Document:

<PAGE>

                                                                     Exhibit 4.2

Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (the "Mark"). This Exhibit has been filed separately with the
Secretary of the Securities and Exchange Commission without the Mark pursuant to
the Company's Application for Order Granting Confidential Treatment pursuant to
Rule 406 under the Securities Act of 1933, as amended.

                             STOCKHOLDERS AGREEMENT

         This Stockholders Agreement (the "Agreement") is made and entered into
at on February 25, 1998 by and between LINDSAY A. ROSENWALD, M.D. (the
"Investor"), DR. STUART WEG, HERBERT BROTSPIES and CALGAR & ASSOCIATES
(collectively the "Licensors") and PAIN MANAGEMENT, INC. (the "Company").

                                    RECITALS

         WHEREAS, the Company's authorized capital structure consists of twenty
five million (25,000,000) shares of common stock, par value $.001 per share (the
"Common Stock") and ten million (10,000,000) shares of preferred stock;

         WHEREAS, it is the intention of the parties hereto that the Investor
shall be allocated seventy-five percent (75%) of the shares of Common Stock
initially issued by the Company and Licensors shall be allocated twenty-five
percent (25%) of the shares of Common Stock initially issued by the Company,
which together shall constitute the entire issued capital of the Company (the
"Stock").

         WHEREAS, the Company has previously entered into a License Agreement
with Dr. Stuart Weg, which is attached hereto as Exhibit A (the "License
Agreement") relating to "Nasal Administration of Ketamine to Manage Pain" (the
"Invention").

         NOW THEREFORE, it is hereby agreed between the parties hereto as
follows:

1.       Issue of shares: Registration

         (a) The Company shall issue to the Investor a number of shares of
Common Stock equal to *** percent (***) of the Stock. The Company shall issue to
the Licensors a number of shares of Common Stock equal to *** percent (***%) of
the Stock. *** percent (***%) of such shares shall be immediately issued to the
Licensor and/or his representatives to be distributed as follows: (i) ***
percent (***%) to Dr. Stuart Weg; (ii) *** percent (***%) to Herbert Brotspies
and (iii) *** percent (***%) to Calgar and Associates. As soon as practicable
after the execution of this Agreement, the Company shall take all necessary
steps to cause the issuance of the Stock.

         (b) Of the shares of Common Stock to be issued to the Licensors and/or
his representatives, the Company shall hold in escrow a number of such shares of
Common Stock equal to *** percent (***%)of the initial share capital of the
Company (the "Escrow Shares"). The Escrow Shares shall vest, if at all, and be
released from escrow upon completion of a statistically significant Phase III
clinical trial and shall be distributed as follows: (i) *** percent (***%) to
the Licensor; (ii) *** percent (***%) to Herbert Brotspies and (iii) ***
percent (***%) to Calgar and Associates.

***Represents material which has been omitted pursuant to an Application for
   Order Granting Confidential Treatment and filed separately with the
   Commission.

                                       1
<PAGE>

         (c) The Company agrees that if, at any time, and from time to time,
after the initial public offering (the "IPO") of the Company's Common Stock and
ending on the date that is five (5) years from the date hereof, the Board of
Directors of the Company shall authorize the filing of a registration statement
under the Act (other than the initial public offering of the Company's Common
Stock, or other than a registration statement on Form S-8, Form S-4 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, (i) promptly notify the Licensors that such
registration statement will be filed and that the Registrable Securities then
held by the Licensors will be included in such registration statement at the
Licensors' request, (ii) cause such registration statement to cover all of such
Registrable Securities issued to the Licensors requesting inclusion, (iii) use
its reasonable best efforts to cause such registration statement to become
effective as soon as practicable and (iv) 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 Licensors 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 Licensors to effect the proposed sale or other
disposition.

          (d) Notwithstanding any other provision herein, 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 Licensors for inclusion and
the Licensors shall retain the right to request inclusion of shares as set forth
above.

          (e) The Licensors shall have the right to request inclusion of any of
their shares of Common Stock in a registration statement as described above up
to two (2) times; provided, however, that an abandoned registration statement
shall not be counted as a request by the Licensors for inclusion.

          (f) The right of any Licensors to request inclusion in any
registration pursuant to this Agreement shall terminate if all shares of Common
Stock held by the Licensors may immediately be sold under Rule 144 or Rule 701
during any 90-day period.

                                       2
<PAGE>

2. Fund Raising

         (a) The Company shall use its reasonable efforts to consummate a
private placement (a "Private Placement") of debt or equity securities of the
Company or otherwise attain net assets in excess of two million dollars
($2,000,000) within one (1) year from the date of execution of this Agreement.
The Company agrees that it will use its reasonable efforts to conduct any such
Private Placement at a pre-money value equal to two million dollars
($2,000,000).

         (b) In the event that the Company has not obtained financing (or
otherwise obtained net assets) in excess of two million dollars ($2,000,000)
within one (1) year from the date hereof, then the Licensor at his option may
terminate the License Agreement upon ten (10) days notice to the Company. If the
License Agreement is so terminated the Company shall have the right to
repurchase the Common Stock issued to the Licensor pursuant to Section 1(a) and
(b) at a price per share equal to $.001.

3.       Sales by Investor:

         (a) Subject to paragraph 3(g) below, if the Investor proposes to sell
any of his Stock or receives an offer from an unaffiliated third party in one or
more related transactions (each a "Sale"), then the Investor shall promptly give
written notice (the "Notice") to the Company and to Licensors on or before the
earlier to occur of (i) five (5) days after the contract date and (ii) twenty
(20) days prior to the closing of such sale. The Notice shall describe in
reasonable detail the proposed sale including, without limitations, the number
of shares of Stock to be sold, the consideration to be paid, and the name and
address of each prospective purchaser.

         (b) Licensors shall have the right, exercisable upon written notice to
the Investor within fifteen (15) days after receipt of the Notice, to
participate in such sale including on the same terms and conditions specified in
the Notice. To the extent that Licensors exercise such right of participation in
accordance with the terms and conditions as set forth below, the number of
shares that the Investor may sell in the transaction shall be correspondingly
reduced.

         (c) Licensors may sell all or any part of that number of shares of
Stock owned by each, respectively, equal to the product obtained by multiplying
(i) the aggregate number of shares covered by the Notice by a (ii) a fraction,
the numerator of which is the number of shares of Stock owned by Licensors at
the time of the sale and the denominator of which is the total number of shares
of Stock owned by Licensors and the Investor at the time of the sale. For
example, if the Investor notifies Licensors of his intention to sell one hundred
thousand (100,000) shares of Stock, and at that time, the Investor and Licensors
own nine million (9,000,000) and one million (1,000,000) shares of Stock,
respectively, Licensors would be entitled to sell up to one tenth (1/10) of the
shares covered by such notice or ten thousand (10,000) shares.

                                       3
<PAGE>

         (d) Licensors shall effect participation in the sale by promptly
delivering to the Investor for the transfer to the prospective purchaser one or
more certificates, properly endorsed for transfer, which represent the number of
shares of Stock which Licensors elects to sell.

         (e) The stock certificate or certificates that Licensors deliver to the
Investor pursuant to paragraph 3(d) shall be transferred to the respective
purchaser in consummation of the sale of the Stock pursuant to the terms and
conditions specified in the Notice, and the Investor shall concurrently
therewith remit to Licensors that portion of the sales proceeds to which
Licensors is entitled by reason of its participation in such sale.

         (f) To the extent that Licensors elect not to participate in any such
Sale, the Investor may enter into an agreement providing for the closing of the
transfer of the Stock covered by the Notice on terms and conditions not more
favorable than those described in the Notice.

         (g) The Investor's obligations, and the co-sale rights of Licensors,
under this section 3 shall terminate immediately upon the earlier to occur of
(i) any sale of the Company's Common Stock to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended (the
"Act") (a "Public Offering") and (ii) the first date on which the Common Stock
of the Company (or securities received in exchange for Common Stock of the
Company) trades on a national securities exchange, on the National Association
of Security Dealers, Inc. Automated Quotations System ("NASDAQ") or on the OTC
Electronic Bulletin Board or in "pink sheets" (a "Trading Date").

4.       Exempt Transfers:

         Notwithstanding the foregoing, the provisions of the above paragraph 3
shall not apply to (a) any pledge of Stock made pursuant to a bona fide loan
transaction that creates a security interest provided that such transaction is
not consummated solely for the purpose of avoiding the co-sales rights of
Licensors contained herein or (b) sales (i) to the public pursuant to a
registration statement filed with, and declared effective by, the SEC under the
Act, or any sales made thereafter, (ii) to the Company or an Affiliate of the
Company (as defined in the Subscription Agreement) or (iii) to a purchaser,
merging or consolidating corporation, or acquiror of more than fifty percent
(50%) of the Company's assets or business.

5.       Term of Agreement

         The Co-sale rights set forth in this Agreement shall terminate upon the
earlier to occur of (a) a Public Offering of the shares of the Company's Common
Stock and (b) a Trading Date.

                                       4
<PAGE>

6.       Miscellaneous

         (a) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York, without regard to principles of
conflicts of law, and exclusive jurisdiction shall be granted to the appropriate
court in New York.

         (b) Disputes arising between the parties which can not be settled
satisfactorily between the parties, shall be finally determined by arbitration
in New York, New York.

         (c) Any notice or other communication required or authorized to be
given by any party under this Agreement to the other party shall be in writing
and shall be personally delivered, sent by telex or facsimile transmission (with
a copy by airmail in either case) or sent by registered airmail addressed to the
other party at the address stated below or such other address as shall be
specified by the parties hereto by notice in accordance with the provisions of
this paragraph. Any notice shall operate and be deemed to have been served at
the expiration of fourteen (14) days after it is posted or on the next following
business day if sent by telex, facsimile transmission or personally delivered;
provided, however, that any notice of change of address shall be effective only
upon receipt.

         Addresses for the purposes of this section are as follows:

Investor:                   Lindsay A. Rosenwald, M.D.
                            c/o Paramount Capital Investments, LLC
                            787 Seventh Avenue
                            New York, New York 10019
                            Attn:  Michael S. Weiss
                            Fax:   212-554-4490

Dr. Stuart Weg:             498 Island Way
                            Franklin Lakes, N.J.
                            Attn:  Dr. Stuart Weg
                            Tel:   201-848-9344
                            Fax:   201-848-1805

Herbert Brotspies:          Herbert Brotspies
                            17 Marline Ave E
                            Edison, NJ
                            Attn:  Herbert Brotspies
                            Tel:   732-321-0456
                            Fax:   732-906-7653

                                       5
<PAGE>

Calgar & Associates:        44 Dale Drive
                            Edison, New Jersey 08820
                            Attn:   Dr. Herbert Gary
                            Tel:    908-548-0996
                            Fax:    908-603-7976

The Company:                Pain Management, Inc.
                            c/o Paramount Capital Investments, LLC
                            787 Seventh Avenue, 48th Floor
                            New York, New York 10019
                            Ann:    Michael S. Weiss
                            Tel:    212-554-4350
                            Fax:    212-554-4355

         (d) This Agreement may be executed in two or more counterparts each of
which shall be deemed an original but all of which constitute one and the same
instrument.

         (e) Nothing in this Agreement is intended to vest, or shall be
construed as vesting, any rights, financial, legal or otherwise, in any person
not a party hereto.

         (f) The headings of sections herein are for convenient reference only
and shall in no way affect the meaning of this Agreement. Section and
sub-section references are to sections and sub-sections of this Agreement unless
explicitly stated otherwise.

         (g) This Agreement may be amended or terminated, and any of the terms
hereof may be waived, only by a document in writing specifically referring to
this Agreement and executed by the parties hereto or, in the case of a waiver,
by the party waving compliance;

         (h) In the event that it is not possible to reach the stage of the
commercial development, production and marketing, then the parties shall
terminate the License Agreement in accordance with the terms thereof. After
reimbursement of all Company expenses, any amounts remaining in the Company
shall first be returned to the Investor, up to the total amount of his
investment in the Company and then to the Licensors up to the total amount of
their investment in the Company. The funds remaining in the Company thereafter,
shall be distributed proportionally according to the percentage of shares held
by each shareholder on the date of termination.

         (i) The parties hereto agree to execute documents and perform such
further acts as may be necessary to bring this Agreement into full force and
effect.

         (j) This Agreement represents the sole and entire agreement between the
parties hereto with respect of the transactions contemplated herein, and
supersedes all prior discussions and agreements among the parties hereto.

                                       6
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first before written.

                                     LINDSAY A. ROSENWALD, M.D.

                                      By: /s/ LINDSAY A. ROSENWALD
                                          --------------------------------------
                                      Name:

                                      DR. STUART WEG

                                      By: /s/ STUART WEG
                                          --------------------------------------
                                      Name:

                                      HERBERT BROTSPIES

                                      By:  /s/ HERBERT BROTSPIES
                                          --------------------------------------
                                      Name:   Herbert Brotspies

                                      CALGAR & ASSOCIATES

                                      By: /s/ HERBERT GARY
                                          --------------------------------------
                                      Name: Herbert Gary
                                      Its:

                                      PAIN MANAGEMENT, INC.

                                      By: /s/ MICHAEL S. WEISS
                                          --------------------------------------
                                      Name:  Michael S. Weiss
                                      Its:   Sole Director

                                       7<PAGE>

                                                                     Exhibit 4.5

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT TRANSFERABLE
         WITHOUT THE EXPRESS WRITTEN CONSENT OF INNOVATIVE DRUG DELIVERY
         SYSTEMS, INC. (THE "COMPANY") AND HAVE NOT BEEN REGISTERED UNDER THE
         SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY
         NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE
         TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
         RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION THEREFROM. ANY
         SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.

                                 INNOVATIVE DRUG
                             DELIVERY SYSTEMS, INC.

                      Warrant for the Purchase of Shares of
                                  Common Stock

No.
       Shares

         FOR VALUE RECEIVED, Innovative Drug Delivery Systems, Inc., a Delaware
corporation (the "Company"), hereby certifies that                   or his
registered assigns (the "Holder") is entitled to purchase from the Company,
subject to the provisions of this Warrant, at any time commencing upon the date
of this agreement and prior to 5:00 P.M., New York City time, on               ,
                                                 (      ) fully paid and
non-assessable shares of the Common Stock, $.001 par value, of the Company
("Common Stock") at an initial per share exercise price equal to $      , or an
initial aggregate exercise price of $     . The number of shares of Common Stock
to be received upon exercise of this Warrant and the price to be paid for each
share of Common Stock are subject to possible adjustment from time to time as
hereinafter set forth. The shares of Common Stock or other securities or
property deliverable upon such exercise as adjusted from time to time is
hereinafter sometimes referred to as the "Warrant Shares," the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Per Share Exercise Price" and the
aggregate purchase price payable for the Warrant Shares hereunder is hereinafter
sometimes referred to as the "Aggregate Exercise Price." The Aggregate Exercise
Price is not subject to adjustment. The Per Share Exercise Price is subject to
adjustment as hereinafter provided; in the event of any such adjustment, the
number of Warrant Shares shall be adjusted by dividing the Aggregate Exercise
Price by the Per Share Exercise Price in effect immediately after such
adjustment. This Warrant is one of a duly authorized issue of Warrants
constituting components of units being sold by the Company on the date hereof
(collectively, the "Warrants").

1.       Exercise of Warrant.

         (a) This Warrant is not transferable and may not be assigned or
otherwise disposed of by the Holder until the Exercise Date.

                                       1
<PAGE>

         (b) This Warrant may be exercised in whole or in part, at any time by
the Holder commencing upon the Exercise Date and prior to the Termination Date:

              (i) by presentation and surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the address set forth in
Subsection 8(a) hereof, together with payment, by certified or official bank
check payable to the order of the Company, of the Aggregate Exercise Price or
the proportionate part thereof if exercised in part.

              (ii) by the surrender of this Warrant (with the cashless exercise
form at the end hereof duly executed) (a "Cashless Exercise") at the address set
forth in Section 8(a) hereof Such presentation and surrender shall be deemed a
waiver of the Holder's obligation to pay the Aggregate Exercise Price, or the
proportionate part thereof if this Warrant is exercised in part. In the event of
a Cashless Exercise, the Holder shall exchange its Warrant for that number of
Warrant Shares subject to such Cashless Exercise multiplied by a fraction, the
numerator of which shall be the difference between (A) the last sale price of
the Common Stock on the trading day prior to such date or, in case no such
reported sales take place on such day, the average of the last reported bid and
asked prices of the Common Stock on such day, in either case on the principal
national securities exchange on which the Common Stock is admitted to trading or
listed, or if not listed or admitted to trading on any such exchange, the
representative closing sale price of the Common Stock as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ"), or other similar organization if NASDAQ is no longer reporting such
information, or, if the Common Stock is not reported on NASDAQ, the high per
share sale price for the Common Stock in the over-the-counter market as reported
by the National Quotation Bureau or similar organization, or if not so
available, the fair market value of the Common Stock as determined in good faith
by the Board of Directors (the "Current Market Price") and (B) the Per Share
Exercise Price, and the denominator of which shall be the then Current Market
Price. For purposes of any computation under this Section 1(a), the then Current
Market Price shall be based on the trading day immediately prior to the Cashless
Exercise.

         (c) If this Warrant is exercised in part only, the Company shall, upon
presentation of this Warrant upon such exercise, execute and deliver (with the
certificate for the Warrant Shares purchased) a new Warrant evidencing the
rights of the Holder hereof to purchase the balance of the Warrant Shares
purchasable hereunder upon the same terms and conditions as herein set forth.
Upon proper exercise of this Warrant, the Company promptly shall deliver
certificates for the Warrant Shares to the Holder duly legended as authorized by
the subscription form. No fractional shares shall be issued upon exercise of
this Warrant. With respect to any fraction of a share called for upon exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the Current Market Price of one (1) share of Common
Stock.

2. Reservation of Warrant Shares: Fully Paid Shares; Taxes. The Company hereby
undertakes until expiration of this Warrant to reserve for issuance or delivery
upon exercise of this Warrant, such number of shares of the Common Stock as
shall be required for issuance and/or delivery upon exercise of this Warrant in
full, and agrees that all Warrant Shares so issued and/or delivered will be
validly issued, fully paid and non-assessable, and further agrees to pay all
taxes and charges that may be imposed upon such issuance and/or delivery.

                                       2
<PAGE>

3.       Protection Against Dilution.

         (a) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Exercise Price shall be adjusted to be equal
to a fraction, the numerator of which shall be the Aggregate Exercise Price and
the denominator of which shall be the number of shares of Common Stock or other
capital stock of the Company which the Holder would have owned immediately
following such action had this Warrant been exercised immediately prior thereto.
An adjustment made pursuant to this Subsection 3(a) shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification.

         (b) In case the Company shall hereafter issue or sell any Common Stock,
any securities convertible into Common Stock, any rights, options or warrants to
purchase Common Stock or any securities convertible into Common Stock, in each
case for a price per share or entitling the holders thereof to purchase Common
Stock at a price per share (determined by dividing (i) the total amount, if any,
received or receivable by the Company in consideration of the issuance or sale
of such securities plus the total consideration, if any, payable to the Company
upon exercise or conversion thereof (the "Total Consideration") by (ii) the
number of additional shares of Common Stock issuable upon exercise or conversion
of such securities) which is less than either the then Current Market Price Per
Share of the Common Stock in effect on the date of such issuance or sale or the
Per Share Warrant Price, the Per Share Warrant Price shall be adjusted as of the
date of such issuance or sale by multiplying the Per Share Warrant Price then in
effect by a fraction, the numerator of which shall be (x) the sum of (A) the
number of shares of Common Stock outstanding on the record date of such issuance
or sale plus (B) the Total Consideration divided by the Current Market Price Per
Share of the Common Stock or the current Per Share Warrant Price; whichever is
greater, and the denominator of which shall be (y) the number of shares of
Common Stock outstanding on the record date of such issuance or sale plus the
maximum number of additional shares of Common Stock issued, sold or issuable
upon exercise or conversion of such securities.

         (c) In the event of any capital reorganization or reclassification, or
any consolidation or merger to which the Company is a party other than a merger
or consolidation in which the Company is the continuing corporation, or in case
of any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this Subsection 3(b) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, statutory
exchanges, sales or conveyances. The issuer of any shares of stock or other
securities or property thereafter deliverable upon the exercise of this Warrant
shall be responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and of said provisions so
proposed to be made, shall be mailed to the Holders of the Warrants not less
than 30 days prior to such event. A sale of all or substantially all of the
assets of the Company for a consideration consisting primarily of securities
shall be deemed a consolidation or merger for the foregoing purposes.

                                       3
<PAGE>

         (d) No adjustment in the Per Share Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per share of Common Stock; provided, however, that any adjustments that by
reason of this Subsection 3(c) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided, further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this Subsection 3(c)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon the
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Exercise Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.

         (e) Whenever the Per Share Exercise Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of Warrants
in accordance with this Section 3, the Company shall promptly provide a
certificate of its Chief Accounting Officer setting forth the Per Share Exercise
Price and the number of Warrant Shares after such adjustment or the effect of
such modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants.

         (f) If, as a result of an adjustment made pursuant to this Section 3,
the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of any Warrant promptly after such adjustment) shall
determine the allocation of the adjusted Per Share Exercise Price between or
among shares or such classes of capital stock or shares of Common Stock and
other capital stock.

                                       4
<PAGE>

4. Limited Transferability. In addition to the limitation on transferability set
forth in Section 1(a) hereof, this Warrant may not be sold, transferred,
assigned or hypothecated by the Holder except in compliance with the provisions
of the Act and the applicable state securities "blue sky" laws, and is so
transferable only upon the books of the Company which it shall cause to be
maintained for such purpose. The Company may treat the registered Holder of this
Warrant as he or it appears on the Company's books at any time as the Holder for
all purposes. The Company shall permit any Holder of a Warrant or his duly
authorized attorney, upon written request during ordinary business hours, to
inspect and copy or make extracts from its books showing the registered holders
of Warrants. All Warrants issued upon the transfer or assignment of this Warrant
will be dated the same date as this Warrant; and all rights of the holder
thereof shall be identical to those of the Holder.

5. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant, and of indemnity
reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.

6. Status of Holder. This Warrant does not confer upon the Holder any right to
vote or to consent to or receive notice as a stockholder of the Company, as
such, in respect of any matters whatsoever, or any other rights or liabilities
as a stockholder, prior to the exercise hereof

7. Notices. No notice or other communication under this Warrant shall be
effective unless, but any notice or other communication shall be effective and
shall be deemed to have been given if, the same is in writing and is mailed by
first-class mail, postage prepaid, addressed to:

If to the Holder:                                                  ; or

If to the Company:            787 Seventh  Avenue,  48th Floor,  New York,
                              New York 10019, Attn: Dr. Fred Mermelstein.

8. Headings. The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.

9. Applicable Law. This Warrant shall be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of
conflicts of law. Notwithstanding anything to the contrary contained herein, in
no event may the effective rate of interest collected or received by the Holder
exceed that which may be charged, collected or received by the Holder under
applicable law. The parties agree to settle any disputes through binding
arbitration in the city, county and State of New York.

                                       5
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its Chief Executive Officer and its corporate seal to be hereunto affixed and
attested by its Secretary this 1st day of             .

                                              INNOVATIVE DRUG
                                              DELIVERY SYSTEMS, INC.

                                              By:
                                                  ------------------------------
                                              Name:
                                              Title:

ATTEST

-------------------
   Secretary

(Corporate Seal]

                                       6
<PAGE>

                   (NOT PERMITTED UNTIL INITIAL EXERCISE DATE)

                                  SUBSCRIPTION

                  The undersigned, ___________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exercise the within
Warrant to the extent of purchasing ____________________ shares of Common Stock
thereunder and hereby makes payment of $____________ by certified or official
bank check in payment of the exercise price therefor.

                  The undersigned hereby represents and warrants to the Company
that the undersigned is acquiring the shares of the Company's Common Stock
pursuant to exercise of the within Warrant for investment purposes only. The
undersigned hereby further acknowledges that the undersigned understands that
such shares (a) have not been registered under the Securities Act of 1933, as
amended, and are being issued to the undersigned by the Company in reliance upon
the foregoing representation and warranty and (b) may not be resold except in
accordance with the requirements of the Act, including Rule 144 thereunder, if
applicable. The undersigned further consents to the placing of a legend on the
certificates for the shares being purchased to the foregoing effect.

Dated:_______________                                Signature:_________________

                                                     Address:___________________

                                   ASSIGNMENT

                  FOR VALUE RECEIVED ______________ hereby sells, assigns and
transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
Innovative Drug Delivery Systems, Inc.

Dated:_________________                              Signature:_________________

                                                     Address:___________________

                                CASHLESS EXERCISE

                  The undersigned ___________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exchange its Warrant for
___________________ shares of Common Stock, par value $.00l per share, of
Innovative Drug Delivery Systems, Inc. pursuant to the Cashless Exercise
provisions of the Warrant.

Dated:________________                               Signature:_________________

                                                     Address:___________________

                                       7
<PAGE>

                               PARTIAL ASSIGNMENT

                  FOR VALUE RECEIVED ______________ hereby assigns and transfers
unto ____________________ the right to purchase _______ shares of the Common
Stock, no par value per share, of Innovative Drug Delivery Systems, Inc. covered
by the foregoing Warrant, and a proportionate part of said Warrant and the
rights evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer that part of said Warrant on the
books of Innovative Drug Delivery Systems, Inc.

Dated:_________________                              Signature:_________________

                                                     Address:___________________

                                       8

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