Exhibit 10.3
DISCOVERY LABORATORIES,
INC.
Warrant
To Purchase Common Stock
Number of
Shares of Common Stock: _____________
Date of
Issuance: May 13, 2009 (" Issuance Date ")
Discovery Laboratories, Inc., a Delaware
corporation (the " Company "), hereby certifies that, for
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, [INVESTOR NAME], the registered
holder hereof or its permitted assigns (the " Holder "), is
entitled, subject to the terms set forth below, to purchase from
the Company, at the Exercise Price (as defined below) then in
effect, upon surrender of this Warrant to Purchase Common Stock
(including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the " Warrant "),
at any time or times on or after the date hereof (the “
Exercisability Date”) , but not after 11:59 p.m., New
York time, on the Expiration Date (as defined below),
[______________ (_____________)] 1 fully paid nonassessable shares of Common Stock
(as defined below) (the " Warrant Shares
"). Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in
Section 15 . This Warrant is the Warrant to
purchase Common Stock (this " Warrant ") issued pursuant to
(i) Section 2 of that certain Subscription Agreement (the
“ Subscription Agreement ”), dated as of May 8,
2009 (the " Subscription Date "), by and between the Company
and the Holder (the " Subscription Agreement ") and (ii) the
Company’s Registration Statement on Form S-3 (File number
333-151654) (the “ Registration Statement
”).
(a) Mechanics of
Exercise . Subject to the terms and conditions
hereof, this Warrant may be exercised by the Holder on any day on
or after the Exercisability Date, in whole or in part, by
(i) delivery of a written notice, in the form attached hereto
as Exhibit A (the " Exercise Notice "), of the
Holder's election to exercise this Warrant and (ii) (A)
payment to the Company of an amount equal to the applicable
Exercise Price multiplied by the number of Warrant Shares as to
which this Warrant is being exercised (the " Aggregate Exercise
Price ") in cash or by wire transfer of immediately available
funds or (B) provided the conditions for cashless exercise set
forth in Section 1(d) are satisfied, by notifying the
Company that this Warrant is being exercised pursuant to a Cashless
Exercise (as defined in Section 1(d) ). The
Holder shall not be required to deliver the original Warrant in
order to effect an exercise hereunder. Execution and
delivery of the Exercise Notice with respect to less than all of
the Warrant Shares shall have the same effect as cancellation of
the original Warrant and issuance of a new Warrant evidencing the
right to purchase the remaining number of Warrant
Shares. On or before the first (1
st ) Business Day following the date on which the
Company has received each of the Exercise Notice and the Aggregate
Exercise Price (or notice of a Cashless Exercise) (the "
Exercise Delivery Documents "), the Company shall transmit
by facsimile an acknowledgment of confirmation of receipt of the
Exercise Delivery Documents to the Holder and Continental Stock
Transfer & Trust Company (the Company’s " Transfer
Agent "). On or before the third (3
rd ) Business Day following the date on which the
Company has received all of the Exercise Delivery Documents (the "
Share Delivery Date "), the Company shall (X) provided that
the Transfer Agent is participating in The Depository Trust Company
(" DTC ") Fast Automated Securities Transfer Program, upon
the request of the Holder, credit such aggregate number of Warrant
Shares to which the Holder is entitled pursuant to such exercise to
the Holder's or its designee's balance account with DTC through its
Deposit Withdrawal Agent Commission system, or (Y) if the Transfer
Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the
address as specified in the Exercise Notice, a certificate,
registered in the Company's share register in the name of the
Holder or its designee, for the number of Warrant Shares to which
the Holder is entitled pursuant to such exercise. Upon
delivery of the Exercise Delivery Documents, the Holder shall be
deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date such Warrant Shares are
credited to the Holder's DTC account or the date of delivery of the
certificates evidencing such Warrant Shares, as the case may
be. If this Warrant is submitted in connection with any
exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise
is greater than the number of Warrant Shares being acquired upon an
exercise, then the Company shall as soon as practicable and in no
event later than three Business Days after any exercise and at its
own expense, issue a new Warrant (in accordance with Section
7(d) ) representing the right to purchase the number of Warrant
Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which
this Warrant is exercised. No fractional shares of
Common Stock are to be issued upon the exercise of this Warrant,
but rather the number of shares of Common Stock to be issued shall
be rounded up to the nearest whole number. The Company
shall pay any and all taxes which may be payable with respect to
the issuance and delivery of Warrant Shares upon exercise of this
Warrant.
1 Insert
a number of shares equal to 50% of the number of Common Shares
purchased under the Subscription Agreement.
(b) Exercise Price
. For purposes of this Warrant, " Exercise Price
" means $1.15, subject to adjustment as provided herein.
(c) Company's Failure to
Timely Deliver Securities . If the Company shall
fail for any reason or for no reason to issue to the Holder within
three (3) Business Days of receipt of the Exercise Delivery
Documents in compliance with the terms of this Section 1 , a
certificate for the number of shares of Common Stock to which the
Holder is entitled and register such shares of Common Stock on the
Company's share register or to credit the Holder's balance account
with DTC for such number of shares of Common Stock to which the
Holder is entitled upon the Holder's exercise of this Warrant, and
if on or after such Trading Day the Holder purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving
from the Company (a "Buy-In" ), then the Company shall,
within three (3) Business Days after the Holder's request and in
the Holder's discretion, either (i) pay cash to the Holder in an
amount equal to the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased (the "Buy-In Price" ), at which point the
Company's obligation to deliver such certificate (and to issue such
Warrant Shares) shall terminate, or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates
representing such Warrant Shares and pay cash to the Holder in an
amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the
Closing Bid Price on the date of exercise.
(d) Cashless Exercise .
Notwithstanding anything contained herein to the
contrary, if and only if either (i) a registration statement
covering the Warrant Shares that are the subject of the Exercise
Notice (the " Unavailable Warrant Shares "), or (ii) an
exemption from registration , is not available for
the resale of such Unavailable Warrant Shares, the Holder may, in
its sole discretion, exercise this Warrant in whole or in part and,
in lieu of making the cash payment otherwise contemplated to be
made to the Company upon such exercise in payment of the Aggregate
Exercise Price, elect instead to receive upon such exercise the
"Net Number" of shares of Common Stock determined according to the
following formula (a " Cashless Exercise "):
Net Number =
(A x B) - (A x C)
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For purposes of the foregoing
formula:
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A=
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the total
number of shares with respect to which this Warrant is then being
exercised.
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B=
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the arithmetic
average of the Closing Sale Prices of the shares of Common Stock
for the five (5) consecutive Trading Days ending on the date
immediately preceding the date of the Exercise Notice.
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C=
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the Exercise
Price then in effect for the applicable Warrant Shares at the time
of such exercise.
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(e) Rule 144
. For purposes of Rule 144(d) promulgated under the
Securities Act, as in effect on the date hereof, it is intended
that the Warrant Shares issued in a Cashless Exercise shall be
deemed to have been acquired by the Holder, and the holding period
for the Warrant Shares shall be deemed to have commenced, on the
date this Warrant was originally issued pursuant to the
Subscription Agreement.
(f) Disputes
. In the case of a dispute as to the determination of
the Exercise Price or the arithmetic calculation of the Warrant
Shares, the Company shall promptly issue to the Holder the number
of Warrant Shares that are not disputed, and all such disputes
shall be resolved pursuant to Section 12 .
(g) Beneficial
Ownership . The Company shall not effect the
exercise of this Warrant, and the Holder shall not have the right
to exercise this Warrant, to the extent that after giving effect to
such exercise, such Person (together with such Person's affiliates)
would beneficially own in excess of 9.99% (the " Maximum
Percentage ") of the shares of Common Stock outstanding
immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of shares
of Common Stock beneficially owned by such Person and its
affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude
shares of Common Stock which would be issuable upon (i) exercise of
the remaining, unexercised portion of this Warrant beneficially
owned by such Person and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other
securities of the Company beneficially owned by such Person and its
affiliates (including, without limitation, any convertible notes or
convertible preferred stock or warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence,
for purposes of this paragraph, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. For purposes of this
Warrant, in determining the number of outstanding shares of Common
Stock, the Holder may rely on the number of outstanding shares of
Common Stock as reflected in (1) the Company's most recent Form
10-K, Form 10-Q, Current Report on Form 8-K or other public filing
with the Securities and Exchange Commission, as the case may be,
(2) a more recent public announcement by the Company or (3) any
other notice by the Company or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. To the extent that
the limitation contained in this Section 1(g) applies, the
determination of whether this Warrant is exercisable (in relation
to other securities owned by such Holder) and of which a portion of
this Warrant is exercisable shall be in the sole discretion of a
Holder, and the submission of an Exercise Notice of shall be deemed
to be each Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder)
and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company
shall have no obligation to verify or confirm the accuracy of such
determination. For any reason at any time, upon
the written or oral request of the Holder, the Company shall within
two (2) Business Days confirm orally and in writing to the Holder
the number of shares of Common Stock then
outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including
this Warrant, by the Holder and its affiliates since the date as of
which such number of outstanding shares of Common Stock was
reported. By written notice to the Company, the Holder
may from time to time increase or decrease the Maximum Percentage
to any other percentage not in excess of 9.99% specified in such
notice; provided that (i) any such increase will not be
effective until the sixty-first (61 st )
day after such notice is delivered to the Company, and (ii) any
such increase or decrease will apply only to the
Holder. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 1(g) to correct
this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended beneficial ownership limitation
herein contained or to make changes or supplements necessary or
desirable to properly give effect to such limitation.
2. ADJUSTMENT OF EXERCISE
PRICE AND NUMBER OF WARRANT SHARES . The Exercise
Price and the number of Warrant Shares shall be adjusted from time
to time as follows:
(a) Adjustment upon
Subdivision or Combination of Common Stock . If the
Company at any time on or after the Subscription Date subdivides
(by any stock split, stock dividend, recapitalization,
reorganization, scheme, arrangement or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced and the number of
Warrant Shares will be proportionately increased. If the
Company at any time on or after the Subscription Date combines (by
any stock split, stock dividend, recapitalization, reorganization,
scheme, arrangement or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination
will be proportionately increased and the number of Warrant Shares
will be proportionately decreased. Any adjustment under
this Section 2(a) shall become effective at the close of
business on the date the subdivision or combination becomes
effective.
(b) Other Events
. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for
by such provisions (including, without limitation, the granting of
stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company's Board of Directors will
make an appropriate adjustment in the Exercise Price and the number
of Warrant Shares so as to protect the rights of the Holder;
provided that no such adjustment pursuant to this Section
2(b) will increase the Exercise Price or decrease the number of
Warrant Shares as otherwise determined pursuant to this Section
2 .
3. RIGHTS UPON DISTRIBUTION
OF ASSETS . If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire
its assets) to holders of shares of Common Stock, by way of return
of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction)
(a " Distribution "), at any time after the issuance of this
Warrant, then, in each such case:
(a) any Exercise Price in
effect immediately prior to the close of business on the record
date fixed for the determination of holders of shares of Common
Stock entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a
price determined by multiplying such Exercise Price by a fraction
of which (i) the numerator shall be the Closing Bid Price of the
shares of Common Stock on the Trading Day immediately preceding
such record date minus the value of the Distribution (as determined
in good faith by the Company's Board of Directors) applicable to
one share of Common Stock, and (ii) the denominator shall be the
Closing Bid Price of the shares of Common Stock on the Trading Day
immediately preceding such record date; and
(b) the number of Warrant
Shares shall be increased to a number of shares equal to the number
of shares of Common Stock obtainable immediately prior to the close
of business on the record date fixed for the determination of
holders of shares of Common Stock entit
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