Exhibit 1.1
BioDelivery Sciences International, Inc.
Placement Agency Agreement
November 27, 2012
William Blair & Company, L.L.C.,
222 West Adams Street
Chicago, Illinois 60606
JMP Securities LLC
600 Montgomery Street, Suite 1100
San Francisco, CA 94111
Roth Capital Partners,
LLC
888 San Clemente Drive
Newport
Beach, CA 92660
Ladies and Gentlemen:
BioDelivery Sciences International, Inc., a Delaware corporation (the “Company”), proposes, subject to the terms and conditions stated herein, to issue and sell (i) an aggregate of
6,791,887 shares of common stock, par value $.001 per share, of the Company (“Common Stock”) and (ii) an aggregate of up to 2,709,300 shares of Series A Non-Voting Preferred Stock, par value $.001 per share, of the Company (the
“Preferred Stock”) to certain investors (each an “Investor”), in an offering under its registration statement on Form S-3 (Registration No. 333-179257). The aggregate of up to 6,791,887 shares of Common Stock to be sold by
the Company, the up to 2,709,300 shares of Preferred Stock to be sold by the Company and the shares of Common Stock issuable upon conversion of the Preferred Stock are herein collectively called the “Shares.” The Company desires to engage
William Blair & Company, L.L.C. (“William Blair”), JMP Securities LLC (“JMP”) and Roth Capital Partners, LLC (“Roth”) in connection with such issuance and sale of the Shares.
1. The Company represents and warrants to, and agrees with, the Placement Agents (as defined below) that:
(A) A registration statement on Form S-3 (File No. 333-179257) (the “Initial Registration Statement”) in respect of the
Shares has been filed with the Securities and Exchange Commission (the “Commission”) by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the “Act”), and the rules and regulations of the
Commission thereunder; the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to the Placement Agents, and, excluding exhibits thereto but including all documents incorporated by reference
in the prospectus contained therein, to the Placement Agent, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a “Rule 462(b) Registration
Statement”), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Act”), which became effective upon filing, and any preliminary prospectus supplement to the base prospectus included in the Initial
Registration Statement and filed with the Commission pursuant to Rule 424(b) under the Act, no other document with respect to the Initial Registration Statement or document incorporated by reference therein has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission.
Any preliminary prospectus included in the Initial Registration Statement or filed
with the Commission pursuant to Rule 424(b) under the Act, including the base prospectus included in the Initial Registration Statement as supplemented by any preliminary prospectus supplement thereto, is hereinafter called a “Preliminary
Prospectus.”
The various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any,
including all exhibits thereto and including (i) the information contained in the form of
final prospectus, including any prospectus supplement thereto, filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof, and deemed by virtue of
Rule 430B or Rule 430C under the Act to be part of the Initial Registration Statement at the time it was declared effective and (ii) the documents incorporated by reference in the Preliminary Prospectus contained in the Initial Registration
Statement at the time such part of the Initial Registration Statement became effective, each as amended at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement, if any,
became or hereafter becomes effective, are hereinafter collectively called the “Registration Statement.”
The
Preliminary Prospectus relating to the Shares that was included in the Registration Statement immediately prior to the Applicable Time (as defined in Section 1(a)(D) hereof) is hereinafter called the “Pricing Prospectus.”
The Pricing Prospectus, including the base prospectus in the Registration Statement and any prospectus supplement thereto, in the form
first filed pursuant to Rule 424(b) under the Act, is hereinafter called the “Prospectus.”
Any reference herein to
any Preliminary Prospectus, the Pricing Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Act, as of the date of such Preliminary
Prospectus or Prospectus, as the case may be; any reference to any amendment or supplement to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after the date of such Preliminary Prospectus or
Prospectus, as the case may be, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and incorporated by reference in such Preliminary Prospectus or Prospectus, as the case may be; any reference to any amendment to
the Registration Statement shall be deemed to refer to and include any annual report of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective date of the Initial Registration Statement that is incorporated
by reference in the Registration Statement; and any “issuer free writing prospectus” as defined in Rule 405 under the Act prepared by or on behalf of the Company or used or referred to by the Company in connection with the offering of the
Shares is hereinafter called an “Issuer Free Writing Prospectus”);
The Pricing Prospectus, together with the
information included in Schedule I(a) hereto and each Issuer Free Writing Prospectus filed or used by the Company on or before the Applicable Time, other than a road show that is an Issuer Free Writing Prospectus but is not required to be filed
pursuant to Rule 433 under the Act, is hereinafter called the “Pricing Disclosure Package”;
(B) No order preventing
or suspending the use of any Preliminary Prospectus or any Issuer Free Writing Prospectus has been issued by the Commission. Each Preliminary Prospectus, at the time of filing thereof, will conform in all material respects to the requirements of the
Act and the rules and regulations of the Commission thereunder, and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to
the Company by the Placement Agents, expressly for use therein (the “Placement Agent Information”);
(C) Each
document incorporated by reference in the Pricing Disclosure Package and the Prospectus, when it became effective or was filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and any further document so filed and incorporated by reference in the Prospectus or any further amendment or supplement thereto, when such document
becomes effective or is filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder and will not
contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with the Placement Agent Information;
(D) For the purposes of
this Placement Agency Agreement (this “Agreement”), the “Applicable Time” is 6:15 p.m. (Eastern time) on the date of this Agreement. The Pricing Disclosure Package, as of the Applicable Time, did not include any untrue statement
of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Free Writing Prospectus listed on
Schedule I(b) hereto does not conflict with the information contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus and each such Issuer Free Writing Prospectus, as supplemented by and taken together with the
Pricing Disclosure Package as of the Applicable Time, did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this representation and warranty shall not apply to statements or omissions made in the Pricing Disclosure Package in reliance upon and in conformity with the Placement Agent Information;
(E) The Registration Statement, (a) at the time it initially became effective, (b) at the time of each amendment
thereto for purposes of complying with Section 10(a)(3) of the Act (whether by post-effective amendment, incorporated report or form of prospectus), (c) at the time of the first contract of sale for the Shares, and (d) as of the
Closing Date (as defined in Section 4 below), conformed and will conform, and the Prospectus (a) on its date, (b) at the time of filing the Prospectus pursuant to Rule 424(b), and (c) as of the Closing Date, and any further
amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable
effective date as to each part of the Registration Statement and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with the Placement Agent
Information;
(F) Except as set forth, incorporated by reference or described in the Registration Statement, Pricing
Disclosure Package and the Prospectus, since the date of the latest audited financial statements included or incorporated by reference in the Pricing Prospectus, (i) none of the Company or any of its subsidiaries has sustained any material loss
or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or action, order or decree of any court or arbitrator or governmental or regulatory
authority; (ii) there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any
class of capital stock, (iii) neither the Company nor any of its subsidiaries has entered into any transaction or agreement that is material to the Company and its subsidiaries taken as a whole or incurred any liability or obligation, direct or
contingent, that is material to the Company and its subsidiaries taken as a whole and (iv) there has not been any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs,
business, properties, management, financial position, stockholders’ equity, results of operations or prospects of the Company and its subsidiaries, taken as a whole (a “Material Adverse Effect”);
(G) Except as set forth, incorporated by reference or described in the Registration
Statement, Pricing Disclosure Package and Prospectus, the Company and its subsidiaries do not own any real property and have good and marketable title to all personal property owned by them which is material to the business of the Company, in each
case free and clear of all liens, encumbrances and defects except such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and
any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its subsidiaries;
(H) The Company and each of its subsidiaries
(i) have been duly organized and are validly existing and in good standing under the laws of their respective jurisdiction of organization, and have all power and authority necessary to own their respective properties and conduct their
businesses as described in the Pricing Disclosure Package, and (ii) have been duly qualified for the transaction of business and are in good standing under the laws of each other jurisdiction in which they own or lease properties or conduct any
business so as to require such qualification, except in the case of clause (ii), where the failure to be so qualified or in good standing would not have a Material Adverse Effect. The foregoing representation and warranty shall not cover Bioral
Nutrient Delivery, LLC, a Delaware limited liability company (“BND”). As of the date hereof, BND is an inactive, majority owned and controlled subsidiary of the Company, and has no operations, assets or liabilities;
(I) The Company has an authorized capitalization as set forth in the Pricing Prospectus in the column entitled “Actual” under
the caption “Capitalization”; all of the issued shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable and conform in all material respects to the description of the
Shares contained in the Pricing Prospectus and Prospectus; except for BND, all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned
directly or indirectly by the Company, free and clear of all liens, encumbrances or claims; and none of the issued shares of capital stock of the Company was issued in violation of the preemptive or other similar rights of any security holder of the
Company;
(J) The unissued Shares to be issued and sold by the Company to the Investors hereunder have been duly and validly
authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and non-assessable and will conform in all material respects to the description of the Shares contained in the
Prospectus; and the issuance of the Shares will not violate any preemptive or other similar rights of any security holder of the Company;
(K) The execution, delivery and performance of the Company of this Agreement, the issue and sale of the Shares and the compliance by the Company with the terms of this Agreement and the consummation of
the transactions contemplated thereby will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, or (ii) result in any violation of the provisions of the Company’s Certificate of
Incorporation, as amended, Amended and Restated Bylaws, or similar organizational documents of the Company or any of its subsidiaries or any law, statute or any judgment, order, rule or regulation of any
court or governmental or regulatory agency or authority having jurisdiction over the Company or any of its subsidiaries or any of their properties. No consent, approval, authorization, order,
registration or qualification of or with any such court or arbitrator or governmental or regulatory agency or authority is required for the execution, delivery and performance by the Company of this Agreement, the issue and sale of the Shares and
compliance by the Company with the terms of this Agreement or the consummation by the Company of the transactions contemplated by this Agreement, except (i) the registration under the Act of the Shares, (ii) such consents, approvals,
authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws, and (iii) the approval of the Financial Industry Regulatory Agency, Inc. (“FINRA”) of the terms and arrangements in connection
with the purchase and distribution of the Shares by the Investors;
(L) Neither the Company nor any of its subsidiaries is
(i) in violation of its charter or by-laws or similar organizational documents or (ii) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound;
(M) The statements set forth in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2011 under the captions “Description of Business—Overview of
“Specialty Pharmaceuticals” and the 505(b)(2) Regulatory Pathway” and “Description of Business—Government Regulation,” insofar as they purport to describe the provisions of laws, regulations, and documents referred to
therein, are accurate, complete and fair in all material respects;
(N) Except as set forth, incorporated by reference or
described in the Registration Statement, Pricing Disclosure Package and the Prospectus, there are no legal, governmental or regulatory investigations, actions, suits or proceedings pending to which the Company or any of its subsidiaries is or may be
a party or of which any property of the Company or any of its subsidiaries is or may be the subject which, if determined adversely to the Company or any of its subsidiaries, could individually or in the aggregate reasonably be expected to have a
Material Adverse Effect; and, to the Company’s knowledge, no such proceedings are threatened or contemplated by governmental or regulatory authorities or by others;
(O) Neither the Company nor any of its subsidiaries is, and after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Pricing Disclosure
Package, none of them will not be, an “investment company” or an entity “controlled” by an “investment company”, as each such term is defined in the Investment Company Act of 1940, as amended (the “Investment
Company Act”);
(P) The Company was not at the time of filing the Initial Registration Statement and at the earliest time
thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Act) of the Shares, is not on the date hereof and will not be as of the Closing Date an “ineligible issuer,” as
defined under Rule 405 under the Act, and the Company has been since the time of the initial filing of the Initial Registration Statement and continues to be eligible to use Form S-3 for the offering of the Shares;
(Q) Cherry, Bekaert & Holland, L.L.P., which has certified certain financial statements of the Company and its subsidiaries, are
independent public accountants as required by the Act and the rules and regulations of the Commission thereunder;
(R) The
Company maintains a system of “internal control over financial reporting” (as such term is defined in Rule 13a-15(f) under the Exchange Act) that complies with the requirements
of the Exchange Act and has been designed by the Company’s principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company and its subsidiaries maintain
internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, the Company’s internal control over
financial reporting is effective and there are no material weaknesses or significant deficiencies in its internal control over financial reporting;
(S) Since the date of the latest audited financial statements included in the Pricing Prospectus, there has been no change in the Company’s internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting;
(T) The Company maintains “disclosure controls and procedures” (as such term is defined in Rule 13a-15(e) under the Exchange Act) that comply with the requirements of the Exchange Act; such
disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions
regarding required disclosure; and such disclosure controls and procedures are effective;
(U) The Company and its
subsidiaries own, possess, have a license to or have adequate rights to use on reasonable terms, all patents, patent applications, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trademarks, service marks, trade names, domain names, or other intellectual property including registrations and applications for registration thereof (collectively “Intellectual
Property”) necessary to carry on the business now operated by them or as described in the Pricing Disclosure Package to be operated by them. Except as set forth, incorporated by reference or described in the Registration Statement, Pricing
Disclosure Package and the Prospectus (i) to the Company’s knowledge, after due investigation, there are no rights of third parties to any such Intellectual Property except as to third parties who have granted the Company a license
thereto, (ii) to the Company’s knowledge, after due investigation, there is no material infringement, misappropriation or other violation by third parties of any such Intellectual Property, (iii) neither the Company nor any of its
subsidiaries has received any notice of or is otherwise aware of any infringement or misappropriation of, or conflict with, asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any
Intellectual Property invalid or unenforceable in whole or in part, or otherwise inadequate to protect the interest of the Company or any of its subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity, unenforceability or inadequacy, in whole or in part, that would, individually or in the aggregate, result in a Material Adverse Effect, (iv) to the Company’s knowledge, after due investigation, none of the
Intellectual Property used by the Company in its business has been obtained or is being used by the Company in violation of any contractual obligation binding on the Company or in violation of the rights of any third parties, (v) the Company is
not aware of any facts that it believes would form a reasonable basis for a successful challenge that any of its employees are in or have ever been in violation of any
employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or
with a former employer where such violation relates to such employee’s breach of a confidentiality obligation, obligation to assign to the company Intellectual Property, or obligation not to use third party Intellectual Property or other
proprietary rights on behalf of the Company; and (vi) the Company is not a party to or bound by any options, licenses or other agreements with respect to the Company’s or any third party’s Intellectual Property that are required to be
set forth on the Prospectus, but are not described in all material respects in the Prospectus;
(V) Except in each case as set
forth, incorporated by reference or described in the Registration Statement, Pricing Disclosure Package and the Prospectus, the Company and its subsidiaries (i) are and at all times have been in material compliance with all federal, state,
local and foreign statutes, rules and regulations applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, handling, marketing, labeling, advertising, promotion, sale, offer for sale, storage, import,
export or disposal of any product under development, subject to an approved New Drug Application, or manufactured or distributed by or on behalf of the Company or its subsidiaries, including, without limitation, the Federal Food, Drug, and Cosmetic
Act and the Controlled Substances Act (“Industry Laws”); (ii) have not received any FDA Form 483, notice of adverse finding, warning letter, untitled letter or other similar correspondence or notice from the U.S. Food and Drug
Administration (the “FDA”), the Drug Enforcement Administration (the “DEA”) or any other federal, state, local or foreign governmental or regulatory authority alleging or asserting material noncompliance with any Industry Laws or
any licenses, certificates, approvals, clearances, authorizations, permits, registrations and supplements or amendments thereto required by any such Industry Laws (“Healthcare Permits”); (iii) possess all material Healthcare Permits,
which are valid and in full force and effect, and are not in material violation of any term of any such Healthcare Permit, and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination of any
Healthcare Permit or results in any other material impairment of the rights of the holder of any Healthcare Permit; (iv) have not received notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other
action from the FDA, DEA or any other federal, state, local or foreign governmental or regulatory authority or third party alleging that any product operation or activity is in material violation of any Industry Laws or Healthcare Permits, and have
no knowledge that the FDA, DEA or any other federal, state, local or foreign governmental or regulatory authority or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; (v) have not
received notice that the FDA, DEA or any other federal, state, local or foreign governmental or regulatory authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any material Healthcare Permit, and have no
knowledge that the FDA, DEA or any other federal, state, local or foreign governmental or regulatory authority is considering such action; (vi) have filed, obtained, maintained or submitted all material reports, documents, forms, notices,
applications, records, claims, submissions and supplements or amendments as required by any Industry Laws or Healthcare Permits, and all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or
amendments were materially complete and correct on the date filed (or were corrected or supplemented by a subsequent submission); and (vii) have not, either voluntarily or involuntarily, initiated, conducted, or issued or caused to be
initiated, conducted or issued, any recall, correction, market withdrawal or replacement, safety alert, post-sale warning, “dear doctor” letter, or other notice or action relating to the alleged lack of safety or efficacy of any product or
any alleged product defect or violation and, to the knowledge of the Company, no third party has initiated, conducted or intends to initiate any such notice or action.
(W) (i) To the Company’s knowledge, the preclinical and clinical trials conducted by or on behalf of the Company and its subsidiaries were and, if still ongoing, are being conducted in all material
respects in accordance with experimental protocols, procedures and controls pursuant to accepted professional scientific standards and all Industry Laws and Healthcare Permits; (ii) the descriptions of the
results of such studies, tests and trials contained or incorporated by reference in the Pricing Disclosure Package are accurate and complete in all material respects and fairly present the data
derived from such studies, tests and trials; (iii) except to the extent disclosed in each of the Pricing Disclosure Package, the Company is not aware of any studies, tests or trials, the results of which the Company believes reasonably call
into question the study, test, or trial results described or referred to in the Pricing Disclosure Package when viewed in the context in which such results are described and the clinical state of development; and (iv) except as set forth,
incorporated by reference or described in the Registration Statement, Pricing Disclosure Package and the Prospectus, since December 31, 2007, the Company has not received any notices or correspondence from the FDA or any other federal, state,
local or foreign governmental or regulatory authority requiring the termination, suspension or material modification of any studies, tests or preclinical or clinical trials conducted by or on behalf of the Company.
(X) (i) Each of the Company and its subsidiaries and, to the knowledge of the Company, their directors, officers, employees, and agents
is, and at all times has been, in material compliance with all applicable healthcare laws and regulations, including, without limitation, the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)), the Anti-Inducement Law (42 U.S.C. §
1320a-7a(a)(5)), the civil False Claims Act (31 U.S.C. §§ 3729 et seq.), the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320d et seq.),
as amended by the Health Information Technology for Economic and Clinical Health Act (42 U.S.C. §§ 17921 et seq.), the exclusion laws (42 U.S.C. § 1320a-7), and the Food Drug and Cosmetic Act (21 U.S.C. §§ 301 et seq.),
Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of the Social Security Act), the regulations promulgated pursuant to such laws, and any other state or federal law, accreditation standards, regulation, guidance document, manual
provision, program memorandum, opinion letter, or other issuance which regulates kickbacks, patient or program charges, recordkeeping, claims process, documentation requirements, medical necessity, referrals, the hiring of employees or acquisition
of services or supplies from those who have been excluded from government health care programs, quality, safety, privacy, security, licensure, accreditation or any other aspect of providing health care or pharmaceutical services (collectively, the
“Health Care Laws”); (ii) neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, employee, agent, employee or affiliate of the Company or any of its subsidiaries, have committed
any act, made any statement or failed to make any statement that would reasonably be expected to provide a basis for the FDA or any other governmental or regulatory authority to invoke its policy with respect to “Fraud, Untrue Statements of
Material Facts, Bribery, and Illegal Gratuities,” or similar policies, set forth in any Health Care Law; (iii) neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, employee, agent,
employee or affiliate of the Company or any of its subsidiaries has been convicted of any crime or engaged in any conduct that has resulted, or would reasonably be expected to result, in debarment under any Health Care Law, including, without
limitation, 21 U.S.C. Section 335a; (iv) no claims, actions, proceedings or investigations that would reasonably be expected to result in such a material debarment or exclusion are pending or, to the knowledge of the Company, threatened,
against the Company, its subsidiaries or, to the knowledge of the Company, any director, officer, employee, agent, employee or affiliate of the Company or any of its subsidiaries; (v) neither the Company nor any of its subsidiaries has received
any notification, correspondence or any other written or oral communication from any governmental or regulatory entity (including, without limitation, the FDA, DEA, the Centers for Medicare and Medicaid Services, and the Department of Health and
Human Services Office of Inspector General) of potential or actual material non-compliance by, or liability of, the Company or any of its subsidiaries under any Health Care Law; (vi) neither the Company nor any of its subsidiaries is a party to
any corporate integrity agreements, monitoring agreements, consent decrees, settlement orders, or similar agreements with or imposed by any governmental or regulatory entity; and (vii) the manufacture of Company’s and its subsidiaries
products by or on behalf of the Company and/or its subsidiaries is being conducted in compliance in all material respects with all applicable Laws, including, without limitation, the FDA’s current good manufacturing practice regulations for
products in the United States, and the respective counterparts thereof promulgated by governmental and regulatory authorities in countries outside the United States;
(Y) (i) The financial statements, including the notes thereto, and the supporting
schedules included or incorporated by reference in the Registration Statement, the Pricing Prospectus and the Prospectus present fairly in all material respects the financial position at the dates indicated and the cash flows and results of
operations for the periods indicated of the Company and its consolidated subsidiaries (the Placement Agents are advised, however (but without qualification or exception to the foregoing representation) that, as disclosed in Part II, Item 5 to
the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2012, the Company has received comment letters from, and is presently engaged in discussion with, the staff of the Commission regarding the Company’s
recognition of revenue under its January 2012 agreement with Endo Pharmaceuticals, Inc. and that no resolution to such comments is in place as of the date of this Agreement); (ii) except as otherwise stated in the Registration Statement, the
Pricing Prospectus and the Prospectus, such financial statements have been prepared in conformity with GAAP applied on a consistent basis throughout the periods involved; and the supporting schedules, if any, included or incorporated by reference in
the Registration Statement, the Pricing Prospectus and the Prospectus present fairly the information required to be stated therein (iii) no other financial statements or supporting schedules are required to be included in the Registration
Statement and (iv) the other financial and related statistical information included or incorporated by reference in the Registration Statement, the Pricing Prospectus and the Prospectus has been derived from the accounting records of the
Company and its subsidiaries, presents fairly in all material respects the information included therein and has been prepared on a basis consistent with that of the financial statements that are included or incorporated by reference in the
Registration Statement, the Pricing Prospectus and the Prospectus and the books and records of the respective entities presented therein;
(Z) There are no off-balance sheet arrangements (as defined in Regulation S-K Item 303(a)(4)(ii)) that may have a material current or future effect on the Company’s financial condition,
changes in financial condition, results of operations, liquidity, capital expenditures or capital resources;
(AA) Since the
date as of which information is given or incorporated by reference in the Pricing Prospectus, and except as may otherwise be set forth, incorporated by reference or described in the Registration Statement, Pricing Disclosure Package and the
Prospectus, the Company has not (i) issued or granted any securities, other than pursuant to employee benefit plans, stock option plans or other employee compensation plans disclosed in the Pricing Prospectus or pursuant to outstanding options,
rights or warrants, (ii) incurred any material liability or obligation, direct or contingent, other than liabilities and obligations which were incurred in the ordinary course of business, (iii) entered into any material transaction not in
the ordinary course of business or (iv) declared or paid any dividends on its capital stock;
(BB) The Company has not
sold or issued any shares of Common Stock during the six-month period preceding the date of the Prospectus, including any sales pursuant to Regulation D of, the Act, other than (i) shares issued pursuant to employee benefit plans, stock option
plans or other employee compensation plans or pursuant to outstanding options, rights or warrants, or (ii) as set forth, incorporated by reference or described in the Registration Statement, Pricing Disclosure Package and the Prospectus;
(CC) There are no contracts or other documents which are required to be described in the Registration Statement, the Pricing
Prospectus or the Prospectus or to be filed as an exhibit to the Registration Statement which have not been described or filed as required;
(DD) Except as described in the Pricing Disclosure Package, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the
Company or the Placement Agents for a brokerage commission, finder’s fee or other like payment in connection with this offering;
(EE) Except as set forth, incorporated by reference or described in the Registration
Statement, Pricing Disclosure Package and the Prospectus, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Act
with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant
to any other registration statement filed by the Company under the Act;
(FF) The holders of outstanding shares of the
Company’s capital stock are not entitled to preemptive or other rights to subscribe for the Shares that have not been complied with or otherwise effectively waived;
(GG) The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and
Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any
governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with
respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened;
(HH) Neither the Company nor
any of its subsidiaries nor any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department
(“OFAC”); and the Company will not directly or indirectly use the proceeds of the offering of the Shares, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for
the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC;
(II) The
Company has not taken and will not take, directly or indirectly, any action which is designed to or which has constituted or which would reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;
(JJ) Neither the Company nor any of its subsidiaries nor any
director, officer, agent or employee of the Company or any of its subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any
direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment;
(KK) The statistical and market-related data included
in the Pricing Disclosure Package are based on or derived from sources which the Company believes are reliable and accurate;
(LL) No “nationally recognized statistical rating organization,” as that term is defined by the Commission in
Section 3(a)(62) of the Exchange Act has issued a rating on the credit of the Company or any debt securities or preferred stock of the Company;
(MM) The Company and each of its subsidiaries carry, or are covered by, insurance from
insurers of recognized financial responsibility in such amounts and covering such risks as the Company and its subsidiaries reasonably believe is adequate for the conduct of their respective businesses and the value of their respective properties;
there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying coverage or defending under a reservation of rights clause, except as would not reasonably be expected to
have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage at
reasonable cost from similar insurers as may be necessary to continue its business;
(NN) The Company and its subsidiaries
have filed all foreign, federal, state and local tax returns required to be filed by them through the date hereof, or have duly requested extensions thereof, and have paid all taxes shown as due thereon, and all such tax returns are true and correct
in all material respects. No deficiencies for taxes of the Company or its subsidiaries have been assessed by a tax authority, and no deficiencies for taxes of the Company or its subsidiaries have, to the Company’s knowledge, been proposed by a
tax authority, except for such deficiencies as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;
(OO) Except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Company and each of its subsidiaries have such permits, licenses, patents,
franchises, exemptions, clearances, approvals, registrations, certificates of need and other approvals or authorizations of governmental or regulatory authorities (“Permits”) as are necessary under applicable law to own their properties
and conduct their businesses in the manner described in the Pricing Prospectus and the Prospectus; each of the Company and its subsidiaries has fulfilled and performed all of its obligations with respect to the Permits and all such Permits are in
full force and effect; and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other impairment of the rights of the holder or any such Permits;
(PP) Except as set forth, incorporated by reference or described in the Registration Statement, Pricing Disclosure Package and the
Prospectus, no relationship, direct or indirect, exists between or among the Company, on the one hand, and the directors, officers, shareholders, customers or suppliers of the Company, on the other hand, that is required to be disclosed in the
Pricing Prospectus and the Prospectus pursuant to Section 404 of Regulation S-K;
(QQ) No labor disturbance by or dispute
with employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is contemplated or threatened and the Company is not aware of any existing or imminent labor disturbance by, or dispute with, the employees of any
of the Company’s or any of the Company’s subsidiaries’ principal suppliers, manufacturers, contractors or customers, in each case except as could not reasonably be expected to have a Material Adverse Effect; and
(RR) Except as disclosed in the Pricing Prospectus and the Prospectus, neither the Company nor any of its subsidiaries is in violation of
any statute, any rule, regulation, decision or order of any governmental authority or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the
environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site
disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any environmental laws, which violation, contamination, liability or claim would individually or in the aggregate be reasonably expected to have a
Material Adverse Effect; and the Company is unaware of any pending investigation which might lead to such a claim.
2. (a) On the basis of the representations, warranties and agreements of the Company herein
contained, and subject to all the terms and conditions of this Agreement, William Blair shall be the Company’s sole lead placement agent and JMP and Roth shall each be a co-placement agent (in such capacity, together, the “Placement
Agents,” “you” or similar terminology), on a reasonable best efforts basis, in connection with the issuance and sale by the Company of the Shares to the Investors in a proposed offering under the Registration Statement, with the terms
of the offering to be subject to market conditions and negotiations between the Company, the Placement Agents and the prospective Investors (such offering shall be referred to herein as the “Offering”). The Company may also, in its sole
discretion, retain (and compensate with the proceeds of the offering) FINRA member financial advisors in connection with the proposed offering. As compensation for services rendered, and provided that any of the Shares are sold to Investors in the
Offering, on the Closing Date (as defined below), the Company shall pay to the Placement Agents an amount in the aggregate equal to the placement fee set forth in Schedule II hereto (the “Placement Fee”). The Placement Fee shall be
allocated among the Placement Agents as they may agree. Additionally, the Company shall pay to William Blair an amount equal to the corporate finance fee set forth on Schedule III hereto (the “Corporate Finance Fee”). The sale of the
Shares shall be made pursuant to a form of Subscription Agreement to be entered into between the Company and each Investor, in the form included as Exhibit A hereto (each, a “Subscription Agreement” and collectively, the “Subscription
Agreements”), on the terms described therein. The Company shall have the sole right to accept offers to purchase the Shares and may reject any such offer in whole or in part. Notwithstanding the foregoing, it is understood and agreed that the
Placement Agents or any of their respective affiliates may, solely at their discretion and without any obligation to do so, purchase Shares as principal; provided, however, that any such purchases by the Placement Agents (or their respective
affiliates) shall be fully disclosed to the Company and approved by the Company in accordance with the previous sentence.
(b)
This Agreement shall not give rise to any commitment by the Placement Agents to purchase any of the Shares, and the Placement Agents shall have no authority to bind the Company to accept offers to purchase the Shares. Each of the Placement Agents
shall act on a reasonable best efforts basis and does not guarantee that it will be able to raise new capital in the Offering. The Placement Agents may retain other brokers or dealers to act as sub-agents on their behalf in connection with the
Offering, the fees of which shall be paid out of the Placement Fee. Prior to the earlier of (i) the date on which this Agreement is terminated and (ii) the Closing Date, the Company shall coordinate its efforts with respect the offering of
the Shares with the Placement Agents, although the Company shall be free to communicate with potential Investors without the knowledge or presence of the Placement Agents.
3. [Intentionally Omitted.]
4. (a) Payment of the purchase price for, and
delivery of, the Shares shall be made at a closing (the “Closing”) to occur on or before December 3, 2012 or on such other date as may be agreed upon in writing by William Blair and the Company (the “Closing Date”), and of which
each Investor will be notified in advance by William Blair, in accordance with Rule 15c6-1 promulgated under the Exchange Act. At the Closing, the Shares to be purchased by each Investor hereunder, in uncertificated form, and in such authorized
denominations and registered in such names as the Investor may request upon at least forty-eight hours’ prior notice to the Company shall be delivered by or on behalf of the Company to the Investor through the facilities of the Depository Trust
Company (“DTC”) or its designated custodian (the “Custodian”), for the account of each Investor, or at the option of the Investor, through physical delivery of the Shares, in each case against payment by or on behalf of each
Investor of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified by the Company and the Custodian to the Investor at least forty-eight hours in advance. If the Company shall default in its obligations to
deliver the Shares to an Investor whose offer it has accepted, the Company shall indemnify and hold the Placement Agents harmless against any loss, claim or damage incurred by the Placement Agents arising from or as a result of such default by the
Company.
(b) The documents to be delivered at the Closing by or on behalf of the parties hereto pursuant to Section 8
hereof, including any additional documents requested by the Placement Agents
pursuant to Section 8(k) hereof, will be delivered at the offices of Latham & Watkins LLP, 233 S. Wacker Drive, Suite 5800, Chicago, IL 60606 or remotely by facsimile or e-mail/.pdf
transmission, as agreed to by the Company and the Placement Agents, and the Shares will be delivered to the Custodian, all as of the Closing. For the purposes of this Section 4, “New York Business Day” shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City are generally authorized or obligated by law or executive order to close.
5. The Company agrees with the Placement Agents:
(a) To prepare the Prospectus
in a form approved by you and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission’s close of business on the second business day following the execution and delivery of this Agreement; to make no further
amendment or any supplement to the Registration Statement or the Prospectus prior to the Closing Date which shall be reasonably disapproved by William Blair promptly after reasonable notice thereof (other than an amendment or supplement which the
Company believes, based on advice of legal counsel, it is required by law to file or use); to file in a timely manner all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Shares; to advise you, promptly after it
receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any amendment or supplement to the Prospectus has been filed and to furnish you with copies thereof if requested by you; to
file promptly all material required to be filed by the Company with the Commission pursuant to Rule 433(d) under the Act; to advise you, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or other prospectus in respect of the Shares, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any
proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or other prospectus or suspending any such qualification, to promptly use its reasonable best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares,
provided that in connection therewith the Company shall not be required to (i) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify,
(ii) file a general consent to service of process in any jurisdiction or (iii) subject itself to taxation in any jurisdiction if it is not otherwise so subject;
(c) Prior to 10:00 a.m., New York City time, on the second New York Business Day next succeeding the date of this Agreement and from time to time, to furnish the Placement Agents with written and
electronic copies of the Prospectus in New York City in such quantities as you may reasonably request, and, if the delivery of a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is required at any time prior to
the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Shares and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus (or in lieu thereof, the notice
referred to in Rule 173(a) under the Act) is delivered, not misleading, or, if for any
other reason it shall be necessary during such period to amend or supplement the Prospectus or to file under the Exchange Act any document incorporated by reference in the Prospectus in order to
comply with the Act or the Exchange Act, to notify you and upon your request to file such document and to prepare and furnish without charge to the Placement Agents and to any dealer in securities as many written and electronic copies as you may
from time to time reasonably request under the circumstances of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance, and in case the Placement Agents are required to deliver
a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) in connection with sales of any of the Shares at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense of
the Placement Agents, to prepare and deliver to the Placement Agents as many written and electronic copies as you may reasonably request under the circumstances of an amended or supplemented Prospectus complying with Section 10(a)(3) of the
Act;
(d) To make generally available to its security holders (which may be satisfied by filing with the Commission’s
Electronic, Gathering, Analysis and Retrieval System (“EDGAR”)) as soon as practicable, but in any event not later than sixteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an
earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158);
(e) To reserve and keep available at all times a sufficient number of shares of Common Stock for the purpose of enabling the
Company to issue the shares of Common Stock issuable upon conversion of the Preferred Stock;
(f) To use the net proceeds
received by it from the sale of the Shares pursuant to this Agreement in the manner specified in the Pricing Prospectus under the caption “Use of Proceeds”;
(g) To use its reasonable best efforts to list, subject to notice of issuance, the Shares on the NASDAQ Capital Market (the “Exchange”); and
(h) If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act;
6. The Company agrees with the Placement
Agents that:
(a) Without the prior consent of William Blair, it has not made and will not make any offer relating to the
Shares that would constitute a “free writing prospectus” as defined in Rule 405 under the Act; the Placement Agents represent and agrees that, without the prior consent of the Company and the Placement Agent, it has not made and will not
make any offer relating to the Shares that would constitute a free writing prospectus; any such free writing prospectus the use of which has been consented to by the Company and the Placement Agents is listed on Schedule I(b) hereto;
(b) The Company has complied and will comply with the requirements of Rule 433 under the Act applicable to any Issuer Free Writing
Prospectus, including timely filing with the Commission or retention where required and legending; and the Company represents that it has satisfied and agrees that it will satisfy the conditions under Rule 433 under the Act to avoid a requirement to
file with the Commission any electronic road show; and
(c) If at any time following issuance of an Issuer Free Writing Prospectus any event
occurred or occurs as a result of which such Issuer Free Writing Prospectus would conflict with the information in the Registration Statement, the Pricing Prospectus or the Prospectus or would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements therein, in the light of the circumstances then prevailing, not misleading, the Company will give prompt notice thereof to William Blair and, if requested by William Blair, will
prepare and furnish without charge to the Placement Agents an Issuer Free Writing Prospectus or other document which will correct such conflict, statement or omission; provided, however, that this covenant shall not apply to any statements or
omissions in an Issuer Free Writing Prospectus made in reliance upon and in conformity with the Placement Agent Information.
7. The Company covenants and agrees with the Placement Agents that (a) the Company will pay or cause to be paid the following:
(i) the fees, disbursements and expenses of the Company’s counsel and accountants in connection with the registration of the Shares under the Act and all other expenses in connection with the preparation, printing, reproduction and filing
of the Registration Statement, the Pricing Prospectus, any Issuer Free Writing Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Placement Agents and dealers; (ii) the
cost of printing or producing any of this Agreement, Closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (iii) all expenses in connection
with the qualification of the Shares for offering and sale under state securities laws as provided in Section 5(b) hereof; (iv) all fees and expenses in connection with listing the Shares on the Exchange; (v) the cost of preparing
stock certificates; (vi) the cost and charges of any transfer agent or registrar; (vii) the customary, accountable out-of-pocket expenses of the Placement Agents in connection with its services hereunder, up to a maximum of $10,000; and
(viii) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section. It is understood and agreed that, except as provided in this Section and Sections 9
and 12 hereof, in connection with hosting meetings with prospective purchasers of the Shares and investor presentations on any “road show” undertaken in connection with the marketing of the offering of the Shares, the Company and the
Placement Agents will each pay their own costs associated with travel, hotel accommodations and any other costs and expenses. It is understood, however, that the Company shall bear the cost of any other matters not directly relating to the sale and
purchase of the Shares pursuant to this Agreement, and that, except as provided in this Section, and Sections 9 and 12 hereof, the Placement Agents will pay all of their own costs and expenses, including without limitation the fees of its counsel,
stock transfer taxes on resale of any of the Shares by them, and any advertising expenses connected with any offers they may make.
8. The obligations of the Placement Agents hereunder, as to the Shares to be delivered at the Closing, shall be subject, in the discretion of William Blair, to the condition that all representations and
warranties and other statements of the Company herein are, at and as of the Closing, true and correct, the condition that the Company shall have performed all of its respective obligations hereunder theretofore to be performed, and the following
additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) under the Act
within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; all material required to be filed by the Company pursuant to Rule 433(d) under the Act shall
have been filed with the Commission within the applicable time period prescribed for such filing by Rule 433; if the Company has elected to rely upon Rule 462(b) under the Act, the Rule 462(b) Registration Statement shall have become effective by
10:00 P.M., Washington, D.C. time, on the date of this Agreement; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; no stop order suspending or preventing the use of the
Prospectus or any Issuer Free Writing Prospectus shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have
been complied with to your reasonable satisfaction;
(b) Latham & Watkins LLP, counsel for the Placement Agents,
shall have furnished to you such written opinion or opinions, dated as of the Closing Date, in form and substance satisfactory to you, with respect to such matters as you may reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such matters;
(c) Ellenoff Grossman & Schole
LLP, corporate and securities counsel for the Company, shall have furnished to you and the Investors their written opinions, addressed to you and the Investors and dated as of the Closing Date, in form and substance satisfactory to you.
(d) McCarter & English, LLP, intellectual property counsel for the Company, shall have furnished to you and the Investors their
written opinion, addressed to you and the Investors and dated as of the Closing Date, in form and substance satisfactory to you.
(e) On the date of the Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m., New York City time, on the effective date of any post-effective amendment to the Registration Statement
filed subsequent to the date of this Agreement and also as of the Closing Date, Cherry, Bekaert & Holland, L.L.P. shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance
satisfactory to you, which letters shall cover, without limitation, the various financial disclosures contained in the Registration Statement, the Preliminary Prospectuses and the Prospectus;
(f) (i) The Company and its subsidiaries, taken as a whole, shall not have sustained since the date of the latest audited financial
statements incorporated by reference in the Pricing Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or action, order
or decree of any court or arbitrator or regulatory authority, in each case otherwise than as set forth or contemplated in the Pricing Disclosure Package, and (ii) since the respective dates as of which information is given in the Pricing
Prospectus, there shall not have been any change in the capital stock or long-term debt of the Company and its subsidiaries, taken as a whole, or any change, or any development involving a prospective change, in or affecting the general affairs,
business, properties, management, financial position, stockholders’ equity, results of operations or prospects (as such prospects are described in the Pricing Disclosure Package) of the Company and its subsidiaries, taken as a whole, otherwise
than as set forth or contemplated in the Pricing Disclosure Package, the effect of which, in any such case described in clause (i) or (ii), is in your reasonable judgment so material and adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being delivered at the Closing on the terms and in the manner contemplated in the Prospectus;
(g) On or after the Applicable Time there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the Exchange; (ii) a
suspension or material limitation in trading in the Company’s securities on the Exchange; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption in
commercial banking or securities settlement or clearance services in the United States; (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or
(v) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v) in your judgment makes
it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at the Closing on the terms and in the manner contemplated in the Prospectus;
(h) The Shares to be sold at the Closing shall have been duly listed, subject to notice of
issuance, on the Exchange;
(i) [Intentionally Omitted];
(j) The Company shall have complied with the provisions of Section 5(c) hereof with respect to the furnishing of copies of the
Prospectus on the second New York Business Day next succeeding the date of this Agreement; and
(k) The Company shall have
furnished or caused to be furnished to the Placement Agents at the Closing certificates of officers of the Company reasonably satisfactory to you as to the accuracy of the representations and warranties of the Company herein at and as of the
Closing, as to the performance by the Company of all of its obligations hereunder to be performed at or prior to the Closing, and as to such other matters as you may reasonably request, and the Company shall have furnished or caused to be furnished
certificates as to the matters set forth in subsections (a) and (e) of this Section.
9. (a) The Company will
indemnify and hold harmless the Placement Agents against any losses, claims, damages or liabilities, joint or several, to which the Placement Agents may become subject, under the Act or otherwise (including in settlement of any litigation if such
settlement is effected with the written consent of the Company), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based (i) upon an untrue statement or alleged untrue statement of a
material fact contained or incorporated by reference in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus, any “issuer
information” filed or required to be filed pursuant to Rule 433(d) under the Act or any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Shares (the
“Marketing Materials”), including any roadshow or investor presentations made to investors by the Company (whether in person or electronically), 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 (ii) in whole or in part upon any inaccuracy in the representations and warranties of the Company contained herein; or (iii) in whole or in
part upon any failure of the Company to perform its obligations hereunder or under law; and will reimburse the Placement Agents for any reasonable legal or other expenses reasonably incurred by the Placement Agents in connection with investigating
or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall 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 alleged untrue statement or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing
Prospectus or in any Marketing Materials, in reliance upon and in conformity with the Placement Agent Information.
(b) Each
Placement Agent, severally and not jointly, will indemnify and hold harmless the Company from and against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the Placement Agents), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, 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, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, in reliance upon and in conformity with
information concerning such Placement Agent Information furnished in writing by or on behalf of the Placement Agents to the Company by the Placement Agent expressly for use therein; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred. Notwithstanding the provisions of this Section 9(b), in no event shall any indemnity by any Placement Agents
under this Section 9(b) exceed its pro rata share of the Placement Fee.
(c) Promptly after receipt by an indemnified party
under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection except to the extent such indemnifying
party has been materially prejudiced by such failure (through the forfeiture of substantive rights or defenses). In case any such action shall be brought against any indemnified party, and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense
thereof other than reasonable costs of investigation. An indemnifying party shall not be obligated under any settlement agreement relating to any action under this Section 6 to which it has not agreed in writing. No indemnifying party shall,
without the written consent of the indemnified party (which consent shall not be unreasonably withheld or delayed), effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(d) If the indemnification provided for in this Section 9 is unavailable to or insufficient to hold harmless an
indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Placement
Agents on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection
(c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the
one hand and the Placement Agents on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Placement Agents on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the
total Placement Fee received by the Placement Agents, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Placement Agents on the other and the parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Placement Agents agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include any reasonable legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), the Placement Agents shall not be required to contribute any amount in excess of the amount by which the total Placement Fee exceeds the amount of any damages which such Placement Agent has
otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company
under this Section 9 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Placement Agents within the meaning of the Act and
each broker-dealer affiliate of the Placement Agents; and the obligations of the Placement Agents under this Section 9 shall be in addition to any liability which the Placement Agents may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if any, who controls the Company within the meaning of the Act.
10. [Intentionally Omitted.]
11. The respective indemnities, agreements,
representations, warranties and other statements of the Company and the Placement Agents, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on behalf of the Placement Agent or any controlling person of the Placement Agent, or the Company or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
12. If any condition specified in Section 8 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the Placement Agents by notice to the Company at any time on or prior to the Closing Date. Upon such termination, the Company shall then not be under any liability to the Placement Agent
except as provided in Sections 7 and 9 hereof.
13. [Intentionally Omitted.]
14. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Placement Agents shall be delivered or
sent by mail, nationally recognized overnight courier, telex or facsimile transmission to you as the Placement Agents in care of William Blair & Company, L.L.C., 222 West Adams Street, Chicago, IL 60606, Fax Number: (312) 551-4646,
Attention: General Counsel; and if to the Company shall be delivered or sent by mail, nationally recognized overnight courier, or facsimile transmission with a copy sent by E-mail to the address of the Company set forth in the Registration
Statement, Attention: General Counsel.
In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)), the Placement Agents are required to obtain, verify and record information that identifies their respective clients, including the Company, which information may include the name and address of their
respective clients, as well as other information that will allow the Placement Agents to properly identify their respective clients.
15. This Agreement shall be binding upon, and inure solely to the benefit of, the Placement Agents and the Company and, to the extent provided in Sections 9 and 11 hereof, the officers and directors of
the Company and each person who controls the Company or the Placement Agents, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No
purchaser of any of the Shares shall be deemed a successor or assign by reason merely of such purchase. Notwithstanding the foregoing, the Investors are relying on the representations, warranties, covenants and agreements made by the Company under,
and are intended third party beneficiaries of, this Agreement.
16. Time shall be of the essence of this Agreement. As used
herein, the term “business day” shall mean any day when the Commission’s office in Washington, DC is open for business.
17. The Company acknowledges and agrees that (i) the Placement Agents have not assumed an advisory or fiduciary responsibility in favor of the Company with respect to the offering contemplated hereby
or the process leading thereto (irrespective of whether the Placement Agents have advised or are currently advising the Company on other matters) or any other obligation to the Company except the obligations expressly set forth in this Agreement and
(ii) the Company has consulted its own legal and financial advisors to the extent it deemed appropriate. The Company agrees that it will not claim that the Placement Agents, or any of them, has, in connection with the transactions contemplated
hereby, rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.
18. This Agreement supersedes all prior agreements and understandings (whether written or oral) between or among the Company and the
Placement Agents with respect to the subject matter hereof.
19. THIS AGREEMENT AND ANY MATTERS RELATED TO THIS TRANSACTION
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS THAT WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAWS OF THE STATE OF NEW YORK. The Company agrees
that any suit or proceeding arising in respect of this agreement or our engagement will be tried exclusively in the U.S. District Court for the Southern District of New York or, if that court does not have subject matter jurisdiction, in any state
court located in The City and County of New York and the Company agrees to submit to the jurisdiction of, and to venue in, such courts.
20. The Company and the Placement Agents hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating
to this Agreement or the transactions contemplated hereby.
21. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. Such counterparts may be delivered by facsimile or by e-mail delivery of
a “pdf” format data file, which counterparts shall be valid as if original and which delivery shall be valid delivery thereof
22. Notwithstanding anything herein to the contrary, the Company is authorized to disclose
to any persons the U.S. federal and state income tax treatment and tax structure of the potential transaction and all materials of any kind (including tax opinions and other tax analyses) provided to the Company relating to that treatment and
structure, without the Placement Agents imposing any limitation of any kind. However, any information relating to the tax treatment and tax structure shall remain confidential (and the foregoing sentence shall not apply) to the extent necessary to
enable any person to comply with securities laws. For this purpose, “tax structure” is limited to any facts that may be relevant to that treatment.
23. If any term or other provision of this Agreement shall be held invalid, illegal or unenforceable, the validity, legality or enforceability of the other provisions of this Agreement shall not be
affected thereby, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue.
24. Except as otherwise expressly provided herein, the provisions of this Agreement may be amended or waived at any time only by the written agreement of the parties hereto. Any waiver, permit, consent or
approval of any kind or character on the part of any such holders of any provision or condition of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in writing. The failure of any party hereto to
enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every
such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.
[Remainder of page intentionally left blank]
If the foregoing is in accordance with your understanding, please sign and return to us six counterparts
hereof, and upon the acceptance hereof by you, this Agreement and such acceptance hereof shall constitute a binding agreement among the Placement Agents and the Company.
[Signature Pages Follow]
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Very truly yours,
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BioDelivery Sciences International, Inc.
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By:
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/s/ Mark A. Sirgo
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Name: Mark A. Sirgo
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Title: President and Chief Executive Officer
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William Blair & Company, L.L.C.
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By:
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/s/ Brent Felitto
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Name:
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Brent Felitto
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Title:
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Principal
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JMP Securities LLC
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By:
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/s/ Stephen P. Ortiz
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Name:
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Stephen P. Ortiz
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Title:
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Managing Director
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Roth Capital Partners
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By:
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/s/ Aaron Guerwitz
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Name:
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Aaron Guerwitz
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Title:
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Head of Capital Markets
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SCHEDULE I
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(a)
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Number of shares of Common Stock: 6,791,887
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Initial price to public: $4.21
Number of shares of Preferred Stock: 2,709,300
Initial price to public: $4.21
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(b)
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Issuer Free Writing Prospectuses: None.
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SCHEDULE II
The Placement Fee shall be an amount in the aggregate equal to 4% of the gross proceeds received by the Company from the sale of the Shares other than Shares sold to one existing institutional investor of
the Company identified by the Company to the Placement Agents prior to execution of this Agreement.
SCHEDULE III
The Corporate Finance Fee shall be an amount in the aggregate equal to 0.5% of the gross proceeds received by the Company from the sale of the shares sold to existing institutional investors of the
Company identified by the Company to William Blair prior to the execution of this Agreement.
Exhibit A
Form of Subscription Agreement
[attached hereto]
Exhibit 4.1
CERTIFICATE OF DESIGNATION
OF
SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK
OF
BIODELIVERY SCIENCES INTERNATIONAL, INC.
Pursuant to Section 151 of the
Delaware General Corporation Law
BioDelivery Sciences International,
Inc.
, a Delaware corporation (the “
Corporation
”), in accordance with the provisions of Section 103 of the Delaware General Corporation Law (the “
DGCL
”) does hereby certify that, in accordance
with Sections 141(c) and 151 of the DGCL, the following resolution was duly adopted by the Board of Directors of the Corporation at a meeting duly convened on November 20, 2012:
RESOLVED
, that pursuant to the authority granted to and vested in the Board of Directors of the Corporation in accordance with the
provisions of the Certificate of Incorporation of the Corporation, as amended (the “
Certificate of Incorporation
”), there is hereby established a series of the Corporation’s authorized preferred stock, par value $.001
per share (the “
Preferred Stock
”), which series shall be designated as the Series A Non-Voting Convertible Preferred Stock, par value $.001 per share, of the Corporation, with the designation, number of shares, powers,
preferences, rights, qualifications, limitations and restrictions thereof (in addition to any provisions set forth in the Certificate of Incorporation which are applicable to the Preferred Stock of all classes and series) as follows:
SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK
SECTION 1. DEFINITIONS
. For the purposes hereof, the following terms shall have the following meanings:
“
Affiliate
” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or
entity, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Holder
will be deemed to be an Affiliate of such Holder.
“
Alternate Consideration
” shall have the meaning
set forth in Section 7(c).
“
Beneficial Ownership Limitation
” shall have the meaning set forth in
Section 6(c).
“
Business Day
” means any day except Saturday, Sunday, any day which shall be a
federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“
Buy-In
” shall have the meaning set forth in Section 6(d)(iii).
“
Closing Sale Price
” means, for any security as of any date, the last closing trade price for such security prior
to 4:00 p.m., New York City time, on the principal securities exchange or trading market where such security is listed or traded, as reported by Bloomberg, L.P. (or an equivalent, reliable reporting service mutually acceptable to and hereafter
designated by Holders of a majority of the then-outstanding Series A Preferred Stock and the Corporation), or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for
such security as
1
reported by Bloomberg, L.P., or, if no last trade price is reported for such security by Bloomberg, L.P., the average of the bid prices of any market makers for such security as reported on the
OTC Pink Market by OTC Markets Group, Inc. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as
determined in good faith by the Board of Directors of the Corporation.
“
Commission
” means the
Securities and Exchange Commission.
“
Common Stock
” means the Corporation’s common stock, par
value $.001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed into.
“
Conversion Date
” shall have the meaning set forth in Section 6(a).
“
Conversion Price
” shall mean $ , as adjusted pursuant to paragraph 7 hereof.
“
Conversion Ratio
” shall have the meaning set forth in Section 6(b).
“
Conversion Shares
” means, collectively, the shares of Common Stock issuable upon conversion of the shares of
Series A Preferred Stock in accordance with the terms hereof.
“
Daily Failure Amount
” means the
product of (x) 0.005 multiplied by (y) the Closing Sale Price of the Common Stock on the applicable Share Delivery Date.
“
DGCL
” shall mean the Delaware General Corporation Law.
“
Distribution
” shall have the meaning set forth in Section 7(b).
“
DTC
” shall have the meaning set forth in Section 6(a).
“
DWAC Delivery
” shall have the meaning set forth in Section 6(a).
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
“
Fundamental Transaction
” shall have the meaning set forth in Section 7(c).
“
Holder
” means any holder of Series A Preferred Stock.
“
Junior Securities
” shall have the meaning set forth in Section 5(a).
“
Liquidation Event
” shall have the meaning set forth in Section 5(b).
“
Notice of Conversion
” shall have the meaning set forth in Section 6(a).
“
Parity Securities
” shall have the meaning set forth in Section 5(a).
“
Person
” means any individual or corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“
Securities Act
” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
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“
Senior Securities
” shall have the meaning set forth in
Section 5(a).
“
Series A Preferred Stock Register
” shall have the meaning set forth in
Section 2(b).
“
Share Delivery Date
” shall have the meaning set forth in Section 6(d)(i).
“
Stated Value
” shall mean $ .
“
Trading Day
” means a day on which the Common Sock is traded for any period on the principal securities exchange
or if the Common Stock is not traded on a principal securities exchange, on a day that the Common Stock is traded on another securities market on which the Common Stock is then being traded.
SECTION 2. DESIGNATION, AMOUNT AND PAR VALUE; ASSIGNMENT.
(a) The series of preferred stock designated by this Certificate shall be designated as the Corporation’s “Series A Non-Voting
Convertible Preferred Stock” (the “
Series A Preferred Stock
”) and the number of shares so designated shall be . Each share of Series A Preferred Stock shall have a par
value of $.001 per share.
(b) The Corporation shall register shares of the Series A Preferred Stock, upon records to be
maintained by the Corporation for that purpose (the “
Series A Preferred Stock Register
”), in the name of the Holders thereof from time to time. The Corporation may deem and treat the registered Holder of shares of Series A
Preferred Stock as the absolute owner thereof for the purpose of any conversion thereof and for all other purposes. The Corporation shall register the transfer of any shares of Series A Preferred Stock in the Series A Preferred Stock Register, upon
surrender of the certificates evidencing such shares to be transferred, duly endorsed by the Holder thereof, to the Corporation at its principal place of business or such other office of the Corporation as may be designated by the Corporation. Upon
any such registration or transfer, a new certificate evidencing the shares of Series A Preferred Stock so transferred shall be issued to the transferee and a new certificate evidencing the remaining portion of the shares not so transferred, if any,
shall be issued to the transferring Holder, in each case, within three (3) Business Days. The provisions of this Certificate are intended to be for the benefit of all Holders from time to time and shall be enforceable by any such Holder.
SECTION 3. DIVIDENDS
. Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares
of the Series A Preferred Stock equal (on an as-if-converted-to-Common-Stock basis without giving effect for such purposes to the Beneficial Ownership Limitation set forth in Section 6(c) hereof) to and in the same form as dividends (other than
dividends in the form of Common Stock) actually paid on shares of the Common Stock when, as and if such dividends (other than dividends in the form of Common Stock) are paid on shares of the Common Stock.
SECTION 4. VOTING RIGHTS
.
Except as otherwise provided herein or as otherwise required by the DGCL, the Series A Preferred
Stock shall have no voting rights. However, as long as any shares of Series A Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Series A
Preferred Stock: (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock as set forth herein or alter or amend this Certificate of Designation, (b) increase the number of authorized shares of
Series A Preferred Stock, or (c) enter into any agreement with respect to any of the foregoing; provided, however, that the foregoing shall not preclude the Corporation from designating or issuing any Junior Securities, Parity Securities or
Senior Securities.
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SECTION 5. RANK; LIQUIDATION
.
(a) The Series A Preferred Stock shall rank: (i) senior to all of the Common Stock; (ii) senior to any class or series of
capital stock of the Corporation hereafter created specifically ranking by its terms junior to any Series A Preferred Stock (“
Junior Securities
”); (iii) on parity with any class or series of capital stock of the
Corporation hereafter created specifically ranking by its terms on parity with the Series A Preferred Stock (“
Parity Securities
”); and (iv) junior to any class or series of capital stock of the Corporation hereafter
created specifically ranking by its terms senior to any Series A Preferred Stock (“
Senior Securities
”), in each case, as to dividends, distributions of assets upon liquidation, dissolution or winding up of the Corporation,
whether voluntarily or involuntarily. The foregoing shall not preclude the Corporation from designating or issuing any Junior Securities, Parity Securities or Senior Securities.
(b) Subject to the prior and superior rights of the holders of any Senior Securities of the Corporation, upon liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary (each, a “
Liquidation Event
”), each holder of shares of Series A Preferred Stock shall be entitled to receive, in preference to any distributions of any of the
assets or surplus funds of the Corporation to the holders of the Common Stock and Junior Securities and pari passu with any distribution to the holders of Parity Securities, an amount equal to $.001 per share of Series A Preferred Stock, plus an
additional amount equal to any dividends declared but unpaid on such shares, before any payments shall be made or any assets distributed to holders of any class of Common Stock or Junior Securities. If, upon any such Liquidation Event, the assets of
the Corporation shall be insufficient to pay the holders of shares of the Series A Preferred Stock the amount required under the preceding sentence, then all remaining assets of the Corporation shall be distributed ratably to holders of the shares
of the Series A Preferred Stock and Parity Securities.
(c) After payment to the holders of shares of the Series A Preferred
Stock of the amount required under Section 5(b) and subject to the prior and superior rights of the holders of any Senior Securities of the Corporation, the remaining assets or surplus funds of the Corporation, if any, available for
distribution to stockholders shall be distributed ratably among the holders of the Series A Preferred Stock, any other class or series of capital stock that participates with the Common Stock in the distribution of assets upon any Liquidation Event
and the Common Stock, with the holders of the Series A Preferred Stock deemed to hold that number of shares of Common Stock into which such shares of Series A Preferred Stock are then convertible (without giving effect for such purposes to the
Beneficial Ownership Limitation set forth in Section 6(c) hereof).
SECTION 6. CONVERSION
.
(a)
Conversions at Option of Holder
. Each share of Series A Preferred Stock shall be convertible, at any time and from time to
time from and after the date of the issuance thereof, at the option of the Holder thereof, into a number of shares of Common Stock equal to the Conversion Ratio in effect at the time of such conversion. Holders shall effect conversions by providing
the Corporation with the form of conversion notice (via overnight courier, facsimile or email) attached hereto as
Annex A
(a “
Notice of Conversion
”), duly completed and executed. For purposes of clarification,
unless required pursuant to industry standard stock transfer procedures, the Corporation or its transfer agent shall not require a Holder to obtain a medallion guaranty, notary attestation or any similar deliverable in order to effectuate the
conversion of all or a portion of such Holder’s shares of Series A Preferred Stock. Other than a conversion following a Fundamental Transaction or following a notice provided for under Section 7(e)(ii) hereof, the Notice of Conversion must
specify at least a number of shares of Series A Preferred Stock to be converted equal to the lesser of (x) 10,000 shares (such number subject to appropriate adjustment following the occurrence of an event specified in Section 7(a) hereof)
and (y) the number of shares of Series A Preferred Stock then held by the Holder. Provided the Corporation’s
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Common Stock transfer agent is participating in the Depository Trust Company (“
DTC
”) Fast Automated Securities Transfer program, the Notice of Conversion may specify, at
the Holder’s election, whether the applicable Conversion Shares shall be credited to the account of the Holder’s prime broker with DTC through its Deposit Withdrawal Agent Commission system (a “
DWAC Delivery
”). The
date on which a conversion of Series A Preferred Stock shall be deemed effective (the “
Conversion Date
”) shall be defined as the Trading Day that the Notice of Conversion, completed and executed, is sent (via overnight
courier, facsimile or email) to, and received during regular business hours by, the Corporation; provided that the original certificate(s) representing such shares of Series A Preferred Stock being converted, duly endorsed, and the accompanying
Notice of Conversion, are received by the Corporation within two (2) Trading Days thereafter. In all other cases, the Conversion Date shall be defined as the Trading Day on which the original stock certificates representing the shares of Series
A Preferred Stock being converted, duly endorsed, and the accompanying Notice of Conversion, are received by the Corporation. The calculations set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error.
(b)
Conversion Ratio
. The “
Conversion Ratio
” for each share of Series A Preferred Stock shall
be equal to the Stated Value divided by the Conversion Price.
(c)
Beneficial Ownership Limitation
. Notwithstanding
anything herein to the contrary, the Corporation shall not effect any conversion of the Series A Preferred Stock, and a Holder shall not have the right to convert any portion of its Series A Preferred Stock, to the extent that, after
giving effect to an attempted conversion set forth on an applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any other Person whose beneficial ownership of Common Stock would be aggregated with the
Holder’s for purposes of Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission, including any “group” of which the Holder is a member) would beneficially own a number of shares of Common
Stock in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares
of Common Stock issuable upon conversion of the Series A Preferred Stock subject to the Notice of Conversion with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which
are issuable upon (A) conversion of the remaining, unconverted shares of Series A Preferred Stock beneficially owned by such Holder or any of its Affiliates, and (B) exercise or conversion of the unexercised or unconverted portion of
any other securities of the Corporation beneficially owned by such Holder or any of its Affiliates (including, without limitation, any convertible notes, convertible stock or warrants) that are subject to a limitation on conversion or exercise
analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this Section 6(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the
applicable rules and regulations of the Commission. In addition, for purposes hereof, “group” has the meaning set forth in Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission. For purposes of
this Section 6(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Corporation’s most recent Form 10-K, Form 10-Q, Current
Report on Form 8-K or other public filing with the Commission, as the case may be, (B) a more recent public announcement by the Corporation or (C) a more recent notice by the Corporation or the Corporation’s transfer agent to the
Holder setting forth the number of shares of Common Stock then outstanding. For any reason at any time, upon the written or oral request of a Holder (which may be by email), the Corporation shall, within two (2) Business Days of such request,
confirm orally and in writing to such Holder (which may be via email) the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to any actual
conversion or exercise of securities of the Corporation, including shares of Series A Preferred Stock, by such Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was last
5
publicly reported or confirmed to the Holder. The “
Beneficial Ownership Limitation
” shall be 9.98% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock pursuant to such Notice of Conversion (to the extent permitted pursuant to this Section 6(c)). The Corporation shall be entitled to rely on representations made to it by the Holder
in any Notice of Conversion regarding its Beneficial Ownership Limitation. By written notice to the Corporation, a Holder may from time to time increase or decrease the Beneficial Ownership Limitation to any other percentage specified in such
notice; provided that any such increase or decrease will not be effective until the sixty-fifth (65th) day after such notice is delivered to the Corporation. The provisions of this Section 6(c) shall be construed, corrected and implemented
in a manner so as to effectuate the intended beneficial ownership limitation herein contained and the shares of Common Stock underlying the Series A Preferred Stock in excess of the Beneficial Ownership Limitation shall not be deemed to be
beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act.
(d)
Mechanics of Conversion
.
(i)
Delivery of Certificate or Electronic
Issuance Upon Conversion
. Not later than three (3) Trading Days after the applicable Conversion Date, or if the Holder requests the issuance of physical certificate(s), two (2) Trading Days after receipt by the Corporation of the
original certificate(s) representing such shares of Series A Preferred Stock being converted, duly endorsed, and the accompanying Notice of Conversion (the “
Share Delivery Date
”), the Corporation shall: (a) deliver, or
cause to be delivered, to the converting Holder a physical certificate or certificates representing the number of Conversion Shares being acquired upon the conversion of shares of Series A Preferred Stock (which certificate or certificates shall not
have any legends on it) or (b) in the case of a DWAC Delivery, electronically transfer such Conversion Shares by crediting the account of the Holder’s prime broker with DTC through its DWAC system. If in the case of any Notice of
Conversion such certificate or certificates are not delivered to or as directed by or, in the case of a DWAC Delivery, such shares are not electronically delivered to or as directed by, the applicable Holder by the Share Delivery Date, the
applicable Holder shall be entitled to elect to rescind such Conversion Notice by written notice to the Corporation at any time on or before its receipt of such certificate or certificates for Conversion Shares or electronic receipt of such shares,
as applicable, in which event the Corporation shall promptly return to such Holder any original Series A Preferred Stock certificate delivered to the Corporation and such Holder shall promptly return to the Corporation any Common Stock certificates
or otherwise direct the return of any shares of Common Stock delivered to the Holder through the DWAC system, representing the shares of Series A Preferred Stock unsuccessfully tendered for conversion to the Corporation.
(ii)
Obligation Absolute
. Subject to any limitations on the beneficial ownership of Series A Preferred Stock to which a Holder may
be subject and subject to such Holder’s right to rescind a Conversion Notice pursuant to Section 6(d)(i) above, the Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Series A Preferred Stock in
accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or
any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law
by such Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares. Subject to any limitations on the
beneficial of ownership of Series A Preferred Stock to which a Holder may be subject and subject to such Holder’s right to rescind a Conversion Notice pursuant to Section 6(d)(i) above, in the event a Holder shall elect to convert any or
all of its Series A Preferred Stock, the Corporation may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any
6
violation of law, agreement or for any other reason, unless an injunction from a court, on notice to such Holder, restraining and/or enjoining conversion of all or part of the Series A Preferred
Stock of such Holder shall have been sought and obtained by the Corporation, and the Corporation posts a surety bond for the benefit of such Holder in the amount of 150% of the value of the Conversion Shares into which would be converted the Series
A Preferred Stock which is subject to such injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of such injunction, the Corporation shall, subject to any limitations on the beneficial ownership of Series A Preferred Stock to which a Holder may be subject and subject to such Holder’s right to rescind a Conversion
Notice pursuant to Section 6(d)(i) above, issue Conversion Shares upon a properly noticed conversion. If the Corporation fails to deliver to a Holder such certificate or certificates, or electronically deliver (or cause its transfer agent to
electronically deliver) such shares in the case of a DWAC Delivery, pursuant to Section 6(d)(i) on or prior to the third (3rd) Trading Day after the Share Delivery Date applicable to such conversion (other than a failure caused by
incorrect or incomplete information provided by such Holder to the Corporation), then, unless the Holder has rescinded the applicable Conversion Notice pursuant to Section 6(d)(i) above, the Corporation shall pay (as liquidated damages and not
as a penalty) to such Holder an amount payable in cash equal to the product of (x) the number of Conversion Shares required to have been issued by the Corporation on such Share Delivery Date, (y) an amount equal to the Daily Failure Amount
and (z) the number of Trading Days actually lapsed after such third (3rd) Trading Day after the Share Delivery Date during which such certificates have not been delivered, or, in the case of a DWAC Delivery, such shares have not been
electronically delivered; provided, however, the Holder shall only receive up to such amount of shares of Common Stock such that Holder and any other persons or entities whose beneficial ownership of Common Stock would be aggregated with the
Holder’s for purposes of Section 13(d) of the Exchange Act (including shares held by any “group” of which the Holder is a member, but excluding shares beneficially owned by virtue of the ownership of securities or rights to
acquire securities that have limitations on the right to convert, exercise or purchase similar to the limitation set forth in Section 6(c) hereof) shall not collectively beneficially own greater than the percentage of the total number of shares
of Common Stock of the Corporation then issued and outstanding applicable to any limitation on beneficial ownership to which such Holder may be subject. Nothing herein shall limit a Holder’s right to pursue actual damages for the
Corporation’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief; provided that Holder shall not receive duplicate damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein. The exercise of any such rights shall not prohibit a
Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
(iii)
Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Conversion
. If the Corporation fails to deliver to a Holder the applicable certificate or certificates or to effect a DWAC Delivery, as applicable, by the Share Delivery Date pursuant to
Section 6(d)(i) (other than a failure caused by incorrect or incomplete information provided by such Holder to the Corporation), and if after such Share Delivery Date such Holder is required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “
Buy-In
”), then the Corporation shall (A) pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount by which (x) such
Holder’s total purchase price (including any brokerage commissions) for the shares of Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive
from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such Holder, either reissue
(if
7
surrendered) the shares of Series A Preferred Stock equal to the number of shares of Series A Preferred Stock submitted for conversion or deliver to such Holder the number of shares of Common
Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section 6(d)(i). For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted conversion of shares of Series A Preferred Stock with respect to which the actual sale price (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of
the immediately preceding sentence, the Corporation shall be required to pay such Holder $1,000. The Holder shall provide the Corporation written notice, within three (3) Trading Days after the occurrence of a Buy-In, indicating the amounts
payable to such Holder in respect of such Buy-In together with applicable confirmations and other evidence reasonably requested by the Corporation. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver certificates representing shares of Common Stock upon conversion
of the shares of Series A Preferred Stock as required pursuant to the terms hereof; provided, however, that the Holder shall not be entitled to both (i) require the reissuance of the shares of Series A Preferred Stock submitted for conversion
for which such conversion was not timely honored and (ii) receive the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section 6(d)(i).
(iv)
Reservation of Shares Issuable Upon Conversion
. The Corporation covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Series A Preferred Stock, free from preemptive rights or any other actual contingent purchase rights of Persons other than
the Holders of the Series A Preferred Stock, not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments of Section 7) upon the conversion of all outstanding shares of Series A
Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.
(v)
Fractional Shares
. No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the
conversion of the Series A Preferred Stock. As to any fraction of a share which a Holder would otherwise be entitled to receive upon such conversion, the Corporation shall at its election, either pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.
(vi)
Transfer Taxes
. The issuance of certificates for shares of the Common Stock upon conversion of the Series A Preferred Stock shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificates, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name
other than that of the registered Holder(s) of such shares of Series A Preferred Stock and the Corporation shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have
paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid.
(e)
Status as Stockholder
. Upon each Conversion Date: (i) the shares of Series A Preferred Stock being converted shall be deemed converted into shares of Common Stock and (ii) the
Holder’s rights as a holder of such converted shares of Series A Preferred Stock shall cease and terminate, excepting only the right to receive certificates for or electronic delivery of such shares of Common Stock and to any remedies provided
herein or otherwise available at law or in equity to such Holder because of a failure by the Corporation to comply with the terms of this Certificate of Designation. In all cases, the holder shall retain all of its rights and remedies for the
Corporation’s failure to convert Series A Preferred Stock.
8
SECTION 7. CERTAIN ADJUSTMENTS
.
(a)
Stock Dividends and Stock Splits
. If the Corporation, at any time while the Series A Preferred Stock is outstanding:
(i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of shares of
Series A Preferred Stock) with respect to the then outstanding shares of Common Stock; (ii) subdivides outstanding shares of Common Stock into a larger number of shares; or (iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation)
outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event (excluding any treasury shares of the Corporation). Any adjustment made pursuant to this
Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a
subdivision or combination.
(b)
Rights Upon Distribution of Assets
. If the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “
Distribution
”), a Holder shall be entitled to receive the dividend or distribution of
assets that would have been payable to such Holder pursuant to the Distribution had such Holder converted his or her shares of Series A Preferred Stock (or, if he or she had partially converted such shares prior to the Distribution, any unconverted
portion thereof) immediately prior to such record date without giving effect for such purposes to the Beneficial Ownership Limitation set forth in Section 6(c) hereof.
(c)
Fundamental Transaction
. If, at any time while the Series A Preferred Stock is outstanding: (i) the Corporation effects any merger or consolidation of the Corporation with or into another
Person (other than a merger in which the Corporation is the surviving or continuing entity and its Common Stock is not exchanged for or converted into other securities, cash or property), (ii) the Corporation effects any sale of all or
substantially all of its assets in one transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which all of the Common Stock is exchanged
for or converted into other securities, cash or property, or (iv) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant (other than as a result of a dividend, subdivision or combination
covered by Section 7(a) above) to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “
Fundamental Transaction
”), then, upon any subsequent
conversion of this Series A Preferred Stock, the Holders shall have the right to receive, in lieu of the right to receive Conversion Shares, for each Conversion Share that would have been issuable upon such conversion immediately prior to the
occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one share of Common Stock (the “
Alternate Consideration
”). For purposes of any such subsequent conversion, the determination of the Conversion Ratio shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall adjust the
9
Conversion Ratio in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then the Holders shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Series A Preferred Stock following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions and
issue to the Holders new preferred stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate Consideration. The terms of any agreement to which the Corporation is a party and
pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 7(b) and ensuring that the Series A Preferred Stock (or any such
replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. The Corporation shall cause to be delivered (via overnight courier, facsimile or email) to each Holder, at its last address as
it shall appear upon the books and records of the Corporation, written notice of any Fundamental Transaction at least ten (10) calendar days prior to the date on which such Fundamental Transaction is expected to become effective or close.
(d)
Calculations
. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th
of a share, as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares
of the Corporation) issued and outstanding.
(e)
Notice to the Holders
.
(i)
Adjustment to Conversion Price
. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7,
the Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Ratio after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
(ii)
Other Notices
. If: (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the
Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or
merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or
(E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be delivered (via overnight courier, facsimile or
email) to each Holder at its last address as it shall appear upon the books and records of the Corporation, at least ten (10) calendar days (or in the event of a voluntary or involuntary dissolution, liquidation or winding up of the affairs of
the Corporation, at least seventy-five (75) calendar days) prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled
to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect
therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.
10
SECTION 8. MISCELLANEOUS
.
(a)
Notices
. Any and all notices or other communications or deliveries to be provided by the Holders
hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by email, facsimile, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 801 Corporate Center
Drive, Suite #210, Raleigh, NC 27607, facsimile number 919-582-9051, or such other facsimile number or address or email address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section. Any
and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service or email addressed to each
Holder at the facsimile number or address of such Holder appearing on the books of the Corporation, or if no such facsimile number or address appears on the books of the Corporation, at the principal place of business of such Holder. Any notice or
other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address
specified in or pursuant to this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile or mail at the facsimile
number or email address specified in or pursuant to this Section between 5:30 p.m. and 11:59 p.m. (New York City time) on any date, (iii) the second (2
nd
) Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be given.
(b)
Lost or Mutilated Series A
Preferred Stock Certificate
. If a Holder’s Series A Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series A Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or
destruction of such certificate, and of the ownership thereof, reasonably satisfactory to the Corporation and, in each case, customary and reasonable indemnity, if requested. Applicants for a new certificate under such circumstances shall also
comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Corporation may prescribe.
(c)
Waiver
. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one
or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation. Any waiver by the Corporation
or a Holder must be in writing.
(d)
Severability
. If any provision of this Certificate of Designation is invalid,
illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If
it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest
permitted under applicable law.
11
(e)
Next Business or Trading Day
. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day or a Trading Day, such payment shall be made on the next succeeding Business Day or Trading Day, as the case may be.
(f)
Headings
. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions
hereof.
(g)
Status of Converted Series A Preferred Stock
. If any shares of Series A Preferred Stock shall be converted
or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series A Preferred Stock.
IN WITNESS WHEREOF
, the Corporation has caused this Certificate of Designation to be signed by its duly authorized officer this
day of , 2012.
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BIODELIVERY SCIENCES INTERNATIONAL, INC.
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By:
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Name:
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Title:
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12
ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO
CONVERT SHARES OF SERIES A PREFERRED STOCK)
The undersigned Holder hereby irrevocably elects to convert the number of shares of Series A Convertible Preferred Stock indicated below, represented by stock certificate No(s).
(the “
Preferred Stock Certificates
”), into shares of common stock, par value $.001 per share (the
“
Common Stock
”), of BioDelivery Sciences International, Inc., a Delaware corporation (the “
Corporation
”), as of the date written below. If securities are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Capitalized terms utilized but not defined herein shall have the meaning ascribed to such terms in that certain Certificate of Designation of Preferences, Rights
and Limitations (the “
Certificate of Designation
”) of Series A Non-Voting Convertible Preferred Stock (the “
Series A Preferred Stock
”) filed by the Corporation on
, 2012.
As of the date hereof, the number of shares of Common Stock
beneficially owned by the undersigned Holder (together with such Holder’s Affiliates, and any other Person whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange
Act and the applicable regulations of the Commission, including any “group” of which the Holder is a member), including the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock subject to this
Notice of Conversion, but excluding the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted Series A Preferred Stock beneficially owned by such Holder or any of its Affiliates, and
(B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation (including any warrants) beneficially owned by such Holder or any of its Affiliates that are subject to a limitation on conversion
or exercise similar to the limitation contained in Section 6(c) of the Certificate of Designation, is . For purposes hereof,
beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the applicable regulations of the Commission. In addition, for purposes hereof, “group” has the meaning set forth in Section 13(d)
of the Exchange Act and the applicable regulations of the Commission.
Conversion calculations:
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Date to Effect Conversion:
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Number of shares of Series A Preferred Stock owned prior to Conversion:
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Number of shares of Series A Preferred Stock to be Converted:
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Number of shares of Common Stock to be Issued:
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Address for delivery of physical certificates:
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Or for DWAC Delivery:
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DWAC Instructions:
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Broker no:
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Account no:
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[HOLDER]
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By:
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Name:
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Title
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Date:
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Exhibit 10.1
SUBSCRIPTION AGREEMENT
BioDelivery Sciences International, Inc.
801 Corporate Center Drive, Suite #210
Raleigh,
North Carolina 27607
Gentlemen:
The undersigned (the “
Investor
”) hereby confirms its agreement with BioDelivery Sciences International, Inc., a Delaware corporation (the “
Company
”), as follows:
1.
This Subscription Agreement, including the Terms and Conditions for Purchase of Securities attached hereto as
Annex I
(collectively, this “
Agreement
”) is made as of the date set forth below between the Company and the Investor.
2.
The Company has authorized the sale and issuance to certain investors of up to an aggregate of $40 million worth of shares (the “
Common Shares
”) of the Company’s
common stock, par value $.001 per share (the “
Common Stock
”);
provided
,
however
, that, in the event that the Investor (together with any other investor purchasing Securities (as defined below) in the Offering (as
defined below) whose beneficial ownership of Common Stock would be aggregated with the Investor’s for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”), and the applicable
rules of the Securities and Exchange Commission (the “
Commission
”)) agrees to purchase Common Shares in the Offering that would cause such investor to hold more than 9.98% of the outstanding shares of Common Stock following the
Offering, that such Investor shall have the right, in its sole discretion by so indicating on the signature page hereto, to subscribe for shares of the Company’s Series A Non-Voting Convertible Preferred Stock, par value $.001 per share
(the “
Preferred Stock”
together with the Common Shares, collectively, the
“Shares”
) to complete the Investor’s allocation in the Offering
,
The Preferred Stock shall have the rights, preferences,
privileges and restrictions set forth in the Certificate of Designation substantially in the form attached hereto as
Exhibit A
(the “
Certificate of Designation
”). Each Share shall be sold for a purchase price of $4.21
per Share (the “
Purchase Price
”). The shares of Common Stock issuable upon conversion of the Preferred Shares are referred to herein as the “
Conversion Shares
.” The Shares and the Conversion Shares are referred to
herein, collectively, as the “
Securities
”.
3.
The offering and sale of the Securities (the
“
Offering
”) are being made pursuant to (a) an effective Registration Statement on Form S-3, Registration No. 333-179257 (the “
Registration Statement
”) filed by the Company with the Commission, including
the prospectus contained therein (the “
Base Prospectus
”), (b) if applicable, certain “free writing prospectuses” (as that term is defined in Rule 405 under the Securities Act of 1933, as amended (the
“
Securities Act
”)), that have been or will be filed, if required, with the Commission and delivered to the Investor on or prior to the date hereof (the “
Issuer Free Writing Prospectus
”), containing certain
supplemental information regarding the Securities, the terms of the Offering and the Company, and (c) a Prospectus Supplement (the “
Prospectus Supplement
” and, together with the Base Prospectus, the
“
Prospectus
”) containing certain supplemental information regarding the Securities, the terms of the Offering and the Company that will be filed with the Commission and delivered to the Investor (or made available to the Investor by
the filing by the Company of an electronic version thereof with the Commission).
4.
The Company and the Investor
agree that the Offering is being made subject to the Placement Agency Agreement, dated November 27, 2012 (the “
Placement Agency Agreement
”), among the Company and William Blair & Company, L.L.C. as sole lead placement
agent (“
Blair
”), and JMP Securities LLC and Roth Capital Partners, as co-placement agents (collectively with Blair, the (“
Placement Agent
s
”) .
The Company and the Investor agree that the
Investor will purchase from the Company and the Company will issue and sell to
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the Investor the Securities set forth below for the aggregate purchase price set forth below. The Securities shall be purchased pursuant to the Terms and Conditions for Purchase of Securities
attached hereto as
Annex I
and incorporated herein by this reference as if fully set forth herein. The Investor acknowledges that the Offering is not being underwritten by the Placement Agents named in the Prospectus Supplement and that there
is no minimum offering amount.
5.
The manner of settlement of the Common Shares purchased by the Investor shall
be as follows: Delivery by crediting the account of the Investor’s prime broker (as specified by such Investor on Exhibit B annexed hereto) with the Depository Trust Company (“
DTC
”) through its Deposit/Withdrawal At
Custodian (“
DWAC
”) system, whereby the Investor’s prime broker shall initiate a DWAC transaction on the Closing Date using its DTC participant identification number, and released by American Stock Transfer & Trust
Company, the Company’s transfer agent (the “
Transfer Agent
”), at the Company’s direction.
NO LATER THAN ONE (1) BUSINESS DAY AFTER THE EXECUTION OF THIS AGREEMENT BY THE INVESTOR AND THE COMPANY, THE INVESTOR
SHALL:
(I) DIRECT THE BROKER-DEALER AT WHICH THE ACCOUNT OR ACCOUNTS TO BE CREDITED WITH THE COMMON SHARES ARE
MAINTAINED TO SET UP A DWAC INSTRUCTING THE TRANSFER AGENT TO CREDIT SUCH ACCOUNT OR ACCOUNTS WITH THE COMMON SHARES, AND
(II) REMIT BY WIRE TRANSFER THE AMOUNT OF FUNDS EQUAL TO THE AGGREGATE PURCHASE PRICE FOR THE SECURITIES BEING PURCHASED BY THE
INVESTOR TO THE FOLLOWING ACCOUNT:
DOMESTIC WIRE INSTRUCTIONS (INSIDE U.S.)
INTERNATIONAL WIRE INSTRUCTIONS (OUTSIDE U.S.)
IT IS THE INVESTOR’S RESPONSIBILITY TO (A) MAKE THE NECESSARY WIRE TRANSFER OR CONFIRM THE PROPER ACCOUNT BALANCE IN A TIMELY MANNER AND (B) ARRANGE FOR SETTLEMENT BY WAY OF DWAC IN A
TIMELY MANNER. IF THE INVESTOR DOES NOT DELIVER THE AGGREGATE PURCHASE PRICE FOR THE SECURITIES OR DOES NOT MAKE PROPER ARRANGEMENTS FOR SETTLEMENT IN A TIMELY MANNER, THE SECURITIES MAY NOT BE DELIVERED AT CLOSING TO THE INVESTOR OR THE INVESTOR
MAY BE EXCLUDED FROM THE CLOSING ALTOGETHER.
6.
Certificates for any Preferred Shares purchased by the
Investor, registered in the name of the Investor, shall be delivered to the Investor promptly following the Closing. The Company shall act as its own transfer agent and registrar for the Preferred Shares.
7.
The Investor represents that, except as set forth below, (a) it has had no position, office or other material
relationship within the past three years with the Company or persons known to it to be affiliates of the Company, (b) it is not a member of the Financial Industry Regulatory Authority, Inc. or an Associated Person (as such term is defined under
the NASD Membership and Registration Rules Section 1011) as of the Closing, and (c) neither the Investor nor any group of Investors (as identified in a public filing made with the Commission) of which the Investor is a part in
connection with the Offering of the Securities, acquired, or obtained the right to acquire, 20% or more of the Common Stock (or securities convertible into or exercisable for Common Stock) or the voting power of the Company on a post-transaction
basis.
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Exceptions:
(If no exceptions, write “none.” If left blank, response will be deemed to be “none.”)
8.
The Investor represents that it has received (or otherwise had made available to it by the filing by the Company of an electronic version thereof with the Commission) the Base Prospectus,
dated February 17, 2012, which is a part of the Company’s Registration Statement, the documents incorporated by reference therein and any Issuer Free Writing Prospectus (collectively, the “
Disclosure Package
”), prior to or
in connection with the receipt of this Agreement. The Investor acknowledges that, prior to the delivery of this Agreement to the Company, the Investor has received or will receive certain additional information regarding the Offering, including
pricing information (the “
Offering Information
”). Such information may be provided to the Investor by any means permitted under the Securities Act, including the Prospectus Supplement, a free writing prospectus and oral
communications.
9.
No offer by the Investor to buy Securities will be accepted and no part of the Purchase Price
will be delivered to the Company until the Investor has received the Offering Information and the Company has accepted such offer by countersigning a copy of this Agreement, and any such offer may be withdrawn or revoked, without obligation or
commitment of any kind, at any time prior to the Company (or any Placement Agents on behalf of the Company) sending (orally, in writing or by electronic mail) notice of its acceptance of such offer. An indication of interest will involve no
obligation or commitment of any kind until the Investor has been delivered the Offering Information and this Agreement is accepted and countersigned by or on behalf of the Company. The Investor understands and agrees that the Company, in its sole
discretion, reserves the right to accept or reject this subscription for Securities, in whole or in part.
10.
The
Company acknowledges that the only material, non-public information relating to the Company it has provided to the Investor in connection with the Offering prior to the date hereof is the existence and proposed terms of the Offering. The Company
understands and confirms that the Investor will rely on the foregoing representations in effecting transactions in securities of the Company.
[REMAINDER OF PAGE LEFT BLANK]
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Number of Common Shares:
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Number of Preferred Shares:
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Purchase Price Per Share: $
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Aggregate Purchase Price: $
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Please confirm that the foregoing correctly sets forth the agreement between us by signing in the space provided below
for that purpose.
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Dated as of: November , 2012
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INVESTOR
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By:
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Print Name:
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Title:
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Address:
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Agreed and Accepted
this day of November, 2012:
BIODELIVERY SCIENCES INTERNATIONAL, INC.
Signature Page to Subscription Agreement
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SECURITIES
1. Authorization
and Sale of the Securities
. Subject to the terms and conditions of this Agreement, the Company has authorized the sale of the Securities.
2. Agreement to Sell and Purchase the Securities; Placement Agents.
2.1 At the Closing (as defined in
Section 3.1
), the Company will sell to the Investor, and the Investor will purchase from
the Company, upon the terms and conditions set forth herein, the number of Shares set forth on the last page of the Agreement to which these Terms and Conditions for Purchase of Securities are attached as
Annex I
(the “
Signature
Page
”) for the aggregate purchase price therefor set forth on the Signature Page.
2.2 The Company proposes to enter
into substantially this same form of Subscription Agreement with certain other investors (the “
Other Investors
”) and expects to complete sales of Securities to them. The Investor and the Other Investors are hereinafter sometimes
collectively referred to as the “
Investors
,” and this Agreement and the Subscription Agreements executed by the Other Investors are hereinafter sometimes collectively referred to as the “
Agreements
.”
2.3 Investor acknowledges that the Company has agreed to pay the Placement Agents a fee (the “
Placement Fee
”) in
respect of the sale of the Securities to the Investors.
2.4 The Company has entered into the Placement Agency Agreement with
the Placement Agents that contains certain representations, warranties, covenants and agreements of the Company that may be relied upon by the Investor, which shall be a third-party beneficiary thereof.
3. Closing and Delivery of the Shares, Warrants and Funds
.
3.1
Closing
. The completion of the purchase and sale of the Securities (the “
Closing
”) shall occur at a place
and time (the “
Closing Date
”) to be specified by the Company and Blair, and of which the Investor will be notified in advance by Blair, in accordance with Rule 15c6-1 promulgated under the Exchange Act. At the Closing:
(a) the Company shall cause the Transfer Agent to deliver to the Investor the number of Common Shares set forth on the Signature Page registered in the name of the Investor or, if so indicated on the Investor Questionnaire attached hereto as
Exhibit B
, in the name of a nominee designated by the Investor, (b) the Company shall cause to be delivered to the Investor a certificate evidencing the number of Preferred Shares set forth on the Signature Page and (c) the
aggregate purchase price for the Securities being purchased by the Investor will be delivered by or on behalf of the Investor to the Company.
3.2
Conditions to the Obligations of the Parties
.
(a)
Conditions to
the Company’s Obligations
. The Company’s obligation to issue and sell the Securities to the Investor shall be subject to: (i) the receipt by the Company of the purchase price for the Securities being purchased hereunder as set
forth on the Signature Page and (ii) the accuracy of the representations and warranties made by the Investor in this Agreement and the fulfillment of those undertakings of the Investor in this Agreement to be fulfilled prior to the Closing
Date.
(b)
Conditions to the Investor’s Obligations
. The Investor’s obligation to purchase the Securities
will be subject to the accuracy of the representations and warranties made by the Company
I-1
in this Agreement and the fulfillment of those undertakings of the Company to be fulfilled prior to the Closing Date, including without limitation, those contained in the Placement Agency
Agreement, and to the condition that Blair shall not have: (i) terminated the Placement Agency Agreement pursuant to the terms thereof or (ii) determined that the conditions to the closing in the Placement Agency Agreement have not been
satisfied. The Investor’s obligations are expressly not conditioned on the purchase by any or all of the Other Investors of the Securities that they have agreed to purchase from the Company. The Investor understands and agrees that, in the
event that Blair in its sole discretion determines that the conditions to closing in the Placement Agency Agreement have not been satisfied or if the Placement Agency Agreement may be terminated for any other reason permitted by the Placement Agency
Agreement, then Blair may, but shall not be obligated to, terminate such Agreement, which shall have the effect of terminating this Subscription Agreement pursuant to
Section 14
below.
3.3
Delivery of Funds
. In connection with the settlement of the Common Shares purchased by such Investor through DTC’s DWAC
delivery system,
no later than one (1) business day after the execution of this Agreement by the Investor and the Company
, the Investor shall remit by wire transfer the amount of funds equal to the aggregate purchase price for the
Securities being purchased by the Investor to the following account designated by the Company:
DOMESTIC WIRE INSTRUCTIONS (INSIDE U.S.)
INTERNATIONAL WIRE INSTRUCTIONS (OUTSIDE U.S.)
3.4
Delivery of Common Shares
. In connection with the settlement of the Common Shares purchased by such Investor through DTC’s DWAC delivery system,
no later than one (1) business
day after the execution of this Agreement by the Investor and the Company
, the Investor shall direct the broker-dealer at which the account or accounts to be credited with the Common Shares being purchased by such Investor are maintained,
which broker/dealer shall be a DTC participant, to set up a DWAC instructing the Transfer Agent to credit such account or accounts with the Common Shares. Such DWAC instruction shall indicate the settlement date for the deposit of the Common Shares,
which date shall be provided to the Investor by Blair. At Closing, the Company shall direct the Transfer Agent to credit the Investor’s account or accounts with the Common Shares pursuant to the information contained in the DWAC.
4. Representations, Warranties and Covenants of the Investor.
The Investor acknowledges, represents and warrants to, and
agrees with, the Company and the Placement Agents that:
4.1 The Investor (a) is knowledgeable, sophisticated and
experienced in making, and is qualified to make decisions with respect to, investments in securities presenting an investment decision like that involved in the purchase of the Securities, including investments in securities issued by the Company
and investments in comparable companies, (b) has answered all questions on the Signature Page and the Investor Questionnaire and the answers thereto are true and correct as of the date hereof and will be true and correct as of the Closing Date
and (c) in connection with its decision to purchase the Securities set forth on the Signature Page, has received, has fully read and understands and is relying only upon the Disclosure Package and the documents incorporated by reference therein
and the Offering Information (including, without limitation, the Company’s risk factors set forth incorporated by reference therein).
4.2 (a) No action has been or will be taken in any jurisdiction outside the United States by the Company or the Placement Agents that would permit an offering of the Securities, or
I-2
possession or distribution of offering materials in connection with the issue of the Securities in any jurisdiction outside the United States where action for that purpose is required,
(b) if the Investor is outside the United States, it will comply with all applicable laws and regulations in each foreign jurisdiction in which it purchases, offers, sells or delivers Securities or has in its possession or distributes any
offering material, in all cases at its own expense and (c) the Placement Agents are not authorized to make and have not made any representation, disclosure or use of any information in connection with the issue, placement, purchase and sale of
the Securities, except as set forth or incorporated by reference in the Base Prospectus, any Issuer Free Writing Prospectus or the Prospectus Supplement.
4.3 (a) The Investor has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement, and (b) this Agreement constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law) and except as to the enforceability of any rights to indemnification or contribution that may be violative of the public policy underlying any law, rule or regulation
(including any federal or state securities law, rule or regulation).
4.4 The Investor understands that nothing in this
Agreement, the Prospectus, the Disclosure Package, the Offering Information or any other materials presented to the Investor in connection with the purchase and sale of the Securities constitutes legal, tax or investment advice. The Investor has
consulted such legal, tax and investment advisors and made such investigation as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of Securities. The Investor also understands that there is no
established public trading market for the Preferred Shares being offered in the Offering, and that the Company does not expect such a market to develop. In addition, the Company does not intend to apply for listing of the Preferred Shares on any
securities exchange. The Investor understands that without an active market, the liquidity of the Preferred Shares will be severely limited. The Investor understands and acknowledges that the Company will act as its own transfer agent and registrar
for the Preferred Shares.
4.5 Since the time at which any Placement Agent first contacted the Investor about the Offering,
the Investor has not disclosed any information regarding the Offering to any third parties (other than its legal, accounting and other advisors) and has not engaged in any transactions involving the securities of the Company (including, without
limitation, any Short Sales involving the Company’s securities). The Investor covenants that it will not engage in any transactions involving the securities of the Company (including Short Sales) prior to the time that the transactions
contemplated by this Agreement are publicly disclosed. The Investor agrees that it will not use any of the Securities acquired pursuant to this Agreement to cover any short position in the Common Stock if doing so would be in violation of applicable
securities laws. For purposes hereof, “
Short Sales
” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not against the box,
and all types of direct and indirect stock pledges, forward sales contracts, options, puts, calls, short sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements (including
on a total return basis), and sales and other transactions through non-U.S. broker dealers or foreign regulated brokers.
5. Survival of Representations, Warranties and Agreements; Third-Party Beneficiaries.
Notwithstanding any investigation made
by any party to this Agreement or by the Placement Agents, all covenants, agreements, representations and warranties made by the Company and the Investor herein will survive the execution of this Agreement, the delivery to the Investor of the
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Securities being purchased and the payment therefor. The Placement Agents shall be third-party beneficiaries with respect to the representations, warranties and agreements of the Investor in
Section 4
hereof.
6. Notices.
All notices, requests, consents and other communications hereunder will
be in writing, will be mailed (a) if within the domestic United States by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile or (b) if delivered from outside
the United States, by International Federal Express or facsimile, and (c) will be deemed given (i) if delivered by first-class registered or certified mail domestic, three business days after so mailed, (ii) if delivered by nationally
recognized overnight carrier, one business day after so mailed, (iii) if delivered by International Federal Express, two business days after so mailed and (iv) if delivered by facsimile, upon electronic confirmation of receipt and will be
delivered and addressed as follows:
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(a)
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if to the Company, to:
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BioDelivery Sciences
International, Inc.
801 Corporate Center Drive, Suite #210
Raleigh, North Carolina 27607
Attention: Mark A. Sirgo
Facsimile: 919-582-9051
with a copy (which
shall not constitute notice) to:
Ellenoff Grossman & Schole LLP
150 East 42
nd
Street
New
York, NY 10017
Attention: Barry I. Grossman, Esq.
Facsimile: 212-370-7889
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(b)
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if to the Investor, at its address on the Signature Page hereto, or at such other address or addresses as may have been furnished to the Company in writing.
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7. Changes
. This Agreement may not be modified or amended except pursuant to an instrument in
writing signed by the Company and the Investor.
8. Headings.
The headings of the various sections of this
Agreement have been inserted for convenience of reference only and will not be deemed to be part of this Agreement.
9. Severability.
In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions contained herein will not in any way be affected or impaired thereby.
10. Governing Law
. This Agreement will be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to the principles of conflicts of law
that would require the application of the laws of any other jurisdiction.
11. Counterparts.
This Agreement may be
executed in two or more counterparts, each of which will constitute an original, but all of which, when taken together, will constitute but one instrument, and will become effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties. The Company and the Investor acknowledge and agree that the Company shall deliver its counterpart to the Investor along with the Prospectus Supplement (or the filing by the Company of an electronic version thereof
with the Commission). Delivery of an executed counterpart by facsimile or portable document format (pdf) shall be effective as delivery of a manually executed counterpart thereof.
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12. Confirmation of Sale.
The Investor acknowledges and agrees that such
Investor’s receipt of the Company’s signed counterpart to this Agreement, together with the Prospectus Supplement (or the filing by the Company of an electronic version thereof with the Commission), shall constitute written confirmation of
the Company’s sale of Securities to such Investor.
13. Press Release.
The Company and the Investor agree
that the Company shall, prior to the opening of the financial markets in New York City on the business day immediately after the date hereof, (a) issue a press release announcing the Offering and disclosing all material information regarding
the Offering and (b) file a Current Report on Form 8-K with the Commission including a form of this Agreement and a form of Certificate of Designation as exhibits thereto.
14. Termination.
In the event that the Placement Agency Agreement is terminated by Blair pursuant to the terms thereof, this
Agreement shall terminate without any further action on the part of the parties hereto.
15. Fees and Expenses.
Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this
Agreement.
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EXHIBIT A
FORM OF CERTIFICATE OF DESIGNATION
[attached hereto]
EXHIBIT B
BIODELIVERY SCIENCES INTERNATIONAL, INC.
INVESTOR QUESTIONNAIRE
Pursuant to Section 3 of
Annex I
to
the Agreement, please provide us with the following information:
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1.
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The exact name that your Shares are to be registered in. You may use a nominee name if appropriate:
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2.
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The relationship between the Investor and the registered holder listed in response to item 1 above:
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3.
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The mailing address of the registered holder listed in response to item 1 above:
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Street Address
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City, State, ZIP
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Tel:
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4.
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Social Security Number or Tax Identification Number:
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5.
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DTC Participant:
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Broker Name:
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(broker-dealer at which the account or accounts to be credited with the Common Shares are maintained)
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DTC Participant Number:
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Account Name:
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Account Number:
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Contact to initiate DWAC:
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Telephone #:
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E-mail:
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6.
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Address for delivery of your physical certificates representing your Preferred Shares, if you would like them sent to a third party and not the address
above:
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Contact Person / Window
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Company:
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Street Address
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City, State, ZIP
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Tel:
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Account Number
(if
applicable):
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