SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
July 28, 1999
Date of Report (Date of earliest event reported)
DISCOVERY LABORATORIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 000-26422 94-3171943
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
3359 Durham Road
Doylestown, Pennsylvania 18901
(Address of principal executive offices)
(212) 223-9504
(Registrant's telephone number, including area code)
Item 5. Other Events
On July 28, 1999, the Company completed a private offering of Units
(the "1999 Unit Offering"), at a per Unit price of $500,000, consisting of (a) a
number of shares of the Company's Common Stock, par value $0.001 per share (the
"Common Stock"), equal to $500,000 divided by $1.21, which was the average
closing bid price of the Common Stock for the five trading days immediately
preceding the Closing Date (the "Closing Bid Price"), and (b) an equal number of
the Company's Class D Warrants, each of which entitles the holder thereof to
purchase a share of Common Stock at any time prior to the close of business on
July 27, 2004 at a per share purchase price equal to 110% of the Closing Bid
Price. The Company received $2.45 million in gross proceeds pursuant to the Unit
Offering. Pursuant to a placement agency agreement with the Company, Paramount
Capital, Inc. ("Paramount"), which acted as placement agent with respect to the
Unit Offering, received $171,500 in cash commissions and was reimbursed for
certain expenses incurred by Paramount in connection with the Unit Offering. In
addition, Paramount received options (the "Placement Options") to acquire 0.49
Units at a per Unit exercise price of $550,000 as partial compensation for its
services in connection with the Unit Offering.
During March and April 1999, the Company privately placed (the
"Prior 1999 Private Placement") with certain investors shares of Common Stock
and warrants for the purchase of Common Stock (the "Class C Warrants"). Pursuant
to price adjustment provisions extended to investors in the Prior 1999 Private
Placement, as a consequence of the Unit Offering, investors in the 1999
Financing will receive an aggregate of 294.531 additional shares of Common Stock
for no additional consideration and the per share exercise price applicable to
the Class C Warrants will be reduced to from $2.30 to $2.15.
Pursuant to the terms of the subscription agreements entered into
with the investors in the Unit Offering, the Company is obligated to file within
30 days a registration statement covering the shares of Common Stock (i)
included in the Units and (ii) subject to the Class D Warrants included in the
Units (including, in each case, Units subject to the Placement Options).
Pursuant to the terms of the Prior 1999 Private Placement, investors in the
Prior 1999 Private Placement are entitled to have included in such registration
statement the shares of Common Stock received by them in such private placement
(including the shares of Common Stock subject to the Class C Warrants issued in
such private placement). Certain other holders of piggyback registration rights
may elect to include shares of Common Stock in such registration statement.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
(c) Exhibits:
4.1 Form of Class D Warrant
10.1 Form of Subscription Agreement
99.1 Press Release dated July 30, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DISCOVERY LABORATORIES, INC.
Date: August 2, 1999
By: /s/ Robert J. Capetola
--------------------------------------------
Name: Robert J. Capetola, Ph.D.
Title: President and Chief Executive Officer
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Exhibit Index
Exhibit Number Description
-------------- -----------
4.1 Form of Class D Warrant
10.1 Form of Subscription Agreement
99.1 Press Release dated July 30, 1999.
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EXHIBIT 4.1
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE. NEITHER SUCH WARRANTS NOR SUCH SECURITIES MAY
BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT SUCH
REGISTRATION, EXCEPT UPON DELIVERY TO THE COMPANY OF SUCH EVIDENCE AS MAY BE
SATISFACTORY TO COUNSEL FOR THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER
SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
DISCOVERY LABORATORIES, INC.
Class D Warrant for the Purchase
of Shares of Common Stock
FOR VALUE RECEIVED, DISCOVERY LABORATORIES, INC., a Delaware
corporation (the "Company"), hereby certifies that [ ] (the "Holder"), its
designee or its permitted assigns is entitled to purchase from the Company, at
any time or from time to time commencing on July 28, 1999 and prior to 5:00
P.M., New York City time, on July 27, 2004 up to [ ] ([ ]) fully paid and
non-assessable shares of common stock (subject to adjustment), $.001 par value
per share, of the Company for $[ ] per share (subject to adjustment as
provided herein) and an aggregate purchase price of $[ ]. (Hereinafter, (i)
said common stock, $.001 par value per share, of the Company, is referred to as
the "Common Stock," (ii) the shares of the Common Stock purchasable hereunder or
under any other Warrant (as hereinafter defined) are referred to as the "Warrant
Shares," (iii) the aggregate purchase price payable for the Warrant Shares
purchasable hereunder is referred to as the "Aggregate Warrant Price," (iv) the
price payable for each of the Warrant Shares is referred to as the "Per Share
Warrant Price," (v) this Warrant, all similar Warrants issued on the date hereof
and all warrants hereafter issued in exchange or substitution for this Warrant
or such similar Warrants are referred to as the "Warrants," (vi) the holder of
this Warrant is referred to as the "Holder" and the holder of this Warrant and
all other Warrants and Warrant Shares are referred to as the "Holders" and
Holders of more than 50% of the outstanding Warrants and Warrant Shares are
referred to as the "Majority of the Holders" and (vii) the Subscription
Agreement between the initial Holder and the Company is referred to as the
"Subscription Agreement"). The Aggregate Warrant Price is not subject to
adjustment.
By acceptance of this Warrant, the Holder agrees to comply with all
applicable
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provisions of the Subscription Agreement to the same extent as if it were a
party thereto.
1. Exercise of Warrant. (a) This Warrant may be exercised in whole
at any time, or in part from time to time, commencing on July 28, 1999 and prior
to 5:00 P.M., Eastern Standard Time, on July 27, 2004 by the Holder by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Section 9(a) hereof, together with proper
payment of the Aggregate Warrant Price, or the proportionate part thereof if
this Warrant is exercised in part, with payment for the Warrant Shares made by
certified or official bank check payable to the order of the Company; or
(b) If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock and the Holder is
entitled to receive a new Warrant covering the Warrant Shares that have not been
exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares.
(c) Upon surrender of this Warrant, the Company will (i) issue a
certificate or certificates in the name of the Holder for the largest number of
whole shares of the Common Stock to which the Holder shall be entitled and, if
this Warrant is exercised in whole, in lieu of any fractional share of the
Common Stock to which the Holder shall be entitled, pay to the Holder cash in an
amount equal to the fair value of such fractional share (determined in such
reasonable manner as the Board of Directors of the Company shall determine), and
(ii) deliver the other securities and properties receivable upon the exercise of
this Warrant, or the proportionate part thereof if this Warrant is exercised in
part, pursuant to the provisions of this Warrant.
2. Reservation of Warrant Shares; Listing. The Company agrees that,
prior to the expiration of this Warrant, the Company shall at all times (i) have
authorized and in reserve, and shall keep available, solely for issuance and
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer, other than under Federal or state securities laws, and free and clear
of all preemptive rights and rights of first refusal and (ii) use its best
efforts to keep the Warrant Shares authorized for listing on the Nasdaq National
Market, the Nasdaq SmallCap Market or any national securities exchange on which
the Company's Common Stock is traded.
3. Protection Against Dilution. (a) If, at any time or from time to
time after the date of this Warrant, the Company shall issue or distribute to
any holder of shares of Common Stock evidence of its indebtedness, any other
securities of the Company or ny cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or distribution
payable in shares of Common Stock, referred to in Section 3(b), and also
excluding cash dividends or cash distributions paid out of net profits legally
available therefor in the full amount thereof (any such non-excluded event being
herein called a "Special Dividend")), the Per Share Warrant Price shall be
adjusted by multiplying the Per Share Warrant Price then in effect by a
fraction, the numerator of which shall be the then Current Market Price in
effect on the record date of such issuance or distribution less the fair market
value (as determined in good faith by the Company's board of directors) of the
evidence of
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indebtedness, cash, securities or property, or other assets issued or
distributed in such Special Dividend applicable to one share of Common Stock and
the denominator of which shall be the then Current Market Price in effect on the
record date of such issuance or distribution. An adjustment made pursuant to
this Subsection 3(a) shall become effective immediately after the record date of
any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution to any holder of 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 Warrant Price shall be
adjusted to be equal to a fraction, the numerator of which shall be the
Aggregate Warrant Price and the denominator of which shall be the number of
shares of Common Stock or other capital stock of the Company that the Holder
would have owned immediately following such action had such Warrant been
exercised immediately prior thereto. An adjustment made pursuant to this
Subsection 3(b) 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.
(c) Except as provided in Subsections 3(a) and 3(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 or
otherwise receive an issuance of Common Stock or any securities convertible
into, or exercisable or exchangeable for, 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 thereof (the "Total Consideration") by (ii) the number of additional
shares of Common Stock issued, sold or issuable upon exercise of such
securities) that is less than the then Current Market Price in effect on the
date of such issuance or sale, then 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 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.
(d) No adjustment in the Per Share Warrant Price shall be required
in the case of the issuance by the Company of Common Stock (i) pursuant to the
exercise of any warrant; (ii) pursuant to the exercise of any stock options or
warrants currently outstanding or securities issued after the date hereof, which
may be approved by the Company's board of directors pursuant to any Company
benefit plan or exercised, under any employee benefit plan of the Company to
officers, directors, consultants or employees, but only with respect to such
warrants or stock options as are exercisable at prices no lower than the closing
bid price of the Common Stock as of the date of grant thereof.
(e) In case 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 a entirety, or in the case of any statutory
exchange of securities with another corporation (including any
7
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 Section 3(e) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The Company shall require the issuer
of any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant to 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 thirty (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.
(f) No adjustment in the Per Share Warrant 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 which by
reason of this Subsection 3(g) 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(g)) 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 Warrant 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.
(g) Whenever the Per Share Warrant 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 prepare 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. The Company may, but shall not be obligated to unless
requested by a Majority of the Holders, obtain, at its expense, a certificate of
a firm of independent public accountants of recognized standing selected by the
board of directors (who may be the regular auditors of the Company) setting
forth the Per Share Warrant Price and the number of Warrant Shares in effect
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.
(h) If the board of directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock other than a
cash distribution out of
8
earned surplus, the Company shall mail notice thereof to the Holders of the
Warrants not less than ten (10) days prior to the record date fixed for
determining stockholders entitled to participate in such dividend or other
distribution.
(i) 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 Warrant Price between or
among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
(j) Upon the expiration of any rights, options, warrants or
conversion privileges with respect to the issuance of which an adjustment to the
Per Share Warrant Price had been made, if such shall not have been exercised,
the number of Warrant Shares purchasable upon exercise of this Warrant, to the
extent this Warrant has not then been exercised, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had they been
originally adjusted (or had the original adjustment not been required, as the
case may be) on the basis of (A) the fact that Common Stock, if any, actually
issued or sold upon the exercise of such rights, options, warrants or conversion
privileges, and (B) the fact that such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company upon such
exercise plus the consideration, if any, actually received by the Company for
the issuance, sale or grant of all such rights, options, warrants or conversion
privileges whether or not exercised; provided, however, that no such
readjustment shall have the effect of decreasing the number of Warrant Shares
purchasable upon exercise of this Warrant by an amount in excess of the amount
of the adjustment initially made in respect of the issuance, sale or grant of
such rights, options, warrants or conversion privileges.
(k) In case any event shall occur as to which the other provisions
of this Section 3 are not strictly applicable but as to which the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles hereof then,
in each such case, the Board of Directors of the Company shall in good faith
determine the adjustment, if any, on a basis consistent with the essential
intent and principles established herein, necessary to preserve the purchase
rights represented by the Warrants. Upon such determination, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein.
4. Fully Paid Stock; Taxes. The shares of the Common Stock
represented by each and every certificate for Warrant Shares delivered upon the
exercise of this Warrant shall at the time of such delivery, be duly authorized,
validly issued and outstanding, fully paid and nonassessable, and not subject to
preemptive rights or rights of first refusal, and the Company will take all such
actions as may be necessary to assure that the par value, if any, per share of
the Common Stock is at all times equal to or less than the then Per Share
Warrant Price. The Company shall pay all documentary, stamp or similar taxes and
other similar governmental charges that may be imposed with respect to the
issuance or delivery of any Common Shares upon exercise of the Warrants (other
than income taxes); provided, however, that if the Common Shares are to be
delivered in a name other than the name of the Holder, no such delivery shall be
made unless the person requesting the same has paid to the Company the amount of
transfer taxes or charges incident thereto, if any.
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5. Registration Under Securities Act of 1933. (a) The Holder shall
have the right to participate in the registration rights granted to Holders of
Registrable Securities (as defined in the Subscription Agreement) with respect
to the Warrant Shares, as adjusted, pursuant to Article V of the Subscription
Agreement. By acceptance of this Warrant, the Holder agrees to comply with the
provisions of Article V of the Subscription Agreement to the same extent as if
it were a party thereto.
(b) Until all of the Warrant Shares have been sold under a
registration statement declared effective by the Securities and Exchange
Commission or pursuant to Rule 144, the Company shall use its reasonable best
efforts to file with the Securities and Exchange Commission all current reports
and the information as may be necessary to enable the Holder to effect sales of
its shares in reliance upon Rule 144 promulgated under the Securities Act of
1933, as amended (the "Act").
6. Investment Intent; Limited Transferability. (a) The Holder
represents, by accepting this Warrant, that it understands that this Warrant and
any securities obtainable upon exercise of this Warrant have not been registered
for sale under Federal or state securities laws and are being offered and sold
to the Holder pursuant to one or more exemptions from the registration
requirements of such securities laws. In the absence of an effective
registration of such securities or an exemption therefrom, any certificates for
such securities shall bear the legend set forth on the first page hereof. The
Holder understands that it must bear the economic risk of its investment in this
Warrant and any securities obtainable upon exercise of this Warrant for an
indefinite period of time, as this Warrant and such securities have not been
registered under Federal or state securities laws and therefore cannot be sold
unless subsequently registered under such laws, unless an exemption from such
registration is available.
(b) The Holder, by its acceptance of this Warrant, represents to the
Company that it is acquiring this Warrant and will acquire any securities
obtainable upon exercise of this Warrant for its own account for investment and
not with a view to, or for sale in connection with, any distribution thereof in
violation of the Act. The Holder agrees that this Warrant and any such
securities will not be sold or otherwise transferred unless (i) a registration
statement with respect to such transfer is effective under the Act and any
applicable state securities laws or (ii) such sale or transfer is made pursuant
to one or more exemptions from the Act.
(c) In addition to the limitations set forth in Section 1, 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
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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.
(d) The Holder has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
Warrants or the exercise of the Warrants; and (ii) the opportunity to request
such additional information which the Company possesses or can acquire without
unreasonable effort or expense.
(e) The Holder 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 investor or other
conference whose attendees were, to such Holder's knowledge, invited by any
general solicitation or general advertising.
(f) The Holder is an "accredited investor" within the meaning of
Regulation D under the Act. Such Holder is acquiring the Warrants for its own
account and not with a present view to, or for sale in connection with, any
distribution thereof in violation of the registration requirements of the
Securities Exchange Act of 1934, without prejudice, however, to such Holder's
right, subject to the provisions of the Purchase Agreement and this Warrant, at
all times to sell or otherwise dispose of all or any part of such Warrants and
Warrant Shares.
(g) Either by reason of such Holder's business or financial
experience or the business or financial experience of its professional advisors
(who are unaffiliated with and who are not compensated by the Company or any
affiliate, finder or selling agent of the Company, directly or indirectly), such
Holder has the capacity to protect such Holder's interests in connection with
the transactions contemplated by this Warrant and the Purchase Agreement.
7. Optional Redemption. In the event that the closing bid price for
any 20 consecutive Trading Days is at least 300% of the Per Share Warrant Price,
the Company shall be entitled to redeem the Warrants, or any of them, at a per
Warrant redemption price of $0.01, by 30 business days' written notice to the
Holder. Upon the expiration of such 30 business day period, all Warrants noticed
for redemption that have not theretofore been exercised by the Holder shall,
upon payment of the aggregate redemption price therefore, cease to represent the
right to purchase any shares of Common Stock and shall be deemed cancelled
without any further act or deed on the part of the Company. The Holder
undertakes to return the certificate representing any redeemed Warrants to the
Company upon their redemption any to indemnify the Company with respect to any
losses, claims, damages or liabilities arising from the Holder's failure to
return such certificate. In the event the certificate so returned represents a
number of Warrants in excess of the number being redeemed, the Company shall as
promptly as practicable issue to the Holder a new certificate for the number of
unredeemed Warrants.
8. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to
the
11
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.
9. Warrant Holder Not Stockholder. This Warrant does not confer upon
the Holder any right to vote on or consent to or receive notice as a stockholder
of the Company, as such, in respect of any matters whatsoever, nor any other
rights or liabilities as a stockholder, prior to the exercise hereof; this
Warrant does, however, require certain notices to Holders as set forth herein.
10. Communication. 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:
(a) the Company at Discovery Laboratories, Inc., 350 South Main
Street, Suite 307, Doylestown, Pennsylvania 18901, Attn: Evan
Myrianthopoulos, Vice President of Finance or such other address as the
Company has designated in writing to the Holder, or
(b) the Holder at [ ], Attn: [ ] or other such address as the Holder
has designated in writing to the Company.
11. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
12. Applicable Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of Delaware without giving effect to
the principles of conflicts of law thereof.
13. Amendment, Waiver, etc. Except as expressly provided herein,
neither this Warrant nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that any provisions hereof may be amended, waived, discharged
or terminated upon the written consent of the Company and the Majority of the
Holders.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed this [ ] day of [ ], 1999.
DISCOVERY LABORATORIES, INC.
By:____________________________
Name:
Title:
13
EXHIBIT 10.1
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of the date set
forth on the signature page hereof between Discovery Laboratories, Inc., a
Delaware corporation (the "Company") and the undersigned (the "Subscriber").
WITNESSETH:
WHEREAS, the Company is offering in a private placement to accredited investors
(the "Offering") a minimum of four (4) Units (the "Minimum Offering") and a
maximum of twelve (12) Units (the "Maximum Offering") with an option in favor of
the Placement Agent to offer up to an additional six (6) Units to cover
overallotments (the "Overallotment") at a purchase price of five hundred
thousand dollars ($500,000) per Unit, with each Unit consisting of (a) a number
of shares of Common Stock of the Company, par value $.001 per share, determined
by dividing five hundred thousand dollars ($500,000) by the average closing bid
price of the Common Stock on the Nasdaq SmallCap Market for the five (5)
consecutive trading days immediately preceding the Closing Date (as defined in
section 3.2 below) of this Offering (the "Offering Price") and (b) warrants
("Warrants"), exercisable at any time following the Closing Date for a period of
five (5) years, to purchase a number of shares of Common Stock equal to one-half
of the number of shares of Common Stock included in the Unit at an exercise
price equal to 125% of the Offering Price. For purposes hereof, "closing bid
price" shall mean, for each trading day, the closing bid price for the Common
Stock on the Nasdaq SmallCap Market on such trading day. "Trading day" shall
mean a day on which the relevant Nasdaq SmallCap Market is open for the
transaction of business. The shares of Common Stock and Warrants included in the
Units, as well as the shares of Common Stock issuable upon exercise of the
Warrants are sometimes 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;
WHEREAS, the Company has engaged Paramount Capital, Inc. (the
"Placement Agent") as Placement Agent for the Offering on a "best-efforts"
basis.
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto agree as
follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company such
number of Units or fractions thereof as is set forth upon the signature page
hereof at a price equal to $500,000 per Unit and the Company agrees to sell such
Units to the Subscriber for said purchase price. The
14
purchase price is payable by personal or business check, wire transfer of
immediately available funds or money order made payable to "State Street Bank
and Trust Co., N.A., Escrow Agent, F/B/O Discovery Laboratories, Inc."
contemporaneously with the execution and delivery of this Agreement by the
Subscriber.
All wires should be sent to:
State Street Bank & Trust Co.
Corporate Trust N.Y.
61 Broadway, 15th floor
New York, New York 10006
Account Number: 9903-8713
Reference Number: 122391-010
ABA Routing Number: 011000028
For the account of: Discovery Laboratories, Inc.
By order of: [insert investor name]
Certificates for the Securities compising the Units will be
delivered by the Company to the Subscriber within 10 days of the Closing of the
Offering applicable to the Subscriber as set forth in Article III hereof.
1.2 The Subscriber recognizes that the purchase of Units involves a
high degree of risk in that (i) the Company remains a development stage business
with a limited operating history and requires substantial funds in addition to
the proceeds of the Offering; (ii) 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; (iii) the
Subscriber may not be able to liquidate its investment; (iv) transferability of
the Units is extremely limited; and (v) in the event of a disposition, the
Subscriber could sustain the loss of its entire investment. Such risks, as well
as other relevant risks, are more fully set forth in the Memorandum (as defined
below) furnished by the Company to the Subscriber.
1.3 The Subscriber represents that the Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended (the "Act"), as indicated by the
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.
1.4 The Subscriber hereby acknowledges and represents that (i) the
Subscriber has prior investment experience, including investment in non-listed
and unregistered securities, or that the Subscriber has employed the services of
an investment advisor, 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; (ii) the Subscriber recognizes
the highly speculative nature of an investment in the Units; and (iii) the
Subscriber
15
is able to bear the economic risk which the Subscriber assumes by investing in
the Units.
1.5 The Subscriber hereby acknowledges receipt and careful review of
the Confidential Private Placement Memorandum dated June 1, 1999, as
supplemented and amended, and the attachments and exhibits thereto, all of which
constitute an integral part thereof (collectively, the "Memorandum") and hereby
represents that the Subscriber has been furnished by the Company during the
course of this transaction with all information regarding the Company which 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 which 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
Memorandum. To the extent necessary, the Subscriber has retained, at its own
expense, and relied upon the advice of appropriate professionals regarding the
investment, tax and legal merits and consequences of this Agreement and its
purchase of the Units hereunder. The Subscriber acknowledges and agrees that the
Placement Agent has not supplied any information for inclusion in the Memorandum
other than information furnished in writing to the Company by the Placement
Agent specifically for inclusion in the Memorandum relating to the Placement
Agent, that the Placement Agent has no responsibility for the accuracy or
completeness of the Memorandum and that the Subscriber has not relied upon the
independent investigation or verification, if any, which may have been
undertaken by the Placement Agent.
(b) The Subscriber covenants that (i) the Subscriber was
contacted regarding the sale of the Units by the Placement Agent, (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 acknowledges that the Offering has not
been reviewed by the United States Securities and Exchange Commission (the
"SEC") because of the Company's representations that this Offering is intended
to be exempt from the registration requirements of Section 5 of the Act pursuant
to Sections 4(2) and 3(b) of the Act. The Subscriber agrees that the Subscriber
will not sell or otherwise transfer the Units or the Securities unless they are
registered under the Act or unless an exemption from such registration is
available.
1.8 The Subscriber understands that none of the Securities have been
registered under the Act by reason of a claimed exemption under the provisions
of the Act which depends, in part, upon the Subscriber's investment intention.
In this connection, the
16
Subscriber hereby represents that the Subscriber is purchasing the Units for the
Subscriber's own account for investment and not with a view toward the resale or
distribution to others. The Subscriber, if an entity, was not formed for the
purpose of purchasing the Units. The Subscriber understands that Rule 144
promulgated under the Act requires, 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 Act.
1.9 The Subscriber understands and hereby acknowledges that the
Company is under no obligation to register the Securities under the Act or any
state securities or "blue sky" laws other than as set forth in Article V. The
Subscriber consents that the Company may, if it desires, permit the transfer of
the Securities under or issuable upon exercise thereof out of the Subscriber's
name only when the Subscriber's request for transfer is accompanied by an
opinion of counsel reasonably satisfactory to the Company that neither the sale
nor the proposed transfer results in a violation of the Act or any applicable
state "blue sky" laws (collectively, "Securities Laws"). The Subscriber agrees
to hold the Company and the Placement Agent and their respective directors,
officers, agents and controlling persons 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 any
misrepresentation made by the Subscriber contained in this Agreement (including
the Confidential Investor Questionnaire contained in Article VII herein) or any
sale or distribution by the Subscriber in violation of the Securities Laws.
1.10 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Securities that such Securities
have not been registered under the Act or any state securities or "blue sky"
laws and setting forth or referring to the restrictions on transferability and
sale thereof contained in this Agreement. The Subscriber is aware that the
Company will make a notation in its appropriate records and issue "stop
transfer" instructions to its transfer agent with respect to the restrictions on
the transferability of such Securities.
1.11 The Subscriber understands that the Company will review this
Agreement and is hereby given authority by the Subscriber to call Subscriber's
bank or place of employment or otherwise review the financial standing of the
Subscriber; and it is further agreed that the Company reserves the unrestricted
right, without further documentation or agreement on the part of the Subscriber,
to reject or limit any subscription, to accept subscriptions for fractional
Units and to close the Offering to the Subscriber at any time.
1.12 The Subscriber hereby represents that the address of the
Subscriber furnished by the Subscriber on the signature page hereof is the
Subscriber's principal residence if the Subscriber is an individual or its
principal business address if it is a corporation or other entity.
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
17
Subscriber is an individual or its principal business address if it is a
corporation or other entity.
1.14 The Subscriber represents that the Subscriber has full power
and authority (corporate, statutory and otherwise) to execute and deliver this
Agreement and to purchase the Units subscribed for hereby. 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,
Keogh Plan, or other entity, then (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 7.4 below.
1.17 The Subscriber represents and warrants that it has not engaged,
consented to nor authorized any broker, finder or intermediary to act on its
behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. The Subscriber
shall indemnify and hold harmless the Company from and against all fees,
commissions or other payments owing to any such person or firm acting on behalf
of such Subscriber hereunder.
1.18 The Subscriber acknowledges that (a) the Company has engaged,
consented to and authorized the Placement Agent in connection with the
transactions contemplated by this Agreement, (b) the Company shall pay the
Placement Agent a commission and reimburse the Placement Agent's expenses in
accordance with the Placement Agency Agreement (as defined in section 5.1(c)
below), and the Company shall indemnify and hold harmless the Subscriber from
and against all fees, commissions or other payments owing by the Company to the
Placement Agent or any other person or firm acting on behalf of the Company
hereunder and (c) registered representatives of the Placement Agent and/or its
designees (including, without limitation, registered representatives of the
Placement Agent and/or its designees who participate in the Offering and sale of
the securities sold in the Offering) will be paid a portion of the commissions
paid to the Placement Agent including a portion of the Placement Options (as
defined in Section 5.1(c) below).
1.19 The Subscriber, whose name appears on the signature line below,
shall be the beneficial owner of the Units for which such Subscriber subscribes.
18
II. REPRESENTATIONS BY 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 lawful authority to
conduct its business as described in the Memorandum. The Company is duly
qualified to do business as a foreign corporation and is in good standing in the
States of New York and in each jurisdiction in which the nature of the business
conducted, or as proposed to be conducted in the Memorandum, by it or the
properties owned, leased or operated by it, makes such qualification or
licensing necessary and where the failure to be so qualified or licensed would
have a material adverse effect upon the business, prospects and financial
condition of the Company other than Pennsylvania, where the Company will be so
qualified prior to the Closing.
2.2 Capitalization and Voting Rights. The authorized, issued and
outstanding capital stock of the Company is as set forth in the Memorandum; all
issued and outstanding shares of capital stock of the Company are validly
issued, fully paid and nonassessable. The Common Stock included in the Units has
been duly and validly authorized and, when issued and paid for pursuant to this
Agreement, will be free and clear of liens, validly issued, fully paid and
nonassessable. 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 Memorandum, in this Agreement and as
otherwise required by law, there are no restrictions upon the voting or transfer
of the Securities 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, the
authorization, sale, issuance and delivery of the Securities 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 Common Stock, as
contemplated by this Agreement, such securities will be duly and validly
authorized and issued, fully paid and nonassessable. The Warrants, when issued,
represent legally valid and binding obligations of the Company, enforceable in
accordance with the terms thereof. The Common Stock underlying the Warrants
will, when issued in accordance with the terms of
19
the Warrants, be validly issued, fully paid and nonassessable. The issuance and
sale of the Units contemplated hereby will not give rise to any preemptive
rights or rights of first refusal on behalf of any person.
2.4 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 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 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 or other third-party is required to be obtained by the
Company in connection with the authorization, execution and delivery of this
Agreement or with the authorization, issuance and sale of the Units or the
Securities comprising the Units, except such filings as may be required to be
made, and which shall have been made at or prior to the required time, with the
SEC, the NASD and the National Association of Securities Dealers Automated
Quotation System ("Nasdaq") and with any state or foreign blue sky or securities
regulatory authority.
2.5 Licenses. Except as set forth in the Memorandum, the Company has
all 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.
2.6 Litigation. Except as set forth in the Memorandum, the Company
knows of no pending or threatened legal or governmental proceedings against the
Company which could materially adversely affect the business, property,
financial condition, operations or prospects of the Company.
2.7 Accuracy of Reports. All material reports required to be filed
by the Company within the three years prior to the date of this Agreement under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), have been
duly filed with the SEC, complied at the time of filing in all material respects
with the requirements of their respective forms and, except to the extent
updated or superseded by the Memorandum or any subsequently filed report, to the
best of the Company's knowledge, were complete and correct in all material
respects as of the dates at which the information was furnished, and contained
(as of such dates) no untrue statement of a material fact or omitted 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.
20
2.8 Accuracy of Memorandum. No information set forth in the
Memorandum contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
2.9 Investment Company. The Company is not an "investment company"
within the meaning of such term under the Investment Company Act of 1940, as
amended, and the rules and regulations of the SEC thereunder.
2.10 Listing. The Company shall promptly file an Application for
Listing of Additional Shares with the Nasdaq SmallCap Market (the "Nasdaq") and
hereby represents and warrants to the Placement Agent and the Subscriber that it
will take any other necessary action in accordance with the rules of the Nasdaq
to enable the Common Stock (including the Common Stock issuable upon exercise of
the Warrants) to trade on the Nasdaq.
III. TERMS OF SUBSCRIPTION
3.1 The Offering is for a minimum of four Units and a maximum of 12
Units. The Placement Agent, at its option, may offer for sale by the Company up
to an additional six Units to cover over-allotments.
3.2 The Offering Period shall begin June 1, 1999. The Company
expects to conduct a single closing of this Offering (the "Closing") at a time
determined by the Company in collaboration with the Placement Agent. After the
Minimum Offering amount has been subscribed for, the Company will have complete
discretion as to the timing of the Closing and will not be obligated to conduct
the Closing within any specific time following receipt of subscriptions for the
Minimum Offering. The Closing is expected to occur no later than July 30, 1999,
subject to an extension of this Offering for up to an additional 60 days at the
option of the Placement Agent (such date, as the same may be extended, the
"Closing Date"). The Units will be offered on a "best-efforts" basis. The
purchase price is payable by personal or business check, wire transfer of
immediately available funds or money order made payable to "State Street Bank
and Trust Co. N.A., Escrow Agent, F/B/O Discovery Laboratories, Inc." as
provided in section 1.1.
3.3 Pending the sale of the Units, all funds paid hereunder shall be
deposited by the Company in escrow with the State Street Bank and Trust Co.,
N.A.. If the Company shall not have obtained subscriptions (including this
subscription) for purchases of $2,000,000 of Units on or before August 1, 1999,
then this subscription shall be void and all funds paid hereunder by the
Subscriber shall be promptly returned to the Subscriber, without interest, in
accordance with Section 3.5 hereof.
3.4 The Subscriber hereby authorizes and directs the Company to
deliver the Securities to be issued to the Subscriber pursuant to this Agreement
directly to the Subscriber's account maintained by the Placement Agent or, if no
such account exists, to the residential or business address indicated on the
signature page hereto.
21
3.5 The Subscriber hereby authorizes and directs the Company to
return any funds for unaccepted subscriptions to the same account from which the
funds were drawn, including any customer account maintained with the Placement
Agent.
IV. CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS
4.1 The Subscribers' obligation to purchase the Units at the Closing
is subject to the fulfillment on or prior to the date of such Closing of the
following conditions, which conditions may be waived at the option of each
Subscriber to the extent permitted by law:
(a) Representations and Warranties. 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 Units (except as may otherwise be provided in this
Agreement).
(e) Minimum Subscriptions. The Company shall have received binding
subscriptions for at least the Minimum Offering.
(f) Legal Opinion. Upon the Closing, counsel to the Company shall
have delivered to the Placement Agent for the benefit of the Placement Agent a
legal opinion with respect to such legal matters relating to this Agreement and
the Memorandum as the Placement Agent may reasonably require.
V. REGISTRATION RIGHTS
5.1 As used in this Agreement, the following terms shall have the
following meanings:
(a) "Affiliate" shall mean, with respect to any Person (as
defined below), any other Person controlling, controlled by, or under direct or
indirect common
22
control with, such Person (for the purposes of this definition "control," when
used with respect to any specified Person, shall mean the power to direct the
management and policies of such person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the
foregoing).
(b) "Business Day" shall mean a day Monday through Friday on
which banks are generally open for business in New York , New York.
(c) "Holders" shall mean the Subscriber and any person holding
Registrable Securities (including the Registrable Securities underlying the
Placement Options (the "Placement Options") to be granted to the Placement Agent
and/or its designees pursuant to the Placement Agency Agreement between the
Company and the Placement Agent dated May 24, 1999 (the "Placement Agency
Agreement")), a holder of the Placement Options, or any person to whom the
rights under Article V have been transferred in accordance with Section 5.9
hereof.
(d) "Person" shall mean any person, individual, corporation,
limited liability company, partnership, trust or other nongovernmental entity or
any governmental agency, court, authority or other body (whether foreign,
federal, state, local or otherwise).
(e) The terms "register," "registered" and "registration"
refer to the registration effected by preparing and filing a registration
statement in compliance with the Act, and the declaration or ordering of the
effectiveness of such registration statement.
(f) "Registrable Securities" shall mean (i) the Common Stock
(including the Common Stock underlying the Placement Options) and (ii) the
shares of Common Stock issuable upon the exercise of the Warrants (including the
shares of Common Stock issuable upon exercise of the Warrants underlying the
Placement Options); 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 Act so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the consummation
of such sale and (C) are held by a Holder or a permitted transferee pursuant to
Section 5.9.
(g) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Section 5.2 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and expenses of counsel for the Company, blue sky fees and
expenses and the expense of any special audits incident to, or required by, any
such registration (but excluding the aggregate fees of legal counsel for all
Holders).
(h) "Registration Statement" shall have the meaning ascribed
to such term in Section 5.2.
23
(i) "Registration Period" shall have the meaning ascribed to
such term in Section 5.4.
(j) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities and the
aggregate fees and expenses of legal counsel for all Holders.
5.2 (a) No later than 30 days after the Closing Date (the "Filing
Date"), the Company shall file a "shelf" registration statement on the
appropriate form (the "Registration Statement") with the SEC and use its best
efforts to effect the registration, qualifications or compliances (including,
without limitation, the execution of any required undertaking to file
post-effective amendments, appropriate qualifications or exemptions under
applicable blue sky or other state securities laws and appropriate compliance
with applicable securities laws, requirements or regulations) of the Registrable
Securities prior to the date which is 90 days after the Final Closing Date.
Notwithstanding the foregoing, the Company shall not be obligated to enter into
any underwriting agreement for the sale of any of the Registrable Securities.
(b) For each 30 day period (or fraction thereof) beyond the 30
and 90 day periods referred to in Section 5.2(a) above that the Registration
Statement (i) has not been filed or (ii) has not been declared effective by the
SEC, to the extent attributable to the Company or its counsel, the Company shall
pay to the Subscriber an amount equal to 1% of the (x) purchase price of the
shares of Common Stock purchased by the Subscriber in the Offering plus (y) the
exercise price for the number of shares of Common Stock issuable upon exercise
of the Warrants.
5.3 All Registration Expenses incurred in connection with any
registration, qualification, exemption or compliance pursuant to Section 5.2
shall be borne by the Company. All Selling Expenses relating to the sale of
securities registered by or on behalf of Holders shall be borne by such Holders
pro rata on the basis of the number of securities so registered.
5.4 In the case of the registration, qualification, exemption or
compliance effected by the Company pursuant to this Agreement, the Company
shall, upon reasonable request, inform each Holder as to the status of such
registration, qualification, exemption and compliance. At its expense the
Company shall:
(a) use its best efforts to keep such registration, and any
qualification, exemption or compliance under state securities laws which the
Holders reasonably request the Company to obtain, continuously effective until
the earlier of (i) the Holders have completed the distribution described in the
registration statement relating thereto and (ii) the second anniversary of the
Closing. The period of time during which the Company is required hereunder to
keep the Registration Statement effective is referred to herein as "the
Registration Period." Notwithstanding the foregoing, at the Company's election,
the Company may cease to keep such registration, qualification, exemption or
compliance effective with
24
respect to any Registrable Securities, and the registration rights of a Holder
with respect to such Registrable Securities shall expire, at such time as the
Holder may sell all Registrable Securities then held by such Holder under Rule
144 under the Act in a three-month period, but this sentence shall not relieve
the Company of any obligation to comply with this Article V as to any shares of
Common Stock issuable upon exercise of the Placement Options;
(b) advise the Holders:
(i) when the Registration Statement or any amendment
thereto has been filed with the SEC and when the Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the SEC for amendments or
supplements to the Registration Statement or the prospectus included therein or
for additional information;
(iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for such purpose;
(iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registrable
Securities included therein for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the
making of any changes in the Registration Statement or the prospectus so that,
as of such date, the statements therein are not misleading and do not omit to
state a material fact required to be stated therein or necessary to make the
statements therein (in the case of the prospectus, in the light of the
circumstances under which they were made) not misleading.
(c) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of any Registration Statement at the
earliest possible time;
(d) furnish to each Holder, without charge, at least one copy
of such Registration Statement and any post-effective amendment or supplement
thereto, including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits (including those incorporated by reference) in
the form filed with the SEC;
(e) during the Registration Period, deliver to each Holder,
without charge, as many copies of the prospectus included in such Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
request; and the Company consents to the use, consistent with the provisions
hereof, of the prospectus and any amendment or supplement thereto by each of the
selling Holders of Registrable Securities in connection with the offering and
sale of the Registrable Securities covered by the prospectus and any amendment
or supplement thereto. In addition, upon the reasonable request of the Holder
and subject in all cases to confidentiality protections reasonably acceptable to
the
25
Company, the Company will meet with a Holder or a representative thereof at the
Company's headquarters to discuss all information relevant for disclosure in the
Registration Statement covering the Registrable Securities, and will otherwise
cooperate with any Holder or its agentsconducting an investigation for the
purpose of reducing or eliminating such Holder's exposure to liability under the
Act, including the reasonable production of information at the Company's
headquarters;
(f) during the Registration Period, deliver to each Holder,
without charge, (i) as soon as practicable (but in the case of the annual report
of the Company to its stockholders, within 120 days after the end of each fiscal
year of the Company) one copy of: (A) its annual report to its stockholders, if
any (which annual report shall contain financial statements audited in
accordance with generally accepted accounting principles in the United States of
America by a firm of certified public accountants of recognized standing); (B)
if not included in substance in its annual report to stockholders, its annual
report on Form 10-K (or similar form); (C) each of its quarterly reports to its
stockholders, if any, and, if not included in substance in its quarterly reports
to stockholders, its quarterly report on Form 10-Q (or similar form), and (D) a
copy of the full Registration Statement (the foregoing, in each case, excluding
exhibits); and (ii) upon reasonable request, all exhibits excluded by the
parenthetical to the immediately preceding clause (D);
(g) prior to any public offering of Registrable Securities
pursuant to any Registration Statement, register or qualify or obtain an
exemption for offer and sale under the securities or blue sky laws of such
jurisdictions as any such Holders reasonably request in writing, provided that
the Company shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such
jurisdiction, and do any and all other acts or things reasonably necessary or
advisable to enable the offer and sale in such jurisdictions of the Registrable
Securities covered by such Registration Statement;
(h) cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to any Registration Statement free of any restrictive legends
to the extent not required at such time and in such denominations and registered
in such names as Holders may request at least three (3) business days prior to
sales of Registrable Securities pursuant to such Registration Statement;
(i) upon the occurrence of any event contemplated by Section
5.4(b)(v) above, the Company shall promptly prepare a post-effective amendment
to the Registration Statement or a supplement to the related prospectus, or file
any other required document so that, as thereafter delivered to purchasers of
the Registrable Securities included therein, the prospectus will not include any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; and
(j) use its best efforts to comply with all applicable rules
and
26
regulations of the SEC, and will make generally available to the Holders not
later than 45 days (or 90 days if the fiscal quarter is the fourth fiscal
quarter) after the end of its fiscal quarter in which the first anniversary date
of the effective date of the Registration Statement occurs, an earnings
statement satisfying the provisions of Section 11(a) of the Act.
5.5 The Holders shall have no right to take any action to restrain,
enjoin or otherwise delay any registration pursuant to Section 5.2 hereof as a
result of any controversy that may arise with respect to the interpretation or
implementation of this Agreement.
5.6 (a) To the extent permitted by law, the Company shall indemnify
each Holder, each underwriter of the Registrable Securities and each person
controlling such Holder within the meaning of Section 15 of the Act, with
respect to which any registration, qualification or compliance has been sought
pursuant to this Agreement, against all claims, losses, damages and liabilities
(or action in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened (subject to Section 5.6(c)
below), arising out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus or offering circular, or any amendment or supplement thereof,
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances in which they were made, or (ii) any violation or
alleged violation by the Company of the Act, the Exchange Act, or any rule or
regulation promulgated under the Act, or the Exchange Act, and shall reimburse
each Holder, each underwriter of the Registrable Securities and each person
controlling such Holder, for legal and other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action as incurred; provided that the Company shall not be liable
in any such case to the extent that any untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder and stated
to be specifically for use in preparation of such registration statement,
prospectus or offering circular; provided that the Company shall not be liable
in any such case where the claim, loss, damage or liability arises out of or is
related to the failure of the Holder to comply with the covenants and agreements
contained in this Agreement respecting sales of Registrable Securities, and
except that the foregoing indemnity agreement is subject to the condition that,
insofar as it relates to any such untrue statement or alleged untrue statement
or omission or alleged omission made in the preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement becomes effective or in the amended prospectus
filed with the SEC pursuant to Rule 424(b) of the Act or in the prospectus
subject to completion and term sheet under Rule 434 of the Act, which together
meet the requirements of Section 10(a) of the Act (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any such Holder, any such
underwriter or any such controlling person, if a copy of the Final Prospectus
furnished by the Company to the Holder for delivery was not furnished to the
person or entity asserting the loss, liability, claim or damage at or prior to
the time such furnishing is required by the Act and the Final Prospectus would
have cured the defect giving rise to such loss, liability, claim or damage.
27
(b) Each Holder will severally, if Registrable Securities held
by such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter of the Registrable Securities and
each person who controls the Company within the meaning of Section 15 of the
Act, against all claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 5.6(c) below), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made, and will reimburse the Company, such
directors and officers, each underwriter of the Registrable Securities and each
person controlling the Company for reasonable legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action as incurred, in each case to the
extent, but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of the Holder and stated to
be specifically for use in preparation of such registration statement,
prospectus or offering circular; provided that the indemnity shall not apply to
the extent that such claim, loss, damage or liability results from the fact that
a current copy of the prospectus or offering circular was not made available to
the Holder and such current copy of the prospectus or offering circular would
have cured the defect giving rise to such loss, claim, damage or liability.
Notwithstanding the foregoing, in no event shall a Holder be liable for any such
claims, losses, damages or liabilities in excess of the proceeds received by
such Holder in the offering, except in the event of fraud by such Holder.
(c) Each party entitled to indemnification under this Section
5.6 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense with its
own counsel at such Indemnified Party's expense, and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement, unless
such failure is materially prejudicial to the Indemnifying Party in defending
such claim or litigation. An Indemnifying Party shall not be liable for any
settlement of an action or claim effected without its written consent (which
consent will not be unreasonably withheld).
(d) If the indemnification provided for in this Section 5.6 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
28
lieu of indemnifying such Indemnified Party thereunder, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
liability, claim, damage or expense in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or omissions
which resulted in such loss, liability, claim, damage or expense as well as any
other relevant equitable considerations. The relative fault of the Indemnifying
Party and of the Indemnified Party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
5.7 (a) Upon receipt of any notice from the Company of the happening
of any event requiring the preparation of a supplement or amendment to a
prospectus relating to Registrable Securities so that, as thereafter delivered
to the Holders, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, each Holder shall
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement contemplated by Section 5.2 until its receipt of copies
of the supplemented or amended prospectus from the Company and, if so directed
by the Company, each Holder shall deliver to the Company all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
(b) Any Holder of 5% or more of the Company's outstanding
Common Stock shall suspend, upon request of the Company, any disposition of
Registrable Securities pursuant to the Registration Statement and prospectus
contemplated by Section 5.2 during (i) any period not to exceed one 120-day
period within any one 12-month period the Company requires in connection with a
primary underwritten offering of equity securities and (ii) any period, not to
exceed one 90-day period per circumstance or development, when the Company
determines in good faith that offers and sales pursuant thereto should not be
made by reason of the presence of material undisclosed circumstances or
developments with respect to which the disclosure that would be required in such
a prospectus is premature, would have an adverse effect on the Company or is
otherwise inadvisable.
(c) As a condition to the inclusion of its Registrable
Securities, each Holder shall furnish to the Company such information regarding
such Holder, the securities of the Company owned beneficially or of record by
such holder and the distribution proposed by such Holder as the Company may
request in writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article V.
(d) With respect to any sale of Registrable Securities
pursuant to a Registration Statement filed pursuant to this Article V, Each
Holder hereby covenants with the Company (i) not to make any sale of the
Registrable Securities without effectively causing the prospectus delivery
requirements under the Act to be satisfied, and (ii) if such Registrable
29
Securities are to be sold by any method or in any transaction other than on a
national securities exchange, the Nasdaq National Market, Nasdaq SmallCap Market
or in the over-the-counter market, in privately negotiated transactions, or in a
combination of such methods, or as otherwise described in the prospectus
contemplated by Section 5.2, to notify the Company at least five (5) business
days prior to the date on which the Holder first offers to sell any such
Registrable Securities.
(e) Each Holder acknowledges and agrees that the Registrable
Securities sold pursuant to the Registration Statement described in this Section
are not transferable on the books of the Company unless the stock certificate
submitted to the transfer agent evidencing such Registrable Securities is
accompanied by a certificate reasonably satisfactory to the Company to the
effect that (i) the Registrable Securities have been sold in accordance with
such Registration Statement and (ii) the requirement of delivering a current
prospectus has been satisfied.
(f) Each Holder shall not take any action with respect to any
distribution deemed to be made pursuant to such registration statement, which
would constitute a violation of Regulation M under the Exchange Act or any other
applicable rule, regulation or law.
(g) At the end of the period during which the Company is
obligated to keep the Registration Statement current and effective as described
above, the Holders of Registrable Securities included in the Registration
Statement an the shares underlying the Warrants shall discontinue sales of
shares pursuant to such Registration Statement upon receipt of notice from the
Company of its intention to remove from registration the shares covered by such
Registration Statement which remain unsold, and such Holders shall notify the
Company of the number of shares registered which remain unsold immediately upon
receipt of such notice from the Company.
5.8 With a view to making available to the Holders the benefits of
certain rules and regulations of the SEC which at any time permit the sale of
the Registrable Securities to the public without registration, the Company shall
use its reasonable best efforts:
(a) to make and keep public information available, as those
terms are understood and defined in Rule 144 under the Act, at all times;
(b) to file with the SEC in a timely manner all reports and
other documents required of the Company under the Exchange Act; and
(c) so long as a Holder owns any Registrable Securities, to
furnish to such Holder upon any reasonable request a written statement by the
Company as to its compliance with Rule 144 under the Act, and of the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents of the Company as such Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing a
Holder to sell any such securities without registration.
30
5.9 With the written consent of the Company and the Holders holding
at least a majority of the Registrable Securities that are then outstanding, any
provision of this Article V may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) or amended. Upon the effectuation of each such
waiver or amendment, the Company shall promptly give written notice thereof to
the Holders, if any, who have not previously received notice thereof or
consented thereto in writing.
VI. MISCELLANEOUS
6.1 Any notice or other communication given hereunder shall be
deemed sufficient in writing and sent by (a) telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received); or (b) registered or
certified mail, return receipt requested, or delivered by hand against written
receipt therefor, addressed to Discovery Laboratories, Inc., 350 South Main
Street, Suite 307, Doylestown, PA 18901, Facsimile: (215) 340-3940, Attn: Robert
Capetola, with a copy to Paramount Capital, Inc., 787 Seventh Avenue, New York,
NY 10019, Facsimile (212) 554-4355, Attn: David M. Tanen. Notices shall be
deemed to have been given or delivered on the date of mailing, except notices of
change of address, which shall be deemed to have been given or delivered when
received.
6.2 Except as set forth in Section 5.9, this Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
6.3 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, subject to acceptance by the
Company and the Placement Agent and subject to the right hereby reserved to the
Company to enter into the same agreements with other subscribers and to add
and/or delete other persons as subscribers.
6.4 (a) Notwithstanding the place where this Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed in accordance with and governed
by the laws of the State of New York without regard to principles of conflicts
of law. In the event that a judicial proceeding is necessary, the 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
(collectively, the "New York Courts"). The parties hereby irrevocably and
unconditionally consent to the jurisdiction of such courts.
(b) Each of the parties hereby irrevocably and unconditionally
consents to venue in the New York Courts, and hereby irrevocably and
unconditionally waives
31
any objection to the laying of venue of any judicial proceeding in the New York
Courts, and agrees not to plead or claim in any such New York Court that any
such judicial proceeding brought in any such court has been brought in an
inconvenient forum.
(c) Each of the parties waives the right to a trial by jury in
any action under this Agreement or any judicial proceeding arising out of the
transactions contemplated hereby, regardless of which party initiates such
judicial proceeding.
6.5 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.
6.6 It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a waiver of
any subsequent breach by that same party.
6.7 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
6.8 This Agreement may be executed in two or more counterparts each
of which shall be deemed an original, but all of which shall together constitute
one and the same instrument.
6.9 The Subscriber agrees not to issue any public statement with
respect to the Subscriber's investment or proposed investment in the Company or
the terms of any agreement or covenant between them and the Company without the
Company's prior written consent, except such disclosures as may be required
under applicable law or under any applicable order, rule or regulation.
6.10 (a) Each Subscriber severally 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. Each Subscriber hereby severally agrees to indemnify and hold
harmless each of the Company and the 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.
32
(b) The Company has engaged, consented to and authorized the
Placement Agent in connection with the transactions contemplated by this
Agreement. The Company hereby agrees to pay the Placement Agent a commission and
other compensation and to reimburse expenses in accordance with the Placement
Agency Agreement dated May 24, 1999, and the Company agrees to indemnify and
hold harmless the Subscribers from and against all fees, commissions or other
payments owing by the Company to any other person or firm acting on behalf of
the Company hereunder.
6.11 Nothing in this Agreement shall create or be deemed to create
any rights in any person or entity not a party to this Agreement, except for the
holders of Registrable Securities.
6.12 In the event of any inconsistency between this Agreement and
the Placement Agency Agreement, the Placement Agency Agreement shall be the
final Authority.
6.13 Any pronoun herein shall include all genders and/or the plural
or singular as appropriate from the context.
33
VII. CONFIDENTIAL INVESTOR QUESTIONNAIRE
7.1 The Subscriber represents and warrants that he, she or it comes
within one category marked below, and that for any category marked, he, she or
it has truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
ARTICLE VII 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 individual 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 .
Category D ___ The undersigned is a bank; a savings and loan association;
insurance company; registered investment company; registered
business development company; licensed small business
investment company "SBIC"; or employee benefit plan within the
meaning of Title 1 of ERISA and (a) the investment decision is
made by a plan fiduciary which is either a bank, savings and
loan association, insurance company or registered investment
advisor, or (b) the plan has total assets in excess of
$5,000,000 or is a self directed plan with investment
decisions made solely by persons that are accredited
investors.
________________________________________________
________________________________________________
(describe entity)
34
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 nonprofit 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 defined in Regulation 506(b)(2)(ii) under the
Securities Act.
Category H ___ The undersigned hereby certifies that it is an accredited
investor because all of its equity owners are accredited
investors. The Company, in its sole discretion, may request
information regarding the basis on which such equity owners
are accredited.
Category I ___ The undersigned hereby certifies that it is an accredited
investor because it has total assets in excess of $5,000,000
and was not formed for the specific purpose of acquiring the
Units.
Category J ___ The undersigned is not within any of the categories above and
is therefore not an accredited investor.
The Company will notify a prospective Subscriber whether such Subscriber is
eligible to purchase shares pursuant to the Agreement (and the Company, in its
sole discretion, retains the right to accept or reject all such purchases). The
undersigned agrees that it will notify the Company at any time on or prior to
the Closing Date in the event that the representations and warranties in this
Investor Questionnaire shall cease to be true, accurate and complete.
35
7.2 SUITABILITY (please answer each question)
(a) For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(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: Biotechnology
Public Private Biotechnology
Companies Companies Companies
Frequently _________ _________ _________
Occasionally _________ _________ _________
Never _________ _________ _________
(f) For an individual Subscriber, do you expect your current level of income to
significantly decrease in the foreseeable future?
YES_______ NO_______
36
(g) For trust, corporate, partnership and other institutional Subscribers, do
you expect your total assets to significantly decrease in the foreseeable
future?
YES_______ NO_______
(h) For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you?
YES_______ NO_______
(i) For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?
YES_______ NO_______
(j) For all Subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
YES_______ NO_______
7.3 MANNER IN WHICH TITLE IS TO BE HELD. (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of
Survivorship (both parties
must sign)
(d) Partnership*
(e) Tenants in Common
(f) Company*
(g) Trust*
(h) Other
*If Units are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.
37
7.4 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
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
________________________________________________________________________________
Name of NASD Member Firm
By: ______________________________
Authorized Officer
Date: ____________________________
7.5 The undersigned is informed of the significance to the Company
of the foregoing representations and answers contained in this Article VII and
such answers have been provided under the assumption that the Company and its
counsel will rely on them.
38
[Signature Page]
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
_____________________________ _________________________________
Facsimile-Business Facsimile--Business
_____________________________ _________________________________
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued:
Check the box marked YES if you would like the securities
to be delivered to your account with Paramount Capital, Inc. Yes___ No___
Dated: ____________, 1999
This Subscription Agreement is agreed to and accepted as of ________, 1999.
DISCOVERY LABORATORIES, INC.
By:
____________________________________________
Name: Robert Capetola
Title: President and Chief Executive Officer
39
CERTIFICATE OF SIGNATORY
(To be completed if shares 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 shares, 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___th day of ________ ___,
1999.
_______________________________
(Signature)
1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE:
Contact: Evan Myrianthopoulos
Vice President of Finance
Discovery Laboratories, Inc.
215.340.4699 ext. 113
Dian Griesel, Ph.D., CEO/
George Roberts
The Investor Relations Group
212.736.2650
DISCOVERY LABORATORIES, INC. COMPLETES
$2.45 MILLION PRIVATE PLACEMENT
DISCOVERY LABORATORIES, INC. COMPLETES SUBLICENSE OF VITAMIN D
ANALOG DSC-103 TO YUYU INDUSTRIAL COMPANY, LTD. OF KOREA
Doylestown, PA, July 30, 1999 - Discovery Laboratories, Inc. (NASDAQ Small Cap:
DSCO) announced today that it has completed a private placement totaling $2.45
million. OrbiMed Advisors LLC of New York, the lead investor, made an investment
totaling $2 million. The Unit offering consisted of common stock priced at
market with warrants priced at a premium to market. The shares issued in the
placement have not been registered and the Company plans to file a registration
statement covering such shares within 30 days of closing.
"We are extremely pleased to have such a premier institutional biotech investor
as OrbiMed as an investor in Discovery, and we look forward to their
contribution to the Company's growth," said Evan Myrianthopoulos, Vice President
of Finance for Discovery. "This capital infusion allows us to begin our next two
pivotal Phase 3 trials of Surfaxin(R) in neonatal indications as we continue to
pursue our corporate partnering objectives."
Discovery also announced today that it has completed a licensing deal with YuYu
Industrial Company, Ltd. of Korea for its vitamin D analog DSC-103. The deal is
the first one completed by Discovery for DSC-103. The privately owned YuYu
Industrial, Ltd. currently markets the natural hormonal form of vitamin D,
calcitriol, in the Korean pharmaceutical market. The sublicense agreement is
royalty based and includes small upfront fees and milestones. As part of the
agreement, YuYu has agreed to an exclusive supply agreement whereby they will
purchase DSC-103 drug substance from Discovery. DSC-103 was licensed from the
University of Wisconsin.
"We are very pleased to have licensed DSC-103 in Korea, the 10th largest
pharmaceutical market in the world," said Robert Capetola, Ph.D., CEO of
Discovery. "YuYu is a great partner to have developing the compound in Korea,
and we are confident that they will be able to effectively market the once a day
oral compound to vitamin D deficient postmenopausal women suffering from
osteoporosis."
Discovery is a bio-pharmaceutical company whose mission is to develop and
commercialize medically novel therapeutics for critical care. Presently,
Discovery is developing proprietary pharmaceuticals to treat respiratory
distress syndrome (RDS) in premature infants, meconium aspiration syndrome (MAS)
in full term babies, direct acute respiratory distress syndrome (ARDS), and
cystic fibrosis. Discovery is actively seeking other development and marketing
partners for DSC-103. More information about Discovery is available on the
company's web site at: www.discoverylabs.com.
To the extent that statements in this press release are not strictly historical,
including statements as to future financial conditions, events conditioned on
stockholder or other approval, or otherwise as to future events, such statements
are forward-looking, and are made pursuant to the safe harbor provisions of the
Securities Litigation Reform Act of 1995. The forward-looking statements
contained in this release are subject to certain risks and uncertainties that
could cause actual results to differ materially from the statements made. Among
the factors
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which could affect the company's actual results and could cause results to
differ from those contained in the forward-looking statements contained herein
are the risk that financial conditions may change, risks relating to the
progress of the company's research and development and the development of
competing therapies and/or technologies by other companies. Those associated
risks and others are further described in the company's filings with the
Securities and Exchange Commission.
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