SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
___________________________
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
May
30, 2008
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:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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o
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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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Amendment
of a Material
Agreement.
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On
May
30, 2008, Discovery Laboratories, Inc. (the “Company”) entered into a First
Amendment to Credit and Security Agreement (the “Amendment”) with GE Business
Financial Services Inc. (formerly known as Merrill Lynch Business Financial
Services Inc.) (“GE”), to amend the Credit and Security Agreement dated as of
May 21, 2007 between the parties (the “Credit Facility”).
The
Credit Facility provided for up to $12.5 million to fund the Company’s capital
programs. The Credit Facility expires on May 31, 2008, subject to a best efforts
undertaking by GE to extend the draw down period beyond the expiration date
for
an additional six months. As of March 31, 2008, approximately $5.2 million
was
outstanding under the Credit Facility ($2.8 million classified as current
liabilities and $2.4 million as long-term liabilities) and $4.9 million remained
available for use, subject to the conditions of the Credit Facility.
Under
the
terms of the Amendment, the Company and GE have agreed to extend the term of
the
Credit Facility for an additional period of six months for the purpose of
funding the Company’s anticipated capital investments for that period, up to
$300,000. In consideration of the extension, the Company has agreed to pay
GE’s
legal fees and expenses of up to $2,000 and a non-refundable consent fee of
$1,500. All other terms and conditions under the Credit Facility remain
unchanged.
Under
the
Credit Facility, the minimum advance is $100,000. Interest on each advance
accrues at a fixed rate per annum equal to LIBOR plus 6.25%, determined on
the
funding date of such advance. Principal and interest on all advances will be
payable in equal installments on the first business day of each month. The
Company may prepay advances, in whole or in part, at any time, subject to a
prepayment penalty, which, depending on the period of time elapsed from the
closing of the Facility, will range from 4% to 1%.
The
Company may use the Credit Facility to finance (a) new property and equipment,
and (b) up to approximately $1.7 million “Other Equipment” and related costs,
which may include leasehold improvements, intangible property such as software
and software licenses, specialty equipment, a pre-payment to pay down the
outstanding obligations under a previous arrangement, and “soft costs” related
to financed property and equipment (including, without limitation, taxes,
shipping, installation and other similar costs). Advances to finance the
acquisition of new property and equipment are amortized over a period of 36
months; the advance related to the prepayment of the Company’s previous
arrangement is amortized over a period of 27 months; and Other Equipment and
related costs is amortized over a period of 24 months. In addition, the
Company’s obligations under the Credit Facility are secured by a security
interest in (a) the financed property and equipment, including the property
and
equipment financed under the Company’s prior arrangement at the time of the
prepayment, and (b) as Supplemental Collateral, all of the Company’s
intellectual property, subject to limited exceptions set forth in the Credit
Facility. Under the Credit Facility, the Supplemental Collateral will be
released on the earlier to occur of (i) receipt by us of FDA approval of the
Company’s NDA for Surfaxin for
the
prevention of Respiratory Distress Syndrome (RDS) in premature infants, or
(ii)
the date on which the Company shall have maintained over a continuous 12-month
period ending on or after March 31, 2008, measured at the end of each calendar
quarter, a minimum cash balance equal to our projected cash requirements for
the
following 12-month period.
The
description of the terms and conditions of the Credit Facility and the Amendment
and the rights and obligations of the Company in connection therewith are
qualified by reference in their entirety to the definitive terms and conditions
of the Credit Facility and the Amendment. The form of the Amendment is attached
hereto as Exhibit 10.1.
Cautionary
Note Regarding Forward-looking Statements:
To
the
extent that statements in this Current Report on Form 8-K are not strictly
historical, such statements are forward-looking, and are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
The forward-looking statements contained in this Current Report are subject
to
certain risks and uncertainties that could cause actual results to differ
materially from the statements made. Such risks and others are further described
in the Company's filings with the Securities and Exchange Commission including
the most recent reports on Forms 10-K, 10-Q and 8-K, and any amendments
thereto.
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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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10.1
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First
Amendment to Credit and Security Agreement (the “Amendment”) dated May 30,
2008, between the Company and GE Business Financial Services Inc.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| Discovery Laboratories, Inc. | ||
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| By: | /s/ Robert J. Capetola | |
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Robert J. Capetola, Ph.D. |
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| President and Chief Executive Officer | ||
Date:
May
30, 2008
FIRST
AMENDMENT
TO
CREDIT AND SECURITY AGREEMENT
THIS
FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this
“Agreement”)
is
made as of May 30, 2008 by and between DISCOVERY
LABORATORIES,
INC.,
a
Delaware corporation (“Borrower”),
and
GE
BUSINESS FINANCIAL SERVICES INC.
(formerly known as Merrill Lynch Business Financial Services Inc.)
(“Lender”).
Recitals
A. Lender
and Borrower have entered into that certain Credit and Security Agreement dated
as of May 21, 2007 (as the same may from time to time be amended, modified,
supplemented or restated, the “Credit
Agreement”).
Lender has extended credit to Borrower for the purposes permitted in the Credit
Agreement.
B. Borrower
has requested that Lender amend the Credit Agreement as more fully set forth
herein. Lender has agreed to so amend certain provisions of the Credit
Agreement, but only to the extent, in accordance with the terms, subject to
the
conditions and in reliance upon the representations and warranties set forth
below.
Agreement
NOW,
THEREFORE,
in
consideration of the foregoing recitals and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, and
intending to be legally bound, the parties hereto agree as follows:
1. Definitions.
Capitalized terms used but not defined in this Agreement,
including its preamble and recitals,
shall
have the meanings given to them in the Credit Agreement.
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2.
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Amendments
to Credit Agreement.
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2.1 Section
1(a) (Availability).
Section
1(a) of the Credit Agreement is hereby amended by
adding the following sentence immediately after the last sentence of the
Section:
Notwithstanding
the foregoing, the aggregate principal amount of Equipment Advances made during
the period commencing on May 30, 2008 and ending on the last day of the Draw
Period shall not exceed Three Hundred Thousand Dollars ($300,000).
2.2 Section
12 (Definitions
and Rules of Construction).
The
following term and its definition in Section 12 of the Credit Agreement are
amended and restated in their entirety as follows:
“Draw
Period”
is the period of time from May 21, 2007 through the earlier to occur of (a)
November 30, 2008, or (b) a Default.
2.3 Notices.
The
addresses of Lender for all notices, requests and other communications are
hereby changed to the following:
GE
Business Financial Services Inc.
c/o
GE Healthcare Financial Services, Inc., LSF
83
Wooster Heights Road, Fifth Floor
Danbury,
Connecticut 06810
Attention:
Senior Vice President of Risk
Phone:
(203) 205-5200
Facsimile:
(203) 205-2192
With
a copy to:
GE
Business Financial Services Inc.
c/o
GE Healthcare Financial Services, Inc.
Two
Bethesda Metro Center, Suite 600
Bethesda,
Maryland 20814
Attention:
General Counsel
Phone:
(301) 961-1640
Facsimile:
(301) 664-9866
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3.
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Limitation
of Amendments.
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3.1 The
amendments set forth in Section 2 above are effective for the purposes set
forth herein and shall be limited precisely as written and shall not be deemed
to (a) be a consent to any amendment, waiver or modification of any other
term or condition of any Financing Document, or (b) otherwise prejudice any
right or remedy which Lender may now have or may have in the future under or
in
connection with any Financing Document.
3.2 This
Agreement shall be construed in connection with and as part of the Financing
Documents and all terms, conditions, representations, warranties, covenants
and
agreements set forth in the Financing Documents, are hereby ratified and
confirmed and shall remain in full force and effect.
4. Representations
and Warranties.
To
induce Lender to enter into this Agreement, Borrower hereby represents and
warrants to Lender as follows:
4.1 Immediately
after giving effect to this Agreement (a) the representations and warranties
contained in the Financing Documents are true, accurate and complete in all
material respects as of the date hereof (except to the extent such
representations and warranties relate to an earlier date, in which case they
are
true and correct as of such date), and (b) no Default or Event of Default
has occurred and is continuing;
4.2 Borrower
has the power and due authority to execute and deliver this Agreement and to
perform its obligations under the Credit Agreement, as amended
hereby;
4.3 The
execution and delivery by Borrower of this Agreement and the performance by
Borrower of its obligations under the Credit Agreement, as amended hereby,
have
been duly authorized by all necessary action on the part of Borrower;
4.4 The
organizational documents of Borrower most recently delivered to Lender remain
true, accurate and complete and have not been amended, supplemented or restated
and are and continue to be in full force and effect;
4.5 The
execution and delivery by Borrower of this Agreement and the performance by
Borrower of its obligations under the Credit Agreement, as amended hereby,
do
not and will not contravene (a) any law or regulation binding on or
affecting Borrower, (b) any material contractual restriction with a Person
binding on Borrower, (c) any order, judgment or decree of any court or
other governmental or public body or authority, or subdivision thereof, binding
on Borrower, or (d) the organizational documents of Borrower;
4.6 The
execution and delivery by Borrower of this Agreement and the performance by
Borrower of its obligations under the Credit Agreement, as amended hereby,
do
not require any order, consent, approval, license, authorization or validation
of, or filing, recording or registration with, or exemption by any governmental
or public body or authority, or subdivision thereof, binding on Borrower, except
as already has been obtained or made;
4.7 This
Agreement has been duly executed and delivered by Borrower and is the binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, liquidation, moratorium or other similar laws of general
application and equitable principles relating to or affecting creditors’
rights.
5. Counterparts.
This
Agreement may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed counterpart of this Agreement by facsimile
or other electronic method of transmission shall be equally as effective as
delivery of an original executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by facsimile or other
electronic method of transmission also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability or binding effect
of
this Agreement.
6. Consent
Fee.
Borrower hereby agrees to pay to Lender a non-refundable consent fee in the
amount of One Thousand Five Hundred Dollars ($1,500) in connection with the
amendments set forth herein to be paid by wire transfer on or before the date
hereof.
7. Effectiveness.
This
Agreement shall be deemed effective upon (a) the due execution and delivery
to
Lender of this Agreement by each party hereto and (b) Borrower’s
payment of the Consent Fee.
8. Attorneys’
Fees and Expenses.
Borrower hereby agrees to pay all of Lender’s legal fees and expenses in
connection with the negotiation and preparation of this Agreement in an amount
not to exceed $2,000. The foregoing cap on legal fees and expenses relates
only
to the negotiation and preparation of this Agreement, and not to any other
legal
fees or expenses related to the Loan.
9. Governing
Law.
This
Agreement and the rights and obligations of the parties hereto shall be governed
by and construed in accordance with the laws of the State of New York.
10. Integration.
This
Agreement and the Financing Documents represent the entire agreement about
this
subject matter and supersede prior negotiations or agreements. All prior
agreements, understandings, and negotiations between the parties about the
subject matter of this Agreement, and the Financing Documents merge into this
Agreement and the Financing Documents.
[Signature
page follows immediately.]
IN
WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed and delivered
as
of the date first written above.
| BORROWER: | ||
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DISCOVERY
LABORATORIES,
INC.
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| By: | /s/ John G. Cooper | |
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Name: John G. Cooper |
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| Title: Executive Vice President and Chief Financial Officer | ||
| LENDER: | ||
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GE
BUSINESS FINANCIAL SERVICES INC.
(formerly
known as Merrill Lynch Business Financial Services
Inc.)
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| By: | /s/ Scott R. Towers | |
|
Name: Scott R. Towers |
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| Title: Its Duly Authorized Signatory | ||