SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------
SCHEDULE 13D & 13D/A
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 2)(1)
Discovery Laboratories, Inc.
----------------------------------------------------
(Name of Issuer)
Common Stock, par value $.001 per share
----------------------------------------------------
(Title of Class of Securities)
254668 10 6
----------------------------------------------------
(CUSIP Number)
Paramount Capital Asset Management, Inc.
c/o Lindsay A. Rosenwald, M.D.
787 Seventh Avenue
New York, NY 10019
(212) 554-4300
----------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 31, 1999
----------------------------------------------------
(Date of Event Which Requires Filing
of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box |_|.
Note. Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
- ----------
(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE>
CUSIP No. 254668 10 6 13D/A Page 2 of 6 Pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Paramount Capital Asset Management, Inc.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES None
BENEFICIALLY --------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 1,502,032
PERSON --------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
None
--------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,502,032
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,502,032
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
37.2%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 254668 10 6 13D Page 3 of 6 Pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Aries Domestic Fund, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES None
BENEFICIALLY --------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 448,390
PERSON --------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
None
--------------------------------------------------------
10 SHARED DISPOSITIVE POWER
448,390
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
448,390
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 254668 10 6 13D/A Page 4 of 6 Pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
The Aries Master Fund
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00 (see Item 3 below)
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES None
BENEFICIALLY --------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 1,053,642
PERSON --------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
None
--------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,053,642
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,053,642
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO (see Item 2)
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 254668 10 6 13D/A Page 5 of 6 Pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
RAQ, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00 (see Item 3 below)
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES None
BENEFICIALLY --------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 1,001,732
PERSON --------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
None
--------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,001,732
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,001,732
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO (see Item 2)
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 254668 10 6 13D/A Page 6 of 6 Pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Lindsay A. Rosenwald, M.D.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00 (see Item 3 below)
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES 275,988
BENEFICIALLY --------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 2,503,764
PERSON --------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
275,988
--------------------------------------------------------
10 SHARED DISPOSITIVE POWER
2,503,764
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,779,752
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
37.2%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Item 1. Security and Issuer.
(a) Common Stock, $.0012 par value ("Shares")
350 South Main Street, Suite 307
Doylestown, PA 18901
Phone: (215) 340-4699
Fax: (215) 340-3940
Item 2. Identity and Background.
Names of Persons Filing:
(a) This statement is filed on behalf of Paramount Capital Asset
Management, Inc. ("Paramount Capital"), Aries Domestic Fund, L.P.
("Aries Domestic"), Aries Master Fund, a Cayman Island exempted
company (formerly known as The Aries Fund, a Cayman Island Trust)
("Aries Fund") and Lindsay A. Rosenwald, M.D. ("Dr. Rosenwald" and
collectively, "Reporting Parties"). See attached Exhibit A which is
a copy of their agreement in writing to file this statement on
behalf of each of them.
(b) Paramount Capital's, Aries Domestic's and Dr. Rosenwald's business
address is 787 Seventh Avenue, 48th Floor, New York, New York,
10019. The business address for Aries Fund is c/o MeesPierson
(Cayman) Limited, P.O. Box 2003, British American Centre, Phase 3,
Dr. Roy's Drive, George Town, Grand Cayman.
(c) RAQ, LLC is a New York limited liability corporation of which Dr.
Rosenwald is the sole proprietor.
(d) Dr. Rosenwald is an investment banker, venture capitalist, fund
manager and sole shareholder of Paramount Capital,(1) a Subchapter S
corporation incorporated in Delaware. Paramount Capital is the
General Partner of Aries Domestic,(2) a limited partnership
incorporated in Delaware. Paramount Capital is the Investment
Manager to Aries Fund,(3) a Cayman Islands exempted company.
(e) Dr. Rosenwald, Paramount Capital, Aries Domestic and Aries Fund and
their respective officers, directors, general partners, investment
managers, or trustees have not, during the five years prior to the
date hereof, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(f) Dr. Rosenwald, Paramount Capital, Aries Domestic and Aries Fund and
their respective officers, directors, general partners, investment
managers, or trustees have not been, during the five years prior to
the date hereof, parties to a civil proceeding of a judicial or
administrative body of competent jurisdiction, as a result of which
such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating
activities subject to, Federal or State securities laws or finding
any violation with respect to such laws.
(g) Dr. Rosenwald is a citizen of the United States.
- ----------
(1) Please see attached Exhibit B indicating the executive officers and
directors of Paramount Capital and providing information called for by Items 2-6
of this statement as to said officers and directors. Exhibit B is herein
incorporated by reference.
(2) Please see attached Exhibit C indicating the general partner of Aries
Domestic and the general partner's executive officers and directors and
providing information called for by Items 2-6 of this statement as to said
general partners, officers and directors. Exhibit C is herein incorporated by
reference.
(3) Please see attached Exhibit D indicating the investment manager of the Aries
Fund and the investment manager's executive officers and directors and providing
information called for by Items 2-6 of this statement as to said investment
manager and officers and directors. Exhibit D is herein incorporated by
reference.
<PAGE>
Item 3. Source and Amount of Funds or Other Consideration.
Since the date of the original filing on Schedule 13D (the "Original
Filing"), in a private placement of the Issuer's securities (the
"Private Placement"), pursuant to a Stock and Warrant Purchase
Agreement dated March 31, 1999, Aries Domestic used its general
funds to purchase (a) 87,766 shares of Common Stock for $1.88 per
share and (b) six (6) year warrants to 87,766 shares of Common Stock
at an exercise price equal to $2.30, for an aggregate purchase price
equal to $165,000 and the Aries Fund used its general funds to
purchase (a) 204,787 of Common Stock for $1.88 per share and (b) (6)
year warrants to 157,766 shares of Common Stock at an exercise price
equal to $2.30, for an aggregate purchase price equal to $385,000.
Item 4. Purpose of Transaction.
The Reporting Parties have acquired shares of Common Stock of the
Issuer as an investment in the Issuer.
As set forth in Item 3, Paramount Capital, Inc. acted as placement
agent for the Issuer in connection with its November, 1996 private
offering of securities.
Except as indicated in this Schedule 13D, the Reporting Parties
currently have no plans or proposals that relate to or would result
in any of the matters described in subparagraphs (a) through (j) of
Item 4 of Schedule 13D.
Except as indicated in this Schedule 13D, the Reporting Parties
currently have no plans or proposals that relate to or would result
in any of the matters described in subparagraphs (a) through (j) of
Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) As of March 31, 1999, Paramount Capital, through acquisition
of the shares by the Aries Fund and Aries Domestic,
beneficially owned 430,133 of Common Sock of the Issuer,
warrants to purchase an additional 301,371 shares of Common
Stock of the Issuer, 225,000 shares of Series B Preferred
Stock of the Issuer (convertible into 700,498 Common Stock of
the Issuer) and warrants to purchase 22,500 shares of Series B
Preferred Stock (convertible into 70,005 shares of Common
Stock of the Issuer) or 20.1% of the Issuer's securities, and
Aries Domestic, the Aries Fund, RAQ, LLC and Dr. Rosenwald
beneficially owned as follows:
Percent Amount Owned
------- ------------
Aries Domestic 6.6% 126,834 shares of common stock
90,392 warrants to purchase
shares of common stock
210,149 shares of common stock
(underlying 67,500
shares of preferred
stock)
21,015 shares of common stock
(underlying 6,750
shares of preferred
stock)
Aries Fund 15.0% 303,207 shares of common stock
210,897 warrants to purchase
shares of common stock
490,349 shares of common stock
(underlying 157,500
shares of preferred
stock)
49,035 shares of common stock
(underlying 15,750
shares of preferred
stock)
RAQ, LLC 15.6% 1,001,732 shares of common stock
Dr. Rosenwald 37.2%(4) 30,664 warrants to purchase
shares of common stock
245,324 shares of common stock
(underlying 6,750
shares of preferred
stock)
(b) Dr. Rosenwald and Paramount Capital share the power to vote or
to direct the vote, to dispose or to direct the disposition of
those certain of those shares beneficially owned by each of
Aries Domestic and Aries Fund. Dr. Rosenwald has the power to
vote or direct the vote, to dispose or to direct the
disposition of those shares owned by RAQ, LLC.
- ----------
(4) For purposes of this Regulation 13-D filing, Dr. Rosenwald's percentage
calculation includes all of the securities owned by Paramount Capital, Aries
Domestic, Aries Fund and RAQ, LLC, however, Dr. Rosenwald may disclaim
beneficial ownership with respect to the shares held by each of the foregoing.
<PAGE>
(c) The following purchases were made by Aries Domestic and Aries
Fund in the past sixty (60) days:
March 31, 1999, Aries Domestic used its general funds to
purchase (a) 87,766 shares of Common Stock for $1.88 per share
and (b) six (6) year warrants to 87,766 shares of Common Stock
at an exercise price equal to $2.30, for an aggregate purchase
price equal to $165,000 and the Aries Fund used its general
funds to purchase (a) 204,787 of Common Stock for $1.88 per
share and (b) (6) year warrants to 157,766 shares of Common
Stock at an exercise price equal to $2.30, for an aggregate
purchase price equal to $385,000.
Other than as set forth herein the Reporting Parties have not
engaged in any transactions in the Common Stock of the Issuer
during the past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with respect to
Securities of the Issuer
Paramount Capital is the investment manager of the Aries Fund and
the General Partner of Aries Domestic and in such capacities has the
authority to make certain investment decisions on behalf of such
entities, including decisions relating to the securities of the
Issuer. In connection with its investment management duties,
Paramount Capital receives certain management fees and performance
allocations from the Aries Fund and Aries Domestic. Dr. Rosenwald is
the sole shareholder of Paramount Capital.
Except as indicated in this Amendment No.2 to the Original Filing
and exhibits hereto, there is no contract, arrangement,
understanding or relationship between the Reporting Parties and any
other party or parties, with respect to any securities of the
Issuer.
Item 7. Material to be Filed as Exhibits:
Exhibit A - Copy of an Agreement between Dr. Rosenwald, Paramount Capital, Aries
Domestic and Aries Fund to file this Statement on Schedule 13D on
behalf of each of them.
Exhibit B - List of executive officers and directors of RAQ, LLC and information
called for by Items 2-6 of this statement relating to said officers
and directors.
Exhibit C - List of executive officers and directors of Paramount Capital and
information called for by Items 2-6 of this statement relating to
said officers and directors.
Exhibit D - List of executive officers and directors of Aries Domestic and
information called for by Items 2-6 of this statement relating to
said officers and directors.
Exhibit E - List of executive officers and directors of Aries Fund and
information called for by Items 2-6 of this statement relating to
said officers and directors.
Exhibit F - Stock Purchase Agreement among Discovery Laboratories and Aries
Domestic Fund, L.P. and The Aries Master Fund, a Cayman Exempted
Company, dated March 31, 1999.
Exhibit G Amendment to the Stock Purchase Agreement dated April 5, 1999.
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
PARAMOUNT CAPITAL ASSET MANAGEMENT, INC.
Dated: April 7, 1999
New York, NY By /s/ Lindsay A. Rosenwald, M.D.
----------------------------------------
Lindsay A. Rosenwald, M.D.
Chairman
ARIES DOMESTIC FUND
By Paramount Capital Asset Management, Inc.
General Partner
Dated: April 7, 1999
New York, NY By /s/ Lindsay A. Rosenwald, M.D.
----------------------------------------
Lindsay A. Rosenwald, M.D.
Chairman
THE ARIES MASTER FUND
By Paramount Capital Asset Management, Inc.
Investment Manager
Dated: April 7, 1999
New York, NY By /s/ Lindsay A. Rosenwald, M.D.
----------------------------------------
Lindsay A. Rosenwald, M.D.
Chairman
RAQ, LLC
Dated: April 7, 1999 By: /s/ Lindsay A. Rosenwald, M.D.
New York, NY ----------------------------------------
Lindsay A. Rosenwald, M.D.
President
LINDSAY A. ROSENWALD, M.D.
Dated: April 7, 1999
New York, NY By /s/ Lindsay A. Rosenwald, M.D.
----------------------------------------
Lindsay A. Rosenwald, M.D.
<PAGE>
EXHIBIT A
AGREEMENT
JOINT FILING OF SCHEDULE 13D
The undersigned hereby agrees to jointly prepare and file with
regulatory authorities a Schedule 13D and any future amendments thereto
reporting each of the undersigned's ownership of securities of Discovery
Laboratories, Inc., and hereby affirm that such Schedule 13D is being filed on
behalf of each of the undersigned.
PARAMOUNT CAPITAL ASSET MANAGEMENT, INC.
Dated: April 7, 1999
New York, NY By /s/ Lindsay A. Rosenwald, M.D.
----------------------------------------
Lindsay A. Rosenwald, M.D.
Chairman
ARIES DOMESTIC FUND
By Paramount Capital Asset Management, Inc.
General Partner
Dated: April 7, 1999
New York, NY By /s/ Lindsay A. Rosenwald, M.D.
----------------------------------------
Lindsay A. Rosenwald, M.D.
Chairman
THE ARIES MASTER FUND
By Paramount Capital Asset Management, Inc.
Investment Manager
Dated: April 7, 1999
New York, NY By /s/ Lindsay A. Rosenwald, M.D.
----------------------------------------
Lindsay A. Rosenwald, M.D.
Chairman
LINDSAY A. ROSENWALD, M.D.
Dated: April 7, 1999
New York, NY By /s/ Lindsay A. Rosenwald, M.D.
----------------------------------------
Lindsay A. Rosenwald, M.D.
Chairman
RAQ, LLC
Dated: April 7, 1999 By: /s/ Lindsay A. Rosenwald, M.D.
New York, NY ----------------------------------------
Lindsay A. Rosenwald, M.D.
President
<PAGE>
EXHIBIT B
The name and principal occupation or employment, which in each instance is
with RAQ, LLC, located at c/o 787 Seventh Avenue, 48th Floor, New York, New
York, 10019, of each executive officer and director of RAQ, LLC is as follows:
PRINCIPAL OCCUPATION
NAME OR EMPLOYMENT
---- --------------------
Lindsay A. Rosenwald, M.D. President
Item 2.
During the five years prior to the date hereof, none of the above persons
(to the best of RAQ, LLC's knowledge) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction, as a result of which such person was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or State securities laws or finding any
violation with respect to such laws.
Items 3-6.
Please refer to Items 3-6 herein reporting the beneficial ownership.
<PAGE>
EXHIBIT C
The name and principal occupation or employment, which in each instance is
with Paramount Capital Asset Management, Inc. ("Paramount Capital") located at
787 Seventh Avenue, 48th Floor, New York, New York, 10019, of each executive
officer and director of Paramount Capital is as follows:
PRINCIPAL OCCUPATION
NAME OR EMPLOYMENT
---- -------------
Lindsay A. Rosenwald, M.D. Chairman of the Board of Paramount
Capital Asset Management, Inc.,
Paramount Capital Investments, LLC and
Paramount Capital, Inc.
Mark C. Rogers, M.D. President of Paramount Capital Asset
Management, Inc., Paramount Capital
Investments, LLC and Paramount
Capital, Inc.
Peter Morgan Kash Director of Paramount Capital Asset
Management, Inc., Senior Managing
Director, Paramount Capital, Inc.
Dr. Yuichi Iwaki Director of Paramount Capital Asset
Management, Inc., Professor,
University of Southern California
School of Medicine
Item 2.
During the five years prior to the date hereof, none of the above persons
(to the best of Paramount Capital's knowledge) was convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction, as a result of which such person was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or State securities laws or finding any
violation with respect to such laws.
Items 3-6.
Please refer to Items 3-6 herein reporting the beneficial ownership.
2
<PAGE>
EXHIBIT D
The name and principal occupation or employment, which is located at 787
Seventh Avenue, 48th Floor, New York, New York, 10019, of the General Partner of
Aries Domestic is as follows:
PRINCIPAL OCCUPATION
NAME OR EMPLOYMENT
---- --------------------
Paramount Capital Asset Management, Inc. General Partner; Investment
Manager
Exhibit B is hereby incorporated by reference.
Item 2.
During the five years prior to the date hereof, the above person (to the
best of Aries Domestic's knowledge) has not been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction, as a result of which such person was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or State securities laws or finding any
violation with respect to such laws.
Items 3-6.
Please refer to Items 3-6 herein reporting the beneficial ownership.
3
<PAGE>
EXHIBIT E
The name and principal occupation or employment, which in each instance is
with The Aries Master Fund ("Aries Fund") located at 787 Seventh Avenue, 48th
Floor, New York, New York, 10019, of each executive officer and director of
Aries Trust is as follows:
PRINCIPAL OCCUPATION
NAME OR EMPLOYMENT
---- --------------------
Paramount Capital Asset Management, Inc. Investment Manager
MeesPierson (Cayman) Management Limited Administrator
Exhibit B is hereby incorporated by reference.
Item 2.
During the five years prior to the date hereof, neither of the above
persons (to the best of Aries Fund's knowledge) have been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction, as a result of which such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, Federal or State securities laws or finding
any violation with respect to such laws.
Items 3-6.
Please refer to Items 3-6 herein reporting the beneficial ownership.
4
<PAGE>
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of March
31, 1999 (the "Effective Date"), among DISCOVERY LABORATORIES, INC., a
Delaware corporation (the "Company"), and ARIES DOMESTIC FUND, L.P., and
THE ARIES MASTER FUND, A CAYMAN ISLAND EXEMPTED COMPANY (the "Investors").
WHEREAS, the Investors have agreed to make an aggregate equity
investment of $650,000 in the Company through the purchase of (a) shares of
Common Stock, par value $.001 per share (the "Common Stock") and (b) warrants
(the "Warrants") to purchase shares of Common Stock, of the Company; and
WHEREAS, the Company has agreed to sell such shares of Common Stock
and Warrants to the Investors.
NOW THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties hereby agree as
follows:
Section 1. Terms of Investment.
1.1 On the date hereof, the Company shall issue and sell to the
Investors, and the Investors shall purchase from the Company, (a) an aggregate
of 345,744 shares of Common Stock (the "Shares") at a price of $1.88 per share
(the "Per Share Price") and (b) Warrants to purchase 345,744 shares of Common
Stock at an exercise price equal to $2.30 (the "Per Share Exercise Price"), for
an aggregate purchase price of $650,000 (the "Purchase Price"), allocated among
the Investors as set forth in Exhibit A. The Warrants shall be issued in the
form of Exhibit B. The Purchase Price shall be paid by wire transfer of
immediately available funds in United States dollars to the Company,
contemporaneously with the execution and delivery of this Agreement, to an
account previously designated in writing by the Company.
1.2 The Shares and Warrants (collectively sometimes referred to as
the "Securities") being sold in accordance with the terms of this Agreement for
the Purchase Price shall be validly issued, fully paid, and nonassessable, and
shall be free of restrictions on transfer other than under this Agreement and
under applicable state and federal securities laws. The shares of Common Stock
issuable upon exercise of the Warrants, when issued in accordance with the terms
of the Warrants, shall be validly issued, fully paid, and nonassessable, and
shall be free of restrictions on transfer other than under this Agreement and
under applicable state and federal securities laws.
Section 2. Purchase Price Adjustment. (a) If, within 150 days from
the Effective Date the Company shall issue and sell shares of Common Stock in a
private offering at a price per share less than the Per Share Price, (i) the
Investors shall be entitled to receive, for no additional consideration, a
number of additional shares of Common Stock sufficient to reduce the Per Share
Price to the per share purchase price paid by investors in such private offering
and (ii) the Per Share Exercise Price shall be reduced to equal the greater of
(A) 110% of the per share purchase price paid by investors in such private
offering and (B) $2.15.
(b) If, within 150 days from the Effective Date the Company
shall issue and sell, in a private offering, any shares of capital stock or
equity derivatives of the Company (including, without limitation, options,
warrants or convertible securities) (the "Offering Securities"), alone or in
combination with shares of Common Stock, , which Offering Securities are
convertible into, or exercisable for, shares of Common Stock at a conversion
price or exercise price less than the Per Share Price (i) the Investors shall be
entitled to receive, for no additional consideration, a number of additional
shares of Common Stock sufficient to reduce the Per Share Price to the
conversion price or exercise price of the Offering Securities and (ii) the Per
Share Exercise Price shall be reduced to equal the greater of (A) 110% of the
conversion price or exercise price of the Offering Securities and (B) $2.15.
(c) If, within 150 days from the Effective Date, the Company
shall not have either (i) raised at least $2 million through the sale of Common
Stock, other capital stock of the Company and/or equity derivatives of the
Company in addition to the Purchase Price or (ii) entered into any partnering
arrangement with a non-affiliate of the Company having a value (taking into
account, on a dollar-for-dollar basis, all upfront and milestone payments
provided for by the terms of such arrangement as well as any substantially
contemporaneous equity investments or written commitments (whether or not
contingent) to make loans or equity investments) of at least $10 million, (A)
the Investors shall be entitled to receive, for no additional consideration, a
number of additional shares of Common Stock sufficient to reduce the Per Share
Price (such reduction pursuant to this Section 2(c) or 2(d) being referred to as
a "Reset") to the average of the lowest three Closing Prices of the Common Stock
during the 20 trading-day period ending on the last trading day prior to the
expiration of such 150-day period and (B) the Per Share Exercise Price shall be
reduced to $2.15. As used herein, "Closing Price" shall mean the last sale price
of the Common Stock, as reported on NASDAQ, on any trading
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day or, if there shall not have been a sale on any trading day, the average
between the closing bid and ask prices reported on NASDAQ for such trading day.
(d) If the average of the Closing Prices for the 20 trading
days preceding the date that is 150 days from the Effective Date is less than
the Per Share Price, then (i) the Investors shall be entitled to receive, for no
additional consideration, a number of additional shares of Common Stock
sufficient to reduce the Per Share Price to the average of the lowest three
Closing Prices of the Common Stock during the 20 trading-day period ending on
the last trading day prior to the expiration of such 150-day period and (ii) the
Per Share Exercise Price shall be reduced to $2.15. Notwithstanding the
foregoing, additional shares of Common Stock shall not be required to be issued
pursuant to this Section 2(d) (1) if the Company has raised at least $4 million
(or such lesser amount as is consented to by Aries Domestic Fund, L.P. and/or
The Aries Master Fund, a Cayman Exempted Company ("Aries")) through the sale of
Common Stock, other capital stock of the Company and/or equity derivatives of
the Company in addition to the Purchase Price by the date that is 150 days from
the Effective Date, or (2) to the extent Aries otherwise agrees to waive or
reduce the required issuance, any such consent or agreement by Aries being
binding on all of the Investors signatory hereto.
(e) In no event shall the Reset or any issuance of securities
by the Company subject to paragraph (a) or (b) above require the Company to
issue a number of shares of Common Stock to the Investors where such issuance
would require the Company to lower the Per Share Price to a price equal to or
less than $0.86.
Section 3. Closing.
3.1 Closing. (a) The purchase and sale of the Shares shall take
place at the offices of Paramount Capital Asset Management, Inc., 787 Seventh
Avenue, New York, New York 10019, on March 31, 1999 (the "Closing"). At the
Closing, in consideration of, and following confirmation of receipt of, the
Purchase Price, the Company shall deliver to the Investors certificates
representing the Shares.
3.2 Conditions to the Obligations of the Investors at the Closing.
(a) Conditions to the Closing. The obligation of the Investors to purchase and
pay for the Securities at the Closing is subject to the satisfaction on or prior
to the applicable date of Closing (the "Closing Date") of the following
conditions, which may be waived by the Investors:
3.3 Opinion of Counsel to the Company. The Investors shall have
received from Roberts, Sheridan & Kotel, A Professional Corporation, counsel for
the Company, its opinion dated such Closing Date in the form of Exhibit C.
3.4 Representations and Warranties. All of the representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects at and as of such Closing Date.
3.5 Performance of Covenants. All of the covenants and agreements of
the Company contained in this Agreement required to be performed on or prior to
such Closing Date shall have been performed in a manner satisfactory in all
material respects to Investors.
3.6 Legal Action. No injunction, order, investigation, claim, action
or proceeding before any court or governmental body shall be pending or
threatened wherein an unfavorable judgment, decree or order would restrain,
impair or prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated by this
Agreement or cause any such transaction to be rescinded.
3.7 Consents. The Company shall have obtained in writing or made all
consents, waivers, approvals, orders, permits, licenses and authorizations of,
and registrations, declarations, notices to and filings and applications with,
any governmental authority or any other person (including, without limitation,
securityholders and creditors of the Company) required to be obtained or made in
order to enable the Company to observe and comply with all its obligations under
the Agreement and to consummate and perform the transactions contemplated
thereby except any of those the failure of which to be obtained shall not have a
material adverse effect on the Company.
3.8 Closing Documents. The Company shall have delivered to Investors
the following:
(a) a certificate executed by the President and Chief Executive
Officer of the Company dated as of the Closing Date stating that the conditions
set forth in Sections 3.2 through 3.7 have been satisfied;
(b) a certificate of the Secretary of the Company, dated such
Closing Date, as to the continued and valid existence of the Company, certifying
the attached copy of the Restated Certificate of Incorporation and the By-laws
of the Company, the authorization of the execution, delivery and performance of
the Agreement, and the resolutions adopted by the Board of Directors of the
Company authorizing the actions to be taken by the Company under the Agreement;
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(c) a certificate of the Secretary of State of the State of
Delaware, dated a recent date, to the effect that the Company is in good
standing in the State of Delaware and that all annual reports, if any, have been
filed as required and that all taxes and fees have been paid in connection
therewith;
(d) a certified copy of the Certificate of Incorporation of the
Company as filed with the Secretary of State of the State of Delaware, including
any amendments thereto; and
3.9 Proceedings. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be satisfactory in form and substance to
Investors.
3.10 Financial Statements; Absence of Changes. The Company shall
have provided to the Investors (i) the consolidated balance sheets of the
Company and its subsidiaries as of December 31, 1998, and the related unaudited
consolidated statements of operations and cash flows for the 12 month period
then ended and for the period from May 18, 1993 (date of inception) to December
31, 1998 (the "Financial Statements"), all of which will be correct and complete
and will present fairly the financial position of the Company and the results of
its operations and changes in its financial position as of the time and for the
periods then ended, and (ii) a certification, in form and substance satisfactory
to the Investors, of the Vice President, Finance of the Company as to the
Financial Statements to the effect that the Financial Statements have been
prepared in accordance with the books and records of the Company and its
subsidiaries and generally accepted accounting principles applied on a basis
consistent with prior years (except as otherwise specified in such Financial
Statements), and present fairly the financial position of the Company and its
subsidiaries and the results of their operations and changes in their financial
position as of the time and for the periods then ended.
3.11 Schedules. The Company shall have provided to Investors all
schedules required pursuant to this Agreement.
Section 4. Conditions to the Obligations of the Company at the
Closing. The obligation of the Company to issue and sell the Shares to the
Investors at the Closing is subject to the satisfaction on or prior to the
applicable Closing Date of the following conditions, any of which may be waived
by the Company:
4.1 Representations and Warranties. The representations and
warranties of Investors contained in this Agreement shall be true and correct in
all material respects at and as of such Closing Date.
4.2 Legal Action. No injunction, order, investigation, claim, action
or proceeding before any court or governmental body shall be pending or
threatened wherein an unfavorable judgment, decree or order would restrain,
impair or prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated by this
Agreement or cause any such transaction to be rescinded.
Section 5 Representations and Warranties of the Investors.
The Investors hereby represent and warrant to the Company that:
5.1 Each of the Investors is an "accredited investor" within the
meaning of Regulation D under the Securities Act of 1933 (the "Securities Act").
Each of the Investors has experience in making investments in development stage
biotechnology companies and is acquiring the Securities for its own account and
not with a present view to, or for sale in connection with, any distribution
thereof in violation of the registration requirements of the Securities Exchange
Act of 1934 (the "Exchange Act").
5.2 Each of the Investors has the power and authority to execute and
deliver this Agreement and to perform its obligations hereunder, having obtained
all required consents, if any, and this Agreement, when executed and delivered,
will constitute a valid and legally binding obligation of such Investor.
5.3 No finder, broker, agent, financial person or other intermediary
has acted on behalf of any of the Investors in connection with the offering of
the Shares or the consummation of this Agreement or any of the transactions
contemplated hereby.
5.4 Each of the Investors has not directly or indirectly sold or
caused to be sold any shares of Common Stock during the 30 trading days
preceding the Closing Date. As of the Closing Date, each of the Investors does
not directly or indirectly have, and as of the date of any Reset, each of the
Investors will not directly or indirectly have, a "short" position with respect
to the Common Stock.
5.5 Each of the Investors recognizes that the purchase of the
Securities involves a high degree of risk including, but not limited to, the
following: (a) an investment in the Company is highly speculative, and only an
investor who can afford the loss
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of their entire investment should consider investing in the Company and the
Securities; (b) an investor may not be able to liquidate its investment; (c)
transferability of the Securities is extremely limited; and (d) in the event of
a disposition, such investor could sustain the loss of its entire investment.
5.6 Each of the Investors hereby represents that it has been
furnished by the Company with all information regarding the Company
that such Investor 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 investment and
has received any additional information that such Investor has
requested.
5.7 Each of the Investors has relied solely upon its own judgment in
making the decision to invest in the Company. To the extent
necessary, such Investor has retained, at its own expense, and
relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Agreement
and its purchase of the Securities hereunder.
5.8 Each of the Investors represents that no Securities were offered
or sold to it by means of any form of general solicitation or general
advertising, and in connection therewith such Investor 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.
5.9 Each of the Investors hereby represents that it, either by
reason of such Investor's business or financial experience or the business or
financial experience of such Investor's outside professional advisors (who are
unaffiliated with and who are not compensated by the Company or any affiliate or
selling agent of the Company, directly or indirectly), has the capacity to
protect the Investor's own interests in connection with the transaction
contemplated hereby.
5.10 Each of the Investors has full power and authority (corporate
or partnership, as the case may be, statutory and otherwise) to execute and
deliver this Agreement and to purchase the Securities. The execution and
delivery by each of the Investors of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate or partnership, as the case may be, action on the part of such
Investor.
5.11 Each Investor 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 Investor to do so.
5.12 No material consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, remains to be obtained or is otherwise
required to be obtained by the Investors in connection with the authorization,
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, including, without limitation the purchase and sale of the
Securities.
Section 6. Representations and Warranties of the Company
The Company hereby represents and warrants to the Investors that:
6.1 Organization, Qualification and Corporate Power. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has full corporate power and
authority to own and hold its properties and to conduct its business; to
execute, deliver and perform this Agreement; and to issue, sell and deliver the
Securities. The Company is duly qualified or licensed to do business in each
jurisdiction in which the failure to be so qualified or licensed would have a
materially adverse effect on the business or financial condition of the Company.
6.2 Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 20,000,000 shares of Common Stock, par value
$0.001 per share, and 5,000,000 shares of Preferred Stock, par value $0.001 per
share, of which 2,420,282 are designated Series B Convertible Preferred Stock of
the Company (the "Series B Preferred Stock") and 2,039 are designated Series C
Convertible Preferred Stock of the Company (the "Series C Preferred Stock"). As
of the date hereof, (i) 5,855,428 shares of Common Stock were issued and
outstanding, (ii) 1,712,386 shares of Series B Preferred Stock were issued and
outstanding and were convertible into 55,331,095 shares of Common Stock, (iii)
2,039 shares of Series C Preferred Stock, which are convertible into shares of
Common Stock under certain circumstances based on the liquidation value of the
Series C Preferred Stock and the market price of the Common Stock, were issued
and outstanding, (iv) 2,000 shares of Common Stock were held in the treasury of
the Company, (v) 2,299,212 shares of Common Stock were reserved for issuance
upon exercise of outstanding options issued under (A) the Company's 1998 Stock
Incentive Plan, the Company's 1995 Stock Option Plan and the Company's 1993
Stock Option Plan (the
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"Option Plans") and (B) stock option plans of certain corporate predecessors of
the Company, (vi) an aggregate of 2,297 shares of Common Stock were reserved for
issuance under stock options granted by the Company outside the Option Plans,
(vii) an aggregate of 2,045,087 shares of Common Stock were reserved for
issuance under outstanding warrants, (viii) 684,997 shares of Common Stock were
reserved for issuance upon conversion of the 220,026 shares of Series B
Preferred Stock issuable upon the exercise of outstanding warrants, and (ix)
173,333 shares of Common Stock were reserved for issuance upon exercise of the
Company's outstanding unit purchase option (including warrants issuable upon the
exercise of such unit purchase option). All of the outstanding shares of Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights. Except as set forth in this Section
6.2 and Section 6.2 of the Disclosure Schedule, there are no options, warrants
or other rights, convertible debt, agreements, arrangements or commitments of
any character obligating the Company or any of its subsidiaries to issue or sell
any shares of capital stock of or other equity interests in the Company or any
of its subsidiaries. The Company is not obligated to retire, redeem, repurchase
or otherwise reacquire any of its capital stock or other securities.
6.3 Authorization; Enforceability. The Company has full corporate
power and authority to execute, deliver and enter into this Agreement and to
consummate the transactions contemplated hereby. All action on the part of the
Company, its directors, managers, members or stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Company, the authorization, sale, issuance and delivery of the Securities
contemplated hereby and the performance of the Company's obligations hereunder
has been taken. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy.
6.4 Financial Statements and SEC Documents. (a) Contained within the
SEC Documents (as defined in Section 6.4(b) are (i) the audited consolidated
balance sheets of the Company and its subsidiaries as of December 31, 1997 and
1996, and the related audited consolidated statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 1997 and
1996, and for the period from May 18, 1993 (date of inception) to December 31,
1997, together with the related notes thereto (the "Audited Financial
Statements") and (ii) the Financial Statements (as such term is defined in
Section 3.10) (other than the Financial Statements at and as of December 31,
1998, which have not yet been included in any document filed with the Securities
and Exchange Commission (the "SEC")). All of the Audited Financial Statements
and the Financial Statements are correct and complete, and have been prepared in
accordance with the books and records of the Company and its subsidiaries and
generally accepted accounting principles, applied consistently with the past
practices of the Company and its subsidiaries (except as otherwise noted in such
Audited Financial Statements and Financial Statements), reflect all liabilities
and obligations of the Company and its subsidiaries, as of their respective
dates, and present fairly the financial position of the Company and its
subsidiaries and the results of their operations as of the time and for the
periods indicated therein.
(b) The Company has filed with the SEC all documents required to be
filed with the SEC by the Company since January 1, 1997 except to the extent
such filings are permitted to be deferred under applicable rules and
regulations. All such documents, as the same have since the time of their filing
been amended, are referred to herein as the "SEC Documents". As of their
respective dates, the SEC Documents complied in all respects with the
requirements of the Securities Act and/or the Securities Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such SEC Documents and none of the SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to be stated therein to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly present the financial position of the Company
as at the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended.
6.5 No Material Adverse Changes. Since December 31, 1997, except as
disclosed in the SEC Documents filed subsequent to that date, in Schedule 6.5 or
in the other schedules to this Agreement, there has not at any time been (a) any
material adverse change in the business, financial condition, operating results,
business prospects, employee relations or customer relations of the Company or
its subsidiaries, other declines in working capital, shareholders' equity and
other financial items resulting from the use of cash in furtherance of the
Company's business, or (b) other adverse changes, which in the aggregate have
been materially adverse to the Company or its subsidiaries.
6.6 Absence of Certain Developments. Except as contemplated by this
Agreement, since December 31, 1998, the Company and each of its subsidiaries
have not (a) issued any securities, (b) borrowed any amount or incurred or
become subject to any liabilities (absolute or contingent), other than
liabilities incurred in the ordinary course of business and liabilities under
contracts entered into in the ordinary course of business, all of which involve
less than $100,000, (c) discharged or satisfied any lien, adverse claim or
encumbrance or paid any obligation or liability (absolute or contingent), other
than current liabilities paid in the ordinary course of business; (d) declared
or made any payment or distribution of cash or other property to the
stockholders of the Company with
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respect to the Common Stock or purchased or redeemed any shares of Common Stock;
(e) mortgaged, pledged or subjected to any lien, adverse claim, charge or any
other encumbrance, any of its properties or assets, except for liens for taxes
not yet due and payable or otherwise in the ordinary course of business; (f)
sold, assigned or transferred any of its assets, tangible or intangible, except
in the ordinary course of business and in an amount less than $100,000, (g)
suffered any extraordinary losses or waived any rights of material value other
than in the ordinary course of business; (h) made any capital expenditures or
commitments therefor other than in the ordinary course of business; (i) entered
into any other transaction other than in the ordinary course of business in an
amount less than $100,000 or entered into any material transaction, whether or
not in the ordinary course of business; (j) made any charitable contributions or
pledges; (k) suffered any damages, destruction or casualty loss, whether or not
covered by insurance, affecting any of the properties or assets of the Company
or its subsidiaries or any other properties or assets of the Company or its
subsidiaries which could have a material adverse effect on the business or
financial condition of the Company or its subsidiaries; (l) made any change in
the nature or operations of the business of the Company or its subsidiaries; or
(m) resolved or entered into any agreement or understanding with respect to any
of the foregoing.
6.7 No Conflict; Governmental Consents. (a) The execution and
delivery by the Company of this Agreement and the consummation of the
transactions contemplated hereby will not result in the material violation of
any 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 Restated Certificate of Incorporation or By-Laws of the
Company, and will not conflict with, or result in a material 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 material properties or
assets is subject, nor result in the creation or imposition of any lien upon any
of the material properties or assets of the Company.
(b) No material consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, remains to be obtained or is otherwise
required to be obtained by the Company in connection with the authorization,
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, including, without limitation the issue and sale of the
Securities, except such filings as may be required to be made with the SEC, the
National Association of Securities Dealers, Inc. , The NASDAQ Stock Market, Inc.
or any state blue sky or securities regulatory authority.
6.8 Licenses. 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.
6.9 Litigation. There are no pending, or to the Company's knowledge,
threatened legal or governmental proceedings against the Company that would
materially adversely affect the business, property, financial condition or
operations of the Company.
6.10 Investment Company. The Company is not an "investment company"
within the meaning of such term under the Investment Company Act of 1940, as
amended, and the rules and regulations of the SEC thereunder.
Section 7. Registration Rights.
7.1 Upon the next filing by the Company of a registration statement
(the "Registration Statement") with the SEC with respect to the resale of the
shares of Common Stock, the Company shall include (a) all shares of Common Stock
acquired hereunder by the Investors hereunder (b) all shares of Common Stock
issuable upon exercise of the Warrants and (c) any shares of Common Stock
acquired as the result of a Reset or otherwise pursuant to Section 2(a) or 2(b)
(the "Registrable Securities"); provided, however, that in any event, the
Company shall file a Registration Statement with the SEC for the resale of the
Registrable Securities no later than the date that is 180 days from the
Effective Date. Upon the filing of the Registration Statement, the Company shall
use its best efforts to cause such registration statement to become effective
within 60 days thereafter. The Company will use its best efforts to effect the
registrations, 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 reasonably requested and as would permit or facilitate
that sale and distribution of all Registrable Securities until all Registrable
Securities held by the Investors have been disposed of pursuant to such
registration statement; provided that the Company shall not be obligated to
maintain the effectiveness of the Registration Statement (or any related
qualifications or compliance) following the first anniversary of the date such
Registration Statement is filed. Other holders of registration rights with
respect to the Common Stock shall be permitted to include their shares of Common
Stock in the Registration Statement provided that, in the event the Investors
elect to retain an underwriter in connection with the distribution contemplated
by the Registration Statement, the inclusion in the Registration Statement of
shares of Common Stock held by other holders of registration rights shall be
conditioned on such other holders disposing of such shares of Common Stock
pursuant to the related underwriting agreement.
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7.2 In connection with any registration statement filed pursuant to
Section 7.1, the following provisions shall apply:
(a) The Investors will promptly provide the Company with such information as the
Company shall reasonably request in order to prepare such 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 Registrable Securities shall be
conditioned on the Investors' execution and delivery of a customary underwriting
agreement with respect thereto (it being understood that the Investors shall
have sole authority with respect to retaining an underwriter in connection with
any registration effected requested pursuant to Section 7.1).
(b) All expenses in connection with the preparation of such registration
statement (other than underwriting fees, discounts or commissions and the fees
and disbursements of counsel for the Investors) shall be borne solely by the
Company.
(c) Following the effective date of such registration statement, the Company
shall, upon the request of the Investors, forthwith supply such number of
prospectuses (including preliminary prospectuses and amendments and supplements
thereto) meeting the requirements of the Securities Act or such other 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 the Investors to permit it to make a public distribution of their
Registrable Securities, provided that the Investors furnishes the Company with
such appropriate information relating to the Investors' intentions in connection
therewith as the Company shall reasonably request in writing.
(d) the Company 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 it is required to be maintained.
(e) The Company will as expeditiously as possible to:
(i) notify the Investors 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 the Company
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;
(ii) cause all Registrable Securities covered by the
registration statement to be listed on each securities exchange on which
the Common Stock is then listed, and, unless the same already exists,
provide a transfer agent, registrar and CUSIP number for all such
Registrable Securities not later than the effective date of the
registration statement;
(iii) enter into such customary agreements (including an
underwriting agreement uncustomary form) and take all such other actions
as the Investors or the underwriters, if any, of a registration requested
pursuant to Section 7.1 reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(iv) make available for inspection by the Investors, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by the
Investors or any underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties
of the Company as shall be necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information requested by any such Inspector in
connection with such registration statement, provided that the Company
shall have received appropriate confidentiality undertakings with respect
to such disclosure;
(v) obtain "cold comfort" letters and updates thereof from the
Company's independent public accountants and an opinion from the Company's
counsel in customary form and covering such matters of the type
customarily covered by "cold comfort" letters and opinions of counsel,
respectively, as the investors shall request in connection with any
registration pursuant to Section 7.1; and
(vi) otherwise comply with all applicable rules and
regulations of the Securities and Exchange Commission.
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(f) The Investors agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 7.2 (a)(i), each
Investor will forthwith discontinue disposition of its Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such Investors' receipt of the copies of the supplemented or amended
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
(g) Indemnification.
(i) In the event of the registration or qualification of any
Registrable Securities under the Securities Act or any other
applicable securities laws pursuant to the provisions of this
Section 7, the Company agrees to indemnify and hold harmless
the Investors and each underwriter, broker or dealer, if any,
of such Registrable Securities, and each other person, if any,
who controls the Investors 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 the Investors 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 the
Investors 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 Registrable
Securities were registered or qualified under the Securities
Act or any other applicable securities laws, any preliminary
prospectus or final prospectus relating to such Registrable
Securities, 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 the Company of any rule or regulation under
the Securities Act or any other applicable securities laws
applicable to the Company or relating to any action or
inaction required by the Company in connection with any such
registration or qualification and will reimburse The Investors
and each such underwriter, broker or dealer and each such
controlling person for any legal or other expenses reasonably
incurred by the Investors 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 the Company 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 the Company
by the Investors 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
Registrable Securities under the Securities Act or any other
applicable securities laws for sale pursuant to the provisions
hereof, the Investors, each underwriter, broker and dealer, if
any, of such Registrable Securities, and each other person, if
any, who controls the Investors or any such underwriter,
broker or dealer within the meaning of the Securities Act,
agrees severally, and not jointly, to indemnify and hold
harmless the Company, each person who controls the Company
within the meaning of the Securities Act, and each officer and
director of the Company from and against any losses, claims,
damages or liabilities, joint or several, to which the
Company, 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, 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 Registrable Securities were registered or
qualified under the Securities Act or any other applicable
securities laws, any preliminary prospectus or final
prospectus relating to such Registrable Securities, 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
unconformity with written information furnished to the Company
by the Investors or such underwriter, broker, dealer or
controlling person specifically for use in connection with the
preparation thereof, and will reimburse the Company, 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 The Investors be liable for any amount in excess
of the sales proceeds of the Registrable Securities sold by
it.
(iii) Promptly after receipt by a person entitled to indemnification
under this Section 7.3(c) (an "indemnified party") of notice
of the commencement of any action or claim relating to any
registration statement as to
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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 of
any action, suit, claim or proceeding effected without its
prior written consent, which consent shall not be unreasonably
withheld.
7.4 (a) Each of the Investors agrees to comply with such customary lock-up
or black-out restrictions on transfer as may be requested by the Company or any
underwriter in connection with a public offering of the Company's securities
after the Effective Date, provided that in no event shall the Investors be
required to comply with any such lock-up or black-out for a period in excess of
180 days from the completion of such offering. In the event a request for filing
of the Registration Statement is made prior during such lock-up or black-out,
the Company shall prepare the Registration Statement for filing but shall not be
required to file the Registration Statement prior to the expiration of such
lock-up or black-out. No transfer in violation of this Agreement shall be made
or recorded on the books of the Company and any such Transfer or purported
Transfer shall be void ab initio and of no force or effect.
(b) The Investors agree to suspend, upon request of the Company, any
disposition of Registrable Securities pursuant to the Registration Statement
during any period, not to exceed one 90-day period per 12-month period, if the
Board of Directors of the Company determines in good faith that the disclosure
of material undisclosed circumstances or developments with respect to the
Company would be required in such a prospectus and that such disclosure would
interfere with any material financing, acquisition, merger, reorganization or
other transaction involving the Company, would have an adverse effect on the
Company or is otherwise inadvisable, provided that in such event, the Company
shall furnish to the Investors a certificate signed by its chief executive
officer setting forth in reasonable detail the basis for requesting such
suspension.
7.5 Any registration statement filed pursuant to this Section 7.1
may include other securities of the Company, with respect to which registration
rights have been granted, and may include securities of the Company being sold
for the account of the Company, provided that in the event the related
registration is underwritten, the inclusion of the Registrable Securities sought
to be included in such registration by the Investors shall take priority over
the inclusion of such other securities.
Section 8. Covenants of the Company.
8.1 Use of Proceeds. The Company, without the consent of the
Investors, will not use any of the proceeds of the purchase and sale of
Securities hereunder to (a) repay any indebtedness of the Company owed to
officers, directors, employees or principal stockholders of the Company or (b)
redeem, repurchase or otherwise acquire any equity security of the Company.
8.2 Expenses of the Offering. The Company shall be responsible for
and shall bear all expenses incurred in connection with the transactions
contemplated hereby, provided that the Company shall not be obligated to
reimburse the Investors for in excess of $2,500 of out-of-pocket expenses
incurred by the Investors.
8.3 Blue Sky. The Company shall use its best efforts to qualify the
Securities for offering and sale under exemptions from qualification or
registration requirements under the securities or "blue sky" laws of such
jurisdictions as the Investors may reasonably request; provided, however, that
the Company will not be obligated to qualify as a dealer in securities in any
jurisdiction in
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which it is not so qualified, 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.
8.4 Form D Filing. The Company shall file five copies of a Notice of
Sale of Securities on Form D with the SEC no later than 15 days after the
Effective Date. The Company shall also comply with any filing requirement
imposed by the laws of New York in connection with the transactions contemplated
hereby.
8.5 No Statements. The Company shall not use the name of the
Investors or any officer, director, employee or shareholder thereof without the
express written consent of such party, except to the extent required to comply
with applicable law. On the Effective Date, the Company shall be entitled to
issue a press release relating to the transactions contemplated by this
Agreement with the consent of the Investors, which consent shall not be
unreasonably withheld.
Section 10. Miscellaneous.
10.1 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., 350 South Main Street, Suite 307
Doylestown, PA 18901 Attn: Robert J. Capetola, Ph.D., Chief Executive Officer,
and to the Investors, or either of them, at Paramount Capital Asset Management,
787 Seventh Avenue, 48th Floor, New York, New York 10019 Attn: Lindsay A.
Rosenwald. 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.
10.2 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. Notwithstanding the foregoing, the Investors shall not
be permitted to assign their rights pursuant to Article 7 to any person or
entity acquiring less than 50% of the Shares acquired by the Investors
hereunder.
10.3 This Agreement sets forth the entire agreement and
understanding among the parties as to the subject matter hereof and merges and
supersedes all prior discussions, agreements and understandings pertaining to
the subject matter hereof. This Agreement may be amended only by mutual written
agreement of the Company and the Investors, and the Company may take any action
herein prohibited or omit to take any action herein required to be performed by
it, and any breach of any covenant, agreement, warranty or representation may be
waived, only if the Company has obtained the written consent or waiver of the
Investors.
10.4 (a) 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 that State's conflicts of
law principles. In the event that a judicial proceeding is necessary, the sole
forum for resolving disputes arising out of or relating to this agreement is the
Supreme Court of the State of New York in and for the County of New York or the
Federal Courts for such state and county, and all related appellate courts
(collectively, the "New York Courts"). The parties hereby irrevocably and
unconditionally consent to the jurisdiction of such courts.
(b) Each of the parties hereby irrevocably and unconditionally
consents to venue in the New York Courts, and hereby irrevocably and
unconditionally waives any objection to the laying of venue of any judicial
proceeding in the New York Courts, and agrees not to plead or claim in any such
New York Court that any such judicial proceeding brought in any such court has
been brought in an inconvenient forum.
(c) Each of the parties agree that service of any process, summons,
notice or document by registered or certified mail, postage prepaid, to its
address set forth in Section 10.1 shall be effective service or process for any
suits, actions or other proceedings brought in the New York Courts. The parties
may use any other legally available means for service of process.
(d) Each of the parties waives the right to a trial by jury in any
action under this Agreement or any judicial proceeding arising out of the
transactions contemplated hereby, regardless of which party initiates such
judicial proceeding.
10.5 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.
10.6 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.
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10.7 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. Any documentary, registration, stamp tax or similar issuance or
transfer taxes due as a result of the conveyance, transfer or sale of the Shares
between any of the Investors (or any of their permitted transferees), on the one
hand, and the Company, on the other hand, pursuant to this Agreement shall be
borne by such Investors (or their respective permitted transferees). Except as
otherwise provided in this Agreement, each party will pay its own expenses
incident to this Agreement.
10.8 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.
10.9 Nothing in this Agreement shall create or be deemed to create
in any person or entity not a party to this Agreement any legal or equitable
right, remedy or claim under this Agreement, and this Agreement shall be for the
sole and exclusive benefit of the parties hereto. The parties hereto expressly
recognize that this Agreement is not intended to create a partnership, joint
venture or other similar arrangement between or among any of such parties or
their respective affiliates.
10.10 No press release or other public disclosure relating to the
transactions contemplated by this Agreement shall be issued or made by or on
behalf of any party hereto without prior consultation with the other party,
except as required by applicable law, court process or stock exchange rules, and
except that the parties may issue press releases and make other public
disclosure consistent with the general terms of the transactions contemplated by
this Agreement. In addition, the parties shall agree on the content of the
initial press release regarding such transactions.
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IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the date first above written.
DISCOVERY LABORATORIES, INC.
By: /s/ Evan Myrianthoupoulos
--------------------------------
Name: Evan Myrianthopoulos
Title: Vice President of Finance
ARIES DOMESTIC FUND, L.P.
By: /s/ Lindsay A. Rosenwald
--------------------------------
Name: Lindsay A. Rosenwald
Title: President, Paramount
Capital Asset Management
THE ARIES MASTER FUND, A CAYMAN
ISLAND EXEMPTED COMPANY
By: /s/ Lindsay A. Rosenwald
--------------------------------
Name: Lindsay A. Rosenwald
Title: President, Paramount
Capital Asset Management
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EXHIBIT A
Investor Amount No. of Shares of Common Stock No. of Warrants
- -------- ------ ----------------------------- ---------------
Aries Domestic
Funds, L.P. $195,000 103,723 103,723
The Aries Master $455,000 242,021 242,021
Fund, a Cayman
Island Exempted
Company
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EXHIBIT G
AMENDMENT (this "Amendment") dated as of April 5, 1999 to the STOCK
PURCHASE AGREEMENT (the "Purchase Agreement") dated as of March 31, 1999
among DISCOVERY LABORATORIES, INC., a Delaware corporation (the
"Company"), and ARIES DOMESTIC FUND, L.P., and THE ARIES MASTER FUND, A
CAYMAN ISLAND EXEMPTED COMPANY (the "Investors").
Section 1. Amendment of Purchase Agreement. (a) Section 1.1 of the
Purchase Agreement is hereby amended in its entirety to read as follows:
1.1 On the date hereof, the Company shall issue and sell to
the Investors, and the Investors shall purchase from the Company, (a) an
aggregate of 292,553 shares of Common Stock (the "Shares") at a price of
$1.88 per share (the "Per Share Price") and (b) Warrants to purchase
292,553 shares of Common Stock at an exercise price equal to $2.30 (the
"Per Share Exercise Price"), for an aggregate purchase price of $550,000
(the "Purchase Price"), allocated among the Investors as set forth in
Exhibit A. The Warrants shall be issued in the form of Exhibit B. The
Purchase Price shall be paid by wire transfer of immediately available
funds in United States dollars to the Company, contemporaneously with the
execution and delivery of this Agreement, to an account previously
designated in writing by the Company.
(b) Exhibit A to the Purchase Agreement is amended in its entirety and replaced
with Exhibit A annexed to this Amendment.
Section 2. No Impairment of Purchase Agreement. Except as explicitly
set forth in Section 1 of this Amendment, the Purchase Agreement shall remain
unmodified and in full force and effect.
Section 3. Miscellaneous. This Amendment 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. This Amendment shall be
governed by and construed in accordance with the laws of the State of New York
without regard to conflicts of law rules of such State.
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IN WITNESS WHEREOF, the undersigned have duly executed this
Amendment as of the date first above written.
DISCOVERY LABORATORIES, INC.
By: /s/ Evan Myrianthopoulos
--------------------------------
Name: Evan Myrianthopoulos
Title: Vice President of Finance
ARIES DOMESTIC FUND, L.P.
By: /s/ Lindsay A. Rosenwald
--------------------------------
Name: Lindsay A. Rosenwald
Title: President, Paramount
Capital Asset Management
THE ARIES MASTER FUND, A CAYMAN
ISLAND EXEMPTED COMPANY
By: /s/ Lindsay A. Rosenwald
--------------------------------
Name: Lindsay A. Rosenwald
Title: President, Paramount
Capital Asset Management
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EXHIBIT A
Investor Amount No. of Shares of Common Stock No. of Warrants
- -------- ------ ----------------------------- ---------------
Aries Domestic
Funds, L.P. $165,000 87,766 87,766
The Aries Master $385,000 204,787 204,787
Fund, a Cayman
Island Exempted
Company
21
