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
February
18, 2010
Date of
Report (Date of earliest event reported)
Discovery
Laboratories, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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000-26422
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94-3171943
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
Number)
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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))
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Item
1.01.
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Entry into a Material
Definitive Agreement.
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On
February 18, 2010, Discovery Laboratories, Inc. (the “Company”) entered into an
Underwriting Agreement with Lazard Capital Markets LLC, as the sole underwriter
(the "Underwriter"), related to a public offering of 27,500,000 shares of common
stock, par value $.001 per share (“Common Stock”), and warrants to purchase
13,750,000 shares of Common Stock (“Warrants”). The shares of
Common Stock and Warrants are being sold as units (“Units”), with each Unit
consisting of (i) one share of Common Stock, and (ii) a Warrant to purchase 0.50
of a share of Common Stock, at a public offering price of $0.60 per Unit, less
underwriting commission and discounts (the "Offering"). The
Underwriter will purchase the Units at a discount of $0.042 per Unit,
representing seven percent (7.0%) of the public offering price, for an aggregate
discount of $1,155,000.
The
Warrants to be issued in the Offering will generally be exercisable for a period
of five years from the date of issuance at an exercise price of $0.85 per
share. The exercise price and number of shares of common stock
issuable on exercise of the Warrants will be subject to adjustment in the event
of any stock split, reverse stock split, stock dividend, recapitalization,
reorganization or similar transaction. The exercise price and the
amount and/or type of property to be issued upon exercise of the Warrants will
also be subject to adjustment if the Company engages in a “Fundamental
Transaction” (as defined in the Warrant).
The
Offering is expected to close on February 23, 2010, subject to the satisfaction
of customary closing conditions. The net proceeds to the Company are expected to
be approximately $15.1 million, assuming no exercise of the Warrants and after
deducting underwriting commissions and discounts and estimated expenses payable
by the Company associated with the Offering. The Offering is being
made pursuant to a preliminary prospectus supplement dated February 17, 2009,
prospectus supplement dated February 18, 2010 and an accompanying prospectus
dated June 18, 2009 pursuant to the Company's existing shelf registration
statement on Form S-3 (File No. 333-151654), which was filed with the Securities
and Exchange Commission (the "Commission") on June 13, 2008 and declared
effective by the Commission on June 18, 2008.
The
Underwriting Agreement contains customary representations, warranties, and
agreements by the Company, and customary conditions to closing, indemnification
obligations of the Company and the Underwriter, including for liabilities under
the Securities Act of 1933, as amended, other obligations of the parties, and
termination provisions.
The
Underwriting Agreement has been attached hereto as an exhibit to provide
investors and security holders with information regarding its terms. It is not
intended to provide any other factual information about the Company. The
representations, warranties and covenants contained in the Underwriting
Agreement were made only for purposes of such agreement and as of specific
dates, were solely for the benefit of the parties to such agreement, and may be
subject to limitations agreed upon by the contracting parties, including being
qualified by confidential disclosures exchanged between the parties in
connection with the execution of the Underwriting Agreement.
A copy of
the opinion of Sonnenschein Nath & Rosenthal LLP relating to the legality of
the issuance and sale of the securities in the Offering is attached as Exhibit
5.1 hereto. A copy of the Underwriting Agreement and the form of
Warrant to be issued in connection with the Offering are filed herewith as
Exhibits 1.1 and 4.1 and are incorporated herein by reference. The foregoing
description of the Offering by the Company and the documentation related thereto
does not purport to be complete and is qualified in its entirety by reference to
such Exhibits
On
February 18, 2010, the Company issued a press release announcing the pricing of
the offering. A copy of the press release is attached hereto as Exhibit 99.1,
and is incorporated herein by reference.
2
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Item
8.01.
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Other
Events.
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Reference
is made to the description of the Offering in Item 1.01. The Company agreed in
the Underwriting Agreement, subject to certain exceptions, not to offer and sell
any shares of its Common Stock or securities convertible into or exercisable or
exchangeable for shares of its Common Stock for a period of ninety (90) days
following the Offering without the written consent of the
Underwriter. However, commencing (a) March 6, 2010, the Company may
issue shares of Common Stock pursuant to the committed equity financing
facilities (the “CEFFs”) with Kingsbridge Capital Limited for the purpose of
satisfying up to $3 million of its obligations under its loan with Novaquest, a
strategic investment group of Quintiles Transnational Corp. (the “Novaquest
Loan”), (b) March 21, 2010, the Company may issue shares of Common Stock
pursuant to the CEFFs for any purpose (but in no event may the aggregate shares
of Common Stock issued under the CEFFs pursuant to (a) and (b) prior to May 4,
2010 exceed, in the aggregate, 2.0% of the Company’s outstanding Common Stock),
and (c) May 5, 2010, there will be no limitation on the Company’s issuance of
shares of Common Stock pursuant to the CEFFs. Other exceptions to the
“lock-up” include the Company's right to issue securities (i) in
connection with strategic alliances involving the Company and other entities and
(ii) to Quintiles Transnational Corp. in connection with the restructuring or
satisfaction of its obligations in whole or in part with respect to the
Novaquest Loan.
As of
December 31, 2009, the Company had cash and marketable securities of $15.7
million, representing a net decrease of $1.9 million from the previous quarter
ended September 30, 2009, primarily due to: (i) $6.0 million used for operating
activities and $0.2 million used for debt service, partially offset by (ii)
aggregate proceeds of $4.3 million from the issuance of 4.6 million shares of
Common Stock pursuant to financings under the Company’s Committed Equity
Financing Facilities. The Company had approximately 126.4 million shares
of Common Stock outstanding as of both December 31, 2009 and February 16,
2010.
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Item
9.01.
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Financial Statements
and Exhibits.
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(d)
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Exhibits
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1.1
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Underwriting
Agreement dated February 18, 2010 by and between Discovery Laboratories,
Inc. and Lazard Capital Markets
LLC.
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4.1
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Form
of Warrant.
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5.1
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Opinion
of Sonnenschein Nath & Rosenthal
LLP.
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23.1
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Consent
of Sonnenschein Nath & Rosenthal LLP (included in its opinion files as
Exhibit 5.1 hereto)
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99.1
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Press
Release dated February 18,
2010.
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3
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Discovery
Laboratories, Inc.
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By:
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/s/ W. Thomas Amick
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Name:
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W.
Thomas Amick
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Title:
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Chairman
of the Board and interim
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Chief
Executive Officer
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Date: February
18, 2010
4
Execution
Copy
27,500,000
Units
DISCOVERY
LABORATORIES, INC.
Common
Stock (par value $0.001)
UNDERWRITING
AGREEMENT
February
18, 2010
LAZARD
CAPITAL MARKETS LLC
30
Rockefeller Plaza
New York,
New York 10020
Dear
Sirs:
1. Introduction. Discovery
Laboratories, Inc., a Delaware corporation (the “Company”), proposes to issue
and sell to the Underwriter, pursuant to the terms and conditions of this
Underwriting Agreement (this “Agreement”), an aggregate of
27,500,000 units (the “Units”), with each Unit
consisting of (i) one share of common stock, $0.001 par value per share (the
“Common Stock”) of the
Company (the “Shares”)
and (ii) one warrant to purchase 0.50 of a share of Common Stock (the “Warrant”). Units
will not be issued or certificated. The Shares and Warrants are
immediately separable and will be issued separately. The terms of the
Warrant are set forth in the form of Exhibit A attached
hereto. The Company hereby confirms that Lazard Capital Markets LLC
(“LCM” or the “Underwriter”) shall act the
Underwriter in accordance with the terms and conditions hereof. The
Shares, Warrants and Warrant Shares are sometimes collectively referred to
herein as the “Securities.” The proposed
offering, issuance and sale of the Units is hereby referred to as the “Offering.”
2. Agreement to Act as
Underwriter. On
the basis of the representations, warranties and agreements of the Company
herein contained, and subject to all the terms and conditions of this
Agreement:
2.1 The
Company agrees to issue and sell and the Underwriter agrees to purchase from the
Company an aggregate of 27,500,000 Units at a purchase price of $0.558 per Unit
(the “Purchase
Price”). The Company has been advised by you that you propose
to make a public offering of the Units as soon after this Agreement has become
effective as in your judgment is advisable. The Company is further
advised by you that the Units are to be offered to the public initially at $0.60
per Unit.
2.2 Payment
of the Purchase Price for, and delivery of, the Shares and the Warrants
contained in the Units shall be made at the time and date of closing and
delivery of the documents required to be delivered to the Underwriter pursuant
to Sections
4 and
6 hereof, which
shall be at 10:00 A.M., New York time, on February 23, 2010 (the “Closing Date”) at the office
of Sonnenschein Nath & Rosenthal LLP, Two World Financial Center, New York,
NY 10281, or at such other time and date as the Underwriter and the Company
determine pursuant to Rule 15c6-1(a) under the Securities Exchange Act of 1934,
as amended (the "Exchange
Act"). On the Closing Date, the Company shall deliver the Shares and
Warrants contained in the Units, which shall be registered in the name or names
and shall be in such denominations as the Underwriter may request at least one
(1) business day before the Closing Date, to the Underwriter, which delivery (a)
with respect to the Shares, shall be made through the facilities of the
Depository Trust Company's DWAC system, and (b) with respect to the Warrants,
shall be made by physical delivery to be received by the Underwriter no later
than one (1) business day following the Closing Date.
2.3 Prior
to the earlier of (i) the date on which this Agreement is terminated and (ii)
the Closing Date, the Company shall not, without the prior written consent of
the Underwriter, solicit or accept offers to purchase Units or securities
convertible into Common Stock (other than pursuant to the exercise of options or
warrants to purchase Common Stock that are outstanding at the date hereof)
otherwise than through the Underwriter in accordance herewith.
2.4 No
Units which the Company has agreed to sell pursuant to this Agreement shall be
deemed to have been purchased and paid for, or sold by the Company, until the
Shares and Warrants contained in such Units shall have been delivered to the
Underwriter thereof against payment by the Underwriter. If the Company shall
default in its obligations to deliver the Shares or Warrants contained in the
Units to the Underwriter, the Company shall indemnify and hold the
Underwriter harmless against any loss, claim, damage or expense arising from or
as a result of such default by the Company in accordance with the procedures set
forth in Section
7(c)
herein.
2
3. Representations and Warranties of
the Company. The
Company represents and warrants to, and agrees with, the Underwriter
that:
(a) The
Company has prepared and filed in conformity with the requirements of the
Securities Act of 1933, as amended (the “Securities Act”), and
published rules and regulations thereunder (the “Rules and Regulations”)
adopted by the Securities and Exchange Commission (the “Commission”) a “shelf”
Registration Statement (as hereinafter defined) on Form S-3 (File No.
333-151654), which became effective as of June 18, 2008 (the “Effective Date”), including a
base prospectus relating to the Units (the “Base Prospectus”), and such
amendments and supplements thereto as may have been required to the date of this
Agreement. The term “Registration Statement” as
used in this Agreement means the registration statement (including all exhibits,
financial schedules and all documents and information deemed to be a part of the
Registration Statement pursuant to Rule 430B of the Rules and Regulations), as
amended and/or supplemented to the date of this Agreement, including the Base
Prospectus. The Registration Statement is effective under the
Securities Act and no stop order preventing or suspending the effectiveness of
the Registration Statement or suspending or preventing the use of the Prospectus
has been issued by the Commission and no proceedings for that purpose have been
instituted or, to the knowledge of the Company, are threatened by the
Commission. The Company, if required by the Rules and Regulations of
the Commission, will file the Prospectus (as defined below), with the Commission
pursuant to Rule 424(b) of the Rules and Regulations. The term “Prospectus” as used in this
Agreement means the prospectus, in the form in which it is to be filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations, or, if the
prospectus is not to be filed with the Commission pursuant to Rule 424(b), the
prospectus in the form included as part of the Registration Statement as of the
Effective Date, except that if any revised prospectus or prospectus supplement
shall be provided to the Underwriter by the Company for use in connection with
the offering and sale of the Units which differs from the Prospectus (whether or
not such revised prospectus or prospectus supplement is required to be filed by
the Company pursuant to Rule 424(b) of the Rules and Regulations), the term
“Prospectus” shall refer
to such revised prospectus or prospectus supplement, as the case may be, from
and after the time it is first provided to the Underwriter (or in the form first
made available to the Underwriter by the Company to meet requests of prospective
purchasers pursuant to Rule 173 under the Securities Act) for such use. Any
preliminary prospectus or prospectus subject to completion included in the
Registration Statement or filed with the Commission pursuant to Rule 424 of the
Rules and Regulations is hereafter called a “Preliminary
Prospectus.” Any reference herein to the Registration
Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein pursuant to Item
12 of Form S-3 which were filed under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), on or before the last to occur of the Effective Date, the date of
the Preliminary Prospectus, or the date of the Prospectus, and any reference
herein to the terms “amend,” “amendment,” or “supplement” with respect to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include (i) the filing of any document under the Exchange
Act after the Effective Date, the date of such Preliminary Prospectus or the
date of the Prospectus, as the case may be, which is incorporated by reference
and (ii) any such document so filed. If the Company has filed an abbreviated
registration statement to register additional securities pursuant to Rule 462(b)
under the Rules and Regulations (the “462(b) Registration
Statement”), then any reference herein to the Registration Statement
shall also be deemed to include such 462(b) Registration Statement.
(b) The
conditions to the use of Form S-3 in connection with the offering and sale of
the Securities as contemplated hereby have been satisfied. The Registration
Statement meets, and the offering and sale of the Securities as contemplated
hereby complies with, the requirements of Rule 415 under the Securities Act
(including, without limitation, Rule 415(a)(4) and (a)(5) of the Rules and
Regulations).
3
(c) As
of the Applicable Time (as defined below) and as of the Closing
Date, none of (i) any General Use Free Writing Prospectus (as defined
below) issued at or prior to the Applicable Time, and the Pricing Prospectus (as
defined below) and the information included on Schedule A hereto, all
considered together (collectively, the “General Disclosure Package”),
(ii) any individual Limited Use Free Writing Prospectus (as defined below)
issued at or prior to the Applicable Time and (iii) the bona fide electronic
road show (as defined in Rule 433(h)(5) of the Rules and Regulations), if any,
that has been made available without restriction to any person, when considered
together with the General Disclosure Package, included or will include, any
untrue statement of a material fact or omitted or as of the Closing Date will
omit, to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided,
however, that the Company makes no representations or warranties as to
information contained in or omitted from any Issuer Free Writing Prospectus, in
reliance upon, and in conformity with, written information furnished to the
Company by the Underwriter specifically for inclusion therein, which information
the parties hereto agree is limited to the Underwriter’s Information (as defined
in Section
16). As used in this paragraph (b) and elsewhere in
this Agreement:
“Applicable
Time” means 5:00 P.M., New York time, on the date of this
Agreement.
“General Use Free
Writing Prospectus” means any Issuer Free Writing Prospectus that is
identified on Schedule
A to
this Agreement.
“Issuer Free
Writing Prospectus” means any “issuer free writing
prospectus,” as defined in Rule 433 of the Rules and Regulations relating
to the Units in the form filed or required to be filed with the Commission or,
if not required to be filed, in the form retained in the Company’s records
pursuant to Rule 433(g) of the Rules and Regulations.
“Limited Use Free
Writing Prospectuses” means any Issuer Free Writing Prospectus that is
not a General Use Free Writing Prospectus.
“Pricing
Prospectus” means the Preliminary Prospectus, if any, and the Base
Prospectus, each as amended and supplemented immediately prior to the Applicable
Time, including any document incorporated by reference therein and any
prospectus supplement deemed to be a part thereof.
(d) No
order preventing or suspending the use of any Preliminary Prospectus, any Issuer
Free Writing Prospectus or the Prospectus relating to the Offering has been
issued by the Commission, and no proceeding for that purpose or pursuant to
Section 8A of the Securities Act has been instituted or, to the knowledge of the
Company, threatened by the Commission, and each Preliminary Prospectus (if any),
at the time of filing thereof, conformed in all material respects to the
requirements of the Securities Act and the Rules and Regulations, and did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; provided, however, that the
Company makes no representations or warranties as to information contained in or
omitted from any Preliminary Prospectus, in reliance upon, and in conformity
with, written information furnished to the Company by the Underwriter
specifically for inclusion therein, which information the parties hereto agree
is limited to the Underwriter’s Information (as defined in Section
16).
4
(e) At
the time the Registration Statement became effective, at the date of this
Agreement and at the Closing Date, the Registration Statement conformed and will
conform in all material respects to the requirements of the Securities Act and
the Rules and Regulations and did not and will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; the
Prospectus, at the time the Prospectus was issued and at the Closing Date,
conformed and will conform in all material respects to the requirements of the
Securities Act and the Rules and Regulations and did not and will not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the
foregoing representations and warranties in this paragraph (e) shall not apply
to information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Underwriter specifically for inclusion therein,
which information the parties hereto agree is limited to the Underwriter’s
Information (as defined in Section
16).
(f) Each
Issuer Free Writing Prospectus, if any, as of its issue date and at all
subsequent times through the completion of the public offer and sale of the
Units or until any earlier date that the Company notified or notifies the
Underwriter as described in Section 4(e), did not, does
not and will not include any information that conflicted, conflicts or will
conflict with the information contained in the Registration Statement, Pricing
Prospectus or the Prospectus, including any document incorporated by reference
therein and any prospectus supplement deemed to be a part thereof that has not
been superseded or modified, or includes an untrue statement of a material fact
or omitted or would omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
foregoing sentence does not apply to statements in or omissions from any Issuer
Free Writing Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by the Underwriter specifically for
inclusion therein, which information the parties hereto agree is limited to the
Underwriter’s Information (as defined in Section
16).
(g) The
documents incorporated by reference in the Prospectus, when they became
effective or were filed with the Commission, as the case may be, conformed in
all material respects to the requirements of the Securities Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission thereunder
and none of such documents contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; and any further documents so filed and incorporated by
reference in the Prospectus, when such documents become effective or are filed
with the Commission, as the case may be, will conform in all material respects
to the requirements of the Securities Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder and will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
5
(h) The
Company has not, directly or indirectly, distributed and will not distribute any
offering material in connection with the Offering other than any Preliminary
Prospectus, the Prospectus and other materials, if any, permitted under the
Securities Act and consistent with Section 4(b) below. The
Company is not an “ineligible issuer” in connection with the Offering pursuant
to Rules 164, 405 and 433 under the Securities Act. The Company will file with
the Commission all Issuer Free Writing Prospectuses (other than a “road show,”
as defined in Rule 433(d)(8) of the Rules and Regulations), if any, in the time
and manner required under Rules 163(b)(2) and 433(d) of the Rules and
Regulations.
(i) The
Company and each of its subsidiaries (as defined in Section 14) have been duly
organized and are validly existing as corporations in good standing (or the
foreign equivalent thereof) under the laws of their respective jurisdictions of
organization. The Company and each of its subsidiaries are duly
qualified to do business and are in good standing as foreign corporations in
each jurisdiction in which their respective ownership or lease of property or
the conduct of their respective businesses requires such qualification and have
all power and authority (corporate or other) necessary to own or hold their
respective properties and to conduct the businesses in which they are engaged,
except where the failure to so qualify or have such power or authority (i) would
not have, singularly or in the aggregate, a material adverse effect on the
condition (financial or otherwise), results of operations, assets, business or
prospects of the Company and its subsidiaries taken as a whole, or (ii) impair
in any material respect the ability of the Company to perform its obligations
under this Agreement or to consummate any transactions contemplated by this
Agreement, the General Disclosure Package or the Prospectus (any such effect as
described in clauses (i) or (ii), a “Material Adverse
Effect”). The Company owns or controls, directly or
indirectly, only the following corporations, partnerships, limited liability
partnerships, limited liability companies, associations or other
entities: Acute Therapeutics, Inc., a Delaware
corporation.
(j) The
Company has the full right, power and authority to enter into this Agreement and
the Warrants, and to perform and to discharge its obligations hereunder and
thereunder; and this Agreement and the Warrants have been duly authorized,
executed and delivered by the Company, and constitute valid and binding
obligations of the Company enforceable in accordance with their terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(k) The
Shares to be issued and sold by the Company to the Underwriter hereunder and the
shares of Common Stock issuable upon the exercise of the Warrants (the “Warrant Shares”) have been
duly and validly authorized and, when issued and delivered against payment
therefor as provided herein, and the Warrant Shares, when issued and delivered
against payment therefor as provided in the Warrants, will be duly and validly
issued, fully paid and nonassessable and free of any preemptive or similar
rights and will conform to the description thereof contained in the General
Disclosure Package and the Prospectus. The issuance and sale of the
Shares, Warrants and Warrant Shares are not subject to any preemptive rights,
rights of first refusal or other similar rights to subscribe for or purchase
such Securities pursuant to any applicable statutes or contract to which the
Company is a party.
6
(l) The
Company has an authorized capitalization as set forth in the Pricing Prospectus,
and all of the issued and outstanding shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable, have been issued in compliance with federal and state securities
laws, and conform to the description thereof contained in the General Disclosure
Package and the Prospectus. As of December 31, 2009, there were
126,375,655 shares of Common Stock issued and outstanding and no shares of
Preferred Stock, par value $0.001 of the Company issued and outstanding and
30,852,207 shares of Common Stock were issuable upon the exercise of all
options, warrants and convertible securities outstanding as of such date. Since
such date, the Company has not issued any securities, other than Common Stock of
the Company issued pursuant to the exercise of stock options previously
outstanding under the Company’s stock option plans or the issuance of Common
Stock pursuant to employee stock purchase plans, including the Company’s 401(k)
Plan. All of the Company’s options, warrants and other rights to
purchase or exchange any securities for shares of the Company’s capital stock
have been duly authorized and validly issued and were issued in compliance with
US federal and state securities laws. None of the outstanding shares
of Common Stock was issued in violation of any preemptive rights, rights of
first refusal or other similar rights to subscribe for or purchase securities of
the Company, except for such rights as may have been fully satisfied or
waived. There are no authorized or outstanding shares of capital
stock, options, warrants, preemptive rights, rights of first refusal or other
rights to purchase, or equity or debt securities convertible into or
exchangeable or exercisable for, any capital stock of the Company or any of its
subsidiaries other than those described above or accurately described in the
General Disclosure Package. The description of the Company’s stock
option, stock bonus and other stock plans or arrangements, and the options or
other rights granted thereunder, as described in the General Disclosure Package
and the Prospectus, accurately and fairly present the information required to be
shown with respect to such plans, arrangements, options and rights.
(m) All
the outstanding shares of capital stock of each subsidiary of the Company have
been duly authorized and validly issued, are fully paid and nonassessable and,
except to the extent set forth in the General Disclosure Package or the
Prospectus, are owned by the Company directly or indirectly through one or more
wholly-owned subsidiaries, free and clear of any claim, lien, encumbrance,
security interest, restriction upon voting or transfer or any other claim of any
third party.
7
(n) The
execution, delivery and performance of this Agreement by the Company, the issue
and sale of the Units by the Company and the consummation of the transactions
contemplated hereby and thereby will not (with or without notice or lapse of
time or both) conflict with or result in a breach or violation of any of the
terms or provisions of, constitute a default or Debt Repayment Triggering Event
(as defined below) under, give rise to any right of termination or other right
or the cancellation or acceleration of any right (except as disclosed in the
General Disclosure Package) or obligation or loss of a benefit under, or give
rise to the creation or imposition of any lien, encumbrance, security interest,
claim or charge upon any property or assets of the Company or any subsidiary
pursuant to, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the provisions of (A)
the charter or by-laws (or analogous governing instruments, as applicable) of
the Company or any of its subsidiaries or (B) any law, statute, rule,
regulation, judgment, order or decree of any court or governmental agency or
body, domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or any of their properties or assets, except, with respect to
clause (B), any violation which, singularly or in the aggregate, would not have
a Material Adverse Effect. A “Debt Repayment Triggering Event” means
any event or condition that gives, or with the giving of notice or lapse of time
would give the holder of any note, debenture or other evidence of indebtedness
(or any person acting on such holder’s behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such indebtedness by
the Company or any of its subsidiaries.
(o) Except
for the registration of the Shares, Warrants and Warrant Shares under the
Securities Act and such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and applicable state or
foreign securities laws, the Financial Industry Regulatory Authority (“FINRA”) and the Nasdaq Global
Market (the “NasdaqGM”)
in connection with the offering and sale of the Units by the Company and the
listing of the Shares and the Warrant Shares on the NasdaqGM, and no consent,
approval, authorization or order of, or filing, qualification or registration
with, any court or governmental agency or body, foreign or domestic, which has
not been made, obtained or taken and is not in full force and effect, is
required for the execution, delivery and performance of this Agreement by the
Company, the offer or sale of the Units or the consummation of the transactions
contemplated hereby or thereby.
(p) Ernst
& Young LLP, who has audited certain financial statements and related
schedules included or incorporated by reference in the Registration Statement,
the General Disclosure Package and the Prospectus, and has audited the Company’s
internal control over financial reporting and management’s assessment thereof,
is an independent registered public accounting firm as required by the
Securities Act and the Rules and Regulations and the Public Company Accounting
Oversight Board (United States) (the “PCAOB”). Except as
pre-approved in accordance with the requirements set forth in Section 10A of the
Exchange Act, Ernst & Young LLP has not been engaged by
the Company to perform any “prohibited activities” (as defined in Section 10A of
the Exchange Act).
8
(q) The
financial statements, together with the related notes and schedules, included or
incorporated by reference in the General Disclosure Package, the Prospectus and
in the Registration Statement fairly present the financial position and the
results of operations and changes in stockholders’ equity and cash flows of the
Company and its consolidated subsidiaries and other consolidated entities at the
respective dates or for the respective periods therein
specified. Such statements and related notes and schedules have been
prepared in accordance with the generally accepted accounting principles in the
United States (“GAAP”)
applied on a consistent basis throughout the periods involved except as may be
set forth in the related notes included or incorporated by reference in the
General Disclosure Package, and except that unaudited financial statements may
not contain footnotes required by GAAP. The financial statements,
together with the related notes and schedules, included or incorporated by
reference in the General Disclosure Package and the Prospectus comply in all
material respects with the Securities Act, the Exchange Act, and the Rules and
Regulations and the rules and regulations under the Exchange Act. No
other financial statements or supporting schedules or exhibits are required by
the Securities Act or the Rules and Regulations to be described, or included or
incorporated by reference in the Registration Statement, the General Disclosure
Package or the Prospectus. There is no pro forma or as adjusted
financial information which is required to be included in the Registration
Statement, the General Disclosure Package or the Prospectus or a document
incorporated by reference therein in accordance with the Securities Act and the
Rules and Regulations which has not been included or incorporated as so
required.
(r) Neither
the Company nor any of its subsidiaries has sustained, since the date of the
latest audited financial statements included or incorporated by reference in the
General Disclosure Package, any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the General Disclosure
Package; and, since such date, there has not been any change in the capital
stock (other than Common Stock of the Company issued pursuant to the exercise of
stock options previously outstanding under the Company’s stock option plans or
the issuance of Common Stock pursuant to employee stock purchase plans,
including the Company’s 401(k) Plan) or long-term debt of the Company or any of
its subsidiaries, or any material adverse changes, or any development involving
a prospective material adverse change, in or affecting the business, assets,
general affairs, management, financial position, prospects, stockholders’ equity
or results of operations of the Company and its subsidiaries taken as a whole,
otherwise than as set forth or contemplated in the General Disclosure
Package.
(s) Except
as set forth in the General Disclosure Package, there is no legal or
governmental action, suit, claim or proceeding pending to which the Company or
any of its subsidiaries is a party or of which any property or assets of the
Company or any of its subsidiaries is the subject which is required to be
described in the Registration Statement, the General Disclosure Package or the
Prospectus or a document incorporated by reference therein and is not described
therein, or which, singularly or in the aggregate, if determined adversely to
the Company or any of its subsidiaries, would be likely to have a Material
Adverse Effect or prevent or adversely affect the ability of the Company to
perform its obligations under this Agreement or the consummation of the
transactions contemplated hereby; and to the best of the Company’s knowledge,
except as set forth in the General Disclosure Package, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others.
9
(t) Neither
the Company nor any of its subsidiaries is in (i) violation of its charter or
by-laws (or analogous governing instrument, as applicable), (ii) default in any
respect, and no event has occurred which, with notice or lapse of time or both,
would constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which it is a party or
by which it is bound or to which any of its property or assets is subject or
(iii) violation in any respect of any statute, law, ordinance, governmental
rule, regulation or court order, decree or judgment to which it or its property
or assets may be subject except, in the case of clauses (ii) and (iii) of this
paragraph (t), for any violations or defaults which, singularly or in the
aggregate, would not have a Material Adverse Effect.
(u) The
Company and each of its subsidiaries possesses all licenses, certificates,
authorizations and permits issued by, and have made all declarations and filings
with, the appropriate local, state, federal or foreign regulatory agencies or
bodies which are necessary or desirable for the ownership of their respective
properties or the conduct of their respective businesses (including, without
limitation, those administered by the Food and Drug Administration of the U.S.
Department of Health and Human Services (the “FDA”) or by any foreign,
federal, state or local governmental or regulatory authority performing
functions similar to those performed by the FDA) as described in the General
Disclosure Package and the Prospectus (collectively, the “Governmental Permits”) except
where any failures to possess or make the same, singularly or in the aggregate,
would not have a Material Adverse Effect. The Company and its
subsidiaries are in compliance with all such Governmental Permits; all such
Governmental Permits are valid and in full force and effect, except where the
validity or failure to be in full force and effect would not, singularly or in
the aggregate, have a Material Adverse Effect. All such Governmental
Permits are free and clear of any restriction or condition that are in addition
to, or materially different from those normally applicable to similar licenses,
certificates, authorizations and permits. Neither the Company nor any subsidiary
has received notification of any revocation or modification (or proceedings
related thereto) of any such Governmental Permit and the Company has no reason
to believe that any such Governmental Permit will not be renewed, except as set
forth in or contemplated by the General Disclosure Package.
(v) The
clinical trials conducted by or on behalf of or sponsored by the Company or in
which the Company or its product candidates have participated that are described
in the General Disclosure Package and Prospectus or the results of which are
referred to in the General Disclosure Package or Prospectus were and, if still
pending, are being conducted in all material respects in accordance with medical
and scientific research procedures that the Company reasonably believes are
appropriate. The descriptions in the General Disclosure Package and Prospectus
of the results of such clinical trials are, in all material respects, accurate
and complete. Except to the extent disclosed in the General
Disclosure Package and the Prospectus, the Company has not received any notices
or other correspondence from the FDA or any other governmental agency exercising
comparable authority requiring the termination, suspension or material
modification of any clinical trials that are described in the General Disclosure
Package or Prospectus or the results of which are referred to in the General
Disclosure Package or Prospectus.
(w) Neither
the Company nor any of its subsidiaries is or, after giving effect to the
offering and sale of the Units, and the application of the proceeds thereof as
described in the General Disclosure Package and the Prospectus, will become an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended, and the rules and regulations of the Commission
thereunder.
10
(x) Neither
the Company, its subsidiaries nor, to the Company’s knowledge, any of the
Company’s or its subsidiaries’ officers, directors or affiliates has taken or
will take, directly or indirectly, any action designed or intended to stabilize
or manipulate the price of any security of the Company, or which caused or
resulted in, or which might in the future reasonably be expected to cause or
result in, stabilization or manipulation of the price of any security of the
Company.
(y) The
Company and its subsidiaries owns or possesses the right to use all material
patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, software,
databases, know-how, Internet domain names, trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures, and other intellectual property (collectively, “Intellectual Property”)
necessary to carry on their respective businesses as currently conducted, and as
proposed to be conducted and described in the General Disclosure Package and
the Prospectus, and the Company is not aware of any claim to the
contrary or any challenge by any other person to the rights of the Company and
its subsidiaries with respect to the foregoing except for those that could not
have a Material Adverse Effect. The Intellectual Property licenses
described in the General Disclosure Package and the Prospectus are valid,
binding upon, and enforceable by or against the parties thereto in accordance
with their terms. The Company and each of its subsidiaries has
complied in all material respects with, and is not in breach nor has received
any asserted or threatened claim of breach of, any Intellectual Property
license, except for any such breach that would not individually or in the
aggregate have a Material Adverse Effect, and the Company has no knowledge of
any breach or anticipated breach by any other person to any Intellectual
Property license. The Company’s and each of its subsidiaries’
businesses as now conducted and as proposed to be conducted does not and will
not infringe or conflict with any valid patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses or other Intellectual Property
or franchise right of any person. To the knowledge of the Company, no
claim has been made against the Company or any of its subsidiaries alleging the
infringement by the Company or any of its subsidiaries of any patent, trademark,
service mark, trade name, copyright, trade secret, license in or other
intellectual property right or franchise right of any person. The
Company and each of its subsidiaries has taken all reasonable steps to protect,
maintain and safeguard its rights in all Intellectual Property, including the
execution of appropriate nondisclosure and confidentiality
agreements. The consummation of the transactions contemplated by this
Agreement will not result in the loss or impairment of or payment of any
additional amounts with respect to, nor require the consent of any other person
in respect of, the Company’s or any of its subsidiaries’ right to own, use, or
hold for use any of the Intellectual Property as owned, used or held for use in
the conduct of the businesses as currently conducted. With respect to
the use of the software in the Company’s or any of its subsidiaries’ businesses
as they are currently conducted, the Company nor any of its subsidiaries has
experienced any material defects in such software including any material error
or omission in the processing of any transactions other than defects which have
been corrected, and to the knowledge of the Company, no such software contains
any device or feature designed to disrupt, disable, or otherwise impair the
functioning of any software or is subject to the terms of any “open source” or
other similar license that provides for the source code of the software to be
publicly distributed or dedicated to the public. The Company and each
of its subsidiaries has at all times complied with all applicable laws relating
to privacy, data protection, and the collection and use of personal information
collected, used, or held for use by the Company and any of its subsidiaries in
the conduct of the Company’s and its subsidiaries businesses, except for any
such breach that would individually or in the aggregate have a Material Adverse
Effect. No claims have been asserted or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries alleging a
violation of any person’s privacy or personal information or data rights and the
consummation of the transactions contemplated hereby will not breach or
otherwise cause any violation of any law related to privacy, data protection, or
the collection and use of personal information collected, used, or held for use
by the Company or any of its subsidiaries in the conduct of the Company’s or any
of its subsidiaries’ businesses. The Company and each of its
subsidiaries takes reasonable measures to ensure that such information is
protected against unauthorized access, use, modification, or other
misuse.
11
(z) Neither
the Company nor its subsidiaries own any real property. The Company
and each of its subsidiaries have good and marketable title in fee simple to, or
have valid rights to lease or otherwise use, all items of real or personal
property, as described in the General Disclosure Package, which are material to
the business of the Company and its subsidiaries taken as a whole, in each case
free and clear of all liens, encumbrances, security interests, claims and
defects that do not, singularly or in the aggregate, materially affect the value
of such property and do not interfere with the use made and proposed to be made
of such property by the Company or any of its subsidiaries, except for those
liens, encumbrances, security interests, claims and defects that would not have
a Material Adverse Effect; and all of the leases and subleases material to the
business of the Company and its subsidiaries, considered as one enterprise, and
under which the Company or any of its subsidiaries holds properties described in
the General Disclosure Package and the Prospectus, are in full force and effect,
and neither the Company nor any subsidiary has received any notice of any
material claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any subsidiary under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company or such
subsidiary to the continued possession of the leased or subleased premises under
any such lease or sublease.
(aa) No
labor disturbance by the employees of the Company or any of its subsidiaries
exists or, to the best of the Company’s knowledge, is threatened or imminent,
and the Company is not aware of any existing or imminent labor disturbance by
the employees of any of its or its subsidiaries’ principal suppliers,
manufacturers, customers or contractors, that could reasonably be expected,
singularly or in the aggregate, to have a Material Adverse
Effect. The Company is not aware that any key employee or significant
group of employees of the Company or any subsidiary plans to terminate
employment with the Company or any such subsidiary.
12
(bb) No
“prohibited transaction” (as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder (“ERISA”), or Section 4975 of
the Internal Revenue Code of 1986, as amended from time to time (the “Code”)) or “accumulated
funding deficiency” (as defined in Section 302 of ERISA) or any of the events
set forth in Section 4043(b) of ERISA (other than events with respect to which
the thirty (30)-day notice requirement under Section 4043 of ERISA has been
waived) has occurred or could reasonably be expected to occur with respect to
any employee benefit plan of the Company or any of its subsidiaries which could,
singularly or in the aggregate, have a Material Adverse Effect. Each
employee benefit plan of the Company or any of its subsidiaries is in compliance
in all material respects with applicable law, including ERISA and the Code. The
Company and its subsidiaries have not incurred and could not reasonably be
expected to incur liability under Title IV of ERISA with respect to the
termination of, or withdrawal from, any pension plan (as defined in
ERISA). Each pension plan for which the Company or any of its
subsidiaries would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified, and nothing has occurred, whether by
action or by failure to act, which could, singularly or in the aggregate, cause
the loss of such qualification.
(cc) The
Company and its subsidiaries are in compliance in all material respects with all
foreign, federal, state and local rules, laws and regulations relating to the
use, treatment, storage and disposal of hazardous or toxic substances or waste
and protection of health and safety or the environment which are applicable to
their businesses (“Environmental Laws”), except
where the failure to comply would not, singularly or in the aggregate, have a
Material Adverse Effect. There has been no storage, generation,
transportation, handling, treatment, disposal, discharge, emission, or other
release of any kind of toxic or other wastes or other hazardous substances by,
due to, or caused by the Company or any of its subsidiaries (or, to the
Company’s knowledge, any other entity for whose acts or omissions the Company or
any of its subsidiaries is or may otherwise be liable) upon any of the property
now or previously owned or leased by the Company or any of its subsidiaries, or
upon any other property, in violation of any law, statute, ordinance, rule,
regulation, order, judgment, decree or permit or which would, under any law,
statute, ordinance, rule (including rule of common law), regulation, order,
judgment, decree or permit, give rise to any liability, except for any violation
or liability which would not have, singularly or in the aggregate with all such
violations and liabilities, a Material Adverse Effect; and there has been no
disposal, discharge, emission or other release of any kind onto such property or
into the environment surrounding such property of any toxic or other wastes or
other hazardous substances with respect to which the Company has knowledge,
except for any such disposal, discharge, emission, or other release of any kind
which would not have, singularly or in the aggregate with all such discharges
and other releases, a Material Adverse Effect. In the ordinary course
of business, the Company and its subsidiaries conduct periodic reviews of the
effect of Environmental Laws on their business and assets, in the course of
which they identify and evaluate associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or Governmental
Permits issued thereunder, any related constraints on operating activities and
any potential liabilities to third parties). On the basis of such
reviews, the Company and its subsidiaries have reasonably concluded that such
associated costs and liabilities would not have, singularly or in the aggregate,
a Material Adverse Effect.
13
(dd) The
Company and its subsidiaries, each (i) has timely filed all necessary federal,
state, local and foreign tax returns that are required to be filed or has
requested extensions thereof, and all such returns were true, complete and
correct, (ii) has paid all federal, state, local and foreign taxes, assessments,
governmental or other charges due and payable for which it is liable, including,
without limitation, all sales and use taxes and all taxes which the Company or
any of its subsidiaries is obligated to withhold from amounts owing to
employees, creditors and third parties, and (iii) does not have any tax
deficiency or claims outstanding or assessed or, to the best of its knowledge,
proposed against any of them, except those, in each of the cases described in
clauses (i), (ii) and (iii) of this paragraph (dd), that would not,
singularly or in the aggregate, have a Material Adverse Effect. The
Company and its subsidiaries, each has not engaged in any transaction which is a
corporate tax shelter or which could be characterized as such by the Internal
Revenue Service or any other taxing authority. The accruals and
reserves on the books and records of the Company and its subsidiaries in respect
of tax liabilities for any taxable period not yet finally determined are
adequate to meet any assessments and related liabilities for any such period,
and since December 31, 2008 the Company and its subsidiaries each has not
incurred any liability for taxes other than in the ordinary course.
(ee) The
Company and each of its subsidiaries carries, or is covered by, insurance
provided by nationally recognized institutions with policies in such amounts and
covering such risks as the Company reasonably considers adequate for the conduct
of their respective businesses and the value of their respective properties and
as is customary for companies engaged in similar businesses in similar
industries. The Company has no reason to believe that it or any
subsidiary will not be able (i) to renew its existing insurance coverage as and
when such policies expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its business as now
conducted and at a cost that would not result in a Material Adverse
Effect.
(ff) The
Company maintains a system of internal accounting and other controls sufficient
to provide reasonable assurances that (i) transactions are executed in
accordance with management’s general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences. Except as described in the
General Disclosure Package, since the end of the Company’s most recent audited
fiscal year, there has been (A) no material weakness in the Company’s internal
control over financial reporting (whether or not remediated) and (B) no change
in the Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
14
(gg) The
minute books of the Company and each of its subsidiaries that would be a
“significant subsidiary” within the meaning of Rule 1-02(w) of Regulation S-X
under the Exchange Act (such a significant subsidiary of the Company, a “Significant Subsidiary”) have
been made available to the Underwriter and counsel for the Underwriter, and such
books (i) contain a complete summary of all meetings and actions of the board of
directors (including each board committee) as of December 31, 2009 and
shareholders of the Company (or analogous governing bodies and interest holders,
as applicable), and each of its Significant Subsidiaries since the time of its
respective incorporation or organization through the date of the latest meeting
and action, and (ii) accurately in all material respects reflect all
transactions referred to in such minutes. There are no material transactions,
agreements or other actions of the Company or of its subsidiaries that are not
properly approved and/or recorded in the minute books of the Company or of its
subsidiaries, as applicable.
(hh) There
is no franchise, lease, contract, agreement or document required by the
Securities Act or by the Rules and Regulations to be described in the General
Disclosure Package and in the Prospectus or a document incorporated by reference
therein or to be filed as an exhibit to the Registration Statement or a document
incorporated by reference therein which is not described or filed therein as
required; and all descriptions of any such franchises, leases, contracts,
agreements or documents contained in the Registration Statement or in a document
incorporated by reference therein are accurate and complete descriptions of such
documents in all material respects. Other than as described in the
General Disclosure Package, no such franchise, lease, contract or agreement has
been suspended or terminated for convenience or default by the Company or any of
its subsidiaries or any of the other parties thereto, and neither the Company
nor any of its subsidiaries has received notice nor does the Company have any
other knowledge of any such pending or threatened suspension, termination or
non-renewal, except for such pending or threatened suspensions, terminations or
non-renewals that would not reasonably be expected to, singularly or in the
aggregate, have a Material Adverse Effect.
(ii) No
relationship, direct or indirect, exists between or among the Company and any of
its subsidiaries on the one hand, and the directors, officers, stockholders (or
analogous interest holders), customers or suppliers of the Company or any of its
subsidiaries or any of their affiliates on the other hand, which is required to
be described in the General Disclosure Package and the Prospectus or a document
incorporated by reference therein and which is not so described.
(jj) No
person or entity has the right to require registration of shares of Common Stock
or other securities of the Company or any of its subsidiaries because of the
filing or effectiveness of the Registration Statement, except for persons and
entities who have expressly waived such right in writing or who have been given
timely and proper written notice and have failed to exercise such right within
the time or times required under the terms and conditions of such
right. Except as described in the General Disclosure Package, there
are no persons with registration rights or similar rights to have any securities
registered by the Company or any of its subsidiaries under the Securities
Act.
15
(kk) Neither
the Company nor any of its subsidiaries own any “margin securities” as that term
is defined in Regulation U of the Board of Governors of the Federal Reserve
System (the “Federal Reserve
Board”), and none of the proceeds of the sale of the Units will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Securities included in the Units to be
considered a “purpose credit” within the meanings of Regulation T, U or X of the
Federal Reserve Board.
(ll) Neither
the Company nor any of its subsidiaries is a party to any contract, agreement or
understanding with any person (other than this Agreement and any letter of
understanding between the Company and the Underwriter) that would give rise to a
valid claim against the Company or the Underwriter for a brokerage commission,
finder’s fee or like payment in connection with the offering and sale of any
securities included in the Units or any transaction contemplated by this
Agreement, the Registration Statement, the General Disclosure Package or the
Prospectus.
(mm) No
forward-looking statement (within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act) contained in either the General
Disclosure Package or the Prospectus has been made or reaffirmed without a
reasonable basis or has been disclosed other than in good faith.
(nn) The
Company is subject to and in compliance in all material respects with the
reporting requirements of Section 13 or Section 15(d) of the Exchange
Act. The Common Stock is registered pursuant to Section 12(b) of the
Exchange Act and is listed on the NasdaqGM, and the Company has taken no action
designed to, or reasonably likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the NasdaqGM, nor has the Company received any notification that the
Commission or the Nasdaq Stock Market LLC is contemplating terminating such
registration or listing, except as disclosed in the Company’s risk factors under
the headings titled (i) “If we are unable to regain compliance with the Minimum
Bid Price Requirement of The Nasdaq Global Market prior to June 1, 2010, our
stock price may decline and our common stock may be subject to delisting from
Nasdaq. If our stock were no longer listed on Nasdaq, the liquidity
of our securities would be impaired” and (ii) “Our common stock has not traded
consistently at a price above $1.00 per share, which subjects us to the risk of
failing to comply with the Nasdaq Stock Market LLC (Nasdaq) listing
requirement. If our stock were no longer listed on Nasdaq, the
liquidity of our securities would be impaired, which would likely cause our
stock price to decline” in the Registration Statement and the Prospectus, and
the General Disclosure Package. No consent, approval, authorization
or order of, or filing, notification or registration with, the NasdaqGM is
required for the listing and trading of the shares of Common Stock on the
NasdaqGM, except for (i) a Notification Form: Listing of Additional Shares and
(ii) a Notification Form: Change in the Number of Shares
Outstanding.
16
(oo) The
Company is in compliance with all applicable provisions of the Sarbanes-Oxley
Act of 2002 and all applicable rules and regulations promulgated thereunder or
implementing the provisions thereof (the “Sarbanes-Oxley
Act”).
(pp) The
Company has taken all necessary actions to ensure that it is in compliance in
all material respects with all applicable corporate governance requirements set
forth in the Nasdaq Marketplace Rules.
(qq) Neither
the Company nor any of its subsidiaries nor, to the best of the Company’s
knowledge, any employee or agent of the Company or any subsidiary, has made any
contribution or other payment to any official of, or candidate for, any federal,
state, local or foreign office in violation of any law (including the Foreign
Corrupt Practices Act of 1977, as amended) or of the character required to be
disclosed in the Registration Statement, the General Disclosure Package or the
Prospectus or a document incorporated by reference therein.
(rr) There
are no transactions, arrangements or other relationships between and/or among
the Company, any of its affiliates (as such term is defined in Rule 405 of the
Securities Act) and any unconsolidated entity, including, but not limited to,
any structured finance, special purpose or limited purpose entity that could
reasonably be expected to materially affect the Company’s or any of its
subsidiaries’ liquidity or the availability of or requirements for their capital
resources required to be described in the General Disclosure Package and the
Prospectus or a document incorporated by reference therein which have not been
described as required.
(ss) There
are no outstanding loans, advances (except normal advances for business expenses
in the ordinary course of business) or guarantees or indebtedness by the Company
or any of its subsidiaries to or for the benefit of any of the officers or
directors of the Company, any of its subsidiaries or any of their respective
family members, except as disclosed in the Registration Statement, the General
Disclosure Package and the Prospectus.
(tt) The
statistical and market-related data included in the Registration Statement, the
General Disclosure Package and the Prospectus are based on or derived from
sources that the Company believes to be reliable.
(uu) Neither
the Company nor any subsidiary nor any of their affiliates (within the meaning
of FINRA Conduct Rule 2720(b)(1)(a)) directly or indirectly controls, are
controlled by, or is under common control with, or is an associated person
(within the meaning of Article I, Section 1(ee) of the By-laws of FINRA) of, any
member firm of FINRA.
(vv) No
approval of the shareholders of the Company under the rules and regulations of
Nasdaq (including Rule 5635 of the Nasdaq Global Marketplace Rules) is required
for the Company to issue and deliver to the Securities included in the
Units.
17
Any
certificate signed by or on behalf of the Company and delivered to the
Underwriter or to counsel for the Underwriter shall be deemed to be a
representation and warranty by the Company to the Underwriter as to the matters
covered thereby.
4. Further Agreements of the
Company. The
Company agrees with the Underwriter:
(a) To
prepare the Rule 462(b) Registration Statement, if necessary, in a form approved
by the Underwriter and file such Rule 462(b) Registration Statement with the
Commission on the date hereof; to prepare the Prospectus in a form approved by
the Underwriter containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rules 430A, 430B and
430C of the Rules and Regulations and to file such Prospectus pursuant to Rule
424(b) of the Rules and Regulations not later than the second (2nd)
business day following the execution and delivery of this Agreement or, if
applicable, such earlier time as may be required by Rule 430A of the Rules and
Regulations; to notify the Underwriter immediately of the Company’s intention to
file or prepare any supplement or amendment to any Registration Statement or to
the Prospectus and to make no amendment or supplement to the Registration
Statement, the General Disclosure Package or to the Prospectus to which the
Underwriter shall reasonably object by notice to the Company after a reasonable
period to review; to advise the Underwriter, promptly after it receives notice
thereof, of the time when any amendment to any Registration Statement has been
filed or becomes effective or any supplement to the General Disclosure Package
or the Prospectus or any amended Prospectus has been filed and to furnish the
Underwriter copies thereof; to file promptly all material required to be filed
by the Company with the Commission pursuant to Rule 433(d) or 163(b)(2), as the
case may be; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of the Prospectus and for so long as the delivery of a prospectus (or
in lieu thereof, the notice referred to in Rule 173(a) of the Rules and
Regulations) is required in connection with the offering or sale of the Units;
to advise the Underwriter, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus, any Issuer Free Writing
Prospectus or the Prospectus, of the suspension of the qualification of the
Units for offering or sale in any jurisdiction, of the initiation or threatening
of any proceeding for any such purpose, or of any request by the Commission for
the amending or supplementing of the Registration Statement, the General
Disclosure Package or the Prospectus or for additional information; and, in the
event of the issuance of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus, any Issuer Free Writing Prospectus or the
Prospectus or suspending any such qualification, and promptly to use its best
efforts to obtain the withdrawal of such order.
18
(b) The
Company represents and agrees that it has not made and, unless it obtains the
prior consent of the Underwriter, it will not, make any offer relating to the
Units that would constitute a “free writing prospectus” as defined in Rule 405
of the Rules and Regulations unless the prior written consent of the Underwriter
has been received (each, a “Permitted Free Writing
Prospectus”); provided that the prior
written consent of the Underwriter hereto shall be deemed to have been given in
respect of the Issuer Free Writing Prospectus(es) included in Schedule A
hereto. The Company represents that it has treated and agrees that it
will treat each Permitted Free Writing Prospectus as an Issuer Free Writing
Prospectus, comply with the requirements of Rules 164 and 433 of the Rules and
Regulations applicable to any Issuer Free Writing Prospectus, including the
requirements relating to timely filing with the Commission, legending and record
keeping and will not take any action that would result in the Underwriter or the
Company being required to file with the Commission pursuant to Rule 433(d) of
the Rules and Regulations a free writing prospectus prepared by or on behalf of
the Underwriter that the Underwriter otherwise would not have been required to
file thereunder.
(c) If
at any time when a Prospectus relating to the Units is required to be delivered
under the Securities Act, any event occurs or condition exists as a result of
which the Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or the Registration Statement, as then amended or
supplemented, would include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not misleading,
or if for any other reason it is necessary at any time to amend or supplement
any Registration Statement or the Prospectus to comply with the Securities Act
or the Exchange Act, the Company will promptly notify the Underwriter, and upon
the Underwriter’s request, the Company will promptly prepare and file with the
Commission, at the Company’s expense, an amendment to the Registration Statement
or an amendment or supplement to the Prospectus that corrects such statement or
omission or effects such compliance and will deliver to the Underwriter, without
charge, such number of copies thereof as the Underwriter may reasonably
request. The Company consents to the use of the Prospectus or any
amendment or supplement thereto by the Underwriter.
(d) If
the General Disclosure Package is being used to solicit offers to buy the Units
at a time when the Prospectus is not yet available to prospective purchasers and
any event shall occur as a result of which, in the judgment of the Company or in
the reasonable opinion of the Underwriter, it becomes necessary to amend or
supplement the General Disclosure Package in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or to make the statements therein not conflict with the information
contained or incorporated by reference in the Registration Statement then on
file and not superseded or modified, or if it is necessary at any time to amend
or supplement the General Disclosure Package to comply with any law, the Company
promptly will either (i) prepare, file with the Commission (if required) and
furnish to the Underwriter and any dealers an appropriate amendment or
supplement to the General Disclosure Package or (ii) prepare and file with the
Commission an appropriate filing under the Exchange Act which shall be
incorporated by reference in the General Disclosure Package so that the General
Disclosure Package as so amended or supplemented will not, in the light of the
circumstances under which they were made, be misleading or conflict with the
Registration Statement then on file, or so that the General Disclosure Package
will comply with law.
19
(e) If
at any time following issuance of an Issuer Free Writing Prospectus there
occurred or occurs an event or development as a result of which such Issuer Free
Writing Prospectus conflicted or will conflict with the information contained in
the Registration Statement, Pricing Prospectus or Prospectus, including any
document incorporated by reference therein and any prospectus supplement deemed
to be a part thereof and not superseded or modified or included or would include
an untrue statement of a material fact or omitted or would omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, the Company has promptly notified or will promptly notify
the Underwriter so that any use of the Issuer Free Writing Prospectus may cease
until it is amended or supplemented and has promptly amended or will promptly
amend or supplement, at its own expense, such Issuer Free Writing Prospectus to
eliminate or correct such conflict, untrue statement or omission. The
foregoing sentence does not apply to statements in or omissions from any Issuer
Free Writing Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by the Underwriter specifically for
inclusion therein, which information the parties hereto agree is limited to the
Underwriter’s Information (as defined in Section
16).
(f) To
the extent not available on the Commission’s EDGAR or IDEA system, to furnish
promptly to the Underwriter and to counsel for the Underwriter a signed copy of
the Registration Statement as originally filed with the Commission, and of each
amendment thereto filed with the Commission, including all consents and exhibits
filed therewith.
(g) To
the extent not available on the Commission’s EDGAR or IDEA system, to deliver
promptly to the Underwriter in New York City such number of the following
documents as the Underwriter shall reasonably
request: (i) conformed copies of the Registration Statement as
originally filed with the Commission (in each case excluding exhibits), (ii)
each Preliminary Prospectus (if any), (iii) any Issuer Free Writing Prospectus,
(iv) the Prospectus (the delivery of the documents referred to in clauses (i),
(ii), (iii) and (iv) of this paragraph (g) to be made not
later than 10:00 A.M., New York time, on the business day following the
execution and delivery of this Agreement), (v) conformed copies of any amendment
to the Registration Statement (excluding exhibits), (vi) any amendment or
supplement to the General Disclosure Package or the Prospectus (the delivery of
the documents referred to in clauses (v) and (vi) of this paragraph (g) to be made not
later than 10:00 A.M., New York City time, on the business day following the
date of such amendment or supplement) and (vii) any document incorporated by
reference in the General Disclosure Package or the Prospectus (excluding
exhibits thereto) (the delivery of the documents referred to in clause (vi) of
this paragraph
(g) to
be made not later than 10:00 A.M., New York City time, on the business day
following the date of such document).
20
(h) To
make generally available to its shareholders as soon as practicable, but in any
event not later than eighteen (18) months after the effective date of each
Registration Statement (as defined in Rule 158(c) of the Rules and Regulations),
an earnings statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Securities Act and the Rules and
Regulations (including, at the option of the Company, Rule 158); and to furnish
to its shareholders as soon as practicable after the end of each fiscal year an
annual report (including a balance sheet and statements of income, shareholders’
equity and cash flows of the Company and its consolidated subsidiaries certified
by independent public accountants) and as soon as possible after each of the
first three fiscal quarters of each fiscal year (beginning with the first fiscal
quarter after the effective date of such Registration Statement), consolidated
summary financial information of the Company and its subsidiaries for such
quarter in reasonable detail.
(i) To
take promptly from time to time such actions as the Underwriter may reasonably
request to qualify the Units and any securities included in the Units, as the
case may be, for offering and sale under the securities or Blue Sky laws of such
jurisdictions (domestic or foreign) as the Underwriter may designate and to
continue such qualifications in effect, and to comply with such laws, for so
long as required to permit the offer and sale of the Units and any securities
included in the Units, in such jurisdictions; provided that the Company and
its subsidiaries shall not be obligated to qualify as foreign corporations in
any jurisdiction in which they are not so qualified or to file a general consent
to service of process in any jurisdiction.
(j) To
the extent not available on the Commission’s EDGAR or IDEA system, upon request,
during the period of five (5) years from the date hereof, to deliver to the
Underwriter upon request, (i) as soon as they are available, copies of all
reports or other communications furnished to shareholders, and (ii) as soon as
they are available, copies of any reports and financial statements furnished or
filed with the Commission or any national securities exchange or automatic
quotation system on which the Common Stock is listed or quoted.
21
(k) That
the Company will not, for a period of ninety (90) days from the date of the
Prospectus (the “Lock-Up
Period”), without the prior written consent of the Underwriter, directly
or indirectly offer, sell, assign, transfer, pledge, contract to sell, or
otherwise dispose of, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, other than (i)
the Company’s sale of the Shares and Warrants included in the Units hereunder,
(ii) the issuance of restricted Common Stock or options to acquire Common Stock
pursuant to the Company’s employee benefit plans, qualified stock option plans
or other employee compensation plans as such plans are in existence on the date
hereof and described in the Prospectus and the issuance of Common Stock pursuant
to the valid exercises of options, warrants or rights outstanding on the date
hereof, (iii) the issuance of Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock (and the issuance of Common Stock
pursuant to the terms of such securities convertible into or exercisable or
exchangeable for Common Stock) in connection with (a) strategic alliances
involving the Company and other entities, including without limitation, joint
venture, licensing and collaboration arrangements and (b) the restructuring or
satisfaction of the Company’s obligations, in whole or in part, with respect to
its loan with Novaquest, a strategic investment group of Quintiles Transnational
Corp. (the “Novaquest
Loan”), and (iv) the issuance of up to 500,000 shares of Common Stock or
securities convertible into, or exercisable or exchangeable for, up to 500,000
shares of Common Stock, to consultants or other providers of services or
products to the Company. The Company will cause each executive
officer, director, shareholder, option-holder and warrantholder listed in Schedule B to furnish to the
Underwriter, prior to the Closing Date, a letter, substantially in the form of
Exhibit A
hereto. The Company also agrees that during such period, the Company
will not file any registration statement, preliminary prospectus or prospectus,
or any amendment or supplement thereto, under the Securities Act for any such
transaction or which registers, or offers for sale, Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock,
except for a registration statement on Form S-8 relating to employee benefit
plans. Notwithstanding the foregoing, beginning on the date that is
(x) sixteen (16) days after the date of the Prospectus, the Company may issue
shares of Common Stock pursuant to the committed equity financing facilities
entered into with Kingsbridge Capital Limited dated May 2008 and December 2008
(collectively, the “CEFFS”) for the purpose of
satisfying up to $3 million of its obligations under the Novaquest Loan, (y)
thirty one (31) days after the date of the Prospectus, the Company may issue
shares of Common Stock pursuant to the CEFFS for any purpose, but in no event
prior to the expiration of seventy-five (75) days after the date of the
Prospectus shall any one or more issuances of shares of Common Stock under the
CEFFS pursuant to clauses (x) and (y) exceed, in the aggregate, two percent
(2.0%) of the Company’s outstanding Common Stock, and (z) seventy-six (76) days
after the date of the Prospectus, there shall be no limitation on the Company’s
issuance of shares of Common Stock pursuant to the CEFFS. The Company
hereby agrees that (i) if it issues an earnings release or material news, or if
a material event relating to the Company occurs, during the last seventeen (17)
days of the Lock-Up Period, or (ii) if prior to the expiration of the Lock-Up
Period, the Company announces that it will release earnings results during the
sixteen (16)-day period beginning on the last day of the Lock-Up Period, the
restrictions imposed by this paragraph (k) or the
letter shall continue to apply until the expiration of the eighteen (18)-day
period beginning on the issuance of the earnings release or the occurrence of
the material news or material event.
(l) To
supply the Underwriter with copies of all correspondence to and from, and all
documents issued to and by, the Commission in connection with the registration
of the Securities included in the Units under the Securities Act or the
Registration Statement, any Preliminary Prospectus or the Prospectus, or any
amendment or supplement thereto or document incorporated by reference
therein.
(m) Prior
to the Closing Date, to furnish to the Underwriter, as soon as they have been
prepared, copies of any unaudited interim consolidated financial statements of
the Company for any periods subsequent to the periods covered by the financial
statements appearing in the Registration Statement and the
Prospectus.
(n) Prior
to the Closing Date, not to issue any press release or other communication
directly or indirectly or hold any press conference with respect to the Company,
its condition, financial or otherwise, or earnings, business affairs or business
prospects (except for routine oral marketing communications in the ordinary
course of business and consistent with the past practices of the Company and of
which the Underwriter is notified), without the prior written consent of the
Underwriter, unless in the judgment of the Company and its counsel, and after
notification to the Underwriter, such press release or communication is required
by law or applicable stock exchange rules.
22
(o) Until
the Underwriter shall have notified the Company of the completion of the
offering of the Units, that the Company will not, and will cause its affiliated
purchasers (as defined in Regulation M under the Exchange Act) not to, either
alone or with one or more other persons, bid for or purchase, for any account in
which it or any of its affiliated purchasers has a beneficial interest, any
Units, or attempt to induce any person to purchase any Units; and not to, and to
cause its affiliated purchasers not to, make bids or purchase for the purpose of
creating actual, or apparent, active trading in or of raising the price of the
Units.
(p) Not
to take any action prior to the Closing Date which would require the Prospectus
to be amended or supplemented pursuant to Section
4.
(q) To
at all times comply with all applicable provisions of the Sarbanes-Oxley Act in
effect from time to time.
(r) To
apply the net proceeds from the sale of the Units as set forth in the
Registration Statement, the General Disclosure Package and the Prospectus under
the heading “Use of Proceeds.”
(s) To
use its best efforts to list, subject to notice of issuance, the Common Stock on
the NasdaqGM.
(t) To
use its best efforts to assist the Underwriter and its counsel with any filings
with FINRA and obtaining clearance from FINRA as to the amount of compensation
allowable or payable to the Underwriter.
(u) To
use its best efforts to do and perform all things required to be done or
performed under this Agreement by the Company prior to the Closing Date and to
satisfy all conditions precedent to the delivery of the Securities included in
the Units.
5. Payment of
Expenses. The
Company agrees to pay, or reimburse if paid by the Underwriter, upon
consummation of the transactions contemplated hereby: (a) the costs
incident to the authorization, issuance, sale, preparation and delivery of the
Securities included in the Units to the Underwriter and any taxes payable in
that connection; (b) the costs incident to the Registration of the Securities
included in the Units under the Securities Act; (c) the costs incident to the
preparation, printing and distribution of the Registration Statement, the Base
Prospectus, any Preliminary Prospectus, any Issuer Free Writing Prospectus, the
General Disclosure Package, the Prospectus, any amendments, supplements and
exhibits thereto or any document incorporated by reference therein and the costs
of printing, reproducing and distributing any transaction document by mail,
telex or other means of communications; (d) if applicable, the fees and expenses
(including related reasonable fees and expenses of counsel for the Underwriter)
incurred in connection with securing any required review by FINRA of the terms
of the sale of the Units and any filings made with FINRA; (e) any applicable
listing, quotation or other fees; (f) the reasonable fees and expenses
(including related reasonable fees and expenses of counsel to the Underwriter)
of qualifying the Securities included in the Units under the securities laws of
the several jurisdictions as provided in Section 4(i) and of
preparing, printing and distributing wrappers, Blue Sky Memoranda and Legal
Investment Surveys; (g) the cost of preparing and printing stock certificates;
(h) all fees and expenses of the registrar and transfer agent of the shares of
Common Stock; (i) the reasonable fees, disbursements and expenses of counsel to
the Underwriter not to exceed $75,000 (inclusive of the fees and expenses of
counsel set forth in Sections 5(d) and
(f) above), and
(j) all other costs and expenses incident to the offering of the Units or the
performance of the obligations of the Company under this Agreement (including,
without limitation, the fees and expenses of the Company’s counsel and the
Company’s independent accountants and the travel and other expenses incurred by
Company personnel in connection with any “road show” including, without
limitation, any expenses advanced by the Underwriter on the Company’s behalf
(which will be promptly reimbursed)); provided that, except to the
extent otherwise provided in this Section 5 and in
Sections 7 and
9, the
Underwriter shall pay its own costs and expenses, including the fees and
expenses of its counsel.
23
6. Conditions to the Obligations of the
Underwriter and the Sale of the Units. The
obligations of the Underwriter hereunder and the Closing of the sale of the
Units, are subject to the accuracy, when made and as of the Applicable Time and
on the Closing Date, of the representations and warranties of the Company
contained herein, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder, and to each of the following additional
terms and conditions:
(a) No
stop order suspending the effectiveness of the Registration Statement or any
part thereof, preventing or suspending the use of any Base Prospectus, any
Preliminary Prospectus, the Prospectus or any Permitted Free Writing Prospectus
or any part thereof shall have been issued and no proceedings for that purpose
or pursuant to Section 8A under the Securities Act shall have been initiated or
threatened by the Commission, and all requests for additional information on the
part of the Commission (to be included or incorporated by reference in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the reasonable satisfaction of the Underwriter; the Rule 462(b)
Registration Statement, if any, each Issuer Free Writing Prospectus, if any, and
the Prospectus shall have been filed with the Commission within the applicable
time period prescribed for such filing by, and in compliance with, the Rules and
Regulations and in accordance with Section 4(a), and the Rule
462(b) Registration Statement, if any, shall have become effective immediately
upon its filing with the Commission; and FINRA shall have raised no objection to
the fairness and reasonableness of the terms of this Agreement or the
transactions contemplated hereby.
(b) The
Underwriter shall not have discovered and disclosed to the Company on or prior
to the Closing Date that the Registration Statement or any amendment or
supplement thereto contains an untrue statement of a fact which, in the opinion
of counsel for the Underwriter, is material or omits to state any fact which, in
the opinion of such counsel, is material and is required to be stated therein or
is necessary to make the statements therein not misleading, or that the General
Disclosure Package, any Issuer Free Writing Prospectus or the Prospectus or any
amendment or supplement thereto contains an untrue statement of fact which, in
the opinion of such counsel, is material or omits to state any fact which, in
the opinion of such counsel, is material and is necessary in order to make the
statements, in the light of the circumstances in which they were made, not
misleading.
24
(c) All
corporate proceedings and other legal matters incident to the authorization,
form and validity of each of this Agreement, the Units and the securities
included therein, the Registration Statement, the General Disclosure Package,
each Issuer Free Writing Prospectus, if any, and the Prospectus and all other
legal matters relating to this Agreement and the transactions contemplated
hereby shall be reasonably satisfactory in all material respects to counsel for
the Underwriter, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them to
pass upon such matters.
(d) Sonnenschein
Nath & Rosenthal LLP shall have furnished to the Underwriter such counsel’s
written opinion and negative assurances statement, as counsel to the Company,
addressed to the Underwriter, dated the Closing Date, in form and substance
reasonably satisfactory to the Underwriter.
(e) Potter
Anderson & Corroon LLP shall have furnished to the Underwriter such
counsel’s written opinion, as intellectual property counsel to the Company,
addressed to the Underwriter, dated the Closing Date, in form and substance
reasonably satisfactory to the Underwriter.
(f) The
Underwriter shall have received from Proskauer Rose LLP, counsel for the
Underwriter, such opinion or opinions and negative assurances statement,
addressed to the Underwriter, dated the Closing Date, with respect to such
matters as the Underwriter may reasonably require, and the Company shall have
furnished to such counsel such documents as they request for enabling them to
pass upon such matters.
(g) At
the time of the execution of this Agreement, the Underwriter shall have received
from Ernst & Young LLP a letter, addressed to the Underwriter, executed and
dated such date, in form and substance satisfactory to the Underwriter (i)
confirming that they are an independent registered accounting firm with respect
to the Company and its subsidiaries within the meaning of the Securities Act and
the Rules and Regulations and PCAOB and (ii) stating the conclusions and
findings of such firm, of the type ordinarily included in accountants’ “comfort
letters” to underwriters, with respect to the financial statements and certain
financial information contained or incorporated by reference in the Registration
Statement, the General Disclosure Package and the Prospectus.
(h) On
the effective date of any post-effective amendment to any Registration Statement
and on the Closing Date, the Underwriter shall have received a letter (the
“Bring-Down Letter”)
from Ernst & Young LLP addressed to the
Underwriter and dated the Closing Date confirming, as of the date of the
Bring-Down Letter (or, with respect to matters involving changes or developments
since the respective dates as of which specified financial information is given
in the General Disclosure Package and the Prospectus, as the case may be, as of
a date not more than three (3) business days prior to the date of the Bring-Down
Letter), the conclusions and findings of such firm, of the type ordinarily
included in accountants’ “comfort letters” to underwriters, with respect to the
financial information and other matters covered by its letter delivered to the
Underwriter concurrently with the execution of this Agreement pursuant to
paragraph (g) of this Section
6.
25
(i) The
Company shall have furnished to the Underwriter a certificate, dated the Closing
Date, of its interim Chief Executive Officer, and its Executive Vice President
and Chief Financial Officer stating that (i) such officers have carefully
examined the Registration Statement, the General Disclosure Package, any
Permitted Free Writing Prospectus and the Prospectus and, in their opinion, the
Registration Statement and each amendment thereto, at the Applicable Time and as
of the date of this Agreement and as of the Closing Date did not include any
untrue statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the General Disclosure Package, as of the Applicable Time and as
of the Closing Date, any Permitted Free Writing Prospectus as of its date and as
of the Closing Date, the Prospectus and each amendment or supplement thereto, as
of the respective date thereof and as of the Closing Date, did not include any
untrue statement of a material fact and did not omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances in which they were made, not misleading, (ii) since the effective
date of the initial Registration Statement, no event has occurred
which should have been set forth in a supplement or amendment to the
Registration Statement, the General Disclosure Package or the Prospectus that
has not been so set forth therein, (iii) to the best of their knowledge after
reasonable investigation, as of the Closing Date, the representations and
warranties of the Company in this Agreement are true and correct and the Company
has complied in all material respects with all agreements and satisfied in all
material respects all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date, and (iv) there has not been,
subsequent to the date of the most recent audited financial statements included
or incorporated by reference in the General Disclosure Package, any material
adverse change in the financial position or results of operations of the Company
and its subsidiaries, or any change or development that, singularly or in the
aggregate, would involve a material adverse change or a prospective material
adverse change, in or affecting the condition (financial or otherwise), results
of operations, business, assets or prospects of the Company and its subsidiaries
taken as a whole, except as set forth in the Prospectus.
(j) Since
the date of the latest audited financial statements included in the General
Disclosure Package or incorporated by reference in the General Disclosure
Package as of the date hereof, (i) neither the Company nor any of its
subsidiaries shall have sustained any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth in the General Disclosure Package, and (ii)
there shall not have been any change in the capital stock (other than Common
Stock of the Company issued pursuant to the exercise of stock options previously
outstanding under the Company’s stock option plans or the issuance of Common
Stock pursuant to employee stock purchase plans, including the Company’s 401(k)
Plan) or long-term debt of the Company nor any of its subsidiaries, or any
change, or any development involving a prospective change, in or affecting the
business, general affairs, management, financial position, stockholders’ equity
or results of operations of the Company and its subsidiaries, otherwise than as
set forth in the General Disclosure Package, the effect of which, in any such
case described in clause (i) or (ii) of this paragraph (j), is, in
the judgment of the Underwriter, so material and adverse as to make it
impracticable or inadvisable to proceed with the sale or delivery of the
Securities included in the Units on the terms and in the manner contemplated in
the General Disclosure Package.
26
(k) No
action shall have been taken and no law, statute, rule, regulation or order
shall have been enacted, adopted or issued by any governmental agency or body
which would prevent the issuance or sale of the Units or materially and
adversely affect or potentially materially and adversely affect the business or
operations of the Company or its subsidiaries; and no injunction, restraining
order or order of any other nature by any federal or state court of competent
jurisdiction shall have been issued which would prevent the issuance or sale of
the Units or materially and adversely affect or potentially materially and
adversely affect the business or operations of the Company or its
subsidiaries.
(l)
Subsequent to the
execution and delivery of this Agreement there shall not have occurred any of
the following: (i) trading in securities generally on the New York
Stock Exchange, NasdaqGM or the American Stock Exchange or in the
over-the-counter market, or trading in any securities of the Company on any
exchange or in the over-the-counter market, shall have been suspended or
materially limited, or minimum or maximum prices or maximum range for prices
shall have been established on any such exchange or such market by the
Commission, by such exchange or market or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium shall have
been declared by Federal or state authorities or a material disruption has
occurred in commercial banking or securities settlement or clearance services in
the United States, (iii) the United States shall have become engaged in
hostilities, or the subject of an act of terrorism, or there shall have been an
outbreak of or escalation in hostilities involving the United States, or there
shall have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States shall be
such), in each case so as to make it, in the judgment of the Underwriter,
impracticable or inadvisable to proceed with the sale or delivery of the
Securities included in the Units on the terms and in the manner contemplated in
the General Disclosure Package and the Prospectus.
(m) The
Company shall have filed a Notification Form: Listing of Additional Shares with
the NasdaqGM and shall have received no objection thereto from the
NasdaqGM.
(n) The
Underwriter shall have received the written agreements, substantially in the
form of Exhibit
A hereto, of the executive officers, directors, shareholders,
optionholders and warrantholders of the Company listed in Schedule B to this
Agreement.
27
(o) The
Underwriter shall have received clearance from FINRA as to the amount of
compensation allowable or payable to the Underwriter as described in the Pricing
Prospectus.
(p) Prior
to the Closing Date, the Company shall have furnished to the Underwriter such
further information, opinions, certificates (including a Secretary’s
Certificate), letters or documents as the Underwriter shall have reasonably
requested.
All
opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Underwriter.
7.
Indemnification and
Contribution.
(a) The
Company shall indemnify and hold harmless the Underwriter, its affiliates and
each of its and their respective directors, officers, members, employees,
representatives and agents (including, without limitation Lazard Frères &
Co. LLC, (which will provide services to the Underwriter) and its affiliates,
and each of its and their respective directors, officers, members, employees,
representatives and agents and each person, if any, who controls Lazard Frères
& Co. LLC within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and each person, if any, who controls the Underwriter
within the meaning of Section 15 of the Securities Act of or Section 20 of the
Exchange Act (collectively, the “Underwriter Indemnified
Parties,” and each a “Underwriter Indemnified
Party”) against any loss, claim, damage, expense or liability whatsoever
(or any action, investigation or proceeding in respect thereof), joint or
several, to which such Underwriter Indemnified Party may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage, expense,
liability, action, investigation or proceeding arises out of or is based upon
(A) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, any Issuer Free Writing Prospectus, any
“issuer information” filed or required to be filed pursuant to Rule 433(d) of
the Rules and Regulations, any Registration Statement or the Prospectus, or in
any amendment or supplement thereto or document incorporated by reference
therein, (B) the omission or alleged omission to state in any Preliminary
Prospectus, any Issuer Free Writing Prospectus, any “issuer information” filed
or required to be filed pursuant to Rule 433(d) of the Rules and Regulations,
any Registration Statement or the Prospectus, or in any amendment or supplement
thereto or document incorporated by reference therein, a material fact required
to be stated therein or necessary to make the statements (with respect to any
Preliminary Prospectus, any Issuer Free Writing Prospectus, any “issuer
information” or the Prospectus, in light of the circumstances under which they
were made) therein not misleading or (C) any breach of the representations and
warranties of the Company contained herein, or the failure of the Company to
perform its obligations hereunder or pursuant to any law relating thereto, and
shall reimburse the Underwriter Indemnified Party promptly upon demand for any
legal fees or other expenses reasonably incurred by that Underwriter Indemnified
Party in connection with investigating, or preparing to defend, or defending
against, or appearing as a third party witness in respect of, or otherwise
incurred in connection with, any such loss, claim, damage, expense, liability,
action, investigation or proceeding, as such fees and expenses are incurred;
provided, however, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, expense or liability arises out of or is based upon an
untrue statement or alleged untrue statement in, or omission or alleged omission
from any Preliminary Prospectus, any Registration Statement or the Prospectus,
or any such amendment or supplement thereto, or any Issuer Free Writing
Prospectus made in reliance upon and in conformity with written information
furnished to the Company by the Underwriter specifically for use therein, which
information the parties hereto agree is limited to the Underwriter’s Information
(as defined in Section
16). This indemnity agreement is not exclusive and will be in
addition to any liability, which the Company might otherwise have and shall not
limit any rights or remedies which may otherwise be available at law or in
equity to each Underwriter Indemnified Party.
28
(b) The
Underwriter shall indemnify and hold harmless the Company and its directors, its
officers who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (collectively, the “Company Indemnified Parties,”
and each a “Company Indemnified
Party”) against any loss, claim, damage, expense or liability whatsoever
(or any action, investigation or proceeding in respect thereof), joint or
several, to which such Company Indemnified Party may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, expense,
liability, action, investigation or proceeding arises out of or is based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, any Issuer Free Writing Prospectus, any
“issuer information” filed or required to be filed pursuant to Rule 433(d) of
the Rules and Regulations, any Registration Statement or the Prospectus, or in
any amendment or supplement thereto, or (ii) the omission or alleged omission to
state in any Preliminary Prospectus, any Issuer Free Writing Prospectus, any
“issuer information” filed or required to be filed pursuant to Rule 433(d) of
the Rules and Regulations, any Registration Statement or the Prospectus, or in
any amendment or supplement thereto, a material fact required to be stated
therein or necessary to make the statements therein not misleading, but in each
case only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by the Underwriter specifically for
use therein, which information the parties hereto agree is limited to the
Underwriter’s Information as defined in Section 16, and shall
reimburse the Company for any legal or other expenses reasonably incurred by
such party in connection with investigating or preparing to defend or defending
against or appearing as third party witness in connection with any such loss,
claim, damage, liability, action, investigation or proceeding, as such fees and
expenses are incurred. This indemnity agreement is not exclusive and
will be in addition to any liability, which the Underwriter might otherwise have
and shall not limit any rights or remedies which may otherwise be available at
law or in equity to each Company Indemnified Party. Notwithstanding
the provisions of this Section 7(b), in no
event shall any indemnity by the Underwriter under this Section 7(b) exceed
the total discount and commission received by the Underwriter in connection with
the Offering.
29
(c) Promptly
after receipt by an indemnified party under this Section 7 of notice
of the commencement of any action, the indemnified party shall, if a claim in
respect thereof is to be made against an indemnifying party under this Section 7, notify
such indemnifying party in writing of the commencement of that action; provided, however, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have under this Section 7 except to
the extent it has been materially prejudiced by such failure; and, provided, further, that the
failure to notify an indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section
7. If any such action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense of such action with counsel reasonably satisfactory to the
indemnified party (which counsel shall not, except with the written consent of
the indemnified party, be counsel to the indemnifying party). After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such action, except as provided herein, the indemnifying
party shall not be liable to the indemnified party under Section 7 for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense of such action other than reasonable costs of
investigation; provided,
however, that any indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense of such
action but the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized in writing by the Company in
the case of a claim for indemnification under Section 7(a) or Section 2.4 or LCM in
the case of a claim for indemnification under Section 7(b), (ii)
such indemnified party shall have been advised by its counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to the indemnifying party, or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party within a reasonable
period of time after notice of the commencement of the action or the
indemnifying party does not diligently defend the action after assumption of the
defense, in which case, if such indemnified party notifies the indemnifying
party in writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of (or, in the case of a failure to diligently defend the action
after assumption of the defense, to continue to defend) such action on behalf of
such indemnified party and the indemnifying party shall be responsible for legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense of such action; provided, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for all such indemnified parties (in addition to any local counsel), which
firm shall be designated in writing by LCM if the indemnified parties under this
Section 7
consist of any Underwriter Indemnified Party or by the Company if the
indemnified parties under this Section 8 consist of
any Company Indemnified Parties. Subject to this Section 7(c),
the amount payable by an indemnifying party under Section 7 shall
include, but not be limited to, (x) reasonable legal fees and expenses of
counsel to the indemnified party and any other expenses in investigating, or
preparing to defend or defending against, or appearing as a third party witness
in respect of, or otherwise incurred in connection with, any action,
investigation, proceeding or claim, and (y) all amounts paid in settlement of
any of the foregoing. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of judgment with respect to any pending or threatened action or any
claim whatsoever, in respect of which indemnification or contribution could be
sought under this Section 7
(whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party in form and substance reasonably
satisfactory to such indemnified party from all liability arising out of such
action or claim and (ii) does not include a statement as to or an admission of
fault, culpability or a failure to act by or on behalf of any indemnified
party. Subject to the provisions of the following sentence, no
indemnifying party shall be liable for settlement of any pending or threatened
action or any claim whatsoever that is effected without its written consent
(which consent shall not be unreasonably withheld or delayed), but if settled
with its written consent, if its consent has been unreasonably withheld or
delayed or if there be a judgment for the plaintiff in any such matter, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or
judgment. In addition, if at any time an indemnified party shall have
requested that an indemnifying party reimburse the indemnified party for
reasonable fees and expenses of counsel, such indemnifying party agrees that it
shall be liable for any settlement of the nature contemplated herein effected
without its written consent if (i) such settlement is entered into more than
forty-five (45) days after receipt by such indemnifying party of the request for
reimbursement, (ii) such indemnifying party shall have received notice of the
terms of such settlement at least thirty (30) days prior to such settlement
being entered into and (iii) such indemnifying party shall not have reimbursed
such indemnified party in accordance with such request prior to the date of such
settlement.
30
(d) If
the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under Section 7(a) or Section 7(b),
then each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid, payable or otherwise incurred by such
indemnified party as a result of such loss, claim, damage, expense or liability
(or any action, investigation or proceeding in respect thereof), as incurred,
(i) in such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriter on the other hand
from the offering of the Units, or (ii) if the allocation provided by clause (i)
of this Section
7(d) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
of this Section
7(d) but also the relative fault of the Company on the one hand and the
Underwriter on the other with respect to the statements, omissions, acts or
failures to act which resulted in such loss, claim, damage, expense or liability
(or any action, investigation or proceeding in respect thereof) as well as any
other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriter on the other with
respect to such offering shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Units purchased under this Agreement
(before deducting expenses) received by the Company bear to the total
underwriting discount and commission received by the Underwriter in connection
with the Offering, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault of the Company on the one hand and
the Underwriter on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriter on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement, omission, act or
failure to act; provided that the parties
hereto agree that the written information furnished to the Company by the
Underwriter for use in any Preliminary Prospectus, any Registration Statement or
the Prospectus, or in any amendment or supplement thereto, consists solely of
the Underwriter’s Information as defined in Section
16. The Company and the Underwriter agree that it would not be
just and equitable if contributions pursuant to this Section 7(d) were to
be determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage, expense, liability, action, investigation or
proceeding referred to above in this Section 7(d) shall be
deemed to include, for purposes of this Section 7(d), any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating, preparing to defend or defending against or
appearing as a third party witness in respect of, or otherwise incurred in
connection with, any such loss, claim, damage, expense, liability, action,
investigation or proceeding. Notwithstanding the provisions of this
Section 7(d),
the Underwriter shall not be required to contribute any amount in excess of the
total discount and commission received by the Underwriter in connection with
this Offering, less the amount of any damages which the Underwriter has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue
statement, omission or alleged omission, act or alleged act or failure to act or
alleged failure to act. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
31
8. Termination. The
obligations of the Underwriter hereunder may be terminated by the Underwriter,
in its absolute discretion by notice given to the Company prior to delivery of
and payment for the Units if, prior to that time, any of the events described in
Sections 6(j),
7(k) or 6(l) have occurred or
if the Underwriter shall decline to purchase the Units for any reason permitted
under this Agreement.
9. Reimbursement of Underwriter’s
Expenses. Notwithstanding
anything to the contrary in this Agreement, if (a) this Agreement shall have
been terminated pursuant to Section 8, (b) the
Company shall fail to tender the Securities included in the Units for delivery
to the Underwriter for any reason not permitted under this Agreement, (c) the
Underwriter shall decline to purchase the Units for any reason permitted under
this Agreement or (d) the sale of the Units is not consummated because any
condition to the obligations of the Underwriter set forth herein is not
satisfied or because of the refusal, inability or failure on the part of the
Company to perform any agreement herein or to satisfy any condition or to comply
with the provisions hereof, then, in addition to the payment of any amounts in
accordance with Section 5, the
Company shall reimburse the Underwriter for the fees and expenses of the
Underwriter’s counsel and for such other accountable out-of-pocket expenses as
shall have been reasonably incurred by them in connection with this Agreement
and the proposed purchase of the Units, and upon demand the Company shall pay
the full amount thereof to the Underwriter.
32
10. Absence of Fiduciary
Relationship. The
Company acknowledges and agrees that:
(a) the
Underwriter’s responsibility to the Company is solely contractual in nature, the
Underwriter has been retained solely to act as Underwriter in connection with
the Offering and no fiduciary, advisory or agency relationship between the
Company and the Underwriter has been created in respect of any of the
transactions contemplated by this Agreement, irrespective of whether the
Underwriter or Lazard Frères & Co. LLC has advised or is advising the
Company on other matters;
(b) the
price of the Units set forth in this Agreement was established by the Company
following discussions and arms-length negotiations with the Underwriter, and the
Company is capable of evaluating and understanding, and understands and accepts,
the terms, risks and conditions of the transactions contemplated by this
Agreement;
(c) it
has been advised that the Underwriter and Lazard Frères & Co. LLC and their
affiliates are engaged in a broad range of transactions which may involve
interests that differ from those of the Company and that the Underwriter has no
obligation to disclose such interests and transactions to the Company by virtue
of any fiduciary, advisory or agency relationship; and
(d) it
waives, to the fullest extent permitted by law, any claims it may have against
the Underwriter for breach of fiduciary duty or alleged breach of fiduciary duty
and agrees that the Underwriter shall have no liability (whether direct or
indirect) to the Company in respect of such a fiduciary duty claim or to any
person asserting a fiduciary duty claim on behalf of or in right of the Company,
including stockholders, employees or creditors of the Company.
11. Successors; Persons Entitled to
Benefit of Agreement. This
Agreement shall
inure to the benefit of and be binding upon the Underwriter, the Company, and
their respective successors and assigns. This Agreement shall also
inure to the benefit of Lazard Frères & Co. LLC and each of its respective
successors and assigns, which shall be third party beneficiaries
hereof. Nothing expressed or mentioned in this Agreement is intended
or shall be construed to give any person, other than the persons mentioned in
the preceding sentences, any legal or equitable right, remedy or claim under or
in respect of this Agreement, or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the benefit of no other
person; except that the representations, warranties, covenants, agreements and
indemnities of the Company contained in this Agreement shall also be for the
benefit of the Underwriter Indemnified Parties and the indemnities of the
Underwriter shall be for the benefit of the Company Indemnified
Parties. It is understood that the Underwriter’s responsibility to
the Company is solely contractual in nature and the Underwriter does not owe the
Company, or any other party, any fiduciary duty as a result of this
Agreement.
33
12. Survival of Indemnities,
Representations, Warranties, etc. The
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company and the Underwriter, as set forth in this
Agreement or made by them respectively, pursuant to this Agreement, shall remain
in full force and effect, regardless of any investigation made by or on behalf
of the Underwriter, the Company, or any person controlling any of them and shall
survive delivery of and payment for the Units. Notwithstanding any
termination of this Agreement, including without limitation any termination
pursuant to Sections
8 or 9,
the indemnity and contribution agreements contained in Section 7 and the
covenants, representations, warranties set forth in this Agreement shall not
terminate and shall remain in full force and effect at all times.
13. Notices. All
statements, requests, notices and agreements hereunder shall be in writing,
and:
(a) if to the
Underwriter, shall be delivered or sent by mail, telex, facsimile transmission
or email to Lazard Capital Markets LLC, Attention: General Counsel, Fax:
212-830-3615; and
(b) if to the
Company, shall be delivered or sent by mail, telex, facsimile transmission or
email to Discovery Laboratories, Inc., 2600 Kelly Road, Warrington, Pennsylvania
18976, Attention: Mary B. Templeton, Esq., Senior Vice President and Deputy
General Counsel (Fax: 215-488-9301), with a copy to: Sonnenschein Nath &
Rosenthal LLP, Two World Financial Center, New York, NY 10281, Attention: Ira L.
Kotel, Esq. (Fax: 212-768-6800).
provided, however, that any
notice to the Underwriter pursuant to Section 7 shall be
delivered or sent by mail, telex or facsimile transmission to the Underwriter at
its address set forth in its acceptance telex to the Underwriter, which address
will be supplied to any other party hereto by the Underwriter upon
request. Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof, except that any such statement,
request, notice or agreement delivered or sent by email shall take effect at the
time of confirmation of receipt thereof by the recipient thereof.
14. Definition of Certain
Terms. For
purposes of this Agreement, (a) “business day” means any day on
which the New York Stock Exchange, Inc. is open for trading and (b) “subsidiary” has the meaning
set forth in Rule 405 of the Rules and Regulations.
34
15. Governing Law, Agent for Service and
Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, including
without limitation Section 5-1401 of the New York General Obligations
Law. No legal proceeding may be commenced, prosecuted or
continued in any court other than the courts of the State of New York located in
the City and County of New York or in the United States District Court for the
Southern District of New York, which courts shall have jurisdiction over the
adjudication of such matters, and the Company and the Underwriter each hereby
consent to the jurisdiction of such courts and personal service with respect
thereto. The Company and the Underwriter each hereby waive all right
to trial by jury in any legal proceeding (whether based upon contract, tort or
otherwise) in any way arising out of or relating to this
Agreement. The Company agrees that a final judgment in any such legal
proceeding brought in any such court shall be conclusive and binding upon the
Company and the Underwriter and may be enforced in any other courts in the
jurisdiction of which the Company is or may be subject, by suit upon such
judgment.
16. Underwriter’s
Information. The
parties hereto acknowledge and agree that, for all purposes of this Agreement,
the Underwriter’s Information consists solely of the following information in
the Prospectus: (i) the last paragraph on the front cover page concerning the
terms of the offering by the Underwriter; (ii) the statements concerning the
Underwriter contained in the first, sixth and ninth (the latter referring to
stabilizing transactions and passive market making) paragraphs under the heading
“Underwriting.”
17. Partial
Unenforceability. The
invalidity or unenforceability of any section, paragraph, clause or provision of
this Agreement shall not affect the validity or enforceability of any other
section, paragraph, clause or provision hereof. If any section,
paragraph, clause or provision of this Agreement is for any reason determined to
be invalid or unenforceable, there shall be deemed to be made such minor changes
(and only such minor changes) as are necessary to make it valid and
enforceable.
18. General. This
Agreement constitutes the entire agreement of the parties to this Agreement and
supersedes all prior written or oral and all contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter
hereof. In this Agreement, the masculine, feminine and neuter genders
and the singular and the plural include one another. The section
headings in this Agreement are for the convenience of the parties only and will
not affect the construction or interpretation of this Agreement. This
Agreement may be amended or modified, and the observance of any term of this
Agreement may be waived, only by a writing signed by the Company and the
Underwriter.
19. Counterparts. This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument and such signatures may be delivered by
facsimile.
35
If the
foregoing is in accordance with your understanding of the agreement between the
Company and the Underwriter, kindly indicate your acceptance in the space
provided for that purpose below.
|
Very
truly yours,
|
|
|
DISCOVERY
LABORATORIES, INC.
|
|
|
By:
|
/s/ W. Thomas
Amick
|
|
Name:
W. Thomas Amick
|
|
|
Title:
Chairman and CEO
|
|
Accepted
as of the date
first
above written:
|
LAZARD
CAPITAL MARKETS LLC
|
|
|
By:
|
/s/ David G. McMillan,
Jr.
|
|
Name:
David G. McMillan, Jr.
|
|
|
Title:
Managing Director
|
|
36
SCHEDULE
A
General
Use Free Writing Prospectuses
None.
SCHEDULE
B
List
of officers and directors subject to Section
4
Board of
Directors
W. Thomas
Amick (Chairman and interim CEO)
Antonio
Esteve
Max
Link
Herbert
H. McDade, Jr.
Marvin E.
Rosenthale
Management
John G.
Cooper
David L.
Lopez
Kathryn
Cole
Charles
F. Katzer
Thomas F.
Miller
Gerald J.
Orehostky
Robert
Segal
Mary B.
Templeton
EXHIBIT
A
Form of
Warrant
EXHIBIT
B
Form
of Lock Up Agreement
February
18, 2010
LAZARD
CAPITAL MARKETS LLC
30
Rockefeller Plaza
New York,
New York 10020
Re: Discovery Laboratories, Inc.
offering of 27,500,000 Units
Dear
Sirs:
In order
to induce Lazard Capital Markets LLC (“Lazard”), to enter in to a
certain Underwriting Agreement (the “Underwriting
Agreement’) with Discovery Laboratories, Inc., a Delaware corporation
(the “Company”), with
respect to the public offering of Units consisting of shares of the Company’s
Common Stock, par value $0.001 per share (“Common Stock”) and warrants to
purchase shares of Common Stock, the undersigned hereby agrees that for a period
(the “lock-up period”)
of ninety (90) days following the date of the final prospectus filed by the
Company with the Securities and Exchange Commission in connection with such
public offering, the undersigned will not, without the prior written consent of
Lazard, directly or indirectly, (i) offer, sell, assign, transfer, pledge,
contract to sell, or otherwise dispose of, any shares of Common Stock or
securities convertible into or exercisable or exchangeable for Common Stock
(including, without limitation, shares of Common Stock or any such securities
which may be deemed to be beneficially owned by the undersigned in accordance
with the rules and regulations promulgated under the Securities Act of 1933, as
the same may be amended or supplemented from time to time (such shares or
securities, the “Beneficially
Owned Shares”)), (ii) enter into any swap, hedge or other agreement or
arrangement that transfers in whole or in part, the economic risk of ownership
of any Beneficially Owned Shares, Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock, or (iii) engage in any short
selling of any Beneficially Owned Shares, Common Stock or securities convertible
into or exercisable or exchangeable for Common Stock.
If (i)
the Company issues an earnings release or material news or a material event
relating to the Company occurs during the last seventeen (17) days of the
lock-up period, or (ii) prior to the expiration of the lock-up period, the
Company announces that it will release earnings results during the sixteen
(16)-day period beginning on the last day of the lock-up period, the
restrictions imposed by this Agreement shall continue to apply until the
expiration of the eighteen (18)-day period beginning on the issuance of the
earnings release or the occurrence of the material news or material
event.
In
addition, the undersigned hereby waives, from the date hereof until the
expiration of the ninetieth (90th) day
following the date of the Company’s final prospectus, any and all rights, if
any, to request or demand registration pursuant to the Securities Act of 1933,
as amended, of any shares of Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock that are registered in the name of
the undersigned or that are Beneficially Owned Shares. In order to
enable the aforesaid covenants to be enforced, the undersigned hereby consents
to the placing of legends and/or stop transfer orders with the transfer agent of
the Common Stock with respect to any shares of Common Stock, securities
convertible into or exercisable or exchangeable for Common Stock or Beneficially
Owned Shares.
Notwithstanding
the foregoing, the undersigned may transfer Beneficially Owned Shares (i) as a
bona fide or gifts, (ii) to any trust for the direct or indirect benefit of the
undersigned or the immediate family of the undersigned, or (iii) by will or
intestate succession; provided, that (A) each donee, transferee or distribute
shall execute and deliver a letter substantially in the form hereof and (B)
neither the undersigned nor any other party to the applicable transaction shall
be required to file, or voluntarily file, a report under Section 16(a) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a
filing on Form 5 made after expiration of the Lock-up Period. For
purposes of this agreement, the term “immediate family” shall mean any
relationship by blood marriage or adoption, not more remote than first
cousin.
In
addition, notwithstanding the foregoing, the restrictions set forth herein shall
not apply to the sale of up to an aggregate 200,000 Shares by the undersigned
together with all of the other executive officers and directors of the Company
that have entered into agreements similar to this one on the date hereof or (ii)
to the establishment of a trading plan that complies with Rule 10b5-1 under the
Exchange Act and that is existing on the date of this Agreement, but only to the
extent that such sale is in connection with options that are set to expire
during the lock-up period; provided, however, that the
restrictions shall apply in full force to sales pursuant to such trading plan
during the lock-up period.
Anything
contained herein to the contrary notwithstanding, any person or entity to whom
shares of Common Stock, securities convertible into or exercisable or
exchangeable for Common Stock or Beneficially Owned Shares are transferred from
the undersigned shall be bound by the terms of this Agreement.
If the
Offering is not consummated by March 7, 2010, this Agreement shall terminate and
the undersigned will be released from its obligations hereunder.
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[Signatory]
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By:
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Name:
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Title:
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DISCOVERY
LABORATORIES, INC.
Form
of Warrant To Purchase Common Stock
Warrant
No.:
Number of
Shares of Common Stock:_____________
Date of
Issuance: [ ], 2010 ("Issuance Date")
Discovery
Laboratories, Inc., a Delaware corporation (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, [INVESTOR NAME], the registered holder hereof or its
permitted assigns (the "Holder"), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon surrender of this Warrant to
Purchase Common Stock (including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the "Warrant"), at any time or
times on or after the date hereof (the “Exercisability Date”), but not
after 11:59 p.m., New York time, on the Expiration Date (as defined below),
[______________ (_____________)]1
fully paid nonassessable shares of Common Stock (as defined below) (the "Warrant
Shares"). Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in Section
15. This Warrant is the Warrant to purchase Common Stock (this
"Warrant") issued
pursuant to (i) Sections 1 and 2 of
that certain Underwriting Agreement (the “Underwriting Agreement”), dated as of
February 18, 2010 (the "Pricing
Date"), by and between the Company and Lazard Capital Markets LLC, as
underwriter and (ii) the Company’s Registration Statement on Form S-3 (File
number 333-151654) (the “Registration
Statement”).
1
Insert a number of shares equal to 50% of the number of shares of
common stock purchased under the Underwriting Agreement.
1. EXERCISE OF
WARRANT.
(a) Mechanics of
Exercise. Subject to the terms and conditions hereof, this
Warrant may be exercised by the Holder on any day on or after the Exercisability
Date, in whole or in part, by (i) delivery of a written notice, in the form
attached hereto as Exhibit A (the "Exercise Notice"), of the
Holder's election to exercise this Warrant and (ii) (A) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by the
number of Warrant Shares as to which this Warrant is being exercised (the "Aggregate Exercise Price") in
cash or by wire transfer of immediately available funds or (B) provided the
conditions for cashless exercise set forth in Section 1(d) are
satisfied, by notifying the Company that this Warrant is being exercised
pursuant to a Cashless Exercise (as defined in Section
1(d)). The Holder shall not be required to deliver the
original Warrant in order to effect an exercise hereunder. Execution
and delivery of the Exercise Notice with respect to less than all of the Warrant
Shares shall have the same effect as cancellation of the original Warrant and
issuance of a new Warrant evidencing the right to purchase the remaining number
of Warrant Shares. On or before the first (1st)
Business Day following the date on which the Company has received each of the
Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless
Exercise) (collectively, the "Exercise Delivery Documents"),
the Company shall transmit by facsimile or electronic mail an acknowledgment of
receipt of the Exercise Delivery Documents to the Holder and Continental Stock
Transfer & Trust Company (the Company’s "Transfer
Agent"). On or before the third (3rd)
Business Day following the date on which the Company has received all of the
Exercise Delivery Documents (the "Share Delivery Date"), the
Company shall (X) provided that the Transfer Agent is participating in The
Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of Warrant Shares to which the Holder is entitled pursuant to
such exercise to the Holder's or its designee's balance account with DTC through
its Deposit/Withdrawal At Custodian (“DWAC”) system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program or the Holder does not request delivery of the Warrant Shares
via DWAC, issue and dispatch by overnight courier to the address as specified in
the Exercise Notice, a certificate, registered in the Company's share register
in the name of the Holder or its designee, for the number of Warrant Shares to
which the Holder is entitled pursuant to such exercise. Upon delivery
of the Exercise Delivery Documents, the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares with respect
to which this Warrant has been exercised, irrespective of the date such Warrant
Shares are credited to the Holder's DTC account or the date of delivery of the
certificates evidencing such Warrant Shares, as the case may be. If
this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the
number of Warrant Shares represented by this Warrant submitted for exercise is
greater than the number of Warrant Shares being acquired upon an exercise, then
the Company shall as soon as practicable and in no event later than three
Business Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 7(d))
representing the right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the number of
Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded down to the nearest whole number. The Company shall pay any
and all taxes which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant.
(b) Exercise
Price. For purposes of this Warrant, "Exercise Price" means $0.85,
subject to adjustment as provided herein.
(c) Company's Failure to Timely
Deliver Securities. If the Company shall fail for any reason
or for no reason to issue to the Holder within three (3) Business Days of
receipt of the Exercise Delivery Documents in compliance with the terms of this
Section 1, a
certificate for the number of shares of Common Stock to which the Holder is
entitled and register such shares of Common Stock on the Company's share
register or to credit the Holder's balance account with DTC for such number of
shares of Common Stock to which the Holder is entitled upon the Holder's
exercise of this Warrant, and if on or after such Trading Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving from the
Company (a "Buy-In"),
then the Company shall, within three (3) Business Days after the Holder's
request and in the Holder's discretion, either (i) pay cash to the Holder in an
amount equal to the Holder's total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the "Buy-In Price"), at which
point the Company's obligation to deliver such certificate (and to issue such
Warrant Shares) shall terminate, or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates representing such Warrant
Shares and pay cash to the Holder in an amount equal to the excess (if any) of
the Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the Closing Bid Price on the date of exercise.
2
(d) Cashless Exercise.
Notwithstanding
anything contained herein to the contrary, if and only if neither (i) a
registration statement covering the Warrant Shares that are the subject of the
Exercise Notice (the "Unavailable Warrant Shares"),
nor (ii) an exemption from registration, is
available for the resale of such Unavailable Warrant Shares, the Holder may, in
its sole discretion, exercise this Warrant in whole or in part and, in lieu of
making the cash payment otherwise contemplated to be made to the Company upon
such exercise in payment of the Aggregate Exercise Price, elect instead to
receive upon such exercise the "Net Number" of shares of Common Stock determined
according to the following formula (a "Cashless
Exercise"):
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Net Number =
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(A x B) - (A x C)
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B
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For purposes of the foregoing
formula:
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A=
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the
total number of shares with respect to which this Warrant is then being
exercised.
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B=
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the
arithmetic average of the Closing Sale Prices of the shares of Common
Stock for the five (5) consecutive Trading Days ending on the Trading Day
immediately preceding the date of the Exercise Notice.
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C=
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the
Exercise Price then in effect for the applicable Warrant Shares at the
time of such
exercise.
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(e) Rule
144. For purposes of Rule 144(d) promulgated under the
Securities Act, as in effect on the date hereof, it is intended that the Warrant
Shares issued in a Cashless Exercise shall be deemed to have been acquired by
the Holder, and the holding period for the Warrant Shares shall be deemed to
have commenced, on the date this Warrant was originally issued pursuant to the
Underwriting Agreement.
(f) Disputes. In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed, and all such
disputes shall be resolved pursuant to Section
12.
3
(g) Beneficial
Ownership. The Company shall not effect the exercise of this
Warrant, and the Holder shall not have the right to exercise this Warrant, to
the extent that after giving effect to such exercise, such Person (together with
such Person's affiliates) would beneficially own in excess of 9.99% (the "Maximum Percentage") of the
shares of Common Stock outstanding immediately after giving effect to such
exercise. For purposes of the foregoing sentence, the aggregate
number of shares of Common Stock beneficially owned by such Person and its
affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (i) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding
sentence, for purposes of this paragraph, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. For purposes of this Warrant, in determining the
number of outstanding shares of Common Stock, the Holder may rely on the number
of outstanding shares of Common Stock as reflected in (1) the Company's most
recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing
with the Securities and Exchange Commission, as the case may be, (2) a more
recent public announcement by the Company or (3) any other notice by the Company
or the Transfer Agent setting forth the number of shares of Common Stock
outstanding. To the extent that the limitation contained in this Section 1(g) applies,
the determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder) and of which a portion of this Warrant is
exercisable shall be in the sole discretion of a Holder, and the submission of
an Exercise Notice of shall be deemed to be each Holder’s determination of
whether this Warrant is exercisable (in relation to other securities owned by
such Holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such
determination. For any reason at any time, upon the written or
oral request of the Holder, the Company shall within two (2) Business Days
confirm to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of
securities of the Company, including this Warrant, by the Holder and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. By written notice to the Company, the
Holder may from time to time increase or decrease the Maximum Percentage to any
other percentage not in excess of 9.99% specified in such notice; provided that (i) any such
increase will not be effective until the sixty-first (61st) day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder. The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 1(g) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended beneficial ownership limitation herein contained
or to make changes or supplements necessary or desirable to properly give effect
to such limitation.
4
2. ADJUSTMENT OF EXERCISE PRICE
AND NUMBER OF WARRANT SHARES. The Exercise Price and the
number of Warrant Shares shall be adjusted from time to time as
follows:
(a) Adjustment upon Subdivision
or Combination of Common Stock. If the Company at any time on
or after the Pricing Date subdivides (by any stock split, stock dividend,
recapitalization, reorganization, scheme, arrangement or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision will
be proportionately reduced and the number of Warrant Shares will be
proportionately increased. If the Company at any time on or after the
Pricing Date combines (by any stock split, stock dividend, recapitalization,
reorganization, scheme, arrangement or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately
decreased. Any adjustment under this Section 2(a) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(b) Other
Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not
expressly provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or other rights with
equity features), then the Company's Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of Warrant Shares so as to
protect the rights of the Holder; provided that no such adjustment pursuant to
this Section
2(b) will increase the Exercise Price or decrease the number of Warrant
Shares as otherwise determined pursuant to this Section
2.
3. RIGHTS UPON DISTRIBUTION OF
ASSETS. If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) to all
holders of shares of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time
after the issuance of this Warrant, then, in each such case:
(a) any
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of shares of Common Stock
entitled to receive the Distribution shall be reduced, effective as of the close
of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid
Price of the shares of Common Stock on the Trading Day immediately preceding
such record date minus the value of the Distribution (as determined in good
faith by the Company's Board of Directors) applicable to one share of Common
Stock, and (ii) the denominator shall be the Closing Bid Price of the shares of
Common Stock on the Trading Day immediately preceding such record date;
and
5
(b) the
number of Warrant Shares shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of
business on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided that in the event
that the Distribution is of shares of Common Stock (or common stock) ("Other Shares of Common Stock")
of a company whose shares of common stock are traded on a national securities
exchange or a national automated quotation system, then the Holder may elect to
receive a warrant to purchase Other Shares of Common Stock in lieu of an
increase in the number of Warrant Shares, the terms of which shall be identical
to those of this Warrant, except that such warrant shall be exercisable into the
number of shares of Other Shares of Common Stock that would have been payable to
the Holder pursuant to the Distribution had the Holder exercised this Warrant
immediately prior to such record date and with an aggregate exercise price equal
to the product of the amount by which the exercise price of this Warrant was
decreased with respect to the Distribution pursuant to the terms of the
immediately preceding paragraph (a) and the number of Warrant Shares calculated
in accordance with the first part of this paragraph (b).
4. PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS.
(a) Purchase
Rights. In addition to any adjustments pursuant to Section 2 above, if
at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of shares of Common Stock (the
"Purchase Rights"), then
the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any limitations on the
exercise of this Warrant) immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of shares of Common Stock are
to be determined for the grant, issue or sale of such Purchase
Rights.
6
(b) Fundamental
Transactions. The Company shall not enter into or be party to
a Fundamental Transaction unless the Successor Entity assumes this Warrant in
accordance with the provisions of this Section (4)(b),
including agreements to deliver to each holder of Warrants in exchange for such
Warrants a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant, including, without
limitation, an adjusted exercise price equal to the value for the shares of
Common Stock reflected by the terms of such Fundamental Transaction, and
exercisable for a corresponding number of shares of capital stock equivalent to
the shares of Common Stock acquirable and receivable upon exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and satisfactory to the
Holder. Upon the occurrence of any Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this Warrant
referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein. Upon
consummation of the Fundamental Transaction, the Successor Entity shall deliver
to the Holder confirmation that there shall be issued upon exercise of this
Warrant at any time after the consummation of the Fundamental Transaction, in
lieu of the shares of the Common Stock (or other securities, cash, assets or
other property) purchasable upon the exercise of the Warrant prior to such
Fundamental Transaction, such shares of stock, securities, cash, assets or any
other property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had this Warrant been converted immediately
prior to such Fundamental Transaction, as adjusted in accordance with the
provisions of this Warrant. In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for shares of Common
Stock (a “Corporate
Event”), the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon an exercise of this
Warrant at any time after the consummation of the Fundamental Transaction but
prior to the Expiration Date, in lieu of the shares of the Common Stock (or
other securities, cash, assets or other property) purchasable upon the exercise
of the Warrant prior to such Fundamental Transaction, such shares of stock,
securities, cash, assets or any other property whatsoever (including warrants or
other purchase or subscription rights) which the Holder would have been entitled
to receive upon the happening of such Fundamental Transaction had the Warrant
been exercised immediately prior to such Fundamental Transaction. If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the consideration it receives upon any exercise of
this Warrant following such Fundamental Transaction. The
provisions of this Section 4 shall apply
similarly and equally to successive Fundamental Transactions and Corporate
Events and shall be applied without regard to any limitations on the exercise of
this Warrant.
5. NONCIRCUMVENTION. The
Company hereby covenants and agrees that the Company will not, by amendment of
its Certificate of Incorporation, Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, and will at all
times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the
Holder. Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as this Warrant is outstanding, take all action necessary
to reserve and keep available out of its authorized and unissued shares of
Common Stock, solely for the purpose of effecting the exercise of this Warrant,
100% of the number of shares of Common Stock issuable upon exercise of this
Warrant then outstanding (without regard to any limitations on
exercise).
6. WARRANT HOLDER NOT DEEMED A
STOCKHOLDER. Except as otherwise specifically provided herein,
the Holder, solely in such Person's capacity as a holder of this Warrant, shall
not be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person's capacity
as the Holder of this Warrant, any of the rights of a stockholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant. In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a stockholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company.
7
7. REISSUANCE OF
WARRANTS.
(a) Transfer of
Warrant. If this Warrant is to be transferred, the Holder
shall surrender this Warrant to the Company together with a written assignment
of this Warrant in the form attached hereto as Exhibit B duly
executed by the Holder or its agent or attorney, whereupon the Company will
forthwith, subject to compliance with any applicable securities laws, issue and
deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)),
registered as the Holder may request, representing the right to purchase the
number of Warrant Shares being transferred by the Holder and, if less then the
total number of Warrant Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 7(d)) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.
(b) Lost, Stolen or Mutilated
Warrant. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall execute and deliver to the Holder a new Warrant (in accordance
with Section
7(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.
(c) Exchangeable for Multiple
Warrants. This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a new Warrant
or Warrants (in accordance with Section 7(d))
representing in the aggregate the right to purchase the number of Warrant Shares
then underlying this Warrant, and each such new Warrant will represent the right
to purchase such portion of such Warrant Shares as is designated by the Holder
at the time of such surrender; provided, however, that no Warrants for
fractional shares of Common Stock shall be given.
(d) Issuance of New
Warrants. Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the
Warrant Shares designated by the Holder which, when added to the number of
shares of Common Stock underlying the other new Warrants issued in connection
with such issuance, does not exceed the number of Warrant Shares then underlying
this Warrant), (iii) shall have an issuance date, as indicated on the face of
such new Warrant, which is the same as the Issuance Date, and (iv) shall have
the same rights and conditions as this Warrant.
8
8. NOTICES. The
Company shall provide the Holder with prompt written notice of all actions taken
pursuant to this Warrant, including in reasonable detail a description of such
action and the reason therefore. Whenever notice is required to be
given under this Warrant, unless otherwise provided herein, such notice shall be
given in writing, will be mailed (a) if within the domestic United States by
first-class registered or certified airmail, or nationally recognized overnight
express courier, postage prepaid, or by facsimile or (b) if delivered from
outside the United States, by International Federal Express or facsimile, and
(c) will be deemed given (i) if delivered by first-class registered or certified
mail domestic, three business days after so mailed, (ii) if delivered by
nationally recognized overnight carrier, one business day after so mailed, (iii)
if delivered by International Federal Express, two business days after so mailed
and (iv) if delivered by facsimile, upon electronic confirmation of receipt, and
will be delivered and addressed as follows:
(a)
if to the Company,
to:
Discovery
Laboratories, Inc.
2600
Kelly Road
Warrington,
Pennsylvania 18976
Attention: John
G. Cooper
Facsimile: 215-488-9301
with copies
to:
Sonnenschein
Nath & Rosenthal LLP
Two World
Financial Center
New York,
New York 10281
Attention: Ira
L. Kotel, Esq.
Facsimile: 212-768-6800
(b) if to the Holder, at
its address on the Exercise Notice in the form attached as Exhibit A hereto, or
at such other address or addresses as may have been furnished to the Company in
writing.
9
9.
AMENDMENT AND
WAIVER. Except as otherwise provided herein, the provisions of
this Warrant may be amended only with the written consent of the Company and the
Holder, and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only with the written
consent of the Holder.
10.
GOVERNING
LAW. This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
11.
CONSTRUCTION;
HEADINGS. This Warrant shall be deemed to be jointly drafted
by the Company and the Holder and shall not be construed against any person as
the drafter hereof. The headings of this Warrant are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Warrant.
12.
DISPUTE
RESOLUTION. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile or electronic mail within two (2) Business Days of receipt of the
Exercise Notice giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Company are unable to agree upon such
determination or calculation of the Exercise Price or the Warrant Shares within
three Business Days of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall, within two (2) Business
Days submit via facsimile or electronic mail (a) the disputed determination of
the Exercise Price to an independent, reputable investment bank selected by the
Company and approved by the Holder or (b) the disputed arithmetic calculation of
the Warrant Shares to the Company's independent, outside
accountant. The Company shall cause at its expense the investment
bank or the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than
ten Business Days from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.
13.
REMEDIES, OTHER
OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Warrant shall be cumulative and in addition to all other
remedies available under this Warrant, at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein
shall limit the right of the Holder to pursue actual damages for any failure by
the Company to comply with the terms of this Warrant.
10
14.
TRANSFER. Subject
to compliance with any applicable securities laws, this Warrant may be offered
for sale, sold, transferred or assigned without the consent of the
Company.
15.
CERTAIN
DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:
(a)
"Bloomberg" means
Bloomberg Financial Markets.
(b)
"Business Day" means any
day other than Saturday, Sunday or other day on which commercial banks in The
City of New York are authorized or required by law to remain
closed.
(c)
"Change of Control"
means any Fundamental Transaction other than (A) any reorganization,
recapitalization or reclassification of the Common Stock, in which holders of
the Company's voting power immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization,
recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or their
equivalent if other than a corporation) of such entity or entities, or (B)
pursuant to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company.
(d)
"Closing Bid Price" and
"Closing Sale Price"
means, for any security as of any date, the last closing bid price and last
closing trade price, respectively, for such security on the Principal Market, as
reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing
trade price, as the case may be, then the last bid price or the last trade
price, respectively, of such security prior to 4:00:00 p.m., New York time, as
reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing bid
price or last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last closing bid
price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for such security by Bloomberg, the average of the bid
prices, or the ask prices, respectively, of any market makers for such security
as reported in the "pink sheets" by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale
Price cannot be calculated for a security on a particular date on any of the
foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case
may be, of such security on such date shall be the fair market value as
determined by the Board of Directors of the Company in the exercise of its good
faith judgment. All such determinations to be appropriately adjusted
for any stock dividend, stock split, stock combination or other similar
transaction during the applicable calculation period.
11
(e)
"Common Stock" means
(i) the Company's shares of Common Stock, par value $0.001 per share, and
(ii) any share capital into which such Common Stock shall have been changed
or any share capital resulting from a reclassification of such Common
Stock.
(f)
RESERVED
(g)
"Convertible Securities"
means any stock or securities (other than Options) directly or indirectly
convertible into or exercisable or exchangeable for shares of Common
Stock.
(h)
"Eligible Market" means
the Principal Market, The New York Stock Exchange, Inc., The American Stock
Exchange, The NASDAQ Global Select Market or The NASDAQ Capital
Market.
(i)
"Expiration Date" means
the date five (5) years following the Date of Issuance or, if such date falls on
a day other than a Business Day or on which trading does not take place on the
Principal Market (a "Holiday"), the next date that
is not a Holiday.
(j)
"Fundamental
Transaction" means that the Company shall, directly or indirectly, in one
or more related transactions, (i) consolidate or merge with or into (whether or
not the Company is the surviving corporation) another Person, or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (iii) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a stock purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination), (v) reorganize, recapitalize or
reclassify its Common Stock, or (vi) any "person" or "group" (as these terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall
become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.
(k)
“Options" means any
rights, warrants or options to subscribe for or purchase shares of Common Stock
or Convertible Securities.
(l)
"Parent Entity" of a
Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or listed
on an Eligible Market, or, if there is more than one such Person or Parent
Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental
Transaction.
12
(m)
"Person" means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and a
government or any department or agency thereof.
(n)
"Principal Market" means
The NASDAQ Global Market.
(o)
RESERVED
(p)
"Successor Entity" means
the Person (or, if so elected by the Holder, the Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or the Person (or, if so
elected by the Holder, the Parent Entity) with which such Fundamental
Transaction shall have been entered into.
(q)
"Trading Day" means any
day on which the Common Stock are traded on the Principal Market, or, if the
Principal Market is not the principal trading market for the Common Stock, then
on the principal securities exchange or securities market on which the Common
Stock are then traded; provided that "Trading Day"
shall not include any day on which the Common Stock are scheduled to trade on
such exchange or market for less than 4.5 hours or any day that the Common Stock
are suspended from trading during the final hour of trading on such exchange or
market (or if such exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the hour ending at
4:00:00 p.m., New York time).
(r)
"Weighted Average Price"
means, for any security as of any date, the dollar volume-weighted average price
for such security on the Principal Market during the period beginning at 9:30:01
a.m., New York City time, and ending at 4:00:00 p.m., New York City time, as
reported by Bloomberg through its "Volume at Price" function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York City time,
and ending at 4:00:00 p.m., New York City time, as reported by Bloomberg, or, if
no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the "pink sheets" by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Weighted Average Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Weighted Average Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 12 with the
term "Weighted Average Price" being substituted for the term "Exercise Price."
All such determinations shall be appropriately adjusted for any share dividend,
share split or other similar transaction during such period.
[Signature
Page Follows]
13
IN WITNESS WHEREOF, the
Company has caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.
|
DISCOVERY
LABORATORIES, INC.
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
EXHIBIT
A
EXERCISE
NOTICE
TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
TO PURCHASE COMMON STOCK
DISCOVERY
LABORATORIES, INC.
The undersigned holder hereby exercises
the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of Discovery
Laboratories, Inc, a Delaware corporation (the "Company"), evidenced by the
attached Warrant to Purchase Common Stock (the "Warrant"). Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.
1. Form of Exercise
Price. The Holder intends that payment of the Exercise Price shall be
made as:
|
|
____________
|
a
"Cash
Exercise" with respect to _________________ Warrant Shares;
and/or
|
|
|
____________
|
a
"Cashless
Exercise" with respect to _______________ Warrant
Shares.
|
2. Payment of Exercise
Price. In the event that the holder has elected a Cash Exercise with
respect to some or all of the Warrant Shares to be issued pursuant hereto, the
holder shall pay the Aggregate Exercise Price in the sum of $___________________
to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant
Shares. The Company shall deliver __________ Warrant Shares in the
name of the undersigned holder or in the name of ______________________ in
accordance with the terms of the Warrant to the following DWAC Account Number or
by physical delivery of a certificate to:
_______________________________
_______________________________
_______________________________
Date:
_______________ __, ______
|
Name
of Registered Holder
|
|
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
ACKNOWLEDGMENT
The Company hereby acknowledges this
Exercise Notice and hereby directs Continental Stock Transfer & Trust
Company to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated
[ ], 2010 from the Company and acknowledged and agreed to
by Continental Stock Transfer & Trust Company.
|
DISCOVERY
LABORATORIES, INC
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
EXHIBIT
B
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this form
and supply required information.
Do not
use this form to exercise the warrant.)
FOR VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to
_______________________________________________
whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________,
_______
|
Holder’s
Signature:
|
|||
|
Holder’s
Address:
|
|||
|
Signature
Guaranteed:
|
NOTE: The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
|
Two
World Financial Center
|
|
New
York, NY 10281-1008
|
|
212.768.6700
|
|
212.768.6800
fax
|
|
www.sonnenschein.com
|
February
18, 2010
Board of
Directors
Discovery
Laboratories, Inc.
2600
Kelly Road, Suite 100
Warrington,
Pennsylvania 18976-3622
|
|
Re:
|
Sale
of Common Stock and Warrants registered pursuant to Registration Statement
on Form S-3 (File No. 333-151654)
|
Ladies
and Gentlemen:
In our
capacity as counsel to Discovery Laboratories, Inc., a Delaware corporation (the
“Company”), we have been
asked to render this opinion in connection with a registration statement on Form
S-3 (the “Registration
Statement”), heretofore filed by the Company with the Securities and
Exchange Commission (the “Commission”) under the
Securities Act of 1933, as amended (the “Act”), the preliminary
prospectus supplement filed pursuant to Rule 424(b) under the Act, dated as of
February 17, 2010 (the “Preliminary Prospectus
Supplement”), and the prospectus supplement filed pursuant to Rule 424(b)
under the Act, dated as of February 18, 2010 (the “Prospectus Supplement”), in
connection with the registration by the Company of the following securities: (i)
27,500,000 shares (the “Shares”) of common stock, par
value $0.001 per share, of the Company (the “Common Stock”), (ii) warrants
to purchase 13,750,000 shares of Common Stock at an exercise price of $0.85 per
share (each a “Warrant”
and collectively, the “Warrants”) and (iii)
13,750,000 shares (the “Warrant
Shares”) of Common Stock that are issuable upon exercise of the
Warrants. The securities being registered are being offered for sale
as units (the “Units”)
with each Unit being comprised of (i) one Share and (ii) one
Warrant.
We are
delivering this opinion to you at your request in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Act.
In
connection with rendering this opinion, we have examined and are familiar with
(i) the Company’s Amended and Restated Certificate of Incorporation, (ii) the
Company’s By-Laws, (iii) the Registration Statement, including the prospectus
contained therein, (iv) the Preliminary Prospectus Supplement, (v) the
Prospectus Supplement (such prospectus and the Preliminary Prospectus Supplement
and Prospectus Supplement are collectively referred to herein as the “Prospectus”), (vi) corporate
proceedings of the Company relating to the Shares, the Warrants and the Warrant
Shares, and (v) such other instruments and documents as we have deemed relevant
under the circumstances.
Brussels Chicago Dallas Kansas
City Los
Angeles New
York Phoenix St. Louis
San
Francisco Short
Hills,
N.J. Silicon
Valley Washington,
D.C. Zurich
February
18, 2010
Page
2
In making
the aforesaid examinations, we have assumed the genuineness of all signatures
and the conformity to original documents of all copies furnished to us as
original or photostatic copies. We have also assumed that the corporate records
furnished to us by the Company include all corporate proceedings taken by the
Company to date.
Based
upon the foregoing and subject to the assumptions and qualifications set forth
herein, we are of the opinion that:
1. The
Shares have been duly authorized by the Company and, when issued in accordance
with the terms set forth in the Registration Statement and the Prospectus, will
be validly issued, fully paid and non-assessable.
2. The
Warrant Shares have been duly authorized by the Company and, when issued in
accordance with the terms set forth in the Registration Statement and the
Prospectus, and, when issued and paid for in accordance with the terms of the
Warrants, will be validly issued, fully paid and non-assessable.
3.
The Warrants have been duly authorized by the Company and, when issued in
accordance with the terms set forth in the Registration Statement and the
Prospectus, will be validly issued.
The
foregoing opinion is limited to the laws of the United States of America and
Delaware corporate law (which includes the Delaware General Corporation Law and
applicable provisions of the Delaware constitution, as well as reported judicial
opinions interpreting same), and we do not purport to express any opinion on the
laws of any other jurisdiction.
We hereby
consent to the use of our opinion as an exhibit to the Registration Statement
and to the reference to this firm and this opinion under the heading “Legal
Matters” in the prospectus comprising a part of the Registration Statement and
any amendment thereto. In giving such consent, we do not hereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Act, or the rules and regulations of the Commission
thereunder.
|
Very
truly yours,
|
|
SONNENSCHEIN
NATH & ROSENTHAL LLP
|
|
/s/
SONNENSCHEIN NATH & ROSENTHAL
LLP
|
Discovery
Labs Prices $16.5 Million Public Offering of
Common
Stock and Warrants
Warrington, PA — February 18, 2010 —
Discovery Laboratories, Inc. (Nasdaq: DSCO) today announced that it has
priced an underwritten public offering of 27,500,000 units at a price to the
public of $0.60 per unit for gross proceeds of $16,500,000. Each unit
consists of one share of common stock and a warrant to purchase 0.50 of a share
of common stock. The shares of common stock and warrants are immediately
separable and will be issued separately such that no units will be issued. The
warrants are exercisable immediately upon issuance, have a five-year term and an
exercise price of $0.85. Net proceeds, after estimated underwriting
discounts and commissions and other estimated fees and expenses, and assuming
the Warrants are not exercised, will be approximately $15.1
million. The offering is expected to close on or about February 23,
2010, subject to satisfaction of customary closing conditions.
Lazard
Capital Markets LLC is acting as sole underwriter for the offering.
The net
proceeds from the offering will be used to support Discovery Labs’ general
corporate activities and for expenses associated with maintaining its research
and development operations, including manufacturing, quality and analytical
capabilities, product development and clinical operations and for other general
corporate purposes.
The
securities described above are being offered by Discovery Laboratories, Inc.
pursuant to a registration statement previously filed and declared effective by
the Securities and Exchange Commission. The securities may be offered only by
means of a prospectus, including a prospectus supplement, forming a part of the
effective registration statement. When available, copies of the final prospectus
supplement and accompanying base prospectus relating to this offering may be
obtained at the Securities and Exchange Commission web site at
http://www.sec.gov, or from Lazard Capital Markets LLC, 30 Rockefeller Plaza,
60th
Floor, New York, NY 10020 or via telephone at (800) 542-0970.
This
press release shall not constitute an offer to sell or the solicitation of an
offer to buy any securities of Discovery Laboratories, Inc. nor shall there be
any sale of the securities in any state or jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state or jurisdiction.
About
Discovery Labs
Discovery
Laboratories, Inc. is a biotechnology company developing Surfactant Therapies
for respiratory diseases. Surfactants are produced naturally in the lungs
and are essential for breathing. Discovery Labs’ novel proprietary KL4 Surfactant
Technology produces a synthetic, peptide-containing surfactant that is
structurally similar to pulmonary surfactant and is being developed in liquid,
aerosol or lyophilized formulations. In addition, Discovery Labs’
proprietary Capillary Aerosolization Technology produces a dense aerosol, with a
defined particle size that is capable of potentially delivering aerosolized
KL4
surfactant to the deep lung without the complications currently associated with
liquid surfactant administration.
Forward-Looking
Statements
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. Examples of such risks and uncertainties are: risks relating to
the rigorous regulatory requirements required for approval of any drug or
drug-device combination products that Discovery Labs may develop, including
that: (a) Discovery Labs and the U.S. Food and Drug Administration (FDA) or
other regulatory authorities will not be able to agree on the matters raised
during regulatory reviews, or Discovery Labs may be required to conduct
significant additional activities to potentially gain approval of its product
candidates, if ever, (b) the FDA or other regulatory authorities may not
accept or may withhold or delay consideration of any of Discovery Labs’
applications, or may not approve or may limit approval of Discovery Labs’
products to particular indications or impose unanticipated label
limitations, and (c) changes in the national or
international political and regulatory environment may make it more difficult to
gain FDA or other regulatory approval; risks relating to Discovery Labs’
research and development activities, including (i) time-consuming and
expensive pre-clinical studies, clinical trials and other efforts, which may be
subject to potentially significant delays or regulatory holds, or fail, and (ii)
the need for sophisticated and extensive analytical methodologies, including an
acceptable biological activity test, if required, as well as other quality
control release and stability tests to satisfy the requirements of the
regulatory authorities; risks relating to Discovery Labs’ ability to develop and
manufacture drug products and capillary aerosolization systems for clinical
studies, and, if approved, for commercialization of drug and combination
drug-device products, including risks of technology transfers to contract
manufacturers and problems or delays encountered by Discovery Labs, its contract
manufacturers or suppliers in manufacturing drug products, drug substances and
capillary aerosolization systems on a timely basis or in an amount sufficient to
support Discovery Labs’ development efforts and, if approved, commercialization;
the risk that Discovery Labs may be unable to identify potential strategic
partners or collaborators to develop and commercialize its products, if
approved, in a timely manner, if at all; the risk that Discovery Labs will not
be able in a changing financial market to raise additional capital or enter into
strategic alliances or collaboration agreements, or that the ongoing credit
crisis will adversely affect the ability of Discovery Labs to fund its
activities, or that additional financings could result in substantial equity
dilution; the risk that Discovery Labs will not be able to access credit from
its committed equity financing facilities (CEFFs), or that the minimum share
price at which Discovery Labs may access the CEFFs from time to time will
prevent Discovery Labs from accessing the full dollar amount potentially
available under the CEFFs; the risk that Discovery Labs or its strategic
partners or collaborators will not be able to retain, or attract, qualified
personnel; the risk that Discovery Labs will be unable to regain compliance with
The Nasdaq Global Market listing requirements prior to the expiration of the
grace period currently in effect, which could eventually result in delisting of
Discovery Labs’ common stock and cause the price of Discovery Labs’ common stock
to decline; the risk that recurring losses, negative cash flows and the
inability to raise additional capital could threaten Discovery Labs’ ability to
continue as a going concern; the risks that Discovery Labs may be unable to
maintain and protect the patents and licenses related to its products, or other
companies may develop competing therapies and/or technologies, or health care
reform may adversely affect Discovery Labs; risks of legal proceedings,
including securities actions and product liability claims; risks relating to
health care reform; and other risks and uncertainties 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.
Contact
Information:
John G.
Cooper, EVP and Chief Financial Officer
215-488-9300