modification or waiver is
sought.
12. Immaterial Modifications to the
Transaction Documents. The Company may, at any time prior to
the expiration of the Offering Period (as defined in the Memorandum), amend this
Subscription Agreement, the Note, Warrant or Security Agreement (this
Subscription Agreement, the Note, Warrant and the Security Agreement are
collectively referred to herein as the “Transaction Documents”) if necessary to
clarify any provision therein, or supplement the Memorandum for events occurring
after the date of the Memorandum, without first providing notice or obtaining
prior consent of the Purchaser, if, and only if, such modification is not
material in any respect.
13. Notices. Any notice
or other communication required or permitted to be given hereunder shall be in
writing and shall be mailed by certified mail, return receipt requested, or
delivered against receipt to the party to whom it is to be given (a) if to the
Company, at the address set forth above, or (b) if to the Purchaser, at the
address set forth on the signature page hereof (or, in either case, to such
other address as the party shall have furnished in writing in accordance with
the provisions of this Section 13). Any notice or other communication
given by certified mail shall be deemed given at the time of certification
thereof, except for a notice changing a party's address which shall be deemed
given at the time of receipt thereof.
14. Assignability. This
Subscription Agreement and the rights, interests and obligations hereunder are
not transferable or assignable by the Purchaser and the transfer or assignment
of the Units, the Notes, the Warrants or the Conversion Shares shall be made
only in accordance with all applicable laws.
E-10
15. Applicable
Law. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of New York, applicable to
contracts to be wholly-performed within said State.
16. Arbitration. The
parties agree to submit all controversies to arbitration in accordance with the
provisions set forth below and understand that:
(a) Arbitration
is final and binding on the parties.
(b) The
parties are waiving their right to seek remedies in court, including the right
to a jury trial.
(c) Pre-arbitration
discovery is generally more limited and different from court
proceedings.
(d) The
arbitrator's award is not required to include factual findings or legal
reasoning and any party's right to appeal or to seek modification of rulings by
arbitrators is strictly limited.
(e) The
panel of arbitrators will typically include a minority of arbitrators who were
or are affiliated with the securities industry.
(f) All
controversies which may arise between the parties concerning this Subscription
Agreement shall be determined by arbitration pursuant to the rules then
pertaining to the Financial Industry Regulatory Authority, Inc. (the “FINRA”) in
New York City, New York. Judgment on any award of any such
arbitration may be entered in the Supreme Court of the State of New York in New
York County or in any other court located in New York County, New York having
jurisdiction of the Person or Persons against whom such award is rendered. Any notice of
such arbitration or for the confirmation of any award in any arbitration shall
be sufficient if given in accordance with the provisions of this
Agreement. The parties agree that the determination of the
arbitrators shall be binding and conclusive upon them.
17. Blue Sky
Qualification. The purchase of Units under this Subscription
Agreement is expressly conditioned upon the exemption from qualification of the
offer and sale of the Units from applicable federal and state securities
laws. The Company shall not be required to qualify this transaction
under the securities laws of any jurisdiction and, should qualification be
necessary, the Company shall be released from any and all obligations to
maintain its offer, and may rescind any sale contracted, in the
jurisdiction.
18. Use of
Pronouns. All pronouns and any variations thereof used herein
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the person or persons referred to may require.
E-11
19. Confidentiality. The
Purchaser acknowledges and agrees that any information or data the Purchaser has
acquired from or about the Company, not otherwise properly in the public domain,
including, without the limitation, the Memorandum, as well as the fact that the
Company is undertaking a private offering of its securities, was received in
confidence. The Purchaser agrees not to divulge, communicate or
disclose, except as may be required by law or for the performance of this
Agreement, or use to the detriment of the Company or for the benefit of any
other person or persons, or misuse in any way, any confidential information of
the Company, including any scientific, technical, trade or business secrets of
the Company, as well as the fact that the Company is undertaking a private
offering of its securities.
20. Miscellaneous.
(a) This
Subscription Agreement, together with the Transaction Documents, constitute the
entire agreement between the Purchaser and the Company with respect to the
subject matter hereof and supersede all prior oral or written agreements and
understandings, if any, relating to the subject matter hereof. The
terms and provisions of this Subscription Agreement may be waived, or consent
for the departure therefrom granted, only by a written document executed by the
party entitled to the benefits of such terms or provisions.
(b) The
representations and warranties of the Purchaser made in this Subscription
Agreement shall survive the execution and delivery hereof and delivery of the
Notes and Warrants contained in the Units.
(c) Each
of the parties hereto shall pay its own fees and expenses (including the fees of
any attorneys, accountants, appraisers or others engaged by such party) in
connection with this Subscription Agreement and the transactions contemplated
hereby whether or not the transactions contemplated hereby are
consummated.
(d) This
Subscription Agreement may be executed in one or more counterparts each of which
shall be deemed an original, but all of which shall together constitute one and
the same instrument.
(e)
Each provision of this Subscription Agreement shall be considered separable and,
if for any reason any provision or provisions hereof are determined to be
invalid or contrary to applicable law, such invalidity or illegality shall not
impair the operation of or affect the remaining portions of this Subscription
Agreement.
(f) Paragraph
titles are for descriptive purposes only and shall not control or alter the
meaning of this Subscription Agreement as set forth in the text.
(g) The
Purchaser understands and acknowledges that there may be multiple Closings for
the Offering.
21. Omnibus Signature
Page. This Subscription Agreement is intended to be read and
be construed in conjunction with the Notes, Warrants and Security Agreement
pertaining to the issuance by the Company of the Units to subscribers pursuant
to the Memorandum. Accordingly, pursuant to the terms and conditions
of this Subscription Agreement and such related agreements it is hereby agreed
that the execution by the Purchaser of this Subscription Agreement, in the place
set forth herein, shall constitute agreement to be bound by the terms and
conditions hereof and the terms and conditions of the Security Agreement with
the same effect as if each of such separate but related agreement was separately
signed.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
E-12
How
to subscribe for Units in the private offering of
|
1.
|
Date and Fill in the
number of Units being purchased and Complete and Sign the
Omnibus Subscription Agreement.
|
|
2.
|
Initial the Accredited
Investor Certification page attached to this
letter.
|
|
3.
|
Complete and return the
Investor Profile and, if applicable, Wire Transfer Authorization attached
to this letter.
|
|
4.
|
Fax all forms to XxXxx
Xxxxx at (000) 000-0000
and then send all signed original documents with check
to:
|
Xx.
XxXxx Xxxxx
Xxxxxxx
Xxxxx Ventures, Inc.
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx
000
Xxxxxxxxx,
XX 00000
|
5.
|
Please
make your subscription payment payable to the order of “Signature Bank, Escrow Agent
for VYTERIS,
INC.”
|
For wiring funds directly to
the escrow account,
see the following
instructions:
Bank Name: Signature Bank
ABA
Number: 000000000
A/C
Name: Signature Bank, as Agent For
A/C
Number: 0000000000
FBO:
Investor
Name
Social
Security Number
Address
Thank you
for your interest,
Xxxxxxx
Xxxxx Ventures, Inc.
E-13
ANTI
MONEY LAUNDERING REQUIREMENTS
|
The
USA PATRIOT Act
|
What
is money laundering?
|
How
big is the problem
and
why is it important?
|
||
|
The
USA PATRIOT Act is designed to detect, deter, and punish terrorists in the
United States and abroad. The Act imposes new anti-money
laundering requirements on brokerage firms and financial
institutions. Since April 24, 2002 all brokerage firms have
been required to have new, comprehensive anti-money laundering
programs.
To
help you understand these efforts, we want to provide you with some
information about money laundering and our steps to implement the USA
PATRIOT Act.
|
|
Money
laundering is the process of disguising illegally obtained money so that
the funds appear to come from legitimate sources or
activities. Money laundering occurs in connection with a wide
variety of crimes, including illegal arms sales, drug trafficking,
robbery, fraud, racketeering, and terrorism.
|
|
The
use of the U.S. financial system by criminals to facilitate terrorism or
other crimes could well taint our financial markets. According
to the U.S. State Department, one recent estimate puts the amount of
worldwide money laundering activity at $1 trillion a
year.
|
|
What
are we required to do to eliminate money laundering?
|
|
|
Under
new rules required by the USA PATRIOT Act, our anti-money laundering
program must designate a special compliance officer, set up employee
training, conduct independent audits, and establish policies and
procedures to detect and report suspicious transaction and ensure
compliance with the new laws.
|
As
part of our required program, we may ask you to provide various
identification documents or other information. Until you
provide the information or documents we need, we may not be able to effect
any transactions for
you.
|
E-14
OMNIBUS
SIGNATURE PAGE TO
THE
SUBSCRIPTION AGREEMENT, SECURITY AGREEMENT AND WARRANT
Subscriber hereby elects to subscribe
under the Subscription Agreement for a total of ______ Units at a price of
$100,000 per Unit (NOTE: to be completed by subscriber) and executes the
Subscription Agreement.
Date
(NOTE: To be completed by subscriber): __________________, 2009
If the
Purchaser is an INDIVIDUAL, and if purchased as JOINT TENANTS, as TENANTS IN
COMMON or as COMMUNITY PROPERTY:
|
Print
Name(s)
|
Social
Security Number(s)
|
|
|
Signature(s)
of Subscriber(s)
|
Signature
|
|
|
Date:
|
Address:
|
|
If the
Purchaser is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY or
TRUST
|
Name
of Partnership, Corporation, Limited Liability Company of
Trust
|
Federal
Taxpayer
|
|
|
|
||
|
|
|
|
|
Name:
|
State
of Organization
|
|
|
Title:
|
||
|
|
|
|
|
Date
|
Address
|
|
XXXXXXX
XXXXX VENTURES, INC.
|
||||
|
By:
|
By:
|
|||
|
Authorized
Officer
|
Authorized
Officer
|
|||
E-15
ACCREDITED
INVESTOR CERTIFICATION
For
Individual Investors Only
(all
Individual Investors must INITIAL where
appropriate):
|
Initial
_______
|
I
have a net worth (including home, furnishings and automobiles) in excess
of $1 million either individually or through aggregating my individual
holdings and those in which I have a joint, community property or other
similar shared ownership interest with my spouse.
|
|
Initial
_______
|
I
have had an annual gross income for the past two years of at least
$200,000 (or $300,000 jointly with my spouse) and expect my income (or
joint income, as appropriate) to reach the same level in the current
year.
|
|
Initial
_______
|
I
am a director or executive officer of Vyteris,
Inc.
|
For
Non-Individual Investors
(all
Non-Individual Accredited Investors must INITIAL where
appropriate):
|
Initial
_______
|
The
investor certifies that it is a partnership, corporation, limited
liability company or business trust that is 100% owned by persons who meet
at least one of the criteria for Individual Investors set forth
above.
|
|
Initial
_______
|
The
investor certifies that it is a partnership, corporation, limited
liability company or business trust that has total assets of at least $5
million and was not formed for the purpose of investing the
Company.
|
|
Initial
_______
|
The
investor certifies that it is an employee benefit plan whose investment
decision is made by a plan fiduciary (as defined in ERISA §3(21)) that is
a bank, savings and loan association, insurance company or registered
investment adviser.
|
|
Initial
_______
|
The
investor certifies that it is an employee benefit plan whose total assets
exceed $5,000,000 as of the date of this Agreement.
|
|
Initial
_______
|
The
undersigned certifies that it is a self-directed employee benefit plan
whose investment decisions are made solely by persons who meet either of
the criteria for Individual Investors.
|
|
Initial
_______
|
The
investor certifies that it is a U.S. bank, U.S. savings and loan
association or other similar U.S. institution acting in its individual or
fiduciary capacity.
|
|
Initial
_______
|
The
undersigned certifies that it is a broker-dealer registered pursuant to
§15 of the Securities Exchange Act of 1934.
|
|
Initial
_______
|
The
investor certifies that it is an organization described in §501(c)(3) of
the Internal Revenue Code with total assets exceeding $5,000,000 and not
formed for the specific purpose of investing in the
Company.
|
|
Initial
_______
|
The
investor certifies that it is a trust with total assets of at least
$5,000,000, not formed for the specific purpose of investing in the
Company, and whose purchase is directed by a person with such knowledge
and experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective
investment.
|
|
Initial
_______
|
The
investor certifies that it is a plan established and maintained by a state
or its political subdivisions, or any agency or instrumentality thereof,
for the benefit of its employees, and which has total assets in excess of
$5,000,000.
|
|
Initial
_______
|
The
investor certifies that it is an insurance company as defined in §2(13) of
the Securities Act, or a registered investment
company.
|
E-16
VYTERIS,
INC.
Investor
Profile
(Must be completed by
Investor)
Section A - Personal
Investor Information
Investor
Name(s):
_____________________________________________________________________________________
Individual
executing Profile or Trustee:
___________________________________________________________________
Social
Security Numbers / Federal I.D. Number:
_____________________________________________________________
|
Date
of Birth:
|
_________________
|
Marital
Status: _________________________________
|
|
|
Joint
Party Date of Birth:
|
_________________
|
Investment
Experience (Years): ______________
|
|
|
Annual
Income:
|
_________________
|
Liquid
Net Worth: ___________________
|
|
|
Net
Worth:
|
________________
|
Tax
Bracket:
______ 15% or below _____ 25% -
27.5% _____ Over 27.5%
|
Investment
Objectives (circle one
or more):
|
Preservation
of Capital, Income, Capital Appreciation, Trading Profits, Speculation or
Other (please specify) * See definitions on following
page
|
Home
Street Address:
__________________________________________________________________________________
Home
City, State & Zip Code:
_________________________________________________________________________
Home
Phone: ________________________ Home Fax: _____________________ Home
Email: ____________________
Employer:
___________________________________________________________________________________________
Employer
Street Address:
_______________________________________________________________________________
Employer
City, State & Zip Code:
______________________________________________________________________
Bus.
Phone: __________________________ Bus. Fax: __________________________ Bus.
Email: ________________
Type of
Business:
____________________________________________________________________________________
Xxxxxxx
Xxxxx Account Executive / Outside Broker/Dealer:
__________________________________________________
If you
are a United States
citizen, please list the number and jurisdiction of issuance of any other
government-issued document evidencing residence and bearing a photograph or
similar safeguard (such as a driver’s license or passport), and provide a
photocopy of each of the documents you have listed.
If you
are NOT a
United
States citizen, for each jurisdiction of which you are a citizen or in
which you work or reside, please list (i) your passport number and country of
issuance or (ii) alien identification card number AND (iii) number and
country of issuance of any other government-issued document evidencing
nationality or residence and bearing a photograph or similar safeguard, and
provide a photocopy of each of these documents you have listed. These
photocopies must be certified by a lawyer as to authenticity.
E-17
Section B – Certificate
Delivery Instructions
____
Please deliver Note and Warrant certificate to the Employer Address listed in
Section A.
____
Please deliver Note and Warrant certificate to the Home Address listed in
Section A.
____
Please deliver Note and Warrant certificate to the following address:
_________________________________.
Section C – Form of Payment
– Check or Wire Transfer
____
Check payable to Signature
Bank, As Escrow Agent for Vyteris, Inc.
____ Wire
funds from my outside account according to the “How to subscribe for Units”
Page.
____ Wire
funds from my Xxxxxxx Xxxxx Account - See Following Page.
____ The funds for
this investment are rolled over, tax deferred from __________ within the allowed
60 day window.
Please
check if you are a FINRA member or affiliate of a FINRA member firm:
________
|
|
|
|
|
Investor
Signature
|
Date
|
|
|
|
|
|
|
Investor
Signature
|
Date
|
E-18
Investment Objectives: The
typical investment listed with each objective are only some examples of the
kinds of investments that have historically been consistent with the listed
objectives. However, neither Vyteris, Inc. nor Xxxxxxx Xxxxx
Ventures, Inc. can assure that any investment will achieve your intended
objective. You must make your own investment decisions and determine
for yourself if the investments you select are appropriate and consistent with
your investment objectives.
Neither
Vyteris, Inc. nor Xxxxxxx Xxxxx Ventures, Inc. assume responsibility to you for
determining if the investments you selected are suitable for you.
Preservation of Capital: An
investment objective of Preservation of Capital
indicates you seek to maintain the principal value of your investments and are
interested in investments that have historically demonstrated a very low degree
of risk of loss of principal value. Some examples of typical
investments might include money market funds and high quality, short-term fixed
income products.
Income: An
investment objective of Income
indicates you seek to generate from investments and are interested in
investments that have historically demonstrated a low degree of risk of loss of
principal value. Some examples of typical investments might include
high quality, short and medium-term fixed income products, short-term bond funds
and covered call options.
Capital
Appreciation: An investment objective of Capital Appreciation
indicates you seek to grow the principal value of your investments over time and
are willing to invest in securities that have historically demonstrated a
moderate to above average degree of risk of loss of principal value to pursue
this objective. Some examples of typical investments might include
common stocks, lower quality, medium-term fixed income products, equity mutual
funds and index funds.
Trading Profits: An investment
objective of Trading
Profits indicates you seek to take advantage of short-term trading
opportunities, which may involve establishing and liquidating positions
quickly. Some examples of typical investments might include
short-term purchases and sales of volatile or low priced common stocks, put or
call options, spreads, straddles and/or combinations on equities or
indexes. This is a high-risk strategy.
Speculation: An
investment objective of Speculation indicates you
seek a significant increase in the principal value of your investments and are
willing to accept a corresponding greater degree of risk by investing in
securities that have historically demonstrated a high degree of risk of loss of
principal value to pursue this objective. Some examples of typical
investments might include lower quality, long-term fixed income products,
initial public offerings, volatile or low priced common stocks, the purchase of
sale of put or call options, spreads, straddles and/or combinations on equities
or indexes, and the use of short-term or day trading strategies.
Other: Please
specify.
E-19
Memorandum
Wire
Transfer Authorization
|
TO:
|
Xxxxx
Xxxxx - Operations Manager
|
|
Xxxxxxx
Xxxxx Ventures, Inc.
|
|
|
RE:
|
Client
Wire Transfer Authorization
|
|
VYTERIS,
INC.
|
DATE:________________
This
memorandum authorizes the transfer of the following listed funds from my Xxxxxxx
Xxxxx Brokerage Account as follows:
|
Xxxxxxx
Xxxxx Brokerage Account #
|
______________________
|
|
Wire
Amount
|
$______________________
|
BANK
NAME: SIGNATURE BANK
ABA NUMBER:
000000000
A/C NAME: SIGNATURE BANK, AS
AGENT FOR VYTERIS, INC.
A/C Number:
0000000000
REFERENCE:
SUBSCRIBER LEGAL
NAME
______________________________________________________
TAX ID NUMBER
______________________________________________________
SUBSCRIBER ADDRESS
______________________________________________________
|
FBO:
|
________________________________________________
|
|
Investment
Title:
|
________________________________________________
|
|
Signature:
|
________________________________________________
|
|
Signature:
|
________________________________________________
|
|
(Joint
Signature)
|
E-20
