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Exhibit 4.1
Execution copy WARRANT THE
SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN
ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM,
OR NOT SUBJECT TO, SUCH REGISTRATION. December 12, 2008
Warrant to Purchase up to 675,000 shares of Common Stock of
Discovery Laboratories, Inc. (the “Company”). In
consideration for Kingsbridge Capital Limited (the
“Investor”) agreeing to enter into that certain Common
Stock Purchase Agreement, dated as of the date hereof, between the
Investor and the Company (the “Agreement”), the Company
hereby agrees that the Investor or any other Warrant Holder (as
defined below) is entitled, on the terms and conditions set forth
below, to purchase from the Company at any time during the Exercise
Period (as defined below) up to 675,000 fully paid and
non-assessable shares of common stock, par value $0.001 per share,
of the Company (the “Common Stock”) at the Exercise
Price (as defined below), as the same may be adjusted from time to
time pursuant to Section 6 hereof. The resale of
the shares of Common Stock or other securities issuable upon
exercise or exchange of this Warrant is subject to the provisions
of the Registration Rights Agreement. Capitalized terms
used herein and not otherwise defined shall have the meanings given
them in the Agreement. Section
1. Definitions.
“Affiliate” shall mean any Person that, directly
or indirectly through one or more intermediaries, controls or is
controlled by, or is under direct or indirect common control with
any other Person. For the purposes of this definition,
“control,” when used with respect to any Person, means
the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the term
“controls” and “controlled” have meanings
correlative to the foregoing. “Closing Price” as
of any particular day shall mean the closing price per share of the
Company’s Common Stock as reported by the Principal Market on
such day. “Exercise Period” shall mean that
period beginning six months after the date of this Warrant and
continuing until the earlier of (i) the expiration of the
five-year period thereafter or (ii) a Funding Default, subject
in each case to earlier termination in accordance with
Section 6 hereof. “Exercise Price” as of
the date hereof shall mean $1.5132.
“Funding Default” shall mean a
failure by Investor to accept a Draw Down Notice made by the
Company and to acquire and pay for the Shares in accordance
therewith within three (3) Trading Days following the delivery of
such Shares to the Investor, provided such Draw Down Notice was
made in accordance with the terms and conditions of the Agreement
(including the satisfaction or waiver of the conditions to the
obligation of the Investor to accept a Draw Down set forth in
Article VII of the Agreement), provided further, that such failure
was reasonably within the control of the Investor.
“Per Share Warrant Value” shall mean the difference
resulting from subtracting the Exercise Price from the Closing
Price on the Trading Day immediately preceding the Exercise Date.
“Person” shall mean an individual, a
corporation, a partnership, a limited liability company, an
association, a trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof. “Principal Market” shall mean the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ
Capital Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange
or market for the Common Stock. “SEC” shall mean
the United States Securities and Exchange Commission.
“Trading Day” shall mean any day other than a Saturday
or a Sunday on which the Principal Market is open for trading in
equity securities. “Warrant Holder” shall mean
the Investor or any permitted assignee or permitted transferee of
all or any portion of this Warrant. “Warrant
Shares” shall mean those shares of Common Stock received or
to be received upon exercise of this Warrant. Section
2. Exercise.
(a) Method
of Exercise. This Warrant may be exercised in whole or
in part (but not as to a fractional share of Common Stock), at any
time and from time to time during the Exercise Period, by the
Warrant Holder by surrender of this Warrant, with the form of
exercise attached hereto as Exhibit A completed and duly
executed by the Warrant Holder (the “Exercise Notice”),
to the Company at the address set forth in Section 10.4 of the
Agreement, accompanied by payment of the Exercise Price multiplied
by the number of shares of Common Stock for which this Warrant is
being exercised (the “Aggregate Exercise
Price”). The later of the date on which an
Exercise Notice or payment of the Exercise Price (unless this
Warrant is exercised in accordance with Section 2(c) below) is
received by the Company in accordance with this clause
(a) shall be deemed an “Exercise Date.”
(b) Payment
of Aggregate Exercise Price. Subject to paragraph
(c) below, payment of the Aggregate Exercise Price shall be
made by wire transfer of immediately available funds to an account
designated by the Company. If the amount of the payment
received by the Company is less than the Aggregate Exercise Price,
the Warrant Holder will be notified of the deficiency and shall
make payment in that amount within three (3) Trading
Days. In the event the payment exceeds the Aggregate
Exercise Price, the Company will refund the excess to the Warrant
Holder within five (5) Trading Days of receipt. 2
(c) Cashless
Exercise. In the event that the Warrant Shares to be
received by the Warrant Holder upon exercise of the Warrant may not
be resold pursuant to an effective registration statement or an
exemption to the registration requirements of the Securities Act of
1933, as amended (“Securities Act”), and applicable
state laws, the Warrant Holder may, as an alternative to payment of
the Aggregate Exercise Price upon exercise in accordance with
paragraph (b) above, elect to effect a cashless exercise by so
indicating on the Exercise Notice and including a calculation of
the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a “Cashless
Exercise”). If a registration statement on Form
S-3 under the Securities Act or such other form as deemed
appropriate by counsel to the Company for the registration of the
resale by the Warrant Holder of (x) the shares of Common Stock of
the Company that may be purchased under the Agreement, (y) the
Warrant Shares, or (z) any securities issued or issuable with
respect to any of the foregoing by way of exchange, stock dividend
or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise, has been declared effective by the SEC and remains
effective, the Company may, in its sole discretion, require the
Warrant Holder to pay the Exercise Price of the Warrant Shares
being purchased by the Warrant Holder under this
Warrant. The Company may, in its sole discretion, permit
the Warrant Holder to effect a Cashless Exercise at any
time. In the event of a Cashless Exercise, the Warrant
Holder shall receive that number of shares of Common Stock
determined by (i) multiplying the number of Warrant Shares for
which this Warrant is being exercised by the Per Share Warrant
Value and (ii) dividing the product by the average Closing
Price of the Common Stock during the five (5) Trading Days
immediately preceding the Exercise Date, rounded to the nearest
whole share. The Company shall cancel the total number
of Warrant Shares equal to the excess of the number of the Warrant
Shares for which this Warrant is being exercised over the number of
Warrant Shares to be received by the Warrant Holder pursuant to
such Cashless Exercise.
(d) Replacement
Warrant. In the event that the Warrant is not exercised
in full, the number of Warrant Shares shall be reduced by the
number of such Warrant Shares for which this Warrant is exercised,
and the Company, at its expense, shall forthwith issue and deliver
to or upon the order of the Warrant Holder a new Warrant of like
tenor in the name of the Warrant Holder, reflecting such adjusted
number of Warrant Shares. Section
3.
Ten Percent Limitation. The Warrant Holder may not
exercise this Warrant such that the number of Warrant Shares to be
received pursuant to such exercise aggregated with all other shares
of Common Stock that are then beneficially owned or deemed to be
beneficially owned by the Warrant Holder would result in (i) the
Warrant Holder owning more than 9.9% of all of such Common Stock as
would be outstanding on such Exercise Date, as determined in
accordance with Section 13(d) of the Exchange Act or (ii) the
Company being required to file any notification or report forms
under the Hart Scott Rodino Antitrust Improvements Act of 1976, as
amended. 3
Section
4. Delivery
of Warrant Shares.
(a) Subject
to the terms and conditions of this Warrant, as soon as practicable
after the exercise of this Warrant in full or in part, and in any
event within ten (10) Trading Days thereafter, the Company at its
expense (including, without limitation, the payment by it of any
applicable issue taxes) will cause to be issued in the name of and
delivered to the Warrant Holder, or as the Warrant Holder may
lawfully direct, a certificate or certificates for, or make deposit
with the Depositary Trust Company via book-entry of, the number of
validly issued, fully paid and non-assessable Warrant Shares to
which the Warrant Holder shall be entitled on such exercise,
together with any other stock or other securities or property
(including cash, where applicable) to which the Warrant Holder is
entitled upon such exercise in accordance with the provisions
hereof.
(b) This
Warrant may not be exercised as to fractional shares of Common
Stock. In the event that the exercise of this Warrant,
in full or in part, would result in the issuance of any fractional
share of Common Stock, then in such event the Warrant Holder shall
receive the number of shares rounded to the nearest whole share.
Section
5. Representations,
Warranties and Covenants of the Company.
(a) The
Warrant Shares, when issued in accordance with the terms hereof,
will be duly authorized and, when paid for or issued in accordance
with the terms hereof, shall be validly issued, fully paid and
non-assessable.
(b) The
Company shall take all commercially reasonable action and
proceedings as may be required and permitted by applicable law,
rule and regulation for the legal and valid issuance of this
Warrant and the Warrant Shares to the Warrant Holder.
(c) The
Company has authorized and reserved for issuance to the Warrant
Holder the requisite number of shares of Common Stock to be issued
pursuant to this Warrant. The Company shall at all times
reserve and keep available, solely for issuance and delivery as
Warrant Shares hereunder, such shares of Common Stock as shall from
time to time be issuable as Warrant Shares.
(d) From
the date hereof through the last date on which this Warrant is
exercisable, the Company shall take all steps commercially
reasonable to ensure that the Common Stock remains listed or quoted
on the Principal Market. 4
Section
6. Adjustment
of the Exercise Price. The Exercise Price and,
accordingly, the number of Warrant Shares issuable upon exercise of
the Warrant, shall be subject to adjustment from time to time upon
the happening of certain events as follows:
(a) Reclassification,
Consolidation, Merger, Mandatory Share Exchange, Sale or Transfer.
(i) Upon
occurrence of any of the events specified in subsection (a)(ii)
below (the “Adjustment Events”) while this Warrant is
unexpired and not exercised in full, the Warrant Holder may in its
sole discretion require the Company, or any successor or purchasing
corporation, as the case may be, without payment of any additional
consideration therefor, upon surrender by the Warrant Holder of the
Warrant to be replaced, to execute and deliver to the Warrant
Holder a new Warrant providing that the Warrant Holder shall have
the right to exercise such new Warrant (upon terms not less
favorable to the Warrant Holder than those then applicable to this
Warrant) and to receive upon such exercise, in lieu of each share
of Common Stock theretofore issuable upon exercise of this Warrant,
the kind and amount of shares of stock, other securities, money or
property receivable upon such Adjustment Event by the holder of one
share of Common Stock issuable upon exercise of this Warrant had
this Warrant been exercised immediately prior to such Adjustment
Event. Such new Warrant shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6.
(ii) The
Adjustment Events shall be (1) any reclassification or change of
Common Stock (other than a change in par value, as a res
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