EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 16th day
of June, 1998, by and among DISCOVERY LABORATORIES, INC., a Delaware
corporation, (the "Company"), XXXXXXX & XXXXXXX DEVELOPMENT CORPORATION, a New
Jersey Corporation ("J&J") and THE SCRIPPS RESEARCH INSTITUTE, a California
not-for-profit organization ("Scripps") (J&J and Scripps are herein collectively
referred to as the "Stockholders").
RECITALS
WHEREAS, Acute Therapeutics, Inc. ("ATI") and Scripps are
parties to the Scripps Stock Purchase Agreement dated as of October 28, 1996
(the "Scripps Agreement"), pursuant to which Scripps acquired 40,000 shares of
common stock, $0.001 par value per share of ATI (the "ATI Common Stock");
WHEREAS, J&J, its affiliate, Ortho Pharmaceutical Corporation
and ATI are parties to the Inventory Transfer/Stock Purchase Agreement dated as
of October 28, 1996, as amended (the "Inventory Transfer Agreement"), pursuant
to which ATI issued to J&J 2,039 shares of its Non-Voting Series B Preferred
Stock, $0.001 par value per share (the "ATI Series B Preferred Stock") and
40,000 shares of ATI Common Stock;
WHEREAS, ATI, Scripps and J&J are parties to a Registration
Rights Agreement dated as of October 28, 1996 (the "ATI Registration Rights
Agreement") pursuant to which Scripps and J&J were granted certain registration
rights;
WHEREAS, the Company and ATI are parties to an Agreement and
Plan of Merger, dated March 5, 1998, as amended on May 1, 1998, whereby a
newly-formed subsidiary of the Company will merge with and into ATI and ATI will
become a wholly-owned subsidiary of the Company (the "Merger Agreement");
WHEREAS, pursuant to the Merger Agreement, each of the issued
and outstanding shares of ATI Common Stock shall be automatically converted into
3.91 shares of Common Stock of the Company, $0.001 par value per share ("the
Common Stock");
WHEREAS, the Company and J&J are parties to the Stock Exchange
Agreement of even date herewith pursuant to which J&J will exchange its ATI
Series B Preferred Stock for 2,039 shares of Series C Preferred Stock, $0.001
par value per share, of
the Company ("Series C Preferred Stock") and pursuant to which the Company will
issue J&J shares of Common Stock (the "Dividend Shares") in lieu of the accrued
but unpaid dividend accrued through the date of the Merger on its shares of ATI
Series B Preferred Stock (the "Stock Exchange Agreement");
WHEREAS, the Stockholders and the Company hereby agree that
this Registration Rights Agreement (the "Agreement") shall govern the rights of
the Stockholders to cause the Company to register the shares of Common Stock
held by the Stockholders;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and
agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.8 hereof.
(c) The term "1934 Act" shall mean the Securities Exchange Act
of 1934, as amended.
(d) The term "register", "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(e) The term "Registrable Securities" means (i) the Common
Stock issued by the Company pursuant to the Merger Agreement in exchange for the
shares of ATI Common Stock originally issued to Scripps pursuant to the Scripps
Purchase Agreement, (ii) the Common Stock issued by the Company pursuant to the
Merger Agreement in exchange for the shares of ATI Common Stock originally
issued to J&J pursuant to the Inventory Transfer Agreement, (iii) any Common
Stock issued to J&J upon conversion or redemption of the Series C Preferred
Stock, (iv) the Dividend Shares and (v) any Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of the shares referenced in (i)-(iv) above,
that cannot be publicly resold by the holder thereof without registration under
the Act or sold in a single transaction exempt from the registration and
prospectus delivery requirement of the Act pursuant to Rule 144 thereunder, it
being understood, for the purposes of this Agreement, that Registrable
Securities shall cease to be Registrable Securities when (1) a registration
statement covering such Registrable Securities has been declared effective and
they have been disposed of pursuant to such effective registration statement,
(2) they are transferred on the open market pursuant to any available exemption
under the Act, (3) they have been otherwise
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transferred and the Company has delivered new certificates or other evidences of
ownership for them not subject to any stop transfer order or other restriction
on transfer and not bearing any legend restricting transfer in the absence of an
effective registration or an exemption from the registration requirements of the
Act, (4) they have been sold, assigned, pledged, hypothecated or otherwise
disposed of by the Holder in a transaction in which the Holder's rights under
this Agreement are not assigned or assignable, or (5) the rights of the Holder
under Section 1.2 have terminated pursuant to Section 1.9.
(f) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are Registrable Securities.
(g) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2 Company Registration.
(a) If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the
Company for stockholders other than the Holders) any of its stock or other
securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan, a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 2.5, the Company shall cause to be registered under
the Act all of the Registrable Securities that each such Holder has requested to
be registered.
(b) Notwithstanding any other provision of this Section 1.2,
if the managing underwriter of an underwritten distribution advises in writing
the Company and the Holders of the Registrable Securities requesting
participation in such registration that in its good faith judgment the number of
shares of Registrable Securities and the other securities requested to be
registered under this Section 1.2 exceeds the number of shares of Registrable
Securities and other securities which can be sold in such offering, then (i) the
number of shares of Registrable Securities and other securities so requested to
be included in the offering shall be reduced to that number of shares which in
the good faith judgment of the managing underwriter can be sold in such offering
(except for shares to be issued by the Company, which shall have priority over
the Registrable Securities), and (ii) such reduced number of shares shall be
allocated among all participating Holders of Registrable Securities and holders
of other securities in proportion, as nearly as practicable, to the respective
number of shares of Registrable Securities and other securities held by such
Holders at the time of filing the registration statement; provided, however,
that a minimum of thirty percent (30%) of the shares to be underwritten shall be
allocated, on a pro rata basis, to the Holders requesting
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inclusion in such offering (the "selling stockholders"). For purposes of clause
(ii) above concerning apportionment, for any selling stockholder which is a
holder of Registrable Securities and which is a partnership or corporation, the
affiliates (as defined in the rules and regulations promulgated under the Act),
partners, retired partners and stockholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling stockholder", as defined in this sentence.
1.3 Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for a period of up to one hundred twenty
(120) days or until the distribution contemplated in the Registration Statement
has been completed; provided, however, that (i) such 120-day period shall be
extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
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(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(g) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(h) Notify the participating Holders at any time when a
prospectus relating to any Registrable Securities covered by such registration
statement is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing and promptly file such amendments and supplements as may be necessary
so that, as thereafter delivered to such Holders of such Registrable Securities,
such prospectus shall not include 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 not misleading in light of the circumstances then existing
and use its best efforts to cause each such amendment and supplement to become
effective.
(i) Furnish on the closing date of an underwritten public
offering (i) an opinion, dated such date, of the counsel representing the
Company, for purposes of such registration, in form and substance as is
customarily given by company counsel to the underwriters in an underwritten
public offering, addressed to the underwriters, and (ii) a letter dated such
date, from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters.
1.4 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of
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disposition of such securities as shall be required to effect the registration
of such Holder's Registrable Securities.
1.5 Expenses of Company Registration. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.2 for each Holder (which right may be assigned as provided
in Section 1.8), including (without limitation) all federal and state
registration, filing, qualification fees, printers and accounting fees relating
or apportionable thereto and reasonable fees and disbursements of one counsel
for the participating Holders together, but excluding underwriting discounts and
commissions relating to Registrable Securities.
1.6 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.7 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, and each officer, director, employee and
agent thereof against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, or the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, or the 1934 Act or any state securities
law; and the Company will pay to each such Holder, underwriter or controlling
person, and each officer, director, employee and agent thereof as incurred, any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.7(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
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(b) To the extent permitted by law, each selling Holder
(severally and not jointly) will indemnify and hold harmless the Company, each
of its directors, each of its officers who has signed the registration
statement, each person, if any, who controls the Company within the meaning of
the Act, any underwriter, any other Holder selling securities in such
registration statement and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, or the 1934 Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 1.7(a), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.7(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder, which
consent shall not be unreasonably withheld; provided, that, in no event shall
any indemnity under this subsection 1.10(b) exceed the gross proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.7, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.7.
(d) If the indemnification provided for in this Section 1.7 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such
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proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.7 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.8 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities, provided: (a) the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement; and (c) such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the Act.
1.9 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 1 after the fifth
anniversary of the date of this Agreement.
1.10 Reports Under 1934 Act. With a view to making available
to the Holders the benefits of Rule 144 promulgated under the Act and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
Registrable Securities to the public without registration, the Company agrees
to:
(a) make and keep available public information, as
those terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports
and other documents required of the Company under the Act and the 1934 Act; and
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(c) furnish to a Holder owning any Registrable
Securities upon request (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144 (at any time after 90 days
after the effective date of the first registration statement filed by the
Company for an offering of its securities to the general public), the Act and
the 1934 Act (at any time after the Company has become subject to the reporting
requirements of the 1934 Act), (ii) a copy of the most recent annual or
quarterly report of the company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably required in
availing any Holder of Registrable Securities of any rule or regulation of the
SEC which permits the selling of any such Registrable Securities without
registration or pursuant to such form (at any time after the company has become
subject to the reporting requirements of the 1934 Act).
1.11 Granting of Registration Rights. The Company shall not,
without the prior written consent of the Holders of at least 50.1% of the
Registrable Securities then outstanding, grant any rights to any persons to
register any shares of capital stock or other securities of the Company that
would limit the Holders' proportional rights under Section 1.2(b). The grant of
registration rights to any person that would entitle such person to participate
on a pro rata basis in an offering under Section 1.2(b) shall not be deemed a
limitation to the Holders' proportional rights under Section 1.2(b), pursuant to
this Section 1.11; provided that in no circumstance will fewer than ten percent
(10%) of the shares to be underwritten pursuant to Section 1.2(b) be allocated
to the Holders, regardless of any subsequent registration rights granted by the
Company.
2. Miscellaneous.
2.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
2.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania without regard to
its conflict of laws principles.
2.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
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2.5 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
2.6 Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
2.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
2.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
2.9 Aggregation of Stock. All shares of Registrable Securities
held or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
2.10 Entire Agreement; Amendment; Waiver; No Further Rights.
This Agreement (including the Exhibits hereto, if any) constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. The Stockholders hereby agree that they have no
further rights under the ATI Registration Rights Agreement.
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
DISCOVERY LABORATORIES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
________________________________
Xxxxxx X. Xxxxxxxx, Ph.D.
President
Address: 0000 Xxxxxx Xxxx
________________________________
Xxxxxxxxxx, XX 00000
________________________________
Stockholders:
XXXXXXX & XXXXXXX DEVELOPMENT
CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
________________________________
Address: One Xxxxxxx & Xxxxxxx Plaza
________________________________
Xxx Xxxxxxxxx, XX 00000
________________________________
THE SCRIPPS RESEARCH INSTITUTE
By: /s/ Xxxxxx XxXxxxxxx
________________________________
Address: 00000 X. Xxxxxx Xxxxx Road, TPC-16
________________________________
Xx Xxxxx, XX 00000
________________________________
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