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
8, 2009
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. Entry into a
Material Definitive Agreement.
On May 8, 2009, Discovery Laboratories, Inc. (the
“Company”) entered into agreements with select
institutional investors to purchase 14 million shares of the Company’s common stock pursuant to a registered direct public
offering. The purchase price for each share of common stock and
related warrant together is $0.81 and will result in gross proceeds of
approximately $11.3 million to the Company. For each share of common stock
purchased, Investors will
also receive warrants to purchase 0.5 shares of common stock at an
exercise price of $1.15 per share. The closing of the offering is expected
to take place on May 13,
2009, subject to customary
closing conditions.
The Company also entered into a related placement agent agreement
(the “Placement Agent
Agreement”) with Lazard
Capital Markets LLC, who is acting as exclusive placement agent for the
offering. The Company has agreed to pay the placement agent an
aggregate fee of 6% of the gross proceeds upon the closing of the offering
and to reimburse the placement agent for certain expenses incurred by it in
connection with the offering. As set forth in the Placement Agent
Agreement, the Company has agreed not to draw down its committed equity
financing facility
arrangements with
Kingsbridge Capital Limited for a period of 30 days after the offering and each
of its directors and select executive officers have agreed to certain lock-up
provisions with regard to future sales of the Company’s common stock for a period of 90 days after the
Offering.
The common stock issuable in the
offering, and issuable upon exercise of the warrants in the offering, are
covered by the Company’s registration statement on Form S-3
(File No. 333-151654),
which was filed
on June 13, 2008 and subsequently declared effective
under the Securities Act of 1933, as amended, by the Securities and Exchange
Commission.
The foregoing description of the
offering does not purport to be complete and is qualified in its entirety by
reference to the Placement
Agent Agreement, which is filed as Exhibit 10.1, the form of subscription
agreement entered into by us and the purchasers in the offering filed as Exhibit
10.2, and the form of warrant issuable to the purchasers in the offering
filed and Exhibit 10.3, each of which and is
incorporated herein by reference. The Placement Agent Agreement and related
exhibits have been filed in order to provide other investors and the
Company’s stockholders with information
regarding its terms and in accordance with applicable rules and
regulations of the Securities and Exchange Commission. The Placement Agent
Agreement contains representations and warranties that the parties made for the
benefit of each other and, with respect to the representations and warrants made by the Company and the
investors participating in this offering, in each case, in the context of all of
the terms and conditions of the agreement and in the context of the specific
relationship between the parties. Accordingly, other
investors and stockholders should not rely on
the representations and warranties. Furthermore, other investors and
stockholders should not rely on the representations and warranties as
characterizations of the actual state of facts, since they were only made as
of the date of the Placement Agent
Agreement. Information concerning the subject matter of such
representations and warranties may change after the date of the Placement Agent
Agreement, which subsequent information may or may not be fully reflected in
the Company’s reports or other filings with the
Securities and Exchange Commission.
Item
8.01. Other
Events.
Reference
is made to the description of the offering contained in Item 1.01. The Company
currently anticipates using the net proceeds from the sale of the securities
issued in the offering to
pay expenses associated with maintaining our research and development
operations, including manufacturing, quality and analytical capabilities,
product development and clinical operations and regulatory for the further development of certain of the Company’s
pipeline of therapeutic surfactant products, including:
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·
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Expenses
related to development of the Company’s lyophilized formulation of
Surfaxin, Surfaxin LS™, which is manufactured as a dry powder and
reconstituted as a liquid prior to administration, including preclinical
and clinical experiments and costs associated with a planned meeting with
U.S. and European regulatory authorities later this year, in preparation
for an anticipated worldwide, late-stage clinical development program in
2010 for Surfaxin LS for the prevention of
RDS;
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·
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Costs
associated with research, engineering and development studies related to
Aerosurf®,
KL4
surfactant in aerosolized form using the Company’s proprietary Capillary
Aerosolization Technology, as well as the costs of preparing an IND filing
in anticipation of a planned Phase 2 clinical program, which is expected
to begin in late 2009 or early
2010;
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·
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Expenses
associated with the ongoing clinical trial to determine if restoration of
surfactant with Surfaxin will improve lung function and result in a
shorter duration of mechanical ventilation and NICU/PICU stay for children
up to two years of age suffering with Acute Respiratory Failure, which was
extended due to low enrollment associated with recent mild viral
seasons;
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·
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Regulatory
activities associated with gaining the potential approval of Surfaxin®
(lucinactant) for the prevention of Respiratory Distress Syndrome, with
respect to which the Company received a Complete Response letter from the
U.S. Food and Drug Administration (FDA) on April 17, 2009. The
Company is seeking an end of review meeting with the FDA and, if that
meeting is successful, believes that Surfaxin may potentially be approved
in 2009.
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The
amounts and timing of the expenditures may vary significantly depending on
numerous factors, such as the progress of our research and development efforts,
technological advances and the competitive environment for Surfaxin and our
other SRT drug candidates and their intended uses. Pending the
application of the net proceeds, we are investing the proceeds in short-term,
interest-bearing instruments or other investment-grade securities.
This
current report does not constitute an offer to sell or the solicitation of an
offer to buy any of our securities and these securities cannot be sold in any
state in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of such
state.
Item 9.01. Financial
Statements and Exhibits.
(d) Exhibits
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10.1
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Placement Agent Agreement, dated
May 8,
2009, between the
Company and Lazard Capital Markets
LLC
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10.2
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Form of Subscription
Agreement
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10.3
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Form of
Warrant
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99.1
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Press Release dated May 8,
2009
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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:
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/s/ Robert J. Capetola | |
| Robert J. Capetola, Ph.D. | |||
| President and Chief Executive Officer | |||
Date: May
8, 2009
Exhibit 10.1
14,000,000
Shares of Common Stock
and
Warrants to Purchase up to 7,000,000 Shares of Common Stock
DISCOVERY
LABORATORIES, INC.
Common
Stock (par value $0.001)
PLACEMENT AGENT
AGREEMENT
May 8,
2009
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 purchasers, pursuant to the terms and conditions of this
Placement Agent Agreement (this “Agreement”) and the
Subscription Agreements in the form of Exhibit A attached hereto
(the “Subscription
Agreements”) entered into with the purchasers identified therein (each a
“Purchaser” and,
collectively, the “Purchasers”), up to an
aggregate of 14,000,000 units (the “Units”), with each Unit
consisting of (i) one share of common stock (a “Share” and, collectively, the
“Shares”), $0.001 par
value per share (the “Common
Stock”) of the Company and (ii) one warrant to purchase 0.50 of a share
of Common Stock (the “Warrants”). Units will not be
issued or certificated. The Shares and Warrants are immediately
separable and will be issued separately. The terms and conditions of the
Warrants are set forth in the form of Exhibit B attached
hereto. The Shares issuable upon exercise of the Warrants are
referred to herein as the “Warrant Shares” and, together
with the Units, the Shares and the Warrants, are referred to herein as the
“Securities.” The
Company hereby confirms that Lazard Capital Markets LLC (“LCM” or the “Placement Agent”) acted as the
Placement Agent in accordance with the terms and conditions
hereof.
2. Agreement to Act as Placement Agent;
Placement of Units. 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 has
authorized and hereby acknowledges that the Placement Agent has acted as its
exclusive agent to solicit offers for the purchase of all or part of the Units
from the Company in connection with the proposed offering of the Units (the
“Offering”). Until
the earlier of the termination of this Agreement or the Closing Date (as defined
in Section
4
hereof), the Company shall not, without the prior written consent of the
Placement Agent, solicit or accept offers to purchase Units otherwise than
through the Placement Agent. LCM may utilize the expertise of Lazard
Frères & Co. LLC in connection with LCM’s placement agent
activities.
2.2 The Company hereby
acknowledges that the Placement Agent, as agent of the Company, used its
reasonable best efforts to solicit offers to purchase the Units from the Company
on the terms and subject to the conditions set forth in the Prospectus (as
defined below). The Placement Agent shall use commercially reasonable efforts to
assist the Company in obtaining performance by each Purchaser whose offer to
purchase Units was solicited by the Placement Agent and accepted by the Company,
but the Placement Agent shall not, except as otherwise provided in this
Agreement, be obligated to disclose the identity of any potential purchaser or
have any liability to the Company in the event any such purchase is not
consummated for any reason. Under no circumstances will the Placement Agent be
obligated to underwrite or purchase any Units for its own account and, in
soliciting purchases of Units, the Placement Agent acted solely as the Company’s
agent and not as principal. Notwithstanding the foregoing and except
as otherwise provided in Section 2.3, it is understood
and agreed that the Placement Agent (or its affiliates) may, solely at its
discretion and without any obligation to do so, purchase Units from the Company
as principal and any such purchases by the Placement Agent (or its affiliates)
shall be disclosed to the Company (including the identity of such
purchaser).
2.3 Subject to the
provisions of this Section 2, offers for the
purchase of Units were solicited by the Placement Agent as agent for the Company
at such times and in such amounts as the Placement Agent deemed
advisable. The Placement Agent communicated to the Company, orally or
in writing, each reasonable offer to purchase Units received by it as agent of
the Company. The Company shall have the sole right in its absolute
discretion to accept offers to purchase the Units and may reject any such offer,
in whole or in part. The Placement Agent has the right, in its
discretion reasonably exercised, subject to giving prior notice to the Company,
to reject any offer to purchase Units received by it, in whole or in part, and
any such rejection shall not be deemed a breach of this Agreement.
2.4 The Units are
being sold to the Purchasers at a price of $0.81 per Unit. The
purchases of the Units by the Purchasers shall be evidenced by the execution of
the Subscription Agreements by the parties thereto.
2.5 As compensation for
services rendered, on the Closing Date (as defined in Section 4 hereof), the
Company shall pay to the Placement Agent by wire transfer of immediately
available funds to an account or accounts designated by the Placement Agent, an
aggregate amount (the “Placement Fee”) equal to six
percent (6%) of the gross proceeds received by the Company from the sale of the
Units on such Closing Date.
2.6 No Units which the
Company has agreed to sell pursuant to this Agreement and the Subscription
Agreements shall be deemed to have been purchased and paid for, or sold by the
Company, until such Shares and Warrants included in the Units shall have been
delivered to the Purchaser thereof against payment by such Purchaser. If the
Company shall default in its obligations to deliver the Shares and Warrants to a
Purchaser with whom it has entered into a binding Subscription Agreement, the
Company shall indemnify and hold the Placement Agent 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 8(c)
herein.
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3. Representations and Warranties of
the Company. The
Company represents and warrants to, and agrees with, the Placement Agent and the
Purchasers 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 Shares (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 430A 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 Placement Agent 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 Placement Agent 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.
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(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).
(c) As of the
Applicable Time (as defined below) and as of the Closing Date, neither (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 nor (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 Placement Agent specifically for inclusion therein, which
information the parties hereto agree is limited to the Placement Agent’s
Information (as defined in Section
17). 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.
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(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 Placement Agent
specifically for inclusion therein, which information the parties hereto agree
is limited to the Placement Agent’s Information (as defined in Section
17).
(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 Placement Agent specifically for inclusion
therein, which information the parties hereto agree is limited to the Placement
Agent’s Information (as defined in Section
17).
(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 Placement Agent as
described in Section
5(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 Placement
Agent specifically for inclusion therein, which information the parties hereto
agree is limited to the Placement Agent’s Information (as defined in Section
17).
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(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.
(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 5(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 15) 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.
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(j) The Company has
the full right, power and authority to enter into this Agreement, each of the
Subscription Agreements and that certain Escrow Agreement (the “Escrow Agreement”) dated as of
the date hereof by and among the Company, the Placement Agent and the escrow
agent named therein, and to perform and to discharge its obligations hereunder
and thereunder; and each of this Agreement, the Escrow Agreement and each of the
Subscription Agreements has been duly authorized, executed and delivered by the
Company, and constitutes a valid and binding obligation of the Company
enforceable in accordance with its 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 and the
Warrants to be issued and sold by the Company to the Purchasers hereunder and
under the Subscription Agreements have been duly and validly authorized and,
when issued and delivered against payment therefor as provided herein and in the
Subscription Agreements, 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 non-assessable and free of any preemptive or similar
rights and will conform to the description thereof contained in the General
Disclosure Package and the Prospectus.
(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 April 30, 2009, there were 104,453,750 shares
of Common Stock issued and outstanding and no shares of Preferred Stock, par
value $0.001 of the Company issued and outstanding and 24,570,593 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. 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.
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(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.
(n) The execution, delivery and
performance of this Agreement, the Subscription Agreements and the Escrow
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 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 Units 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, 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, the Subscription Agreements and the Escrow Agreement by the Company,
the offer or sale of the Units or the consummation of the transactions
contemplated hereby or thereby.
8
(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).
(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 financial position 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 and 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) 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.
9
(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.
(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.
10
(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 accurate and fairly present the data
derived from such clinical trials, and the Company has no knowledge of any
studies or tests performed by or on behalf of the Company the results of which
are materially inconsistent with or otherwise materially call into question the
results described or referred to in the General Disclosure Package and
Prospectus. 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 requiring the
termination, suspension or 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 Securities, including the issuance, offering and sale of the
Warrant Shares, 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.
(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.
11
(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 to
its 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 its knowledge, 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 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.
(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.
12
(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.
(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
recognized, financially sound and reputable 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.
14
(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 as 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.
(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 Placement Agent and counsel for the Placement Agent,
and such books (i) contain a complete summary of all meetings and actions of the
board of directors (including each board committee) as of April 18, 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.
15
(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.
(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 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 Placement Agent) that would give rise
to a valid claim against the Company or the Placement Agent for a brokerage
commission, finder’s fee or like payment in connection with the offering and
sale of 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.
16
(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. 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.
(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 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 not 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 and accurate.
17
(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 4350 of the Nasdaq Global Marketplace Rules) is required for the Company to
issue and deliver to the Purchasers the Units.
Any
certificate signed by or on behalf of the Company and delivered to the Placement
Agent or to counsel for the Placement Agent shall be deemed to be a
representation and warranty by the Company to the Placement Agent and the
Purchasers as to the matters covered thereby.
4. The Closing. The
time and date of closing and delivery of the documents required to be delivered
to the Placement Agent pursuant to Sections 5 and 7 hereof shall be at
10:00 A.M., New York time, on May 13, 2009 (the “Closing Date”) at the office
of Dickstein Shapiro LLP, 1177 Avenue of the Americas, 47th Floor, New York, New
York.
5. Further Agreements of the
Company. The
Company agrees with the Placement Agent and the Purchasers:
(a) To prepare the
Rule 462(b) Registration Statement, if necessary, in a form approved by the
Placement Agent 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 Placement Agent 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 Placement Agent 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 Placement Agent shall reasonably object by notice to the Company after
a reasonable period to review; to advise the Placement Agent, 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 Placement Agent 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 Placement Agent, 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 Placement Agent, 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 Placement
Agent has been received (each, a “Permitted Free Writing
Prospectus”); provided that the prior
written consent of the Placement Agent 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 Placement Agent 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 Placement Agent that the Placement Agent 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 Placement Agent, and
upon the Placement Agent’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
Placement Agent, without charge, such number of copies thereof as the Placement
Agent may reasonably request. The Company consents to the use of the
Prospectus or any amendment or supplement thereto by the Placement
Agent.
19
(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 Placement Agent, 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 Placement Agent 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.
(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 Placement Agent 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 Placement Agent specifically for inclusion
therein, which information the parties hereto agree is limited to the Placement
Agent’s Information (as defined in Section
17).
(f) To the extent not
available on the Commission’s EDGAR or IDEA system, to furnish promptly to the
Placement Agent and to counsel for the Placement Agent 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.
20
(g) To the extent not
available on the Commission’s EDGAR or IDEA system, to deliver promptly to the
Placement Agent in New York City such number of the following documents as the
Placement Agent 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).
(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 Placement Agent may reasonably request to
qualify the Units for offering and sale under the securities or Blue Sky laws of
such jurisdictions (domestic or foreign) as the Placement Agent 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 Securities 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 Placement Agent
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 Placement Agent, 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 Units
(including the Shares and the 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 and (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 strategic alliances involving
the Company and other entities, including without limitation, joint venture,
licensing and collaboration arrangements. The Company will cause each
executive officer, director, shareholder, option-holder and warrantholder listed
in Schedule
B to
furnish to the Placement Agent, prior to the Closing Date, a letter,
substantially in the form of Exhibit C hereto,
pursuant to which each such person shall agree, among other things, not to
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, not to engage
in any swap or other agreement or arrangement that transfers, in whole or in
part, directly or indirectly, the economic risk of ownership of Common Stock or
any such securities and not to engage in any short selling of any Common Stock
or any such securities, during the Lock-Up Period, without the prior written
consent of the Placement Agent. 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 thirty one (31) 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 April
2006, May 2008 and December 2008 (collectively, the “CEFFS”), but in no event
during the Lock-Up Period shall such issuance of shares of Common Stock under
the CEFFS exceed, in the aggregate, two percent (2.0%) of the Company’s
outstanding common stock. 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.
22
(l) To supply the
Placement Agent with copies of all correspondence to and from, and all documents
issued to and by, the Commission in connection with the registration of 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 Placement Agent, 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 Placement Agent is notified), without the prior written consent of the
Placement Agent, unless in the judgment of the Company and its counsel, and
after notification to the Placement Agent, such press release or communication
is required by law.
(o) Until the
Placement Agent 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 5.
(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, effect and maintain, subject to notice of issuance, the Common
Stock on the Nasdaq GM.
(t) To use its best
efforts to assist the Placement Agent and its counsel with any filings with
FINRA and obtaining clearance from FINRA as to the amount of compensation
allowable or payable to the Placement Agent.
23
(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 Units.
6. Payment of
Expenses. The
Company agrees to pay, or reimburse if paid by the Placement Agent, whether or
not the transactions contemplated hereby are consummated or this Agreement is
terminated: (a) the costs incident to the authorization, issuance,
sale, preparation and delivery of the Units to the Purchasers and any taxes
payable in that connection; (b) the costs incident to the Registration of 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 Placement
Agent) 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
Placement Agent) of qualifying the Units under the securities laws of the
several jurisdictions as provided in Section 5(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 Units; (i)
the reasonable fees, disbursements and expenses of counsel to the Placement
Agent not to exceed $75,000, 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 Placement
Agent on the Company’s behalf (which will be promptly reimbursed)); provided that, except to the
extent otherwise provided in this Section 6 and in Sections 8 and 10, the Placement
Agent shall pay its own costs and expenses, including the fees and expenses of
its counsel.
7. Conditions to the Obligations of the
Placement Agent and the Purchasers, and the Sale of the Units. The
respective obligations of the Placement Agent hereunder and the Purchasers under
the Subscription Agreements, 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 Placement Agent; 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 5(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.
24
(b) The Placement
Agent 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 Placement Agent, 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.
(c) All corporate
proceedings and other legal matters incident to the authorization, form and
validity of each of this Agreement, the Subscription Agreements, the Escrow
Agreement, the Units, 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 Placement Agent, 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) Dickstein Shapiro
LLP shall have furnished to the Placement Agent such counsel’s written opinion
and negative assurances statement, as counsel to the Company, addressed to the
Placement Agent, dated the Closing Date, in form and substance reasonably
satisfactory to the Placement Agent.
(e) Potter Anderson
& Corroon LLP shall have furnished to the Placement Agent such counsel’s
written opinion, as intellectual property counsel to the Company, addressed to
the Placement Agent, dated the Closing Date, in form and substance reasonably
satisfactory to the Placement Agent.
(f) The Placement
Agent shall have received from Proskauer Rose LLP, counsel for the Placement
Agent, such opinion or opinions and negative assurances statement, addressed to
the Placement Agent, dated the Closing Date, with respect to such matters as the
Placement Agent 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.
25
(g) At the time of the
execution of this Agreement, the Placement Agent shall have received from Ernst
& Young LLP a letter, addressed to the Placement Agent, executed and dated
such date, in form and substance satisfactory to the Placement Agent (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 Placement Agent shall have received a letter (the “Bring-Down Letter”) from Ernst
& Young LLP addressed to the
Placement Agent 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
Placement Agent concurrently with the execution of this Agreement pursuant to
paragraph (g) of this Section 7.
(i) The Company shall
have furnished to the Placement Agent a certificate, dated the Closing Date, of
its Chief Executive Officer, its President or a Vice President and its 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, (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.
26
(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) 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 Placement Agent, so material and adverse as to make it
impracticable or inadvisable to proceed with the sale or delivery of the Units
on the terms and in the manner contemplated in the General Disclosure
Package.
(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, Nasdaq GM 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) as to make it, in the judgment of the Placement Agent, impracticable or
inadvisable to proceed with the sale or delivery of the Units on the terms and
in the manner contemplated in the General Disclosure Package and the
Prospectus.
27
(m) The Company shall
have filed a Notification Form: Listing of Additional Shares with the Nasdaq GM
and shall have received no objection thereto from the Nasdaq GM.
(n) The Placement
Agent shall have received the written agreements, substantially in the form of
Exhibit C
hereto, of the executive officers, directors, shareholders, optionholders and
warrantholders of the Company listed in Schedule B to this
Agreement.
(o) The Company shall
have entered into Subscription Agreements with each of the Purchasers and such
agreements shall be in full force and effect.
(p) The Company shall
have entered into the Escrow Agreement and such agreement shall be in full force
and effect.
(q) The Placement
Agent shall have received clearance from FINRA as to the amount of compensation
allowable or payable to the Placement Agent as described in the Pricing
Prospectus.
(r) Prior to the
Closing Date, the Company shall have furnished to the Placement Agent such
further information, opinions, certificates (including a Secretary’s
Certificate), letters or documents as the Placement Agent 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 Placement Agent.
28
8. Indemnification and
Contribution.
(a) The Company shall
indemnify and hold harmless the Placement Agent, 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 Placement Agent) 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 Placement
Agent within the meaning of Section 15 of the Securities Act of or Section 20 of
the Exchange Act (collectively, the “Placement Agent Indemnified
Parties,” and each a “Placement Agent 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 Placement Agent 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
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, and shall reimburse the Placement
Agent Indemnified Party promptly upon demand for any legal fees or other
expenses reasonably incurred by that Placement Agent 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 Placement Agent specifically for use therein, which information
the parties hereto agree is limited to the Placement Agent’s Information (as
defined in Section
17). 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 Placement Agent Indemnified Party.
29
(b) The Placement
Agent 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 Placement Agent specifically
for use therein, which information the parties hereto agree is limited to the
Placement Agent’s Information as defined in Section 17, 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 Placement Agent 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 8(b), in no event
shall any indemnity by the Placement Agent under this Section 8(b) exceed the total
compensation received by the Placement Agent in accordance with Section
2.5.
30
(c) Promptly after
receipt by an indemnified party under this Section 8 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 8, 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 8 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 8. 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 8 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 8(a) or Section 2.6 or LCM in the
case of a claim for indemnification under Section 8(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 8 consist of any
Placement Agent Indemnified Party or by the Company if the indemnified parties
under this Section
8 consist of any Company Indemnified Parties. Subject to this
Section 8(c), the amount
payable by an indemnifying party under Section 8 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 8 (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 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.
31
(d) If the
indemnification provided for in this Section 8 is unavailable or
insufficient to hold harmless an indemnified party under Section 8(a) or Section 8(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 Placement Agent on the other
hand from the offering of the Units, or (ii) if the allocation provided by
clause (i) of this Section 8(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 8(d) but also the
relative fault of the Company on the one hand and the Placement Agent 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 Placement Agent 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 Placement Fee
received by the Placement Agent 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 Placement Agent 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 Placement Agent 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
Placement Agent for use in any Preliminary Prospectus, any Registration
Statement or the Prospectus, or in any amendment or supplement thereto, consists
solely of the Placement Agent’s Information as defined in Section
17. The Company and the Placement Agent agree that it would
not be just and equitable if contributions pursuant to this Section 8(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 8(d) shall be deemed
to include, for purposes of this Section 8(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 8(d), the Placement
Agent shall not be required to contribute any amount in excess of the total
compensation received by the Placement Agent in accordance with Section 2.5 less the amount
of any damages which the Placement Agent 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.
32
9. Termination. The
obligations of the Placement Agent and the Purchasers hereunder and under the
Subscription Agreements may be terminated by the Placement Agent, 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 7(j), 7(k) or 7(l) have occurred or
if the Purchasers shall decline to purchase the Units for any reason permitted
under this Agreement or the Subscription Agreements.
10. Reimbursement of Placement Agent’s
Expenses. Notwithstanding
anything to the contrary in this Agreement, if (a) this Agreement shall have
been terminated pursuant to Section 9, (b) the Company
shall fail to tender the Units for delivery to the Purchasers for any reason not
permitted under this Agreement, (c) the Purchasers 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 Purchasers or
the Placement Agent 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 6, the
Company shall reimburse the Placement Agent for the fees and expenses of the
Placement Agent’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 Placement Agent.
11. Absence of Fiduciary
Relationship. The
Company acknowledges and agrees that:
(a) the Placement
Agent’s responsibility to the Company is solely contractual in nature, the
Placement Agent has been retained solely to act as Placement Agent in connection
with the Offering and no fiduciary, advisory or agency relationship between the
Company and the Placement Agent has been created in respect of any of the
transactions contemplated by this Agreement, irrespective of whether the
Placement Agent 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 Placement Agent, 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;
33
(c) it has been
advised that the Placement Agent 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 Placement Agent 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 Placement
Agent for breach of fiduciary duty or alleged breach of fiduciary duty and
agrees that the Placement Agent 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.
12. Successors; Persons Entitled to
Benefit of Agreement. This
Agreement shall inure to the benefit of and be binding upon the Placement Agent,
the Company, and their respective successors and assigns. This
Agreement shall also inure to the benefit of Lazard Frères & Co. LLC, the
Purchasers, and each of their 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 Placement Agent Indemnified Parties and the
indemnities of the Placement Agent shall be for the benefit of the Company
Indemnified Parties. It is understood that the Placement Agent’s
responsibility to the Company is solely contractual in nature and the Placement
Agent does not owe the Company, or any other party, any fiduciary duty as a
result of this Agreement.
13. Survival of Indemnities,
Representations, Warranties, etc. The
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company and the Placement Agent, 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 Placement Agent, the Company, the Purchasers 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 9 or 10, the indemnity and
contribution agreements contained in Section 8 and the covenants,
representations, warranties set forth in this Agreement shall not terminate and
shall remain in full force and effect at all times.
14. Notices. All
statements, requests, notices and agreements hereunder shall be in writing,
and:
(a) if to the
Placement Agent, 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
34
(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: John G. Cooper (Fax: 215-488-9301), with a copy to: Dickstein Shapiro
LLP, 1177 Avenue of the Americas, 47th Floor, New York, New York 10036-2714,
Attention: Ira L. Kotel, Esq. (Fax: 212-997-9880).
provided, however, that any
notice to the Placement Agent pursuant to Section 8 shall be delivered
or sent by mail, telex or facsimile transmission to the Placement Agent at its
address set forth in its acceptance telex to the Placement Agent, which address
will be supplied to any other party hereto by the Placement Agent 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.
15. 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.
16. 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 Placement Agent each
hereby consent to the jurisdiction of such courts and personal service with
respect thereto. The Company and the Placement Agent each hereby
consent to personal jurisdiction, service and venue in any court in which any
legal proceeding arising out of or in any way relating to this Agreement is
brought by any third party against the Company or the Placement
Agent. The Company and the Placement Agent 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 Placement Agent 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.
17. Placement Agent’s
Information. The
parties hereto acknowledge and agree that, for all purposes of this Agreement,
the Placement Agent’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 Placement Agent; and (ii) the statements concerning
the Placement Agent contained in the first and sixth paragraphs under the
heading “Plan of Distribution.”
18. 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.
35
19. 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
Placement Agent.
20. 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.
21.
Right
of First Refusal. The parties acknowledge that,
pursuant to an engagement letter between the Company and the Placement
Agent, the Placement Agent has a right of first refusal to act as Placement
Agent with respect to a public offering by the Company and to earn
mutually agreed upon compensation in connection therewith.
36
If the
foregoing is in accordance with your understanding of the agreement between the
Company and the Placement Agent, kindly indicate your acceptance in the space
provided for that purpose below.
|
Very
truly yours,
|
|||
|
DISCOVERY
LABORATORIES, INC.
|
|||
|
By:
|
/s/ Robert Capetola | ||
|
|
Name:
Robert Capetola
|
||
|
Title:
President and C.E.O.
|
|||
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
|
37
SCHEDULE A
General
Use Free Writing Prospectuses
None.
SCHEDULE B
List
of officers and directors subject to Section 5
Board of
Directors
W. Thomas
Amick
Robert J.
Capetola (President and 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 Subscription Agreement
EXHIBIT B
Form
of Warrant
EXHIBIT
C
Form
of Lock Up Agreement
May 13,
2009
LAZARD
CAPITAL MARKETS LLC
30
Rockefeller Plaza
New York,
New York 10020
|
Re:
|
Discovery
Laboratories, Inc. offering of 14,000,000
Units
|
Dear
Sirs:
In order
to induce Lazard Capital Markets LLC (“Lazard”), to enter in to a
certain placement agent agreement with Discovery Laboratories, Inc., a Delaware
corporation (the “Company”), with respect to the
public offering of units consisting of the Company’s Common Stock, par value
$0.001 per share (“Common
Stock”) and warrants to purchase the Common Stock (the “Units”), 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 May 22, 2009, 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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Exhibit
10.2
SUBSCRIPTION
AGREEMENT
Discovery
Laboratories, Inc.
2600
Kelly Road
Warrington,
Pennsylvania 18976
Gentlemen:
The undersigned (the “Investor”) hereby confirms its
agreement with Discovery Laboratories, Inc., a Delaware corporation (the “Company”), as
follows:
1. This
Subscription Agreement, including the Terms and Conditions for Purchase of Units
attached hereto as Annex I
(collectively, this “Agreement”) is made as of the
date set forth below between the Company and the Investor.
2. The
Company has authorized the sale and issuance to certain investors of up to an
aggregate of 14,000,000 units (the “Units”), subject to adjustment
by the Company’s Board of Directors or a committee thereof, with each Unit
consisting of (i) one share (the “Share,” collectively, the
“Shares”) of its common
stock, par value $0.001 per share (the “Common Stock”), and (ii) one
warrant (the “Warrant,”
collectively, the “Warrants”) to purchase 0.50
shares of Common Stock (and the fractional amount being the “Warrant Ratio”), in
substantially the form attached hereto as Exhibit B, for a
purchase price of $0.81 per Unit (the “Purchase
Price”). Units will not be issued or
certificated. The Shares and Warrants are immediately separable and
will be issued separately. The shares of Common Stock issuable upon exercise of
the Warrants are referred to herein as the “Warrant Shares” and, together
with the Units, the Shares and the Warrants, are referred to herein as the
“Securities”).
3. The
offering and sale of the Units (the “Offering”) are being made
pursuant to (a) an effective Registration Statement on Form S-3, No. 333-151654
(the “Registration
Statement”) filed by the Company with the Securities and Exchange
Commission (the “Commission”), including the
Prospectus contained therein (the “Base Prospectus”), (b) if
applicable, certain “free writing prospectuses” (as that term is defined in Rule
405 under the Securities Act of 1933, as amended (the “Act”)), that have been or will
be filed, if required, with the Commission and delivered to the Investor on or
prior to the date hereof (the “Issuer Free Writing
Prospectus”), containing certain supplemental information regarding the
Units, the terms of the Offering and the Company and
(c) a Prospectus Supplement (the “Prospectus Supplement” and,
together with the Base Prospectus, the “Prospectus”) containing only
certain supplemental information regarding the Units and terms of the Offering
that will be filed with the Commission and delivered to the Investor prior to
the Closing.
4. The
Company and the Investor agree that the Investor will purchase from the Company
and the Company will issue and sell to the Investor the Units set forth below
for the aggregate purchase price set forth below. The Units shall be
purchased pursuant to the Terms and Conditions for Purchase of Units attached
hereto as Annex
I and incorporated herein by this reference as if fully set forth
herein. The Investor acknowledges that the Offering is not being
underwritten by Lazard Capital Markets LLC (“LCM” or the “Placement Agent”) and that
there is no minimum offering amount.
5. The manner
of settlement of the Shares included in the Units purchased by the Investor
shall be determined by such Investor as follows (check
one):
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[____]
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A.
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Delivery
by crediting the account of the Investor's prime broker (as specified by
such Investor on Exhibit A
annexed hereto) with the Depository Trust Company (“DTC”) through its
Deposit/Withdrawal At Custodian ("DWAC") system, whereby
Investor's prime broker shall initiate a DWAC transaction on the Closing
Date using its DTC participant identification number, and released by
Continental Stock Transfer & Trust Company, the Company’s transfer
agent (the “Transfer
Agent”), at the Company's direction. NO LATER THAN ONE (1) BUSINESS
DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE INVESTOR AND THE COMPANY,
THE INVESTOR SHALL:
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(I)
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DIRECT
THE BROKER-DEALER AT WHICH THE ACCOUNT OR ACCOUNTS TO BE CREDITED WITH THE
SHARES ARE MAINTAINED TO SET UP A DWAC INSTRUCTING THE TRANSFER AGENT TO
CREDIT SUCH ACCOUNT OR ACCOUNTS WITH THE SHARES,
AND
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(II)
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REMIT
BY WIRE TRANSFER THE AMOUNT OF FUNDS EQUAL TO THE AGGREGATE PURCHASE PRICE
FOR THE UNITS BEING PURCHASED BY THE INVESTOR TO THE FOLLOWING
ACCOUNT:
|
JPMorgan
Chase Bank, N.A.
ABA #
021000021
Account
Name: Discovery Laboratories, Inc.
Account
Number: N/A
Attention: Audrey
Cohen
Tel:
(212) 623-5078
– OR
–
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[____]
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B.
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Delivery
versus payment (“DVP”) through DTC (i.e., on the
Closing Date, the Company shall deliver Shares registered in the
Investor’s name and address as set forth below and released by the
Transfer Agent to the Investor through DTC at the Closing directly to the
account(s) at LCM identified by the Investor; upon receipt of such Shares,
LCM shall promptly electronically deliver such Shares to the Investor, and
simultaneously therewith payment shall be made by LCM by wire transfer to
the Company). NO LATER THAN ONE (1) BUSINESS
DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE INVESTOR AND THE COMPANY,
THE INVESTOR SHALL:
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(I)
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NOTIFY LCM OF THE ACCOUNT OR
ACCOUNTS AT LCM TO BE CREDITED WITH THE SHARES BEING PURCHASED BY SUCH
INVESTOR, AND
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(II)
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CONFIRM
THAT THE ACCOUNT OR ACCOUNTS AT LCM TO BE CREDITED WITH THE SHARES BEING
PURCHASED BY THE INVESTOR HAVE A MINIMUM BALANCE EQUAL TO THE AGGREGATE
PURCHASE PRICE FOR THE UNITS BEING PURCHASED BY THE
INVESTOR.
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2
IT IS THE INVESTOR’S
RESPONSIBILITY TO (A) MAKE THE NECESSARY WIRE TRANSFER OR CONFIRM THE PROPER
ACCOUNT BALANCE IN A TIMELY MANNER AND (B) ARRANGE FOR SETTLEMENT BY WAY OF DWAC
OR DVP IN A TIMELY MANNER. IF THE INVESTOR DOES NOT DELIVER THE
AGGREGATE PURCHASE PRICE FOR THE UNITS OR DOES NOT MAKE PROPER ARRANGEMENTS FOR
SETTLEMENT IN A TIMELY MANNER, THE SHARES AND WARRANTS MAY NOT BE DELIVERED AT
CLOSING TO THE INVESTOR OR THE INVESTOR MAY BE EXCLUDED FROM THE CLOSING
ALTOGETHER.
6. The
executed Warrant shall be delivered in accordance with the terms
thereof.
7. The
Investor represents that, except as set forth below, (a) it has had no position,
office or other material relationship within the past three years with the
Company or persons known to it to be affiliates of the Company, (b) it is not a
member of the Financial Industry Regulatory Authority, Inc. or an Associated
Person (as such term is defined under the NASD Membership and Registration Rules
Section 1011) as of the Closing, and (c) neither the Investor nor any group of
Investors (as identified in a public filing made with the Commission) of which
the Investor is a part in connection with the Offering of the Units, acquired,
or obtained the right to acquire, 20% or more of the Common Stock (or securities
convertible into or exercisable for Common Stock) or the voting power of the
Company on a post-transaction basis. Exceptions:
(If no
exceptions, write “none.” If left blank, response will be deemed to be
“none.”)
8. The
Investor represents that it has received (or otherwise had made available to it
by the filing by the Company of an electronic version thereof with the
Commission) the Base Prospectus, dated June 18, 2008, which is a part of the
Company’s Registration Statement and the documents incorporated by reference
therein (collectively, the “Disclosure Package”), prior to
or in connection with the receipt of this Agreement. The Investor
acknowledges that, prior to the delivery of this Agreement to the Company, the
Investor will receive certain additional information regarding the Offering,
including pricing information (the “Offering Information”). Such
information may be provided to the Investor by any means permitted under the
Act, including the Prospectus Supplement, a free writing prospectus and oral
communications.
9. No offer
by the Investor to buy Units will be accepted and no part of the Purchase Price
will be delivered to the Company until the Investor has received the Offering
Information and the Company has accepted such offer by countersigning a copy of
this Agreement, and any such offer may be withdrawn or revoked, without
obligation or commitment of any kind, at any time prior to the Company (or the
Placement Agent on behalf of the Company) sending (orally, in writing or by
electronic mail) notice of its acceptance of such offer. An
indication of interest will involve no obligation or commitment of any kind
until the Investor has been delivered the Offering Information and this
Agreement is accepted and countersigned by or on behalf of the
Company.
10. The
Company acknowledges that the only material, non-public information relating to
the Company it has provided to the Investor in connection with the Offering
prior to the date hereof is the existence of the Offering.
3
Number of
Units: ___________________________
Purchase
Price Per Unit: $_____________________
Aggregate
Purchase Price:
$___________________
Please confirm that the foregoing
correctly sets forth the agreement between us by signing in the space provided
below for that purpose.
|
Dated
as of: May __, 2009
__________________________________________
INVESTOR
By:_______________________________________
Print
Name:_________________________________
Title:______________________________________
Address:___________________________________
|
Agreed
and Accepted
this ___
day of May, 2009:
DISCOVERY
LABORATORIES, INC.
By:________________________________
Title:
4
ANNEX I
TERMS
AND CONDITIONS FOR PURCHASE OF UNITS
1. Authorization and
Sale of the Units. Subject to the terms and conditions of this
Agreement, the Company has authorized the sale of the Units.
2. Agreement
to Sell and Purchase the Units; Placement Agent.
2.1 At the
Closing (as defined in Section 3.1), the
Company will sell to the Investor, and the Investor will purchase from the
Company, upon the terms and conditions set forth herein, the number of Units set
forth on the last page of the Agreement to which these Terms and Conditions for
Purchase of Units are attached as Annex I (the “Signature Page”) for the
aggregate purchase price therefor set forth on the Signature Page.
2.2 The
Company anticipates that other investors (the “Other Investors” will
participate in the Offering, and expects to complete sales of Units to
them. The Company agrees that such Other Investors will execute
substantially the same form of Subscription Agreement as this
Agreement. The Investor and the Other Investors are hereinafter
sometimes collectively referred to as the “Investors,” and this Agreement
and the Subscription Agreements executed by the Other Investors are hereinafter
sometimes collectively referred to as the “Agreements.”
2.3 Investor
acknowledges that the Company has agreed to pay Lazard Capital Markets LLC
(“LCM” or the “Placement Agent”) a fee of six
percent (6.0%) (the “Placement
Fee”) in respect of the sale of Shares to the Investor.
2.4 The
Company has entered into a Placement Agent Agreement, dated May 8, 2009 (the
“Placement Agreement”),
with the Placement Agent that contains certain representations, warranties,
covenants and agreements of the Company that may be relied upon by the Investor,
which shall be a third party beneficiary thereof.
3. Closing
and Delivery of the Shares, Warrants and Funds.
3.1 Closing. The completion of
the purchase and sale of the Units (the “Closing”) shall occur at a
place and time (the “Closing
Date”) to be specified by the Company and LCM, and of which the Investors
will be notified in advance by LCM, in accordance with Rule 15c6-1 promulgated
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). At
the Closing, (a) the Company shall cause the Transfer Agent to deliver to the
Investor the number of Shares set forth on the Signature Page registered in the
name of the Investor or, if so indicated on the Investor Questionnaire attached
hereto as Exhibit
A, in the name of a nominee designated by the Investor, (b) the Company
shall cause to be delivered to the Investor a Warrant to purchase a number of
whole Warrant Shares determined by multiplying the number of Shares set forth on
the signature page by the Warrant Ratio and rounding down to the nearest whole
number and (c) the aggregate purchase price for the Units being purchased by the
Investor will be delivered by or on behalf of the Investor to the
Company.
5
3.2 Conditions
to the Obligations of the Parties.
(a) Conditions
to the Company’s Obligations. The Company’s
obligation to issue and sell the Units to the Investor shall be subject to: (i)
the receipt by the Company of the purchase price for the Units being purchased
hereunder as set forth on the Signature Page and (ii) the accuracy of the
representations and warranties made by the Investor and the fulfillment of those
undertakings of the Investor to be fulfilled prior to the Closing
Date.
(b) Conditions
to the Investor’s Obligations. The Investor’s
obligation to purchase the Units will be subject to (x) the representations and
warranties made by the Company in the Agreements and the Placement Agreement
shall be true and correct as of the date hereof and as of the Closing Date and
the Company shall have fulfilled those undertakings of the Company required to
be fulfilled prior to the Closing Date, including without limitation, those
contained in the Placement Agreement, and (y) that the Placement Agent shall not
have: (i) terminated the Placement Agreement pursuant to the terms thereof or
(ii) determined that the conditions to the closing in the Placement Agreement
have not been satisfied. The Investor’s obligations are expressly not
conditioned on the purchase by any or all of the Other Investors of the Units
that they have agreed to purchase from the Company. The Investor
understands and agrees that, in the event that LCM in its sole discretion
determines that the conditions to closing in the Placement Agreement have not
been satisfied or if the Placement Agreement may be terminated for any other
reason permitted by such Agreement, then LCM may, but shall not be obligated to,
terminate such Agreement, which shall have the effect of terminating this
Subscription Agreement pursuant to Section 14
below. The Placement Agent shall not have the authority to amend or
modify the Company’s representations and warranties set forth in Section 3 of
the Placement Agreement or the closing conditions contained in Section 7 of the
Placement Agreement in a manner adverse to the Investor or waive any provisions
or conditions contained therein without the consent of the
Investor.
3.3 Delivery
of Funds.
(a) DWAC
Delivery. If the Investor elects to settle the Shares
purchased by such Investor through DTC’s Deposit/Withdrawal at Custodian (“DWAC”) delivery system, no later
than one (1) business day after the execution of this Agreement by the Investor
and the Company, the Investor shall remit by wire transfer the amount of
funds equal to the aggregate purchase price for the Units being purchased by the
Investor to the following account designated by the Company and the Placement
Agent pursuant to the terms of that certain Escrow Agreement (the “Escrow Agreement”) dated as of
the date hereof, by and among the Company, the Placement Agent and JPMorgan
Chase Bank, N.A. (the “Escrow
Agent”):
JPMorgan
Chase Bank, N.A.
ABA #
021000021
Account
Name: Discovery Laboratories, Inc.
Account
Number: N/A
Attention: Audrey
Cohen
Tel:
(212) 623-5078
6
Such
funds shall be held in escrow until the Closing and delivered by the Escrow
Agent on behalf of the Investors to the Company upon the satisfaction, in the
sole judgment of LCM, of the conditions set forth in Section 3.2(b)
hereof. The Placement Agent shall have no rights in or to any of the
escrowed funds, unless LCM and the Escrow Agent are notified in writing by the
Company in connection with the Closing that a portion of the escrowed funds
shall be applied to the Placement Fee. The Company agrees to
indemnify and hold the Escrow Agent harmless from and against any and all
losses, costs, damages, expenses and claims (including, without limitation,
court costs and reasonable attorneys fees) (“Losses”) arising under this
Section 3.3 or
otherwise with respect to the funds held in escrow pursuant hereto or arising
under the Escrow Agreement, unless it is finally, judicially determined that
such Losses resulted directly from the willful misconduct or gross negligence of
the Escrow Agent. Anything in this Agreement to the contrary
notwithstanding, in no event shall the Escrow Agent be liable for any special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if the Escrow Agent has been advised of the
likelihood of such loss or damage and regardless of the form of
action.
(b) Delivery Versus Payment
through The Depository Trust Company. If the Investor elects
to settle the Shares purchased by such Investor by delivery versus payment
through DTC, no later
than one (1) business day after the execution of this Agreement by the Investor
and the Company, the Investor shall confirm that the account or accounts
at LCM to be credited with the Units being purchased by the Investor have a
minimum balance equal to the aggregate purchase price for the Units being
purchased by the Investor.
3.4 Delivery
of Shares.
(a) DWAC
Delivery. If the Investor elects to settle the Shares
purchased by such Investor through DTC’s DWAC delivery system, no later
than one (1) business day after the execution of this Agreement by the Investor
and the Company, the Investor shall direct the broker-dealer at which the
account or accounts to be credited with the Shares being purchased by such
Investor are maintained, which broker/dealer shall be a DTC participant, to set
up a DWAC instructing Continental Stock Transfer & Trust Company, the
Company’s “Transfer
Agent”, to credit such account or accounts with the
Shares. Such DWAC instruction shall indicate the settlement date for
the deposit of the Shares, which date shall be provided to the Investor by
LCM. Simultaneously with the delivery to the Company by the Escrow
Agent of the funds held in escrow pursuant to Section 3.3 above,
the Company shall direct the Transfer Agent to credit the Investor’s account or
accounts with the Shares pursuant to the information contained in the
DWAC.
(b) Delivery Versus Payment
through The Depository Trust Company. If the Investor elects
to settle the Shares purchased by such Investor by delivery versus payment
through DTC, no later
than one (1) business day after the execution of this Agreement by the Investor
and the Company, the Investor shall notify LCM of the account or accounts
at LCM to be credited with the Shares being purchased by such
Investor. On the Closing Date, the Company shall deliver the Shares
to the Investor through DTC directly to the account(s) at LCM identified by
Investor and simultaneously therewith payment shall be made by LCM by wire
transfer to the Company.
7
4. Representations,
Warranties and Covenants of the Investor.
The
Investor acknowledges, represents and warrants to, and agrees with, the Company
and the Placement Agent (as to itself), that:
4.1 The
Investor (a) is knowledgeable, sophisticated and experienced in making, and is
qualified to make decisions with respect to, investments in shares presenting an
investment decision like that involved in the purchase of the Units, including
investments in securities issued by the Company and investments in comparable
companies, (b) has answered all questions on the Signature Page and the Investor
Questionnaire and the answers thereto are true and correct as of the date hereof
and will be true and correct as of the Closing Date and (c) in connection with
its decision to purchase the number of Units set forth on the Signature Page,
has received and is relying only upon the Disclosure Package and the documents
incorporated by reference therein and the Offering Information.
4.2 (a) No
action has been or will be taken in any jurisdiction outside the United States
by the Company or the Placement Agent that would permit an offering of the Units, or possession or
distribution of offering materials in connection with the issue of the
Securities in any jurisdiction outside the United States where action for that
purpose is required, (b) if the Investor is outside the United States, it will
comply with all applicable laws and regulations in each foreign jurisdiction in
which it purchases, offers, sells or delivers Securities or has in its
possession or distributes any offering material, in all cases at its own expense
and (c) the Placement Agent is not authorized to make and have not made any
representation, disclosure or use of any information in connection with the
issue, placement, purchase and sale of the Units, except as set forth or
incorporated by reference in the Base Prospectus, the Prospectus Supplement or
any free writing prospectus.
4.3 (a) The
Investor has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby and has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement, and (b) this Agreement constitutes a valid and binding
obligation of the Investor enforceable against the Investor in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ 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) and except as
to the enforceability of any rights to indemnification or contribution that may
be violative of the public policy underlying any law, rule or regulation
(including any federal or state securities law, rule or
regulation).
4.4 The
Investor understands that nothing in this Agreement, the Prospectus, the
Disclosure Package, the Offering Information or any other materials presented to
the Investor in connection with the purchase and sale of the Units constitutes legal, tax or
investment advice. The Investor has consulted such legal, tax and
investment advisors and made such investigation as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of
Units. The Investor also understands that there is no
established public trading market for the Warrants being offered in the
Offering, and that the Company does not expect such a market to
develop. In addition, the Company does not intend to apply for
listing the Warrants on any securities exchange. Without an active
market, the liquidity of the Warrants will be limited.
8
4.5 Since the
date on which the Placement Agent first contacted the Investor about the
Offering, the Investor has not disclosed any information regarding the Offering
to any third parties (other than its legal, accounting and other advisors) and
has not engaged in any purchases or sales involving the securities of the
Company (including, without limitation, any Short Sales involving the Company’s
securities). The Investor covenants that it will not engage in any
purchases or sales in the securities of the Company (including Short Sales)
prior to the time that the transactions contemplated by this Agreement are
publicly disclosed. The Investor agrees that it will not use any of
the Securities acquired pursuant to this Agreement to cover any short position
in the Common Stock if doing so would be in violation of applicable securities
laws. For purposes hereof, “Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act, whether or not against the box, and all
types of direct and indirect stock pledges, forward sales contracts, options,
puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule
16a-1(h) under the Exchange Act) and similar arrangements (including on a total
return basis), and sales and other transactions through non-US broker dealers or
foreign regulated brokers.
5. Survival of
Representations, Warranties and Agreements; Third Party
Beneficiary. Notwithstanding any investigation made by any
party to this Agreement or by the Placement Agent, all covenants, agreements,
representations and warranties made by the Company and the Investor herein will
survive the execution of this Agreement, the delivery to the Investor of the
Shares and Warrants being purchased and the payment therefor. The
Placement Agent and Lazard Fréres & Co. shall be third party beneficiaries
with respect to the representations, warranties and agreements of the Investor
in Section 4 hereof.
6. Notices. All
notices, requests, consents and other communications hereunder will be 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:
9
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(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:
Dickstein
Shapiro LLP
1177
Avenue of the Americas, 47th
Floor
New York,
New York 10036
Attention: Ira
L. Kotel, Esq.
Facsimile: 212-997-9880
(b) if to the
Investor, at its address on the Signature Page hereto, or at such other address
or addresses as may have been furnished to the Company in writing.
7. Changes. This
Agreement may not be modified or amended except pursuant to an instrument in
writing signed by the Company and the Investor.
8. Headings. The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and will not be deemed to be part of this
Agreement.
9. Severability. In
case any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein will not in any way be affected or
impaired thereby.
10. Governing
Law. This Agreement will be governed by, and construed in
accordance with, the internal laws of the State of New York, without giving
effect to the principles of conflicts of law that would require the application
of the laws of any other jurisdiction.
11. Counterparts. This
Agreement may be executed in two or more counterparts, each of which will
constitute an original, but all of which, when taken together, will constitute
but one instrument, and will become effective when one or more counterparts have
been signed by each party hereto and delivered to the other
parties. The Company and the Investor acknowledge and agree that the
Company shall deliver its counterpart to the Investor along with the Prospectus
Supplement (or the filing by the Company of an electronic version thereof with
the Commission).
12. Confirmation of
Sale. The Investor acknowledges and agrees that such
Investor’s receipt of the Company’s signed counterpart to this Agreement,
together with the Prospectus Supplement (or the filing by the Company of an
electronic version thereof with the Commission), shall constitute written
confirmation of the Company’s sale of Units to such Investor.
10
13. Press
Release. The Company and the Investor agree that the Company
shall, prior to the opening of the financial markets in New York City on the
business day immediately after the date hereof, (a) issue a press release
announcing the Offering and disclosing all material information regarding the
Offering and (b) file a Current Report on Form 8-K with the Securities and
Exchange Commission including a form of this Agreement and a form of Warrant as
exhibits thereto. Notwithstanding the foregoing, the Company shall
not publicly disclose the name of the Investor or any affiliate or investment
adviser of the Investor, or include the name of the Investor or any affiliate or
investment adviser of any Investor in any press release or filing with the
Securities and Exchange Commission or any regulatory agency or trading market,
without the prior written consent of such Investor, except (i) as required by
federal securities law and (ii) to the extent such disclosure is required by law
or trading market regulations, in which case the Company shall provide the
Investor with prior written notice of such disclosure permitted under this
sub-clause (ii). From and after the issuance of the press release
described above, the Investor shall not be in possession of any material, non
public information received from the Company, any subsidiary of the Company or
any of their respective officers, directors or employees.
14. Termination. In
the event that the Placement Agreement is terminated by the Placement Agent
pursuant to the terms thereof, this Agreement shall terminate without any
further action on the part of the parties hereto. The Investor shall have the
right to terminate this agreement if the Closing has not occurred on or before
May 21, 2009.
11
Exhibit
A
DISCOVERY
LABORATORIES, INC.
INVESTOR
QUESTIONNAIRE
Pursuant
to Section 3 of
Annex I to the
Agreement, please provide us with the following information:
|
1.
|
The
exact name that your Shares and Warrants are to be registered in. You may
use a nominee name if appropriate:
|
________________________________ |
|
2.
|
The
relationship between the Investor and the registered holder listed in
response to item 1 above:
|
________________________________ |
|
3.
|
The
mailing address of the registered holder listed in response to item 1
above:
|
________________________________ |
|
4.
|
The
Social Security Number or Tax Identification Number of the registered
holder listed in the response to item 1 above:
|
________________________________ |
|
5.
|
Name
of DTC Participant (broker-dealer at which the account or accounts to be
credited with the Shares are maintained):
|
________________________________ |
|
6.
|
DTC
Participant Number:
|
________________________________ |
|
7.
|
Name
of Account at DTC Participant being credited with the
Shares:
|
________________________________ |
|
8.
|
Account
Number at DTC Participant being credited with the Shares:
|
________________________________ |
12
Exhibit
10.3
DISCOVERY
LABORATORIES, INC.
Warrant
To Purchase Common Stock
Warrant
No.:
___________
Number of
Shares of Common Stock: _____________
Date of
Issuance: May 13, 2009 ("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) Section 2 of that
certain Subscription Agreement (the “Subscription Agreement”),
dated as of May 8, 2009 (the "Subscription Date"), by and
between the Company and the Holder (the "Subscription Agreement") and
(ii) the Company’s Registration Statement on Form S-3 (File number 333-151654)
(the “Registration
Statement”).
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) (the "Exercise
Delivery Documents"), the Company shall transmit by facsimile an
acknowledgment of confirmation 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 Agent Commission system, or (Y) if the Transfer Agent is
not participating in the DTC Fast Automated Securities Transfer Program, 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 up 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.
1 Insert
a number of shares equal to 50% of the number of Common Shares purchased under
the Subscription Agreement.
(b) Exercise
Price. For purposes of this Warrant, "Exercise Price" means $1.15,
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.
(d) Cashless Exercise.
Notwithstanding
anything contained herein to the contrary, if and only if either (i) a
registration statement covering the Warrant Shares that are the subject of the
Exercise Notice (the "Unavailable Warrant Shares"),
or (ii) an exemption from registration, is not
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"):
|
Net
Number = (A x B)
- (A x C)
|
|
B
|
For
purposes of the foregoing formula:
|
A=
|
the
total number of shares with respect to which this Warrant is then being
exercised.
|
|
B=
|
the
arithmetic average of the Closing Sale Prices of the shares of Common
Stock for the five (5) consecutive Trading Days ending on the date
immediately preceding the date of the Exercise
Notice.
|
|
C=
|
the
Exercise Price then in effect for the applicable Warrant Shares at the
time of such exercise.
|
(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
Subscription 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.
(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 orally and in writing 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.
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 Subscription 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
Subscription 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 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
(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 common shares 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.
(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. REISSUANCE OF
WARRANTS.
(a) Transfer of
Warrant. If this Warrant is to be transferred, the Holder
shall surrender this Warrant to the Company, whereupon the Company will
forthwith 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. NOTICES. Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 7 of Annex I
to the Subscription Agreement. 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.
9. AMENDMENT AND
WAIVER. Except as otherwise provided herein, the provisions of
this Warrant may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained 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 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 (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.
14. TRANSFER. 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.
(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.
(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]
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.
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DISCOVERY
LABORATORIES, INC.
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By:
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Name:
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Title:
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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:
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____________
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a
"Cash
Exercise" with respect to _________________ Warrant Shares;
and/or
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____________
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a
"Cashless
Exercise" with respect to _________________ Warrant
Shares.
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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 to the holder __________ Warrant
Shares in accordance with the terms of the Warrant.
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 May ____, 2009 from the
Company and acknowledged and agreed to by Continental Stock Transfer & Trust
Company.
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DISCOVERY
LABORATORIES, INC.
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By:
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Name:
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Title:
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Exhibit
99.1
Discovery
Labs to Raise $11.3 Million in Registered Direct Offering
Warrington, PA — May 8, 2009 —
Discovery Laboratories, Inc. (Nasdaq: DSCO) today announced that it has
entered into definitive agreements with select institutional investors to raise
gross proceeds of approximately $11.3 million, before deducting placement
agent’s fees and other offering expenses, in a registered direct
offering. Under the terms of the transaction, Discovery Labs will
sell 14 million shares of its common stock at a purchase price of $0.81 per
share. Investors will also receive warrants to purchase one half
share of common stock for each share of common stock purchased. The
warrants will be exercisable at any time on or after the date of issuance for a
period of five years at an exercise price of $1.15 per share of common
stock. The closing of the offering is expected to take place on May
13, 2009, subject to the satisfaction of customary closing conditions. Lazard
Capital Markets LLC acted as the exclusive placement agent for the
transaction.
This
press release shall not constitute an offer to sell or the solicitation of an
offer to buy any securities, nor shall there be any sale of these 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. The shares of common stock and warrants
described above are being offered pursuant to registration statement previously
declared effective by the Securities and Exchange Commission and a prospectus,
forming a part of the effective registration statement. Copies of the
final prospectus supplement for this offering and accompanying base prospectus
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,
New York, NY 10020.
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. Discovery Labs is focused initially on
developing its KL4 surfactant
pipeline to build a pediatric franchise that will potentially address several
respiratory conditions affecting neonates and young children, beginning with
Respiratory Distress Syndrome (RDS). For more information, please visit the
Company’s website at
www.Discoverylabs.com.
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: (i) Discovery Labs and the U.S. Food and Drug Administration (FDA) will
not be able to agree on the matters raised by the FDA in its Complete Response
letter dated April 17, 2009, or the FDA may require Discovery Labs to conduct
significant additional activities to potentially gain approval of
Surfaxin, if ever (ii) 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 (iii) 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 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; 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; risks that (a) market
conditions, the competitive landscape or otherwise, may make it difficult to
launch and profitably sell products, (b) Discovery Labs may be unable to
identify potential strategic partners or collaborators to market its products,
if approved, in a timely manner, if at all, and (c) Discovery Labs’ products
will not gain market acceptance by physicians, patients, healthcare payers and
others in the medical community; the risk that Discovery Labs or its strategic
partners or collaborators will not be able to attract or maintain qualified
personnel; 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, or that the share price at which Discovery Labs may access the
facilities from time to time will not enable Discovery Labs to access the full
dollar amount potentially available under the facilities; the risk that
Discovery Labs will be unable to maintain The Nasdaq Global Market listing
requirements, causing 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 reimbursement
and 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:
Lisa
Caperelli, Investor Relations
215-488-9413