EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of July 7,
2004 (the "Effective Date"), is by and between DISCOVERY LABORATORIES, INC. (the
"Company"), and KINGSBRIDGE CAPITAL LIMITED (the "Investor").
WHEREAS, the Company and the Investor have entered into that certain
Common Stock Purchase Agreement, dated as of the Effective Date hereof (the
"Purchase Agreement"), pursuant to which the Company may issue to the Investor,
from time to time, up to $75 million worth of shares of Common Stock as provided
for therein;
WHEREAS, pursuant to the terms of, and in partial consideration for the
Investor entering into, the Purchase Agreement, the Company has issued to the
Investor a warrant, exercisable from time to time within five (5) years
following the six-month anniversary of the date of issuance (the "Warrant") for
the purchase of an aggregate of up to 375,000 shares of Common Stock at a price
specified in such Warrant;
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investor's agreement to enter into the Purchase Agreement, the Company has
agreed to provide the Investor with certain registration rights with respect to
the Registrable Securities (as defined in the Purchase Agreement) as set forth
herein;
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein, in the Warrant and in the
Purchase Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, intending to be legally bound
hereby, the parties hereto agree as follows (capitalized terms used herein and
not defined herein shall have the respective meanings ascribed to them in the
Purchase Agreement):
ARTICLE I
REGISTRATION RIGHTS
Section 1.1. REGISTRATION STATEMENT.
(a) Filing of the Registration Statement. Upon the terms and subject
to the conditions set forth in this Agreement, the Company shall file with the
Commission, within forty-five (45) calendar days after the Effective Date, a
registration statement on Form S-3 under the Securities Act or such other form
as deemed appropriate by counsel to the Company for the registration for the
resale by the Investor of the Registrable Securities (the "Registration
Statement"). For purposes of this Agreement, the "Filing Date" shall refer to
the date on which the Company files the Registration Statement.
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(b) Effectiveness of the Registration Statement. The Company shall
use commercially reasonable efforts (i) to have the Registration Statement
declared effective by the Commission as soon as reasonably practicable, but in
any event no later than forty-five (45) calendar days after the Filing Date, or
ninety (90) calendar days after the Filing Date in the event that the Commission
reviews the Registration Statement, following the date that the Registration
Statement is filed and (ii) to ensure that the Registration Statement remains in
effect throughout the term of this Agreement as set forth in Section 4.2,
subject to the terms and conditions of this Agreement.
(c) Regulatory Disapproval. The contemplated effective date for the
Registration Statement as described in Section 1.1(b) shall be extended without
default or liquidated damages hereunder or under the Purchase Agreement in the
event that the Company's failure to obtain the effectiveness of the Registration
Statement on a timely basis results from (i) the failure of the Investor to
provide the Company with information requested by the Company and necessary to
complete the Registration Statement by the Filing Date, (ii) the Commission's
disapproval of the structure of the transactions contemplated by the Purchase
Agreement, (iii) the Commission failing to respond within a customary time
period to the filing of the Registration Statement or any post filing
communications from the Company, or (iv) events or circumstances that are not in
any way attributable to the Company; provided, that the Company has complied and
continues to comply with its obligation to use commercially reasonable efforts
to cause the Registration Statement to become effective. In the event of clause
(ii) above, the parties agree to cooperate with one another in good faith to
arrive at a resolution acceptable to the Commission.
(d) Failure to Maintain Effectiveness of Registration Statement. In
the event the Company fails to maintain the effectiveness of the Registration
Statement throughout the period set forth in Section 4.2, other than temporary
suspensions as set forth in Section 1.1(e) or 2.1(n), and the Investor holds any
Registrable Securities at any time during the period of such ineffectiveness (an
"Ineffective Period"), the Company shall pay to the Investor in immediately
available funds into an account designated by the Investor an amount (which
shall in no event exceed $2.5 million) equal to the product of (x) the total
number of Registrable Securities issued to the Investor under the Purchase
Agreement and owned by the Investor at any time during such Ineffective Period
and (y) the result, if greater than zero, obtained by subtracting the VWAP on
the Trading Day immediately following the last day of such Ineffective Period
from the VWAP on the Trading Day immediately preceding the day on which any such
Ineffective Period began; provided, however, that the foregoing payments shall
not apply in respect of Registrable Securities that (i) are otherwise freely
tradable by the Investor, including, but not limited to, under Rule 144
promulgated under the Securities Act (as such rule may be amended from time to
time, "Rule 144") or (ii) the Company offers to repurchase from the Investor for
a per share purchase price equal to the VWAP on the Trading Day immediately
preceding the day on which any such Ineffective Period began.
(e) Deferral or Suspension During a Blackout Period. If in the good
faith judgment of the Company, following consultation with legal counsel (which
may be internal counsel), it would be detrimental to the Company or its
stockholders for the Registration Statement to be filed or for resales of
Registrable Securities to be made pursuant to the Registration Statement due to
(i) the existence of a material development or potential material development
involving the Company that the Company would be obligated to disclose in the
Registration Statement, which disclosure would be premature or otherwise
inadvisable at such time or would have a Material Adverse Effect on the Company
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or its stockholders or (ii) a proposed filing of or use of an existing
registration statement in connection with a Company-initiated registration of
any class of its equity securities, which, in the good faith judgment of the
Company, would adversely effect or require premature disclosure of the filing or
use of such Company-initiated registration (notice thereof, a "Blackout
Notice"), the Company shall have the right to (A) immediately defer such filing
for a period of not more than sixty (60) days beyond the date on which the
Registration Statement was otherwise required hereunder to be filed or (B)
suspend use of the Registration Statement by the Investor for a period of not
more than thirty (30) days (any such deferral or suspension period, a "Blackout
Period"). The Investor acknowledges that it would be seriously detrimental to
the Company and its stockholders for the Registration Statement to be filed or
used, or remain in effect, during a Blackout Period and therefore essential to
defer such filing, or suspend the use or the effectiveness thereof, during such
Blackout Period and agrees to cease any disposition of the Registrable
Securities during such Blackout Period. The Company may not utilize any of its
rights under this Section 1.1(e) to defer the filing of a Registration Statement
(or suspend its use or effectiveness) more than six (6) times in any twelve (12)
month period. In the event that, within fifteen (15) Trading Days following any
Settlement Date, the Company gives a Blackout Notice to the Investor and the
VWAP on the Trading Day immediately preceding such Blackout Period ("Old VWAP")
is greater than the VWAP on the first Trading Day following such Blackout Period
on which the Investor may sell its Registrable Securities pursuant to an
effective Registration Statement ("New VWAP"), then the Company shall pay to the
Investor, by wire transfer of immediately available funds to an account
designated by the Investor, the "Blackout Amount." For the purposes of this
Agreement, Blackout Amount means a percentage equal to: (1) seventy-five percent
(75%) if such Blackout Notice is delivered prior to the fifth (5th) Trading Day
following such Settlement Date; (2) fifty percent (50%) if such Blackout Notice
is delivered on or after the fifth (5th) Trading Day following such Settlement
Date, but prior to the tenth (10th) Trading Day following such Settlement Date;
(3) twenty-five percent (25%) if such Blackout Notice is delivered on or after
the tenth (10th) Trading Day following such Settlement Date, but prior to the
fifteenth (15th) Trading Day following such Settlement Date; and (4) zero
percent (0%) thereafter of: the product of (i) the number of Registrable
Securities purchased by the Investor pursuant to the most recent Draw Down and
actually held by the Investor immediately prior to the Blackout Period and (ii)
the result obtained by subtracting the New VWAP from the Old VWAP; provided,
however, that (i) no Blackout Amount in respect of any Blackout Period shall
exceed $2.5 million, (ii) no Blackout Amount shall be payable under this Section
1.1(e) in the event that the Registrable Securities are eligible for resale
under Rule 144 during the Blackout Period and (iii) no Blackout Amount shall be
payable under this Section 1.1(e) in the event that the Company offers to
repurchase from the Investor for a per share purchase price equal to the VWAP on
the Trading Day immediately preceding the day on which any such Ineffective
Period began.
(f) Liquidated Damages. (1) The Company and the Investor hereto
acknowledge and agree that the amounts payable under Sections 1.1(d) and 1.1(e)
and the Blackout Shares deliverable under Section 1.1(e) above shall constitute
liquidated damages and not penalties. The parties further acknowledge that (i)
the amount of loss or damages likely to be incurred by the Investor is incapable
or is difficult to precisely estimate, (ii) the amounts specified in such
subsections bear a reasonable proportion and are not plainly or grossly
disproportionate to the probable loss likely to be incurred in connection with
any failure by the Company to obtain or maintain the effectiveness of the
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Registration Statement, (iii) one of the reasons for the Company and the
Investor reaching an agreement as to such amounts was the uncertainty and cost
of litigation regarding the question of actual damages and (iv) the Company and
the Investor are sophisticated business parties and have been represented by
sophisticated and able legal and financial counsel and negotiated this Agreement
at arm's length.
(g) The Company and the Investor agree and acknowledge that the
amounts payable under Sections 1.1(d) and 1.1(e), as applicable, constitute the
Investor's sole remedy with respect to the Company's failure to maintain the
effectiveness for the Registration Statement or for any deferral or suspension
of the Registration Statement during a Blackout Period as discussed in such
Sections. The Investor further agrees and acknowledges that assuming the payment
of any amount by the Company, as set forth in such Sections, the Company's
failure to maintain the effectiveness of the Registration Statement or for any
deferral or suspension of the Registration Statement during a Blackout Period,
as applicable, shall not constitute a material breach or default of any
obligation of the Company to the Investor.
(h) Additional Registration Statements. In the event and to the
extent that the Registration Statement fails to register a sufficient amount of
Common Stock necessary for the Company to issue and sell to the Investor and the
Investor to purchase from the Company all of the Registrable Securities to be
issued, sold and purchased under the Purchase Agreement and the Warrant, the
Company shall prepare and file with the Commission an additional registration
statement or statements in order to effectuate the purpose of this Agreement,
the Purchase Agreement and the Warrant.
ARTICLE II
REGISTRATION PROCEDURES
Section 2.1. FILINGS; INFORMATION. The Company shall use commercially reasonable
efforts to effect the registration with respect to the sale of the Registrable
Securities by the Investor in accordance with the intended methods of
disposition thereof. Without limiting the foregoing, the Company in each such
case will use commercially reasonable efforts to perform the following acts as
expeditiously as possible, but in no event later than the deadline, if any,
prescribed therefor in this Agreement:
(a) Subject to Section 1.1(e), the Company shall: (i) prepare and
file with the Commission the Registration Statement; (ii) use commercially
reasonable efforts to cause such filed Registration Statement to become and to
remain effective (pursuant to Rule 415 under the Securities Act or otherwise);
(iii) prepare and file with the Commission such amendments and supplements to
the Registration Statement and the Prospectus used in connection therewith (the
"Prospectus")as may be necessary to keep such Registration Statement effective
for the time period prescribed by Section 4.2 and in order to effectuate the
purpose of this Agreement, the Purchase Agreement and the Warrant; and (iv)
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the Investor set forth in
such Registration Statement; provided, however, that the Investor shall be
responsible for the delivery of the Prospectus to the Persons to whom the
Investor sells the Registrable Securities, and the Investor agrees to dispose of
Registrable Securities in compliance with the plan of distribution described in
the Registration Statement and otherwise in compliance with applicable federal
and state securities or blue sky laws and regulations.
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(b) If so requested by the Investor, or if the Investor determines
to engage an underwriter (other than the Investor) in connection with the
offering of any Registrable Securities (an "Underwritten Offering"), a managing
underwriter or underwriters, the Company shall (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, and the Investor agrees should be included
therein and (ii) make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such prospectus supplement or
post-effective amendment; provided, however, that the Company shall not be
required to take any action pursuant to this Section 2.1(b)(ii) that would, in
the opinion of counsel for the Company, violate applicable law.
(c) In the event of an Underwritten Offering: (A) the Company shall
enter into such reasonable agreements and take all such other reasonable actions
in connection therewith (including those reasonably requested by the managing
underwriters, if any) in order to expedite or facilitate the disposition of such
Registrable Securities, and in such connection, the Company shall: (i) make such
representations and warranties to the Investor and the underwriters with respect
to the business of the Company (including with respect to businesses or assets
acquired or to be acquired by the Company), and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance (subject to such exceptions
as the Company may disclose) and scope as are customarily made by issuers to
underwriters in underwritten offerings, and confirm such representations and
warranties if and when requested; (ii) consent to indemnification provisions and
procedures in the underwriting agreement no less favorable to the Investor and
the underwriters than those set forth herein (or such other provisions and
procedures acceptable to the Company, the Investor and the managing
underwriters); and (iii) deliver such documents and certificates as may be
reasonably requested by the Investor, its counsel and the managing underwriters,
if any, to evidence the continued validity of their representations and
warranties made pursuant to clause (i) above and to evidence compliance with any
customary conditions contained in the applicable underwriting agreement, this
Agreement, the Purchase Agreement or the Warrant.
(B) The Investor will enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering, and will take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless the Investor has notified the Company in writing
of its election to exclude all of its Registrable Securities from such
Registration Statement; provided, however, that the Investor shall consult with
the Company prior to any such Underwritten Offering and defer such offering for
a reasonable period upon the commercially reasonable request of the Company.
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(C) The Investor may not participate in any underwriting
distribution hereunder unless it (i) agrees to sell its Registrable Securities
on the basis provided in any underwriting agreements, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting agreements and (iii) agrees to pay all underwriting discounts and
commissions and other fees and expenses of investment bankers and any manager or
managers of such underwriting, and legal expenses of the underwriter, applicable
with respect to its Registrable Securities.
(d) As early as practical prior to filing the Registration Statement
or Prospectus, or any amendment or supplement thereto (excluding amendments
deemed to result from the filing of documents incorporated by reference
therein), the Company shall deliver to the Investor and to counsel representing
the Investor, in accordance with the notice provisions of Section 4.8, copies of
the Registration Statement and the Prospectus, together with exhibits thereto,
which documents will be subject to review by the Investor and such counsel, and
thereafter deliver to the Investor and such counsel, in accordance with the
notice provisions of Section 4.8, such number of copies of the Registration
Statement, each amendment and supplement thereto (in each case including all
exhibits thereto), the Prospectus (including each preliminary prospectus) and
such other documents or information as the Investor or counsel may reasonably
request in order to facilitate the disposition of the Registrable Securities.
(e) The Company shall deliver, in accordance with the notice
provisions of Section 4.8, to the Investor such number of conformed copies of
the Registration Statement and of each amendment and supplement thereto (in each
case including all exhibits and documents incorporated by reference), such
number of copies of the Prospectus (including each preliminary prospectus and
any summary prospectus) and any other prospectus filed under Rule 424
promulgated under the Securities Act relating to the Investor's Registrable
Securities, and such other documents, as such seller may reasonably request to
facilitate the disposition of its Registrable Securities.
(f) After the filing of the Registration Statement, the Company
shall promptly notify the Investor of any stop order issued or threatened by the
Commission in connection therewith and take all commercially reasonable actions
required to prevent the entry of such stop order or to remove it if entered.
(g) The Company shall use commercially reasonable efforts to (i)
register or qualify the Registrable Securities under such other securities or
blue sky laws and regulations of each jurisdiction in the United States as the
Investor may reasonably (in light of its intended plan of distribution) request
and (ii) cause the Registrable Securities to be registered with or approved by
such other governmental agencies or authorities in the United States as may be
necessary by virtue of the business and operations of the Company and do any and
all other customary acts and things that may be reasonably necessary or
advisable to enable the Investor to consummate the disposition of the
Registrable Securities; provided, however, that the Company will not be required
to qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 2.1(g), subject itself to
taxation in any such jurisdiction, consent or subject itself to general service
of process in any such jurisdiction, change any existing business practices,
benefit plans or outstanding securities or amend or otherwise modify the Charter
or Bylaws.
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(h) In the event of an Underwritten Offering, the Company shall
enter into customary agreements and take such other actions as are reasonably
required in order to expedite the disposition of such Registrable Securities.
(i) The Company shall make available to the Investor (and will
deliver to Investor's counsel), (A) subject to restrictions imposed by the
United States federal government or any agency or instrumentality thereof,
copies of all public correspondence between the Commission and the Company
concerning the Registration Statement and will also make available for
inspection by the Investor and any attorney, accountant or other professional
retained by the Investor (collectively, the "Inspectors"), (B) upon reasonable
advance notice during normal business hours all financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers and employees to
supply all information reasonably requested by any Inspectors in connection with
the Registration Statement; provided, however, that any such Inspectors must
agree in writing for the benefit of the Company not to use or disclose any such
Records except as provided in this Section 2.1(i). Any and all Records that the
Company determines, in good faith, to be confidential and that it notifies the
Inspectors are confidential shall be treated as confidential and not be
disclosed by the Inspectors unless the disclosure or release of such Records is
requested or required pursuant to oral questions, interrogatories, requests for
information or documents or a subpoena or other order from a court of competent
jurisdiction or other judicial or governmental process; provided, however, that
prior to any disclosure or release pursuant to the immediately preceding clause,
the Inspectors shall provide the Company with prompt notice of any such request
or requirement so that the Company may seek an appropriate protective order or
waive such Inspectors' obligation not to disclose such Records; and, provided,
further, that if failing the entry of a protective order or the waiver by the
Company permitting the disclosure or release of such Records, the Inspectors,
upon advice of counsel, are compelled to disclose such Records, the Inspectors
may disclose that portion of the Records that counsel has advised the Inspectors
that the Inspectors are compelled to disclose; provided, however, that upon any
such required disclosure, such Inspector shall use his or her best efforts to
obtain reasonable assurances that confidential treatment will be afforded such
information. The Investor agrees that information obtained by it solely as a
result of such inspections (not including any information obtained from a third
party who, insofar as is known to the Investor after reasonable inquiry, is not
prohibited from providing such information by a contractual, legal or fiduciary
obligation to the Company) shall be deemed confidential and shall not be used
for any purposes other than as indicated above or by it as the basis for any
market transactions in the securities of the Company or its affiliates unless
and until such information is made generally available to the public. The
Investor further agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its expense but with the assistance of the
relevant Inspectors, to undertake appropriate action to prevent disclosure of
the Records deemed confidential.
(j) In the event of an Underwritten Offering of the resale of
Registrable Securities pursuant to the Registration Statement, then to the
extent required by the managing underwriters and reasonably necessary to effect
a sale of Registrable Securities in accordance with prevailing business
practices at the time of any such underwritten sale of Registrable Securities
pursuant to a Registration Statement, the Company shall deliver to the Investor
a signed counterpart, addressed to the Investor, of (1) an opinion or opinions
of counsel to the Company and (2) a comfort letter or comfort letters from the
Company's independent public accountants, each in customary form and covering
such matters of the type customarily covered by opinions or comfort letters, as
the case may be, as the Investor therefor reasonably requests.
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(k) The Company shall otherwise comply with all applicable rules and
regulations of the Commission, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act.
(l) The Company shall appoint a transfer agent and registrar for all
of the Registrable Securities covered by such Registration Statement not later
than the effective date of such Registration Statement.
(m) The Investor shall cooperate with the Company, as reasonably
requested by the Company, in connection with the preparation and filing of any
Registration Statement hereunder. The Company may require the Investor to
promptly furnish in writing to the Company such information as may be required
in connection with such registration including, without limitation, all such
information as may be requested by the Commission or the NASD or any state
securities commission and all such information regarding the Investor, the
Registrable Securities held by the Investor and the intended method of
disposition of the Registrable Securities. The Investor agrees to provide such
information requested in connection with such registration within five (5)
business days after receiving such written request and the Company shall not be
responsible for any delays in obtaining or maintaining the effectiveness of the
Registration Statement caused by the Investor's failure to timely provide such
information.
(n) Upon receipt of a Blackout Notice from the Company, the Investor
shall immediately discontinue disposition of Registrable Securities pursuant to
the Registration Statement covering such Registrable Securities until (i) the
Company advises the Investor that the Blackout Period has terminated and (ii)
the Investor receives copies of a supplemented or amended prospectus, if
necessary. If so directed by the Company, the Investor will deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor's possession (other than
a limited number of file copies) of the prospectus covering such Registrable
Securities that is current at the time of receipt of such notice.
(o) If the Investor determines to engage in an Underwritten
Offering, the Investor will enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering, and will take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities. The Investor shall consult with the Company prior to any
Underwritten Offering and shall defer such Underwritten Offering for a
reasonable period upon the commercially reasonable request of the Company.
(o) The Investor shall not take any action with respect to any
distribution deemed to be made pursuant to the Registration Statement, which
would constitute a violation of Regulation M under the Exchange Act or any other
applicable rule, regulation or law.
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Section 2.2. REGISTRATION EXPENSES. The Company shall pay all registration
expenses incurred in connection with the Registration Statement (the
"Registration Expenses"), including, without limitation: (i) all registration,
filing, securities exchange listing and fees required by the NASD; (ii) all
registration, filing, qualification and other fees and expenses of compliance
with applicable state securities or blue sky laws and regulations (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities); (iii) all word processing,
duplicating, printing, messenger and delivery expenses; (iv) the Company's
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties); (v) the fees
and expenses incurred by the Company in connection with the listing of the
Registrable Securities; (vi) reasonable fees and disbursements of counsel for
the Company and customary fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any special
audits or comfort letters or costs associated with the delivery by independent
certified public accountants of such special audit(s) or comfort letter(s)
requested pursuant to Section 2.1(k) hereof); (vii) the fees and expenses of any
special experts retained by the Company in connection with such registration and
amendments and supplements to the Registration Statement and Prospectus; (viii)
all reasonable fees and expenses of counsel for the Investor to the extent
incurred in connection with the review, and assistance in preparation, of the
Registration Statement, correspondence with the Commission and amendments and
supplements to the Registration Statement and Prospectus (but only to the extent
such activities were conducted at the request of the Company or its counsel);
(ix) ongoing due diligence expenses of the Investor equal to $7,500 per calendar
quarter payable on the last day of each calendar quarter during the term of this
Agreement; provided, however, that the payments set forth in this clause (ix)
shall no longer apply for calendar quarters ending after the Company has issued
and sold shares of Common Stock to the Investor for an aggregate in Draw Down
Amounts equal to or greater than $10,000,000; and (x) premiums and other costs
of the Company for policies of insurance against liabilities arising out of any
public offering of the Registrable Securities being registered. Any fees and
disbursements of underwriters, broker-dealers or investment bankers, including
without limitation underwriting fees, discounts, transfer taxes or commissions,
and any other fees or expenses, including legal fees and expenses (other than
those described above) if any, attributable to the sale of Registrable
Securities, shall be payable by the Investor.
ARTICLE III
INDEMNIFICATION
Section 3.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Investor, its partners, affiliates, officers, directors,
employees and duly authorized agents, and each Person or entity, if any, who
controls the Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (collectively, the "Controlling Persons"), from
and against any Damages, joint or several, and any action or proceeding in
respect thereof to which the Investor, its partners, affiliates, officers,
directors, employees and duly authorized agents, and any Controlling Person, may
become subject under the Securities Act or otherwise, as incurred, insofar as
such Damages (or actions or proceedings in respect thereof) arise out of, or are
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement, or in any preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement relating to the
Registrable Securities or (ii) any omission or alleged omission to state therein
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a material fact required to be stated therein or necessary to make the
statements therein under the circumstances not misleading, and shall reimburse
the Investor, its partners, affiliates, officers, directors, employees and duly
authorized agents, and each such Controlling Person, for any legal and other
expenses reasonably incurred by the Investor, its partners, affiliates,
officers, directors, employees and duly authorized agents, or any such
Controlling Person, as incurred, in investigating or defending or preparing to
defend against any such Damages or actions or proceedings; provided, however,
that the Company shall not be liable to the extent that any such Damages arise
out of the Investor's (or any other indemnified Person's) failure to send or
give a copy of the final prospectus or supplement (as then amended or
supplemented) to the persons asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such person if such
statement or omission was corrected in such final prospectus or supplement;
provided, further, that the Company shall not be liable to the extent that any
such Damages arise out of or are based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration
Statement, or any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Investor or
any other person who participates as an underwriter in the offering or sale of
such securities, in either case, specifically stating that it is for use in the
preparation thereof. In connection with any Registration Statement with respect
to which the Investor is participating, such Investor will indemnify and hold
harmless, to the same extent and in the same manner as set forth in the
preceding paragraph, the Company, each of its directors, officers, 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 (each a "Company Indemnified
Person") against any Damages to which any Company Indemnified Person may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as such
Damages arise out of or are based upon any (a)(i)untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement, or
in any preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement relating to the Registrable Securities or (ii) omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein under the circumstances not misleading
in reliance upon and in conformity with written information furnished to the
Company by the Investor or on behalf of the Investor expressly for use in
connection with such Registration Statement or other document or (b) any failure
by the Investor to comply with prospectus delivery requirements of the
Securities Act, the Exchange Act or any other law or legal requirement
applicable to sales under the Registration Statement.
Section 3.2. CONDUCT OF INDEMNIFICATION PROCEEDINGS. All claims for
indemnification under Section 3.1 shall be asserted and resolved in accordance
with the provisions of Section 10.02 and 10.03 of the Purchase Agreement.
Section 3.3. ADDITIONAL INDEMNIFICATION. Indemnification similar to that
specified in the preceding paragraphs of this Article 3 (with appropriate
modifications) shall be given by the Company with respect to any required
registration or other qualification of securities under any federal or state law
or regulation of any governmental authority other than the Securities Act. The
provisions of this Article III shall be in addition to any other rights to
indemnification, contribution or other remedies which an Indemnified Party or a
Company Indemnified Person may have pursuant to law, equity, contract or
otherwise.
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Section 3.4. CONTRIBUTION. To the extent that any indemnification provided for
herein is prohibited or limited by law, the indemnifying party will make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under this Article III to the fullest extent permitted by law. However,
(a) no contribution will be make under circumstances where maker of such
contribution would not have been required to indemnify the indemnified party
under the fault standards set forth in this Article III, (b) no seller of
Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any Person who is not guilty of such fraudulent misrepresentation, and (c)
contribution (together with any indemnification obligations under this
Agreement) by any seller of Registrable Securities will be limited in amount of
proceeds received by such seller from the sale of such Registrable Securities.
ARTICLE IV
MISCELLANEOUS
Section 4.1. NO OUTSTANDING REGISTRATION RIGHTS. Except as otherwise disclosed
in accordance with the Purchase Agreement or in the Commission Documents, the
Company represents and warrants to the Investor that there is not in effect on
the date hereof any agreement by the Company pursuant to which any holders of
securities of the Company have a right to cause the Company to register or
qualify such securities under the Securities Act or any state securities or blue
sky laws and regulations of any jurisdiction.
Section 4.2. TERM. The registration rights provided to the Investor hereunder,
and the Company's obligation to keep the Registration Statement effective, shall
terminate at the earlier of (i) such time that is two years following the
termination of the Purchase Agreement, (ii) such time as all Registrable
Securities have been issued and have ceased to be Registrable Securities and
(iii) upon the consummation by the Company of an "Excluded Merger or Sale" (as
defined in the Purchase Agreement). Notwithstanding the foregoing, paragraphs
(c) and (d) of Section 1.1, Article III, Section 4.8 and Section 4.9 shall
survive the termination of this Agreement.
Section 4.3. RULE 144. The Company will, at its expense, promptly take such
action as the Investor may reasonably request to enable the Investor to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 or any similar rule or
regulation hereafter adopted by the Commission; provided, that the Investor may
not make any such request more than once during any calendar quarter during the
term of this Agreement. If at any time the Company is not required to file such
reports, it will, at its expense, forthwith upon the written request of the
Investor, make available adequate current public information with respect to the
Company within the meaning of paragraph (c)(2) of Rule 144 or such other
information as necessary to permit sales pursuant to Rule 144. Upon the request
of the Investor, the Company will deliver to the Investor a written statement,
signed by the Company's principal financial officer, as to whether it has
complied with such requirements.
Section 4.4. CERTIFICATE. The Company will, at its expense, forthwith upon the
reasonable request of the Investor but not more than once in any calendar
quarter, deliver to the Investor, a certificate signed by the Company's
principal financial officer, stating (a) the Company's name, address and
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telephone number (including area code), (b) the Company's Internal Revenue
Service identification number, (c) the Company's Commission file number, (d) the
number of shares of each class of Stock outstanding as shown by the most recent
report or statement published by the Company and (e) whether the Company has
filed the reports required to be filed under the Exchange Act for a period of at
least ninety (90) days prior to the date of such certificate and in addition has
filed the most recent annual report required to be filed thereunder.
Section 4.5. AMENDMENT AND MODIFICATION. Any provision of this Agreement may be
waived, provided that such waiver is set forth in a writing executed by both
parties to this Agreement. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of the Investor. No course
of dealing between or among any Person having any interest in this Agreement
will be deemed effective to modify, amend or discharge any part of this
Agreement or any rights or obligations of any person under or by reason of this
Agreement.
Section 4.6. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. The Investor may
assign its rights under this Agreement to any subsequent holder of the
Registrable Securities (unless sold pursuant to an effective registration
statement or in accordance with Rule 144 under the Securities Act), provided
that the Company shall have the right to require any holder of Registrable
Securities to execute a counterpart of this Agreement as a condition to such
holder's claim to any rights hereunder. The Company may assign this Agreement at
any time in connection with a sale or acquisition of the Company, whether by
merger, consolidation, sale of all or substantially all of the Company's assets
or similar transaction, without the consent of the Investor or other subsequent
holders of Registrable Securities; provided, that the successor or acquiring
Person or entity agrees in writing to assume all of the Company's rights and
obligations under this Agreement. This Agreement, together with the Purchase
Agreement and the Warrant sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges and supersedes
all prior discussions, agreements and understandings of any and every nature
among them.
Section 4.7. SEVERABILITY. In the event that any provision of this Agreement
becomes, or is declared by a court of competent jurisdiction to be, illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided, that such severability shall be ineffective if
it materially changes the economic benefit of this Agreement to any party
hereto.
Section 4.8. NOTICES. All notices, demands, requests, consents, approvals and
other communications required or permitted hereunder shall be given in
accordance with Section 12.04 of the Purchase Agreement.
Section 4.9. GOVERNING LAW; DISPUTE RESOLUTION. This Agreement shall be
construed under the laws of the State of New York. Any dispute arising out of or
relating to this Agreement shall be resolved by means of arbitration pursuant to
the provisions of Article XI of the Purchase Agreement.
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Section 4.10. SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION. (a) The Company and
the Investor acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity.
(b) The Company and the Investor irrevocably submit to the
jurisdiction of the United States District Court and other courts of the United
States sitting in the State of New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii) hereby waive,
and agree not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the Investor
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section shall
affect or limit any right to serve process in any other manner permitted by law.
The prevailing party in any litigation in connection with this Agreement shall
be entitled to recover from the other party all costs and expenses, including,
without limitation, reasonable attorney's fees, incurred by such party in
connection with any such litigation.
Section 4.11 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect their meaning, construction or effect.
Section 4.12. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.
Section 4.13. FURTHER ASSURANCES. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
Section 4.14. ABSENCE OF PRESUMPTION. This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
KINGSBRIDGE CAPITAL LIMITED
By: /s/ ▇▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
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Name: Valentine ▇'▇▇▇▇▇▇▇▇
Title: Director
DISCOVERY LABORATORIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
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