Exhibit 4.9
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of the date set forth
on the signature page hereof between Innovative Drug Delivery Systems, Inc. (the
"Company"), and the undersigned (the "Subscriber").
W I T N E S S E T H:
WHEREAS, the Company has retained Paramount Capital, Inc. ("Paramount")
and ▇▇▇▇▇ Fargo ▇▇▇ ▇▇▇▇▇▇, LLC ("▇▇▇▇▇ Fargo") (together with Paramount, the
Placement Agents) to place, on a "all or none, best efforts" basis, in a private
offering (the "Offering") of "Units" consisting of 90,090 shares of Series B
Convertible Preferred Stock, par value $.001 per share, stated value $5.55 per
share (the "Units") of the Company. The Purchase Price of each Unit will be
$500,000.
WHEREAS, the Company desires to issue a minimum of 4 Units (the
"Minimum Offering") and a maximum of 10 Units (the "Maximum Offering") with an
option in favor of the Company to offer up to an additional 5 Units to cover
over-allotments. Each share of Preferred Stock is convertible at the option of
the holder thereof into one (1) share of common stock, par value $.001 per
share, of the Company (the "Common Stock"), initially at a conversion price
equal to $5.55 per share of Common Stock (the Preferred Stock and the Common
Stock issuable upon conversion of the Preferred Stock are sometimes hereinafter
collectively referred to as the "Securities");
WHEREAS, the Subscriber desires to purchase that number of Units set
forth on the signature page hereof on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
I. SUBSCRIPTION FOR UNITS; REPRESENTATIONS OF AND COVENANTS BY SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company such
number of Units, or fractions thereof, and the Company agrees to sell such
number of Units to the Subscriber as is set forth on the signature page hereof
at a price per Unit equal to $500,000 per Unit (the "Initial Offering Price").
The purchase price is payable by personal or business check or money order made
payable to "State Street Bank and Trust Company, N.A., Escrow Agent, F/B/O
Innovative Drug Delivery Systems, Inc." contemporaneously with the execution and
delivery of this Agreement by the Subscriber. Subscribers may also pay the
subscription amount by wire transfer of immediately available funds to:
State Street Bank & Trust Company, N.A.
Corporate Trust Dept.
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
ABA Routing Number:
Account Name: State Street Bank Corporate Trust
Account Number:
Sub Account Name: Innovative Drug Delivery Systems Inc.
Sub Account Number (SEI#):
Name of Subscriber: [Insert Investor Name]
The certificates representing the Units shall be delivered by the Company within
10 business days following the consummation of the Offering. The Subscriber
understands, however, that this purchase of the Units is contingent upon the
Company making sales of the Minimum Offering amount prior to the Final Closing
Date (as defined below) of the Offering.
1.2 The Subscriber recognizes that the purchase of the Units involves a
high degree of risk including, but not limited to, the following: (a) the
Company remains a development stage business with limited operating history and
requires substantial funds in addition to the proceeds of the Offering; (b) an
investment in the Company is highly speculative, and only investors who can
afford the loss of their entire investment should consider investing in the
Company and the Units; (c) the Subscriber may not be able to liquidate its
investment; (d) transferability of the Securities is extremely limited; (e) in
the event of a disposition, the Subscriber could sustain the loss of its entire
investment; and (f) the Company has not paid any dividends since its inception
and does not anticipate paying any dividends, even if declared by the Board of
Directors pursuant to the terms of the Preferred Stock. Such risks are more
fully set forth in the Confidential Private Placement Memorandum dated
November 20, 2001, as supplemented and amended, and the attachments and exhibits
thereto, all of which constitute an integral part thereof furnished by the
Company to the Subscriber (the "Memorandum").
1.3 The Subscriber represents that the Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D ("Regulation D")
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
as indicated by the Subscriber's responses to the questions contained in Article
VII hereof, and that the Subscriber is able to bear the economic risk of an
investment in the Units. 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, at the present time, could afford
a complete loss of such investment.
1.4 The Subscriber hereby acknowledges and represents that (a) the
Subscriber has knowledge and experience in business and financial matters, prior
investment experience, including investment in securities that are non-listed,
unregistered and/or not traded on a national securities exchange nor on the
National Association of Securities Dealers, Inc. (the
"NADS") automated quotation system ("NASDAQ") or the Subscriber has employed the
services of a "purchaser representative" (as defined in Rule 501 of Regulation
D), attorney and/or accountant to read all of the documents furnished or made
available by the Company both to the Subscriber and to all other prospective
investors in the Units and to evaluate the merits and risks of such an
investment on the Subscriber's behalf; (b) the Subscriber recognizes the highly
speculative nature of this investment; and (c) the Subscriber is able to bear
the economic risk that the Subscriber hereby assumes.
1.5 The Subscriber hereby acknowledges receipt and careful review of
the Memorandum, including, without limitation, the "Risk Factors" included
therein, the form of Certificate of Designations attached thereto and this
Agreement (collectively referred to as the "Offering Materials") and hereby
represents that the Subscriber has been furnished by the Company during the
course of the Offering with all information regarding the Company that the
Subscriber has requested or desired to know, has been afforded the opportunity
to ask questions of and receive answers from duly authorized officers or other
representatives of the Company concerning the terms and conditions of the
Offering and has received any additional information that the Subscriber has
requested.
1.6 (a) In making the decision to invest in the Units the Subscriber
has relied solely upon the information provided by the Company in the Offering
Materials. To the extent necessary, the Subscriber has retained, at its own
expense, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement and the
purchase of the Units hereunder. The Subscriber disclaims reliance on any
statements made or information provided by any person or entity (whether written
or oral) in the course of Subscriber's consideration of an investment in the
Units other than the Offering Materials. The Subscriber acknowledges and agrees
that the Company has prepared the Memorandum and that no other person has
supplied any information for inclusion in the Memorandum.
(b) The Subscriber represents that (i) the Subscriber was contacted
regarding the sale of the Units by the Company or the Placement Agents (or an
authorized agent or representative thereof) with whom the Subscriber had a prior
substantial pre-existing relationship and (ii) no Units were offered or sold to
it by means of any form of general solicitation or general advertising, and in
connection therewith, the Subscriber did not (A) receive or review any
advertisement, article, notice or other communication published in a newspaper
or magazine or similar media or broadcast over television or radio, whether
closed circuit, or generally available; or (B) attend any seminar meeting or
industry investor conference whose attendees were invited by any general
solicitation or general advertising.
1.7 The Subscriber hereby represents that the Subscriber, either by
reason of the Subscriber's business or financial experience or the business or
financial experience of the Subscriber's professional advisors (who are
unaffiliated with and not compensated by the Company or any affiliate or selling
agent of the Company, directly or indirectly), has the capacity to protect the
Subscriber's own interests in connection with the transaction contemplated
hereby.
1.8 The Subscriber hereby acknowledges that the Offering has not been
reviewed by the United States Securities and Exchange Commission (the "SEC") nor
any state regulatory authority since the Offering is intended to be exempt from
the registration requirements of Section 5 of the Securities Act pursuant to
Regulation D promulgated under the Securities Act. The Subscriber understands
that the Securities have not been registered under the Securities Act and agrees
not to sell or otherwise transfer the Securities unless they are registered
under the Securities Act or unless an exemption from such registration is
available.
1.9 The Subscriber understands that the Securities comprising the Units
have not been registered under the Securities Act by reason of a claimed
exemption under the provisions of the Securities Act that depends, in part, upon
the Subscriber's investment intention. In this connection, the Subscriber hereby
represents that the Subscriber is purchasing the Securities for the Subscriber's
own account for investment and not with a view toward the resale or distribution
to others and such Subscriber has no contract, undertaking, agreement or other
arrangement, in existence or contemplated, to sell, pledge, assign or otherwise
transfer any of the Securities to any other person. The Subscriber, if an
entity, further represents that it was not formed for the purpose of purchasing
the Securities.
1.10 The Subscriber understands that there is no public market for the
Units nor the Securities comprising the Units and that no market may develop for
the Units or any of such Securities. The Subscriber understands that even if a
public market develops for the Units or such Securities, Rule 144 ("Rule 144")
promulgated under the Securities Act requires for non-affiliates, among other
conditions, a one-year holding period prior to the resale (in limited amounts)
of securities acquired in a non-public offering without having to satisfy the
registration requirements under the Securities Act. The Subscriber understands
and hereby acknowledges that the Company is under no obligation to register any
of the Units or any of the Securities comprising the Units under the Securities
Act or any state securities or "blue sky" laws or foreign laws other than as set
forth in Article VI herein. The Subscriber agrees to hold the Company and the
Placement Agents and each of their respective directors, officers, employees,
affiliates, controlling persons and agents and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of (a) any
misrepresentation made by the Subscriber contained in this Agreement (including
the Confidential Investor Questionnaire contained in Article VIII herein); (b)
any sale or distribution by the Subscriber in violation of the Securities Act or
any applicable state securities or "blue sky" laws or any foreign laws; or (c)
any untrue statement of a material fact made by the Subscriber and contained
herein.
1.11 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Securities substantially as set
forth below, that such Securities have not been registered under the 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 also consents to the placement of such additional legend(s) on
any certificate or other document evidencing the Securities as may be required
under state securities or "blue sky" laws or other applicable foreign laws. The
Subscriber is aware that the Company will make a notation in its appropriate
records with respect to the restrictions on the transferability of the
Securities.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
Additionally, each Subscriber that is a resident of Florida consents to the
placement of the following legend on any certificate or other document
evidencing the Preferred Stock and the Common Stock:
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.
EACH OFFEREE WHO IS A FLORIDA RESIDENT SHOULD BE AWARE THAT ANY SALE
MADE TO RESIDENTS OF FLORIDA SHALL BE VOIDABLE WITHIN THREE DAYS AFTER
THE FIRST TENDER OF CONSIDERATION IS MADE BY THE PURCHASER TO THE
ISSUER OR TO THE PLACEMENT AGENT. EACH PERSON ENTITLED TO EXERCISE SUCH
RIGHT TO WITHDRAW AND WHO WISHES TO EXERCISE SUCH RIGHT MUST CAUSE A
WRITTEN NOTICE OR TELEGRAM TO BE SENT TO THE ISSUER OR PLACEMENT AGENT
WITHIN THE AFOREMENTIONED THREE-DAY PERIOD.
1.12 The Subscriber understands that the Company and the Placement
Agents will review this Agreement and are hereby given authority by the
Subscriber to call Subscriber's bank or place of employment or otherwise review
the financial standing of the Subscriber; and it is further agreed that the
Company or the Placement Agents, at their sole discretion, reserve the
unrestricted right, without further documentation or agreement on the part of
the Subscriber, to reject or limit any subscription, to accept subscriptions for
fractional Units and to close the Offering to the Subscriber at any time and the
Company reserves the right to issue stop transfer instructions to its transfer
agent with respect to such Securities.
1.13 The Subscriber hereby represents that the address of the
Subscriber furnished by Subscriber on the signature page hereof is the
Subscriber's principal residence if Subscriber is an individual or its
principal business address if it is a corporation or other entity.
1.14 The Subscriber represents that the subscriber has full power and
authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchae the Units and the Securities underlying the Units. The
Subscriber further represents that its subscription and payment for the Units,
and its continued beneficial ownership of the Securities included in the Units,
will not violate any applicable securities or other laws of its jurisdiction.
This Agreement constitutes the legal, valid and binding obligation of the
Subscriber, enforceable against the Subscriber in accordance with its terms.
1.15 If the Subscriber is a corporation, partnership, limited liability
company, trust, employee benefit plan, individual retirement account, ▇▇▇▇▇
Plan, or other tax-exempt entity, (a) it is authorized and qualified to become
an investor 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.
1.16 The Subscriber acknowledges that if he or she is a Registered
Representative of an NASD member firm, he or she must give such firm the notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm in Section 8.5 below.
1.17 The Subscriber acknowledges that at such time, if ever, as the
Securities are registered, sales of the Securities will be subject to state
securities laws.
1.18 (a) Subject to the provision below and Section 1.18(b), the
Subscriber hereby agrees that from the earlier to occur of (i) the date of the
initial public offering of the Common Stock (the "IPO") or (ii) the first date
(the "Trading Date") on which the Common Stock (or securities received in
exchange for Common Stock) trades on a national securities exchange or on the
NASDAQ (a "Trading Event") and continuing for a period of 180 days thereafter or
such longer period as may be required by the Company or requested by the
underwriter or underwriters, in the case of an IPO (the "Lock-Up Period"), the
Subscriber will not, without the prior written consent of the Company, offer,
pledge, sell, contract to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, the Registrable Securities (as defined in
Section 6.1) purchased or acquired by the Subscriber. In addition, the
Subscriber agrees that during the period from the date that Subscriber was first
contacted with respect to the potential purchase of the Units through the last
date upon which Subscriber holds any Securities or Registrable Securities, the
Subscriber will not directly or indirectly, through related parties, affiliates
or otherwise sell "short" or "short against the box" (as those terms are
generally understood) any equity security of the Company.
(b) In connection with any public offering of the Company's securities
subsequent to the IPO, the Holder hereby agrees to be subject to a lock-up for a
period of 60 days or such longer period following such public offering as
required by the underwriter or underwriters of such public offering. The
foregoing lock-ups shall be applicable regardless of whether the securities are
then registered for re-sale under the Securities Act. This Section 1.18 shall be
binding upon any transferee of the Securities.
(c) In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities (as
defined below) of each Holder (as defined below) (and the shares or securities
of every other person subject to the foregoing restriction) until the end of
such period.
1.19 The Subscriber agrees not to issue any public statement with
respect to the Subscriber's investment or proposed investment in the Company or
the terms of any agreement or covenant between them and the Company without both
the Company's and each Placement Agents' prior written consent, except such
disclosures as may be required under applicable law or under any applicable
order, rule or regulation.
1.20 The Subscriber represents and warrants that it has not engaged,
consented to or authorized any broker, finder or intermediary to act on its
behalf; directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. The Subscriber
hereby agrees to indemnify and hold harmless the Company and each Placement
Agent from and against all fees, commissions or other payments owing to any such
person or firm acting on behalf of such Subscriber hereunder.
1.21 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.
1.22 The Subscriber understands, acknowledges and agrees with the
Company and the Placement Agents that, except as otherwise set forth herein,
that 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.
1.23 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 and/or the provisions of Regulation S,
which exemption is in part dependent upon the truth, completeness and accuracy
of the statements made by the Subscriber.
1.24 The Subscriber understands, acknowledges and agrees with the
Company and the Placement Agents 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, as well as Regulation S, any transferee
may, at a minimum, be required to fulfill the investor suitability requirements
thereunder.
1.25 The Subscriber understands and acknowledges the Placement Agents
have been engaged by the Company to place the Units in connection with this
Offering and will receive a fee equal to 7% of the aggregate cash value of the
amount of equity investment raised by the Company and placed by the Placement
Agents.
1.26 The Subscriber acknowledges that the information contained in this
Agreement or otherwise made available to the Subscriber is confidential and
non-public and agrees that all such 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 this Subscription) nor disclosed to any
third party for any reason, notwithstanding that a Subscriber's subscription may
not be accepted by the Company; provided, however, that this obligation shall
not apply to any such information that (i) is part of the public knowledge or
literature and readily accessible at the date hereof; (ii) becomes part of the
public knowledge or literature and readily accessible by publication (except as
a result of a breach of this provision) or (iii) is received from third parties
(except third parties who disclose such information in violation of any
confidentiality agreements or obligations, including, without limitation, any
subscription or other similar agreement entered into with the Company).
II. REPRESENTATIONS BY AND COVENANTS OF THE COMPANY
The Company hereby represents and warrants to the Subscriber that:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and authority to conduct
its business as described in the Memorandum and the Company is duly qualified to
do business as a foreign corporation and its is in good standing in the State of
New York.
2.2 Capitalization and Voting Rights. The authorized, issued and
outstanding capital stock of the Company is as set forth in the Memorandum and
all issued and outstanding shares of the Company are validly issued, fully paid
and nonassessable. The Preferred Stock comprising the Units, when issued and
paid for in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable. The Common Stock to be received by the Subscriber
upon conversion of the Preferred Stock, when issued and paid for in accordance
with the terms of the Securities, will be validly issued, fully paid and
nonassessable. The Company shall at all times during the period that any of the
shares of Preferred Stock remain outstanding and unexercised have authorized and
reserved for issuance a sufficient number of shares of Common Stock to provide
for conversion of the Preferred Stock. Except as set forth in the Memorandum,
there are no outstanding options, warrants, agreements, convertible securities,
preemptive rights or other rights to subscribe for or to purchase any shares of
capital stock of the Company. Except as set forth in the Offering Materials and
as otherwise required by law, there are no restrictions upon the voting or
transfer of any of the shares of capital stock of the Company pursuant to the
Company's Certificate of Incorporation, as amended (the "Certificate
of Incorporation"), By-Laws or other governing documents or any agreement or
other instruments to which the Company is a party or by which the Company is
bound.
2.3 Authorization; Enforceability. The Company has all corporate right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company and the
authorization, sale, issuance and delivery of the Securities contemplated hereby
and the performance of the Company's obligations hereunder has been taken. This
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy. Upon the issuance and delivery of the
Preferred Stock as contemplated by this Agreement, such Preferred Stock will be
validly issued, fully paid and nonassessable. Upon the issuance and delivery of
the Common Stock issuable upon conversion of the Preferred Stock, and upon
compliance by the Subscriber with the terms hereof and the Securities, the
Common Stock will be validly issued, fully paid and nonassessable. The issuance
and sale of the Preferred Stock contemplated hereby and the issuance and sale of
the Common Stock underlying the Preferred Stock will not give rise to any
preemptive rights or rights of first refusal on behalf of any person.
2.4 Certificate of Designations of Preferred Stock. The Preferred Stock
has all of the rights, preferences and privileges substantially as set forth in
the Form of Certificate of Designations attached as Exhibit A to the Memorandum.
2.5 No Conflict; Governmental Consents.
(a) The execution and delivery by the Company of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
violation of any material law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or governmental authority to or by
which the Company is bound, or of any provision of the Certificate of
Incorporation or By-Laws of the Company, and will not conflict with, or result
in a material breach or violation of; any of the terms or provisions of; or
constitute (with due notice or lapse of time or both) a default under, any
lease, loan agreement, mortgage, security agreement, trust indenture or other
agreement or instrument to which the Company is a party or by which it is bound
or to which any of its properties or assets is subject, nor result in the
creation or imposition of any lien upon any of the properties or assets of the
Company.
(b) No consent, approval, authorization or other order of any
governmental authority is required to be obtained by the Company in connection
with the authorization, execution and delivery of this Agreement or with the
authorization, issue and sale of the Securities, except such filings as may be
required to be made with the SEC, the NASD, NASDAQ and with any state or foreign
blue sky or securities regulatory authority.
2.6 Licenses. Except as otherwise set forth in the Memorandum, the
Company has sufficient licenses, permits and other governmental authorizations
currently required for the conduct of its business or ownership of properties
and is in all material respects complying therewith.
2.7 Litigation. The Company knows of no pending or threatened legal or
governmental proceedings against the Company that would materially adversely
affect the business, property, financial condition or operations of the Company.
2.8 Memorandum; Disclosure. The information set forth in the Memorandum
as of the date thereof contains no untrue statement of a material fact nor omits
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
2.9 Placement Agent. The Company has engaged, consented to and
authorized the Placement Agents to place the Units for the Company in connection
with the transactions contemplated by this Agreement. The Company will (i) pay
the Placement Agents a commission as set forth in the Memorandum; (ii) will
reimburse placement agents reasonable out-of-pocket expenses incurred in
connection with the Offering; and (iii) the Company agrees to indemnify and hold
harmless the Subscribers from and against all fees, commissions or other
payments owing by the Company to the Placement Agents or any other person or
firm acting on behalf of the Company hereunder.
2.10 Use of Proceeds. The net proceeds of the Offering shall be used as
described in the Memorandum. The Company shall not use any proceeds from the
Offering to repay any indebtedness to current executive officers or principal
stockholders of the Company.
III. TERMS OF SUBSCRIPTION
3.1 The Company desires to issue at least the Minimum Offering amount
and at most the Maximum Offering amount with an option in favor of Placement
Agents to offer up to an additional 5 Units to cover over-allotments. Each share
of Preferred Stock is convertible at the option of the holder thereof into one
share of Common Stock of the Company, initially at a conversion price equal to
$5.55 per share of Common Stock. The Preferred Stock included in the Minimum
Offering will be offered by the Company through the Placement Agents on a "best
efforts, all or none" basis. The sale of shares of Preferred Stock which will
provide the Company with aggregate gross proceeds in excess of the Minimum
Offering will be offered by the Company through the Placement Agents on a "best
efforts" basis. Upon receipt of the Minimum Offering amount, the Company may
conduct a closing (the "Initial Closing Date"). After the Initial Closing Date,
the Company may conduct one or more additional closings with respect to amounts
up to the Maximum Offering amount, plus any over allotment amount until (i) the
Maximum Offering amount, plus the maximum over-allotment amount, has been
reached or, if later, (ii) the termination date, which is December 15, 2001,
subject to extension by the Company for up to an additional 60 days (together
with "i" the "Final Closing Date"). The closing on the Initial Closing Date, any
such additional closing and the closing on the Final Closing Date is herein
referred to as a "Closing."
3.2 The Company has engaged the Placement Agents, both NASD member
broker dealers, to place the Preferred Stock. The Placement Agents will receive
commission as described in the Memorandum and Section 1.25 herein.
3.3 Pending the sale of the Preferred Stock, all funds paid hereunder
shall be deposited by the Company in escrow with State Street Bank and Trust
Company, N.A., having a branch at ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇. If the
Company shall not have obtained subscriptions (including this subscription) for
purchases of the Minimum Offering amount on or before the Final Closing Date,
then this subscription shall be void and all funds paid hereunder by the
Subscriber shall be promptly returned to the Subscriber.
3.4 The Subscriber hereby authorizes and directs the Company to deliver
the certificates representing the shares of Preferred Stock to be issued to the
Subscriber pursuant to this Agreement directly to the Subscriber's account
maintained by Placement Agents, if any, or, if no such account exists, to the
residential or business address indicated on the signature page hereto.
3.5 The Subscriber hereby authorizes and directs the Company to return
any funds for unaccepted subscriptions to the same account from which the funds
were drawn.
IV. CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS
4.1 The Subscriber's obligation to purchase the Units at the Closing
with respect to such subscription is subject to the fulfillment on or prior to
the date of such Closing of the following conditions, which said conditions may
be waived at the option of each Subscriber to the extent permitted by law:
(a) Representations and Warranties Correct. The representations and
warranties made by the Company in Article II hereof shall be true and correct in
all material respects when made, and shall be true and correct in all material
respects on the date of such Closing with the same force and effect as if they
had been made on and as of said date.
(b) Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to such purchase shall
have been performed or complied with in all material respects.
(c) No Legal Order Pending. There shall not then be in effect any legal
or other order enjoining or restraining the transactions contemplated by this
Agreement.
(d) No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law, rule or regulation prohibiting or restricting such sale or
requiring any consent or approval of any person, which shall not have been
obtained, to issue the Securities (except as otherwise provided in this
Agreement).
(e) Minimum Subscriptions. The Company shall have received binding
subscriptions for at least the Minimum Offering amount.
V. CONDITIONS TO OBLIGATIONS OF THE COMPANY
5.1 The Company's obligation to sell the Units at any Closing is
subject to the fulfillment on or prior to the date of such Closing of the
following conditions, which said conditions may be waived at the option of the
Company to the extent permitted by law:
(a) Representations and Warranties Correct. The representations and
warranties made by the Subscriber in Articles I and VIII hereof shall be true
and correct when made, and shall be true and correct on the date of such Closing
with the same force and effect as if they had been made on and as of said date.
(b) Minimum Subscriptions. The Company shall have received binding
subscriptions for at least the Minimum Offering amount.
VI. REGISIRATION RIGHTS
6.1 Definitions. As used in this Agreement, the following terms shall
have the following meanings.
(a) The term "Holder" shall mean any person owning or having the right
to acquire Registrable Securities or any permitted transferee of a Holder
pursuant to Section 6.11.
(b) The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
order of effectiveness of such registration statement or document.
(c) The term "Registrable Securities" shall mean (i) the shares of
Common Stock issuable upon conversion of the Preferred Stock; and (ii) any
shares of Common Stock issued pursuant to this Agreement or issuable pursuant to
a dividend or other distribution with respect to or in replacement of the
Preferred Stock; 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 SEC,
(B) have not been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect hereto are removed upon the
consummation of such sale and (C) are held by a Holder or a permitted transferee
of a Holder pursuant to Section 6.11.
6.2 Piggyback Registration.
(a) The Company agrees that if, at any time, and from time to time,
after the earlier to occur of (i) an IPO and (ii) a Trading Event, and ending on
the date that is five years from the date hereof, the Board of Directors of the
Company (the "Board") shall authorize the filing of a registration statement
under the Securities Act (other than the initial public offering of the
Company's Common Stock or a registration statement on Form ▇-▇, ▇▇▇▇ ▇-▇ or any
other form that does not include substantially the same information as would be
required in a form for the general registration of securities) in connection
with the proposed offer of any of its securities by it or any of its
stockholders, the Company shall: (A) promptly notify the Holder that such
registration statement will be filed and that the Registrable Securities then
held by the Holder will be included in such registration statement at the
Holder's request; (B) cause such registration statement to cover all of such
Registrable Securities issued to the Holder for which the Holder requests
inclusion; (C) use its commercially reasonable efforts to cause such
registration statement to become effective as soon as practicable; and (D) take
all other action necessary under any Federal or state law or regulation of any
governmental authority to permit all such Registrable Securities that have been
issued to the Holder to be sold or otherwise disposed of, and will maintain such
compliance with each such Federal and state law and regulation of any
governmental authority for the period necessary for the Holder to effect the
proposed sale or other disposition.
(b) Notwithstanding any other provision of this Article VI, the Company
may at any time, abandon or delay any registration commenced by the Company. In
the event of such an abandonment by the Company, the Company shall not be
required to continue registration of shares requested by the Holder for
inclusion and the Holder shall retain the right to request inclusion of shares
as set forth above.
(c) Each Holder shall have the right to request inclusion of any of its
Registrable Securities in a registration statement as described in this Section
6.2, up to four times.
6.3 Demand Registration.
(a) Registration on Request. (i) The Company further agrees that if, at
any time, and from time to time, but at least 180 days after the earlier to
occur of (i) an IPO and (ii) a Trading Event, and ending on the date that is
five years from the date hereof, the Holders desire to effect the registration
under the Securities Act of outstanding Registrable Securities, the Holders may
make a written request that the Company effect such registration; provided that
such registration covers at least 51% of the Registrable Securities owned by the
Holders at such time. Such request will specify the number of shares of
Registrable Securities proposed to be sold and will also specify the intended
method of disposition thereof. The Company will use its best efforts to file,
within 30 days of such demand, the registration under the Securities Act of the
Registrable Securities which the Company has been so requested to register by
such Holders pursuant to this Section 6.3(a)(i), to the extent necessary to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities to be registered; provided, further,
that the Holders shall be entitled to only one demand registration.
(ii) Notwithstanding Section 6.3(a)(i),
(A) the Company shall not be obligated to file a registration
statement relating to a registration request pursuant to this Section
6.3 at any time during the six-month period immediately following the
effective date of another registration statement filed by the Company
(other than a registration statement on Form S-4 or Form S-8 or any
successor or similar form);
(B) the Company shall not be obligated to file the
registration statement pursuant to this Section 6.3 unless the
aggregate price to the public with respect to such registration
statement is expected to be not less than $1 million; and
(C) if the Board determines, in its good faith reasonable
judgment, that the Company should not file the registration statement
otherwise required to be filed pursuant this Section 6.3 or should
withdraw any such previously filed registration statement because (1)
the Company is engaged in or in good faith plans to engage in any
financing, acquisition or other material transaction which would be
adversely affected by the filing or maintenance of the registration
statement otherwise required to be filed or maintained pursuant to this
Section 6.3; or (2) the Company is in the possession of material
nonpublic information required to be disclosed in such registration
statement or an amendment or supplement thereto, the disclosure of
which in such registration statement would be materially
disadvantageous to the Company (a "Disadvantageous Condition"), then
the Company shall be entitled to postpone for the shortest reasonable
period of time (but not exceeding 180 days from the date of the
determination), the filing of such registration statement or, if such
registration statement has already been filed, may withdraw such
registration statement and shall promptly give the Holders written
notice of such determination, containing a general statement of the
reasons for such postponement and an approximation of the anticipated
delay. If the Company shall so postpone the filing or effect the
withdrawal of the registration statement, the Holders who made the
request for registration shall have the right to withdraw the request
for registration by giving written notice to the Company within 30 days
after receipt of the notice of postponement. The Company's right to
delay a request for registration or to withdraw a registration
statement pursuant to this Section 6.3 may not be exercised more than
once in any one-year period.
(b) After the receipt of a registration request hereunder, the Company
shall notify the Holders of any other person requesting shares of Registrable
Securities to be included therein and the number of shares of Common Stock
requested to be included therein. If the Company determines to take any action
pursuant to clause (C) above, the Company shall deliver a notice to the Holders
to such effect. Upon the receipt of any such notice, such Holders shall
forthwith discontinue use of the prospectus contained in such registration
statement and, if so directed by the Company, shall deliver to the Company all
copies of the prospectus then covering such Registrable Securities current at
the time of receipt of such notice (or, if no registration statement has yet
been filed, all drafts of the prospectus covering such Registrable Securities).
If any Disadvantageous Condition shall cease to exist, the Company shall
promptly
notify the Holders to such effect. If any registration statement shall have been
withdrawn, the Company shall, if requested by the Holders who made the request
for registration, at such time as it is possible or, if earlier, at the end of
the 180-day period following such withdrawal, file a new registration statement
covering the Registrable Securities that were covered by such withdrawn
registration statement, and the effectiveness of such registration statement
shall be maintained for such time as may be necessary so that the period of
effectiveness of such new registration statement, when aggregated with the
period during which such withdrawn registration statement was effective, if any,
shall be such time as may be otherwise required by this Agreement.
6.4 Whenever required under this Article VI to include Registrable
Securities in a Company registration statement, the Company shall, as
expeditiously as reasonably possible:
(a) Use its commercially reasonable efforts to cause such registration
statement to become effective. The Company will also use its commercially
reasonable efforts to, during the period that such Registration Statement is
required to be maintained hereunder, file such post-effective amendments and
supplements thereto as may be required by the Securities Act and the rules and
regulations thereunder or otherwise to ensure that the Registration Statement
does not contain any untrue statement of material fact or omit to state a fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading; provided, however, that if applicable rules under the Securities Act
governing the obligation to file a post-effective amendment permits, in lieu of
filing a post-effective amendment that (i) includes any prospectus required by
Section 10(a)(3) of the Securities Act or (ii) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the Company may incorporate by reference information
required to be included in (i) and (ii) above to the extent such information is
contained in periodic reports filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") in the
registration statement.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement, and the prospectus used in connection with such
registration statement, as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus as amended or supplemented from time to time,
in conformity with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to facilitate the disposition
of Registrable Securities owned by them.
(d) Use its commercially reasonable efforts to register and qualify the
securities covered by such registration statement under such other federal or
state securities laws of such jurisdictions as shall be reasonably requested by
the Holders; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, (i) when the registration
statement or any post-effective amendment and supplement thereto has become
effective; (ii) of the issuance by the SEC of any stop order or the initiation
of proceedings for that purpose (in which event the Company shall make every
effort to obtain the withdrawal of any order suspending effectiveness of the
registration statement at the earliest possible time or prevent the entry
thereof); of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose; and (iv) of
the happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.
(g) Cause all such Registrable Securities registered hereunder to be
listed on each securities exchange or quotation service on which similar
securities issued by the Company are then listed or quoted.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
6.5 Furnish Information. It shall be a condition precedent to the
obligation of the Company to take any action pursuant to this Article VI with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding the Holder, the
Registrable Securities held by the Holder, and the intended method of
disposition of such securities as shall be reasonably required by the Company to
effect the registration of such Holder's Registrable Securities.
6.6 Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 6.2 and Section 6.3 for each Holder, including (without
limitation) all registration, filing, and qualification fees, printers and
accounting fees relating or apportionable thereto, but excluding underwriting
discounts and commissions relating to Registrable Securities; provided, however,
that the Company shall not bear the cost of any professional fees or costs of
accounting, financial or legal advisors to any of the Holders. Notwithstanding
the foregoing, each Holder shall pay all registration expenses that such Holder
is required to pay under applicable law.
6.7 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under
Section 6.2 to include any of the Holders' Registrable Securities in such
underwriting unless such Holders accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it (or by other
persons entitled to select the underwriters), and then only in such quantity as
the underwriters determine in their sole discretion will not jeopardize the
success of the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by stockholders to be included in
such offering exceeds the amount of securities sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling stockholders according to the total amount of securities
entitled to be included therein owned by each selling stockholder or in such
other proportions as shall mutually be agreed to by such selling stockholders).
For purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder who is a holder of Registrable Securities and is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder", and any pro-rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder", as defined in this sentence.
6.8 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Article VI.
6.9 Indemnification. In the event that any Registrable Securities are
included in a registration statement under this Article VI.
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, or the Exchange Act, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, or any rule or
regulation promulgated under the Securities Act, or the Exchange Act, and the
Company will pay to each such Holder, underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
Section 6.9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, a action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company or either Placement Agent
be liable in any such case for any such loss, claim, damage, liability, or
action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company and each Placement Agent, each of its directors,
each of its officers, each person, if any, who controls the Company and each
Placement Agent within the meaning of the Securities Act or the Exchange Act,
any underwriter, any other Holder selling securities in such registration
statement and any controlling person of any such underwriter or other Holder,
against any losses, claims, damages, or liabilities (Joint or several) to which
any of the foregoing persons may become subject, under the Securities Act, or
the Exchange Act, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this Section 6.9(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 6.9(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided, further, that, in no event shall any indemnity under this Section
6.9(b) exceed the greater of the cash value of the (i) gross proceeds from the
offering received by such Holder or (ii) Holder's investment pursuant to this
Agreement as set forth on the signature page attached hereto.
(c) Promptly after receipt by an indemnified party under this Section
6.9 of notice of the commencement of any action (including any governmental
action), such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under this Section 6.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel selected by the
indemnifying party and approved by the indemnified party (whose approval shall
not be unreasonably withheld); provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
6.9, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 6.9.
(d) If the indemnification provided for in this Section 6.9 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the Violation that resulted in such loss, liability, claim, damage, or
expense as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the alleged omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such Violation.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in any underwriting agreement entered
into in connection with an underwritten public offering are in conflict with the
foregoing provisions, the provisions in such underwriting agreement shall
control.
(f) The obligations of the Company and Holders under this Section 6.9
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Article VI, and otherwise.
6.10 Reports Under the Exchange Act. With a view to making available to
the Holders the benefits of Rule 144 and any other rule or regulation of the SEC
that may at any time permit a Holder to sell securities of the Company to the
public without registration, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after 90 days after the
effective date of the registration statement filed in connection with an IPO by
the Company;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (ii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration.
6.11 Permitted Transferees. The rights to cause the Company to register
Registrable Securities granted to the Holders by the Company under this Article
VI may be
assigned in full by a Holder in connection with a transfer by such Holder of its
Registrable Securities if (a) such Holder gives prior written notice to the
Company; (b) such transferee agrees to comply with and be bound by the terms and
provisions of this Agreement; (c) such transfer is otherwise in compliance with
this Agreement and (d) such transfer is otherwise effected in accordance with
applicable securities laws. Except as specifically permitted by this Section
6.11, the rights of a Holder with respect to Registrable Securities as set out
herein shall not be transferable to any other Person, and any attempted transfer
shall cause all rights of such Holder therein to be forfeited.
6.12 Termination of Registration Rights. The right of any Holder to
request or demand inclusion in any registration pursuant to Section 6.2 and
Section 6.3 shall terminate if all shares of Registrable Securities held by such
Holder may immediately be sold under Rule 144(k).
VII. MISCELLANEOUS
7.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and (i) sent by telecopy or facsimile, (ii) sent by
registered or certified mail, return receipt requested, or (iii) delivered by
hand against written receipt therefore; addressed to: Innovative Drug Delivery
Systems, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, CFO, fax: (▇▇▇) ▇▇▇-▇▇▇▇, and to the Subscriber at the Subscriber's
address indicated on the signature page of this Agreement. Notices shall be
deemed to have been given or delivered on the date of transmission, mailing or
delivery, except notices of change of address, which shall be deemed to have
been given or delivered when received.
7.2 Except as otherwise provided herein, this Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
7.3 Subject to the provisions of Section 6.11, 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 Units as herein provided, subject, however, to
the right hereby reserved by the Company to enter into the same agreement 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 SUCH STATE'S PRINCIPLES OF CONFLICTS OF LAW. IN THE EVENT THAT A
JUDICIAL PROCEEDING IS NECESSARY, THE SOLE FORUM FOR RESOLVING DISPUTES ARISING
OUT OF OR RELATING TO THIS AGREEMENT IS THE SUPREME COURT OF THE STATE OF NEW
YORK IN AND FOR THE COUNTY OF NEW YORK OR THE FEDERAL COURTS FOR SUCH STATE AND
COUNTY, AND ALL RELATED APPELLATE COURTS, THE PARTIES HEREBY IRREVOCABLY CONSENT
TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.
7.6 In the event that legal proceedings are commenced by the Company
against the Subscriber, or by the Subscriber against the Company, in connection
with this Agreement or the transactions contemplated hereby, the party or
parties which do not prevail in such proceedings shall pay the reasonable
attorneys' fees and other costs and expenses, including investigation costs,
incurred by the prevailing party in such proceedings.
7.7 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.
7.8 It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
7.9 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
7.10 This Agreement may be executed in two or more counterparts each of
which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
7.11 Nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement, except for the
holders of Registrable Securities.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
VIII. CONFIDENTIAL INVESTOR QUESTIONNAIRE
8.1 The Subscriber represents and warrants that he, she or it comes
within one category marked below, and that for any category marked, he, she or
it has truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish
any additional information which the Company deems necessary in order to verify
the answers set forth below.
Category A -- The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or
joint net worth with his or her spouse, presently
exceeds $1,000,000.
Explanation. In calculating net worth you may include
equity in personal property and real estate,
including your principal residence, cash, short-term
investments, stock and securities. Equity in personal
property and real estate should be based on the fair
market value of such property less debt secured by
such property.
Category B -- The undersigned is an individual (not a partnership,
corporation, etc.) who had an income in excess of
$200,000 in each of the two most recent years, or
joint income with his or her spouse in excess of
$300,000 in each of those years (in each case
including foreign income, tax exempt income and full
amount of capital gains and losses but excluding any
income of other family members and any unrealized
capital appreciation) and has a reasonable
expectation of reaching the same income level in the
current year.
Category C -- The undersigned is a director or executive officer of
the Company which is issuing and selling the Units.
Category D -- The undersigned is one or more of the following: a
bank as defined in section 3(a)(2) of the Securities
Act; a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the
Securities Act whether acting in its individual or
fiduciary capacity; a broker dealer registered
pursuant to Section 15 of the Exchange Act; an
insurance company as defined in Section 2(13) of the
Act; an investment company registered under the
Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of
that Act; a Small Business Investment Company
licensed by the U.S. Small Business Administration
under Section 301(c) or (d) of the Small Business
Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions, or
any agency or instrumentality of a state or its
political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of
$5,000,000; an employee benefit plan within the
meaning of Title I of the Employee Retirement Income
Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in Section 3(21)
of such Act, which is either a bank, savings and loan
association, insurance company, or registered
investment adviser, or if the employee benefit plan
has total assets in excess of $5,000,000; or, if a
self-directed plan, with investment decisions made
solely by persons that are accredited investors.
(Describe entity)
Category E -- The undersigned is a private business development
company as defined in Section 202(a)(22) of the
Investment Advisors Act of 1940. (describe entity)
-----------------------------------------------------
-----------------------------------------------------
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 person" as described 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
date of Closing with respect to this subscription
in the event that the representations and warranties
in this Agreement shall cease to be true, accurate
and complete.
8.2 SUITABILITY (please answer each question)
(a) For an individual Subscriber, please describe your current
employment, including the company by which you are employed and its principal
business:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(b) For an individual Subscriber, please describe any college or
graduate degrees held by you:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(c) For all Subscribers, please list types of prior investments:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(d) For all Subscribers, please state whether you have you participated
in other private placements before:
YES _____ NO _____
(e) If your answer to question (d) above was "YES", please indicate
frequency of such prior participation in private placements of:
Public Private Public or Private
Companies Companies Biotechnology Companies
--------- --------- -----------------------
Frequently --------- ---------- ----------
Occasionally --------- ---------- ----------
Never --------- ---------- ----------
(f) For individual Subscribers, do you expect your current level of
income to significantly decrease in the foreseeable future:
YES _____ NO _____
(g) For trust, corporate, partnership and other institutional
Subscribers, do you expect your total assets to significantly decrease in the
foreseeable nature:.
YES _____ NO _____
(h) For all Subscribers, do you have any other investments or
contingent liabilities which you reasonably anticipate could cause you to need
sudden cash requirements in excess of cash readily available to you:
YES _____ NO _____
(i) For all Subscribers, are you familiar with the risk aspects and
the non-Liquidity of investments such as the securities for which you seek to
subscribe?
YES _____ NO _____
(j) For all Subscribers, do you understand that there is no guarantee
of financial return on this investment and that you run the risk of losing your
entire investment?
YES _____ NO _____
8.3 GENERAL QUALIFICATIONS
(a) Subscriber considers itself to be a knowledgeable and experienced
investor.
YES _____ NO _____
(b) Subscriber can afford the complete loss of its investments in the
Units.
YES _____ NO _____
(c) Subscriber is able to bear the economic risk of investment in the
Units for an indeterminate period of time.
YES _____ NO _____
8.4 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
* The attached Certificate of Signatory must also be completed.
8.5 NASD AFFILIATION.
Are you affiliated or associated with an NASD member firm (please check one):
YES _____ NO _____
If Yes, please describe:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
*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
Rule 3050 of the NASD Conduct Rules.
------------------------------------
Name of NASD Member Firm
By:
---------------------------------
Authorized Officer
Date:
--------------------------------
8.6. The undersigned is informed of the significance to the Company of
the foregoing representations and answers contained in the Confidential Investor
Questionnaire contained in this Article VIII and such answers have been provided
under the assumption that the Company will rely on them.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
NUMBER OF UNITS ______ X $500,000 = _______ (the "Purchase Price")
------------------------------------ --------------------------------------
Signature Signature (if purchasing jointly)
------------------------------------ --------------------------------------
Name Typed or Printed Name Typed or Printed
------------------------------------ --------------------------------------
Entity Name Entity Name
------------------------------------ --------------------------------------
Address Address
------------------------------------ --------------------------------------
City, State and Zip Code City, State and Zip Code
------------------------------------ --------------------------------------
Telephone-Business Telephone-Business
------------------------------------ --------------------------------------
Telephone-Residence Telephone-Residence
------------------------------------ --------------------------------------
Facsimile-Business Facsimile-Business
------------------------------------ --------------------------------------
Facsimile-Residence Facsimile-Residence
------------------------------------ --------------------------------------
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued:
--------------------------------------
Dated: ________________, 2001
This Subscription Agreement is agreed to and accepted as of
_______________, 2001.
INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
By:
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, MD.
Title: Chief Executive Officer, IDDS
CERTIFICATE OF SIGNATORY
(To be completed if Units are
being subscribed for by an entity)
I, ___________________________, am the____________________________ of
_____________________________________ (the "Entity").
I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Subscription Agreement and to purchase and hold the
Units, and certify further that the Subscription Agreement has been duly and
validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this _____ day of
_________________, _____
---------------------------------
(Signature)