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
May
22, 2008
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
of
incorporation)
|
(Commission
File Number)
|
(IRS
Employer
Identification
Number)
|
2600
Kelly Road, Suite 100
Warrington,
Pennsylvania 18976
(Address
of principal executive offices)
(215)
488-9300
(Registrant's
telephone number, including area code)
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o
Written
communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting
material pursuant to Rule
14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement
communications pursuant
to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement
communications pursuant
to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item
1.01. Entry
into a Material Definitive Agreement
On
May
22, 2008, Discovery Laboratories, Inc. (the “Company”) entered into a Committed
Equity Financing Facility (the “2008 CEFF”) with Kingsbridge Capital Limited
(“Kingsbridge”) pursuant to a Common Stock Purchase Agreement (the “Purchase
Agreement”). The 2008 CEFF is the third CEFF between the Company and Kingsbridge
since 2004.
Under
the
2008 CEFF, Kingsbridge has committed to finance up to $60 million of capital
to
support the Company’s business plans and corporate activities. Subject to
certain limitations, from time to time, the Company can require Kingsbridge
to
purchase up to an aggregate of 19,328,000 newly-issued shares of the Company’s
Common Stock, par value $.001 per share. The maximum amount the Company may
draw
down in any single pricing period is the lesser of 3.0% of the Company’s market
capitalization immediately prior to the commencement of the pricing period
and
$10 million. Each pricing period will consist of eight trading days. Unless
the
Company and Kingsbridge agree otherwise, the 2008 CEFF provides for three
trading days between pricing periods.
The
shares will be priced on each trading day of each pricing period at a discount
to the volume weighted average price (VWAP) on each such trading day, as
follows:
|
VWAP
|
|
|
%
of VWAP
|
(Applicable
Discount)
|
|||
|
Greater
than $7.25 per share
|
94
|
%
|
(6
|
)%
|
|||
|
Less
than or equal to $7.25 but greater than $3.85 per share
|
92
|
%
|
(8
|
)%
|
|||
|
Less
than or equal to $3.85 but greater than or equal to $1.75 per
share
|
90
|
%
|
(10
|
)%
|
|||
|
Less
than or equal to $1.75 but greater than or equal to $1.15 per
share
|
88
|
%
|
(12
|
)%
|
The
minimum purchase price at which Common Stock may be sold in any pricing period,
before applying the appropriate discount, is the greater of $1.15 or 90% of
the
closing price on the trading day immediately preceding the commencement of
a
pricing period. If on any trading day during the pricing period for a draw
down,
the VWAP is less than such minimum purchase price before discount, no shares
will be issued with respect to that trading day and the total amount that may
be
drawn down during that pricing period will be reduced for each such trading
day
by one-eighth of the amount that the Company initially specified.
The
maximum number of shares the Company may sell under the Purchase Agreement
is
19,328,000 shares of Common Stock, which is less than the maximum number of
shares the Company may sell to Kingsbridge without approval of the Company’s
stockholders under the applicable listing rules of the Nasdaq Stock Market.
This
cap on the number of shares issuable under the Purchase Agreement may limit
the
aggregate proceeds the Company is able to obtain under the 2008
CEFF.
2
In
connection with the 2008 CEFF, the Company issued to Kingsbridge a Warrant
(the
“Warrant”) to purchase up to 825,000 shares of Common Stock with an exercise
price of $2.506 per share. The Warrant is exercisable for a five year period
beginning November 22, 2008. The Warrant must be exercised for cash, except in
limited circumstances.
The
Company is not obligated to utilize any of the $60 million available under
the
2008 CEFF and there are no minimum commitment or minimum use penalties. The
2008
CEFF does not contain any operating restrictions or financial covenants
affecting the Company or minimum market volume restrictions. The 2008 CEFF
does
not limit the Company’s ability to offer, sell and/or issue securities of any
kind, except that the Company is restricted from issuing “future-priced
securities”, which are defined to include securities of any type where the
purchase, conversion or exchange price is determined using any floating discount
or post-issuance adjustable discount to the market price of the Common Stock.
During the term of the 2008 CEFF, Kingsbridge is restricted from entering into
or executing any “short sale” (as such term is defined in Rule 200 of Regulation
SHO, or any successor regulation, promulgated by the SEC) of the Common
Stock.
The
Committed Equity Financing Facility entered into by the Company and Kingsbridge
on April 17, 2006 (the “2006 CEFF”), remains in effect, and provides for the
potential issuance of up to approximately 5.2 million shares through April
17,
2009. The Company's ability to require Kingsbridge to purchase Common Stock
under the 2006 CEFF is subject to various limitations. Shares sold to
Kingsbridge under the 2006 CEFF are subject to a discount ranging from 6 to
10
percent of the VWAP for each of the eight trading days following initiation
of a
draw down under the 2006 CEFF. If on any trading day during the eight trading
day pricing period for a draw down under the 2006 CEFF, the VWAP is less than
the greater of (i) $2.00 or (ii) 85 percent of the closing price of the Common
Stock for the trading day immediately preceding the beginning of the draw down
period, no shares will be issued with respect to that trading day and the total
amount of the draw down for that pricing period will be reduced for each such
trading day by one-eighth of the draw down amount that the Company initially
specified.
In
connection with the 2008 CEFF, the Company entered into a Registration Rights
Agreement with Kingsbridge, whereby the Company agreed to file a registration
statement with the SEC with respect to the resale of the shares issuable
pursuant to the Purchase Agreement, the Registration Rights Agreement and
underlying the Warrant. Under the Registration Rights Agreement, if the Company
suspends or fails to maintain the effectiveness of the registration statement,
the Company may become obligated to Kingsbridge and has the right to pay such
amounts in Common Stock. The issuance of any such Common Stock will reduce
the
number of shares of Common Stock issuable under the 2008 CEFF.
3
The
Company relied on the exemption from registration provided by Section 4(2)
of
the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated
thereunder, in connection with obtaining Kingsbridge’s commitment under the 2008
CEFF, and for the issuance of the Warrant in consideration of such
commitment.
Copies
of
the Warrant, the Purchase Agreement and the Registration Rights Agreement are
attached as Exhibits 4.1, 10.1 and 10.2, respectively, to this Current Report
on
Form 8-K and are incorporated herein by reference. The foregoing description
of
the terms of these agreements does not purport to be complete, and is qualified
in its entirety by reference to such exhibits. The foregoing documents have
been
filed in order to provide other investors and the Company’s stockholders with
information regarding their terms and in accordance with applicable rules and
regulations of the Securities and Exchange Commission. Such documents may
contain representations and warranties that the Company and Kingsbridge made
for
the benefit of each other in the context of the applicable terms and conditions
and in the context of the specific relationship between such parties.
Accordingly, other investors and stockholders should not rely on such
representations and warranties. Furthermore, other investors and stockholders
should not rely on the representations and warranties as characterizations
of
the actual state of facts, since they were only made as of the date of the
respective documents. Information concerning the subject matter of such
representations and warranties may change after such date, which subsequent
information may or may not be fully reflected in the Company’s reports or other
filings with the Securities and Exchange Commission.
On
May
26, 2008 the Company issued a press release announcing the entry into the 2008
CEFF. The full text of the press release is set forth in Exhibit 99.1 to this
Current Report on Form 8-K.
| Item 3.02. | Unregistered Sales of Equity Securities | ||
The
information under Item 1.01 of this Current Report on Form 8-K is incorporated
by reference into this Item 3.02.
|
Item
9.01.
|
Financial
Statements and Exhibits
|
||
|
(d)
|
Exhibits:
|
||
|
4.1
|
Warrant
dated May 22, 2008, by and between Kingsbridge Capital and the
Company
|
||
|
10.1
|
Common
Stock Purchase Agreement, dated as of May 22, 2008, by and between
Kingsbridge Capital and the Company
|
||
|
10.2
|
Registration
Rights Agreement, dated as of May 22, 2008, by and between Kingsbridge
Capital and the Company
|
||
|
99.1
|
Press
Release dated May 26, 2008
|
||
4
Cautionary
Note Regarding Forward-looking Statements:
To
the
extent that statements in this Current Report on Form 8-K are not strictly
historical, including statements as to business strategy, outlook, objectives,
future milestones, plans, intentions, goals, future financial conditions, future
collaboration agreements, the success of the Company’s product development or
otherwise as to future events, such statements are forward-looking, and are
made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The forward-looking statements contained in this Current
Report are subject to certain risks and uncertainties that could cause actual
results to differ materially from the statements made. Such risks and others
are
further described in the Company’s filings
with the
Securities and Exchange Commission including the most recent reports on Forms
10-K, 10-Q and 8-K, and any amendments thereto.
5
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has
duly
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
| Discovery Laboratories, Inc. | ||
| |
|
|
| By: | /s/ Robert J. Capetola | |
|
Robert J. Capetola, Ph.D. |
||
| President and Chief Executive Officer | ||
| Date: May 27, 2008 | ||
6
WARRANT
THE
SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”),
OR
ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON
AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION
WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
May
22, 2008
Warrant
to Purchase up to 825,000 shares of Common Stock of Discovery Laboratories,
Inc.
(the “Company”).
In
consideration for Kingsbridge Capital Limited (the “Investor”)
agreeing to enter into that certain Common Stock Purchase Agreement, dated
as of
the date hereof, between the Investor and the Company (the “Agreement”),
the
Company hereby agrees that the Investor or any other Warrant Holder (as defined
below) is entitled, on the terms and conditions set forth below, to purchase
from the Company at any time during the Exercise Period (as defined below)
up to
825,000 fully paid and non-assessable shares of common stock, par value $0.001
per share, of the Company (the “Common
Stock”)
at the
Exercise Price (as defined below), as the same may be adjusted from time to
time
pursuant to Section 6 hereof. The resale of the shares of Common Stock or
other securities issuable upon exercise or exchange of this Warrant is subject
to the provisions of the Registration Rights Agreement. Capitalized terms used
herein and not otherwise defined shall have the meanings given them in the
Agreement.
Section
1. Definitions.
“Affiliate”
shall
mean any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by, or is under direct or indirect common control
with
any other Person. For the purposes of this definition, “control,”
when
used with respect to any Person, means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise, and the term “controls”
and
“controlled”
have
meanings correlative to the foregoing.
“Closing
Price”
as
of
any particular day shall mean the closing price per share of the Company’s
Common Stock as reported by the Principal Market on such day.
“Exercise
Period”
shall
mean that period beginning six months after the date of this Warrant and
continuing until the earlier of (i) the expiration of the five-year period
thereafter or (ii) a Funding Default, subject in each case to earlier
termination in accordance with Section 6 hereof.
“Exercise
Price”
as
of
the date hereof shall mean $2.506 .
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“Funding
Default”
shall
mean a failure by Investor to accept a Draw Down Notice made by the Company
and
to acquire and pay for the Shares in accordance therewith within three (3)
Trading Days following the delivery of such Shares to the Investor, provided
such Draw Down Notice was made in accordance with the terms and conditions
of
the Agreement (including the satisfaction or waiver of the conditions to the
obligation of the Investor to accept a Draw Down set forth in Article VII of
the
Agreement), provided further, that such failure was reasonably within the
control of the Investor.
“Per
Share Warrant Value”
shall
mean the difference resulting from subtracting the Exercise Price from the
Closing Price on the Trading Day immediately preceding the Exercise
Date.
“Person”
shall
mean an individual, a corporation, a partnership, a limited liability company,
an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
“Principal
Market”
shall
mean the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ
Capital Market, the American Stock Exchange or the New York Stock Exchange,
whichever is at the time the principal trading exchange or market for the Common
Stock.
“SEC”
shall
mean the United States Securities and Exchange Commission.
“Trading
Day”
shall
mean any day other than a Saturday or a Sunday on which the Principal Market
is
open for trading in equity securities.
“Warrant
Holder”
shall
mean the Investor or any permitted assignee or permitted transferee of all
or
any portion of this Warrant.
“Warrant
Shares”
shall
mean those shares of Common Stock received or to be received upon exercise
of
this Warrant.
Section
2. Exercise.
(a) Method
of Exercise.
This
Warrant may be exercised in whole or in part (but not as to a fractional share
of Common Stock), at any time and from time to time during the Exercise Period,
by the Warrant Holder by surrender of this Warrant, with the form of exercise
attached hereto as Exhibit A
completed and duly executed by the Warrant Holder (the “Exercise
Notice”),
to
the Company at the address set forth in Section 10.4 of the Agreement,
accompanied by payment of the Exercise Price multiplied by the number of shares
of Common Stock for which this Warrant is being exercised (the “Aggregate
Exercise Price”).
The
later of the date on which an Exercise Notice or payment of the Exercise Price
(unless this Warrant is exercised in accordance with Section 2(c) below) is
received by the Company in accordance with this clause (a) shall be deemed
an “Exercise
Date.”
(b) Payment
of Aggregate Exercise Price.
Subject
to paragraph (c) below, payment of the Aggregate Exercise Price shall be
made by wire transfer of immediately available funds to an account designated
by
the Company. If the amount of the payment received by the Company is less than
the Aggregate Exercise Price, the Warrant Holder will be notified of the
deficiency and shall make payment in that amount within three (3) Trading Days.
In the event the payment exceeds the Aggregate Exercise Price, the Company
will
refund the excess to the Warrant Holder within five (5) Trading Days of
receipt.
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(c) Cashless
Exercise.
In the
event that the Warrant Shares to be received by the Warrant Holder upon exercise
of the Warrant may not be resold pursuant to an effective registration statement
or an exemption to the registration requirements of the Securities Act of 1933,
as amended (“Securities Act”), and applicable state laws, the Warrant Holder
may, as an alternative to payment of the Aggregate Exercise Price upon exercise
in accordance with paragraph (b) above, elect to effect a cashless exercise
by so indicating on the Exercise Notice and including a calculation of the
number of shares of Common Stock to be issued upon such exercise in accordance
with the terms hereof (a “Cashless
Exercise”).
If a
registration statement on Form S-3 under the Securities Act or such other form
as deemed appropriate by counsel to the Company for the registration of the
resale by the Warrant Holder of (x) the shares of Common Stock of the Company
that may be purchased under the Agreement, (y) the Warrant Shares, or (z) any
securities issued or issuable with respect to any of the foregoing by way of
exchange, stock dividend or stock split or in connection with a combination
of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise, has been declared effective by the SEC and remains effective,
the
Company may, in its sole discretion,
require
the Warrant Holder to pay the Exercise Price of the Warrant Shares being
purchased by the Warrant Holder under this Warrant. The Company may, in its
sole
discretion, permit the Warrant Holder to effect a Cashless Exercise at any
time.
In the event of a Cashless Exercise, the Warrant Holder shall receive that
number of shares of Common Stock determined by (i) multiplying the number
of Warrant Shares for which this Warrant is being exercised by the Per Share
Warrant Value and (ii) dividing the product by the average Closing Price of
the Common Stock during the five (5) Trading Days immediately preceding the
Exercise Date, rounded to the nearest whole share. The Company shall cancel
the
total number of Warrant Shares equal to the excess of the number of the Warrant
Shares for which this Warrant is being exercised over the number of Warrant
Shares to be received by the Warrant Holder pursuant to such Cashless
Exercise.
(d) Replacement
Warrant.
In the
event that the Warrant is not exercised in full, the number of Warrant Shares
shall be reduced by the number of such Warrant Shares for which this Warrant
is
exercised, and the Company, at its expense, shall forthwith issue and deliver
to
or upon the order of the Warrant Holder a new Warrant of like tenor in the
name
of the Warrant Holder, reflecting such adjusted number of Warrant
Shares.
Section
3. Ten
Percent Limitation.
The
Warrant Holder may not exercise this Warrant such that the number of Warrant
Shares to be received pursuant to such exercise aggregated with all other shares
of Common Stock that are then beneficially owned or deemed to be beneficially
owned by the Warrant Holder would result in (i) the Warrant Holder owning more
than 9.9% of all of such Common Stock as would be outstanding on such Exercise
Date, as determined in accordance with Section 13(d) of the Exchange Act or
(ii) the Company being required to file any notification or report forms under
the Hart Scott Rodino Antitrust Improvements Act of 1976, as
amended.
3
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Section
4. Delivery
of Warrant Shares.
(a) Subject
to the terms and conditions of this Warrant, as soon as practicable after the
exercise of this Warrant in full or in part, and in any event within ten (10)
Trading Days thereafter, the Company at its expense (including, without
limitation, the payment by it of any applicable issue taxes) will cause to
be
issued in the name of and delivered to the Warrant Holder, or as the Warrant
Holder may lawfully direct, a certificate or certificates for, or make deposit
with the Depositary Trust Company via book-entry of, the number of validly
issued, fully paid and non-assessable Warrant Shares to which the Warrant Holder
shall be entitled on such exercise, together with any other stock or other
securities or property (including cash, where applicable) to which the Warrant
Holder is entitled upon such exercise in accordance with the provisions
hereof.
(b) This
Warrant may not be exercised as to fractional shares of Common Stock. In the
event that the exercise of this Warrant, in full or in part, would result in
the
issuance of any fractional share of Common Stock, then in such event the Warrant
Holder shall receive the number of shares rounded to the nearest whole
share.
Section
5. Representations,
Warranties and Covenants of the Company.
(a) The
Warrant Shares, when issued in accordance with the terms hereof, will be duly
authorized and, when paid for or issued in accordance with the terms hereof,
shall be validly issued, fully paid and non-assessable.
(b) The
Company shall take all commercially reasonable action and proceedings as may
be
required and permitted by applicable law, rule and regulation for the legal
and
valid issuance of this Warrant and the Warrant Shares to the Warrant
Holder.
(c) The
Company has authorized and reserved for issuance to the Warrant Holder the
requisite number of shares of Common Stock to be issued pursuant to this
Warrant. The Company shall at all times reserve and keep available, solely
for
issuance and delivery as Warrant Shares hereunder, such shares of Common Stock
as shall from time to time be issuable as Warrant Shares.
(d) From
the
date hereof through the last date on which this Warrant is exercisable, the
Company shall take all steps commercially reasonable to ensure that the Common
Stock remains listed or quoted on the Principal Market.
Section
6. Adjustment
of the Exercise Price.
The
Exercise Price and, accordingly, the number of Warrant Shares issuable upon
exercise of the Warrant, shall be subject to adjustment from time to time upon
the happening of certain events as follows:
(a) Reclassification,
Consolidation, Merger, Mandatory Share Exchange, Sale or
Transfer.
(i) Upon
occurrence of any of the events specified in subsection (a)(ii) below (the
“Adjustment
Events”)
while
this Warrant is unexpired and not exercised in full, the Warrant Holder may
in
its sole discretion require the Company, or any successor or purchasing
corporation, as the case may be, without payment of any additional consideration
therefor, upon surrender by the Warrant Holder of the Warrant to be replaced,
to
execute and deliver to the Warrant Holder a new Warrant providing that the
Warrant Holder shall have the right to exercise such new Warrant (upon terms
not
less favorable to the Warrant Holder than those then applicable to this Warrant)
and to receive upon such exercise, in lieu of each share of Common Stock
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money or property receivable upon such
Adjustment Event by the holder of one share of Common Stock issuable upon
exercise of this Warrant had this Warrant been exercised immediately prior
to
such Adjustment Event. Such new Warrant shall provide for adjustments that
shall
be as nearly equivalent as may be practicable to the adjustments provided for
in
this Section 6.
4
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(ii) The
Adjustment Events shall be (1) any reclassification or change of Common Stock
(other than a change in par value, as a result of a subdivision or combination
of Common Stock or in connection with an Excluded Merger or Sale) and (2) any
consolidation, merger or mandatory share exchange of the Company with or into
another corporation (other than a merger or mandatory share exchange with
another corporation in which the Company is a continuing corporation and which
does not result in any reclassification or change other than a change in par
value or as a result of a subdivision or combination of Common Stock), other
than (each of the following referred to as an “Excluded
Merger or Sale”)
a
transaction involving (A) sale of all or substantially all of the assets of
the Company or (B) any merger, consolidation or similar transaction where
the consideration payable to the stockholders of the Company by the acquiring
Person consists substantially of cash or publicly traded securities, or a
combination thereof, or where the acquiring Person does not agree to assume
the
obligations of the Company under outstanding warrants (including this Warrant).
In the event of an Excluded Merger or Sale, the Company shall deliver a notice
to the Warrant Holder at least 10 days before the consummation of such Excluded
Merger or Sale, the Warrant Holder may exercise this Warrant at any time before
the consummation of such Excluded Merger or Sale (and such exercise may be
made
contingent upon the consummation of such Excluded Merger or Sale), and any
portion of this Warrant that has not been exercised before consummation of
such
Excluded Merger or Sale shall terminate and expire, and shall no longer be
outstanding.
(b) Subdivision
or Combination of Shares.
If the
Company, at any time while this Warrant is unexpired and not exercised in full,
shall subdivide its Common Stock, the Exercise Price shall be proportionately
reduced as of the effective date of such subdivision, or, if the Company shall
take a record of holders of its Common Stock for the purpose of so subdividing
its Common Stock, as of such record date, whichever is earlier. If the Company,
at any time while this Warrant is unexpired and not exercised in full, shall
combine its Common Stock, the Exercise Price shall be proportionately increased
as of the effective date of such combination, or, if the Company shall take
a
record of holders of its Common Stock for the purpose of so combining its Common
Stock, as of such record date, whichever is earlier.
(c) Stock
Dividends.
If the
Company, at any time while this Warrant is unexpired and not exercised in full,
shall pay a stock dividend or other distribution in shares of Common Stock
to
all holders of Common Stock, then the Exercise Price shall be adjusted, as
of
the date the Company shall take a record of the holders of its Common Stock
for
the purpose of receiving such dividend or other distribution (or if no such
record is taken, as at the date of such payment or other distribution), to
that
price determined by multiplying the Exercise Price in effect immediately prior
to such payment or other distribution by a fraction: (i) the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution. The provisions
of
this subsection (c) shall not apply under any of the circumstances for
which an adjustment is provided in subsections (a) or (b).
5
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(d) Liquidating
Dividends, Etc.
If the
Company, at any time while this Warrant is unexpired and not exercised in full,
makes a distribution of its assets or evidences of indebtedness to the holders
of its Common Stock as a dividend in liquidation or by way of return of capital
or other than as a dividend payable out of earnings or surplus legally available
for dividends under applicable law or any distribution to such holders made
in
respect of the sale of all or substantially all of the Company’s assets (other
than under the circumstances provided for in the foregoing subsections
(a) through (c)), then the Warrant Holder shall be entitled to receive upon
exercise of this Warrant in addition to the Warrant Shares receivable in
connection therewith, and without payment of any consideration other than the
Exercise Price, the kind and amount of such distribution per share of Common
Stock multiplied by the number of Warrant Shares that, on the record date for
such distribution, are issuable upon such exercise of the Warrant (with no
further adjustment being made following any event which causes a subsequent
adjustment in the number of Warrant Shares issuable), and an appropriate
provision therefor shall be made a part of any such distribution. The value
of a
distribution that is paid in other than cash shall be determined in good faith
by the Board of Directors of the Company. Notwithstanding the foregoing, in
the
event of a proposed dividend in liquidation or distribution to the stockholders
made in respect of the sale of all or substantially all of the Company’s assets,
the Company shall deliver a notice to the Warrant Holder at least 10 days before
the date on which the Company shall take a record of the holders of its Common
Stock for the purpose of receiving such dividend or other distribution (or
if no
such record is taken, at least 10 days before the date of such payment or other
distribution), the Warrant Holder may exercise this Warrant at any time before
such record date or the date of such payment or other distribution, as
applicable, (and such exercise may be made contingent upon such payment or
other
distribution), and any portion of this Warrant that has not been exercised
before such record date or the date of such payment or other distribution,
as
applicable, shall terminate and expire, and shall no longer be
outstanding.
(e) Adjustment
for Spin Off.
If, for
any reason, prior to the exercise of this Warrant in full, the Company spins
off
or otherwise divests itself of a part of its business or operations or disposes
all or a part of its assets in a transaction (a “Spin
Off”)
in
which the Company does not receive compensation for such business, operations
or
assets, but causes securities of another entity (“Spin
Off Securities”)
to be
issued to all or substantially all holders of Common Stock, then the Company
shall cause (i) to be reserved Spin Off Securities equal to the number thereof
which would have been issued to the Warrant Holder in the event that the entire
unexercised portion of this Warrant outstanding on the record date (the
“Record
Date”)
for
determining the number of Spin Off Securities to be issued to holders of Common
Stock had been exercised by the Warrant Holder as of the close of business
on
the Trading Day immediately prior to the Record Date (the “Reserved
Spin Off Shares”),
and
(ii) to be issued to the Warrant Holder on the exercise of all or any
unexercised portion of this Warrant, such amount of the Reserved Spin Off Shares
equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction, of
which
(I) the numerator is the unexercised portion of this Warrant then being
exercised, and (II) the denominator is the aggregate amount of the unexercised
portion of this Warrant.
6
Execution
Copy
Section
7. Notice
of Adjustments.
Whenever the Exercise Price or number of Warrant Shares shall be adjusted
pursuant to Section 6 hereof, the Company shall promptly prepare a
certificate signed by its Chief Executive Officer or Chief Financial Officer
setting forth in reasonable detail the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Company’s Board of Directors
made any determination hereunder), and the Exercise Price and number of Warrant
Shares purchasable at that Exercise Price after giving effect to such
adjustment, and shall promptly cause copies of such certificate to be delivered
to the Warrant Holder by a means set forth in Section 10.4 of the
Agreement.
Section
8. No
Impairment.
The
Company will not, by amendment of its Charter or Bylaws or through any
reorganization, transfer of assets, consolidation, merger, dissolution or issue
or sale of securities, willfully avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all
such
action as may be necessary or appropriate in order to protect the rights of
the
Warrant Holder against wrongful impairment. Without limiting the generality
of
the foregoing, the Company (a) will not increase the par value of any
Warrant Shares above the amount payable therefor on such exercise, and
(b) will take all such action as may be reasonably necessary or appropriate
in order that the Company may validly and legally issue fully paid and
non-assessable Warrant Shares on the exercise of this Warrant. Notwithstanding
the foregoing, nothing in this Section 8 shall restrict or impair the Company’s
right to effect any changes to the rights, preferences, privileges or
restrictions associated with the Warrant Shares so long as such changes do
not
affect the rights, preferences, privileges or restrictions associated with
the
Warrant Shares in a manner adversely different from the effect that such changes
have generally on the rights, preferences, privileges or restrictions associated
with all other shares of Common Stock.
Section
9. Rights
As Stockholder.
Except
as set forth in Section 6 above, prior to exercise of this Warrant, the
Warrant Holder shall not be entitled to any rights as a stockholder of the
Company with respect to the Warrant Shares, including (without limitation)
the
right to vote such shares, receive dividends or other distributions thereon
or
be notified of stockholder meetings.
Section
10. Replacement
of Warrant.
Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of the Warrant and, in the case of any such loss,
theft or destruction of the Warrant, upon delivery of an indemnity agreement
or
security reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, on surrender and cancellation of such Warrant,
the
Company at its expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
Section
11. Choice
of Law.
This
Warrant shall be construed under the laws of the State of New York.
7
Execution
Copy
Section
12. Entire
Agreement; Amendments.
Except
for any written instrument concurrent or subsequent to the date hereof executed
by the Company and the Investor, this Warrant, the Agreement and the
Registration Rights Agreement contain the entire understanding of the parties
with respect to the matters covered hereby and thereby. No provision of this
Warrant may be waived or amended other than by a written instrument signed
by
the party against whom enforcement of any such amendment or waiver is
sought.
Section
13. Restricted
Securities.
(a) Registration
or Exemption Required.
This
Warrant has been issued in a transaction exempt from the registration
requirements of the Securities Act in reliance upon the provisions of
Section 4(2) thereof and Regulation D promulgated thereunder, and/or upon
such other exemption from the registration requirements of the Securities Act
as
may be available with respect to this Warrant. This Warrant and the Warrant
Shares issuable upon exercise of this Warrant may not be resold except pursuant
to an effective registration statement or an exemption to the registration
requirements of the Securities Act and applicable state laws.
(b) Legend.
Any
replacement Warrants issued pursuant to Section 2 and Section 10
hereof and, unless a registration statement has been declared effective by
the
SEC and remains effective in accordance with the Securities Act with respect
thereto, any Warrant Shares issued upon exercise hereof, shall bear the
following legend:
“THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”),
OR
ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON
AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION
WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.”
(c) No
Other Legend or Stock Transfer Restrictions.
No
legend other than the one specified in Section 13(b) has been or shall be
placed on the share certificates representing the Warrant Shares and no
instructions or “stop
transfer orders”
(so
called “stock
transfer restrictions”)
or
other restrictions have been or shall be given to the Company’s transfer agent
with respect thereto other than as expressly set forth in this
Section 13.
(d) Assignment.
Assuming the conditions of Section 13(a) above regarding registration or
exemption have been satisfied, the Warrant Holder may sell, transfer, assign,
pledge or otherwise dispose of this Warrant (each of the foregoing, a
“Transfer”),
in
whole or in part, but only to an Affiliate of the Warrant Holder. The Warrant
Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit B,
indicating the person or persons to whom the Warrant shall be Transferred and
the respective number of Warrant Shares to be covered by the warrants to be
Transferred to each assignee. The Company shall effect the Transfer within
ten
(10) days, and shall deliver to the Transferee(s) designated by the Warrant
Holder a Warrant or Warrants of like tenor and terms for the appropriate number
of shares. In connection with and as a condition of any such proposed Transfer,
the Company may require
(i)
the
Warrant Holder to provide an opinion of counsel to the Warrant Holder in form
and substance reasonably satisfactory to the Company to the effect that the
proposed Transfer complies with all applicable federal and state securities
laws
and (ii)
any such Transferee to provide customary representations and warranties
attendant to the acquisition of unregistered securities, including without
limitation the transferee’s investment intent and status as an “accredited
investor” within the meaning of Regulation D.
8
Execution
Copy
(e) Investor’s
Compliance.
Nothing
in this Section 13 shall affect in any way the Investor’s obligations under
any agreement to comply with all applicable securities laws upon resale of
the
Common Stock.
Section
14. Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be given in accordance with
Section 10.4 of the Agreement.
Section
15. Miscellaneous.
This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. The headings in
this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
Section
16. Company
Call Right.
(a) If
a
Funding Default occurs, the Company shall have the right to demand the surrender
of this Warrant or any remaining portion thereof, Warrant Shares and/or cash
from the Investor as follows (the “Call
Right”):
(i) If
the
Investor has not previously exercised this Warrant in full, then the Company
shall have a right to demand the surrender of this Warrant, or remaining portion
thereof, from the Investor without compensation, and the Investor shall promptly
surrender this Warrant, or remaining portion thereof. Following such demand
for
surrender, this Warrant shall automatically be deemed to have been canceled
and
shall have no further force or effect.
(ii) If,
prior
to receiving a Call Right Notice (as defined below), the Investor has previously
exercised this Warrant with respect to some or all of the Warrant Shares, and
the Investor has not previously sold such Warrant Shares, then the
Company
shall have a right to purchase from the Investor that number of shares of Common
Stock equal to the number of shares of Common Stock issued in connection with
the exercise(s) of the Warrant, at a repurchase price per share equal to the
price per share paid by the Investor in connection with such exercise(s). For
greater certainty, (a) if Warrant Shares were exercised for cash, the
purchase price per share under the Call Right shall be equal to the Exercise
Price, (b) if Warrant Shares were exercised in a Cashless Exercise, the
purchase price per share for such Warrant Shares under the Call Right shall
be
zero, and (c) if such Warrant Shares were exercised on both a cash and
Cashless Exercise basis, the purchase price per share under the Call Right
shall
be equal to the total amount of cash paid in connection with such cash
exercise(s) divided by the total number of shares of Common Stock issued in
connection with all exercises of the Warrant (whether on a cash or Cashless
Exercise basis).
9
Execution
Copy
(iii) If,
prior
to receiving a Call Right Notice, the Investor has previously exercised this
Warrant with respect to some or all of the Warrant Shares, and the Investor
subsequently sold such Warrant Shares, then the Investor shall remit to the
Company the excess, if any, of (x) the proceeds received by Investor through
the
sale of such Warrant Shares, over (y) the aggregate Exercise Price for such
Warrant Shares. In the event that the Investor obtained such Warrant Shares
through a Cashless Exercise, then the Investor shall instead remit to the
Company all proceeds received by the Investor through the sale of such Warrant
Shares. For the avoidance of doubt, in the event that the Investor has sold
some
or all of the Warrant Shares prior to receiving a Call Right Notice, then the
right set forth in this paragraph (iii) shall constitute the sole Call
Right of the Company with respect to such Warrant Shares which have been
sold.
(b) The
Company
may exercise the Call Right by delivering a notice (the “Call
Right Notice”)
to the
Investor within thirty (30) days after the occurrence of a Funding Default.
On
the tenth (10th)
business day
following delivery of the Call Right Notice to the Investor, the
Company
shall tender the purchase price, if any, and the Investor shall tender shares
of
Common Stock, if any, to be sold to the
Company
pursuant to the Call Right Notice, immediately following which the
Company
and
the
Investor
shall consummate such purchase and sale. The Call Right shall survive both
the
assignment of the Warrant by the Investor and the disposition of the Warrant
Shares by the Investor following exercise of the Warrant.
[Remainder
of Page Intentionally Left Blank. Signature Page Follows.]
10
Execution
Copy
IN
WITNESS WHEREOF, this Warrant was duly executed by the undersigned, thereunto
duly authorized, as of the date first set forth above.
|
DISCOVERY
LABORATORIES, INC.
|
||
| |
|
|
| By: | /s/ John G. Cooper | |
|
Name:
John G. Cooper
|
||
| Title: Executive Vice President and Chief Financial Officer | ||
Investor
acknowledges and agrees to the terms and conditions of this
Warrant.
|
KINGSBRIDGE
CAPITAL LIMITED
|
||
| |
|
|
| By: | /s/ Tony Gardner-Hillman | |
|
Tony
Gardner-Hillman
|
||
|
Director
|
||
11
EXHIBIT
A TO THE WARRANT
EXERCISE
FORM
DISCOVERY
LABORATORIES, INC.
The
undersigned hereby irrevocably exercises the right to purchase _______________
shares of Common Stock of Discovery Laboratories, Inc., a Delaware corporation
(the “Company”),
evidenced by the attached Warrant, and (CIRCLE EITHER (i) or (ii))
(i) tenders herewith payment of the Aggregate Exercise Price with respect
to such shares in full, in the amount of $__________, in cash, by certified
or
official bank check or by wire transfer for the account of the Company or
(ii) elects, pursuant to Section 2(c) of the Warrant, to convert such
Warrant into shares of Common Stock of the Company on a cashless exercise basis,
all in accordance with the conditions and provisions of said
Warrant.
The
undersigned requests that stock certificates for such Warrant Shares be issued,
and a Warrant representing any unexercised portion hereof be issued, pursuant
to
this Warrant, in the name of the registered Warrant Holder and delivered to
the
undersigned at the address set forth below.
Dated:_______________________________________
|
Signature
of Registered Holder
|
|
|
Name
of Registered Holder (Print)
|
|
|
Address
|
12
EXHIBIT
B TO THE WARRANT
ASSIGNMENT
(To
be
executed by the registered Warrant Holder desiring to transfer the
Warrant)
FOR
VALUED RECEIVED, the undersigned Warrant Holder of the attached Warrant hereby
sells, assigns and transfers unto the persons below named the right to purchase
_______________ shares of Common Stock of Discovery Laboratories, Inc. (the
“Company”)
evidenced by the attached Warrant and does hereby irrevocably constitute and
appoint _______________ attorney to transfer the said Warrant on the books
of
the Company, with full power of substitution in the premises.
Dated:_____________________
|
Signature
|
|
|
Fill
in for new Registration of Warrant:
|
|
|
Name
|
|
|
Address
|
|
|
Please
print name and address of assignee (including zip code
number)
|
|
13
Execution
Copy
COMMON
STOCK PURCHASE AGREEMENT
by
and between
KINGSBRIDGE
CAPITAL LIMITED
and
DISCOVERY
LABORATORIES, INC.
dated
as of May 22, 2008
|
ARTICLE
I
|
DEFINITIONS
|
1
|
|
ARTICLE
II
|
PURCHASE
AND SALE OF COMMON STOCK
|
5
|
|
Section
2.1
|
Purchase
and Sale of Stock
|
5
|
|
Section
2.2
|
Closing
|
5
|
|
Section
2.3
|
Registration
Statement and Prospectus
|
6
|
|
Section
2.4
|
Warrant
|
6
|
|
Section
2.5
|
Blackout
Shares
|
6
|
|
ARTICLE
III
|
DRAW
DOWN TERMS
|
6
|
|
Section
3.1
|
Draw
Down Notice
|
6
|
|
Section
3.2
|
Number
of Shares
|
6
|
|
Section
3.3
|
Limitation
on Draw Downs
|
6
|
|
Section
3.4
|
Trading
Cushion
|
6
|
|
Section
3.5
|
Settlement
|
7
|
|
Section
3.6
|
Delivery
of Shares; Payment of Draw Down Amount
|
7
|
|
Section
3.7
|
Failure
to Deliver Shares
|
7
|
|
ARTICLE
IV
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
8
|
|
Section
4.1
|
Organization,
Good Standing and Power
|
8
|
|
Section
4.2
|
Authorization;
Enforcement
|
8
|
|
Section
4.3
|
Capitalization
|
8
|
|
Section
4.4
|
Issuance
of Shares
|
9
|
|
Section
4.5
|
No
Conflicts
|
9
|
|
Section
4.6
|
Commission
Documents, Financial Statements
|
9
|
|
Section
4.7
|
No
Material Adverse Change
|
10
|
|
Section
4.8
|
No
Undisclosed Liabilities
|
10
|
|
Section
4.9
|
No
Undisclosed Events or Circumstances
|
10
|
|
Section
4.10
|
Actions
Pending
|
10
|
|
Section
4.11
|
Compliance
with Law
|
10
|
|
Section
4.12
|
Certain
Fees
|
11
|
|
Section
4.13
|
Disclosure
|
11
|
|
Section
4.14
|
Material
Non-Public Information
|
11
|
|
Section
4.15
|
Exemption
from Registration; Valid Issuances
|
11
|
|
Section
4.16
|
No
General Solicitation or Advertising in Regard to this
Transaction
|
11
|
|
Section
4.17
|
No
Integrated Offering
|
11
|
|
Section
4.18
|
Acknowledgment
Regarding Investor’s Purchase of Shares
|
12
|
|
ARTICLE
V
|
REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE INVESTOR
|
12
|
|
Section
5.1
|
Organization
and Standing of the Investor
|
12
|
-
i
-
|
Section
5.2
|
Authorization
and Power
|
12
|
|
Section
5.3
|
No
Conflicts
|
12
|
|
Section
5.4
|
Financial
Capability
|
13
|
|
Section
5.5
|
Information
|
13
|
|
Section
5.6
|
Trading
Restrictions
|
13
|
|
Section
5.7
|
Statutory
Underwriter Status
|
13
|
|
Section
5.8
|
Not
an Affiliate
|
13
|
|
Section
5.9
|
Manner
of Sale
|
14
|
|
Section
5.10
|
Prospectus
Delivery
|
14
|
|
ARTICLE
VI
|
COVENANTS
OF THE COMPANY
|
14
|
|
Section
6.1
|
Securities
|
14
|
|
Section
6.2
|
Reservation
of Common Stock
|
14
|
|
Section
6.3
|
Registration
and Listing
|
14
|
|
Section
6.4
|
Registration
Statement
|
15
|
|
Section
6.5
|
Compliance
with Laws.
|
15
|
|
Section
6.6
|
Other
Financing
|
15
|
|
Section
6.7
|
Prohibited
Transactions
|
16
|
|
Section
6.8
|
Corporate
Existence
|
16
|
|
Section
6.9
|
Non-Disclosure
of Non-Public Information
|
16
|
|
Section
6.10
|
Notice
of Certain Events Affecting Registration; Suspension of Right to
Request a
Draw Down
|
16
|
|
Section
6.11
|
Amendments
to the Registration Statement
|
16
|
|
Section
6.12
|
Prospectus
Delivery
|
16
|
|
ARTICLE
VII
|
CONDITIONS
TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN
|
17
|
|
Section
7.1
|
Accuracy
of the Company’s Representations and Warranties
|
17
|
|
Section
7.2
|
Performance
by the Company
|
17
|
|
Section
7.3
|
Compliance
with Law
|
17
|
|
Section
7.4
|
Effective
Registration Statement
|
17
|
|
Section
7.5
|
No
Knowledge
|
18
|
|
Section
7.6
|
No
Suspension
|
18
|
|
Section
7.7
|
No
Injunction
|
18
|
|
Section
7.8
|
No
Proceedings or Litigation
|
18
|
|
Section
7.9
|
Sufficient
Shares Registered for Resale
|
18
|
|
Section
7.10
|
Warrant
|
18
|
|
Section
7.11
|
Opinion
of Counsel
|
18
|
|
Section
7.12
|
Accuracy
of Investor’s Representation and Warranties
|
18
|
|
ARTICLE
VIII
|
TERMINATION
|
19
|
|
Section
8.1
|
Term
|
19
|
|
Section
8.2
|
Other
Termination
|
19
|
|
Section
8.3
|
Effect
of Termination
|
19
|
|
ARTICLE
IX
|
INDEMNIFICATION
|
20
|
|
Section
9.1
|
Indemnification
|
20
|
- ii -
|
Section
9.2
|
Notification
of Claims for Indemnification
|
21
|
|
ARTICLE
X
|
MISCELLANEOUS
|
22
|
|
Section
10.1
|
Fees
and Expenses
|
22
|
|
Section
10.2
|
Reporting
Entity for the Common Stock
|
22
|
|
Section
10.3
|
Brokerage
|
22
|
|
Section
10.4
|
Notices
|
22
|
|
Section
10.5
|
Assignment
|
24
|
|
Section
10.6
|
Amendment;
No Waiver
|
24
|
|
Section
10.7
|
Entire
Agreement
|
24
|
|
Section
10.8
|
Severability
|
24
|
|
Section
10.9
|
Title
and Subtitles
|
25
|
|
Section
10.10
|
Counterparts
|
25
|
|
Section
10.11
|
Choice
of Law
|
25
|
|
Section
10.12
|
Specific
Enforcement, Consent to Jurisdiction.
|
25
|
|
Section
10.13
|
Survival
|
25
|
|
Section
10.14
|
Publicity
|
25
|
|
Section
10.15
|
Further
Assurances
|
25
|
- iii -
This
COMMON STOCK PURCHASE AGREEMENT (this “Agreement”)
is
entered into as of the 22d day of May, 2008, by and between Kingsbridge Capital
Limited, an entity organized and existing under the laws of the British Virgin
Islands, whose registered address is Palm Grove House, 2nd Floor, Road Town,
Tortola, British Virgin Islands (the “Investor”),
and
Discovery Laboratories, Inc., a corporation organized and existing under the
laws of the State of Delaware (the “Company”).
WHEREAS,
the parties desire that, upon the terms and subject to the conditions and
limitations set forth herein, the Company may issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase from
the
Company, up to $60 million worth of shares of Common Stock (as defined below);
and
WHEREAS,
such investments will be made in reliance upon the provisions of
Section 4(2) (“Section 4(2)”)
and
Regulation D (“Regulation D”)
of the
United States Securities Act of 1933, as amended and the rules and regulations
promulgated thereunder (the “Securities
Act”),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
in Common Stock to be made hereunder; and
WHEREAS,
the parties hereto are concurrently entering into a Registration Rights
Agreement in the form of Exhibit A
hereto
(the “Registration
Rights Agreement”)
pursuant to which the Company shall register the Common Stock issued and sold
to
the Investor under this Agreement and issuable under the Warrant (as defined
below), upon the terms and subject to the conditions set forth therein;
and
WHEREAS,
in consideration for the Investor’s execution and delivery of, and its
performance of its obligations under, this Agreement, the Company is
concurrently issuing to the Investor a Warrant in the form of Exhibit B
hereto
(the “Warrant”)
pursuant to which the Investor may purchase from the Company up to 825,000
shares of Common Stock, upon the terms and subject to the conditions set forth
therein;
NOW,
THEREFORE, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
As
used
in this Agreement, the following terms shall have the meanings set forth
below:
“Blackout
Amount”
shall
have the meaning assigned to such term in the Registration Rights
Agreement.
“Blackout
Shares”
shall
have the meaning assigned to such term in the Registration Rights
Agreement.
“Bylaws”
shall
have the meaning assigned to such term in Section 4.3 hereof.
“Charter”
shall
have the meaning assigned to such term in Section 4.3 hereof.
“Closing
Date”
shall
have the meaning assigned to such term in Section 2.2 hereof.
“Closing
Price”
as
of
any particular day shall mean the closing price per share of the Common Stock
as
reported by Bloomberg L.P. on such day.
“Commission”
means
the United States Securities and Exchange Commission.
“Commission
Documents”
shall
have the meaning assigned to such term in Section 4.6 hereof.
“Commitment
Period”
means
the period commencing on the Effective Date and expiring on the earliest to
occur of (i) the date on which the Investor shall have purchased Shares
pursuant to this Agreement for an aggregate purchase price equal to the Maximum
Commitment Amount, (ii) the date this Agreement is terminated pursuant to
Article VIII hereof, and (iii) the date occurring thirty-six (36) months
from the Effective Date.
“Common
Stock”
means
the common stock of the Company, par value $0.001 per share.
“Condition
Satisfaction Date”
shall
have the meaning assigned to such term in Article VII hereof.
“Convertible
Security”
shall
have the meaning assigned to such term in Section 6.07 hereof
“Damages”
means
any loss, claim, damage, liability, costs and expenses (including, without
limitation, reasonable attorneys’ fees and expenses and costs and reasonable
expenses of expert witnesses and investigation).
“Draw
Down”
shall
have the meaning assigned to such term in Section 3.1 hereof.
“Draw
Down Amount”
means
the actual dollar amount of a Draw Down paid to the Company.
“Draw
Down Discount Price”
means
(i) 88% of the VWAP on any Trading Day during a Draw Down Pricing Period
when the VWAP equals or exceeds $1.15 but is less than or equal to $1.75,
(ii) 90% of the VWAP on any Trading Day during the Draw Down Pricing Period
when VWAP exceeds $1.75 but is less than or equal to $3.85, (iii) 92% of the
VWAP on any Trading Day during the Draw Down Pricing Period when VWAP exceeds
$3.85 but is less than or equal to $7.25 or (iv) 94% of the VWAP on any Trading
Day during the Draw Down Pricing Period when VWAP exceeds $7.25.
“Draw
Down Notice”
shall
have the meaning assigned to such term in Section 3.1 hereof.
“Draw
Down Pricing Period”
shall
mean, with respect to each Draw Down, a period of eight (8) consecutive Trading
Days beginning on the first Trading Day specified in a Draw Down
Notice.
“DTC”
shall
mean the Depository Trust Company, or any successor thereto.
2
“Effective
Date”
means
the first Trading Day immediately following the date on which the Registration
Statement is declared effective by the Commission.
“Exchange
Act”
means
the United States Securities Exchange Act of 1934, as amended, and the rules
and
regulations promulgated thereunder.
“Excluded
Merger or Sale”
shall
have the meaning assigned to such term in the Warrant.
“FINRA”
means
the Financial Industry
Regulatory Authority.
“Knowledge”
means
the actual knowledge of those officers of the Company required to file
statements pursuant to Section 16 of the Exchange Act.
“LIBOR” means
the
offered rate for twelve-month U.S. dollar deposits that appears on Moneyline
Telerate Page 3750 (or such other page as may replace such Moneyline Telerate
Page 3750 for the purpose of displaying comparable rates), as of 11:00 a.m.
(London time) two (2) business days prior to the beginning of the relevant
period.
“Make
Whole Amount”
shall
have the meaning specified in Section 3.7.
“Market
Capitalization”
means,
as of any Trading Day, the product of (i) the closing sale price of the
Company’s Common Stock as reported by Bloomberg L.P. using the AQR function and
(ii) the number of outstanding shares of Common Stock of the Company as
reported by Bloomberg L.P. using the DES function.
“Material
Adverse Effect”
means
any effect that is not negated, corrected, cured or otherwise remedied within
a
reasonable period of time on the business, operations, properties or financial
condition of the Company and its consolidated subsidiaries that is material
and
adverse to the Company and such subsidiaries, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise interfere
with the ability of the Company to perform any of its obligations under this
Agreement, the Registration Rights Agreement or the Warrant in any material
respect; provided, however, that none of the following shall constitute a
“Material
Adverse Effect”:
(i)
the effects of conditions or events that are generally applicable to the
capital, financial, banking or currency markets or the biotechnology or
pharmaceutical industries; (ii) the effects of conditions or events that are
reasonably expected to occur in the Company’s ordinary course of business (such
as, by way of example only, failed clinical trials, serious adverse events
involving the Company’s product candidates or products, delays in product
development or commercial launch, unfavorable regulatory determinations,
difficulties in generating product sales or involving collaborators or
intellectual property disputes), except for purposes of Section 4.9 herein;
(iii) any changes or effects resulting from the announcement or consummation
of
the transactions contemplated by this Agreement, including, without limitation,
any changes or effects associated with any particular Draw Down, and (iv)
changes in the market price of the Common Stock.
“Maximum
Commitment Amount”
means
the lesser of (i) $60 million in aggregate Draw Down Amounts or (ii)
19,328,000 shares of Common Stock (as adjusted for stock splits, stock
combinations, stock dividends and recapitalizations that occur on or after
the
date of this Agreement) minus the number of Blackout Shares, if any, delivered
to the Investor under the Registration Rights Agreement; provided, however,
that
the Maximum Commitment Amount shall not exceed that number of shares of Common
Stock that the Company may issue pursuant to this Agreement and the transactions
contemplated hereby without breaching the Company’s obligations under the rules
and regulations of the Principal Market.
3
“Maximum
Draw Down Amount”
means
the
lesser of $10 million and 3.0% of the Company’s Market Capitalization at the
time of the Draw Down.
“Permitted
Transaction”
shall
have the meaning assigned to such term in Section 6.6 hereof.
“Person”
means
any individual, corporation, partnership, limited liability company,
association, trust or other entity or organization, including any government
or
political subdivision or an agency or instrumentality thereof.
“Principal
Market”
means
the NASDAQ
Capital Market,
the
NASDAQ Global Select Market, the NASDAQ Global Market, the American Stock
Exchange or the New York Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock.
“Prohibited
Transaction”
shall
have the meaning assigned to such term in Section 6.7 hereof.
“Prospectus”
as
used
in this Agreement means the prospectus in the form included in the Registration
Statement, as supplemented from time to time pursuant to Rule 424(b) of the
Securities Act (including, without limitation, any information that may have
been omitted from such prospectus pursuant to Rules 430(a), 430(b) and 430(c)
of
the Securities Act).
“Registrable
Securities”
means
(i) the Shares, (ii) the Warrant Shares, and (iii) any securities
issued or issuable with respect to any of the foregoing by way of exchange,
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
As
to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (w) the Registration Statement has
been
declared effective by the Commission and such Registrable Securities have been
disposed of pursuant to the Registration Statement, (x) such Registrable
Securities have been sold under circumstances under which all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the
Securities Act (“Rule 144”)
are
met, (y) such time as such Registrable Securities have been otherwise
transferred to holders who may trade such shares without restriction under
the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend
or
(z) in the opinion of counsel to the Company such Registrable Securities may
be
sold without registration and without any time, volume or manner limitations
pursuant to Rule 144 (or any similar provision then in effect) under the
Securities Act.
“Registration
Rights Agreement”
shall
have the meaning set forth in the recitals of this Agreement.
4
“Registration
Statement”
shall
have the meaning assigned to such term in the Registration Rights
Agreement.
“Regulation D”
shall
have the meaning set forth in the recitals of this Agreement. “Section 4(2)”
shall
have the meaning set forth in the recitals of this Agreement.
“Securities
Act”
shall
have the meaning set forth in the recitals of this Agreement.
“Settlement
Date”
shall
have the meaning assigned to such term in Section 3.5 hereof.
“Shares”
means
the shares of Common Stock of the Company that are and/or may be purchased
hereunder.
“Trading
Day”
means
any day other than a Saturday or a Sunday on which the Principal Market is
open
for trading in equity securities.
“VWAP”
means
the volume weighted average price (the aggregate sales price of all trades
of
Common Stock during each Trading Day divided by the total number of shares
of
Common Stock traded during such Trading Day) of the Common Stock during any
Trading Day as reported by Bloomberg, L.P. using the AQR function.
“Warrant”
shall
have the meaning set forth in the recitals of this Agreement.
“Warrant
Shares”
means
the shares of Common Stock issuable to the Investor upon exercise of the
Warrant.
ARTICLE
II
PURCHASE
AND SALE OF COMMON STOCK
Section
2.1 Purchase
and Sale of Stock.
Upon
the terms and subject to the conditions set forth in this Agreement, the Company
shall to the extent it elects to make Draw Downs in accordance with Article
III
hereof, issue and sell to the Investor and the Investor shall purchase Common
Stock from the Company for an aggregate (in Draw Down Amounts) of up to the
Maximum Commitment Amount, consisting of purchases based on Draw Downs in
accordance with Article III hereof.
Section
2.2 Closing.
In
consideration of and in express reliance upon the representations, warranties,
covenants, terms and conditions of this Agreement, the Company agrees to issue
and sell to the Investor, and the Investor agrees to purchase from the Company,
that number of the Shares to be issued in connection with each Draw Down. The
execution and delivery of this Agreement (the “Closing”)
shall
take place at the offices of Stroock & Stroock & Lavan LLP, 180 Maiden
Lane, New York, NY 10038 at 5:00 p.m. local time on May 22, 2008, or at such
other time and place or on such date as the Investor and the Company may agree
upon (the “Closing
Date”).
Each
party shall deliver at or prior to the Closing all documents, instruments and
writings required to be delivered at the Closing by such party pursuant to
this
Agreement.
5
Section
2.3 Registration
Statement and Prospectus.
The
Company shall prepare and file with the Commission the Registration Statement
(including the Prospectus) in accordance with the provisions of the Securities
Act and the Registration Rights Agreement.
Section
2.4 Warrant.
On the
Closing Date, the Company shall issue and deliver the Warrant to the
Investor.
Section
2.5 Blackout
Shares.
The
Company shall deliver any Blackout Amount or issue and deliver any Blackout
Shares to the Investor in accordance with Section 1.1(e) of the
Registration Rights Agreement.
ARTICLE
III
DRAW
DOWN TERMS
Subject
to the satisfaction of the conditions hereinafter set forth in this Agreement,
the parties agree as follows:
Section
3.1 Draw
Down Notice.
During
the Commitment Period, the Company may, in its sole discretion, issue a Draw
Down Notice (as hereinafter defined) which shall specify the dollar amount
of
Shares the Company elects to sell to the Investor (each such election, a
“Draw
Down”)
up to
a Draw Down Amount equal to the Maximum Draw Down Amount, which Draw Down the
Investor shall be obligated to accept. The Company shall inform the Investor
in
writing by sending a duly completed Draw Down Notice (as hereinafter defined)
in
the form of Exhibit
C
hereto
by e-mail to the addresses set forth in Section 10.4, with a copy to the
Investor’s counsel, as to such Draw Down Amount before commencement of trading
on the first Trading Day of the related Draw Down Pricing Period (the
“Draw
Down Notice”).
In
addition to the Draw Down Amount, each Draw Down Notice shall designate the
first Trading Day of the Draw Down Pricing Period. In no event shall any Draw
Down Amount exceed the Maximum Draw Down Amount. Each Draw Down Notice shall
be
accompanied by a certificate, signed by the Chief Executive Officer, Chief
Financial Officer or Executive Vice President and General Counsel, dated as
of
the date of such Draw Down Notice, in the form of Exhibit D
hereof.
Section
3.2 Number
of Shares.
Subject
to Section 3.6(b), the number of Shares to be issued in connection with
each Draw Down shall be equal to the sum of the number of shares issuable on
each Trading Day of the Draw Down Pricing Period. Subject to
Section 3.6(b), the number of shares issuable on a Trading Day during a
Draw Down Pricing Period shall be equal to the quotient of one eighth (1/8th)
of
the Draw Down Amount divided by the Draw Down Discount Price for such Trading
Day.
Section
3.3 Limitation
on Draw Downs.
Only
one Draw Down shall be permitted for each Draw Down Pricing Period.
Section
3.4 Trading
Cushion.
Unless
the parties agree in writing otherwise, there shall be a minimum of three (3)
Trading Days between the expiration of any Draw Down Pricing Period and the
beginning of the next succeeding Draw Down Pricing Period.
6
Section
3.5 Settlement.
Subject
to Section 3.6(b), the number of Shares purchased by the Investor in any Draw
Down shall be determined and settled on two separate dates. Shares purchased
by
the Investor during the first four Trading Days of any Draw Down Pricing Period
shall be determined and settled no later than the sixth Trading Day of such
Draw
Down Pricing Period. Shares purchased by the Investor during the second four
Trading Days of any Draw Down Pricing Period shall be determined and settled
no
later than the second Trading Day after the last Trading Day of such Draw Down
Pricing Period. Each date on which settlement of the purchase and sale of Shares
occurs hereunder being referred to as a “Settlement
Date.”
The
Investor shall provide the Company with delivery instructions for the Shares
to
be issued at each Settlement Date at least two Trading Days in advance of such
Settlement Date. The number of Shares actually issued shall be rounded to the
nearest whole number of Shares.
Section
3.6 Delivery
of Shares; Payment of Draw Down Amount.
(a) On
each
Settlement Date, the Company shall deliver the Shares purchased by the Investor
to the Investor or its designees exclusively via book-entry through the DTC
to
an account designated by the Investor, and upon receipt of the Shares, the
Investor shall cause payment thereof to be made to the Company’s designated
account by wire transfer of immediately available funds, if the Shares are
received by the Investor no later than 1:00 p.m. (Eastern Time), or next day
available funds, if the Shares are received thereafter. Upon the written request
of the Company, the Investor will cause its banker to confirm to the Company
that the Investor has provided irrevocable instructions to cause payment for
the
Shares to be made as set forth above, upon confirmation by such banker that
the
Shares have been delivered through the DTC in unrestricted form.
(b) For
each
Trading Day during a Draw Down Pricing Period on which the VWAP is less than
the
greater of (i) 90% of the Closing Price of the Company’s Common Stock on
the Trading Day immediately preceding the commencement of such Draw Down Pricing
Period, or (ii) $1.15, such Trading Day shall not be used in calculating
the number of Shares to be issued in connection with such Draw Down, and the
Draw Down Amount in respect of such Draw Down Pricing Period shall be reduced
by
one eighth (1/8th) of the initial Draw Down Amount specified in the Draw Down
Notice. If trading in the Company’s Common Stock is suspended for any reason for
more than three (3) consecutive or non-consecutive hours during any Trading
Day
during a Draw Down Pricing Period, such Trading Day shall not be used in
calculating the number of Shares to be issued in connection with such Draw
Down,
and the Draw Down Amount in respect of such Draw Down Pricing Period shall
be
reduced by one eighth (1/8th) of the initial Draw Down Amount specified in
the
Draw Down Notice.
Section
3.7 Failure
to Deliver Shares.
If on
any Settlement Date, the Company fails to take all actions within the reasonable
control of the Company to cause the delivery of the Shares purchased by the
Investor, and such failure is not cured within two (2) Trading Days following
such Settlement Date, the Company shall pay to the Investor on demand in cash
by
wire transfer of immediately available funds to an account designated by the
Investor the “Make
Whole Amount;”
provided, however, that in the event that the Company is prevented from
delivering Shares in respect of any such Settlement Date in a timely manner
by
any fact or circumstance that is not reasonably within the control of, or
directly attributable to, the Company, or is otherwise reasonably within the
control of, or directly attributable to, the Investor, then such two (2) Trading
Day period shall be automatically extended until such time as such fact or
circumstance is cured. As used herein, the Make Whole Amount shall be an amount
equal to the sum of (i) the Draw Down Amount actually paid by the Investor
in respect of such Shares plus (ii) an amount equal to the actual loss
suffered by the Investor in respect of sales to subsequent purchasers, pursuant
to transactions entered into before the Settlement Date, of the Shares that
were
required to be delivered by the Company, which shall be based upon documentation
reasonably satisfactory to the Company demonstrating the difference (if greater
than zero) between (A) the price per share paid by the Investor to purchase
such number of shares of Common Stock necessary for the Investor to meet its
share delivery obligations to such subsequent purchasers minus (B) the
average Draw Down Discount Price during the applicable Draw Down Pricing
Period
in
respect of such Settlement Date.
In the
event that the Make Whole Amount is not paid within two (2) Trading Days
following a demand therefor from the Investor, the Make Whole Amount shall
accrue interest compounded daily at a rate of
LIBOR
plus 300 basis points, per annum up to and including the date on which the
Make
Whole Amount is actually paid. For
the
purposes of this Section 3.7 facts or circumstances that are reasonably within
the control of the Company include such facts and circumstances directly
attributable to acts or omissions of the Company, its officers, directors,
employees, agents and representatives, including, without limitation, any
transfer agent(s), accountant(s) and/or attorney(s) engaged by the Company
in
connection with the Company’s performance of its obligations hereunder.
Notwithstanding anything to the contrary set forth in this Agreement, in the
event that the Company pays the Make Whole Amount (plus interest, if applicable)
in respect of any Settlement Date in accordance with this Section 3.7, such
payment shall be the Investor’s sole remedy in respect of the Company’s failure
to deliver Shares in respect of such Settlement Date, and the Company shall
not
be obligated to deliver such Shares.
7
ARTICLE
IV
REPRESENTATIONS
AND
WARRANTIES OF THE COMPANY
The
Company hereby makes the following representations and warranties to the
Investor:
Section
4.1 Organization,
Good Standing and Power.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as now being conducted. Except as set forth in the Commission
Documents (as defined below), as of the date hereof, the Company does not own
more than fifty percent (50%) of the outstanding capital stock of or control
any
other business entity, other than any wholly-owned subsidiary that is not
“significant”
within
the meaning of Regulation S-X promulgated by the Commission. The Company is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure to be so qualified or be in good standing would not have a Material
Adverse Effect.
Section
4.2 Authorization;
Enforcement.
(i) The Company has the requisite corporate power and authority to enter
into and perform its obligations under this Agreement, the Registration Rights
Agreement and the Warrant and to issue the Shares, the Warrant, the Warrant
Shares and any Blackout Shares (except to the extent that the number of Blackout
Shares required to be issued exceeds the number of authorized shares of Common
Stock under the Charter); (ii) the execution and delivery of this Agreement
and the Registration Rights Agreement, and the execution, issuance and delivery
of the Warrant, by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required (other than as
contemplated by Section 6.5); and (iii) each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered, and the
Warrant has been duly executed, issued and delivered, by the Company and
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may
be
limited by applicable bankruptcy, securities, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors’ rights and
remedies or indemnification or by other equitable principles of general
application.
Section
4.3 Capitalization.
The
authorized capital stock of the Company and the shares thereof issued and
outstanding as of December 31, 2007 are set forth in a Commission Document.
All
of the outstanding shares of the Common Stock have been duly and validly
authorized and issued, and are fully paid and non-assessable. Except as set
forth in this Agreement, as described in the Commission Documents or as
disclosed on a schedule (the “Disclosure
Schedule”)
previously delivered to the Investor, as of December 31, 2007, no shares of
Common Stock were entitled to preemptive rights or registration rights and
there
were no outstanding options, warrants, scrip, rights issued by the Company
to
subscribe to, call or commitments of any character whatsoever issued by the
Company relating to, or securities or rights convertible into or exchangeable
for or giving any right to subscribe for, any shares of capital stock of the
Company, except for stock options and restricted stock units issued by the
Company to its employees, directors and consultants. Except as set forth in
this
Agreement, the Commission Documents, or as previously disclosed to the Investor
in the Disclosure Schedule, as of December 31, 2007, there were no contracts,
commitments, understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock of the Company
or
options, securities or rights convertible into or exchangeable for or giving
any
right to subscribe for any shares of capital stock of the Company. Except as
described in the Commission Documents or as previously disclosed to the Investor
in
the
Disclosure Schedule,
as of
the date hereof the Company is not a party to any agreement granting
registration rights to any Person with respect to any of its equity or debt
securities. Except as set forth in the Commission Documents or as previously
disclosed to the Investor in the Disclosure Schedule, as of the date hereof
the
Company is not a party to, and it has no Knowledge of, any agreement restricting
the voting or transfer of any shares of the capital stock of the Company. The
offer and sale of all capital stock, convertible securities, rights, warrants,
or options of the Company issued during the twenty-four month period immediately
prior to the Closing complied in all material respects with all applicable
federal and state securities laws, and no stockholder has a right of rescission
or damages with respect thereto that would reasonably be expected to have a
Material Adverse Effect. The Company has furnished or made available to the
Investor true and correct copies of the Company’s Restated Certificate of
Incorporation, as amended and in effect on the date hereof (the “Charter”),
and
the Company’s Amended and Restated Bylaws, as amended and in effect on the date
hereof (the “Bylaws”).
8
Section
4.4 Issuance
of Shares.
Subject
to Section 6.5, the Shares, the Warrant and the Warrant Shares have been,
and any Blackout Shares will be, duly authorized by all necessary corporate
action (except to the extent that the number of Blackout Shares required to
be
issued exceeds the number of authorized shares of Common Stock under the
Charter) and, when issued and paid for in accordance with the terms of this
Agreement, the Registration Rights Agreement and the Warrant, and subject to,
and in reliance on, the representations, warranties and covenants made herein
by
the Investor, the Shares and the Warrant Shares shall be validly issued and
outstanding, fully paid and non-assessable, and the Investor shall be entitled
to all rights accorded to a holder of shares of Common Stock.
Section
4.5 No
Conflicts.
The
execution, delivery and performance of this Agreement, the Registration Rights
Agreement, the Warrant and any other document or instrument contemplated hereby
or thereby, by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and shall not in any
material respect: (i) result in the violation of any provision of the
Charter or Bylaws, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give rise to any rights of termination, amendment, acceleration or cancellation
of, any material agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is
a
party where such default or conflict would constitute a Material Adverse Effect,
(iii) create or impose a lien, charge or encumbrance on any property of the
Company under any agreement or any commitment to which the Company is a party
or
by which the Company is bound or by which any of its respective properties
or
assets are bound which would constitute a Material Adverse Effect,
(iv) result in a violation of any federal, state, local or foreign statute,
rule, regulation, order, writ, judgment or decree (including federal and state
securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound where such violation would constitute a Material Adverse
Effect, or (v) require any consent of any third-party that has not been
obtained pursuant to any material contract to which the Company is a party
or to
which any of its assets, operations or management may be bound where the failure
to obtain any such consent would constitute a Material Adverse Effect. The
Company is not required under federal, state or local law, rule or regulation
to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement, the Registration
Rights Agreement or the Warrant, or issue and sell the Shares, the Warrant
Shares or the Blackout Shares (except to the extent that the number of Blackout
Shares required to be issued exceeds the number of authorized shares of Common
Stock under the Charter) in accordance with the terms hereof and thereof (other
than any filings that may be required to be made by the Company with the
Commission, the FINRA, Nasdaq or state securities commissions subsequent to
the
Closing, and, any registration statement (including any amendment or supplement
thereto) or any other filing or consent which may be filed pursuant to this
Agreement, the Registration Rights Agreement or the Warrant); provided that,
for
purposes of the representation made in this sentence, the Company is assuming
and relying upon the accuracy of the relevant representations and agreements
of
the Investor herein.
Section
4.6 Commission
Documents, Financial Statements.
(a) The
Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and since June 1, 2007 the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it
with
the Commission pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d) of the Exchange
Act (all of the foregoing, including filings incorporated by reference therein,
being referred to herein as the “Commission
Documents”).
Except as previously disclosed to the Investor in writing, since June 1, 2007
the Company has maintained all requirements for the continued listing or
quotation of its Common Stock, and such Common Stock is currently listed or
quoted on the NASDAQ Global Market. The Company has made available (including
through the Commission’s EDGAR filing system) to the Investor true and complete
copies of the Commission Documents filed with the Commission since June 1,
2007
and prior to the Closing Date. The Company has not provided to the Investor
any
information which, according to applicable law, rule or regulation, should
have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement.
As
of its date, the Company’s Annual Report on Form 10-K for the year ended
December 31, 2007 complied in all material respects with the requirements
of the Exchange Act and the rules and regulations of the Commission promulgated
thereunder applicable to such document, and, as of its date, after giving effect
to the information disclosed and incorporated by reference therein, to the
Company’s Knowledge such Annual Report on Form 10-K did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they were made, not misleading. As of their
respective dates, to the Company’s Knowledge the financial statements, together
with the related notes and schedules thereto, of the Company included in the
Commission Documents filed with the Commission since June 1, 2007 complied
as to
form and substance in all material respects with all applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial
statements, together with the related notes and schedules thereto, have been
prepared in accordance with generally accepted accounting principles
(“GAAP”)
applied on a consistent basis during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto
or
(ii) in the case of unaudited interim statements, to the extent they may
not include footnotes or may be condensed or summary statements), and fairly
present in all material respects the financial condition of the Company and
its
subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(b) The
Company has timely filed with the Commission and made available to the Investor
via EDGAR or otherwise all certifications and statements required by (x) Rule
13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section 1350
(Section 906 of the Sarbanes-Oxley Act of 2002 (“SOXA”))
with
respect to all relevant Commission Documents. The Company is in compliance
in
all material respects with the provisions of SOXA applicable to it as of the
date hereof. The Company maintains disclosure controls and procedures required
by Rule 13a-15 or Rule 15d-15 under the Exchange Act. As used in this Section
4.6(b), the term “file” shall be broadly construed to include any manner in
which a document or information is furnished, supplied or otherwise made
available to the Commission.
9
Section
4.7 No
Material Adverse Change.
Except
as disclosed in the Commission Documents or a press release of the Company,
since December 31, 2007 no event or series of events has or have occurred that,
individually or in the aggregate, have had a Material Adverse Effect on the
Company.
Section
4.8 No
Undisclosed Liabilities.
Except
as disclosed in the Commission Documents, to the Company’s Knowledge, neither
the Company nor any of its subsidiaries has any liabilities, obligations, claims
or losses (whether liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) that would be required to be disclosed on
a
balance sheet of the Company or any subsidiary (including the notes thereto)
in
conformity with GAAP and are not disclosed in the Commission Documents, other
than those incurred in the ordinary course of the Company’s or its subsidiaries
respective businesses since December 31, 2007 or which, individually or in
the
aggregate, do not or would not have a Material Adverse Effect on the
Company.
Section
4.9 No
Undisclosed Events or Circumstances.
To the
Company’s Knowledge, no event or circumstance has occurred or exists with
respect to the Company or its subsidiaries or their respective businesses,
properties, operations or financial condition, which, under applicable law,
rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed and which, individually
or
in the aggregate, would have a Material Adverse Effect on the
Company.
Section
4.10 Actions
Pending.
There
is no action, suit, claim, investigation or proceeding pending or, to the
Knowledge of the Company, threatened against the Company or any subsidiary
which
questions the validity of this Agreement or the transactions contemplated hereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth in the Commission Documents or in the Disclosure Schedule, there is no
material action, suit, claim, investigation or proceeding pending or, to the
Knowledge of the Company, threatened, against or involving the Company, any
subsidiary or any of their respective properties or assets, or to the Knowledge
of the Company involving any officers or directors, in their capacity as
officers or directors, of the Company or any of its subsidiaries, including,
without limitation, any securities class action lawsuit or stockholder
derivative lawsuit, that could be reasonably expected to have a Material Adverse
Effect on the Company. Except as set forth in the Commission Documents or as
previously disclosed to the Investor in writing, no judgment, order, writ,
injunction or decree or award has been issued by or, to the Knowledge of the
Company, requested of any court, arbitrator or governmental agency which could
be reasonably expected to result in a Material Adverse Effect.
Section
4.11 Compliance
with Law.
The
business of the Company and its subsidiaries has been and is presently being
conducted in accordance with all applicable federal, state, local and foreign
governmental laws, rules, regulations and ordinances, except as set forth in
the
Commission Documents or such that would not reasonably be expected to cause
a
Material Adverse Effect. Except as set forth in the Commission Documents, each
of the Company and each of its subsidiaries has all franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals necessary for the conduct of its business as now being conducted
by
it, except for such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, the failure to possess
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
10
Section
4.12 Certain
Fees.
Except
as expressly set forth in this Agreement, no brokers, finders or financial
advisory fees or commissions will be payable by the Company or any of its
subsidiaries in respect of the transactions contemplated by this
Agreement.
Section
4.13 Disclosure.
To the
Company’s Knowledge, neither this Agreement nor any other documents,
certificates or instruments furnished to the Investor by or on behalf of the
Company or any subsidiary in connection with the transactions contemplated
by
this Agreement contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements made herein or
therein, in the light of the circumstances under which they were made herein
or
therein, not misleading.
Section
4.14 Material
Non-Public Information.
Except
for this Agreement and the transactions contemplated hereby, neither the Company
nor its employees have disclosed to the Investor, any material non-public
information that, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company prior to the date hereof but which has
not been so disclosed.
Section
4.15 Exemption
from Registration; Valid Issuances.
Subject
to, and in reliance on, the representations, warranties and covenants made
herein by the Investor, the issuance and sale of the Shares, the Warrant, the
Warrant Shares and any Blackout Shares in accordance with the terms and on
the
bases of the representations and warranties set forth in this Agreement, may
and
shall be properly issued pursuant to Section 4(2), Regulation D and/or
any other applicable federal and state securities laws. Neither the sales of
the
Shares, the Warrant, the Warrant Shares or any Blackout Shares pursuant to,
nor
the Company’s performance of its obligations under, this Agreement, the
Registration Rights Agreement, or the Warrant shall (i) result in the
creation or imposition of any liens, charges, claims or other encumbrances
upon
the Shares, the Warrant Shares, any Blackout Shares or any of the assets of
the
Company, or (ii) except as previously disclosed to the Investor in the
Disclosure Schedule, entitle the holders of any outstanding shares of capital
stock of the Company to preemptive or other rights to subscribe to or acquire
the shares of Common Stock or other securities of the Company.
Section
4.16 No
General Solicitation or Advertising in Regard to this
Transaction. Except
for the Registration Statement, neither the Company nor any of its affiliates
or
any Person acting on its or their behalf (i) has conducted any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or
general advertising with respect to any of the Shares, the Warrant, the Warrant
Shares or any Blackout Shares or (ii) has made any offers or sales of any
security or solicited any offers to buy any security under any circumstances
that would require registration of the Shares under the Securities
Act.
Section
4.17 No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would require
registration under the Securities Act of shares of the Common Stock issuable
hereunder with any other offers or sales of securities of the
Company.
11
Section
4.18 Acknowledgment
Regarding Investor’s Purchase of Shares.
The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm’s length investor with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that
the
Investor is not acting as a financial advisor or fiduciary of the Company (or
in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Investor’s purchase of the
Shares.
ARTICLE
V
REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE INVESTOR
The
Investor hereby makes the following representations, warranties and covenants
to
the Company:
Section
5.1 Organization
and Standing of the Investor.
The
Investor is a company duly organized, validly existing and in good standing
under the laws of the British Virgin Islands.
Section
5.2 Authorization
and Power.
The
Investor has the requisite power and authority to enter into and perform its
obligations under this Agreement, the Warrant and the Registration Rights
Agreement and to purchase the Shares, any Blackout Shares, the Warrant and
the
Warrant Shares in accordance with the terms hereof and thereof. The execution,
delivery and performance of this Agreement, the Warrant and the Registration
Rights Agreement by Investor and the consummation by it of the transactions
contemplated hereby or thereby have been duly authorized by all necessary
corporate action, and no further consent or authorization of the Investor,
its
Board of Directors or stockholders is required. Each of this Agreement and
the
Registration Rights Agreement has been duly executed and delivered by the
Investor and constitutes a valid and binding obligation of the Investor
enforceable against the Investor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, securities, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of creditor’s
rights and remedies or indemnification or by other equitable principles of
general application.
Section
5.3 No
Conflicts.
The
execution, delivery and performance of this Agreement, the Registration Rights
Agreement, the Warrant and any other document or instrument contemplated hereby,
by the Investor and the consummation of the transactions contemplated thereby
do
not (i) violate any provision of the Investor’s charter documents or
bylaws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Investor is a party,
(iii) create or impose a lien, charge or encumbrance on any property of the
Investor under any agreement or any commitment to which the Investor is a party
or by which the Investor is bound or by which any of its respective properties
or assets are bound, (iv) result in a violation of any federal, state,
local or foreign statute, rule, regulation, order, writ, judgment or decree
(including federal and state securities laws and regulations) applicable to
the
Investor or by which any property or asset of the Investor are bound or
affected, or (v) require the consent of any third-party that has not been
obtained pursuant to any material contract to which Investor is subject or
to
which any of its assets, operations or management may be subject. The Investor
is not required under federal, state or local law, rule or regulation to obtain
any consent, authorization or order of, or make any filing or registration
with,
any court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement or to purchase or acquire the
Shares, the Warrant, the Warrant Shares or any Blackout Shares in accordance
with the terms hereof, provided that, for purposes of the representation made
in
this sentence, the Investor is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
12
Section
5.4 Financial
Capability.
The
Investor has the financial capability to perform all of its obligations under
this Agreement, including the capability to purchase the Shares, the Warrant,
the Warrant Shares and any Blackout Shares in accordance with the terms hereof.
The Investor has such knowledge and experience in business and financial matters
that it is capable of evaluating the merits and risks of an investment in Common
Stock and the Warrant. The Investor is an “accredited
investor”
as
defined in Regulation D. The Investor is a “sophisticated
investor”
as
described in Rule 506(b)(2)(ii) of Regulation D. The Investor
acknowledges that an investment in the Common Stock and the Warrant is
speculative and involves a high degree of risk.
Section
5.5 Information.
The
Investor and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Shares, any Blackout Shares, the Warrant
and the Warrant Shares which have been requested by the Investor. The Investor
has reviewed or received copies of the Commission Documents. The Investor and
its advisors, if any, have been afforded the opportunity to ask questions of
the
Company. The Investor has sought such accounting, legal and tax advice as it
has
considered necessary to make an informed investment decision with respect to
its
acquisition of the Shares, any Blackout Shares, the Warrant and the Warrant
Shares. The Investor understands that it (and not the Company) shall be
responsible for its own tax liabilities that may arise as a result of this
investment or the transactions contemplated by this Agreement.
Section
5.6 Trading
Restrictions.
The
Investor covenants that during the Commitment Period, neither the Investor
nor
any of its affiliates nor any entity managed or controlled by the Investor
will
enter into or execute or cause or assist any Person to enter into or execute
any
“short
sale”
(as
such term is defined in Rule 200 of Regulation SHO, or any successor regulation,
promulgated by the Commission under the Exchange Act) of any securities of
the
Company.
Section
5.7 Statutory
Underwriter Status.
The
Investor acknowledges that, pursuant to the Commission’s current interpretations
of the Securities Act, the Investor will be disclosed as an “underwriter”
within
the meaning of the Securities Act in the Registration Statement (and amendments
thereto) and in any Prospectus contained therein to the extent required by
applicable law.
Section
5.8 Not
an
Affiliate.
The
Investor is not an officer, director or “affiliate”
(as
defined in Rule 405 of the Securities Act) of the Company.
13
Section
5.9 Manner
of Sale.
At no
time was Investor presented with or solicited by or through any leaflet, public
promotional meeting, television advertisement or any other form of general
solicitation or advertising.
Section
5.10 Prospectus
Delivery.
The
Investor agrees that unless the Shares, the Warrant Shares or any Blackout
Shares are eligible for resale pursuant to all the conditions of Rule 144,
it
will resell the Shares, the Warrant Shares and any Blackout Shares only pursuant
to the Registration Statement, in a manner described under the caption
“Plan
of Distribution”
in
the
Registration Statement, and in a manner in compliance with all applicable
securities laws, including, without limitation, any applicable prospectus
delivery requirements of the Securities Act and the insider trading restrictions
of the Exchange Act. The Investor acknowledges and agrees that the Company
shall
be under no obligation to the Investor to supplement the Prospectus to reflect
the issuance of any Shares pursuant to a Draw Down at any time prior to the
day
following the second Settlement Date with respect to such Draw
Down.
ARTICLE
VI
COVENANTS
OF THE COMPANY
The
Company covenants with the Investor as follows, which covenants are for the
benefit of the Investor and its permitted assignees (as defined
herein):
Section
6.1 Securities
Compliance.
The
Company shall notify the Commission and the Principal Market, if and as
applicable, in accordance with their respective rules and regulations, of the
transactions contemplated by this Agreement, and shall use commercially
reasonable efforts to take all other necessary action and proceedings as may
be
required and permitted by applicable law, rule and regulation, for the legal
and
valid issuance of the Shares, the Warrant Shares and the Blackout Shares, if
any, to the Investor.
Each
Commission Document to be filed with the Commission after the Closing Date
and
incorporated by reference in the Registration Statement and Prospectus, when
such document becomes effective or is filed with the Commission, as the case
may
be, shall comply in all material respects with the requirements of the
Securities Act or the Exchange Act, as applicable, and other federal, state
and
local laws, rules and regulations applicable to it, and shall not contain any
untrue statement of a material fact or omit to state a material fact required
to
be stated therein or necessary in order to make the statements therein, in
light
of the circumstances under which they were made, not misleading.
Section
6.2 Reservation
of Common Stock.
As of
the date hereof, the Company has available and the Company shall reserve and
keep available at all times, free of preemptive rights and other similar
contractual rights of stockholders, shares of Common Stock for the purpose
of
enabling the Company to satisfy any obligation to issue the Shares in connection
with all Draw Downs contemplated hereunder and the Warrant Shares. The number
of
shares so reserved from time to time, as theretofore increased or reduced as
hereinafter provided, may be reduced by the number of shares actually delivered
hereunder.
Section
6.3 Registration
and Listing.
During
the Commitment Period, the Company shall use commercially reasonable efforts
to:
(i) take all action necessary to cause its Common Stock to continue to be
registered under Section 12(b) or 12(g) of the Exchange Act, (ii) comply in
all
material respects with its reporting and filing obligations under the Exchange
Act, (iii) prevent the termination or suspension of such registration, or the
termination or suspension of its reporting and filing obligations under the
Exchange Act or Securities Act (except as expressly permitted herein). The
Company shall use commercially reasonable efforts to maintain the listing and
trading of its Common Stock and the listing of the Shares purchased by Investor
hereunder on the Principal Market (including, without limitation, maintaining
sufficient net tangible assets) and will comply in all material respects with
the Company’s reporting, filing and other obligations under the bylaws or rules
of the FINRA and the Principal Market. The Company will not be required to
carry
out any action pursuant to this Agreement, the Registration Rights Agreement
or
the Warrant that would adversely impact the listing of the Company’s securities
on the Principal Market, which Principal Market may be changed by the Company
in
the future in the Company’s discretion.
14
Section
6.4 Registration
Statement.
Without
the prior written consent of the Investor, the Registration Statement shall
be
used solely in connection with the transactions between the Company and the
Investor contemplated hereby.
Section
6.5 Compliance
with Laws.
(a) The
Company shall comply, and cause each subsidiary to comply, with all applicable
laws, rules, regulations and orders, noncompliance with which would reasonably
be expected to have a Material Adverse Effect. Without limiting the generality
of the foregoing, neither the Company nor any of its officers, directors or
affiliates will take, directly or indirectly, any action designed or intended
to
stabilize or manipulate the price of any security of the Company, or which
would
in the future reasonably be expected to cause or result in, stabilization or
manipulation of the price of any security of the Company.
(b) Without
the consent of its stockholders in accordance with FINRA and The NASDAQ Stock
Market LLC rules, the Company will not be obligated to issue, and the Investor
will not be obligated to purchase, any Shares or Blackout Shares which would
result in the issuance under this Agreement, the Warrant and the Registration
Rights Agreement of Shares, Warrant Shares and Blackout Shares (collectively)
representing more than the applicable percentage under the rules of the FINRA
and The NASDAQ Stock Market LLC , including, without limitation, NASDAQ
Marketplace Rule 4350(i), that would require stockholder approval of the
issuance thereof. Nothing herein shall compel the Company to seek such consent
of its stockholders. In addition, the Company will not be obligated to issue,
and the Investor will not be obligated to purchase, any Shares, Warrant Shares
or Blackout Shares if as a result of the acquisition of such Shares, Warrant
Shares and/or Blackout Shares, the Company would be required to file any
notification or report forms under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended. Nothing herein shall compel the Company to file such
notification and report forms.
Section
6.6 Other
Financing.
Nothing
in this Agreement shall be construed to restrict the right of the Company to
offer, sell and/or issue securities of any kind whatsoever, provided such
transaction is not a Prohibited Transaction (as defined below) (any such
transaction that is not a Prohibited Transaction is referred to in this
Agreement as a “Permitted
Transaction”).
Without limiting the generality of the preceding sentence, the Company may,
without the prior written consent of the Investor, (i) establish stock option
or
award plans or agreements (for directors, employees, consultants and/or
advisors), and issue securities thereunder, and amend such plans or agreements,
including increasing the number of shares available thereunder, (ii) issue
equity securities to finance, or otherwise in connection with, the acquisition
of one or more other companies, equipment, technologies or lines of business,
(iii) issue shares of Common Stock and/or Preferred Stock in connection with
the
Company’s option or award plans, stock purchase plans, stock bonus programs,
rights plans, warrants or options, (iv) issue shares of Common Stock and/or
Preferred Stock in connection with the acquisition of products, licenses,
equipment or other assets and strategic collaborations or partnerships or joint
ventures; (v) issue shares of Common and/or Preferred Stock to employees,
consultants and/or advisors as consideration for services rendered or to be
rendered, (vi) issue and sell equity or debt securities in a public offering,
(vii) issue and sell and equity or debt securities in a private placement (other
than in connection with any Prohibited Transaction), (viii) issue equity
securities to equipment lessors, equipment vendors, banks or similar lending
institutions in connection with leases or loans, or in connection with strategic
commercial or licensing transactions, (ix) issue securities in connection with
any stock split, stock dividend, recapitalization, reclassification or similar
event by the Company, and (x) issue shares of Common Stock to the Investor
under
any other agreement entered into between the Investor and the
Company.
15
Section
6.7 Prohibited
Transactions.
Except
as
set forth on Schedule 6.7 of the Disclosure Schedule, during the term of this
Agreement, the Company shall not enter into any Prohibited Transaction without
the prior written consent of the Investor, which consent may be withheld at
the
sole discretion of the Investor. For the purposes of this Agreement, the term
“Prohibited
Transaction”
shall
refer to the issuance by the Company of any “future priced securities,” which
shall mean the issuance of shares of Common Stock or securities of any type
whatsoever that are, or may become, convertible or exchangeable into shares
of
Common Stock where the purchase, conversion or exchange price for such Common
Stock is determined using any floating discount or other post-issuance
adjustable discount to the market price of Common Stock, including, without
limitation, pursuant to any equity line or other financing that is substantially
similar to the financing provided for under this Agreement, provided that
any
future issuance by the Company of a convertible security (“Convertible
Security”)
that
contains provisions that adjust the conversion price of such Convertible
Security in the event of stock splits, dividends, distributions or similar
events or pursuant to anti-dilution provisions shall not be a Prohibited
Transaction.
Section
6.8 Corporate
Existence.
The
Company shall take all steps necessary to preserve and continue the corporate
existence of the Company; provided, however, that nothing in this Agreement
shall be deemed to prohibit the Company from engaging in any Excluded Merger
or
Sale with another Person, subject to the terms of the Warrant.
Section
6.9 Non-Disclosure
of Non-Public Information.
Except
as otherwise expressly provided in this Agreement, the Registration Rights
Agreement or the Warrant, none of the Company, its officers, directors,
employees nor agents shall disclose material non-public information to the
Investor, its advisors or representatives.
Section
6.10 Notice
of Certain Events Affecting Registration; Suspension of Right to Request a
Draw
Down.
The
Company shall promptly notify the Investor upon the occurrence of any of the
following events in respect of the Registration Statement or the Prospectus
related to the offer, issuance and sale of the Shares and the Warrant Shares
hereunder: (i) receipt of any request for material additional information by
the
Commission or any other federal or state governmental authority or for
amendments or supplements to the Registration Statement or the Prospectus during
the period of effectiveness of the Registration Statement; (ii) the issuance
by
the Commission or any other federal or state governmental authority of any
stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and (iv) the Company becoming aware of the happening of any event,
which makes any statement of a material fact made in the Registration Statement
or Prospectus untrue in a material respect or which requires the making of
any
material additions to or material changes to the statements then made in the
Registration Statement or Prospectus in order to state a material fact required
by the Securities Act to be stated therein or necessary in order to make the
statements then made therein, in light of the circumstances under which they
were made, not misleading, or of the necessity to amend the Registration
Statement or supplement the Prospectus to comply with the Securities Act. If
at
any time the Commission shall issue any stop order suspending the effectiveness
of the Registration Statement, the Company shall use commercially reasonable
efforts to obtain the withdrawal of such order at the earliest possible time.
The Company shall not be required to disclose to the Investor the substance
or
specific reasons of any of the events set forth in clauses (i) through (iv)
of
the previous sentence, only that the event has occurred. The Company shall
not
request a Draw Down during the continuation of any of the foregoing
events.
Section
6.11 Amendments
to the Registration Statement.
After
the Registration Statement has been declared effective by the Commission, the
Company shall not (a) file any amendment to the Registration Statement or make
any amendment or supplement to the Prospectus of which the Investor shall not
have been previously or be simultaneously advised; provided, however, that
the
Company may, to the extent it deems advisable, and without the prior consent
of
or notice to Investor, supplement the Prospectus within one Trading Day
following the second Settlement Date for each Draw Down solely to reflect the
issuance of Shares with respect to such Draw Down, and (b) so long as, in the
reasonable opinion of counsel for the Investor, a Prospectus is required to
be
delivered in connection with sales of the Shares by the Investor, if the Company
files any information, documents or reports that are incorporated by reference
in the Registration Statement pursuant to the Exchange Act, the Company shall,
if requested in writing by the Investor, deliver a copy of such information,
documents or reports to the Investor promptly following such filing.
Section
6.12 Prospectus
Delivery.
From
time to time for such period as in the reasonable opinion of counsel for the
Investor a prospectus is required by the Securities Act to be delivered in
connection with sales by the Investor, the Company will expeditiously deliver
to
the Investor, without charge, as many copies of the Prospectus (and of any
amendment or supplement thereto) as the Investor may reasonably request. Subject
to the Registration Rights Agreement, the Company consents to the use of the
Prospectus (and of any amendment or supplement thereto) in accordance with
the
provisions of the Securities Act and state securities laws in connection with
the offering and sale of the Shares and the Warrant Shares and for such period
of time thereafter as the Prospectus is required by the Securities Act to be
delivered in connection with sales of the Shares and the Warrant
Shares.
Notwithstanding the foregoing, in no event shall the Company be under any
obligation to the Investor to supplement the Prospectus or to reflect the
issuance of any Shares pursuant to a Draw Down or deliver any Prospectus as
so
supplemented at any time prior to the Trading Day following the second
Settlement Date with respect to such Draw Down.
16
ARTICLE
VII
CONDITIONS
TO THE OBLIGATION OF THE INVESTOR
TO
ACCEPT A DRAW DOWN
The
obligation of the Investor hereunder to accept a Draw Down Notice and to acquire
and pay for the Shares in accordance therewith is subject to the satisfaction
or
waiver, at each Condition Satisfaction Date, of each of the conditions set
forth
below. Other than those conditions set forth in Section 7.12 which are for
the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion, the conditions are for the Investor’s sole benefit and may be waived
by the Investor at any time in its sole discretion. As used in this Agreement,
the term “Condition
Satisfaction Date”
shall
mean, with respect to each Draw Down, the date on which the applicable Draw
Down
Notice is delivered to the Investor and each Settlement Date in respect of
the
applicable Draw Down Pricing Period.
Section
7.1 Accuracy
of the Company’s Representations and Warranties.
Each of
the representations and warranties of the Company shall be true and correct
in
all material respects as of the date when made as though made at that time
except for representations and warranties that are expressly made as of a
particular date.
Section
7.2 Performance
by the Company.
The
Company shall have, in all material respects, performed, satisfied and complied
with all covenants, agreements and conditions required by this Agreement, the
Registration Rights Agreement and the Warrant to be performed, satisfied or
complied with by the Company.
Section
7.3 Compliance
with Law.
The
Company shall have complied in all respects with all applicable federal, state
and local governmental laws, rules, regulations and ordinances in connection
with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby except for any failures
to
so comply which could not reasonably be expected to have a Material Adverse
Effect.
Section
7.4 Effective
Registration Statement.
Upon
the terms and subject to the conditions set forth in the Registration Rights
Agreement, the Registration Statement shall have previously become effective
and
shall remain effective and (i) neither the Company nor the Investor shall have
received notice that the Commission has issued or intends to issue a stop order
with respect to the Registration Statement or that the Commission otherwise
has
suspended or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
Commission’s concerns have been addressed and the Investor is reasonably
satisfied that the Commission no longer is considering or intends to take such
action), and (ii) no other suspension of the use or withdrawal of the
effectiveness of the Registration Statement or the Prospectus shall
exist.
17
Section
7.5 No
Knowledge.
The
Company shall have no Knowledge of any event that could reasonably be expected
to have the effect of causing the Registration Statement with respect to the
resale of the Registrable Securities by the Investor to be suspended or
otherwise ineffective (which event is reasonably likely to occur within eight
Trading Days following the Trading Day on which a Draw Down Notice is delivered)
as of the Settlement Date.
Section
7.6 No
Suspension.
Trading
in the Company’s Common Stock shall not have been suspended by the Commission,
the Principal Market or the FINRA and trading in securities generally as
reported on the Principal Market shall not have been suspended or limited as
of
the Condition Satisfaction Date.
Section
7.7 No
Injunction.
No
statute, rule, regulation, order, decree, writ, ruling or injunction shall
have
been enacted, entered, promulgated, endorsed or, to the Knowledge of the
Company, threatened by any court or governmental authority of competent
jurisdiction which prohibits the consummation of or which would materially
modify or delay any of the transactions contemplated by this
Agreement.
Section
7.8 No
Proceedings or Litigation.
No
action, suit or proceeding before any arbitrator or any court or governmental
authority shall be pending or, to the Knowledge of the Company, threatened,
and,
to the Knowledge of the Company no inquiry or investigation by any governmental
authority shall be threatened, against the Company or any subsidiary, or any
of
the officers, directors or affiliates of the Company or any subsidiary, seeking
to enjoin, prevent or change the transactions contemplated by this Agreement,
or
seeking material damages in connection with such transactions, except for any
action, suit or proceeding which could not reasonably be expected to have a
Material Adverse Effect.
Section
7.9 Sufficient
Shares Registered for Resale.
The
Company shall have sufficient Shares, calculated using the closing trade price
of the Common Stock as of the Trading Day immediately preceding such Draw Down
Notice, registered under the Registration Statement to issue and sell such
Shares in accordance with such Draw Down Notice.
Section
7.10 Warrant.
The
Warrant shall have been duly executed, delivered and issued to the Investor,
and
the Company shall not be in default in any material respect under any of the
provisions thereof, provided that any refusal by or failure of the Company
to
issue and deliver Warrant Shares in respect of any exercise (in whole or in
part) thereof shall be deemed to be material for the purposes of this Section
7.10.
Section
7.11 Opinion
of Counsel.
The
Investor shall have received the form of opinion mutually agreed to between
the
parties on the date of this Agreement.
Section
7.12 Accuracy
of Investor’s Representation and Warranties.
The
representations and warranties of the Investor shall be true and correct in
all
material respects as of the date when made as though made at that time except
for representations and warranties that are made as of a particular
date.
18
ARTICLE
VIII
TERMINATION
Section
8.1 Term.
Unless
otherwise terminated in accordance with Section 8.2 below, this Agreement shall
terminate upon the earlier to occur of (i) the expiration of the Commitment
Period or (ii) the issuance of Shares pursuant to this Agreement in an amount
equal to the Maximum Commitment Amount.
Section
8.2 Other
Termination.
(a) The
Investor may terminate this Agreement upon (x) one (1) Trading Day’s notice if
the Company enters into any Prohibited Transaction as set forth in Section
6.7
without the Investor’s prior written consent, or (y) one (1) Trading Day’s
notice if the Investor provides written notice of a Material Adverse Effect
to
the Company, and such Material Adverse Effect continues for a period of ten
(10)
Trading Days after the receipt by the Company of such notice.
(b) The
Investor may terminate this Agreement upon one (1) Trading Day’s notice to the
Company at any time in the event that the Registration Statement is not
initially declared effective in accordance with the Registration Rights
Agreement, provided, however, that in the event the Registration Statement
is
declared effective prior to the delivery of such notice, the Investor shall
thereafter have no right to terminate this Agreement pursuant to this Section
8.2(b).
(c) The
Company may terminate this Agreement upon one (1) Trading Day’s notice;
provided, however, that the Company shall not terminate this Agreement pursuant
to this Section 8.2(c) during any Draw Down Pricing Period; provided further,
that, in the event of any termination of this Agreement by the Company
hereunder, so long as the Investor owns Shares purchased hereunder and/or
Warrant Shares, unless all of such shares of Common Stock may be resold by
the
Investor without registration and without any time, volume or manner limitations
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act, the Company shall not suspend or withdraw the Registration
Statement or otherwise cause the Registration Statement to become ineffective,
or voluntarily delist the Common Stock from, the Principal Market without
listing the Common Stock on another Principal Market.
(d) Each
of
the parties hereto may terminate this Agreement upon one (1) Trading Day’s
notice if the other party has breached a material representation, warranty
or
covenant to this Agreement and such breach is not remedied within ten (10)
Trading Days after notice of such breach is delivered to the breaching party.
Section
8.3 Effect
of Termination.
In the
event of termination by the Company or the Investor, written notice thereof
shall forthwith be given to the other party and the transactions contemplated
by
this Agreement shall be terminated without further action by either party.
If
this Agreement is terminated as provided in Section 8.1 or 8.2 herein, this
Agreement shall become void and of no further force and effect, except as
provided in Section 10.13. Nothing in this Section 8.3 shall be deemed to
release the Company or the Investor from any liability for any breach under
this
Agreement occurring prior to such termination, or to impair the rights of the
Company and the Investor to compel specific performance by the other party
of
its obligations under this Agreement arising prior to such
termination.
19
ARTICLE
IX
INDEMNIFICATION
Section
9.1 Indemnification.
(a) Except
as
otherwise provided in this Article IX, unless disputed as set forth in Section
9.2, the Company agrees to indemnify, defend and hold harmless the Investor
and
its affiliates and their respective officers, directors, agents, employees,
subsidiaries, partners, members and controlling persons (each, an “Investor
Indemnified Party”),
to
the fullest extent permitted by law from and against any and all Damages
directly resulting from or directly arising out of any breach of any
representation or warranty, covenant or agreement (except as otherwise
specifically provided) by the Company in this Agreement, the Registration Rights
Agreement or the Warrant; provided, however, that the Company shall not be
liable under this Article IX to an Investor Indemnified Party to the extent
that
such Damages resulted or arose from the breach by an Investor Indemnified Party
of any representation, warranty, covenant or agreement of an Investor
Indemnified Party contained in this Agreement, the Registration Rights Agreement
or the Warrant or the negligence, recklessness, willful misconduct or bad faith
of an Investor Indemnified Party. The parties intend that any Damages subject
to
indemnification pursuant to this Article IX will be net of insurance proceeds
(which the Investor Indemnified Party agrees to use commercially reasonable
efforts to recover). Accordingly, the amount which the Company is required
to
pay to any Investor Indemnified Party hereunder (a “Company
Indemnity Payment”)
will
be reduced by any insurance proceeds actually recovered by or on behalf of
any
Investor Indemnified Party in reduction of the related Damages. In addition,
if
an Investor Indemnified Party receives a Company Indemnity Payment required
by
this Article IX in respect of any Damages and subsequently receives any such
insurance proceeds, then the Investor Indemnified Party will pay to the Company
an amount equal to the Company Indemnity Payment received less the amount of
the
Company Indemnity Payment that would have been due if the insurance proceeds
had
been received, realized or recovered before the Company Indemnity Payment was
made.
(b) Except
as
otherwise provided in this Article IX, unless disputed as set forth in Section
9.2, the Investor agrees to indemnify, defend and hold harmless the Company
and
its affiliates and their respective officers, directors, agents, employees,
subsidiaries, partners, members and controlling persons (each, a “Company
Indemnified Party”),
to
the fullest extent permitted by law from and against any and all Damages
directly resulting from or directly arising out of any breach of any
representation or warranty, covenant or agreement by the Investor in this
Agreement, the Registration Rights Agreement or the Warrant; provided, however,
that the Investor shall not be liable under this Article IX to a Company
Indemnified Party to the extent that such Damages resulted or arose from the
breach by a Company Indemnified Party of any representation, warranty, covenant
or agreement of a Company Indemnified Party contained in this Agreement, the
Registration Rights Agreement or the Warrant or the negligence, recklessness,
willful misconduct or bad faith of a Company Indemnified Party. The parties
intend that any Damages subject to indemnification pursuant to this Article
IX
will be net of insurance proceeds (which the Company agrees to use commercially
reasonable efforts to recover). Accordingly, the amount which the Investor
is
required to pay to any Company Indemnified Party hereunder (an “Investor
Indemnity Payment”)
will
be reduced by any insurance proceeds theretofore actually recovered by or on
behalf of any Company Indemnified Party in reduction of the related Damages.
In
addition, if a Company Indemnified Party receives an Investor Indemnity Payment
required by this Article IX in respect of any Damages and subsequently receives
any such insurance proceeds, then the Company Indemnified Party will pay to
the
Investor an amount equal to the Investor Indemnity Payment received less the
amount of the Investor Indemnity Payment that would have been due if the
insurance proceeds had been received, realized or recovered before the Investor
Indemnity Payment was made.
20
Section
9.2 Notification
of Claims for Indemnification.
Each
party entitled to indemnification under this Article IX (an “Indemnified
Party”)
shall,
promptly after the receipt of notice of the commencement of any claim against
such Indemnified Party in respect of which indemnity may be sought from the
party obligated to indemnify such Indemnified Party under this Article IX (the
“Indemnifying
Party”),
notify the Indemnifying Party in writing of the commencement thereof. Any such
notice shall describe the claim in reasonable detail. The failure of any
Indemnified Party to so notify the Indemnifying Party of any such action shall
not relieve the Indemnifying Party from any liability which it may have to
such
Indemnified Party (a) other than pursuant to this Article IX or (b) under this
Article IX unless, and only to the extent that, such failure results in the
Indemnifying Party’s forfeiture of substantive rights or defenses or the
Indemnifying Party is prejudiced by such delay. The procedures listed below
shall govern the procedures for the handling of indemnification
claims.
(a) Any
claim
for indemnification for Damages that do not result from a Third Party Claim
as
defined in the following paragraph, shall be asserted by written notice given
by
the Indemnified Party to the Indemnifying Party. Such Indemnifying Party shall
have a period of thirty (30) days after the receipt of such notice within which
to respond thereto. If such Indemnifying Party does not respond within such
thirty (30) day period, such Indemnifying Party shall be deemed to have refused
to accept responsibility to make payment as set forth in Section 9.1. If such
Indemnifying Party does not respond within such thirty (30) day period or
rejects such claim in whole or in part, the Indemnified Party shall be free
to
pursue such remedies as specified in this Agreement.
(b) If
an
Indemnified Party shall receive notice or otherwise learn of the assertion
by a
person or entity not a party to this Agreement of any threatened legal action
or
claim (collectively a “Third
Party Claim”),
with
respect to which an Indemnifying Party may be obligated to provide
indemnification, the Indemnified Party shall give such Indemnifying Party
written notice thereof within twenty (20) days after becoming aware of such
Third Party Claim.
(c) An
Indemnifying Party may elect to defend (and, unless the Indemnifying Party
has
specified any reservations or exceptions, to seek to settle or compromise)
at
such Indemnifying Party’s own expense and by such Indemnifying Party’s own
counsel, any Third Party Claim. Within thirty (30) days after the receipt of
notice from an Indemnified Party (or sooner if the nature of such Third Party
Claim so requires), the Indemnifying Party shall notify the Indemnified Party
whether the Indemnifying Party will assume responsibility for defending such
Third Party Claim, which election shall specify any reservations or exceptions.
If such Indemnifying Party does not respond within such thirty (30) day period
or rejects such claim in whole or in part, the Indemnified Party shall be free
to pursue such remedies as specified in this Agreement. In case any such Third
Party Claim shall be brought against any Indemnified Party, and it shall notify
the Indemnifying Party of the commencement thereof, the Indemnifying Party
shall
be entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party in its reasonable judgment; provided,
however, that any Indemnified Party may, at its own expense, retain separate
counsel to participate in such defense at its own expense. Notwithstanding
the
foregoing, in any Third Party Claim in which both the Indemnifying Party, on
the
one hand, and an Indemnified Party, on the other hand, are, or are reasonably
likely to become, a party, such Indemnified Party shall have the right to employ
separate counsel and to control its own defense of such claim if, in the
reasonable opinion of counsel to such Indemnified Party, either (x) one or
more
significant defenses are available to the Indemnified Party that are not
available to the Indemnifying Party or (y) a conflict or potential conflict
exists between the Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, that would make such separate representation
advisable; provided, however, that in such circumstances the Indemnifying Party
(i) shall not be liable for the fees and expenses of more than one counsel
to
all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for
such reasonable fees and expenses of such counsel incurred in any such Third
Party Claim, as such expenses are incurred, provided that the Indemnified
Parties agree to repay such amounts if it is ultimately determined that the
Indemnifying Party was not obligated to provide indemnification under this
Article IX. The Indemnifying Party agrees that it will not, without the prior
written consent of the Indemnified Party, settle, compromise or consent to
the
entry of any judgment in any pending or threatened claim relating to the matters
contemplated hereby (if any Indemnified Party is a party thereto or has been
actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Party from all liability arising or that may arise out of such claim. The rights
accorded to an Indemnified Party hereunder shall be in addition to any rights
that any Indemnified Party may have at common law, by separate agreement or
otherwise; provided, however, that notwithstanding the foregoing or anything
to
the contrary contained in this Agreement, nothing in this Article IX shall
restrict or limit any rights that any Indemnified Party may have to seek
equitable relief.
21
ARTICLE
X
MISCELLANEOUS
Section
10.1 Fees
and Expenses.
(a) Each
of
the Company and the Investor agrees to pay its own expenses incident to the
performance of its obligations hereunder, except that the Company shall be
solely responsible for (i) all reasonable attorneys fees and expenses incurred
by the Investor in connection with the preparation, negotiation, execution
and
delivery of this Agreement, the Registration Rights Agreement and the Warrant,
and review of the Registration Statement, and in connection with any amendments,
modifications or waivers of this Agreement, including, without limitation,
all
reasonable attorneys fees and expenses, (ii) all stamp or other similar taxes
and duties, if any, levied in connection with issuance of the Shares pursuant
hereto; provided, however, that in each of the above instances the Investor
shall provide customary supporting invoices or similar documentation in
reasonable detail describing such expenses (however, the Investor shall not
be
obligated to provide detailed time sheets for legal fees and expenses), and
provided further, that the maximum aggregate amount payable by the Company
pursuant to clause (i) above shall be $75,000 and the Investor shall bear all
fees and expenses in excess of $75,000 in connection with clause (i) above.
(b) If
any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the Registration Rights Agreement or the Warrant, the prevailing
party shall be entitled to reasonable fees, costs and necessary disbursements
in
addition to any other relief to which such party may be entitled.
Section
10.2 Reporting
Entity for the Common Stock.
The
reporting entity relied upon for the determination of the trading price or
trading volume of the Common Stock on any given Trading Day for the purposes
of
this Agreement shall be Bloomberg, L.P. or any successor thereto. The written
mutual consent of the Investor and the Company shall be required to employ
any
other reporting entity.
Section
10.3 Brokerage.
Each of
the parties hereto represents that it has had no dealings in connection with
this transaction with any finder or broker who will demand payment of any fee
or
commission from the other party. The Company on the one hand, and the Investor,
on the other hand, agree to indemnify the other against and hold the other
harmless from any and all liabilities to any Persons claiming brokerage
commissions or finder’s fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
Section
10.4 Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice given in accordance herewith, in each case with a copy to
the
e-mail address set forth beside the facsimile number for the addressee below.
Any notice or other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by facsimile,
with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a Trading Day during normal
business hours where such notice is to be received), or the first Trading Day
following such delivery (if delivered other than on a Trading Day during normal
business hours where such notice is to be received) or (b) on the second Trading
Day following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
22
|
If
to the Company:
|
|
|
Discovery
Laboratories, Inc.
|
|
|
2600
Kelley Road, Suite 100
|
|
|
Warrington,
Pennsylvania 18976
|
|
|
Facsimile:
215-488-9300
|
|
|
Attention:
Deputy General Counsel
|
|
|
Email:
mtempleton@DiscoveryLabs.com
|
|
|
with
a copy (which shall not constitute notice) to:
|
|
|
Dickstein
Shapiro LLP
|
|
|
1177
Avenue of the Americas, 41st Floor
|
|
|
New
York, NY 10036-2714
|
|
|
Telephone:
(212) 227-6500
|
|
|
Facsimile:
(212) 227-6501
|
|
|
E-mail:
koteli@dicksteinshapiro.com
|
|
|
Attention:
Ira L. Kotel
|
|
|
if
to the Investor:
|
|
|
Kingsbridge
Capital Limited
|
|
|
Attention:
Mr. Tony Gardner-Hillman
|
|
|
P.O.
Box 1075
|
|
|
Elizabeth
House
|
|
|
9
Castle Street
|
|
|
St.
Helier
|
|
|
Jersey
|
|
|
JE42QP
|
|
|
Channel
Islands
|
|
|
Telephone:
011-44-1534-636-041
|
|
|
Facsimile:
011-44-1534-636-042
|
|
|
Email:
admin@kingsbridgecap.com; and
adamgurney@kingsbridgecap.com
|
|
|
with
a copy (which shall not constitute notice) to:
|
|
|
Kingsbridge
Corporate Services Limited
|
|
|
Kingsbridge
House
|
|
|
New
Abbey
|
|
|
Kilcullen,
County Kildare
|
|
|
Republic
of Ireland
|
|
|
Telephone:
011-353-45-481-811
|
|
|
Facsimile:
011-353-45-482-003
|
|
|
Email:
adamgurney@kingsbridge.ie; emmagalway@kingsbridge.ie; and
pwhelan@kingsbridge.ie
|
|
23
|
and
another copy (which shall not constitute notice) to:
|
|
|
Stroock
& Stroock & Lavan LLP
|
|
|
180
Maiden Lane
|
|
|
New
York, NY 10038
|
|
|
Facsimile:
(212) 806-5400
|
|
|
Attention:
Keith M. Andruschak, Esq. -
kandruschak@stroock.com
|
Either
party hereto may from time to time change its contact information for notices
under this Section by giving at least ten (10) days’ prior written notice of
such changed contact information to the other party hereto.
Section
10.5 Assignment.
Neither
this Agreement nor any rights of the Investor or the Company hereunder may
be
assigned by either party to any other Person.
Section
10.6 Amendment;
No Waiver.
No
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth in
this Agreement, the Warrant and the Registration Rights Agreement. Except as
expressly provided in this Agreement, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by both parties hereto. The failure of either party to insist
on strict compliance with this Agreement, or to exercise any right or remedy
under this Agreement, shall not constitute a waiver of any rights provided
under
this Agreement, nor estop the parties from thereafter demanding full and
complete compliance nor prevent the parties from exercising such a right or
remedy in the future.
Section
10.7 Entire
Agreement.
This
Agreement, the Registration Rights Agreement and the Warrant set forth the
entire agreement and understanding of the parties relating to the subject matter
hereof and supersedes all prior and contemporaneous agreements, negotiations
and
understandings between the parties, both oral and written, relating to the
subject matter hereof.
Section
10.8 Severability.
If any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that, if the severance
of such provision materially changes the economic benefits of this Agreement
to
either party as such benefits are anticipated as of the date hereof, then such
party may terminate this Agreement on five (5) Trading Days prior written notice
to the other party. In such event, the Registration Rights Agreement will
terminate simultaneously with the termination of this Agreement; provided that
in the event that this Agreement is terminated by the Company in accordance
with
this Section 10.8 and the Warrant Shares either have not been registered for
resale by the Investor in accordance with the Registration Rights Agreement
or
are otherwise not freely tradable (if and when issued) in accordance with
applicable law, then the Registration Rights Agreement in respect of the
registration of the Warrant Shares shall remain in full force and
effect.
24
Section
10.9 Title
and Subtitles.
The
titles and subtitles used in this Agreement are used for the convenience of
reference and are not to be considered in construing or interpreting this
Agreement.
Section
10.10 Counterparts.
This
Agreement may be executed in multiple counterparts, each of which may be
executed by less than all of the parties and shall be deemed to be an original
instrument which shall be enforceable against the parties actually executing
such counterparts and all of which together shall constitute one and the same
instrument.
Section
10.11 Choice
of Law.
This
Agreement shall be construed under the laws of the State of New
York.
Section
10.12 Specific
Enforcement, Consent to Jurisdiction.
(a) The
Company and the Investor acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It
is accordingly agreed that either party shall be entitled to an injunction
or
injunctions to prevent or cure breaches of the provisions of this Agreement
by
the other party and to enforce specifically the terms and provisions hereof
or
thereof, this being in addition to any other remedy to which either party may
be
entitled by law or equity.
(b) Each
of
the Company and the Investor (i) hereby irrevocably submits to the jurisdiction
of the United States District Court and other courts of the United States
sitting in the State of New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii) hereby waives,
and agrees not to assert in any such suit, action or proceeding, any claim
that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue
of
the suit, action or proceeding is improper. Each of the Company and the Investor
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to
it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section 10.12
shall affect or limit any right to serve process in any other manner permitted
by law.
Section
10.13 Survival.
The
representations and warranties of the Company and the Investor contained in
Articles IV and V and the covenants contained in Article V and Article VI shall
survive the execution and delivery hereof and the Closing until the termination
of this Agreement, and the agreements and covenants set forth in Article VIII
and Article IX of this Agreement shall survive the execution and delivery hereof
and the Closing hereunder.
Section
10.14 Publicity.
Except
as otherwise required by applicable law or regulation, or NASDAQ rule or
judicial process, prior to the Closing, neither the Company nor the Investor
shall issue any press release or otherwise make any public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement. In the event the Company is required
by law, regulation, NASDAQ rule or judicial process, based upon reasonable
advice of the Company’s counsel, to issue a press release or otherwise make a
public statement or announcement with respect to this Agreement prior to the
Closing, the Company shall consult with the Investor on the form and substance
of such press release, statement or announcement. Promptly after the Closing,
each party may issue a press release or otherwise make a public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement; provided that, prior to issuing
any
such press release, making any such public statement or announcement, the party
wishing to make such release, statement or announcement consults and cooperates
in good faith with the other party in order to formulate such press release,
public statement or announcement in form and substance reasonably acceptable
to
both parties.
Section
10.15 Further
Assurances.
From
and after the date of this Agreement, upon the request of the Investor or the
Company, each of the Company and the Investor shall execute and deliver such
instruments, documents and other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
[Remainder
of this page intentionally left blank]
25
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officer as of the date first
written.
|
KINGSBRIDGE
CAPITAL LIMITED
|
||
| |
|
|
| By: |
/s/
Tony Gardner-Hillman
|
|
|
Tony
Gardner-Hillman
|
||
|
Director
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DISCOVERY
LABORATORIES, INC..
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| By: | /s/ John G. Cooper | |
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Name:
John G. Cooper
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Title:
Executive Vice President and
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Chief
Financial Officer
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26
Exhibit
A
Form
of Registration Rights Agreement
27
Exhibit
B
Form
of Warrant
28
Exhibit
C
Form
of Draw Down Notice
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Kingsbridge
Capital Limited
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Attention:
Mr. Tony Gardner-Hillman
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P.O.
Box 1075
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Elizabeth
House
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9
Castle Street
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St.
Helier
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Jersey
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JE42QP
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Channel
Islands
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Facsimile:
011-44-1534-636-042
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Email:
admin@kingsbridgecap.com; and
adamgurney@kingsbridgecap.com
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Kingsbridge
Corporate Services Limited
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Kingsbridge
House
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New
Abbey
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Kilcullen,
County Kildare
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Republic
of Ireland
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Facsimile:
011-353-45-482-003
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Email:
adamgurney@kingsbridge.ie; and pwhelan@kingsbridge.ie
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Stroock
& Stroock & Lavan LLP
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180
Maiden Lane
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New
York, NY 10038
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Facsimile:
(212) 806-5400
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Attention:
Keith M. Andruschak, Esq. -
kandruschak@stroock.com
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Reference
is hereby made to that certain Common Stock Purchase Agreement dated as of
May
22, 2008 (the “Agreement”) by and between Discovery Laboratories, Inc., a
corporation organized and existing under the laws of the State of Delaware
(the
“Company”), and Kingsbridge Capital Limited, an entity organized and existing
under the laws of the British Virgin Islands (the “Investor”). Capitalized terms
used and not otherwise defined herein shall have the meanings given such terms
in the Agreement.
In
accordance with and pursuant to Section 3.1 of the Agreement, the Company hereby
issues this Draw Down Notice to the Investor pursuant to the terms set forth
below.
Draw
Down
Amount: $___________; and
First
Trading Day of Draw Down Pricing Period: __________, 20[_].
Enclosed
with this Draw Down Notice is an executed copy of the Officer’s Certificate
described in Section 3.1 of the Agreement, the base form of which is attached
to
such Agreement as Exhibit D.
29
Exhibit
D
Officer’s
Certificate
I,
[NAME
OF OFFICER], do hereby certify to Kingsbridge Capital Limited (the “Investor”),
with
respect to the common stock of Discovery Laboratories, Inc. (the “Company”)
issuable in connection with the Draw Down Notice, dated _______________ (the
“Notice”)
attached hereto and delivered pursuant to Article III of the Common Stock
Purchase Agreement, dated May 22, 2008 (the “Agreement”),
by
and between the Company and the Investor, as follows (capitalized terms used
but
undefined herein have the meanings given to such terms in the
Agreement):
1. I
am the
duly elected [OFFICER] of the Company.
2. The
representations and warranties of the Company set forth in Article IV of the
Agreement are true and correct in all material respects as though made on and
as
of the date hereof (except for such representations and warranties that are
made
as of a particular date).
3. The
Company has performed in all material respects all covenants and agreements
to
be performed by the Company on or prior to the date hereof related to the Notice
and has satisfied each of the conditions to the obligation of the Investor
set
forth in Article VII of the Agreement.
4. The
Shares issuable in respect of the Notice will be delivered without restrictive
legend via book entry through the Depositary Trust Company to an account
designated by the Investor.
The
undersigned has executed this Certificate this _____ day of, 20[_].
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Name:
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Title:
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30
Execution
Copy
This
REGISTRATION RIGHTS AGREEMENT (this “Agreement”),
dated
as of May 22nd, 2008, is by and between DISCOVERY LABORATORIES, INC. (the
“Company”)
and
KINGSBRIDGE CAPITAL LIMITED (the “Investor”).
WHEREAS,
the Company and the Investor have entered into that certain Common Stock
Purchase Agreement, dated as of the date hereof (the “Purchase
Agreement”),
pursuant to which the Company may issue, from time to time, to the Investor
up
to $60 million worth of shares of Common Stock as provided for
therein;
WHEREAS,
pursuant to the terms of, and in partial consideration for the Investor entering
into, the Purchase Agreement, the Company has issued to the Investor a warrant,
exercisable from time to time, in accordance with its terms, within five (5)
years following the six-month anniversary of the date of issuance (the
“Warrant”)
for
the purchase of an aggregate of up to 825,000 shares of Common Stock at a price
specified in such Warrant;
WHEREAS,
pursuant to the terms of, and in partial consideration for, the Investor’s
agreement to enter into the Purchase Agreement, the Company has agreed to
provide the Investor with certain registration rights with respect to the
Registrable Securities (as defined in the Purchase Agreement) as set forth
herein;
NOW,
THEREFORE, in consideration of the premises, the representations, warranties,
covenants and agreements contained herein, in the Warrant, and in the Purchase
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, intending to be legally bound
hereby, the parties hereto agree as follows (capitalized terms used herein
and
not defined herein shall have the respective meanings ascribed to them in the
Purchase Agreement):
ARTICLE
I
REGISTRATION
RIGHTS
Section
1.1 Registration
Statement.
(a) Filing
of the Registration Statement.
Upon
the terms and subject to the conditions set forth in this Agreement, the Company
shall file with the Commission within ninety (90) calendar days after the
Closing Date a registration statement on Form S-3 under the Securities Act
or
such other form as deemed appropriate by counsel to the Company for the
registration for the resale by the Investor of the Registrable Securities (the
“Registration
Statement”),
provided, however, that the Company’s obligations in this Article I are subject
to any limitations on the Company’s ability to register the full complement of
such Registrable Securities in accordance with Rule 415 under the Securities
Act
or other regulatory limitations.
(b) Effectiveness
of the Registration Statement.
The
Company shall use commercially reasonable efforts (i) to have the
Registration Statement declared effective by the Commission as soon as
reasonably practicable, but in any event no later than one hundred eighty (180)
calendar days after the Closing Date and (ii) to ensure that the
Registration Statement remains in effect throughout the term of this Agreement
as set forth in Section 4.2, subject to the terms and conditions of this
Agreement.
(c) Regulatory
Disapproval.
The
contemplated effective date for the Registration Statement as described in
Section 1.1(b) shall be extended without default or liquidated damages
hereunder or under the Purchase Agreement in the event that the Company’s
failure to obtain the effectiveness of the Registration Statement on a timely
basis results from (i)
the
failure of the Investor to timely provide the Company with information requested
by the Company and necessary to complete the Registration Statement in
accordance with the requirements of the Securities Act or (ii) the
Commission’s
disapproval of the structure of the transactions contemplated by the Purchase
Agreement,
or
(iii) events or circumstances that are not in any way attributable to the
Company, including but not limited to delays caused by the Commission. In
the
event
of
clause (ii) above,
the
parties agree to cooperate with one another in good faith to arrive at a
resolution acceptable to the Commission.
(d) Failure
to Maintain Effectiveness of Registration Statement.
In the
event the Company fails to maintain the effectiveness of the Registration
Statement (or the Prospectus) throughout the period set forth in Section 4.2,
other than temporary suspensions as set forth in Section 1.1(e), and the
Investor holds any Registrable Securities at any time during the period of
such
ineffectiveness (an “Ineffective Period”), and provided that such failure to
maintain effectiveness was within the reasonable control of the Company, the
Company shall pay on demand to the Investor in immediately available funds
into
an account designated by the Investor an amount equal to the product of (i)
the
total number of Registrable Securities issued to the Investor under the Purchase
Agreement (which, for the avoidance of doubt, shall not include any Warrant
Shares) and owned by the Investor at any time during such Ineffective Period
(and not otherwise sold, hypothecated or transferred) and (ii) the result,
if
greater than zero, obtained by subtracting the VWAP on the Trading Day
immediately following the last day of such Ineffective Period from the VWAP
on
the Trading Day immediately preceding the day on which any such Ineffective
Period began; provided, however, that (A)
the
foregoing payments shall not apply in respect of Registrable Securities
(I)
that
are
otherwise freely tradable by the Investor,
including pursuant to Rule 144 under the Securities Act (as such Rule may be
amended from time to time, "Rule 144") or (II) if the Company offers to
repurchase from the Investor such Registrable Securities for a per share
purchase price equal to the VWAP on the Trading Day immediately preceding the
day on which any such Ineffective Period began and (B) unless otherwise required
by any applicable federal and state securities laws, the Company shall be under
no obligation to supplement the Prospectus to reflect the issuance of any Shares
pursuant to a Draw Down at any time prior to the day following the Settlement
Date with respect to such Shares and that the failure to supplement the
Prospectus prior to such time shall not be deemed a failure to maintain the
effectiveness of the Registration Statement (or Prospectus) for purposes of
this
Agreement (including this Section 1.1(d)).
(e) Deferral
or Suspension During a Blackout Period.
Notwithstanding the provisions of Section 1.1(d), if in the good faith
judgment of the Company, following consultation with legal counsel, it would
be
detrimental to the Company or its stockholders for the Registration Statement
to
be filed or for resales of Registrable Securities to be made pursuant to the
Registration Statement due to (i) the existence of a material development
or potential material development involving the Company that the Company would
be obligated to disclose or incorporate by reference in the Registration
Statement and which the Company has not disclosed, or which disclosure would
be
premature or otherwise inadvisable at such time or would have a Material Adverse
Effect on the Company or its stockholders, or (ii) a filing of a
Company-initiated registration of any class of its equity securities would
adversely affect or require premature disclosure of such filing (the Company’s
notice thereof, a “Blackout
Notice”),
the
Company shall have the right to (A) immediately defer such filing for a
period of not more than sixty (60) days beyond the date by which such
Registration Statement was otherwise required hereunder to be filed or
(B) suspend use of such Registration Statement for a period of not more
than thirty (30) days (any such deferral or suspension period, a “Blackout
Period”).
The
Investor acknowledges that it would be seriously detrimental to the Company
and
its stockholders for such Registration Statement to be filed (or remain in
effect) during a Blackout Period and therefore essential to defer such filing
(or suspend the use thereof) during such Blackout Period and agrees to cease
any
disposition of the Registrable Securities during such Blackout Period. The
Company may not utilize any of its rights under this Section 1.1(e) to
defer the filing of a Registration Statement (or suspend its effectiveness)
more
than six (6) times in any twelve (12) month period. In the event that, within
fifteen (15) Trading Days following any Settlement Date, the Company gives
a
Blackout Notice to the Investor and the VWAP on the Trading Day immediately
preceding such Blackout Period (“Old
VWAP”)
is
greater than the VWAP on the first Trading Day following such Blackout Period
that the Investor may sell its Registrable Securities pursuant to an effective
Registration Statement (“New
VWAP”),
then
the Company shall pay to the Investor, by wire transfer of immediately available
funds to an account designated by the Investor, the “Blackout Amount.” For the
purposes of this Agreement, Blackout Amount means a percentage equal to: (1)
seventy-five percent (75%) if such Blackout Notice is delivered prior to the
fifth (5th) Trading Day following such Settlement Date; (2) fifty percent (50%)
if such Blackout Notice is delivered on or after the fifth (5th) Trading Day
following such Settlement Date, but prior to the tenth (10th) Trading Day
following such Settlement Date; (3) twenty-five percent (25%) if such Blackout
Notice is delivered on or after the tenth (10th) Trading Day following such
Settlement Date, but prior to the fifteenth (15th) Trading Day following such
Settlement Date; and (4) zero percent (0%) thereafter of: the product of (i)
the
number of Registrable Securities purchased by the Investor pursuant to the
most
recent Draw Down and actually held by the Investor (and not otherwise sold,
hypothecated or transferred) immediately prior to the Blackout Period and (ii)
the result, if greater than zero, obtained by subtracting the New VWAP from
the
Old VWAP; provided, however, that no Blackout Amount shall be payable in respect
of Registrable Securities (x) that are otherwise freely tradable by the
Investor, including under Rule 144, during the Blackout Period or (y) if the
Company offers to repurchase from the Investor such Registrable Securities
for a
per share purchase price equal to the VWAP on the Trading Day immediately
preceding the day on which any such Blackout Period began. For any Blackout
Period in respect of which a Blackout Amount becomes due and payable, rather
than paying the Blackout Amount, the Company may at is sole discretion, issue
to
the Investor shares of Common Stock with an aggregate market value determined
as
of the first Trading Day following such Blackout Period equal to the Blackout
Amount (“Blackout
Shares”).
2
(f) Liquidated
Damages;
Sole
Remedy.
The
Company and the Investor hereto acknowledge and agree that the amounts payable
under Sections 1.1(d) and 1.1(e) and
the
Blackout Shares deliverable under Section 1.1(e) above
shall
constitute liquidated damages and not penalties. The parties further acknowledge
that (i) the
amount of loss or damages likely to be incurred by the Investor is incapable
or
is difficult to precisely estimate, (ii) the
amounts specified in such subsections bear a reasonable proportion and are
not
plainly or grossly disproportionate to the probable loss likely to be incurred
in connection with any failure by the Company to obtain or maintain the
effectiveness of the Registration Statement, (iii) one
of
the reasons for the Company and the Investor reaching an agreement as to such
amounts was the uncertainty and cost of litigation regarding the question of
actual damages, and (iv) the
Company and the Investor are sophisticated business parties and have been
represented by sophisticated and able legal and financial counsel and negotiated
this Agreement at arm’s length.
The
Investor agrees that, so long as the Company makes the payments or deliveries
provided for in Sections 1.1(d) or 1.1(e), as applicable, the Company’s failure
to maintain the effectiveness, deferral or suspension of the Registration
Statement that triggered such payments or deliveries shall not constitute a
material breach or default of any obligation of the Company to the
Investor
and such
payments or deliveries shall constitute the Investor’s sole remedies with
respect thereto.
(g) Additional
Registration Statements.
In the
event and to the extent that the Registration Statement fails to register a
sufficient amount of Common Stock necessary for the Company to issue and sell
to
the Investor and the Investor to purchase from the Company all of the
Registrable Securities to be issued, sold and purchased under the Purchase
Agreement and the Warrant, the Company shall, upon a timetable mutually
agreeable to both the Company and the Investor, use its commercially reasonable
efforts to prepare and file with the Commission an additional registration
statement or statements in order to effectuate the purpose of this Agreement,
the Purchase Agreement, and the Warrant.
ARTICLE
II
REGISTRATION
PROCEDURES
Section
2.1 Filings;
Information.
The
Company shall effect the registration with respect to the sale of the
Registrable Securities by the Investor in accordance with the intended methods
of disposition thereof. Without limiting the foregoing, the Company in each
such
case will do the following as expeditiously as is commercially reasonable,
but
in no event later than the deadline, if any, prescribed therefor in this
Agreement:
(a) Subject
to Section 1.1(e), the Company shall (i) prepare and file with the
Commission the Registration Statement; (ii) use commercially reasonable
efforts to cause such filed Registration Statement to become and to remain
effective (pursuant to Rule 415 under the Securities Act or otherwise);
(iii) prepare and file with the Commission such amendments and supplements
to the Registration Statement and the Prospectus used in connection therewith
as
may be necessary to keep such Registration Statement effective for the time
period prescribed by Section 4.2 and in order to effectuate the purpose of
this Agreement, the Purchase Agreement, and the Warrant; and (iv) comply in
all material respects with the provisions of the Securities Act with respect
to
the disposition of all securities covered by such Registration Statement during
such period in accordance with the intended methods of disposition by the
Investor set forth in such Registration Statement; provided, however, that
the
Company shall be under no obligation to supplement the Prospectus to reflect
the
issuance of any Shares pursuant to a Draw Down at any time prior to the Trading
Day following the second Settlement Date with respect to a Draw Down and,
provided further, however, that the Investor shall be responsible for the
delivery of the Prospectus to the Persons to whom the Investor sells the Shares
and the Warrant Shares, and the Investor agrees to dispose of Registrable
Securities in compliance with the plan of distribution described in the
Registration Statement and otherwise in compliance with applicable federal
and
state securities laws.
3
(b) The
Company shall deliver to the Investor and its counsel, in accordance with the
notice provisions of Section 4.8, such number of copies of the Registration
Statement, each amendment and supplement thereto (in each case including all
exhibits thereto), the Prospectus (including each preliminary prospectus) and
such other documents or information as the Investor or counsel may reasonably
request in order to facilitate the disposition of the Registrable Securities,
provided, however, that to the extent reasonably practicable, such delivery
may
be accomplished via electronic means.
(c) After
the
filing of the Registration Statement, the Company shall promptly notify the
Investor of any stop order issued or, to the Knowledge of the Company,
threatened by the Commission in connection therewith and take all commercially
reasonable actions required to prevent the entry of such stop order or to remove
it if entered.
(d) The
Company shall use commercially reasonable efforts to (i) register or
qualify the Registrable Securities under such other securities or blue sky
laws
of each jurisdiction in the United States as the Investor may reasonably (in
light of its intended plan of distribution) request, and (ii) cause the
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary
by
virtue of the business and operations of the Company and do any and all other
customary acts and things that may be reasonably necessary or advisable to
enable the Investor to consummate the disposition of the Registrable Securities;
provided, however, that the Company will not be required to qualify generally
to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 2.1(d), subject itself to taxation in any such
jurisdiction, consent or subject itself to general service of process in any
such jurisdiction, change any existing business practices, benefit plans or
outstanding securities or amend or otherwise modify the Charter or
Bylaws.
(e) The
Company shall make available to the Investor (and will deliver to Investor’s
counsel), (i) subject to restrictions imposed by the United States federal
government or any agency or instrumentality thereof, copies of all public
correspondence between the Commission and the Company concerning the
Registration Statement and will also make available for inspection by the
Investor and any attorney, accountant or other professional retained by the
Investor (collectively, the “Inspectors”),
(ii) upon reasonable advance notice during normal business hours all
financial and other records, pertinent corporate documents and properties of
the
Company (collectively, the “Records”)
as
shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company’s officers and employees to supply all
information reasonably requested by any Inspectors in connection with the
Registration Statement; provided, however, that (x) the Company shall not be
obligated to disclose any portion of the Records consisting of either (A)
material non-public information or (B) confidential information of a third
party
and (y) any such Inspectors must agree in writing for the benefit of the Company
not to use or disclose any such Records except as provided in this
Section 2.1(e). Records that the Company determines, in good faith, to be
confidential and that it notifies the Inspectors are confidential shall not
be
disclosed by the Inspectors unless the disclosure or release of such Records
is
requested or required pursuant to oral questions, interrogatories, requests
for
information or documents or a subpoena or other order from a court of competent
jurisdiction or other judicial or governmental process; provided, however,
that
prior to any disclosure or release pursuant to the immediately preceding clause,
the Inspectors shall provide the Company with prompt notice of any such request
or requirement so that the Company may seek an appropriate protective order
or
waive such Inspectors’ obligation not to disclose such Records; and, provided,
further, that if failing the entry of a protective order or the waiver by the
Company permitting the disclosure or release of such Records, the Inspectors,
upon advice of counsel, are compelled to disclose such Records, the Inspectors
may disclose that portion of the Records that counsel has advised the Inspectors
that the Inspectors are compelled to disclose; provided, however, that upon
any
such required disclosure, such Inspector shall use his or her best efforts
to
obtain reasonable assurances that confidential treatment will be afforded such
information. The Investor agrees that information obtained by it solely as
a
result of such inspections (not including any information obtained from a third
party who, insofar as is known to the Investor after reasonable inquiry, is
not
prohibited from providing such information by a contractual, legal or fiduciary
obligation to the Company) shall be deemed confidential and shall not be used
for any purposes other than as indicated above or by it as the basis for any
market transactions in the securities of the Company or its affiliates unless
and until such information is made generally available to the public. The
Investor further agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of the Records deemed confidential.
4
(f) The
Company shall otherwise comply in all material respects with all applicable
rules and regulations of the Commission, including, without limitation,
compliance with applicable reporting requirements under the Exchange
Act.
(g) The
Company shall appoint (or shall have appointed) a transfer agent and registrar
for all of the Registrable Securities covered by such Registration Statement
not
later than the effective date of such Registration Statement.
(h) The
Investor shall cooperate with the Company, as reasonably requested by the
Company, in connection with the preparation and filing of any Registration
Statement hereunder. The Company may require the Investor to promptly furnish
in
writing to the Company such information as may be required in connection with
such registration including, without limitation, all such information as may
be
requested by the Commission, the NASDAQ Stock Market or FINRA or any state
securities commission and all such information regarding the Investor, the
Registrable Securities held by the Investor and the intended method of
disposition of the Registrable Securities. The Investor agrees to provide such
information requested in connection with such registration within five (5)
business days after receiving such written request and the Company shall not
be
responsible for any delays in obtaining or maintaining the effectiveness of
the
Registration Statement caused by the Investor’s failure to timely provide such
information.
(i) Upon
receipt of a Blackout Notice from the Company, the Investor shall immediately
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until (i) the Company
advises the Investor that the Blackout Period has terminated and (ii) the
Investor receives copies of a supplemented or amended prospectus, if necessary.
If so directed by the Company, the Investor will deliver to the Company (at
the
expense of the Company) or destroy (and deliver to the Company a certificate
of
destruction) all copies in the Investor’s possession (other than a limited
number of file copies) of the prospectus covering such Registrable Securities
that is current at the time of receipt of such notice.
Section
2.2 Registration
Expenses.
Except
as set forth in Section 10.1 of the Purchase Agreement, the Company shall
pay all registration expenses incurred in connection with the Registration
Statement (the “Registration
Expenses”),
including, without limitation: (a) all registration, filing, securities
exchange listing and fees required by the NASDAQ Stock Market, (b) all
registration, filing, qualification and other fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements
of
counsel in connection with blue sky qualifications of the Registrable
Securities), (c) all of the Company’s word processing, duplicating,
printing, messenger and delivery expenses, (d) the Company’s internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), (e) the fees
and expenses incurred by the Company in connection with the listing of the
Registrable Securities, (f) reasonable fees and disbursements of counsel for
the
Company and customary fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any special
audits or comfort letters or costs associated with the delivery by independent
certified public accountants of such special audit(s) or comfort letter(s),
(g)
the fees and expenses of any special experts retained by the Company in
connection with such registration and amendments and supplements to the
Registration Statement and Prospectus, and (h) premiums and other costs of
the
Company for policies of insurance against liabilities of the Company arising
out
of any public offering of the Registrable Securities being registered, to the
extent that the Company, in its discretion, elects to obtain and maintain such
insurance. Any fees and disbursements of underwriters, broker-dealers or
investment bankers, including without limitation underwriting fees, discounts,
transfer taxes or commissions, and any other fees or expenses (including legal
fees and expenses) if any, attributable to the sale of Registrable Securities,
shall be payable by each holder of Registrable Securities pro rata on the basis
of the number of Registrable Securities of each such holder that are included
in
a registration under this Agreement.
5
ARTICLE
III
INDEMNIFICATION
Section
3.1 Indemnification.
The
Company agrees to indemnify and hold harmless the Investor, its partners,
affiliates, officers, directors, employees and duly authorized agents, and
each
Person or entity, if any, who controls the Investor within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
together with the partners, affiliates, officers, directors, employees and
duly
authorized agents of such controlling Person or entity (collectively, the
“Controlling
Persons”),(each
of
the
Investor, its partners, affiliates, officers, directors, employees and duly
authorized agents, and the
Investor’s Controlling Persons, an “Investor Indemnified Person”),
from and
against any loss, claim, damage, liability, costs and expenses (including,
without limitation, reasonable attorneys’ fees and disbursements and costs and
expenses of investigating and defending any such claim) (collectively,
“Damages”), joint or several, and any action or proceeding in respect thereof to
which an
Indemnified Investor Person
may
become subject under the Securities Act or otherwise, as incurred, insofar
as
such Damages (or actions or proceedings in respect thereof) arise out of, or
are
based upon, any untrue statement or alleged untrue statement of a material
fact
contained in any Registration Statement, or in any preliminary prospectus,
final
prospectus, summary prospectus, amendment or supplement relating to the
Registrable Securities or arises out of, or are based upon, any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein under the circumstances not
misleading, and shall reimburse such
Investor Indemnified Person
for any
legal and other expenses reasonably incurred by the Investor, its partners,
affiliates, officers, directors, employees and duly authorized agents, or any
such Controlling Person, as incurred, in investigating or defending or preparing
to defend against any such Damages or actions or proceedings; provided, however,
that the Company shall not be liable to the extent that any such Damages arise
out of the Investor’s (or any other Investor indemnified Person’s) (i) failure
to send or give a copy of the final prospectus or supplement (as then amended
or
supplemented) to the persons asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such person if such
statement or omission was corrected in such final prospectus or supplement
or
(ii) written confirmation of the sale of Registrable Securities purchased in
any
specific Draw Down prior to the filing of a supplement to the Prospectus to
reflect such Draw Down (provided, that the Company is in compliance with its
covenants with respect to the filing of such supplement); provided, further,
that the Company shall not be liable to the extent that any such Damages arise
out of or are based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such Registration Statement, or any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Investor or any other person who
participates as an underwriter in the offering or sale of such securities,
in
either case, specifically stating that it is for use in the preparation thereof.
In connection with any Registration Statement with respect to which the Investor
is participating, the Investor will indemnify and hold harmless, to the same
extent and in the same manner as set forth in the preceding paragraph, the
Company, each of its partners, affiliates, officers, directors, employees and
duly authorized agents and
each
of
the
Company’s Controlling Persons
(each a
"Company
Indemnified Person")
against any Damages to which any Company Indemnified Person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such Damages
arise out of or are based upon (a) any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement, or in
any
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement relating to the Registrable Securities or arise out of, or are based
upon, any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein under the
circumstances not misleading to the extent that such violation occurs in
reliance upon and in conformity with written information furnished to the
Company by the Investor or on behalf of the Investor expressly for use in
connection with such Registration Statement, or (b) any failure by the
Investor to comply with prospectus delivery requirements of the Securities
Act,
the Exchange Act or any other law or legal requirement applicable to sales
under
the Registration Statement, or (c) a written confirmation of the sale of
Registrable Securities purchased by such Investor in any specific Draw Down
prior to the filing of a supplement to the Prospectus to reflect such Draw
Down
(provided the Company is in compliance with its covenants with respect to the
filing of such supplement).
6
Section
3.2 Conduct
of Indemnification Proceedings.
All
claims for indemnification under Section 3.1 shall be asserted and resolved
in accordance with the provisions of Section 9.2 and 9.3 of the Purchase
Agreement.
Section
3.3 Additional
Indemnification.
Indemnification similar to that specified in the preceding paragraphs of this
Article III (with appropriate modifications) shall be given by the Company
and
the
Investor with
respect to any required registration or other qualification of securities under
any federal or state law or regulation of any governmental authority other
than
the Securities Act. The provisions of this Article III shall be in addition
to
any other rights to indemnification, contribution or other remedies which an
Investor
Indemnified
Person
or a
Company Indemnified Person may have pursuant to law, equity, contract or
otherwise.
To
the
extent that any indemnification provided for herein is prohibited or limited
by
law, the indemnifying party will make the maximum contribution with respect
to
any amounts for which it would otherwise be liable under this Article III to
the
fullest extent permitted by law. However, (a) no contribution will be made
under circumstances where the maker of such contribution would not have been
required to indemnify the indemnified party under the fault standards set forth
in this Article III, (b) if the Investor is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act),
no
Investor Indemnified
Person will
be
entitled to contribution from any Person who is not guilty of such fraudulent
misrepresentation, and (c) contribution (together with any indemnification
obligations under this Agreement) by the Investor will be limited in amount
to
the proceeds received by the Investor from sales of Registrable
Securities.
ARTICLE
IV
MISCELLANEOUS
Section
4.1 No
Outstanding Registration Rights.
Except
as otherwise disclosed in accordance with the Purchase Agreement or in the
Commission Documents, the Company represents and warrants to the Investor that
there is not in effect on the date hereof any agreement by the Company pursuant
to which any holders of securities of the Company have a right to cause the
Company to register or qualify such securities under the Securities Act or
any
securities or blue sky laws of any jurisdiction.
Section
4.2 Term.
The
registration rights provided to the holders of Registrable Securities hereunder,
and the Company’s obligation to keep the Registration Statement effective, shall
terminate at the earlier of (a) such time that is one year following the
termination of the Purchase Agreement, (b) such time as all Registrable
Securities have been issued and have ceased to be Registrable Securities, or
(c) upon the consummation of an “Excluded
Merger or Sale”
as
defined in the Warrant or an event described in the last sentence of Section
6(d) or Section 6(e) of the Warrant. Notwithstanding the foregoing, Section 1.1(d),
Article III, Section 4.7, Section 4.8, Section 4.9,
Section 4.10, Section 4.11 and Section 4.13 shall survive the
termination of this Agreement.
Section
4.3 Rule 144.
The
Company will, at its expense, promptly take such action as holders of
Registrable Securities may reasonably request to enable such holders of
Registrable Securities to sell Registrable Securities without registration
under
the Securities Act within the limitation of the exemptions provided by
(a) Rule 144
under
the Securities Act (“Rule 144”),
as
such Rule may be amended from time to time,
or
(b) any similar rule or regulation hereafter adopted by the Commission;
provided, that such holders of Registrable Securities may not make any such
request more than once in any calendar quarter during the term of this
Agreement.
If at
any time the Company is not required to file such reports, it will, at its
expense, forthwith upon the written request of any holder of Registrable
Securities, make available adequate current public information with respect
to
the Company within the meaning of Rule 144(c)(2) or such other information
as necessary to permit sales pursuant to Rule 144. Upon the request of the
Investor, the Company will deliver to the Investor a written statement, signed
by the Company’s principal financial officer, as to whether it has complied with
such requirements.
7
Section
4.4 Certificate.
The
Company will, at its expense, forthwith upon the request of any holder of
Registrable Securities, deliver to such holder a certificate, signed by the
Company’s principal financial officer, stating (a) the Company’s name,
address and telephone number (including area code), (b) the Company’s
Internal Revenue Service identification number, (c) the Company’s
Commission file number, (d) the number of shares of each class of capital
stock outstanding as shown by the most recent report or statement published
by
the Company, and (e) whether the Company has filed the reports required to
be
filed under the Exchange Act for a period of at least ninety (90) days prior
to
the date of such certificate and in addition has filed the most recent annual
report required to be filed thereunder.
Section
4.5 Amendment
And Modification.
Any
provision of this Agreement may be waived, provided that such waiver is set
forth in a writing executed by the Company and the holder(s) of the majority
of
then-outstanding Registrable Securities. The provisions of this Agreement,
including the provisions of this sentence, may be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may be given, with the written consent of the Company and the holder(s) of
the
majority of then-outstanding Registrable Securities. No course of dealing
between or among any Person having any interest in this Agreement will be deemed
effective to modify, amend or discharge any part of this Agreement or any rights
or obligations of any person under or by reason of this Agreement.
Section
4.6 Successors
and Assigns; Entire Agreement.
This
Agreement and all of the provisions hereof shall be binding upon and inure
to
the benefit of the parties hereto and their respective successors and permitted
assigns. The Company may assign this Agreement at any time in connection with
a
sale or acquisition of the Company, whether by merger, consolidation, sale
of
all or substantially all of the Company’s assets, or similar transaction,
without the consent of the Investor, provided that the successor or acquiring
Person or entity agrees in writing to assume all of the Company’s rights and
obligations under this Agreement. Investor may assign its rights and obligations
under this Agreement only with the prior written consent of the Company, and
any
purported assignment by the Investor absent the Company’s consent shall be null
and void. This Agreement, together with the Purchase Agreement and the Warrant
sets forth the entire agreement and understanding between the parties as to
the
subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature among them.
Section
4.7 Severability.
If any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that, if the severance
of such provision materially changes the economic benefits of this Agreement
to
either party as such benefits are anticipated as of the date hereof, then such
party may terminate this Agreement on five (5) business days prior written
notice to the other party. In such event, the Purchase Agreement will terminate
simultaneously with the termination of this Agreement.
Section
4.8 Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be given in accordance with
Section 10.4 of the Purchase Agreement.
Section
4.9 Governing
Law; Dispute Resolution.
This
Agreement shall be construed under the laws of the State of New
York.
Section
4.10 Headings.
The
headings in this Agreement are for convenience of reference only and shall
not
constitute a part of this Agreement, nor shall they affect their meaning,
construction or effect.
Section
4.11 Counterparts.
This
Agreement may be executed in multiple counterparts, each of which shall be
deemed to be an original instrument and all of which together shall constitute
one and the same instrument.
Section
4.12 Further
Assurances.
Each
party shall cooperate and take such action as may be reasonably requested by
another party in order to carry out the provisions and purposes of this
Agreement and the transactions contemplated hereby.
Section
4.13 Absence
of Presumption.
This
Agreement shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting or causing any
instrument to be drafted.
8
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by
the undersigned, thereunto duly authorized, as of the date first set forth
above.
|
KINGSBRIDGE
CAPITAL LIMITED
|
||
| |
|
|
| By: |
/s/
Tony Gardner-Hillman
|
|
|
Tony
Gardner-Hillman
|
||
|
Director
|
||
|
Discovery
Laboratories, Inc.
|
||
| |
|
|
| By: | /s/ John G. Cooper | |
|
Name:
John G. Cooper,
|
||
|
Title:Executive
Vice President and
Chief
Financial Officer
|
||
9
Discovery
Labs Secures $60 Million Committed Equity Financing
Facility
Warrington,
PA — May 27, 2008 — Discovery Laboratories, Inc. (Nasdaq:
DSCO),
has
entered into a new Committed Equity Financing Facility (CEFF) with Kingsbridge
Capital Limited, a private investment group, in which Kingsbridge has committed
to provide up to $60 million of capital over a three-year period through
the purchase of newly-issued shares of Discovery Labs’ common stock. Under the
terms of the agreement, Discovery Labs will determine the exact timing and
amount of any CEFF financings, subject to certain conditions. The CEFF allows
Discovery Labs to raise capital, at its discretion, to support the Company’s
business plans.
John
G.
Cooper, Executive Vice President and Chief Financial Officer of Discovery Labs,
commented, “This new CEFF, coupled with our existing cash and our 2006 CEFF,
significantly improves the Company’s financial flexibility to support the
potential commercialization of SURFAXIN®
for the
prevention of Respiratory Distress Syndrome in premature infants and the
development of our respiratory pipeline. Our ability to choose the timing and
amount of financings under our CEFF arrangements has the potential to minimize
dilution for our shareholders.”
Under
the
terms of the CEFF, Discovery Labs has access to up to $60 million from
Kingsbridge in exchange for newly-issued shares of Discovery Labs’ common stock.
The funds that can be raised under the CEFF will depend on the number of shares
actually sold, which may not exceed a total of approximately 19.3 million
shares. Discovery Labs may access the capital for up to three years after the
Securities and Exchange Commission declares effective a registration statement
to be filed by Discovery Labs covering the resale of the shares of common stock
issuable in connection with the CEFF.
Discovery
Labs may access capital under the CEFF in tranches of up to the lesser of $10
million or 3% of Discovery Labs’ market capitalization at the time of the draw
down of each tranche, subject to certain conditions. The shares covered by
each
tranche will be issued and priced over an eight-day period. Kingsbridge will
purchase shares of common stock pursuant to the CEFF at discounts ranging from
6% to 12% depending on the volume-weighted average market price of the common
stock. The minimum acceptable purchase price for the shares to be issued to
Kingsbridge during the eight-day period is determined by the higher of $1.15
or
90% of the volume-weighted average price of Discovery Labs’ common stock the day
before the commencement of each tranche. Throughout the term of the CEFF,
Kingsbridge is restricted from engaging in any short selling of Discovery Labs’
common stock.
Discovery
Labs is not obligated to use any of the $60 million available under the CEFF.
The CEFF does not restrict Discovery Labs’ operating activities and does not
prohibit Discovery Labs from entering into or completing debt or equity
financings, other than those that would involve certain future-priced
securities.
In
connection with the CEFF, Discovery Labs issued a warrant to Kingsbridge to
purchase up to 825,000 shares of common stock at an exercise price of $2.51
per
share, which represents a 40% premium over the average of the closing prices
of
Discovery Labs’ common stock during the five trading days preceding the signing
of the CEFF. The warrant will be exercisable beginning six months from the
date
of the agreement and will remain exercisable for five years.
The
securities issuable in connection with the CEFF and upon the exercise of the
warrant issued to Kingsbridge have not been registered under the Securities
Act
of 1933 and may not be offered or sold in the United States absent registration
under the Securities Act and applicable state securities laws or available
exemptions from registration requirements. Discovery Labs has agreed to file
a
registration statement for the resale of the shares of common stock issuable
in
connection with the CEFF and the shares of common stock underlying the warrant.
This press release shall not constitute an offer to sell or the solicitation
of
an offer to buy these securities, nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to the registration or qualification under the securities laws
of
any such state.
About
Discovery Labs
Discovery
Laboratories, Inc. is a biotechnology company developing Surfactant Replacement
Therapies (SRT) for respiratory diseases. Surfactants are produced naturally
in
the lungs and are essential for breathing. Discovery Labs’ technology produces a
peptide-containing synthetic surfactant that is structurally similar to
pulmonary surfactant. Discovery Labs believes that, with its proprietary
technology, SRT has the potential, for the first time, to advance respiratory
medicine and address a variety of respiratory diseases affecting neonatal,
pediatric and adult patients.
SURFAXIN®,
the
Company’s lead product from its SRT pipeline, is the subject of an Approvable
Letter from the FDA for the prevention of Respiratory Distress Syndrome in
premature infants. SURFAXIN is also being developed for other neonatal and
pediatric indications. AEROSURF™, Discovery Labs’ aerosolized SRT, is being
developed to potentially obviate the need for intubation and conventional
mechanical ventilation and holds
the
promise to significantly expand the use of surfactants in respiratory medicine.
For
more
information, please visit our website at www.Discoverylabs.com.
To
the extent that statements in this press release are not strictly historical,
all such statements are forward-looking, and are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from the statements made,
including, without limitation, the risks that: Discovery Labs may be unable
to
timely respond, if at all, to the recent approvable letter for Surfaxin;
Discovery Labs may not succeed in the FDA or other regulatory agency review
process, including that such regulatory authority may not approve the marketing
and sale of Surfaxin or any other drug product that Discovery Labs may develop,
or such regulatory agency may further delay and/or limit marketing of Surfaxin
or any of Discovery Labs’ drug products by indication or impose other label
limitations; Discovery Labs may not be able to raise additional capital or
enter
into additional collaboration agreements (including strategic alliances for
development or commercialization of SRT); changes in the national or
international political and regulatory environment may make it more difficult
for Discovery Labs to gain FDA or other regulatory approval of its products;
Discovery Labs may be unable to profitably develop and market its products;
Discovery Labs’ significant, time-consuming and costly research and development
activities, including pre-clinical studies, clinical trials and other efforts
to
gain regulatory approval for any of its products may not progress or may be
subject to potentially significant delays or regulatory holds, or fail;
Discovery Labs may be unable to successfully manufacture or provide adequate
supplies of drug substances on a timely basis; Discovery Labs may be unable
to
transfer its manufacturing technology to third-party contract manufacturers
or
its contract manufacturers or any of its materials suppliers may encounter
problems manufacturing drug products or drug substances on a timely basis or
manufacture in amounts sufficient to meet demand; Discovery Labs and its
collaborators may be unable to develop, manufacture and successfully
commercialize products that combine Discovery Labs’ drug products with
innovative aerosolization technologies; Discovery Labs may be unable to maintain
and protect the patents and licenses related to its SRT; other companies may
develop competing therapies and/or technologies or health care reform may
adversely affect Discovery Labs; and Discovery Labs may become involved in
securities, product liability and other litigation. The foregoing risks and
others are further described in Discovery Labs filings with the Securities
and
Exchange Commission including the most recent reports on Forms 10-K, 10-Q and
8-K, and any amendments thereto.
Company
Contact:
Lisa
Caperelli, Investor Relations
215-488-9413