SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of the date set forth on
the signature page hereof between Discovery Laboratories, Inc., a Delaware
corporation (the "Company") and the undersigned (the "Subscriber").
WITNESSETH:
WHEREAS, the Company desires to issue a minimum (the "Minimum Offering") of
five (5) units (the "Units") and a maximum (the "Maximum Offering") of
thirty-six (36) Units, with an option in favor of the Placement Agent to offer
up to an additional twelve (12) Units to cover over-allotments, in a private
placement offering (the "Offering"), each Unit consisting of (a) 50,000 shares
of Series A Convertible Preferred Stock of the Company, par value of $.001 per
share, (the "Preferred Stock"), initially convertible into shares of common
stock of the Company, par value $.001 per share (the "Common Stock"), and (b)
50,000 shares of Common Stock (collectively with the Preferred Stock and the
Common Stock underlying the Preferred Stock, the "Shares"), and the Subscriber
desires to purchase that number of Units set forth on the signature page hereof
on the terms and conditions hereinafter set forth;
WHEREAS, the Company has engaged Paramount Capital, Inc. (the "Placement
Agent") as Placement Agent for the Offering on a "best-efforts" basis.
NOW, THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereto do
hereby agree as follows:
I SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER
1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the
Company such number of Units or fractions thereof and the Company
agrees to sell such Units to the Subscriber as is set forth upon the
signature page hereof. The Units will be offered at $500,000 per Unit
(the "Initial Offering Price"). The purchase price is payable by
personal or business check, wire transfer of immediately available
funds or money order made payable to "Fleet Bank, Escrow Agent, F/B/O
Discovery Laboratories, Inc." contemporaneously with the execution and
delivery of this Agreement. The Units will be delivered by the Company
within ten (10) days following the consummation of the Offering as set
forth in Article III hereof.
2 The Subscriber recognizes that the purchase of Units involves a high
degree of risk in that (i) the Company remains a development stage
business with limited operating history and requires substantial funds
in addition to the proceeds of the Offering; (ii) an investment in
the Company is highly speculative, and only investors who can afford
the loss of their entire investment should consider investing in the
Company and the Units; (iii) the Subscriber may not be able to
liquidate his investment; (iv) transferability of the Shares is
extremely limited; and (v) in the event of a disposition, the
Subscriber could sustain the loss of his entire investment. Such risks
are more fully set forth in the Confidential Private Placement
Memorandum (as defined below) furnished by the Company to the
Subscriber.
3 The Subscriber represents that the Subscriber is an "accredited
investor" as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended (the "Act"),
as indicated by his responses to the questions contained in Article
VIII hereof, and that the Subscriber is able to bear the economic risk
of an investment in the Units.
4 The Subscriber hereby acknowledges and represents that (i) the
Subscriber has prior investment experience, including investment in
non-listed and unregistered securities, or the Subscriber has employed
the services of an investment advisor, attorney and/or accountant to
read all of the documents furnished or made available by the Company
both to the Subscriber and to all other prospective investors in the
Units and to evaluate the merits and risks of such an investment on
the Subscriber's behalf; (ii) the Subscriber recognizes the highly
speculative nature of this investment; and (iii) the Subscriber is
able to bear the economic risk which the Subscriber hereby assumes.
5 The Subscriber hereby acknowledges receipt and careful review of the
Confidential Private Placement Memorandum (the "Memorandum") dated
June 17, 1996, as supplemented and amended, and the attachments and
exhibits thereto (including the Certificate of Designations of the
Series A Convertible Preferred Stock, all of which constitute an
integral part of the Memorandum (the "Memorandum") and hereby
represents that the Subscriber has been furnished by the Company
during the course of this transaction with all information regarding
the Company which the Subscriber has requested or desired to know, has
been afforded the opportunity to ask questions of and receive answers
from duly authorized officers or other representatives of the Company
concerning the terms and conditions of the Offering and has received
any additional information which Subscriber has requested.
6 (a) The Subscriber has relied solely upon the information provided by
the Company in the Memorandum in making the decision to invest in the
Units. To
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the extent necessary, the Subscriber has retained, at the expense of
the Subscriber, and relied upon appropriate professional advice
regarding the investment, tax and legal merits and consequences of
this Agreement and its purchase of the Units hereunder. The Subscriber
acknowledges and agrees that the Placement Agent has not supplied any
information for inclusion in the Memorandum other than information
furnished in writing to the Company by the Placement Agent
specifically for inclusion in the Memorandum relating to the Placement
Agent, that the Placement Agent has no responsibility for the accuracy
or completeness of the Memorandum and that the Subscriber has not
relied upon the independent investigation or verification, if any,
which may have been undertaken by the Placement Agent.
(b) To the best of its knowledge, (i) the Subscriber was contacted
regarding the sale of the Units by the Placement Agent, (or an
authorized agent or representative thereof) with whom the Subscriber
had a prior substantial pre-existing relationship and (ii) no Units
were offered or sold to it by means of any form of general
solicitation or general advertising, and in connection therewith the
Subscriber: did not (A) receive or review any advertisement, article,
notice or other communication published in a newspaper or magazine or
similar media or broadcast over television or radio whether closed
circuit, or generally available; or (B) attend any seminar meeting or
industry investor conference whose attendees were invited by any
general solicitation or general advertising.
7 The Subscriber hereby represents that the Subscriber either by reason of
the Subscriber's business or financial experience or the business or
financial experience of the Subscriber's professional advisors (who are
unaffiliated with and who are not compensated by the Company or any
affiliate or selling agent of the Company, including the Placement Agent,
directly or indirectly) has the capacity to protect the Subscriber's own
interests in connection with the transaction contemplated hereby. The
Subscriber hereby acknowledges that the Offering has not been reviewed by
the United States Securities and Exchange Commission (the "SEC") because of
the Company's representations that this is intended to be exempt from the
registration requirements of Section 5 of the Act pursuant to Sections 4(2)
of the Act and Regulation D promulgated thereunder. The Subscriber agrees
that the Subscriber will not sell or otherwise transfer the Shares unless
they are registered under the Act or unless an exemption from such
registration is available.
8 The Subscriber understands that the Shares comprising the Units have not
been registered under the Act by reason of a claimed exemption under the
provisions of the Act which depends, in part, upon the Subscriber's
investment intention. In this connection, the Subscriber hereby represents
that the Subscriber is purchasing the Shares comprising the Units for the
Subscriber's own account for investment and not with a view toward the
resale or distribution to others. The Subscriber, if an entity, was not
formed for the purpose of purchasing the Shares.
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9 The Subscriber understands that although there currently is a public
market for the Common Stock, Rule 144 promulgated under the Act requires,
among other conditions, a two-year holding period prior to the resale (in
limited amounts) of securities acquired in a non-public offering without
having to satisfy the registration requirements under the Act. The
Subscriber understands and hereby acknowledges that the Company is under no
obligation to register the Units or any of the Shares comprising the Units
under the Act or any state securities or "blue sky" laws other than as set
forth in Article V. The Subscriber consents that the Company may, if it
desires, permit the transfer of the Shares comprising the Units under or
issuable upon exercise thereof out of the Subscriber's name only when the
Subscriber's request for transfer is accompanied by an opinion of counsel
reasonably satisfactory to the Company that neither the sale nor the
proposed transfer results in a violation of the Act or any applicable state
"blue sky" laws (collectively, "Securities Laws"). The Subscriber agrees to
hold the Company and its directors, officers, employees, controlling
persons and agents (including the Placement Agent and its officers,
directors, employees and controlling persons) and controlling persons and
their respective heirs, representatives, successors and assigns harmless
and to indemnify them against all liabilities, costs and expenses incurred
by them as a result of any misrepresentation made by the Subscriber
contained in this Agreement (including the Confidential Investor
Questionnaire contained in Article VIII herein) or any sale or distribution
by the Subscriber in violation of the Securities Laws.
10 The Subscriber consents to the placement of a legend on any certificate or
other document evidencing the Shares that such Shares have not been
registered under the Act or any state securities or "blue sky" laws and
setting forth or referring to the restrictions on transferability and sale
thereof contained in this Agreement. The Subscriber is aware that the
Company will make a notation in its appropriate records with respect to the
restrictions on the transferability of such Shares.
11 The Subscriber understands that the Company will review this Agreement and
is hereby given authority by the Subscriber to call Subscriber's bank or
place of employment or otherwise review the financial standing of the
Subscriber; and it is further agreed that the Company reserves the
unrestricted right to reject or limit any subscription, to accept
subscriptions for fractional Units and to close the Offering to the
Subscriber at any time.
12 The Subscriber hereby represents that the address of the Subscriber
furnished by the Subscriber on the signature page hereof is the
Subscriber's principal residence if the Subscriber is an individual or its
principal business address if it is a corporation or other entity.
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13 The Subscriber represents that he or it has full power and authority
(corporate, statutory and otherwise) to execute and deliver this Agreement
and to purchase the Units. This Agreement constitutes the legal, valid and
binding obligation of the Subscriber, enforceable against the Subscriber in
accordance with its terms.
14 If the Subscriber is a corporation, company, trust, employee benefit plan,
individual retirement account, Xxxxx Plan, or other tax-exempt entity, it
is authorized and qualified to become an investor in the Company and the
person signing this Agreement on behalf of such entity has been duly
authorized by such entity to do so.
15 The Subscriber acknowledges that if he is a Registered Representative of an
NASD member firm, he must give such firm the notice required by the NASD's
Rules of Fair Practice, receipt of which must be acknowledged by such firm
in Section 8.4 below.
16 The Subscriber acknowledges that at such time, if ever, as the Shares are
registered, sales of the Shares will be subject to state securities laws,
including those of the State of New Jersey which requires any securities
sold in New Jersey to be sold through a registered broker-dealer or in
reliance upon an exemption from registration.
17 Subject to the proviso below, the Subscriber hereby agrees that from the
date hereof and continuing for a period (the "Lock-Up Period") of twelve
(12) months from the first date on which the shares of Common Stock become
publicly traded (the "Initial Trading Date"), Subscriber will not, without
the prior written consent of Placement Agent, offer, pledge, sell, contract
to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any Shares provided however that, following each
three month period after the Initial Trading Date, an amount of Shares
equal to 25 % of the number of Shares purchased by the Subscriber shall
become exempt from the lock-up provisions contained in this sentence. In
addition, the Subscriber agrees that while it holds any Shares, the
Subscriber will not directly or indirectly, through related parties,
affiliates or otherwise sell "short" or "short against the box" (as those
terms are generally understood) any equity security of the Company;
provided, however, that it shall not be a violation of this Section 1.17,
if the Subscriber places a sell order for Registrable Securities prior to
the conversion of the Preferred Stock, relies on the Company to deliver
such Registrable Securities in accordance with Section 5.4(h) and completes
the sale of such Registrable Securities before the Company delivers the
Registrable Securities to the Subscriber.
II REPRESENTATIONS BY AND COVENANTS OF THE COMPANY
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Except as set forth on the Schedule of Exceptions attached hereto as Exhibit A,
the Company hereby represents and warrants to the Subscriber that:
1 Organization, Good Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as described in the Memorandum. The Company is duly qualified to
do business as a foreign corporation and is in good standing in the State
of New York.
2 Capitalization and Voting Rights. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Memorandum under
"Capitalization"; all issued and outstanding shares of the Company are
validly issued, fully paid and nonassessable. The Shares comprising the
Units have been duly and validly authorized and, when issued and paid for
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable. Except as set forth in the Memorandum, there are no
outstanding options, warrants, agreements, convertible securities,
preemptive rights or other rights to subscribe for or to purchase any
shares of capital stock of the Company. Except as set forth in the
Memorandum and in this Agreement and as otherwise required by law, there
are no restrictions upon the voting or transfer of the Shares pursuant to
the Company's Certificate of Incorporation, By-Laws or other governing
documents or any agreement or other instruments to which the Company is a
party or by which the Company is bound.
3 Authorization; Enforceability. This Agreement has been duly and validly
authorized by the Company and is enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law). The Company has full power and lawful
authority to authorize, issue and sell the Units to be sold by it hereunder
on the terms and conditions set forth herein.
4 Certificate of Designations of Preferred Stock. The Preferred Stock has the
rights, preferences and privileges substantially as set forth in the Form
of Certificate of Designations attached as Exhibit A to the Memorandum with
the initial conversion rate of 4.0 and initial conversion price (the
"Initial Conversion Price") of $2.50.
5 No Conflict; Governmental Consents.
(i) The execution and delivery by the Company of this Agreement and the
consummation of the transactions contemplated hereby will not result
in the violation of any
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law, statute, rule, regulation, order, writ, injunction, judgment or
decree of any court or governmental authority to or by which the
Company is bound, or of any provision of the Certificate of
Incorporation or By-Laws of the Company, and will not conflict with,
or result in a breach or violation of, any of the terms or provisions
of, or constitute (with due notice or lapse of time or both) a default
under, any lease, loan agreement, mortgage, security agreement, trust
indenture or other agreement or instrument to which the Company is a
party or by which it is bound or to which any of its properties or
assets is subject, nor result in the creation or imposition of any
lien upon any of the properties or assets of the Company.
(ii) No consent, approval, authorization or other order of any governmental
authority is required to be obtained by the Company in connection with
the authorization, execution and delivery of this Agreement or with
the authorization, issue and sale of the Units or the Shares
comprising the Units, except such filings as may be required to be
made with the SEC and Nasdaq and with any state or foreign blue sky or
securities regulatory authority.
6 Licenses. Except as set forth in the Memorandum, the Company has sufficient
licenses, permits and other governmental authorizations currently required
for the conduct of its business or ownership of properties and is in all
material respects complying therewith.
7 Litigation. Except as set forth in the Memorandum, the Company knows of no
pending or threatened legal or governmental proceedings against the Company
which could materially adversely affect the business, property, financial
condition or operations of the Company.
8 Memorandum; Disclosure. No information set forth in the Memorandum contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
9 Investment Company. The Company is not an "investment company" within the
meaning of such term under the Investment Company Act of 1940 and the rules
and regulations of the SEC thereunder.
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III TERMS OF SUBSCRIPTION
1 The Company shall issue a minimum of five (5) Units and a maximum of
thirty-six (36) Units. The Placement Agent, at its sole option, may offer
and sell up to an additional twelve (12) Units to cover over-allotments.
The Offering Period shall begin June 17, 1996. Upon receipt of the Minimum
Offering amount, the Placement Agent may conduct a closing (the "Initial
Closing Date") and may conduct subsequent closings on an interim basis
(each a "Closing") until the Maximum Offering amount (including any
over-allotment amount) has been reached (the "Final Closing Date"). The
Offering Period shall terminate on or about August 15, 1996, subject to an
extension, at the sole option of the Placement Agent, for an additional
one-hundred and twenty (120) days. The Units will be offered on a "best
efforts" basis. The purchase price is payable by personal or business
check, wire transfer of immediately available funds or money order made
payable to "Fleet Bank, Escrow Agent, F/B/O Discovery Laboratories, Inc."
2 Placement of the Units will be made by the Placement Agent, who will
receive (i) a commission equal to nine percent (9%) of the aggregate
purchase price of the Units sold and (ii) a non-accountable expense
allowance (the "Expense Allowance") equal to four percent (4%) of the
aggregate purchase price of the Units sold. In addition, upon the closing
of the sale of the Units being offered, the Company will grant to the
Placement Agent and/or its designees (i) preferred stock warrants (the
"Preferred Stock Warrants") to purchase a number of newly issued shares of
Preferred Stock equal to 10% of the number of shares of Preferred Stock
issued in the Offering, exercisable for a period of 10 years from the Final
Closing Date at an exercise price equal to 110% of the stated value per
share of Preferred Stock sold in the Offering, and (iv) Common Stock
warrants (the "Common Stock Warrants") to purchase a number of newly issued
shares of Common Stock equal to 10% of the number of shares of Common Stock
issued in the Offering exercisable for a period of 10 years from the Final
Closing Date at an exercise price equal to 10% of the Initial Conversion
Price (the Preferred Stock Warrants and the Common Stock Warrants being
collectively referred to as the "Placement Warrants"). The Placement
Warrants will contain a cashless exercise feature, certain antidilution
provisions and the right to have the Common Stock underlying the Placement
Warrants included in the registration statement required pursuant to
Section V hereof.
3 Pending the sale of the Units, all funds paid hereunder shall be deposited
by the Company in escrow with the Fleet Bank N.A., 000 Xxxxx Xxxxxx Xxxx,
Xxxxx Xxxxx, Xxxxxxxx, XX 00000. If the Company shall not have obtained
subscriptions (including this subscription) for purchases of 5 Units on or
before the Final Closing Date, then this subscription shall be void and all
funds paid hereunder by the
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Subscriber shall be promptly returned to the Subscriber, without interest,
subject to paragraph 3.5 hereof.
4 The Subscriber hereby authorizes and directs the Company to deliver the
Shares comprising the Units to be issued to the Subscriber pursuant to this
Agreement directly to the Subscriber's account maintained by the Placement
Agent, if any, or if no such account exists, to the residential or business
address indicated on the signature page hereto.
5 The Subscriber hereby authorizes and directs the Company to return any
funds for unaccepted subscriptions to the same account from which the funds
were drawn, including any customer account maintained with the Placement
Agent.
IV CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS
1 The Subscribers' obligation to purchase the Units at the Closing is subject
to the fulfillment on or prior to each Closing Date of the following
conditions, which conditions may be waived at the option of each Subscriber
to the extent permitted by law:
a Representations and Warranties Correct. The representations and
warranties made by the Company in Section 2 hereof shall be true and
correct in all material respects when made, and shall be true and
correct in all material respects on each Closing Date with the same
force and effect as if they had been made on and as of said date.
b Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to such purchase
shall have been performed or complied with in all material respects.
c Listing. The Company will promptly file an Application for Listing of
Additional Shares with the Nasdaq SmallCap Market in accordance with
Rule 10b-7 under the Securities Exchange Act of 1934 and hereby
represents and warrants to the Placement Agent and to the Subscribers
that it will take all action reasonably necessary to list all Shares
(excluding the Preferred Stock but including the Common Stock into
which the Preferred Stock is convertible) in accordance with the rules
of the Nasdaq SmallCap Market.
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d No Legal Order Pending. There shall not then be in effect any legal or
other order enjoining or restraining the transactions contemplated by
this Agreement.
e No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law, rule or regulation prohibiting or restricting such
sale or requiring any consent or approval of any person which shall
not have been obtained to issue the Shares (except as otherwise
provided in this Agreement).
f Minimum Subscriptions. The Company shall have received binding
subscriptions for at least 5 Units.
g Legal Opinion. On each Closing Date, Counsel to the Company shall have
delivered to the Placement Agent for the benefit of the Placement
Agent and the Subscribers, legal opinions to such effect with respect
to legal matters relating to this Agreement and the Memorandum as the
Placement Agent may require.
(h) Comfort Letter. On the Closing Date, the Company's auditors shall
have delivered to the Placement Agent for the benefit of the Placement Agent and
the Subscribers, a comfort letter to such effect as the Placement Agent may
require.
V REGISTRATION RIGHTS
1 As used in this Agreement, the following terms shall have the following
meanings:
a "Affiliate" shall mean, with respect to any person, any other person
controlling, controlled by or under direct or indirect common control
with such person (for the purposes of this definition "control," when
used with respect to any specified person, shall mean the power to
direct the management and policies of such person, directly or
indirectly, whether through ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled"
shall have meanings correlative to the foregoing).
b "Business Day" shall mean a day Monday through Friday on which banks
are generally open for business in New York.
c "Holders" shall mean the Subscribers and any person holding
Registrable Securities to whom the rights under Section 5 have been
transferred in accordance with Section 5.9 hereof.
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d "Person" shall mean any person, individual, corporation, partnership,
trust or other nongovernmental entity or any governmental agency,
court, authority or other body (whether foreign, federal, state, local
or otherwise).
e The terms "register," "registered" and "registration" refer to the
registration effected by preparing and filing a registration statement
in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement.
f "Registrable Securities" shall mean (A) the Common Stock, (B) the
shares of Common Stock issuable upon the conversion of the Preferred
Stock, (C) the shares of Common Stock underlying the Placement
Warrants and (E) any shares of Common Stock issued as (or issuable
upon the conversion of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to or in
replacement of the Shares; provided, however, that securities shall
only be treated as Registrable Securities if and only for so long as
they (I) have not been disposed of pursuant to a registration
statement declared effective by the SEC, (II) have not been sold in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the
consummation of such sale or (III) are held by a Holder or a permitted
transferee pursuant to subsection 5.9.
g "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Section 5.2 hereof, including, without
limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and expenses of counsel for the Company,
blue sky fees and expenses (for a reasonable number of states) and the
expense of any special audits incident to or required by any such
registration (but excluding the fees of legal counsel for any Holder).
h "Registration Statement" shall have the meaning ascribed to such term
in Section 5.2.
i "Registration Period" shall have the meaning ascribed to such term in
Section 5.4.
j "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all
tees and expenses of legal counsel for any Holder.
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2 No later than 60 days after the Final Closing Date (the "Filing Date"), the
Company will file a shelf registration statement (the "Registration
Statement") with the SEC and use its reasonable best efforts to effect the
registration, qualifications or compliances (including, without limitation,
the execution of any required undertaking to file post-effective
amendments, appropriate qualifications under applicable blue sky or other
state securities laws and appropriate compliance with applicable securities
laws, requirements or regulations) as may be so reasonably requested and as
would permit or facilitate the sale and distribution of all Registrable
Securities. Notwithstanding the foregoing, the Company will not be
obligated to enter into any underwriting agreement for the sale of any of
the Shares .
3 All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 5.2 shall be borne by the
Company. All Selling Expenses relating to the sale of securities registered
by or on behalf of Holders shall be borne by such Holders pro rata on the
basis of the number of securities so registered.
4 In the case of the registration, qualification or compliance effected by
the Company pursuant to this Agreement, the Company will, upon reasonable
request, inform each Holder as to the status of such registration,
qualification and compliance. At its expense the Company will:
a use its reasonable best efforts to keep such registration, and any
qualification or compliance under state securities laws which the
Company determines to obtain, continuously effective until at
least the third anniversary of the Closing Date or until the
Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs.
The period of time during which the Company is required
hereunder to keep the Registration Statement effective is
referred to herein as "the Registration Period." Notwithstanding
the foregoing at the Company's election, the Company may cease
to keep such registration, qualification or compliance effective
with respect to any Registrable Securities, and the registration
rights of a Holder shall expire, at such time as the Holder may
sell under Rule 144 under the Securities Act (or other
exemption from registration acceptable to the Company) in a
three-month period all Registrable Securities then held by such
Holder; and
b advise the Holders:
(i) when the Registration Statement or any amendment thereto has been
filed with the Commission and when the registration statement or any
post-effective amendment thereto has become effective;
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(ii) of any request by the Commission for amendments or supplements to the
Registration Statement or the prospectus included therein or for
additional information;
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for such purpose;
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares included therein for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) of the happening of any event that requires the making of any changes
in the Registration Statement or the prospectus so that, as of such
date, the statements therein are not misleading and do not omit to
state a material fact required to be stated therein or necessary to
make the statements therein (in the case of the prospectus, in the
light of the circumstances under which they were made) not misleading;
C make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of any Registration Statement
at the earliest possible time;
d furnish to each Holder, without charge, at least one copy of such
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder
so requests in writing, all exhibits (including those
incorporated by reference) in the form filed with the Commission;
e during the Registration Period, deliver to each Holder, without
charge, as many copies of the prospectus included in such
Registration Statement and any amendment or supplement thereto as
such Holder may reasonably request; and the Company consents to
the use, consistent with the provisions hereof, of the prospectus
or any amendment or supplement thereto by each of the selling
Holders of Registrable Securities in connection with the offering
and sale of the Registrable Securities covered by the prospectus
or any amendment or supplement thereto. In addition, upon the
reasonable request of the Subscriber and subject in all cases to
confidentiality protections reasonably acceptable to the Company,
the Company will meet with a Subscriber or a representative
thereof at the Company's headquarters to discuss all information
relevant for disclosure in the Registration Statement covering
the Registrable Securities, and will
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otherwise cooperate with any Subscriber conducting an
investigation for the purpose of reducing or eliminating such
Subscriber's exposure to liability under the Securities Act,
including the reasonable production of information at the
Company's headquarters;
f during the Registration Period, deliver to each Holder, without
charge, (i) as soon as practicable (but in the case of the annual
report of the Company to its stockholders, within 120 days after
the end of each fiscal year of the Company) one copy of: (A) its
annual report to its stockholders (which annual report shall
contain financial statements audited in accordance with generally
accepted accounting principles in the United States of America by
a firm of certified public accountants of recognized standing);
(B) if not included in substance in its annual report to
stockholders, its annual report on Form lO-K (or similar form);
(C) each of its quarterly reports to its stockholders, and, if
not included in substance in its quarterly reports to
stockholders, its quarterly report on Form lO-Q (or similar
form), and (D) a copy of the full Registration Statement (the
foregoing, in each case, excluding exhibits); and (ii) upon
reasonable request, all exhibits excluded by the parenthetical to
the immediately preceding clause (D), and all other information
that is generally available to the public;
g prior to any public offering of Registrable Securities pursuant
to any Registration Statement, register or qualify for offer and
sale under the securities or blue sky laws of such jurisdictions
as any such Holders reasonably request in writing, provided that
the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction, and do any
and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the Registrable
Securities covered by such Registration Statement;
h cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities
to be sold pursuant to any Registration Statement free of any
restrictive legends to the extent not required at such time and
in such denominations and registered in such names as Holders may
request at least three business days prior to sales of
Registrable Securities pursuant to such Registration Statement;
i upon the occurrence of any event contemplated by Section
5.4(b)(v) above, the Company shall promptly prepare a
post-effective amendment to the Registration Statement or a
supplement to the related prospectus, or file any other required
document so that, as thereafter delivered to purchasers of the
14
Registrable Securities included therein, the prospectus will not
include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; and
j use its reasonable efforts to comply with all applicable rules
and regulations of the Commission, and will make generally
available to the Holders not later than 45 days (or 90 days if
the fiscal quarter is the fourth fiscal quarter) after the end of
its fiscal quarter in which the first anniversary date of the
effective date of the Registration Statement occurs, an earnings
statement satisfying the provisions of Section 11(a) of the Act.
5 The Holders shall have no right to take any action to restrain, enjoin or
otherwise delay any registration pursuant to Section 5.2 hereof as a result
of any controversy that may arise with respect to the interpretation or
implementation of this Agreement.
6
a To the extent permitted by law, the Company will indemnify each
Holder, each underwriter of the Shares and each person controlling
such Holder within the meaning of Section 15 of the Securities Act,
with respect to which any registration, qualification or compliance
has been effected pursuant to this Agreement, against all claims,
losses, damages and liabilities (or action in respect thereof),
including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 5.6(c) below),
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus or offering circular, or any amendment or supplement
thereof, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in light of the
circumstances in which they were made, and will reimburse each Holder,
each underwriter of the Shares and each person controlling such
Holder, for reasonable legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim,
loss, damage, liability or action as incurred, provided that the
Company will not be liable in any such case to the extent that any
untrue statement or omission or allegation thereof is made in reliance
upon and in conformity with written information furnished to the
Company by or on behalf of such Holder and stated to be specifically
for use in preparation of such registration statement, prospectus or
offering circular; provided that the Company will not be liable in any
such case where the claim, loss, damage or liability arises out of or
is related to the failure of the Holder to
15
comply with the covenants and agreements contained in this Agreement
respecting sales of Registrable Securities, and except that the
foregoing indemnity agreement is subject to the condition that,
insofar as it relates to any such untrue statement or alleged untrue
statement or omission or alleged omission made in the preliminary
prospectus but eliminated or remedied in the amended prospectus on
file with the SEC at the time the registration statement becomes
effective or in the amended prospectus filed with the SEC pursuant to
Rule 424(b) or in the prospectus subject to completion and term sheet
under Rule 434 of the Securities Act, which together meet the
requirements of Section lO(a) of the Securities Act (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit
of any such Holder, any such underwriter or any such controlling
person, if a copy of the Final Prospectus was not furnished to the
person or entity asserting the loss, liability, claim or damage at or
prior to the time such furnishing is required by the Securities Act.
b Each Holder will severally, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company,
each of its directors and officers, each underwriter of the Shares and
each person who controls the Company within the meaning of Section 15
of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or
threatened (subject to Section 5.6(c) below), arising out of or based
on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission
(or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in light of the circumstances in which they were made, and
will reimburse the Company, such directors and officers, each
underwriter of the Shares and each person controlling the Company for
reasonable legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss,
damage, liability or action as incurred, in each case to the extent,
but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the
Holder and stated to be specifically for use in preparation of such
registration statement, prospectus or offering circular; provided that
the indemnity shall not apply to the extent that such claim, loss,
damage or liability results from the fact that a current copy of the
prospectus that was made available to the Holder was not sent or given
to the person asserting any such claim, loss,
16
damage or liability at or prior to the written confirmation of the
sale of the Registrable Securities confirmed to such person if such
current copy of the prospectus would have cured the defect giving rise
to such loss, claim, damage or liability. Notwithstanding the
foregoing, in no event shall a Holder be liable for any such claims,
losses, damages or liabilities in excess of the proceeds received by
such Holder in the offering, except in the event of fraud by such
Holder.
c Each party entitled to indemnification under this Section 5.6 (the
"Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by
the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense
at such Indemnified Party's expense, and provided further that the
failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Agreement, unless such failure is prejudicial to the Indemnifying
Party in defending such claim or litigation. An Indemnifying Party
shall not be liable for any settlement of an action or claim effected
without its written consent (which consent will not be unreasonably
withheld).
d If the indemnification provided for in this Section 5.6 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 thereunder, 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 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 which 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.
17
7
a Each Holder agrees that, upon receipt of any notice from the Company
of the happening of any event requiring the preparation of a
supplement or amendment to a prospectus relating to Registrable
Securities so that, as thereafter delivered to the Holders, such
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, each Holder
will forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement contemplated by Section 5.2
until its receipt of copies of the supplemented or amended prospectus
from the Company and, if so directed by the Company, each Holder shall
deliver to the Company all copies, other than permanent file copies
then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
b Each Holder agrees to suspend, upon request of the Company, any
disposition of Registrable Securities pursuant to the registration
statement and prospectus contemplated by Section 5.2 during (A) any
period not to exceed two 30-day periods within any one 12-month period
the Company requires in connection with a primary underwritten
offering of equity securities and (B) any period, not to exceed one
60-day period per circumstance or development, when the Company
determines in good faith that offers and sales pursuant thereto should
not be made by reason of the presence of material undisclosed
circumstances or developments with respect to which the disclosure
that would be required in such a prospectus is premature, would have
an adverse effect on the Company or is otherwise inadvisable. In the
event of an initial public offering of the Company's securities by the
Company prior to or concurrent with the effectiveness of the
Registration Statement, at the request of the underwriter (the "IPO
Underwriter") of such initial public offering, each Holder shall be
prohibited from selling any share of Common Stock that is not included
in the IPO Underwriter's offering for a period of 180 days or such
longer period following such initial public offering as the IPO
Underwriter shall require.
c As a condition to the inclusion of its Registrable Securities, each
Holder shall furnish to the Company such information regarding such
Holder and the distribution proposed by such Holder as the Company may
request in writing or as shall be required in connection with any
registration, qualification or compliance referred to in this Article
V.
d Each Holder hereby covenants with the Company (l) not to make any sale
of the Registrable Securities without effectively causing the
18
prospectus delivery requirements under the Securities Act to be
satisfied, and (2) if such Registrable Securities are to be sold by
any method or in any transaction other than on Nasdaq (or other
national securities exchange), in the over-the-counter market, in
privately negotiated transactions, or in a combination of such
methods, to notify the Company at least five business days prior to
the date on which the Holder first offers to sell any such Shares .
e Each Holder acknowledges and agrees that the Registrable Securities
sold pursuant to the registration statement described in this Section
are not transferable on the books of the Company unless the stock
certificate submitted to the transfer agent evidencing such Shares is
accompanied by a certificate reasonably satisfactory to the Company to
the effect that (A) the Registrable Securities have been sold in
accordance with such registration statement and (B) the requirement of
delivering a current prospectus has been satisfied.
f Each Holder agrees not to take any action with respect to any
distribution deemed to be made pursuant to such registration
statement, that constitutes a violation of Rule lO(b)-6 under the
Exchange Act or any other applicable rule, regulation or law.
g At the end of the period during which the Company is obligated to keep
the registration statement current and effective as described above,
the Holders of Registrable Securities included in the registration
statement shall discontinue sales of shares pursuant to such
registration statement upon receipt of notice from the Company of its
intention to remove from registration the shares covered by such
registration statement which remain unsold, and such Holders shall
notify the Company of the number of shares registered which remain
unsold immediately upon receipt of such notice from the Company.
8 With a view to making available to the Holders the benefits of certain
rules and regulations of the SEC which at any time permit the sale of the
Registrable Securities to the public without registration, the Company
agrees to use its reasonable best efforts to:
a make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act at all
times;
b file with the SEC in a timely manner all reports and other documents
required of the Company under the Exchange Act; and
19
c so long as a Holder owns any unregistered Registrable Securities,
furnish to such Holder upon any reasonable request a written statement
by the Company as to its compliance with Rule 144 under the Securities
Act, and of the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents
of the Company as such Holder may reasonably request in availing
itself of any rule or regulation of the SEC allowing a Holder to sell
any such securities without registration.
9 The rights to cause the Company to register Registrable Securities granted
to the Holders by the Company under Section 5.1 may be assigned in full by
a Holder, provided, that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws; (ii) such transfer involves not
less than the lesser of all of such Holder's Shares or 100,000 Shares (iii)
such Holder gives prior written notice to the Company; and (iv) such
transferee agrees to comply with the terms and provisions of this
Agreement, and such transfer is otherwise in compliance with this
Agreement. Except as specifically permitted by this Section 5.9, the rights
of a Holder with respect to Registrable Securities as set out herein shall
not be transferable to any other Person, and any attempted transfer shall
cause all rights of such Holder therein to be forfeited.
10 With the written consent of the Company and the Holders holding at least a
majority of the Registrable Securities that are then outstanding, any
provision of this Article V may be waived (either generally or in a
particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely) or amended. Upon the effectuation
of each such waiver or amendment, the Company shall promptly give written
notice thereof to the Holders, if any, who have not previously received
notice thereof or consented thereto in writing.
VI MISCELLANEOUS
1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail,
return receipt requested, or delivered by hand against written receipt
therefor, addressed to Discovery Laboratories, Inc., 000 Xxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, XX 00000, Attn: Chairman, and to the Subscriber
at his address indicated on the signature page of this Agreement.
Notices shall be deemed to have been given or delivered on the date of
mailing, except notices of change of address, which shall be deemed to
have been given or delivered when received.
2 This Agreement shall not be changed, modified or amended except by a
writing signed by the parties to be charged, and this Agreement may
not be discharged
20
except by performance in accordance with its terms or by a writing
signed by the party to be charged.
3 Subject to the provisions of Section 5.9, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and to
their respective heirs, legal representatives, successors and assigns.
This Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges and
supersedes all prior discussions, agreements and understandings of any
and every nature among them.
4 Upon the execution and delivery of this Agreement by the Subscriber,
this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Units as herein provided; subject,
however, to the right hereby reserved to the Company to enter into the
same agreements with other subscribers and to add and/or delete other
persons as subscribers.
5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS
AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
6 In order to discourage frivolous claims the parties agree that unless
a claimant in any proceeding arising out of this Agreement succeeds in
establishing his claim and recovering a judgment against another party
(regardless of whether such claimant succeeds against one of the other
parties to the action), then the other party shall be entitled to
recover from such claimant all of its/their reasonable legal costs and
expenses relating to such proceeding and/or incurred in preparation
therefor.
7 The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Agreement, which shall remain in full
force and effect. If any provision of this Agreement shall be declared
by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced in whole or in part, such provision shall
be interpreted so as to remain enforceable to the maximum extent
permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless
remain in full force and effect and enforceable to the extent they are
valid, legal and enforceable, and no provisions shall be deemed
dependent upon any other covenant or provision unless so expressed
herein.
21
8 It is agreed that a waiver by either party of a breach of any
provision of this Agreement shall not operate, or be construed, as a
waiver of any subsequent breach by that same party.
9 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent
of this Agreement.
10 This Agreement may be executed in two or more counterparts each of
which shall be deemed an original, but all of which shall together
constitute one and the same instrument.
11 (a) The Subscribers severally agree not to issue any public statement
with respect to the Subscribers' investment or proposed investment in
the Company or the terms of any agreement or covenant between them and
the Company without the Company's prior written consent, except such
disclosures as may be required under applicable law or under any
applicable order, rule or regulation.
(b) The Company agrees not to disclose the names, addresses or any
other information about the Subscribers, except as required by law;
provided, that the Company may use the name (but not the address) of
the Subscriber in the Registration Statement.
12 (a) Each Subscriber severally represents and warrants that it has not
engaged, consented to or authorized any broker, finder or intermediary
to act on its behalf, directly or indirectly, as a broker, finder or
intermediary in connection with the transactions contemplated by this
Agreement. Each Subscriber hereby severally agrees to indemnify and
hold harmless the Company from and against all fees, commissions or
other payments owing to any such person or firm acting on behalf of
such Subscriber hereunder.
(b) The Company has engaged, consented to and authorized the Placement
Agent in connection with the transactions contemplated by this
Agreement. The Company hereby agrees to pay the Placement Agent a
commission and to reimburse expenses in accordance with the Placement
Agency Agreement dated June 17, 1996 (the "Placement Agency
Agreement"), and the Company agrees to indemnify and hold harmless the
Subscribers from and against all fees, commissions or other payments
owing by the Company to any other person or firm acting on behalf of
the Company hereunder.
13 Nothing in this Agreement shall create or be deemed to create any
rights in any person or entity not a party to this Agreement, except
(a) for the holders of Registrable Securities and (b) for the
Placement Agent pursuant to Sections 1.6(a) and 6.12(b) hereof.
22
VII NOTICE TO, AND REPRESENTATIONS AND COVENANTS OF, CERTAIN STATE
RESIDENTS
1 Connecticut Residents: The undersigned acknowledges that the Units
have not been registered under the Connecticut Uniform Securities Act,
as amended (the "Act") and are subject to restrictions on
transferability and sale of securities as set forth herein. The
undersigned hereby agrees that such Units will not be transferred or
sold without registration under the Act or exemption therefrom.
2 Maine Residents: These Units are being sold pursuant to an exemption
from registration with the bank superintendent of the State of Maine
under Section 10502(2)(r) of Title 32 of the Maine revised statutes.
These Units may be deemed restricted securities and as such the holder
may not be able to resell the Units unless pursuant to registration
under the state or federal securities laws or unless an exemption
under such laws exists.
3 Missouri Residents: The undersigned acknowledges that the Units are
not registered under the Missouri Uniform Securities Act, as amended
(the "Act") and are subject to restrictions on transferability and
sale of securities as set forth herein. The undersigned hereby
acknowledges that such Units may be disposed of only through a
licensed broker-dealer. It is a felony to sell securities in violation
of the Missouri Uniform Securities Act.
4 Pennsylvania Residents: The undersigned hereby acknowledges that the
Company is relying upon the exemption from registration of securities
set forth in Section 203(d) of the Pennsylvania Securities Act of
1972, as amended (the "Pennsylvania Act") in connection with the sale
of the Units to the undersigned.
In accordance with the requirements of Section 203(d) of the
Pennsylvania Act, the undersigned hereby agrees not to sell his Units within
twelve (12) months from the date of purchase except pursuant to Section 204.01
of the Blue Sky Regulations of the Pennsylvania Securities Act of 1972.
Additionally, the undersigned is aware of the right of withdrawal under Section
207(m) of the Act described in the introductory pages of the Memorandum.
5 Texas Residents: The undersigned hereby acknowledges that the Units
cannot be sold unless they are subsequently registered under the
Securities Act of 1933, as amended and the Texas Securities Act, or an
exemption from registration is available. The undersigned further
acknowledges that because the Units are not readily transferable, he
must bear the economic risk of his investment for an indefinite period
of time.
23
VIII CONFIDENTIAL INVESTOR OUESTIONNAIRE
1 The Subscriber represents and warrants that he, she or it comes within
one category marked below, and that for any category marked, he or she
has truthfully set forth, where applicable, the factual basis or
reason the Subscriber comes within that category. ALL INFORMATION IN
RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The
undersigned agrees to furnish any additional information which the
Company deems necessary in order to verify the answers set forth
below.
Category A The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or joint net
worth with his or her spouse, presently exceeds $1,000,000.
Explanation. In calculating net worth you may include
equity in personal property and real estate, including
your principal residence, cash, short-term investments,
stock and securities. Equity in personal property and
real estate should be based on the fair market value of
such property less debt secured by such property.
Category B The undersigned is an individual (not a partnership,
corporation, etc.) who had an income in excess of $200,000
in each of the two most recent years, or joint income with
his or her spouse in excess of $300,000 in each of those
years (in each case including foreign income, tax exempt
income and full amount of capital gains and loses but
excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable
expectation of reaching the same income level in the current
year.
Category C The undersigned is a director or executive officer of the
Company which is issuing and selling the Units.
Category D The undersigned is a bank; a savings and loan association;
insurance company; registered investment company; registered
business development company; licensed small business
investment company ("SBIC"); or employee benefit plan within
the meaning of Title 1 of ERISA and (a) the investment
decision is made by a plan fiduciary which is either a bank,
savings and loan association, insurance company or
registered investment advisor, or (b) the plan has total
assets in excess of $5,000,000 or is a self directed plan
with investment decisions made solely by persons that are
accredited investors.
_______________________________________
_______________________________________
(describe entity)
24
Category E The undersigned is a private business development company
as defined in section 202(a)(22) of the Investment Advisors
Act of 1940.
_______________________________________
(describe entity)
Category F The undersigned is either a corporation, partnership,
Massachusetts business trust, or non-profit organization
within the meaning of Section 501(c)(3) of the Internal
Revenue Code, in each case not formed for the specific
purpose of acquiring the Units and with total assets in
excess of $5,000,000.
_______________________________________
_______________________________________
(describe entity)
Category G The undersigned is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Units, where the purchase is directed by a
"sophisticated person" as defined in Regulation
506(b)(2)(ii).
Category H The undersigned is an entity (other than a trust) all the
equity owners of which are "accredited investors" within one
or more of the above categories. If relying upon this
Category alone, each equity owner must complete a separate
copy of this Agreement.
_______________________________________
_______________________________________
(describe entity)
Category I The undersigned is not within any of the categories above
and is therefore not an accredited investor.
25
The undersigned agrees that the undersigned will notify the Company at any time
on or prior to the Closing Date in the event that the representations and
warranties in this Agreement shall cease to be true accurate and complete.
2 SUITABILITY (please answer each question)
(a) For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(b) For an individual Subscriber, please describe any college or graduate
degrees held by you:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(c) For all Subscribers, please list types of prior investments:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(d) For all Subscribers, please state whether you have you participated in other
private placements before:
YES _______ NO________
(e) For all Subscribers, please indicate frequency of such prior participation
in private placements of:
Public Private Public or Private
Companies Companies Biotechnology Companies
Frequently _________ _____________ __________
Occasionally _________ _____________ __________
Never _________ _____________ __________
(f) For individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
YES _______ NO _______
26
(g) For trust, corporate, partnership and other institutional Subscribers, do
you expect your total assets to significantly decrease in the foreseeable
future:
YES _______ NO _______
(h) For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you:
YES _______ NO _______
(i) For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?
YES _______ NO _______
(j) For all Subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
YES _______ NO _______
3 Manner In Which Title to be Held. (circle one)
a Individual Ownership
b Community Property
c Joint Tenant with Right of Survivorship
(both parties must sign)
d Partnership*
e Tenants in Common
f Company*
g Trust*
h Other
*If Units are being subscribed for by an entity, the attached Certificate of
Signatory must also be completed.
27
4 NASD Affiliation.
Are you affiliated or associated with an NASD member firm (please check one):
YES _______ NO _______
If Yes, please describe:
______________________________________________________________
______________________________________________________________
______________________________________________________________
*If Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
____________________________________
Name of NASD Member Firm
By: ________________________________
Authorized Officer
Date: ______________________________
5 The undersigned is informed of the significance to the Company of the
foregoing representations and answers contained in the Confidential
Investor Questionnaire contained in this Section 8 and such answers
have been provided under the assumption that the Company will rely on
them.
28
[Signature Page]
NUMBER OF UNITS _______ X $ _______ = _______ (the "Purchase Price")
________________________________ ________________________________
Signature Signature (if purchasing jointly
________________________________ ________________________________
Name Typed or Printed Name Typed or Printed
________________________________ ________________________________
Address Address
________________________________ ________________________________
City, State and Zip Code City, State and Zip Code
________________________________ ________________________________
Telephone-Business Telephone--Business
________________________________ ________________________________
Telephone-Residence Telephone--Residence
________________________________ ________________________________
Facsimile-Business Facsimile--Business
________________________________ ________________________________
Facsimile-Residence Facsimile--Residence
________________________________ ________________________________
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued: _____________________________
Dated: _________________________, 1996
This Subscription Agreement is agreed to and accepted as of , 1996.
DISCOVERY LABORATORIES, INC.
By:_____________________________
Name: Xxxxx X. Xxx, M.D.
29
Title: President
30
CERTIFICATE OF SIGNATORY
(To be completed if Units are
being subscribed for by an entity)
I, __________________, am the __________________ of
____________________________________________________ (the "Entity" ).
I certify that I am empowered and duly authorized by the Entity to execute
and carry out the terms of the Subscription Agreement and to purchase and hold
the Units, and certify further that the Subscription Agreement has been duly and
validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this ________ day of _____________, 1996.
_________________________________
(Signature)
31
