SECOND AMENDED AND RESTATED LOAN AGREEMENT
Exhibit
10.1
SECOND
AMENDED AND RESTATED
THIS
LOAN
AGREEMENT (this “Agreement”)
is
dated as of December 10, 2001, and amended and restated as of October 25, 2006
(the “Restatement
Date”),
by
and between DISCOVERY LABORATORIES, INC., a Delaware corporation (“Borrower”),
and
PHARMABIO DEVELOPMENT INC., a North Carolina corporation, d/b/a NovaQuest
(“Lender”).
WHEREAS,
Borrower and Lender entered into the
Loan
Agreement dated
as
of
December
10, 2001 (the “Original
Date”),
as
amended by the Amended and Restated Loan Agreement (the “Amended
and Restated Loan Agreement”)
dated
as of November 3, 2004;
WHEREAS,
Lender has advanced to Borrower an aggregate principal amount of Eight Million,
Five Hundred Thousand Dollars ($8,500,000) under the terms of the Amended and
Restated Loan Agreement, all of which, together with accrued interest in the
amount of $222,652.78 as of September 30, 2006, remains outstanding and payable
to Lender as of the Restatement Date (such principal and interest, the
“Loan”);
WHEREAS,
Borrower and Lender wish to amend and restate the Amended and Restated Loan
Agreement in its entirety as set forth in this Agreement; and
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged by the parties, the parties hereby amend and
restate the Amended and Restated Loan Agreement
in its
entirety
and
hereby agree as follows:
ARTICLE
I
DEFINITIONS
1.01 Definitions.
Capitalized terms used but not defined in the text of this Agreement shall
have
the meanings ascribed to them on Exhibit
A
attached
hereto and incorporated herein by reference.
ARTICLE
II
AMOUNT
AND TERMS OF LOAN
2.01 Term
Loan.
(a) Subject
to and upon the terms and conditions set forth herein, Lender agrees to continue
to make the Loan available to Borrower as of the Restatement Date. Borrower
acknowledges that the Loan satisfies Lender’s obligation to make available loans
or advances, and Lender has no obligation under the terms of this Agreement
to
make any additional future loans or advances to Borrower.
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2.02
[Intentionally Omitted.]
2.03 Note.
Borrower’s obligation to pay the principal of, and interest on, the Loan made by
Lender shall be evidenced by a single promissory note (the “Note”)
duly
executed and delivered by Borrower in the form of Exhibit
B
attached
hereto dated as of the Original Date and amended and restated as of the
Restatement Date. Any prepayments made by Borrower to Lender shall be recorded
by Lender and shall be endorsed on the grid attached to the Note.
2.04
Repayment;
Interest; Prepayments.
(a) Borrower
shall pay the aggregate outstanding principal amount of the Loan and all accrued
interest on or before April 30, 2010 (the “Maturity
Date”),
unless
any such
amount becomes
due and
payable sooner pursuant to the provisions of this Agreement. Borrower may prepay
all or a portion of the Loan at any time and from time to time
without
penalty, on the following terms and conditions: (i) Borrower shall give Lender
at least three (3) Business Days’ prior notice of its intent to prepay and of
the amount of the prepayment and (ii) each prepayment shall not be less than
$250,000. Any prepayments shall be credited first to accrued and unpaid interest
and then to principal.
(b) Interest
on the Loan shall accrue beginning October 1, 2006, and be payable at a rate
per
annum (the “Base
Rate”)
equal
to the Prime Rate in effect from time to time, or, if less, the maximum rate
permitted by law. Interest shall be calculated on the basis of a 360-day year
for the actual number of days elapsed. All
interest shall compound annually and be payable on the Maturity Date.
(c) The
outstanding principal amount of the Loan and any accrued interest thereon that
are not paid when due shall accrue interest on a daily basis at the lesser
of
(i) three percent (3.00%) in excess of the Base Rate, or (ii) the maximum rate
permitted by law, such accrual beginning on the date payment is due and
continuing until the date payment is made in full. All
such
interest shall compound as set forth in Section 2.04(b).
(d) All
payments of principal and interest described above shall be made to Lender
in
lawful money of the United States of America in immediately available
funds.
ARTICLE
III
CONDITIONS
PRECEDENT
3.01 Conditions
Precedent to this
Agreement.
The
obligation of Lender to execute
and
deliver
this
Agreement
to
Borrower
is
subject to the conditions precedent that Lender shall have received from
Borrower each
of the
following documents on the Restatement Date:
(a) The
Note
duly executed by Borrower;
(b) A
Security
Agreement in a
form
acceptable to the parties (the “Security
Agreement”),
the
related financing statement and one or more appropriate instruments to be
recorded with the United States Patent and Trademark Office, each in
a
form
acceptable to the parties, in each case duly executed by Borrower;
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(c) A
Warrant
Agreement in a form acceptable to the parties and dated as of the Restatement
Date (the “Warrant”),
duly
executed by Borrower;
(d) Copies
of
resolutions of the Board of Directors of Borrower approving this Agreement,
the
Note, the Security Agreement, the Warrant and any other documents required
or
necessary to consummate the transactions contemplated in this Agreement
(the Agreement, the Note, and the Security Agreement (including any amendment,
modification, extension, refinancing, or restructuring thereof) shall be
referred to, collectively, as the “Loan
Documents”;
the
Loan Documents and the Warrant shall be referred to, collectively, as the
“Transaction
Documents”),
certified by an appropriate officer of Borrower;
(e) A
certificate of the appropriate officers of Borrower certifying (i) that the
representations and warranties contained in Article IV are true and correct
in
all material respects,
(ii)
that
Borrower has performed, satisfied and complied with, in all material respects,
all covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with on or prior to the date of this
Agreement,
and
(iii)
that no
event has occurred and is continuing, which constitutes an Event of Default
or
would
constitute an Event of Default but for the requirement that notice be given
or
time elapse or both;
(f) A
certificate of good standing (or comparable document) regarding Borrower from
the State of Delaware; and
(g) A
subordination agreement in a form acceptable to Lender and executed by Borrower
and General Electric Capital Corporation.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES
OF
BORROWER
For
purposes of this Agreement and the Security Agreement, with respect to Borrower,
all references to “knowledge”, “knowingly” and similar words should be construed
to
refer
to the knowledge of the executive officers of Borrower (including the Chief
Executive Officer, Chief Financial Officer, General Counsel, and Executive
Vice
Presidents or any comparable officer),
after
reasonable investigation and inquiry. Borrower
represents,
warrants
and
covenants
to
Lender,
as of
the Restatement Date,
as
follows:
4.01 Corporate
Status.
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and Borrower is qualified to do
business as a foreign corporation in each jurisdiction in which qualification
is
required, except where failure to so qualify will not violate any provision
of
the organizational documents of Borrower, and would not have a material adverse
effect on the financial condition, properties, business or results of operations
of Borrower (a “Material
Adverse Effect”).
Except for Acute Therapeutics, Inc., a wholly owned subsidiary of Borrower
that
is presently inactive
and has
no material assets (“ATI”),
Borrower does not own or control, directly or indirectly, any interest in any
other corporation, partnership, limited liability company,
association, or other business entity. Except
as
set forth in the SEC Reports, Borrower
is not a participant in any joint venture, partnership, or similar
arrangement. Borrower has all requisite corporate power and authority to carry
on its business as now conducted.
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4.02 Issuance,
Sale and Delivery of the Securities.
The
Warrant
is,
and
the
Warrant Shares, when issued and paid for pursuant to the terms of the Warrant,
will be,
duly and
validly authorized, duly issued and outstanding, fully paid, nonassessable
and
free and clear of all pledges, liens, encumbrances and restrictions (other
than
restrictions arising under federal or state securities or “blue sky” laws). The
issuance of the Warrant is
not,
and
the
issuance of
the
Warrant Shares by Borrower (hereinafter such securities are sometimes
collectively referred to as the “Securities”)
will
not
be,
subject
to any preemptive or other similar rights. No further approval or authority
of
the stockholders or the Board of Directors of Borrower
will be
required for the issuance and sale of the Securities to be sold by Borrower
as
contemplated herein.
4.03 Due
Execution, Delivery and Performance of the Agreements.
Borrower has full legal right, corporate power and authority to enter into
the
Transaction Documents and to perform the transactions contemplated under the
Transaction Documents. The
Transaction Documents have been duly authorized, executed and delivered by
Borrower. Except
as
set forth herein, the
making
and performance of the Transaction Documents by Borrower and the consummation
of
the transactions contemplated therein will not result in the creation of any
lien, charge, security interest or encumbrance upon any assets of Borrower
pursuant to the terms
or
provisions of, or will not conflict with, result in the breach or violation
of,
or constitute, either by itself or upon notice or the passage of time or both,
a
default under any agreement, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument to which Borrower is a party or by which
Borrower or its properties may be bound or affected and in each case which
would
have a Material Adverse Effect or violate any statute or any authorization,
judgment, decree, order, rule or regulation of any court or any regulatory
body,
administrative
agency or other governmental body, applicable to Borrower or any of its
properties. Except
for any required notifications or qualifications under the federal and state
securities or “blue sky” laws and regulations with respect to the issuance of
the Warrant, the Warrant Shares and the Note, no
consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body, or any other party, is
required for the execution and delivery of the Transaction Documents or the
consummation in the U.S. of the transactions contemplated thereby.
The Transaction Documents constitute valid and binding obligations of Borrower,
enforceable in
the
U.S. in
accordance with their respective terms except as such enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization or other similar
laws affecting the enforcement of creditors’ rights generally and as to
limitations on the enforcement of the remedy of specific performance and other
equitable remedies.
4.04 Financial
Statements and Reports.
Unless
available on the Internet free of charge, Borrower has made available to Lender
true and complete copies of the SEC Reports. As of their respective filing
dates, the SEC Reports were prepared in all material respects in accordance
with
the requirements of the Securities Act or the Exchange Act, as the case may
be,
and the rules and regulations of the SEC promulgated thereunder applicable
to
such SEC Reports. The SEC Reports, when read as a whole, do not contain any
untrue statements of a material fact and do not omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of Borrower included
in
the SEC Reports have been prepared in accordance with United States generally
accepted accounting principles (“GAAP”)
applied on a consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present, in all material respects, the financial
position of Borrower as at the dates thereof and the results of its operations
and cash flows for the periods then ended subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments and any other
adjustments described in such financial statements. Since January 1, 2006,
Borrower has filed with the SEC on a timely basis, or received a valid extension
of such time of filing, all forms, reports and documents required to be filed
by
it under the Exchange Act.
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4.05 No
Defaults.
Except
as to defaults, violations and breaches which individually or in the aggregate
would not have a Material Adverse Effect, Borrower is not in violation or
default of any provision of its certificate of incorporation or bylaws, or
other
organizational documents, or in breach of or default with respect to any
provision of any agreement, judgment, decree, order, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument to which it
is
a party or by which it or any of its properties are bound; and there does not
exist any state of fact which, with notice or lapse of time or both, would
constitute an event of default or default on the part of Borrower as defined
in
such documents, except such defaults which individually or in the aggregate
would not have a Material Adverse Effect.
4.06 Contracts.
(a)
The
contracts and agreements of Borrower described in the SEC Reports and in
Schedule
3(e)(ii)
and
Schedule
3(e)(iii)
of the
Security Agreement, including without limitation Borrower’s licenses
and
options
for licenses, are in full force and effect as of the Restatement Date and
Borrower is not, nor to Borrower’s knowledge is any other party, in breach of or
default under any of such contracts or agreements which would have a Material
Adverse Effect, except such contracts or agreements as may have expired in
accordance with their terms. All such contracts and agreements constitute valid
and binding obligations of Borrower, enforceable in accordance with their
respective terms except as such enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting the
enforcement of creditors’ rights generally and as to limitations on the
enforcement of the remedy of specific performance and other equitable
remedies.
(b)
Without limiting the generality of Section 4.06(a), Borrower makes the following
representations and warranties in this Section 4.06(b) regarding (i) the
Sublicense Agreement dated October 28, 1996 (as in effect on the Restatement
Date, the “Sublicense”)
among
Xxxxxxx & Xxxxxxx and Ortho Pharmaceutical Corporation, as licensors
(collectively, “Licensor”),
and
ATI,
as
licensee, and (ii) the Research Funding and Option Agreement dated March 1,
2000
(the “Research
Agreement”)
between the Scripps Research Institute and Borrower:
(1) Borrower
is the successor to
ATI
under
the
Sublicense.
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(2) The
Sublicense is in full force and effect, and Borrower is not, nor to Borrower’s
knowledge is the Licensor, in breach or default under the Sublicense in any
material respect or in any manner that would permit a party to terminate the
Sublicense. To Borrower’s knowledge, no event or condition exists or has
occurred which would permit a party to terminate the Sublicense.
The Sublicense is a valid and binding agreement, enforceable in accordance
with
its terms
except
as such enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors’
rights generally and as to limitations on the enforcement of the remedy of
specific performance and other equitable remedies.
Borrower has not received any notice or other communication from the Licensor
under the Sublicense regarding any actual, alleged or potential violation,
breach, default or termination of the Sublicense or any material change in
the
rights of Borrower under the Sublicense.
(3) To
Borrower’s knowledge,
(x)
the
representations and warranties of the Licensor
under
Section 12 of the Sublicense are true and correct and (y) the Scripps Agreement
(as defined in the Sublicense) is in full force and effect.
(4) Borrower
has achieved all milestones required to be achieved under the Sublicense by
the
dates required thereunder (including without limitation under Section 6.2 of
the
Sublicense), taking into account any valid and binding extensions obtained
by
Borrower.
(5) The
Research Agreement is not a material contract of Borrower with respect to its
financial condition, results of operations, prospects, or products. Borrower
has
not exercised any option under the Research Agreement.
4.07 No
Actions.
Except
as set forth on Schedule 4.07, there are no legal or governmental actions,
suits, proceedings, arbitrations or investigations pending or, to Borrower’s
knowledge, threatened,
to which
Borrower is or may be a party or of which property owned, leased or licensed
by
Borrower is or may be the subject, or related to environmental or discrimination
matters, which actions, suits, proceedings or investigations, individually
or in
the aggregate, might prevent or might reasonably be expected to have a material
adverse effect on the transactions contemplated by this Agreement or result
in a
material adverse change in the financial condition, properties, business, or
results of operations of Borrower (a “Material
Adverse Change”);
and
no labor disturbance by the employees of Borrower exists or is imminent, to
Borrower’s knowledge, which might reasonably be expected to have a Material
Adverse Effect. Borrower is not a party to or subject to the provisions of
any
material injunction, judgment, decree or order of any court, regulatory body
administrative agency or other governmental body.
4.08 Properties.
Borrower has good and marketable title to all the properties and assets
reflected as owned by it in the SEC Reports, subject to no lien, mortgage,
pledge, charge or encumbrance of any kind except Permitted Liens. Borrower
holds
its leased properties under valid and binding leases. Borrower owns, leases
or
licenses all such properties necessary for the conduct of its business (as
described in the SEC Reports).
6
4.09 No
Material
Change.
Except
as disclosed in the SEC Reports, since June 30, 2006:
(i)
Borrower has not incurred any material liabilities or obligations,
indirect,
or
contingent, or entered into any material
verbal
or written agreement or other transaction which is not in the ordinary course
of
business or which could reasonably be expected to result in a material reduction
in the future earnings of Borrower; (ii) Borrower has not sustained any material
loss or interference with its business or properties from fire, flood,
windstorm, accident or other calamity not covered by insurance; (iii) Borrower
has not paid or declared any dividends or other distributions with respect
to
its capital stock and Borrower is not in default in the payment of principal
or
interest on any outstanding debt obligations; (iv) except as disclosed in the
SEC Reports and on Schedule 4.09, there has not been any change in the capital
stock of Borrower, other than options issued pursuant to employee equity
incentive plans or purchase plans approved by Borrower’s Board of Directors
(including the issuance of capital stock under Borrower’s 401(k) Plan), or
indebtedness material to Borrower; and (v) except for the operating losses
and
negative cash flow Borrower has continued to incur, there has not been any
Material Adverse Change.
4.10 Intellectual
Property.
(a)
Borrower
owns or has obtained valid rights to use the Intellectual Property necessary
for
the conduct of Borrower’s business (as described in the SEC
Reports).
(b)
To
Borrower’s knowledge: (i) there are no third parties who have any ownership
rights to any Intellectual Property that is owned by, or has been licensed
to,
Borrower for the product indications described in the SEC Reports that would
preclude Borrower from conducting its business (as described in the SEC
Reports), except for the ownership rights of the owners of the Intellectual
Property licensed or optioned by Borrower; (ii) there are currently no sales
of
any products that would constitute an infringement by third parties of any
Intellectual Property owned, licensed or optioned by Borrower; (iii) there
is no
pending or threatened action, suit, proceeding or claim by others challenging
the rights of Borrower in or to any Intellectual Property owned, licensed or
optioned by Borrower; (iv) there is no pending or threatened action, suit,
proceeding or claim by others challenging the validity or scope of any
Intellectual Property owned, licensed or optioned by Borrower; (v) there is
no
pending or threatened action, suit, proceeding or claim by others that Borrower
infringes or otherwise violates any patent, trademark, copyright, trade secret
or other proprietary right of others; and (vi) Borrower is not subject to any
judgment, order, writ, injunction or decree of any court or any Federal, state,
local, foreign or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any arbitrator, and Borrower
has not entered into or is a party to any contract which restricts or impairs
the use of any such Intellectual Property in a manner which would have a
Material Adverse Effect.
4.11 Compliance.
Borrower has been and is in compliance
with,
in
all
material respects,
all
applicable laws, rules, regulations and orders,
in
respect
of the
conduct of its business and the ownership of its properties, including without
limitation with respect to the FFDCA, environmental issues,
and
taxes and other governmental charges.
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4.12 Taxes.
Borrower has filed all federal, state, local and foreign income and other tax
returns required to be filed by it and has paid or accrued all taxes shown
as
due thereon, and, except as set forth on Schedule 4.12, Borrower has no
knowledge of a tax deficiency which has been or might be asserted or threatened
against it.
4.13 Insurance.
Borrower maintains insurance with sound and reputable insurance companies of
the
types and in the amounts that Borrower reasonably believes is adequate for
its
business, including, but not limited to, insurance covering all real and
personal property owned or leased by Borrower against all risks customarily
insured against by similarly situated companies, all of which insurance is
in
full force and effect.
4.14 No
Undisclosed Liabilities.
(a)
Neither
Borrower nor any of its subsidiaries has any liabilities, obligations, claims
or
losses (whether liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) that would be required to be disclosed on
a
balance sheet of Borrower or any subsidiary (including the notes thereto) in
accordance with GAAP and are not disclosed in the SEC Reports other than those
incurred in the ordinary course of Borrower’s or its subsidiaries’ respective
businesses since June 30, 2006, and which, individually or in the aggregate,
do
not or would not have a Material Adverse Effect.
(b) Set
forth
on Schedule
6.03(e)
attached
hereto is a true and complete list and description of all Debt of Borrower
and
its subsidiaries outstanding on the Restatement Date.
(c) Set
forth
on Schedule
6.04(i) attached
hereto is a true and complete list and description of all Liens of Borrower
and
its subsidiaries outstanding on the Restatement Date, other
than Liens existing under Sections 6.04(a), 6.04(b), 6.04(c), 6.04(g) or
6.04(h).
4.15 No
Undisclosed Events or Circumstances.
To
Borrower’s knowledge, no event or circumstance has occurred or exists with
respect to Borrower or its subsidiaries or their respective businesses,
properties, operations or financial condition, which, under applicable law,
rule
or regulation, requires public disclosure or announcement by Borrower but which
has not been so publicly announced or disclosed and which, individually or
in
the aggregate, do not or would not have a Material Adverse Effect.
4.16 Disclosure.
To
Borrower’s knowledge, as of the Restatement Date, the Transaction Documents
contain no untrue statement of a material fact or omit to state a material
fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.
4.17 Material
Non-Public Information.
Except
for this Agreement and the transactions contemplated hereby, neither Borrower
nor its agents have disclosed to Lender any material non-public information
that, according to applicable law, rule or regulation, should have been
disclosed publicly by Borrower prior to the Restatement Date but which has
not
been so disclosed.
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4.18 Fixed
Assets.
Set
forth on Schedule
4.18
attached
hereto is a true and complete list and description, including the book value,
of
all material fixed assets of Borrower.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF LENDER
Lender
represents and warrants to Borrower, as of the Restatement Date as
follows:
5.01 Corporate
Status.
Lender
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of North Carolina. Lender has all requisite corporate power
and authority to carry on its business as now conducted.
5.02 Due
Execution, Delivery and Performance of Agreement.
Lender
and its Affiliates have full legal right, corporate power and authority to
enter
into the Transaction Documents and to perform the transactions contemplated
thereunder. This Agreement has been duly authorized, executed and delivered
by
Lender. This Agreement constitutes the valid and binding obligation of Lender
enforceable in accordance with its terms.
5.03 Investment.
Lender
is acquiring the Note, the Warrant and the Warrant Shares for Lender’s own
account, and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act. Lender acknowledges having access to the SEC Reports. Lender has been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of Borrower concerning the
business affairs and financial condition of Borrower and (ii) the opportunity
to
request such additional documents and information which Borrower possesses
or
can acquire without unreasonable effort or expense and has had access to and
has
acquired sufficient information about Borrower to reach an informed and
knowledgeable decision to acquire the Securities to be purchased hereunder.
Lender, either by reason of its own business or financial experience or the
business or financial experience of its professional advisors (who are
unaffiliated with and who are not compensated by Borrower or any Affiliate,
finder or selling agent of Borrower, directly or indirectly), has such business
and financial experience as is required to give it the capacity to utilize
the
information received, to evaluate the risks involved in purchasing such
securities, to make an informed decision about purchasing the Securities and
is
able to bear the risks of an investment in the Securities. Lender is able to
bear the economic risk of holding the Securities for an indefinite period of
time and can afford a complete loss of its investment. Lender is not a “broker”
or a “dealer” as defined in the Exchange Act and is not an “affiliate” of
Borrower as defined in Rule 405 promulgated under the Securities
Act.
5.04 Accredited
Investor.
Lender
is an “accredited investor” within the meaning of Rule 501 of Regulation D
promulgated under the Securities Act.
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5.05 Note,
the Warrant and the Warrant Shares Not Registered.
Lender
understands that the Note, the Warrant and the Warrant Shares are not registered
under the Securities Act or registered or qualified under any state securities
or “blue sky” laws in reliance on specific exemptions therefrom. Lender
acknowledges and agrees that it shall not directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) the Note, the Warrant and the Warrant
Shares, except in compliance with the Securities Act and state securities or
“blue sky” laws and the rules and regulations promulgated thereunder and with
this Agreement and the Warrant. Lender understands that unless and until the
Warrant and the Warrant Shares have been registered for resale by Borrower
or
Lender in compliance with applicable securities laws, the certificates
evidencing the Warrant and the Warrant Shares will be imprinted with a legend
(in accordance with Section 5.06) that prohibits the transfer of the Warrant
and
the Warrant Shares unless (a) such transaction is registered or such
registration is not required or (b) if the transfer is pursuant to an
exemption from registration, upon the reasonable request of Borrower, an opinion
of counsel reasonably satisfactory to Borrower is obtained to the effect that
the transaction is not required to be registered or is so exempt.
Notwithstanding anything in this Agreement to the contrary, Lender may pledge
the Note, the Warrant, and the Warrant Shares in connection with bona fide
loan
transactions in which Lender or its Affiliate is the borrower, provided that
no
such pledge shall occur
knowingly,
after
reasonable investigation and inquiry,
to any
person or entity which actively sells, distributes, markets, develops, or
produces a pharmaceutical product or device which directly competes with the
Product.
5.06 Legend.
To the
extent applicable, each certificate evidencing the Warrant and the Warrant
Shares, shall be endorsed with the legend substantially in the form set forth
below:
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“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES OR "BLUE-SKY"
LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, ENCUMBERED
OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER SUCH ACT OR UNDER SUCH
LAWS,
OR PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION.”
|
ARTICLE
VI
COVENANTS
OF BORROWER
So
long
as any or all of the Loan or other obligations of Borrower under the Loan
Documents shall remain unpaid, Borrower shall comply with the following
covenants:
6.01 Compliance
with Laws.
Borrower shall
comply,
and cause
each
of
its subsidiaries to comply,
in all material respects with all applicable laws, rules, regulations and
orders, in respect of the conduct of its business and the ownership of its
properties, including without limitation with respect to the FFDCA,
environmental issues, and taxes and other governmental changes, where the
failure to so comply would have a Material Adverse Effect.
6.02 Transfers
of Assets.
Borrower shall not, and shall not permit any of its subsidiaries to, sell,
convey, transfer, lease, license,
assign
or
otherwise dispose of (whether in one transaction or in a series of transactions)
(a) all or substantially all of its assets or properties (whether now owned
or
hereafter acquired) to any entity or person, (b) without Lender’s written
consent (which consent shall not be unreasonably withheld), any material assets,
properties or rights relating to the Product,
or (c)
any of its assets or properties except
in the
ordinary course of business and, in the case of this clause (c), so long as
such
action is not likely to have
a
Material Adverse Effect or a material adverse effect on Lender’s
rights
hereunder.
10
6.03 Debt.
Borrower shall not create or incur or allow to be created, incurred or exist,
or
permit any of its subsidiaries to create or incur or allow to be created,
incurred or exist, any Debt, except
each
of
the following forms of Debt, individually and not in the aggregate:
(a)
accounts
payable incurred or created in the ordinary course of Borrower’s
business;
(b)
Debt
incurred or created in the ordinary course of Borrower’s business and which does
not exceed $5,000,000
in
the
aggregate
(which
shall not include any Debt described in clauses (c)
and
(d));
(c) Debt
incurred or created solely for the purpose of financing the acquisition of
property (other than real property), leasehold improvements and equipment for
use in Borrower’s business and which does not exceed $15,000,000
in the
aggregate;
(d)
Debt
which is junior and subordinate in right of payment to Borrower’s obligations to
Lender under the Loan Documents (“Junior
Debt”)
so
long as, prior to the creation of such Junior Debt, unless
such Junior Debt is described in clauses (a) through (c) above, Lender
has consented in writing to such Junior Debt (such consent not to be
unreasonably
withheld), and Lender and the holder of such Junior Debt have entered into
a
subordination agreement in form and substance reasonably satisfactory to Lender
providing for the subordination of the Junior Debt to the obligations of
Borrower under the Loan Documents; and
(e) Debt
existing on the Restatement Date and set forth on Schedule
6.03(e)
attached
hereto. For the avoidance of doubt, Schedule
6.03(e)
includes
a true and complete list and description of all Debt of Borrower existing on
the
Restatement Date, regardless of whether any such Debt is permitted by clauses
(a) through (d) above.
6.04 Liens,
Etc.
Borrower shall not create or incur or allow to be created, incurred or exist,
or
permit any of its subsidiaries to create or incur or allow to be created,
incurred or exist, any Lien upon or with respect to any of Borrower’s or its
subsidiaries’ assets or properties, except each of the following (collectively,
“Permitted
Liens”):
(a)
Liens
for
taxes, assessments or other governmental charges in the ordinary course of
business and for which no interest, late charge or penalty is attaching or
which
are being contested in good faith by appropriate proceedings;
(b)
Liens,
not delinquent, created by statute in connection with worker’s compensation,
unemployment insurance, social security and similar statutory
obligations;
(c)
Liens
of
mechanics, materialmen, carriers, warehousemen or other like statutory or common
law liens securing obligations incurred in good faith in the ordinary course
of
business that are not due and payable or which are being contested in good
faith; provided that Borrower has set aside reserves reasonable under the
circumstances for any such liens being contested in good faith;
11
(d) Purchase
money Liens upon property and equipment of Borrower acquired for use in
Borrower’s business, securing the purchase price thereof or securing Debt
incurred solely for the purpose of financing the acquisition thereof, and all
of
which Liens in the aggregate do not secure Debt in excess of $15,000,000 at
any
time outstanding;
(e)
Liens
securing capital lease obligations under which the lessor’s
recourse is limited to the leased property;
(f) Liens
securing indebtedness which is junior and subordinate in right of payment to
Borrower’s obligations to Lender under the Loan Documents (“Junior
Liens”)
so
long as, prior to the creation of such Junior Liens,
unless
such Junior Liens are described in clauses (a) through (e) above,
Lender
has consented in writing to
such
Junior Liens (such consent not to be unreasonably withheld), and Lender and
the
holder of such Junior Liens have entered into a subordination agreement in
form
and substance reasonably satisfactory to Lender providing for the subordination
of the indebtedness secured by the Junior Liens to the obligations of Borrower
under the Loan Documents;
(g)
any
rights reserved to or vested in any municipality or public authority to control
or regulate the use of the real property used and occupied by Borrower in any
manner; easements, rights-of-way, servitudes, restrictions and other defects,
encumbrances and irregularities in title to the real property used and occupied
by Borrower which could not, individually or in the aggregate, materially and
adversely affect the condition or operation of such real property; rights of
landlords under real property leases; so long as, in any case under this clause
(g), any lienholder’s recourse is limited to the related real
property;
(h) statutory
purchase-money Liens, including without limitation under Article 2 of the
Uniform Commercial Code securing obligations related to the acquisition of
goods
and services incurred in good faith in the ordinary course of business that
are
not due and payable or which are being contested in good faith; provided that
Borrower has set aside reserves reasonable under the circumstances for any
such
liens being contested in good faith; and
(i)
Liens, other than Liens existing under clauses (a) through (c) and (g) and
(h)
above, existing on the Restatement Date and set forth on Schedule
6.04(i) attached
hereto; provided,
however,
that no
such Liens may be modified, extended, or otherwise amended in any way that
adversely affects, including by reason of delay, the perfection or priority
of
Borrower’s security interest in the Collateral unless Lender has consented to
such amendment in writing. For the avoidance of doubt, Schedule
6.04(i)
includes
a true and complete list and description of all Liens of Borrower existing
on
the Restatement Date, other than Liens existing under clauses (a) through (c)
and (g) and (h) above, regardless of whether any such Lien is permitted by
clauses (d) through (f) above.
12
6.05 Corporate
Existence; Business.
Borrower will (i) maintain and preserve in full force and effect its corporate
existence, and
(ii)
continue to engage in the business in which it is engaged on the Restatement
Date.
6.06 Exchange
Act Registration.
Borrower will cause
the
Common
Stock to
continue to be registered under Section 12(g) of the Exchange Act, will comply
in all material respects with its reporting and filing obligations under the
Exchange Act,
and will
not take any action or file any documents to terminate or suspend such
registration or terminate or suspend its reporting or filing obligations under
the Exchange Act.
6.07 SEC
and Other Information.
(a) Upon written
request,
Borrower will provide to Lender,
within
three
(3) Business Days of
receipt of such written request,
a copy
of any publicly available forms, reports or other documents filed
by
Borrower
with the
SEC if such documents
are not
available on the Internet free of charge. If for any reason at any time Borrower
is not required to file annual, quarterly and other periodic reports with the
SEC pursuant to the terms of the Exchange Act, then Borrower shall make
available at no charge to Lender financial statements no later than the time
they would be filed with the SEC if Borrower was required to file such annual,
quarterly and other periodic reports. Any audited consolidated financial
statements and unaudited interim financial statements prepared pursuant to
the
preceding sentence shall be prepared in accordance with GAAP applied on a
consistent basis (except as may be indicated therein or in the notes thereto)
during the periods involved, and shall fairly present in all material respects
the financial position of Borrower as of the dates thereof and the results
of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited interim financial statements, to normal year-end audit
adjustments).
(b)
Borrower
will
permit officers and designated representatives of Lender,
at
reasonable times and intervals during
normal business hours, and upon reasonable prior notice, to
visit
and inspect, under guidance of officers of Borrower
and in
accordance with Borrower’s quality and standard operating procedures,
any of
the properties of Borrower, and to examine the Collateral and the books of
record and account of Borrower and discuss the affairs, finances and accounts
of
Borrower with, and be advised as to the same by, Borrower’s officers;
provided,
that
(i)
so
long as Lender shall not have any reasonable basis for insecurity with respect
to Borrower, the Loan or the Collateral, such visitations and inspections shall
not occur more than twice in any fiscal year of Borrower, and (ii) Lender
shall, in
accordance with the Confidentiality and Non-Disclosure Agreement, dated July
11,
2006, between Lender and Borrower (the “Confidentiality
Agreement”),
cause
its
Affiliates and representatives to, treat
all
nonpublic
information made available
to
it
in
strict confidence and disclose such
information
only on a need-to-know basis to Affiliates, subcontractors and employees who
are
under a written obligation to maintain the confidentiality of the
information.
Lender
shall
be
responsible for any disclosure of such information by its Affiliates,
subcontractors and employees.
6.08 Notice
of Certain Events.
Promptly, and in any event within five (5) Business Days after an executive
officer of Borrower obtains knowledge thereof, Borrower will notify Lender
of
(a) the occurrence of an Event of Default, (b) any litigation, governmental
proceeding or investigation or other event that is likely to materially and
adversely affect the financial condition, properties, business,
or
results of operations of Borrower,
or (c)
any Change of Control.
13
6.09 Compliance
with Certain Agreements.
Borrower shall perform and fulfill all of its obligations under the Sublicense
as necessary to maintain Borrower’s rights in such agreement in full force and
effect in all material respects. Borrower shall provide written notice to Lender
within five (5) Business Days of Borrower’s receipt of any notice from any other
parties to the Sublicense proposing or threatening to terminate any such
agreement.
6.10 Insurance.
Borrower shall maintain in full force and effect insurance with sound and
reputable insurance companies of the types and in the amounts that Borrower
reasonably believes is adequate for its business, including, but not limited
to,
insurance covering all real and personal property owned or leased by Borrower
against all risks customarily insured against by similarly situated
companies.
ARTICLE
VII
EVENTS
OF
DEFAULT
7.01 Events
of Default.
The
occurrence of each of the following events shall be considered an event of
default (each an “Event
of Default”):
(a) Borrower
shall fail to pay all principal and interest due under this Agreement on or
before the Maturity Date;
(b) Any
representation or warranty made by Borrower under this Agreement or any other
Transaction Document shall prove to have been incorrect or untrue when made
or
deemed made and such incorrect or untrue representation or warranty has a
Material Adverse Effect;
(c) Borrower
shall fail to perform or observe any term, covenant or agreement contained
in
this Agreement required to be performed or observed by Borrower (other than
Section 6.02, 6.03 or 6.04) and such failure to perform or observe such term,
covenant or agreement has a Material Adverse Effect and is not cured within
thirty (30) days after receipt of notice thereof by Borrower;
(d) Borrower
shall fail to perform or observe the provisions of Section 6.02, 6.03 or 6.04,
except, in the case of Section 6.04, if an Event of Default is based on a tax
lien, judgment lien or materialman’s lien, such lien shall continue without
discharge or stay for a period of sixty (60) days;
(e) One
or
more judgments, decrees or orders for the payment of money shall be entered
against Borrower or any of its subsidiaries involving in the aggregate a
liability of $300,000 or more in excess of any applicable insurance proceeds
(or, in the case of shareholder class actions, $600,000 or more), and any such
judgment, decree or order shall continue without discharge or stay for a period
of sixty (60) days;
14
(f) Borrower
shall (i) commence a voluntary case under the federal bankruptcy laws (as now
or
hereafter in effect), (ii) file a petition seeking to take advantage of any
other laws relating to bankruptcy, insolvency, reorganization, winding up or
composition for adjustment of debts, (iii) consent to or fail to contest in
a
timely manner any petition filed against it in an involuntary case under such
bankruptcy laws or other laws, (iv) apply for or consent to, or fail to contest
in a timely and appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee, or liquidator of itself or of
a
substantial part of its property, (v) admit in writing its inability to pay
its
debts as they become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action for the purpose of
authorizing or effecting any of the foregoing;
(g) A
case or
other proceeding shall be commenced against Borrower or any of its subsidiaries
in any court of competent jurisdiction seeking (i) relief under the federal
bankruptcy laws (as now or hereafter in effect) or under any other laws relating
to bankruptcy, insolvency, reorganization, winding up or adjustment of debts,
or
(ii) the appointment of a trustee, receiver, custodian, liquidator or the like
for Borrower or any of its subsidiaries or for all or any substantial part
of
their respective assets, and such case or proceeding shall continue without
dismissal or stay for a period of sixty (60) consecutive days, or an order
granting the relief requested in such case or proceeding (including, but not
limited to, an order for relief under such federal bankruptcy laws) shall be
entered;
(h) A
Change
of Control shall occur; provided,
however, that a Change of Control, as defined in clauses (ii) and (iii) of
the
definition of Change of Control, shall not be an Event of Default if Lender
shall have consented to such Change of Control in writing (such consent not
to
be unreasonably withheld
and
taking into account, without limitation, the business strategy and adequacy
of
collateral for the Loan following such Change of Control);
(i) Borrower
or any of its subsidiaries shall default in the performance or observance of
any
agreement or instrument relating to any Debt, or any other event shall occur
or
condition exist, and the effect of such default, event or condition is to cause
or permit the holder of any such Debt to cause any such Debt to become due
prior
to its stated maturity;
(j) Borrower
shall fail to perform or observe any term, covenant or agreement under the
Security Agreement in any material respect, or the Security Agreement or any
material provision thereof shall cease to be in full force and
effect;
(k) There
shall have been a Material Adverse Change (other than with respect to matters
relating to general economic conditions on Borrower’s industry as a whole)
which, taken as a whole, materially adversely affects Borrower’s ability to
satisfy its obligations under the Loan Documents; provided,
however,
that in
no event shall a Material Adverse Change be deemed to have occurred by virtue
of
the incurrence by Borrower or its Affiliates of any debt or other obligations
permitted by this Agreement;
(l) the
Common Stock shall not be listed or quoted on an Eligible Market;
15
(m) The
Sublicense shall have been terminated or expired, or cease to be in full force
and effect for the benefit of Borrower;
(n) Borrower
shall withdraw, terminate, or abandon the NDA to market the Product for the
indication prevention of respiratory distress syndrome in premature infants
(RDS);
(o) The
Product Launch Date for the indication prevention of RDS shall not have occurred
within one hundred eighty (180) days after the related FDA Approval
Date;
(p) Following
the Product Launch Date, Borrower shall withdraw the Product for the indication
prevention of RDS from the market; or
(q) Borrower
shall receive a Not Approvable Letter.
7.02 Effect
of Event of Default.
If any
Event of Default shall occur and be continuing, then Lender (i) may, by notice
to Borrower, declare the Loan to be terminated, whereupon the same shall
forthwith terminate, (ii) may, by notice to Borrower, declare the Note, all
interest thereon and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Note, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by Borrower, and (iii) exercise any rights or remedies under the Security
Agreement; provided,
however,
that if
an Event of Default specified in Section
7.01(f)
or
(g) shall occur, (A) the Loan shall automatically be terminated and (B) the
Note, all such interest and all such amounts shall automatically become and
be
due and payable, without presentment, demand, protest or any notice of any
kind,
all of which are hereby expressly waived by Borrower.
ARTICLE
VIII
MISCELLANEOUS
8.01 Amendments.
No
amendment or waiver of any provision of this Agreement or the Note, nor consent
to any departure by Borrower therefrom, shall in any event be effective unless
the same shall be in writing and signed by Borrower and Lender, and then such
waiver or consent shall be effective only in the specific instance and for
the
specific purpose for which given.
8.02 Notices.
All
notices and other communications provided for hereunder shall be in writing,
shall specifically refer to this Agreement, shall be addressed to the receiving
party’s address set forth below or to such other address as a party may
designate by notice hereunder, and shall be deemed to have been sufficiently
given for all purposes if (i) mailed by first class certified or registered
mail, postage prepaid, (ii) sent by nationally recognized overnight courier
for
next Business Day delivery, (iii) personally delivered,
or (iv)
made by telecopy or facsimile transmission with confirmed receipt.
| If to Borrower: |
Discovery
Laboratories, Inc.
|
0000
Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx,
XX 00000
Attn:
Chief Executive Officer and General Counsel
Facsimile:
(000) 000-0000
16
| with a copy to: |
Xxxxxxxxx
Xxxxxxx LLP
|
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
XX 00000-0000
Attn:
Xxx
X. Xxxxx
Facsimile:
(000) 000-0000
| If to Lender: |
PharmaBio
Development Inc. d/b/a NovaQuest
|
0000
Xxxxxxxxxx Xxxxx
Xxxxxxxxxx
Xxxx., Xxxxx 000
Xxxxxx,
XX 00000
Attn:
President
Facsimile:
(000) 000-0000
| with a copy to: |
Smith,
Anderson, Blount, Dorsett, Xxxxxxxx & Xxxxxxxx,
L.L.P.
|
0000
Xxxxxxxx Xxxxxxx Xxxxxx
Xxxxxxx,
XX 00000
Attn:
Xxxxxxxxxxx X. Xxxxx
Facsimile:
(000) 000-0000
8.03 No
Waiver; Remedies.
No
failure on the part of Lender to exercise, and no delay in exercising, any
right
hereunder or under the Notes shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by
law.
8.04 Attorneys’
Fees.
In the
event that any dispute among the parties to the Loan Documents should result
in
litigation, the prevailing party in such dispute shall be entitled to recover
from the losing party all fees, costs and expenses enforcing any right of such
prevailing party under or with respect to the Loan Documents, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expense of appeals.
8.05 Binding
Effect; Assignment.
This
Agreement shall be binding upon and inure to the benefit of Borrower and Lender
and their respective successors and permitted assigns, provided that (a)
Borrower shall not assign or transfer any or all of its rights or obligations
under any of the Loan Documents, and (b) so long as no Event of Default shall
have occurred, Lender shall not assign or transfer any or all of its rights
or
obligations under the Loan Documents, provided,
however,
that
the foregoing shall not limit Lender’s right to assign or transfer the right to
receive money or proceeds under the Loan Documents or any comparable arrangement
so long as Lender remains the party to the Loan Documents and provided that
Borrower shall continue to deal solely and directly with Lender in connection
with Lender’s rights and obligations under the Loan Documents. Lender shall not
assign or transfer any or all of its rights or obligations under the Warrant
or
the Warrant Shares knowingly, after reasonable investigation and inquiry, to
any
person or entity which actively sells, distributes, markets, develops, or
produces a pharmaceutical product or device which directly competes with the
Product. Notwithstanding the foregoing, Lender may assign any or all of its
rights or obligations under any of the Loan Documents to an Affiliate of Lender,
provided, that any such Affiliate shall agree in writing to be subject to the
foregoing limitations. Any assignment or attempted assignment in violation
of
this Section 8.05 shall be null and void.
17
8.06 Severability.
To the
extent any provision of this Agreement is prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
8.07 Entire
Agreement.
This
Agreement, the other Transaction Documents and the Confidentiality Agreement
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter thereof and supersede all prior oral or written
agreements and understandings relating to the subject matter thereof. No
statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in the Transaction Documents shall affect, or be used to
interpret, change or restrict, the express terms and provisions of the
Transaction Documents. If any provision contained in this Agreement shall be
deemed to conflict with any provision of any of the other Transaction Documents,
then the provision contained in this Agreement shall be controlling.
8.08 Further
Action.
Each
party shall, without further consideration, take such further action and execute
and deliver such further documents as may be reasonably requested by the other
party in order to carry out the provisions and purposes of the Transaction
Documents.
8.09 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original and all of which, when taken together, shall constitute
one and the same instrument. This Agreement may be executed and delivered by
telecopy or facsimile transmission and any execution by such means shall be
deemed an original.
8.10 Publicity.
Except
as otherwise required by applicable law or by obligations pursuant to any
listing agreement with or rules of any securities exchange or automated
quotation system, each party shall, and shall cause its respective Affiliates
to, not, issue any press release or make any other public statement relating
to,
connected with or arising out of this Agreement or the matters contained herein
without the other parties’ prior written approval of the contents and the manner
of presentation and publication thereof (which approval shall not be
unreasonably withheld or delayed).
8.11 Termination
by Borrower.
At such
time that the Loan and accrued interest have irrevocably been paid in full
and
Borrower has satisfied all of its obligations under the Loan Documents, Lender
shall, at the request and expense of Borrower, promptly, and in no event later
than ten (10) Business Days thereafter, make, execute, endorse, acknowledge,
file and/or deliver to Borrower any and all agreements, certificates,
instruments or other documents, and take all other action, as reasonably
requested by Borrower to terminate this Agreement.
18
8.12 Disclaimer.
Neither
Lender nor Borrower, nor any of such party’s Affiliates, directors, officers,
employees, subcontractors or agents shall have, under any legal theory
(including, but not limited to, contract, negligence and tort liability), any
liability to any other party hereto for any loss of opportunity or goodwill,
or
any type of special, incidental, indirect or consequential damage or loss,
in
connection with or arising out of this Agreement.
8.13 Governing
Law.
This
Agreement, including, without limitation, the interpretation, performance,
enforcement, breach or termination thereof and any remedies relating thereto,
shall be governed by and construed in accordance with the laws of the State
of
Delaware, United States of America, as applied to agreements executed and
performed entirely in the State of Delaware, without regard to conflicts of
law
rules.
8.14 Internal
Review.
In the
event that a dispute, difference, claim, action, demand, request, investigation,
controversy, threat, discovery request or request for testimony or information
or other question arises pertaining to any matters which arise under, out of,
in
connection with, or in relation to this Agreement (a “Dispute”)
and
either party so requests in writing, prior to the initiation of any formal
legal
action, the Dispute will be submitted to the Chief Executive Officers of
Borrower and Lender. For all Disputes referred to the Chief Executive Officers,
the Chief Executive Officers shall use their good faith efforts to meet at
least
two times in person and to resolve the Dispute within ten (10) days after such
referral.
8.15 Arbitration.
(a)
If
the
parties are unable to resolve any Dispute under Section 8.14,
then
either party may require the matter to be settled by final and binding
arbitration by sending written notice of such election to the other party
clearly marked “Arbitration Demand”. Thereupon
such Dispute shall be arbitrated in accordance with the terms and conditions
of
this Section 8.15.
Notwithstanding
the
foregoing, either party may apply to a court of competent jurisdiction for
a
temporary restraining order, a preliminary injunction, or other equitable relief
to preserve the status quo or prevent irreparable harm.
(b)
The
arbitration panel will be composed of three arbitrators, one of whom will be
chosen by Borrower, one by Lender, and the third by the two so chosen. If both
or either of Borrower or Lender fails to choose an arbitrator or arbitrators
within
fourteen
(14)
days
after receiving notice of commencement of arbitration, or if the two arbitrators
fail to choose a third arbitrator within fourteen
(14)
days
after their appointment, the American Arbitration Association shall, upon the
request of both or either of the parties to the
arbitration, appoint the arbitrator or arbitrators required to complete the
panel. The arbitrators shall have reasonable experience in the matter under
dispute. The decision of the arbitrators shall be final and binding on the
parties, and specific performance giving effect to the decision of the
arbitrators may be ordered by any court of competent jurisdiction.
(c)
Nothing
contained herein shall operate to prevent either party from asserting
counterclaim(s) in any arbitration commenced in accordance with this
agreement, and any such party need not comply with the procedural provisions
of
this Section 8.15
in
order to
assert such counterclaim(s).
19
(d)
The
arbitration shall be filed with the office of the American Arbitration
Association (“AAA”)
located in Wilmington, Delaware or such other AAA office as the parties may
agree upon (without any obligation to so agree). The arbitration shall be
conducted pursuant to the Commercial Arbitration Rules of AAA as in effect
at
the time of the arbitration hearing, such arbitration to be completed in a
sixty
(60) day period. In addition, the following rules and procedures shall apply
to
the arbitration:
(i)
The
arbitrators shall have the sole authority to decide whether or not any Dispute
between the parties is arbitrable and whether the party presenting the issues
to
be arbitrated has satisfied the conditions precedent to such party’s right to
commence arbitration as required by this Section
8.15.
(ii)
The
decision of the arbitrators, which shall be in writing and state the findings
the facts and conclusions of law upon which the decision is based, shall be
final and binding upon the parties, who shall forthwith comply after receipt
thereof. Judgment upon the award rendered by the arbitrator may be entered
by
any competent court. Each party submits itself to the jurisdiction of any such
court, but only for the entry and enforcement to judgment with respect to the
decision of the arbitrators hereunder.
(iii)
The
arbitrators shall have the power to grant all legal and equitable remedies
(including, without limitation, specific performance) and award compensatory
damages provided by applicable law, but shall not have the power or authority
to
award punitive damages. No party shall seek punitive damages in relation to
any
matter under, arising out of, or in connection with or relating to this
Agreement in any other forum.
(iv)
The
parties shall bear their own costs
in
preparing for and participating in the resolution of any Dispute pursuant to
this Section 8.15,
and
the
costs of the arbitrator(s) shall be equally divided between the parties;
provided,
however,
that
each party shall bear the costs incurred in connection with any Dispute brought
by such party that the arbitrators determine to have been brought in bad
faith.
(e)
Except as provided in the last sentence of Section
8.15(a),
the
provisions of this Section 8.15
shall be
a complete defense to any suit, action or proceeding instituted in any federal,
state or local court or before any administrative tribunal with respect to
any
Dispute arising with regard to this Agreement. Any party commencing a lawsuit
in
violation of this Section 8.15
shall
pay the costs of the other party, including, without limitation,
reasonable attorney’s fees and defense costs.
[Rest
of page intentionally left blank; signatures on following
page]
20
[Signature
page to
Second Amended and Restated
Loan
Agreement]
IN
WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective duly
authorized officers, as of the date first above written.
| BORROWER: | |
| DISCOVERY LABORATORIES, INC. | |
| By: /s/ Xxxx X. Xxxxxx | |
| Name: Xxxx X. Xxxxxx | |
| Title: Executive Vice President and Chief Financial Officer | |
| LENDER: | |
| PHARMABIO DEVELOPMENT INC. | |
| d/b/a NOVAQUEST | |
| By: /s/ Xxx Xxxxxxx | |
| Name: Xxx Xxxxxxx | |
| Title: Senior Vice President, Corporate Development |
21
EXHIBIT
A
DEFINITIONS
“Affiliate”
shall mean, as to any person or entity, any corporation or business entity
controlled by, controlling or under common control with such party or entity.
For this purpose, “control” shall mean direct or indirect beneficial ownership
of at least fifty percent (50%) of the voting stock or income interest in such
corporation or other business entity.
“ATI”
shall have the meaning set forth in Section 4.01.
“Business
Day” shall mean any day other than a Saturday, Sunday or legal holiday on which
banks in North Carolina and New York are open for the conduct of their banking
business.
“Change
of Control” shall mean the occurrence of any of the following events: (i) the
acquisition, whether directly or indirectly, by any person or entity, including
a “group” as defined in Section 13(d)(3) of the Exchange Act, of fifty percent
(50%) or more of the Common Stock; (ii) Borrower shall merge or consolidate
(or
engage in any other share exchange, acquisition or business combination
transaction) with or into another corporation or other entity, with the effect
that the persons who were the shareholders of Borrower immediately prior to
the
effective time of such transaction hold less than fifty-one percent (51%) of
the
combined voting power of the outstanding equity securities of the surviving,
continuing or acquiring entity in such transaction; (iii) Borrower shall sell,
convey, transfer, lease, license, assign or otherwise transfer or dispose of
(whether in one transaction or a series of transactions) all or substantially
all of its assets or properties (whether now owned or hereafter acquired) to
any
person or entity, or permit any of its subsidiaries to do so; or (iv) at any
time during any calendar year, fifty percent (50%) or more of the members of
the
full Board of Directors of Borrower shall have resigned or been removed or
replaced. The determination of “combined voting power” shall be based on the
aggregate number of votes that are attributable to outstanding securities
entitled to vote in the election of directors, general partners, managers or
persons performing analogous functions to directors of the entity in question,
without regard to contractual arrangements or rights accruing in special
circumstances.
“Collateral”
shall have the meaning set forth in the Security Agreement.
“Common
Stock” shall mean the common stock, par value $0.001 per share, of
Borrower.
“Debt”
shall mean (i) indebtedness for borrowed money, (ii) obligations evidenced
by
bonds, debentures, notes or other similar instruments, (iii) obligations to
pay
the deferred purchase price of property or services, (iv) obligations as lessee
under leases which shall have been or should be, in accordance with GAAP,
recorded as capital leases, and (v) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to purchase
or otherwise acquire, or otherwise to assure a creditor against loss in respect
of, indebtedness or obligations of others of the kinds referred to in clauses
(i) through (iv) above; provided,
however,
Debt
shall not include any Debt of Borrower under this Agreement.
1
“Eligible
Market” means any national securities exchange, the NASDAQ Global Select Market,
the NASDAQ Global Market or the NASDAQ Capital Market.
“Event
of
Default” shall have the meaning set forth in Section 7.01.
“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.
“FDA”
shall mean the United States Food and Drug Administration or its
successor.
“FDA
Approval Date” shall mean the first date on which the FDA approves an
application to market the Product.
“FFDCA”
shall mean the United States Federal Food, Drug and Cosmetic Act, as amended
from time to time, and all regulations promulgated thereunder.
“Intellectual
Property” shall have the meaning set forth in the Security
Agreement.
“Liens”
shall mean any lien, security interest, mortgage, pledge, encumbrance, charge
or
claim.
“Loan”
shall have the meaning set forth in Section 2.01(a).
“Loan
Documents” shall have the meaning set forth in Section 3.01(d).
“Material
Adverse Change” shall have the meaning set forth in Section 4.07.
“Material
Adverse Effect” shall have the meaning set forth in Section 4.01.
“Maturity
Date” shall have the meaning set forth in Section 2.04(a).
“NDA”
shall mean a “new drug application” as such term is used under the
FFDCA.
“Not
Approvable Letter” shall mean a letter from the FDA pursuant to 21 CFR 314.120
with respect to the NDA for the Product that has been filed with the FDA prior
to the date hereof, for the indication prevention of
respiratory distress syndrome in premature infants (RDS).
“Note”
shall have the meaning set forth in Section 2.04.
“Permitted
Lien” shall have the meaning set forth in Section 6.04.
“Prime
Rate” shall mean the rate which Wachovia Bank, N.A. (or its successor) announces
from time to time as its prime lending rate, the Prime Rate to change when
and
as such prime lending rate changes.
“Product”
shall mean the product currently known as Surfaxin, as such name may change
from
time to time, for any and all formulations and delivery mechanisms, and for
any
and all indications.
2
“Product
Launch Date” shall mean the first date on which the Product is shipped in the
United States for commercial sale.
“SEC”
shall
mean the United
States
Securities and Exchange Commission.
“SEC
Reports” shall mean Borrower’s most recently filed Annual Report on Form
10-K
and the Proxy Statement filed in connection with Borrower’s most recent annual
meeting of stockholders and all Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K filed by Borrower after
January 1, 2006.
“Securities”
shall have the meaning set forth in Section 4.02.
“Securities
Act” shall mean the Securities Act of 1933, as amended.
“Security
Agreement” shall have the meaning set forth in Section 3.01(b).
“Sublicense”
shall have the meaning set forth in Section 4.06(b).
“Transaction
Documents” shall have the meaning set forth in Section 3.01(d).
“Warrant”
shall have the meaning set forth in Section 3.01(c).
“Warrant
Shares” shall mean the shares issuable by Borrower upon the exercise of the
Warrant.
3
EXHIBIT
B
FORM
OF
NOTE
Schedules
