SUBSCRIPTION AGREEMENT
Exhibit
4.7
This
SUBSCRIPTION AGREEMENT (this “Agreement”)
made
as of the date set forth on the signa-ture page hereof between INSITE VISION
INCORPORATED, a Delaware corporation having a place of business at 000 Xxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000 (the “Company”)
and
the undersigned (each, a “Subscriber”
and
collectively, the “Subscribers”).
W
I T N E
S S E T H:
WHEREAS,
the Company desires to sell Units (as defined below) to persons who qualify
as
“accredited investors” as defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933 (the “Securities
Act”);
and
WHEREAS,
the Subscribers desire 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 promis-es and the mutual representations
and
covenants hereinaf-ter set forth, the parties hereto do hereby agree as
follows:
I.
SUBSCRIPTION
FOR UNITS
1.1 Amount
of the Offering.
The
Company will offer to sell to persons who qualify as “accredited investors” as
defined in Rule 501 of Regulation D (“Regulation
D”)
promulgated under the Securities Act (the “Offering”).
(a)
Each
“Unit”
may be
sold as a whole Unit or as a fraction thereof, and shall consist
of:
(i)
a
number of shares of common stock of the Company, par value $0.01 per share
(the
“Common
Stock”),
determined by dividing $200,000 (the “Unit
Price”)
by the
last per share closing price of the Common Stock as reported by the American
Stock Exchange (“AMEX”)
on the
date hereof (the “Per
Share Price”);
and
(ii)
warrants (the “Warrants”)
to
purchase a number of shares of Common Stock equal to 30% of the Common Stock
included in such Unit.
(b)
The
aggregate number of shares of Common Stock issuable under the Units (excluding
the Warrants) shall not exceed 18,000,000.
(c)
The
exercise price of the Warrants shall also be no lower than 115.0% of the
last
sale price of a share of the Company’s Common Stock on the date of this
Agreement and shall be payable in cash or by cashless exercise as further
provided in the Warrants. The terms of the Warrants shall provide that the
Warrants may not be exercised or transferred for a period of six (6) months
from
the Closing (as defined below). The terms of the Warrants shall provide that
the
exercise price and the number of shares that may be purchased under the Warrants
may be adjusted in the event of a stock split, combination or stock dividend
with respect to the Company’s Common Stock, but the Warrants shall not otherwise
contain antidilution provisions or other terms that would reset the exercise
price of the Warrants.
1.2 Closing. Upon
receipt of binding subscription agreements for up to the number of Units
in the
Offering (the “Subscriptions”),
and
subject to the other terms and conditions of this Agreement, at a time to
be
agreed upon by the Company and Paramount BioCapital, Inc. (the “Placement
Agent”)
and of
which the Subscribers will be notified by the Placement Agent by facsimile
transmittal or otherwise, the Company will (a) sell to the Subscribers and
the
Subscribers will purchase from the Company, on a pro-rata basis, the Common
Stock and Warrants included in the Units subscribed for by Subscribers under
the
terms of the Offering (the “Closing”
and
such date the “Closing
Date”),
and
the Subscribers will remit to the Escrow Agent prior to the Closing the
applicable pro-rata portion of the Aggregate Purchase Price for the Closing
(each, a “Closing
Amount”)
for
release to the Company at the Closing; (b) issue to the Placement Agent or
its
designees the Placement Warrants pursuant to that certain Placement Agent
Agreement, dated February 24, 2005 (the “Placement
Agent Agreement”)
by and
between the Company and the Placement Agent (the “Placement
Warrants”);
and
(c) pay to the Placement Agent or its designees the Cash Commissions (as
defined
in the Placement Agent Agreement). The Placement Agent will notify each
Subscriber, after consultation with the Company, as to such Subscriber’s Closing
Amount (each a “Subscriber
Amount”)
by
providing such Subscriber with a notice substantially similar to that attached
hereto as Exhibit
A.
The
“Aggregate
Purchase Price”
shall
mean the product of the amount of Units sold to Subscribers and the Unit
Price
and shall equal the aggregate of all Subscribers’ Closing Amounts. Upon
compliance with all conditions to the Closing, the Placement Agent, with
notice
to the Company, shall authorize the Escrow Agent to release the proceeds
of the
Closing to the Company, less fees and expenses due to the Placement Agent.
Interest, if any, that has accrued with respect to the Aggregate Purchase
Price
while in escrow shall also be distributed to the Company at the Closing and
Subscribers will have no right to such interest.
1.3 Offering
Termination Date.
Unless
terminated earlier in the Placement Agent’s or the Company’s sole discretion,
the Offering will expire on the earlier to occur of the Closing Date and
11:59
p.m. New York City time on May 4, 2005 (subject to extension at the Company’s
sole discretion without notice to the Subscribers) (the “Offering
Termination Date”).
1.4 Closing
Mechanics.
Prior
to the Closing, the Aggregate Purchase Price will be deposited in a segregated
escrow account with the Escrow Agent pursuant to the instructions provided
below
in this Section 1.4. Subject to the terms and conditions of this Agreement
(including, without limitation, the Company’s and the Placement Agent’s option,
each at its sole discretion, to refuse to accept Subscriptions from any
Subscriber), the Subscriber hereby subscribes for and agrees to purchase
from
the Company such number of Units and the Company agrees to sell such number
of
Units to the Subscriber as is set forth upon the signature page hereof at
the
Unit Price (as defined on the signature page hereto). Pursuant to Section
1.2,
the Closing Amount, is payable by wire transfer, certified bank check, personal
or business check, or money order made payable to “US Bank Trust National
Association Corporation Trust, (the “Escrow
Agent”)
F/B/O
InSite Vision Incorporated.” Subscribers paying by check should direct such
check to: Xxxxx Xxxxxxxxxx, Paramount BioCapital, Inc., 000 Xxxxxxx Xxx.,
00xx
Xxxxx, Xxx Xxxx, XX 00000. Subscribers paying by wire transfer should direct
such wire transfer to:
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US
Bank
Trust National Association Corporation Trust
ABA
Routing Number: 000000000
US
Bank
Trust N.A.
Account
Number: 180121167365
For:
Paramount BioCapital & InSite Vision
SEI
Number: 789272000
Attn:
Xxxxxx Xxxxxxxx
Tel
#
000-000-0000
Fax
#
000-000-0000
Each
Subscriber must complete and return a duly executed, unaltered copy of this
Agreement (including the completed Confidential Subscriber Questionnaire
included in Article VIII hereof) to the Placement Agent at the Placement
Agent’s
address indicated in the Memorandum on or before the date indicated to you
by
the Placement Agent to be eligible to participate in the Offering. The Company
and the Placement Agent retain complete discretion to accept or reject any
Subscriptions unless and until the Company executes a counterpart to this
Agreement that includes such Subscriber’s signature.
1.5 Delivery
of Certificates.
The
certificates representing the Common Stock and Warrants included in the Units
purchased at the Closing will be delivered by the Compa-ny within 10 business
days following the Closing as set forth in Article IV hereof.
II.
REPRESENTATIONS,
WARRANTIES AND COVENANTS OF SUBSCRIBERS
Each
Subscriber hereby represents, warrants and covenants to the Company as
follows:
2.1 The
Subscriber recognizes and acknowledges that the purchase of the Units involves
a
high degree of risk including, but not limited to, the following: (i) an
investment in the Company is highly speculative, and only Subscribers who
can
afford the loss of their entire investment should consider investing in the
Company and the Units; (ii) the Subscriber may not be able to liquidate
his/her/its investment; (iii) transferability of the Common Stock and Warrants
included in the Units, and the common stock issuable upon exercise of the
Warrants (collectively the “Securities”)
is
extremely limited; (iv) in the event of a disposition of the Securities,
the
Subscriber could sustain the loss of his/its entire investment; and (v) the
Company has not paid any dividends on its Common Stock since inception and
does
not anticipate the payment of dividends in the foreseeable future.
2.2 The
Subscriber is an “accredited investor” as such term is defined in Rule 501 of
Regulation D promulgated under the Securities Act, as indicated by the
Subscriber’s responses to the questions contained in Article VIII hereof which
responses are true and correct as of the date hereof and shall be true and
correct as of the Closing, and that the Subscriber is able to bear the economic
risk of an invest-ment in the Company. If the Subscriber is a natural person,
the Subscriber has reached the age of majority in the state or other
jurisdiction in which the Subscriber resides, has adequate means of providing
for the Subscriber’s current financial needs and contingencies, is able to bear
the substantial economic risks of an investment in the Securities for an
indefinite period of time, has no need for liquidity in such investment and
could afford a complete loss of such investment. After giving effect to the
purchase of the Units requested to be purchased by Subscriber hereunder,
Subscriber represents and warrants that Subscriber neither individually nor
together as a group (except as permitted by Rule 13d-5(b)(2) promulgated
under
the Exchange Act (as defined below)) shall own more than 19.9% of the Company’s
outstanding Common Stock or voting power.
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2.3 The
Subscriber hereby acknowledges and represents that (i) the Subscriber is
knowledgeable, sophisticated and has experience in making, and is qualified
to
make, decisions with respect to investments representing an investment decision
like that involved in the purchase of the Units and has prior investment
experience, including investment in securities which are non-listed,
unregistered and/or not traded on the NASDAQ National or SmallCap Market
or
listed on AMEX; (ii) the Subscriber recognizes the highly speculative nature
of
this investment, that an investment in the Units and the underlying Securities
involves a significant degree of risk, that the market price of the Common
Stock
has been and continues to be volatile, and Subscriber has carefully evaluated
the risks of an investment in the Units; and (iii) the Subscriber is able
to
bear the economic risk of an investment in the Units and the potential loss
of
such investment, which risk the Subscriber hereby assumes.
2.4 The
Subscriber hereby acknowledges that he/she/it has received and carefully
reviewed this Agreement, the Confidential Private Offering Memorandum prepared
by the Company and dated as of April 20, 2005, as amended or supplemented,
including all documents attached thereto or incorporated by reference therein,
including the following documents filed by the Company with the Securities
and
Exchange Commission (the “SEC”
or the
“Commission”,
and
such documents, the “SEC
Filings”):
SEC
Form 10-K, filed March 31, 2005; and SEC Form 8-K filed March 31, 2005; and
any
future filings that the Company makes with the SEC under Sections 13(a),
13(c),
14, or 15(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”),
until
the Offering Termination Date (as defined herein) (the confidential offering
memorandum, including the SEC Filings and all other exhibits and information
incorporated by reference therein is referred to herein as the “Memorandum”).
Any
information that the Company subsequently files with the SEC that is
incorporated by reference will automatically update and supersede any previous
information that is part of this Memorandum. The Subscriber further represents
that the Subscriber has been fur-nished by the Company during the course
of this
transaction with all information regarding the Company which the Subscriber,
its
investment advisor, attorney and/or accountant has requested or desired to
know
or which is otherwise relevant to an investment decision, 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 which
the Subscriber or its advisors or agents has requested.
2.5 (a) The
Subscriber has relied solely upon the information provided by the Company
in
making the decision to invest in the Units. The Subscriber is familiar with
and
understands the terms of the Offering, including the rights to which the
Subscriber is entitled under this Agreement. In evaluating the suitability
of an
investment in the Company, the Subscriber has not relied upon any representation
or other information (whether oral or written) from the Company, or any agent,
employee or affiliate of the Company other than as set forth in the Memorandum,
in this Agreement or resulting from Subscriber’s own independent investigation.
Subscriber understands and acknowledges that nothing in this Agreement, the
Memorandum or any other materials provided to Subscriber in connection with
the
Subscription for the Units or sale of the Securities constitutes investment,
tax
or legal advice. To the extent deemed necessary or advisable by Subscriber
in
his/her/its sole discretion, the Subscriber has retained, at his/her/its
sole
expense, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and its
purchase of the Units hereunder.
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(b) The
Subscriber represents that no Units or other securities 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 or Subscriber conference whose attendees were invited by any general
solicitation or general advertising.
2.6 The
Subscriber hereby acknowledges that the Offering has not been reviewed,
recommended or endorsed by the SEC or any state securities regulatory authority
or other governmental body or agency, 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
shall not sell or otherwise transfer the Units unless such transfer is
registered under the Securities Act or unless an exemption from such
registration is available. The Subscriber understands that if required by
the
laws or regulations or any applicable jurisdictions, the Offering contemplated
hereby will be submitted to the appropriate authorities of such state(s)
for
registration or exemption therefrom and the Offering contemplated hereby
will be
specifically subject to the receipt of such registration or exemption.
2.7 The
Subscriber understands and acknowledges that neither the Units nor the
Securities have been registered under the Securities Act in reliance upon
a
claimed exemption under the provisions of the Securities Act which depends,
in
part, upon the Subscriber’s investment intention and the truth and accuracy of,
and Subscriber’s compliance with, the representations, warranties,
acknowledgments and covenants of Subscriber set forth herein. In this
connection, the Subscriber hereby represents that the representations,
warranties, acknowledgments and covenants of Subscriber set forth herein
are
true and accurate, Subscriber will comply with the covenants set forth herein,
and the Subscriber is purchasing the Units and underlying Securities for
the
Subscriber’s own account for investment purposes only and not with a view toward
the resale or distribution to others and has no contract, undertaking, agreement
or other arrangement, in existence or contemplated, to sell, pledge, assign
or
otherwise transfer the Units or underlying Securities to any other person.
The
Subscriber, if an entity, also represents that it was not formed for the
purpose
of purchasing the Units or underlying Securities. The Subscriber has no current
plans to effect a “change of control” of the Company, as such term is understood
in Rule 13d of the Exchange Act.
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2.8 The
Subscriber understands that neither the Units nor the Securities will be
registered or available for sale in the public markets except as specifically
provided herein, and Rule 144 promulgated under the Securities Act
(“Rule
144”)
requires, among other conditions, a one-year holding period of the Company
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 Securities
under
the Securities Act or any state securities or “blue sky” laws or assist the
Subscriber in obtaining an exemption from various registration requirements,
other than as set forth in Article VI herein. The Subscriber agrees to hold
the
Company and its directors, officers, employees, 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 (i) any misrepresentation made by the Subscriber contained
in
this Agreement (including the Confidential Subscriber Questionnaire contained
in
Article VIII herein), (ii) any sale or distribution by the Subscriber in
violation of the Securities Act or any applicable state securities or “blue sky”
laws or (iii) any untrue statement of a material fact made by the Subscriber
and
contained herein (including the Confidential Subscriber Questionnaire contained
in Article VIII herein) or omission of a material fact asked for by such
questionnaire necessary to make such statements made by the Subscriber and
contained herein (including the Confidential Subscriber Questionnaire contained
in Article VIII herein), in light of the circumstances in which they are
made,
not misleading.
2.9 The
Subscriber consents to the placement of a legend on any certificate, warrant
or
other document evidencing the Units substantially as set forth below, that
such
Units 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
aware that the Company will make a notation in its appropriate records and
with
its transfer agent with respect to the restrictions on the transferability
of
the Units.
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY
STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT AND
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY, REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.
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2.10 The
Subscriber agrees to supply
the Company, as soon as practical but in no event later than five (5) days
after
the Subscriber receives the request therefore from the Company, with such
additional information concerning the Subscriber as the Company reasonably
deems
necessary or advisable.
2.11 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.
2.12 The
Subscriber represents that (i) the Subscriber has full right, power, authority
and capacity (corporate, personal, statutory and otherwise) to execute, deliver,
and perform this Agreement and to purchase the Securities and has taken all
action necessary to authorize the execution, delivery and performance of
this
Agreement; and (ii) this Agreement constitutes the legal, valid and binding
obligation of the Subscriber, enforce-able against the Subscriber in accordance
with its terms.
2.13 If
the
Subscriber is a corporation, partnership, limited liability company, trust,
employee benefit plan, individual retirement account, Xxxxx Plan, or other
entity (a) it is authorized and qualified to become a Subscriber in the Company
and the person signing this Agreement on behalf of such entity has been duly
authorized by such entity to do so and (b) it is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
2.14 The
Subscriber acknowledges that if he or she is a Registered Representa-tive
of an
NASD member firm, he or she must give such firm the notice required by the
NASD
Rules of Fair Practice, receipt of which must be acknowl-edged in accordance
with such rules.
2.15 The
Subscriber acknowledges and agrees that it shall not be entitled to seek
any
remedies with respect to the Offering from any party other than the
Company.
2.16
The
Subscriber understands, acknowledges and agrees with the Company that this
Subscription may be rejected, in whole or in part, by the Company or the
Placement Agent, in each of their sole and absolute discretion, at any time
before the Closing Date notwithstanding prior receipt by the Subscriber of
notice of acceptance of the Subscriber’s Subscription. Subscriptions accepted at
the Closing Date shall be binding on the Company.
2.17
The
Subscriber understands, acknowledges and agrees with the Company that, except
as
otherwise set forth herein, the Subscription hereunder is irrevocable by
the
Subscriber, that, except as required by law, the Subscriber is not entitled
to
cancel, terminate or revoke this Agreement or any agreements of the Subscriber
hereunder and that this Agreement and such other agreements shall survive
the
death or disability of the Subscriber 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 Subscriber is more than
one
person, the obligations of the Subscriber hereunder shall be joint and several
and the agreements, representations, warranties and acknowledgments herein
contained shall be deemed to be made by and be binding upon each such person
and
his/her heirs, executors, administrators, successors, legal representatives
and
permitted assigns.
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2.18 The
Subscriber understands, acknowledges and agrees with the Company that the
Offering is intended to be exempt from registration under the Securities
Act by
virtue of Section 4(2) of the Securities Act and the provisions of Regulation
D
thereunder, which is in part dependent upon the truth, completeness and accuracy
of the statements made by the Subscriber.
2.19 The
Subscriber understands, acknowledges and agrees with the Company that, there
can
be no assurance that the Subscriber will be able to sell or dispose of the
Securities. It is understood that in order not to jeopardize the Offering’s
exempt status under Section 4(2) of the Securities Act and Regulation D,
in
addition to any other restrictions on transfer set forth herein or in the
Warrants, the Company may, at a minimum, require any transferee to fulfill
the
Subscriber suitability requirements thereunder and make the representations,
warranties and covenants of Subscriber hereunder.
2.20 The
Subscriber agrees that during the period from the date that Subscriber was
first
contacted with respect to the Offering (the “First
Date”)
through the last date upon which Subscriber holds any Units, 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 or take any action with respect
to any equity security of the Company which would violate the Securities
Act or
the rules and regulations promulgated thereunder and from the First Date
through
the Closing Date has not and will not take any action the intent or reasonably
foreseeable effect of which is to reduce the trading price of the Common
Stock.
2.21 The
Subscriber acknowledges and agrees that the information contained in this
Agreement, the Memorandum or otherwise made available to the Subscriber by
the
Company (collectively, the “Confidential
Information”)
is to
be used solely for the purpose of evaluating a possible investment in the
Units
and is confidential and non-public and agrees that all such Confidential
Information shall be kept in confidence by the Subscriber and neither used
by
the Subscriber for the Subscriber’s personal benefit (other than in connection
with evaluating a possible investment in the Units) nor disclosed to any
third
party for any reason and in any manner, notwithstanding that a Subscriber’s
subscription may not be accepted by the Company; provided, however, that
this
obligation shall not apply to any such Confidential Information that (i)
is part
of the public knowledge or literature and readily accessible at the date
hereof
(except as a result of a breach of this provision by any party), or (ii)
becomes
part of the public knowledge or literature and readily accessible by publication
(except as a result of a breach of this provision by any party).
2.22 If
the
Subscriber is purchasing the Units in a fiduciary capacity for another person
or
entity, including without limitation a corporation, partnership, trust or
any
other entity, the Subscriber has been duly authorized and empowered to execute
this Agreement and all other subscription documents, and such other person
or
entity fulfills all the requirements for purchase of the shares as such
requirements are set forth herein, concurs in the purchase of the Securities
and
agrees to be bound by the obligations, representations, warranties and covenants
contained herein. Upon request of the Company, the Subscriber will provide
true,
complete and current copies of all relevant documents creating the Subscriber,
authorizing its investment in the Company and/or evidencing the satisfaction
of
the foregoing.
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2.23 No
authorization, approval, consent or license of any person is required to
be
obtained for the purchase of the Units
by the
Subscriber, other than as have been obtained and are in full force and effect.
The execution and delivery of this Agreement does not, and the consummation
of
the transactions contemplated hereby will not, result in any violation of
or
constitute a default under any material agreement or other instrument to
which
the Subscriber is a party or by which the Subscriber or any of its properties
are bound, or to the best of the Subscriber’s knowledge, any permit, franchise,
judgment, order, decree, statute, rule or regulation to which the Subscriber
or
any of its businesses or properties is subject.
2.24 The
representations, warranties and agreements of the Subscriber contained herein,
in the Confidential Subscriber Questionnaire and in any other writing delivered
in connection with the transactions contemplated hereby shall be true and
correct in all respects on and as of the Closing Date as if made on and as
of
such date and shall survive the execution and delivery of this Agreement
and the
purchase of the Securities. Subscriber agrees to notify the Company as promptly
as possible of any change in any of the foregoing information until such
time as
the Subscriber has sold all of its Securities.
2.25 The
Subscriber hereby covenants with the Company not to make any sale of the
Securities under the Registration Statement without effectively causing the
prospectus delivery requirement under the Securities Act to be satisfied,
and
further agrees to comply with reasonable requests of the Company or its transfer
agent to provide additional information and representations concerning such
sale.
2.26 Subscriber
acknowledges the following disclosure, which is set forth herein as required
pursuant to Section 25102(a) of the California Corporate Securities Law of
1968:
“THE
SALE
OF THE SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE
SALE
OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR
25105
OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE
SALE
IS SO EXEMPT.”
2.27 Subscriber
acknowledges the following disclosure, which is set forth herein pursuant
to the
Illinois Securities Act:
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“THE
UNDERSIGNED ACKNOWLEDGES THAT THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE ILLINOIS SECURITIES ACT AND ARE BEING OFFERED AND SOLD PURSUANT TO AN
EXEMPTION THEREFROM. THE SECURITIES CANNOT BE SOLD OR TRANSFERRED UNLESS
THEY
ARE REGISTERED UNDER THE ILLINOIS SECURITIES ACT OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.”
2.28 Subscriber
acknowledges the following disclosures, which are set forth herein pursuant
to
the Florida Securities Act:
“THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE FLORIDA SECURITIES
ACT AND ARE BEING SOLD IN RELIANCE UPON AN EXEMPTION PROVIDED BY SECTION
517.061
THEREOF. UNLESS THE SECURITIES ARE REGISTERED, THEY MAY NOT BE REOFFERED
FOR
SALE OR RESOLD IN THE STATE OF FLORIDA EXCEPT AS AN EXEMPT SECURITY OR IN
AN
EXEMPT TRANSACTION UNDER SAID ACT.”
“THE
UNDERSIGNED ACKNOWLEDGES THAT THE FLORIDA SECURITIES ACT REQUIRES AND THE
ISSUER
HEREBY AGREES THAT THE UNDERSIGNED SHALL HAVE THE RIGHT TO WITHDRAW HIS
ACCEPTANCE OF AN OFFER TO ACQUIRE THESE SECURITIES FOR A PERIOD OF THREE
(3)
BUSINESS DAYS FOLLOWING HIS EXECUTION OF AN AGREEMENT RELATING TO THE
ACQUISITION OF SUCH SECURITIES AND PAYMENT THEREFOR. IF THE UNDERSIGNED SHOULD
DETERMINE TO WITHDRAW HIS ACCEPTANCE OF THE OFFER TO INVEST IN THE ISSUER,
HE
MAY DO SO WITHOUT ANY LIABILITY WHATSOEVER. TO ACCOMPLISH THIS WITHDRAWAL,
THE
UNDERSIGNED NEED ONLY SEND A LETTER OR TELEGRAM TO THE ISSUER INDICATING
HIS
INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE SENT AND POSTMARKED
PRIOR TO THE END OF THE AFOREMENTIONED THIRD BUSINESS DAY. IF THE UNDERSIGNED
SENDS A LETTER, IT IS PRUDENT TO SEND IT BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO ENSURE THAT IT IS RECEIVED AND TO EVIDENCE THE TIME WHEN IT
WAS
MAILED. SHOULD THE REQUEST BE MADE ORALLY, WRITTEN CONFIRMATION THAT THE
REQUEST
HAS BEEN RECEIVED SHOULD BE REQUESTED.”
2.29 The
Subscriber is not an adverse party to the Company in any lawsuit involving
the
Company.
III. REPRESENTATIONS,
WARRANTIES AND COVENANTS BY AND OF THE COMPANY
B-10
The
Company hereby represents and warrants to the Subscriber that (for purposes
of
this Article III, references to “Memorandum” shall mean the Memorandum,
including without limitation, the SEC Filings set forth or incorporated by
reference therein:
3.1 Organization,
Good Standing and Qualification.
As of
the Closing, the Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has full
corporate power and authority to conduct its business as currently conducted.
The Company is duly qualified as a foreign corporation to do business and
is in
good standing in every jurisdiction in which the property owned or leased
by it
or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or in
good
standing would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the business, operations, condition
(financial or otherwise), assets, or results of operations of the Company
and
its Subsidiaries (as defined below) as a whole (a “Material
Adverse Effect”).
3.2 Capitalization.
(a) The
authorized capital stock of the Company as of March 31, 2005 is as set forth
in
the Memorandum, under the heading “Capitalization”. All of the securities issued
by the Company have been issued in accordance with all applicable federal
and
state securities laws. Other than as disclosed or contemplated in the Memorandum
under the heading “Capitalization”, there are no other options, warrants, calls,
rights, commitments or agreements of any character to which the Company is
a
party or by which either the Company is bound or obligating the Company to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of the capital stock of the Company
or
obligating the Company to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. Other than as disclosed in the Memorandum
under the heading “Capitalization” there are no preemptive rights or rights of
first refusal or similar rights which are binding on the Company permitting
any
person to subscribe for or purchase from the Company shares of its capital
stock
pursuant to any provision of law, the Company’s Certificate of Incorporation as
in effect on the date hereof (the “Certificate
of Incorporation”)
or the
Company’s By-laws, as in effect on the date hereof (the “By-laws”)
or by
agreement or otherwise. Other than as disclosed in the Memorandum under the
heading “Capitalization”, there are no securities or instruments (including,
without limitation, any warrants or convertible debentures) containing
anti-dilution or similar provisions that will be triggered by the issuance
of
the Securities as described in this Agreement. The Company has made available
to
the Placement Agent true and correct copies of the Company’s Certificate of
Incorporation and the Company’s By-laws.
(b)
The
Common Stock and Warrants to be issued at the Closing, and the Common Stock
issuable upon exercise of the Warrants issued at the Closing have been duly
authorized and, when issued, delivered and paid for in the manner set forth
in
this Agreement and the Warrants, will be duly authorized, validly issued,
fully
paid and non-assessable. Other than as disclosed in the Memorandum under
the
heading “Capitalization”, there is no stockholder of the Company that has any
right to request or require the Company to register the sale of any shares
owned
by such stockholder under the Securities Act. No further approval or authority
of the stockholders or the board of directors of the Company (the “Board
of Directors”)
will
be required for the issuance and sale of the Securities to be sold by the
Company as contemplated herein.
B-11
3.3 Authorization;
Enforceability.
The
Company has all requisite 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, execution, delivery and performance of this
Agreement by the Company, the authorization, sale, issuance and delivery
of the
Securities contemplated herein and the performance of the Company’s obligations
hereunder has been taken (other than filings as may be required to be made
with
the Commission, the NASD and AMEX and with any state or foreign blue sky
or
securities regulatory authority, which filings will be made on or prior to
the
Closing or, for those filings which by their terms are to be made post-Closing,
such filings will be made post-Closing within the time period prescribed
for
such filings). 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, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to
limitations of public policy, general principals of equity (regardless of
whether such enforceability is considered at law or equity) and except as
the
indemnification agreements of the Company in Section 6.7 hereof may be legally
unenforceable. Other than as disclosed in the Memorandum under the heading
“Capitalization”, the issuance
and sale of the Securities contemplated hereby will not give rise to any
preemptive rights or rights of first refusal on behalf of any person pursuant
to
any agreement to which the Company is a party.
3.4 No
Conflict; Governmental and Other Consents.
(a) The
execution and delivery by the Company of this Agreement and the consumma-tion
of
the transactions contemplated hereby will not result in the violation of
any
law, statute, rule, regulation, order, writ, injunction, judgment or decree
of
any court or governmental authority to or by which the Company or any subsidiary
is bound, or of any provision of the Certificate of Incorporation or By-laws
of
the Company or any subsidiary, and will not conflict with, or result in a
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 or any subsidiary 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
or
any subsidiary where such violation, breach, default or imposition is reasonably
likely to result in a Material Adverse Effect.
(b) Except
as
disclosed in the Memorandum, no consent, approval, authorization or other
order
of any governmental authority or other third-party is required to be obtained
by
the Company or any subsidiary in connection with the authorization, execution
and delivery of this Agreement or with the authorization, issue and sale
of the
Securities, except such filings as may be required to be made with the
Commission, the NASD and AMEX and with any state or foreign blue sky or
securities regulatory authority, which filings will be made on or prior to
the
Closing or, for those filings which by their terms are to be made post-Closing,
such filings will be made post-Closing within the time period prescribed
for
such filings.
B-12
3.5 Litigation.
Other
than as disclosed in the 2004 10-K or the Memorandum, there is no pending
or, to
the actual knowledge of the Company, threatened legal or governmental
proceedings to which the Company is a party which is reasonably expected
to
result in a Material Adverse Effect or which would or might reasonably be
expected to materially adversely affect the Company’s ability to perform its
obligations under this Agreement.
3.6 Accuracy
of Offering Documents.
The
Company’s annual report on SEC Form 10-K for the year ended December 31, 2004
(the “2004
10-K”),
and
all reports required to be filed by the Company within one year prior to
the
date of this Agreement under the Securities Exchange Act, have been duly
filed
with the Commission, complied at the time of filing in all material respects
with the requirements of their respective forms and the rules and regulations
thereunder, except to the extent updated or superseded by any subsequently
filed
report, were complete and correct in all material respects as of the dates
at
which the information was furnished, and such reports did not contain (as
of
their respective dates) any untrue statements of a material fact nor omitted
to
state any material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading, or, if amended, as so amended.
3.7 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
Commission thereunder.
3.8
Use
of
Proceeds.
The
Company intends to use the net proceeds of the Offering as described under
the
heading “Use of Proceeds” in the Memorandum.
3.9 Intellectual
Property.
Except
as disclosed in the Memorandum, the Company and/or its subsidiaries owns
or
possesses adequate and, to its knowledge, enforceable rights to use all material
patents, patent applications, trademarks, service marks, trade names, logos,
corporate names, copyrights, trade secrets, processes, mask works, licenses,
inventions, formulations, technology and know-how and other intangible property
currently used in the conduct of its business as described in the Memorandum
(the "Proprietary
Rights").
Except as disclosed in the Memorandum, the Company and/or its Subsidiaries
have
taken commercially reasonable measures to protect all of the Company’s and such
Subsidiary’s Proprietary Rights. Except as set forth in the Memorandum, neither
the Company nor any of its Subsidiaries has received any notice of, and there
are not any facts known to the Company or any Subsidiary which indicate the
existence of (i) any infringement or misappropriation by any third party
of any
of the Proprietary Rights, which infringement or misappropriation would
reasonably be expected to have a Material Adverse Effect, (ii) any claim
by a
third party contesting the validity of any of the Proprietary Rights, other
than
claims that would not reasonably be expected to have a Material Adverse Effect
or (iii) any infringement, misappropriation or violation by the Company or
any
subsidiary or, to
B-13
the
Company’s knowledge, any of their employees, of any Proprietary Rights of third
parties that would be reasonably expected to have a Material Adverse Effect.
Except as disclosed in the Memorandum and the 2004 10-K under the headings
under
the headings “Risk
Factors -- Our business depends upon our proprietary rights, and we may not
be
able to protect, enforce or secure our intellectual property rights
adequately,”“We
may require additional licenses or be subject to expensive and uncertain
patent
litigation in order to sell AzaSite in the U.S. and/or Europe; We are aware
that
Pfizer has recently received patents in the U.S. and Europe which cover the
use
of azithromycin in a topical formulation to treat bacterial infections in
the
eye” and
“Business
- Patents and Proprietary Rights,”
to the
Company's knowledge, no infringement, illicit copying, misappropriation or
violation of any intellectual property rights of any third party has occurred
by
the Company or any of its Subsidiaries with respect to any products currently
being sold by the Company or any Subsidiary or with respect to any products
currently under development by the Company or any Subsidiary or with respect
to
the conduct of the business of the Company or any Subsidiary as currently
conducted. Except as disclosed in the Memorandum and the 2004 10-K under
the
headings “Risk
Factors -- Our business depends upon our proprietary rights, and we may not
be
able to protect, enforce or secure our intellectual property rights
adequately,”“We
may require additional licenses or be subject to expensive and uncertain
patent
litigation in order to sell AzaSite in the U.S. and/or Europe; We are aware
that
Pfizer has recently received patents in the U.S. and Europe which cover the
use
of azithromycin in a topical formulation to treat bacterial infections in
the
eye” and
“Business
- Patents and Proprietary Rights,”
to the
Company's knowledge, no infringement, illicit copying, misappropriation or
violation of any intellectual property rights of any third party will occur
by
the Company or any of its subsidiaries as a result of the sale by the Company
or
any subsidiary of any products currently under development by the Company
should
such products receive the applicable regulatory approval for commercial sale.
Except as set forth in the Memorandum, the Company is not aware that any
of its
employees, including the employees of its subsidiaries, are obligated under
any
contract (including licenses, covenants or commitments of any nature) or
other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that the Company believes would materially interfere
with
the use of the employee's best efforts to promote the interests of the Company
and/or its subsidiaries or that would conflict with the business of the Company
and/or its subsidiaries as currently conducted. To the Company's knowledge,
neither the execution and delivery of this Agreement, nor the carrying on
of the
business of the Company and its subsidiaries by the employees of the Company
and
its subsidiaries, nor the conduct of the business of the Company and its
subsidiaries, as currently conducted, will conflict with or result in a breach
of the terms, conditions or provisions of, or constitute a default under,
any
contract, covenant or instrument under which any such employee is now
obligated.
3.10 Private
Offering.
No form
of general solicitation or general advertising was used by the Company in
connection with the Offering. Subject in part to the accuracy and completeness
of the Subscribers' representations in Article II and Article VIII of this
Agreement, no registration of the Units or the Securities pursuant to the
provisions of the Securities Act will be required by the offer, sale, or
issuance of the Units and the Securities pursuant to this
Agreement.
B-14
3.11
Additional
Company Covenants.
Until
the earlier to occur of the Closing Date and the Offering Termination Date,
the
Company will not issue or sell any securities to any party, other than (i)
the
issuances and sales contemplated by this Agreement, (ii) pursuant to the
terms
of previously granted employee stock options and previously issued outstanding
warrants, options, and convertible securities and, (iii) the issuance of
up to
1,000,000 shares of Common Stock (or options exercisable for such shares)
pursuant to currently authorized shares under its stock option plan and employee
stock purchase plan and pursuant to the conversion into Common Stock of amounts
due under currently outstanding promissory notes that are not held by officers,
directors or senior members of the Company’s management. The Company will use
its best efforts to ensure that its officers and directors will not transfer
or
sell any of the Company’s securities to any party, other than to a spouse,
child, grandchild, parent, brother or sister, to a trust established for
the
benefit of the same, or to the estate of any of the same by gift, will or
intestate succession, or pursuant to the terms of previously granted employee
stock options and previously granted outstanding warrants, options, and
convertible securities, until the earlier to occur of the Closing Date and
the
Offering Termination Date.
IV. TERMS
OF SUBSCRIPTION; CONDITIONS TO OBLIGATIONS OF THE COMPANY
4.1 The
Company reserves the right to reject the subscription made hereby in its
sole
discretion. Unless terminated earlier in the Placement Agent’s or the Company’s
sole discretion, the Offering will expire on the Offering Termination
Date.
4.2 Pending
the sale of the Securities pursuant to the subscribed Units, all funds paid
hereunder shall be deposited by each such Subscriber in escrow with the Escrow
Agent prior to the Closing, consistent with the terms of this Agreement.
4.3 The
Subscriber hereby authorizes and directs the Company, upon the Closing, to
deliver the Securities issuable pursuant to the Units to be issued to the
Subscriber pursuant to this Agreement at such Closing to the residential
or
business address indicated on the signature page hereto.
4.4 The
Subscriber hereby authorizes and directs the Company to return, without
interest, any funds for unaccepted subscriptions to the same account from
which
the funds were drawn, including any customer account maintained with the
Placement Agent.
4.5 The
Company’s agreement with each Subscriber is a separate agreement and each sale
of the Securities included in the Units to each Subscriber is a separate
sale.
4.6 In
addition to the other requirements set forth herein, the Company’s obligation to
complete the sale and issuance of the Securities and deliver the Units to
the
Subscriber at the Closing shall be subject to the following conditions, any
one
or more of which may be waived in writing by the Company: (a) receipt
by
the Company of the full amount of the purchase price for the Units being
purchased hereunder at the Closing; (b) the representations, warranties,
and acknowledgements made by the Subscribers in this Agreement shall be true
and
correct when made and shall be true and correct on and as of the Closing,
and
all undertakings, agreements and covenants of the Subscribers required to
be
fulfilled prior to the Closing shall have been performed or complied with;
(c) the Subscriber shall have completed,
B-15
executed
and delivered to the Company the Confidential Subscriber Questionnaire set
forth
in Article VIII of this Agreement, which Questionnaire shall be true and
correct
as of the Closing and shall be satisfactory to the Placement Agent and the
Company, each in their sole discretion; (d) there shall not then be
in
effect any legal or other order enjoining or restraining the transactions
contemplated by this Agreement; (e) the sale of the Units shall not
be
prohibited by any applicable law, regulation or governmental order; and (f)
the
Company shall have received AMEX approval to sell the number of Units in
the
Offering. In the event the Company obtains approval from AMEX for a number
of
Units that is less than the number of Units set forth in Section 1.1, subject
to
Section 4.1, the Company shall consummate the Closing with the Subscribers
for a
proportionate amount of the number of Units that each such Subscriber has
otherwise agreed to purchase, up to the number of Units for which the Company
has obtained AMEX approval.
V. CONDITIONS
TO OBLIGATIONS OF THE SUBSCRIBERS
5.1 Each
Subscriber’s obligations to purchase the Units at the Closing is subject to the
fulfillment on or prior to the Closing of the following conditions, which
conditions may be waived at the option of each Subscriber to the extent
permitted by law:
(a) Representations
and Warranties Correct; Survival.
The
representations and warranties made by the Company in Article III hereof
shall
be true and correct in all material respects when made (except for any
representation or warranty that speaks as of a specific date, which shall
be
true and correct in all material respects as of such date), and shall be
true
and correct in all material respects on the Closing Date with the same force
and
effect as if they had been made on and as of said date (except for any
representation or warranty that speaks as of a specific date, which shall
be
true and correct in all material respects as of such date). The representations
and warranties made by the Company in Article III hereof shall survive until
the
first anniversary of the Closing Date.
(b) Covenants.
All
covenants, agreements and conditions contained in this Agreement to be performed
by the Company on or prior to the Closing 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 Units or the Securities (except as otherwise
provided in this Agreement). The Company shall have received AMEX approval
to
sell the number of Units in the Offering.
B-16
VI.
REGISTRATION
RIGHTS
6.1 As
used
in this Agreement, the following terms shall have the following
meanings:
(a) “Affiliate”
shall
mean, with respect to any Person (as defined below), any other Person
controlling, controlled by or under direct or indirect common control with
such
Person (for the purposes of this definition “control,” when used with respect to
any specified Person, shall mean the power to direct the management and policies
of such person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms “controlling” and
“controlled” shall have meanings correlative to the foregoing).
(b) “Business
Day”
shall
mean a day Monday through Friday on which banks are generally open for business
in New York, New York.
(c) “Holders”
shall
mean the Subscribers and any person holding Registrable Securities or any
person
to whom the rights under Article VI have been transferred in accordance with
Section 6.10 hereof.
(d) “Person”
shall
mean any person, individual, corporation, limited liability company,
partnership, trust or other nongovernmental entity or any governmental agency,
court, authority or other body (whether foreign, federal, state, local or
otherwise).
(e) The
terms
“register,”“registered”
and
“registration”
refer
to the registration effected by preparing and filing a registration statement
in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(f) “Registrable
Securities”
shall
mean the Common Stock included in the Units, the Common Stock issuable upon
exercise of the Warrants included in the Units, and the Common Stock issuable
upon exercise of any warrants issued to the Placement Agent; 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 a registration statement
declared effective by the Commission; (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; (C) are held
by
a Holder or a permitted transferee pursuant to Section 6.10; or (D)
have
not become eligible for sale pursuant to Rule 144(k) (or any successor thereto)
under the Securities Act.
(g) “Registration
Expenses”
shall
mean all expenses incurred by the Company in complying with Section 6.2
hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and expenses of counsel
for
the Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration, and the reasonable fees
and
expenses of one legal counsel for all Holders in connection with the
Registration Statement, not to exceed $3,000.
B-17
(h) “Selling
Expenses”
shall
mean all underwriting discounts and selling commissions applicable to the
sale
of Registrable Securities and all fees and expenses of legal counsel and
other
advisors for any Holder, except for the fees and expenses of the such counsel
of
the Holders as is set forth in the definition of “Registration Expenses”
above.
6.2 Subject
to the terms herein, the Company will, as soon as practicable following the
Closing Date but not later than 30 days following the Closing Date (the
“Filing
Date”),
(a)
subject to receipt of necessary information from, and reasonable cooperation
by,
the Holders, file a registration statement with the SEC (the “Registration
Statement”)
on the
appropriate form to allow the resale of the Registrable Securities, and use
its
best efforts, subject to receipt of necessary information from, and reasonable
cooperation by, the Holders, to have such Registration Statement declared
effective by the SEC prior to the date which is 90 days after the Filing
Date;
and (b) subject to Section 6.8 hereof, cause such Registration Statement
to
remain effective (the “Registration
Period”)
until
the earlier of (i) such date as the holders of the Registrable Securities
have
completed the distribution described in the Registration Statement and (ii)
at
such time that such Registrable Securities have become eligible for sale
pursuant to Rule 144(k) (or any successor thereto) under the Securities Act.
Thereafter, the Company shall be entitled to withdraw the Registration Statement
and the Holders shall have no further right to offer or sell any of the
Securities pursuant to the Registration Statement. To the extent permissible,
such Registration Statement also shall cover, to the extent allowable under
the
Securities Act and the rules promulgated thereunder (including Rule 416 under
the Securities Act), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions
with
respect to the Registrable Securities.
6.3 Should
(a) the Company fail to file the Registration Statement by the Filing Date
for
any reason, (b) the Registration Statement not be declared effective by the
SEC
within 90 days after the Filing Date for any reason, or (c) the Registration
Statement be filed and declared effective, but the effectiveness of such
Registration Statement be suspended for any reason for more than an aggregate
of
90 days (whether consecutive or non-consecutive) in the aggregate during
any
12-month period during the Registration Period (each a “Registration
Default”),
then
the Company will issue each Subscriber (on a pro-rata basis), as liquidated
damages and not as a penalty, additional Warrants to purchase a number of
shares
of Common Stock equal to 1% of the shares of Common Stock, on a fully diluted
basis, issued to Subscribers in the Offering for each 15 day period during
which
a Registration Default continues beyond
the aforementioned periods up to a maximum in liquidated damages of no more
than
5% of such shares of Common Stock issued to Subscribers in the Offering,
and no
further liquidated or other damages will be owed pursuant to this provision;
provided, however, that for purposes of this Section 6.3, no day shall be
counted for purposes of this Section 6.3 on which performance of the Company
is
prevented by reason of closure or other unavailability of the SEC or U.S.
federal government due to weather, attack, war or other act of G-d.
6.4 All
Registration Expenses incurred in connection with any registration,
qualification, exemption or compliance pursuant to Section 6.2 shall be borne
by
the Company. All Selling Expenses relating to the sale of securities registered
by or on behalf of Holders shall be borne by such Holders.
B-18
6.5 In
the
case of the registration, qualification, exemption or compliance effected
by the
Company pursuant to this Agreement, the Company shall, upon reasonable request,
inform each Holder as to the status of such registration, qualification,
exemption and compliance. At its expense the Company shall:
(a) subject
to Section 6.8 hereof, use its best efforts to keep such registration, and
any
qualification, exemption or compliance under state or federal securities
laws
which the Company determines to obtain, continuously effective until the
termination of the Registration Period; and
(b) advise
the Holders as soon as practicable:
(i) when
the
Registration Statement or any amendment thereto has been filed with the
Commission and when the Registration Statement or any post-effective amendment
thereto has become effective;
(ii) of
any
request by the Commission for amendments or supplements to the Registration
Statement or the prospectus included therein or for additional
information;
(iii) of
the
issuance by the Commission of any stop order suspending the effectiveness
of the
Registration Statement or the initiation of any proceedings for such
purpose;
(iv) of
the
receipt by the Company of any notification with respect to the suspension
of the
qualification of the Registrable Securities included therein for sale in
any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
(v) of
the
happening of any event that requires the making of any changes in the
Registration Statement or the prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a material
fact
required to be stated therein or necessary to make the statements therein
(in
the case of the prospectus, in the light of the circumstances under which
they
were made) not misleading;
(c) make
every reasonable effort to obtain the withdrawal of any order suspending
the
effectiveness of any Registration Statement at the earliest possible
time;
(d) at
each
Holder’s written request, furnish to each Holder, without charge, at least one
copy of such Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so requests
in
writing, all exhibits (including those incorporated by reference) in the
form
filed with the Commission;
B-19
(e) during
the Registration Period, deliver to each Holder, without charge, as many
copies
of the prospectus included in such Registration Statement and any amendment
or
supplement thereto as such Holder may reasonably request in writing in order
to
facilitate the public sale or other disposition of all or any of the Securities
by Holder; and the Company consents to the use, consistent with the provisions
hereof and applicable laws, rules or regulations, of the prospectus or any
amendment or supplement thereto by each of the selling Holders of Registrable
Securities in connection with the offering and sale of the Registrable
Securities covered by the prospectus or any amendment or supplement thereto.
In
addition, upon the reasonable request of the Holder and subject in all cases
to
confidentiality protections reasonably acceptable to the Company, the Company
will meet with a Holder or a representative thereof at the Company’s
headquarters to discuss all information relevant for disclosure in the
Registration Statement covering the Registrable Securities, and will otherwise
cooperate with any Holder conducting an investigation for the purpose of
reducing or eliminating such Holder’s exposure to liability under the Securities
Act, including the reasonable production of information at the Company’s
headquarters;
(f) prior
to
any public offering of Registrable Securities pursuant to any registration
statement, register or qualify or obtain an exemption for offer and sale
under
the securities or blue sky laws of such jurisdictions as any such Holders
reasonably request in writing and do any and all other reasonable acts or
things
reasonably necessary or advisable to enable the offer and sale in such
jurisdictions of the Registrable Securities covered by such Registration
Statement, provided,
however, that
the
Company shall not for any such purpose be required to (i) qualify to transact
business as a foreign corporation in any jurisdiction where it is not so
qualified; (ii) consent to general service of process in any such jurisdiction;
(iii) subject itself to taxation in any such jurisdiction; (iv) provide any
undertakings that cause material expense or burden to the Company; or (v)
make
any change to its organizational documents which the Board of Directors of
the
Company determines to be contrary to the best interests of the Company and
its
stockholders;
(g) cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to any
Registration Statement free of any restrictive legends to the extent not
required at such time and in such denominations and registered in such names
as
Holders may request at least five (5) business days prior to sales of
Registrable Securities pursuant to such Registration Statement, subject to
the
submission by Holder to the Company’s transfer agent of the original
certificate(s) representing the Registrable Securities to be sold and a separate
Subscriber’s Certificate of Subsequent Sale duly executed by Subscriber and all
other documentation reasonably required by the Company and the Company’s
transfer agent;
B-20
(h) subject
to Section 6.8 hereof, upon the occurrence of any event contemplated by Section
6.5(b)(v) above, the Company shall promptly prepare a post-effective amendment
to the Registration Statement or a supplement to the related prospectus,
or file
any other required document so that, as thereafter promptly delivered to
purchasers of the Registrable Securities included therein, the prospectus
will
not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
(i) use
its
reasonable best efforts to comply with all applicable rules and regulations
of
the Commission, and use its reasonable best efforts to make generally available
to the Holders (which may be satisfied upon filing via XXXXX) not later than
45
days (or 90 days if the fiscal quarter is the fourth fiscal quarter) after
the
end of its fiscal quarter in which the first anniversary date of the effective
date of the Registration Statement occurs, an earnings statement satisfying
the
provisions of Section 11(a) of the Securities Act.
Notwithstanding
the foregoing, it shall be a condition precedent to the obligations of the
Company to take any action pursuant to paragraphs (a) through (i) of this
Section 6.5, that the Subscriber shall furnish to the Company such
information regarding itself, the Securities to be sold by the Subscriber,
and
the intended method of disposition of such Securities as shall be required
to
effect the registration of the Securities, all of which information shall
be
furnished to the Company in writing specifically for use in the Registration
Statement.
6.6 The
Holders shall have no right to take any action to restrain, enjoin or otherwise
delay any registration pursuant to Section 6.2 hereof as a result of any
controversy that may arise with respect to the interpretation or implementation
of this Agreement.
6.7 (a) To
the
extent permitted by law, the Company shall indemnify each Holder and Affiliate
of each Holder, with respect to which any registration, qualification or
compliance has been effected pursuant to this Agreement, against all claims,
losses, damages and liabilities (or action in respect thereof), including
any of
the foregoing incurred in settlement of any litigation, commenced or threatened
(subject to Section 6.7(c) below), arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in the
Registration Statement, or any amendment or supplement thereof, incident
to any
such registration, qualification or compliance, or based on any omission
(or
alleged omission) to state therein a material fact required to be stated
therein
or necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, and will reimburse each Holder and
each
person controlling such Holder, for reasonable legal and other expenses
reasonably incurred by such Holder or person controlling such Holder in
connection with investigating or defending any such claim, loss, damage,
liability or action as incurred; provided that the Company will not be liable
in
any such case to the extent that any such claim, loss, damage, liability
or
action arises out of, relates to or is based upon (i) an untrue statement
or
omission made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Holder or person controlling
such Holder and stated to be specifically for use in preparation of such
registration statement, prospectus or any supplement or amendment thereto,
or
(ii) the failure of the Holder to comply with the covenants and agreements
contained in this Agreement respecting sales of Registrable
Securities.
B-21
(b) Each
Holder will severally, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors
and
officers, and each Affiliate of the foregoing, against all claims, losses,
damages, liabilities and expenses (or actions in respect thereof), including
any
of the foregoing incurred in settlement of any litigation, commenced or
threatened (subject to Section 6.7(c) below), arising out of or based on
any
untrue statement of a material fact contained in any registration statement,
prospectus, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission to state
therein a material fact required to be stated therein or necessary to make
the
statements therein not misleading, in light of the circumstances in which
they
were made, in each case to the extent, but only to the extent, that such
untrue
statement or omission thereof is made in reliance upon and in conformity
with
written information furnished to the Company by or on behalf of the Holder
and
stated to be specifically for use in preparation of such registration statement,
prospectus or any amendment or supplement thereto, and the Holder will reimburse
the Company, its directors and officers, and each person controlling the
Company
for reasonable legal and any other expenses reasonably incurred in connection
with investigating, defending, settling, compromising or paying any such
claim,
loss, damage, liability, expense or action as incurred. Notwithstanding the
foregoing, in no event shall a Holder be liable for any such claims, losses,
damages or liabilities in excess of the net proceeds received by such Holder
in
the Offering, except in the event of fraud or intentional misrepresentation
by
such Holder.
(c) Each
party entitled to indemnification under this Section 6.7 (the “Indemnified
Party”)
shall
give notice to the party required to provide indemnification (the “Indemnifying
Party”)
promptly after such Indemnified Party has actual knowledge of any claim as
to
which indemnity may be sought, provided that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party
of its obligations under this Agreement, unless such failure is materially
prejudicial to the Indemnifying Party in defending such claim or litigation.
Subject to provisions hereinafter stated, in case any such action is brought
against any Indemnified Party and such Indemnified Party seeks or intends
to
seek indemnity from an Indemnifying Party, the Indemnifying Party will be
entitled to participate in, and, to the extent that it may wish, jointly
with
all other indemnifying parties similarly notified, to assume the defense
thereof
with counsel reasonably satisfactory to such Indemnified Party; provided,
however,
if the
defendants in any such action include both the Indemnified Party and the
Indemnifying Party, and the Indemnifying Party and the Indemnified Party,
based
upon the advice of such Indemnified Party’s counsel, shall have reasonably
concluded that there may be a conflict of interest between the positions
of the
Indemnifying Party and the Indemnified Party in conducting the defense of
any
such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available
to
the Indemnifying Party, the Indemnified Party or parties shall have the right
to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party
or
parties. Upon receipt of notice from the Indemnifying Party to such Indemnified
Party of its election so to assume the defense of such action and approval
by
the Indemnified Party of counsel, the Indemnifying Party will not be liable
to
such Indemnified Party under this Section 6.7 for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof unless (i) the Indemnified
B-22
Party
shall have employed such counsel in connection with the assumption of legal
defenses in accordance with the proviso to the preceding sentence (it being
understood, however, that the Indemnifying Party shall not be liable for
the
expenses of more than one separate counsel, approved by such Indemnifying
Party
representing the Indemnified Parties who are parties to such action, or
(ii) the Indemnifying Party shall not have employed counsel reasonably
satisfactory to the Indemnified Party to represent the Indemnified Party
within
a reasonable time after notice of commencement of action, in each of which
cases
the reasonable fees and expenses of counsel shall be at the expense of the
Indemnifying Party. In no event shall any Indemnifying Party be liable in
respect of any amounts paid in settlement of any action unless the Indemnifying
Party shall have approved the terms of such settlement; provided
that such
approval shall not be unreasonably withheld.
(d) If
the
indemnification provided for in this Section 6.7 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 thereunder, 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 or inaccuracies in the representations and warranties in this
Agreement which 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 omission to state a material fact or the inaccurate
representation and/or warranty 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. Notwithstanding the foregoing, in no event shall a
Holder
be liable for any such claims, losses, damages or liabilities pursuant to
this
paragraph 6.7(b) in excess of the net proceeds received by such Holder in
the
Offering, except in the event of fraud or intentional misrepresentation by
such
Holder.
6.8 (a) Notwithstanding
any other provision of this Agreement, each Holder agrees that, upon receipt
of
any notice from the Company of the happening of any event requiring the
preparation of a supplement or amendment to a prospectus relating to Registrable
Securities or the filing of an appropriate report with the SEC pursuant to
the
Exchange Act, so that, as thereafter delivered to the Holders, such prospectus
shall not contain an untrue statement of a material fact or omit to state
any
material fact required to be stated therein or necessary to make the statements
therein not misleading, each Holder will forthwith discontinue disposition
of
Registrable Securities pursuant to the registration statement contemplated
by
Section 6.2 until its receipt of copies of the supplemented or amended
prospectus from the Company or confirmation of the filing of such report
with
the SEC by the Company, any such prospectus to be forwarded promptly to the
Subscriber by the Company, and, if so directed by the Company, each Holder
shall
deliver to the Company all copies, other than permanent file copies then
in such
Holder’s possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
B-23
(b) Notwithstanding
any other provision of this Agreement, each Holder shall suspend, upon request
of the Company, any disposition of Registrable Securities pursuant to the
Registration Statement and prospectus contemplated by Section 6.2
during
any periods not to exceed 90 days in the aggregate within any one 12-month
period when the Company reasonably determines in good faith that offers and
sales pursuant thereto should not be made by reason of the presence of material
undisclosed circumstances or developments with respect to which the disclosure
that would be required in such a prospectus is premature, would have an adverse
effect on the Company or is otherwise inadvisable.
(c) As
a
condition to the inclusion of its Registrable Securities, each Holder shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request
in
writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article VI.
(d) Each
Holder hereby covenants with the Company not to make any sale of the Registrable
Securities without effectively causing the prospectus delivery requirements
under the Securities Act to be satisfied.
(e) Each
Holder acknowledges and agrees that the Registrable Securities sold pursuant
to
the Registration Statement described in this Section are not transferable
on the
books of the Company unless the stock certificate submitted to the transfer
agent evidencing such Registrable Securities is accompanied by a certificate
reasonably satisfactory to the Company to the effect that (i) the
Registrable Securities have been sold in accordance with such Registration
Statement and (ii) the requirement of delivering a current prospectus
has
been satisfied.
(f) Each
Holder agrees not to take any action with respect to any distribution deemed
to
be made pursuant to such registration statement which would constitute a
violation of Regulation M under the Exchange Act or any other applicable
rule,
regulation or law.
(g) At
the
end of the period during which the Company is obligated to keep the Registration
Statement current and effective as described above, the Holders of Registrable
Securities included in the Registration Statement shall discontinue sales
of
shares pursuant to such Registration Statement upon receipt of notice from
the
Company of its intention to remove from registration the shares covered by
such
Registration Statement which remain unsold, and such Holders shall notify
the
Company of the number of shares registered which remain unsold immediately
upon
receipt of such notice from the Company.
6.9 With
a
view to making available to the Holders the benefits of certain rules and
regulations of the Commission which at any time permit the sale of the
Registrable Securities to the public without registration, the Company shall
use
its reasonable best efforts to:
B-24
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144 under the Securities Act, at all times;
(b) file
with
the Commission in a timely manner all reports and other documents required
of
the Company under the Exchange Act; and
(c) so
long
as a Holder owns any unregistered Registrable Securities, furnish to such
Holder, upon any reasonable written request, a written statement by the Company
as to its compliance with Rule 144 under the Securities Act, and of
the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company as such Holder
may
reasonably request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without
registration.
6.10 The
rights to cause the Company to register Registrable Securities granted to
the
Holders by the Company under Section 6.2 may be assigned in full by
a
Holder in connection with a transfer by such Holder of its Registrable
Securities, but only if: (i) such transfer may otherwise be effected
in
accordance with applicable securities laws; (ii) such Holder gives
prior
written notice of the proposed transfer to the Company including the name
and
address of such transferee and a copy of the transfer documents and agreements;
(iii) such transferee agrees in writing with the Company to be bound by and
to
comply with the terms and provisions of this Agreement; (iv) the transferee
is
an “accredited investor” as that term is defined in Rule 501 of Regulation D;
and (v) such transfer is otherwise in compliance with this Agreement. Except
as
specifically permitted by this Section 6.10, the rights of a Holder
with
respect to Registrable Securities as set forth herein shall not be transferable
to any other person, the Company may impose stop transfer orders with respect
to
any such transfer or attempted transfer, and any such transfer or attempted
transfer shall be null and void.
6.11 The
Company shall use best efforts to cause all Registrable Securities covered
by a
Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed.
6.12 With
the
written consent of the Company and the Holders holding at least a majority
of
the Registrable Securities that are then outstanding, any provision of this
Article VI may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time
or
indefinitely) or amended and shall be effective against all Holders. Upon
the
effectuation of each such waiver or amendment, the Company shall promptly
give
written notice thereof to the Holders, if any, who have not previously received
notice thereof or consented thereto in writing.
B-25
VII.
MISCELLANEOUS
7.1 Any
notice or other communication given hereunder shall be deemed sufficient
if in
writing and sent by facsimile, with confirmation, by registered or certified
mail, return receipt requested, or delivered by hand against written receipt
therefore or sent by nationally recognized overnight express courier postage
prepaid, if to the Company: addressed to InSite Vision Incorporated, 000
Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000, Attn: Chief Financial Officer,
Fax:
(000) 000-0000 and if to the Subscriber, at the Subscriber’s address or
facsimile number indicated on the signature page of this Agree-ment. Notices
shall be deemed to have been given or delivered in the case of facsimile,
upon
receipt of confirmation of transmission by the sender, registered or certified
mail, three days after so mailed, in the case of hand delivery, when so
delivered against written receipt therefore, and in the case of overnight
express courier, the day after mailing, except notices of change of address,
which shall be deemed to have been given or delivered when
received.
7.2 Except
as
otherwise provided above, 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 per-formance in accordance with
its
terms or by a writing signed by the party to be charged.
7.3 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.
7.4 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
the Units as herein provided; subject, however, to the right hereby reserved
to
the Company to revoke this subscription in accordance with Section 4.1, enter
into the same agreements with other subscribers and to add and/or delete
other
persons as subscribers.
7.5 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 PRINCIPLES OF CONFLICTS OF LAW. IN THE EVENT THAT A JUDICIAL
PROCEEDING IS NECESSARY, THE EXCLUSIVE FORUMS FOR RESOLVING DISPUTES ARISING
OUT
OF OR RELATING TO THIS AGREEMENT ARE EITHER 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.
B-26
7.6 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 condi-tions and provisions
or
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and en-forceable, and no
provisions shall be deemed dependent upon any other covenant or provision
unless
so expressed herein.
7.7 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.
7.8 The
parties agree to execute and deliver all such further documents, agreements
and
instruments and take such other and further action as may be neces-sary or
appropriate to carry out the purposes and intent of this Agreement.
7.9 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.
7.10 (a) The
Subscribers severally agree not to issue any public statement with respect
to
the Subscribers’ 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 Subscribers, except as required by law and to satisfy its obligations
under Article VI.
7.11 The
Subscriber represents and warrants that it has not engaged, consented to
nor
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. Subscriber hereby severally
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.
7.12 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 for the holders of Registrable
Securities.
7.13 The
Company acknowledges and agrees that irreparable damage would occur in the
event
that any of the provisions of Article VI of this Agreement were not performed
in
accordance with its specific terms or were otherwise breached and that such
damage would not be compensable in money damages and that it would be extremely
difficult or impracticable to measure the resultant damages.
B-27
Accordingly,
except as otherwise specifically set forth herein, any Subscriber shall be
entitled to an injunction or injunctions with respect to the provisions of
this
Agreement and to enforce specifically the terms and provisions hereof, in
addition to any other remedy to which it may be entitled at law or in equity,
and the Company expressly waives any defense that a remedy in damages would
be
adequate and expressly waives any requirement in an action for specific
performance for the posting of a bond by the Subscriber bringing such
action.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
B-28
VIII.
CONFIDENTIAL
SUBSCRIBER QUESTIONNAIRE
The
Subscriber represents and warrants that he, she or it comes within one cate-gory
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 PARTS I-IV OF THIS
QUESTIONNARE WILL BE KEPT STRICTLY CONFIDENTIAL except as otherwise required
by
law or as necessary for inclusion in the Registration Statement. 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, pres-ently ex-ceeds $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
in-vestments, stock and securi-ties. 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 Securities. | ||
| 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) | ||
|
|
|||
|
|
|||
B-29
| Category E | The undersigned is a private business development company as defined in section 202(a)(22) of the Investment Advi-sors Act of 1940. (describe entity) | ||
|
|
|||
|
|
|||
| 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 Subscriber" as defined in Regulation 506(b)(2-)(ii) under the Securities 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.
Part
II
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:
_____________________________________________________________________________________________________________________________________________________________
B-30
(b)
For
an individual Subscriber, please describe any college or graduate degrees
held
by you:
____________________________________________________________________________________________________________________________________________________________
(c)
For
all Subscribers, please state whether you have you participated in other
private
placements
before:
YES_______ NO_______
(d)
If
your answer to question (d) above was “YES”, please indicate frequency of such
prior participation in private
placements
of:
|
|
Public Companies
|
Private
Companies
|
Public
or Private
Pharmaceutical
Companies
|
|||||||
| Frequently |
|
|
|
|||||||
| Occasionally |
|
|
|
|||||||
| Never |
|
|
|
|||||||
(e)
For
individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
YES_______ NO_______
(f)
For
trust, corporate, partnership and other institutional Subscribers, do you
expect
your total assets to significantly decrease in the foreseeable future:
YES_______ NO_______
(g)
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_______
(h)
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_______
B-31
(i)
For
all Subscribers, do you understand that there is no guarantee of financial
return on this investment, that an investment in the Securities is highly
speculative and risky and that you run the risk of losing your entire
investment?
YES_______ NO_______
(j)
For
all Subscribers, will you have sufficient readily available cash to fund
your
obligation to purchase Securities at the Closing pursuant to your subscription
if and when the Closing occurs?
YES_______ NO_______
Part
III 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
Securities are being subscribed for by an entity, the attached Certificate
of
Signatory must also be completed.
Part
IV NASD
AFFILIATION.
Are
you
affiliated or associated with an NASD member firm (please check
one):
Yes
_________ No
__________
If
Yes,
please describe:
_________________________________________________________
_________________________________________________________
_________________________________________________________
B-32
*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 III, Sections 28(a) and (b) of the Rules of Fair Practice.
_________________________________
Name
of
NASD Member Firm
By:
______________________________
Authorized
Officer
Date:
____________________________
Part
V
REGISTRATION
QUESTIONNAIRE
The
following questions in this Part V are specifically intended to provide
information to the Company for the Company's use in the preparation of the
Registration Statement contemplated by the Subscription Agreement and for
specific inclusion in such Registration Statement.
PLEASE
ANSWER EVERY QUESTION BELOW. If a question is inapplicable to you or your
answer
is in the negative, please so state by inserting “N/A.” If you are in doubt
whether a particular question requires an affirmative response from you,
please
furnish full particulars so that those persons responsible for preparing
the
Registration Statement contemplated by the Subscription Agreement can determine
whether any disclosure based on your answer is required. Information requested
in this questionnaire is as of the date you complete the questionnaire, unless
otherwise indicated. Your furnishing such information does not necessarily
mean
that such information will be disclosed, although it may be disclosed.
You
are required to promptly provide the Company with any update to the information
if such information changes after the date hereof.
DEFINITIONS
Your
answers to this questionnaire should be made upon the basis of the following
definitions of terms used in this questionnaire:
The
term
“beneficial
owner”
of a
security includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or shares
(1) voting
power,
which includes the power to vote, or direct the voting of, such security
or
(2) investment
power,
which
includes the power to dispose or direct the disposition of such security.
A
person may be regarded as having voting power of a security which is owned
(i)
by his spouse or minor children or by any of his relatives or his spouse’s
relatives who share the same home with him, (ii) a partnership
of
which he is a partner or (iii) a corporation of which he is a substantial
stockholder. A person is also deemed to be the beneficial owner of shares
which
that person has the right to acquire within 60 days, including but not limited
to any right to acquire through the exercise of an option, through conversion
of
a security, pursuant to the power to revoke a trust or pursuant to the automatic
termination of a trust. Please also disclose any other rights which you have
to
acquire securities of the Company on or before July 31, 2005.
B-33
The
term
“material,”
when
used to qualify a requirement for the furnishings of information as to any
subject, limits the information required to those matters about which the
average prudent investor should reasonably be informed before buying or selling
the securities of the Company. If you are in doubt as to the materiality
of
certain information, you should relate sufficient facts to enable the Company
and its advisors to reach a conclusion as to its materiality.
QUESTIONS
QUESTION
1:
State
your present position or positions with the Company (if any), including
membership on any audit, personnel, compensation or similar committee or
committees; any positions held by you during the previous three years; and
any
positions to which you have been elected or appointed but the duties of which
you have not yet assumed. For each position, list the term or expected term
of
office.
ANSWER:
QUESTION
2:
Other
than Securities that you will acquire in connection with the
Offering,
provide
below information regarding the equity securities of the Company of which
you
are the “beneficial owner.”Please
refer to the definition of “beneficial owner,” above.
Under
the column “Nature of Ownership,” please indicate amounts of securities for
which you have (a) sole voting power, (b) shared voting power, (c) sole
investment power, or (d) shared investment power. If your response covers
any
securities included because you have the right to acquire them on or before
July
31, 2005, please separately indicate the amount of such securities. Also,
if you
hold more than 5% of the Company’s securities pursuant to a voting trust or
similar agreement, please separately state the amount of such securities
held or
to be held pursuant to the trust or agreement, the duration of the agreement
and
the names and addresses of the voting trustees, outlining briefly their voting
rights and other powers under the trust or agreement.
ANSWER
(attach additional pages if necessary):
| Number of Securities |
Nature
of Ownership
|
Title
of
Securities
|
B-34
QUESTION
3:
If
you
plan to offer your shares of Common Stock through the selling efforts of
brokers
or dealers, describe the terms (and attach copies) of any agreement,
arrangement, or understanding entered into with broker(s) or dealer(s),
including volume limitations on sales, parties to the agreement and the
conditions under which the agreement may be terminated. If known, identify
the
broker(s) or dealer(s), which will participate in the offering and state
the
amount to be offered through each.
ANSWER:
QUESTION
4:
Describe
below any information known to you, and if none state “none,” pertaining to
underwriting compensation and arrangements or any dealings between any
underwriter or related person, member of the NASD or a person associated
with a
member of the NASD, and the Company or any controlling stockholder thereof
since
January 1, 2002.
ANSWER:
QUESTION
5:
State
below whether you or any of your associates are a member of NASD, a controlling
stockholder of a member, a person associated or affiliated with a member
or an
underwriter or related person with respect to the proposed offering. If you
responded “yes,” describe such relationship:
ANSWER:
QUESTION
6:
Are
you a
broker-dealer?
ANSWER:
Yes
______ No______
B-35
QUESTION
7:
If
you
are not a broker-dealer, are you affiliated with a broker-dealer?
ANSWER:
Yes
______ No______
QUESTION
8:
If
you
are affiliated with a broker-dealer, did you purchase the securities in the
ordinary course of business?
ANSWER:
Yes
______ No______
QUESTION
9:
If
you
are affiliated with a broker-dealer, did you have any agreements or
understandings, directly or indirectly, with any person to distribute the
securities at the time that you purchased the securities?
ANSWER:
Yes
______ No______
Please
note that the Commission takes the position that if you are a broker-dealer,
you
are to be identified in the Registration Statement as an underwriter. In
the
“Plan of Distribution,” the Registration Statement will provide substantially as
follows:
“The
selling stockholders and any broker-dealers, agents or underwriters that
participate with the selling stockholders in the distribution of the issued
and
outstanding shares of common stock or the shares of stock issuable upon exercise
of warrants may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event any commissions received by these broker-dealers,
agents or underwriters and any profits realized by the selling stockholders
on
the resales of the securities may be deemed to be underwriting commissions
or
discounts under the Securities Act. If the selling stockholders are deemed
to be
underwriters, the selling stockholders may be subject to certain statutory
and
regulatory liabilities, including liabilities imposed pursuant to Sections
11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange
Act.”
B-36
QUESTION
10:
Are
their
specific individuals who have voting or investment control over the
securities?
ANSWER:
Yes
______ No______
If
you
answered “yes”, please list the names of such individuals:
____________________________________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________________________________
The
answers to the foregoing questions are true and correct to the best of the
undersigned’s knowledge, information and belief. The undersigned agrees to
promptly notify the Company in writing in care of Chief Financial Officer,
InSite Vision Incorporated, 000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000
of
(a) any transfer by you of your Units, (b) sales of common stock of the Company
(giving the number of shares sold and the name of the broker-dealer used)
and
(c) any other changes in the answers to this questionnaire that should be
made
as a result of any material development occurring subsequent to the date
hereof.
Dated:
___________, 2005.
____________________________________
Signature
The
undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in the Confidential Subscriber
Questionnaire contained in this Article VIII and such answers have been provided
under the assumption that the Company will rely on them.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE
PAGE TO FOLLOW]
B-37
[Signature
Page]
_____________
X $
____________ =
$____________
Number
of
Units the
Unit
Price
Closing
Amount
| Signature of Subscriber | Signature of Subscriber (if purchasing jointly) | |
| Name Typed or Printed | Name Typed or Printed | |
| Entity Name | Entity Name | |
| Title | Title | |
| Xxxxxxx | Xxxxxxx | |
| Xxxx, Xxxxx xxx Xxx Xxxx | Xxxx, Xxxxx 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:
_______________________________________
Dated:
_______,
2005
B-38
This
Subscription Agreement is agreed to and accepted by the Company as of May
3, 2005.
| INSITE VISION INCORPORATED | |||
|
By:
/s/
X. Xxxxx Xxxxxxxxxxxxxx, Ph. D.
|
|||
|
Name:
X.
Xxxxx Xxxxxxxxxxxxxx, Ph. D.
|
|||
| Title: President and Chief Executive Officer | |||
B-39
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 _________________,
2005.
| (Signature) |
B-40
Exhibit
A
Notice
to Subscriber
of
Subscriber
Amount
Dear
Subscriber:
Pursuant
to the Section 1.2 of that certain Subscriber Agreement by and between InSite
Vision Incorporated and certain signatories therein, dated as of _________,
2005
(the “Subscription Agreement”), this letter shall serve as notice to provide you
with information concerning your allocation for the Closing in connection
with
the Offering of Units by the Company and the amount you are hereby obligated
to
invest at the Closing per the Subscription Agreement (the “Closing Amount” as
further defined in the Subscription Agreement).
| A) Subscriber’s subscription amount: | ______________ | |
| B) Number of Units Available to all Subscribers for Closing: | ______________ | |
| C) Number of Units Allocated to you for Closing: | ______________ | |
| D) Closing Amount due at Closing: | ______________ |
B-41
