EXHIBIT 10.21
AGREEMENT dated as of November 25, 1998 between Xxxxxxx, Xxxxxxx &
Xxxxxxxx LLP ("Xxxxxxx") and Discovery Laboratories, Inc. ("Discovery")
In consideration of the mutual promises contained herein, the parties
hereto agree as follows:
SECTION 1. Payment of Account; Issuance of Shares. (a) Discovery shall
pay in full, on or prior to December 29, 1998, all outstanding invoices for
legal services rendered by Xxxxxxx, provided that $20,763.82 of the amount
outstanding under such invoices (the "Converted Amount") shall be satisfied by
the delivery to Xxxxxxx of (i) 14,000 shares of Discovery's Common Stock, par
value $0.001 per share ("Common Stock"), on or prior to December 29, 1998 (the
"Base Shares") and (ii) such number of additional shares of Common Stock as
Xxxxxxx may be entitled to pursuant to Section 1(b) on or prior to January 15,
1998.
(b) In the event the product obtained by multiplying (i) the average of
the midpoint between the closing bid and ask prices for the Common Stock over
the ten consecutive trading days through and including December 31, 1998 by (ii)
0.75 (the product of clauses (i) and (ii) being hereinafter referred to as the
"Discounted Year-End FMV") by (iii) 14,000 is less than the Converted Amount
(any such difference being hereinafter referred to as the "Shortfall Amount"),
Xxxxxxx shall be entitled to receive, in addition to the Base Shares, shares of
Common Stock having an aggregate value, based on the Discounted Year-End FMV,
equal to the Shortfall Amount (collectively, together with the Base Shares, the
"Shares").
SECTION 2. Piggyback Registration Rights. (a) At least 10 business days
prior to the filing of any registration statement under the Securities Act of
1933, as amended (the "Securities Act"), to register the sale of Common Stock
for the account of Discovery or any other person (including a registration
statement with respect to an underwritten public offering but excluding a
registration statement on Form S-4 or S-8 (or any successor forms under the
Securities Act) or other registrations relating solely to employee benefit plans
or any transaction governed by Rule 145 of the Securities Act), Discovery shall
give written notice of such proposed filing and of the proposed date thereof to
Xxxxxxx and if, on or before the twentieth day following the date on which such
notice is given, Discovery shall receive a written request from Xxxxxxx
requesting that Discovery include among the securities covered by such
registration statement any Shares, Discovery shall include such Shares in such
registration statement so as to permit such Shares to be sold or disposed of in
the manner and on the terms of the offering thereof. Such registration shall
hereinafter be called a "Piggyback Registration".
(b) Terms and Conditions of Registration or Qualification. In
connection with any registration statement filed pursuant to Section 2(a), the
following provisions shall apply:
(i) Xxxxxxx shall, if requested by the managing underwriter,
agree not to sell publicly any Shares held by it (other than the Shares
so registered) for such period of time following the effective date of
the registration statement relating to
such offering, but in no event in excess of 180 days, as the managing
underwriter may require and Discovery shall agree, provided that in no
event shall Xxxxxxx be required to refrain from publicly selling such
Shares for a longer period than any executive officer or any
5%-or-greater stockholder (provided that such stockholder or an
affiliated or associated person of such stockholder is a member of the
Board of Directors of Discovery) agrees to refrain from publicly
selling additional shares of Common Stock in connection with such
registration.
(ii) If the managing underwriter advises that the inclusion in
such registration of the Shares sought to be registered, together with
the other shares of Common Stock being registered, exceeds the number
of shares of Common Stock (the "Saleable Number") that can be sold in
an orderly fashion within a price range acceptable to Discovery, then
the number of Shares offered shall be limited as follows: first, such
number of shares (up to the entire Saleable Number) as Discovery
desires to offer for its account shall be allocated to Discovery;
second, such number of shares (up to the remainder of the Saleable
Number) as holders of registration rights having minimum inclusion
rights or other preferential rights to be included in such registration
on an incidental basis are entitled to include; and third, such number
of shares (up to the remainder of the Saleable number) as Xxxxxxx and
any other holders of registration rights participating in such
registration desire to include in such registration pro rata in
accordance with the number of shares of Common Stock offered by Xxxxxxx
and such other holders of registration rights.
(iii) Xxxxxxx will promptly provide Discovery with such
information as Discovery shall reasonably request in order to prepare
such registration statement and, upon Discovery's request, Xxxxxxx
shall provide such information in writing and signed by Xxxxxxx and
stated to be specifically for inclusion in the registration statement.
In the event that the distribution of the Common Stock covered by the
registration statement shall be effected pursuant to an underwritten
offering, the inclusion in such registration of the Shares shall be
conditioned on Xxxxxxx'x execution and delivery of a customary
underwriting agreement with respect thereto.
(iv) All expenses in connection with the preparation of any
registration statement filed pursuant to Section 2(a) hereof (other
than underwriting fees, discounts or commissions with respect to Shares
or fees and disbursements of counsel for Xxxxxxx) shall be borne solely
by Discovery.
(v) Following the effective date of such registration
statement, Discovery shall, upon the request of Xxxxxxx, forthwith
supply such number of prospectuses (including preliminary prospectuses
and amendments and supplements thereto) meeting the requirements of the
Securities Act or such other
2
securities laws where the registration statement or prospectus has been
filed and such other documents as are referred to in the registration
statement as shall be requested by Xxxxxxx to permit it to make a
public distribution of its Shares, provided that Xxxxxxx furnishes
Discovery with such appropriate information relating to Xxxxxxx'x
intentions in connection therewith as Discovery shall reasonably
request in writing.
(vi) Discovery shall prepare and file such amendments and
supplements to such registration statement as may be necessary to keep
such registration statement effective and to comply with the provisions
of the Securities Act or such other securities laws where the
registration statement has been filed with the respect to the offer and
sale or other disposition of the shares covered by such registration
statement during the period required for distribution of the shares,
which period shall not be in excess of three months from the effective
date of such registration statement.
(vii) Discovery shall use its best efforts to register or
qualify the Shares covered by any such registration statement under
such securities or Blue Sky laws in such jurisdictions as Xxxxxxx may
request, provided that Discovery shall not be required to execute a
general consent to service of process or to qualify to do business as a
foreign corporation in any jurisdiction where it is not so qualified in
order to comply with such request.
(viii) In connection with any registration pursuant to Section
2(a), Discovery will as expeditiously as possible:
A. cause the Shares covered by such registration
statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business
and operations of Discovery to enable Xxxxxxx to consummate the
disposition of such Shares;
B. notify Xxxxxxx at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event as a result of which the prospectus
included in such registration statement contains an untrue statement of
a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, and Discovery will prepare a supplement or amendment to
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;
C. cause all Shares covered by the registration
statement to be listed on each securities exchange on which the Common
Stock is then listed, and,
3
unless the same already exists, provide a transfer agent, registrar and
CUSIP number for all such Shares not later than the effective date of
the registration statement;
D. enter into such customary agreements (including an
underwriting agreement (in customary form) and take all such other
actions as Xxxxxxx or the underwriters of the offering, if any,
reasonably request in order to expedite or facilitate the disposition
of such Shares;
E. make available for inspection by Xxxxxxx, any
underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by Xxxxxxx or any such underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of Discovery as shall be necessary to enable
them to exercise their due diligence responsibility, and cause
Discovery's officers, directors and employees to supply all information
requested by any such Inspector in connection with such registration
statement;
F. obtain "cold comfort" letters and updates thereof
from Discovery's independent public accountants and an opinion from
Discovery's counsel in customary form and covering such matters of the
type customarily covered by "cold comfort" letters and opinions of
counsel, respectively, as Xxxxxxx shall request; and
G. otherwise comply with all applicable rules and
regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable,
an earnings statement covering a period of 12 months, beginning within
three months after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder.
(ix) Xxxxxxx agrees that, upon receipt of any notice from
Discovery of the happening of any event of the kind described in
Section 2.1(b)(viii)(B), Xxxxxxx will forthwith discontinue disposition
of its Shares pursuant to the registration statement covering such
Shares until Xxxxxxx'x receipt of the copies of the supplemented or
amended prospectus covering such Shares current at the time of receipt
of such notice.
(x) Discovery shall not be required to register any Shares
that may be sold without registration under Rule 144(k).
4
(c) Indemnification.
(i) In the event of the registration or qualification of any
Shares under the Securities Act or any other applicable securities laws
pursuant to the provisions of this Section 2, Discovery agrees to
indemnify and hold harmless Xxxxxxx and each underwriter, broker or
dealer, if any, of such Shares, and each other person, if any, who
controls Xxxxxxx or any such underwriter, broker or dealer within the
meaning of the Securities Act or any other applicable securities, from
and against any and all losses, claims, damages or liabilities (or
actions in respect thereof), joint or several, to which Xxxxxxx or such
underwriter, broker or dealer within the meaning of the Securities Act
or any other applicable securities, from and against any and all
losses, claims, damages or liabilities (or actions in respect thereof),
joint or several, to which Xxxxxxx or such underwriter, broker or
dealer or controlling person may become subject under the Securities
act or any other applicable securities laws or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration
statement under which such Shares were registered or qualified under
the Securities Act or any other applicable securities laws, any
preliminary prospectus or final prospectus relating to such Shares, or
any amendment or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or any violation by Discovery of any rule or
regulation under the Securities Act or any other applicable securities
laws applicable to Discovery or relating to any action or inaction
required by Discovery in connection with any such registration or
qualification and will reimburse Xxxxxxx and each such underwriter,
broker or dealer and each such controlling person for any legal or
other expenses reasonably incurred by Xxxxxxx or such underwriter,
broker or dealer or controlling person in connection with investigating
or defending any such loss, claim, damage, liability or action,
provided that Discovery will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or omission made in such registration
statement, such preliminary prospectus, such final prospectus or such
amendment or supplement thereto in reliance upon and in conformity with
written information furnished to Discovery by Xxxxxxx or such
underwriter, broker, dealer or controlling person specifically and
expressly for use in the preparation thereof.
(ii) In the event of the registration or qualification of any
Shares under the Securities Act or any other applicable securities laws
for sale pursuant to the provisions hereof, Xxxxxxx, each underwriter,
broker and dealer, if any, of such Shares, and each other person, if
any, who controls Xxxxxxx or any such underwriter, broker or dealer
within the meaning of the Securities Act, agrees severally, and not
jointly, to indemnify and hold harmless Discovery, each person who
controls Discovery within the meaning of the Securities Act, and each
officer and director of Discovery from and against any losses, claims,
damages or liabilities, joint or several, to which Discovery, such
controlling person or any such officer or director may become subject
under the Securities Act or any other applicable securities laws or
otherwise, insofar as such losses, claims,
5
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement of any material fact contained in
any registration statement under which such Shares were registered or
qualified under the Securities Act or any other applicable securities
laws, any preliminary prospectus or final prospectus relating to such
Shares, or any amendment or supplement thereto, or arise out of or are
based upon an untrue statement or the omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, which untrue statement or omission
was made therein in reliance upon and in conformity with written
information furnished to Discovery by Xxxxxxx or such underwriter,
broker, dealer or controlling person specifically for use in connection
with the preparation thereof, and will reimburse Discovery, such
controlling person and each such officer or director of any legal or
any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or
action, provided, that in no event shall Xxxxxxx be liable for any
amount in excess of the net proceeds from the Shares sold by it.
(iii) Promptly after receipt by a person entitled to
indemnification under this Section 2(c) (an "indemnified party") of
notice of the commencement of any action or claim relating to any
registration statement filed under Section 2(a) or as to which
indemnity may be sought hereunder, such indemnified party of its
election so to assume the defense thereof, the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, other than
the reasonable cost of investigation, provided that no indemnifying
party shall enter into any settlement without the prior written consent
of the indemnified party unless such indemnified party is fully
released and discharged from any such liability. Notwithstanding the
foregoing, the indemnified party shall have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (A) the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such suit, action,
claim or proceeding, (B) the indemnifying party shall not have employed
counsel (reasonably satisfactory to the indemnified party) to take
charge of the defense of such action, suit, claim or proceeding, or (C)
such indemnified party shall have reasonably concluded, based upon the
advice of counsel, that there may be defenses available to it which are
different from or additional to those available to the indemnifying
party which, if the indemnifying party and the indemnified party were
to be represented by the same counsel, could result in a conflict of
interest for such counsel or materially prejudice the prosecution of
the defenses available to such counsel or materially prejudice the
prosecution of the defenses available to such indemnified party. If any
of the event specified in clauses (A), (B) or (C) of the preceding
sentence shall have occurred or shall otherwise be applicable, then the
fees and expenses of one counsel or firm of counsel selected by a
majority in interest of the indemnified parties (and reasonably
acceptable to the indemnifying party) shall be borne by the
indemnifying party. If, in any such case, the indemnified party employs
separate counsel, the indemnifying party shall not have the right to
direct the defense of such action, suit, claim or proceeding on behalf
of the indemnified party and the indemnified party shall assume such
defense and/or settle such action; provided, however, that, an
indemnifying party shall not be liable for the settlement
6
of any action, suit, claim or proceeding effected without its prior
written consent, which consent shall not be unreasonably withheld.
SECTION 3. Representations and Warranties of Xxxxxxx. Xxxxxxx hereby
represents and warrants to Discovery and covenants with Discovery as follows:
x. Xxxxxxx has received and carefully reviewed a copy of Discovery's
Annual Report on Form 10-KSB for the year ended December 31, 1997
(including without limitation the section thereof entitled "Important
Considerations Regarding Forward-Looking Statements"), Discovery's
Quarterly Report on Form 10-QSB for quarter ended September 30, 1998
and Discovery's current reports on Form 8-K dated November 13 and
December 1, 1998, has been afforded the opportunity to ask questions of
and receive answers from duly authorized officers or other
representatives of Discovery concerning the terms and conditions of the
transactions contemplated by this Agreement and has received any
additional information regarding Discovery and the Shares which Xxxxxxx
has requested.
x. Xxxxxxx'x agreement to accept the Shares in satisfaction of the
Converted Amount was not obtained by means of any form of general
solicitation or general advertising, and in connection therewith
Xxxxxxx 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.
x. Xxxxxxx is an accredited investor within the meaning of Rule 501
under the Securities Act of 1933, as amended (the "Securities Act"),
and Xxxxxxx was not formed for the purpose of receiving the Shares.
Xxxxxxx, either by reason of Xxxxxxx'x business or financial experience
or the business or financial experience of Xxxxxxx'x purchaser
representative (within the meaning of Rule 501 under the Securities
Act), which purchaser representative, if any, is unaffiliated with and
is not compensated by Discovery or any affiliate of Discovery, directly
or indirectly, has the capacity to protect Xxxxxxx'x interests in
connection with this Agreement. x. Xxxxxxx recognizes that the
acquisition of the Shares involves a high degree of risk in that (i) an
investment in Discovery is highly speculative and (ii) Xxxxxxx could
sustain the loss of Xxxxxxx'x entire investment.
x. Xxxxxxx hereby acknowledges that the issuance of the Shares to
Xxxxxxx has not been registered under the Securities Act and is
intended to be exempt from the registration requirements of Section 5
of the Securities Act pursuant to Sections 4(2) of the Securities Act
and Regulation D promulgated thereunder. Xxxxxxx agrees that Xxxxxxx
will not sell or otherwise transfer the Shares unless (i) such
7
sale or transfer is registered under the Securities Act or (ii) in the
opinion of counsel reasonably acceptable to Discovery, such sale or
transfer is otherwise exempt from registration under the Securities
Act.
SECTION 4. Securities Act Legends; Stop Transfer Instructions. Xxxxxxx
agrees that each certificate representing the Shares shall bear a legend
substantially similar to the following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED ABSENT SUCH REGISTRATION UNLESS EVIDENCE SATISFACTORY TO
COUNSEL FOR THE COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE HAS BEEN DELIVERED TO THE COMPANY.
and that such certificates may also have such additional legends, if any, as may
be required in order to comply with the "blue sky" laws of any jurisdiction.
Xxxxxxx further agrees to the issuance by Discovery to its transfer agent of
stop transfer instructions with respect to any sale or other transfer of the
Shares by Xxxxxxx absent registration under the Securities Act or the
establishment by Xxxxxxx of an exemption therefrom in accordance with this
Agreement.
SECTION 5. Rule 144 Undertaking. For so long as and to the extent
necessary to permit Xxxxxxx to sell the Shares pursuant to Rule 144 under the
Securities Act, Discovery shall use reasonable efforts to file, on a timely
basis, all reports and data required to be filed with the Securities and
Exchange commission by Discovery pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Discovery has filed all
repots required to be so filed by it during the preceding 12 months.
SECTION 6. Miscellaneous. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement among the parties hereto with respect to its
subject matter and supersedes all prior agreements, whether written or oral,
with respect to the subject matter hereof. This Agreement shall be governed by
and
8
construed in accordance with the laws of the State of New York (without regard
to conflicts of law principles). All representations and warranties made herein
by Xxxxxxx shall survive the execution and delivery of this Agreement.
XXXXXXX, XXXXXXX & XXXXXXXX LLP:
By /s/ Xxxxx Xxxxxxxxx
--------------------------------
Name:
Title:
DISCOVERY LABORATORIES, INC.
By /s/ Xxxx Xxxxxxxxxxxxxxx
--------------------------------
Name: Xxxx Xxxxxxxxxxxxxxx
Title: VP Finance
9
