<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(D) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 6, 1997
InKine Pharmaceutical Company, Inc.
------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
New York 0-24972 13-3754005
- -----------------------------------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
</TABLE>
425 Park Avenue, New York, NY 10022
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 319-8300
<PAGE>
Item 1. Changes in Control of Registrant
On November 18, 1997, InKine Pharmaceutical Company, Inc., formerly
Panax Pharmaceutical Company Ltd. (the "Company"), completed the private
placement of 17 million shares of common stock (the "Private Placement") at a
purchase price of $1 per share for gross proceeds of $17 million. The Company
also issued 1,448,429 shares of common stock to the placement agents in the
Private Placement in lieu of cash commissions. The Company's estimated
expenses in connection with the Private Placement were approximately $1.1
million (including $660,000 in non-accountable expense allowance and other
cash payments to the placement agents), resulting in net proceeds to the
Company from the Private Placement of approximately $15.9 million.
Prior to the Private Placement, the Company had outstanding 3,357,012
shares of common stock. Consequently, in connection with the consummation of
the Private Placement, a change in control of the Company occurred. The
Company believes, however, that no particular stockholder or group of
stockholders is or was a controlling stockholder or group, either before or
after consummation of the Private Placement.
<PAGE>
Item 2. Acquisition or Disposition of Assets.
As of November 6, 1997 the Company acquired all the outstanding
capital stock of CorBec Pharmaceuticals, Inc. ("CorBec") and Sangen
Pharmaceutical Company ("Sangen"), both Delaware corporations. The businesses
of CorBec and Sangen have been described in reports previously filed by the
Company under the Securities Exchange Act of 1934.
The CorBec acquisition was accomplished (pursuant to an Agreement and
Plan of Reorganization dated October 31, 1997 among the Company, CorBec and
certain security holders of CorBec) by the merger of a wholly owned subsidiary
of the Company (formed for the purpose of this acquisition) with and into
CorBec, with CorBec the surviving corporation (the "Merger"). In the Merger,
the Company paid an aggregate of $750,000 and issued an aggregate of 750,000
shares of common stock to the former stockholders of CorBec. The Company also
agreed to issue additional shares and pay additional cash to the former CorBec
stockholders on a contingent basis in the future upon the realization of
certain milestones in the development of CorBec's technology. The description
of these milestone-based payments and share issuances set forth under the
caption "Acquisitions" in Item 5 of Part II of the Company's quarterly report
on Form 10-QSB for the quarter ended September 30, 1997 (as amended by Form
10-QSB/A filed on November 17, 1997) is incorporated herein by reference. This
consideration paid and payable to the former CorBec stockholders was
determined in negotiations between the Company's management and the former
CorBec stockholders based on the current and potential value of CorBec's
technology. The former CorBec stockholders consist of the University of
Pennsylvania, Dr. Alan Schreiber, the inventor of CorBec's technology, four
private venture capital funds and certain other former employees of or
consultants to CorBec. None of these persons has any relationship (other than
as a stockholder by virtue of the Merger) with the Company or its officers,
directors or affiliates or any person associated with any of the foregoing,
except that (i) the University of Pennsylvania is a party to a Funded Research
Agreement and a License Agreement with CorBec and (ii) Dr. Schreiber is party
to a consulting agreement with CorBec. The Company funded the cash portion of
the Merger consideration from its operating capital.
The Sangen acquisition occurred pursuant to a Stock Purchase
Agreement dated September 3, 1997 between the Company and Dr. Leonard S.
Jacob, formerly the sole stockholder of Sangen. In connection with this
acquisition, Dr. Jacob entered into an employment agreement with the Company
as the Chairman of the Board of Directors and the Chief Executive Officer. In
consideration for all the outstanding stock of Sangen and Dr. Jacob's
employment arrangement with the Company, the Company granted to Dr. Jacob an
option to purchase a number of shares of the Company's common stock equal to
7.5% of the fully diluted capitalization of the Company. "Fully diluted
capitalization" was determinable upon completion of the Private Placement
described in Item 1 above and means all issued and outstanding shares of
common stock of the Company plus all shares issuable upon exercise of
outstanding derivative instruments (other than certain warrants and options
granted to the underwriter in the Company's initial public offering). The
additional information regarding Dr. Jacob's option, as well as an option
granted to Dr. Taffy J. Williams, the Company's President and Chief Operating
Officer, and shares of common stock and warrants issued to Allegheny
University of the Health Sciences and Dr. George Tuszynski in connection with
the Sangen acquisition, which was included under the caption "Acquisitions" in
Item 5 of Part II of the quarterly report on Form 10-QSB for the quarter ended
September 30, 1997 (as amended by Form 10-QSB/A filed on November 17, 1997) is
incorporated herein by reference. The consideration payable by the Company to
Dr. Jacob in connection with the Sangen acquisition was determined by
negotiation between the Company's management and Dr. Jacob and was based on
the current and potential value of the Sangen technology and on Dr. Jacob's
employment arrangement with the Company.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
The financial statements required by this Item will be filed by an
amendment of this report on Form 8-K/A within 60 days of the date of filing of
this report.
(b) Pro Forma Financial Information.
The pro forma financial information required by this Item will be
filed by an amendment of this report on Form 8-K/A within 60 days of the date
of filing of this report.
<PAGE>
(c) Exhibits.
10.1 Agreement and Plan of Reorganization among Panax Pharmaceutical
Company Ltd., Corbec Pharmaceuticals, Inc. and certain Security
Holders of Corbec Pharmaceuticals, Inc., dated October 31, 1997.
10.2 Registration Rights Agreement among Panax Pharmaceutical Company Ltd.
and the former security holders of Corbec Pharmaceuticals, Inc.,
dated November 6, 1997.
10.3 Stock Purchase Agreement by and between Panax Pharmaceutical Company
Ltd. and Leonard S. Jacob dated September 3, 1997.
10.4 Employment Agreement between InKine Pharmaceutical Company, Inc. and
Leonard S. Jacob, dated November 6, 1997
10.5 Employment Agreement between InKine Pharmaceutical Company, Inc. and
Taffy J. Williams, dated November 6, 1997.
10.6 Option to Purchase Shares of Common Stock of the InKine
Pharmaceutical Company, Inc. dated November 6, 1997 issued to Leonard
S. Jacob.
10.7 Common Stock Purchase Warrant, dated November 6, 1997 issued to
Allegheny University of the Health Sciences.
10.8 Non-Milestone Common Stock Purchase Warrant, dated November 6, 1997
issued to George Tuszynski.
10.9 Common Stock Purchase Warrant, dated November 6, 1997 issued to
George Tuszynski.
99 Item 5 of Part II of the Company's quarterly report on Form 10-QSB
for the quarter ended September 30, 1997 (as amended by Form 10-QSB/A
filed on November 17, 1997), portions of which are incorporated by
reference into this report on Form 8-K
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
InKine Pharmaceutical Company, Inc.
By: /s/ Taffy J. Williams
---------------------------------------
Taffy J. Williams, Ph.D.
President and Chief Operating Officer
Dated: November 21, 1997
<PAGE>
EXHIBIT INDEX
10.1 Agreement and Plan of Reorganization among Panax Pharmaceutical
Company Ltd., Corbec Pharmaceuticals, Inc. and certain Security
Holders of Corbec Pharmaceuticals, Inc., dated October 31, 1997.
10.2 Registration Rights Agreement among Panax Pharmaceutical Company Ltd.
and the former security holders of Corbec Pharmaceuticals, Inc.,
dated November 6, 1997.
10.3 Stock Purchase Agreement by and between Panax Pharmaceutical Company
Ltd. and Leonard S. Jacob dated September 3, 1997.
10.4 Employment Agreement between InKine Pharmaceutical Company, Inc. and
Leonard S. Jacob, dated November 6, 1997
10.5 Employment Agreement between InKine Pharmaceutical Company, Inc. and
Taffy J. Williams, dated November 6, 1997.
10.6 Option to Purchase Shares of Common Stock of the InKine
Pharmaceutical Company, Inc. dated November 6, 1997 issued to Leonard
S. Jacob.
10.7 Common Stock Purchase Warrant, dated November 6, 1997 issued to
Allegheny University of the Health Sciences.
10.8 Non-Milestone Common Stock Purchase Warrant, dated November 6, 1997
issued to George Tuszynski.
10.9 Common Stock Purchase Warrant, dated November 6, 1997 issued to
George Tuszynski.
99 Item 5 of Part II of the Company's quarterly report on Form 10-QSB
for the quarter ended September 30, 1997 (as amended by Form 10-QSB/A
filed on November 17, 1997), portions of which are incorporated by
reference into this report on Form 8-K
<PAGE>
----------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
among
PANAX PHARMACEUTICAL COMPANY LTD.
and
CORBEC PHARMACEUTICALS, INC.
and certain
SECURITY HOLDERS OF CORBEC PHARMACEUTICALS, INC.
----------------------------------------------
--------
October 31, 1997
--------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
BACKGROUND........................................................................................................1
TERMS.............................................................................................................2
1. THE MERGER.....................................................................................................2
1.1. The Merger................................................................................................2
1.2. Effective Time of the Merger..............................................................................2
1.3. Closing...................................................................................................2
1.4. Conversion of The Company's Common Stock; Mechanics.......................................................3
1.5. Conversion of Acquisition Subsidiary Stock................................................................5
1.6. Additional Consideration..................................................................................5
2. REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE COMPANY AND THE STOCKHOLDERS..................................7
2.1. Organization and Qualification; Corporate Power...........................................................7
2.2. Capitalization............................................................................................7
2.3. Subsidiaries..............................................................................................8
2.4. Corporate Power as to this Agreement......................................................................8
2.5. Authorization and Validity of Agreements..................................................................8
2.6. No Violation of Law or Default by Execution and Performance of this Agreement.............................9
2.7. Approvals and Consents....................................................................................9
2.8. Financial Statements of the Company and its Subsidiaries..................................................9
2.9. No Undisclosed Liabilities...............................................................................10
2.10. No Material Changes.....................................................................................10
2.11. Tax Returns, Reports to Taxing Authorities, Audits and Tax Payments.....................................11
2.12. Permits and Licenses....................................................................................12
2.13. Compliance with Laws and Regulations....................................................................12
2.14. Environmental Matters...................................................................................12
2.15. Properties..............................................................................................13
2.16. Marketable Title to Assets..............................................................................13
2.17. Material Contracts......................................................................................13
2.18. Litigation..............................................................................................14
2.19. Insurance...............................................................................................14
2.20. Compensation............................................................................................14
2.21. Banking Arrangements....................................................................................14
2.22. Patents, Trademarks, Licenses...........................................................................15
2.23. Intangible Assets.......................................................................................15
2.24. Absence of Creditors' Arrangements and Bankruptcies.....................................................15
2.25. Employee Benefit Plans..................................................................................16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
2.26. Labor Contracts and Relations...........................................................................16
2.27. No Change in Contractual Relations......................................................................16
2.28. Minute Books, Stock Records, Officers, Directors........................................................17
2.29. Brokers.................................................................................................17
2.30. Full Disclosure.........................................................................................17
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE STOCKHOLDERS.................................................17
3.1. Organization.............................................................................................18
3.2. Power as to this Agreement...............................................................................18
3.3. Authorization and Validity of Agreement..................................................................19
3.4. No Violation of Law or Default by Execution and Performance of this Agreement............................19
3.5. Approvals and Consents...................................................................................19
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIROR.........................................................19
4.1. Organization and Qualification; Corporate Power..........................................................19
4.2. Capitalization...........................................................................................20
4.3. Corporate Power as to this Agreement.....................................................................20
4.4. Authorization and Validity of Agreements.................................................................20
4.5. No Violation of Law or Default by Execution and Performance of this Agreement............................21
4.6. Approvals and Consents...................................................................................21
4.7. Financial Statements.....................................................................................21
4.8. No Undisclosed Liabilities...............................................................................22
4.9. No Material Changes......................................................................................22
4.10. Tax Returns, Reports to Taxing Authorities, Audits and Tax Payments.....................................23
4.11. Litigation..............................................................................................23
4.12. Brokers.................................................................................................23
4.13. Proprietary Rights......................................................................................23
5. ADDITIONAL COVENANTS..........................................................................................24
5.1. Conduct of Business by the Company Pending Closing.......................................................24
5.2. Conduct of Business by Acquiror Pending Closing..........................................................27
5.3. Reasonable Access to Information and Documents...........................................................27
5.4. Best Efforts.............................................................................................27
5.5. Discussions by the Company with Other Parties............................................................28
5.6. Development of Technology by Acquiror....................................................................29
5.7. Reimbursement for Additional Contributions...............................................................29
5.8. Approval by the Company's Stockholders...................................................................29
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
6. INDEMNIFICATION AND REMEDIES..................................................................................29
6.1. Definition of "Representations and Warranties."..........................................................29
6.2. Survival of Representations, Warranties and Covenants; Right to Indemnification Not Affected by Knowledge.30
6.3. Exclusive Remedies.......................................................................................30
6.4. Indemnification by the Stockholders......................................................................30
6.5. Indemnification by Acquiror..............................................................................31
6.6. Determination of Losses..................................................................................31
6.7. Limitations on Claims....................................................................................31
6.8. Procedures Relating to Indemnification for Third Party Claims under Sections 6.4 and 6.5.................32
7. CERTAIN SECURITIES LAW MATTERS................................................................................34
7.1. Securities Act Covenants and Representations.............................................................34
7.2. Legend on Stock Certificates.............................................................................34
7.3. Registration Rights......................................................................................35
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIROR...............................................................36
8.1. Performance of Agreements................................................................................36
8.2. Representations and Warranties...........................................................................36
8.3. No Adverse Legal Proceedings.............................................................................36
8.4. Certificate of Secretary.................................................................................36
8.5. Good Standing Certificates...............................................................................37
8.6. Consents and Approvals...................................................................................37
8.7. Acquiror Shares Listed on NASDAQ.........................................................................37
8.8. Opinion of Counsel for the Company.......................................................................37
8.9. Surrender of Derivatives; Certificate Specifying Definitive Stock Ownership; Additional Certifications...37
8.10. Completion of Financing.................................................................................38
8.11. Acquisition of Sangen Pharmaceutical Company............................................................38
8.12. Resignations............................................................................................38
8.13. New Litigation..........................................................................................38
8.14. Registration Rights Agreement...........................................................................38
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS.......................................39
9.1. Performance of Agreements................................................................................39
9.2. Representations and Warranties...........................................................................39
9.3. No Adverse Legal Proceedings.............................................................................39
9.4. Certificates of Secretaries and Good Standing Certificates...............................................39
9.5. Opinion of Counsel for Acquiror..........................................................................40
9.6. Completion of Financing..................................................................................40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
9.7. Acquisition of Sangen Pharmaceutical Company.............................................................40
9.8. Acquiror Shares Listed on NASDAQ.........................................................................40
9.9. Registration Rights Agreement............................................................................40
9.10. New Litigation..........................................................................................40
9.11. Payment to ALW Partnership..............................................................................41
10. TERMINATION OF AGREEMENT.....................................................................................41
10.1. Termination of Agreement................................................................................41
11. CERTAIN DEFINITIONS..........................................................................................41
11.1. Affiliate...............................................................................................41
11.2. Knowledge...............................................................................................42
11.3. Person..................................................................................................42
12. GENERAL......................................................................................................42
12.1. Nature and Survival of Representations..................................................................42
12.2. Governing Law...........................................................................................43
12.3. Parties in Interest.....................................................................................43
12.4. Entire Agreement........................................................................................43
12.5. Notices.................................................................................................43
12.6. Section Headings and Titles.............................................................................43
12.7. Schedules...............................................................................................44
12.8. Modification............................................................................................44
</TABLE>
EXHIBITS
A - Form of Agreement and Plan of Merger between CorBec
Acquisition Corp. and the Company (See Section 1.1)
B - Form of Registration Rights Agreement (See Section 7.3)
C - Form of Opinion of Counsel for the Company (See Section 8.8)
D - Form of Opinion of Counsel for Acquiror (See Section 9.5)
<PAGE>
SCHEDULES AND SUPPLEMENTARY
DOCUMENTS REFERRED TO IN AGREEMENT
Principal Title
Section Reference
2.1............... Schedule of Corporate Organization
2.7............... Schedule of Required Approvals and Consents
2.10.............. Schedule of Material Changes
2.11.............. Schedule of Tax Matters
2.12.............. Schedule of Permits
2.14.............. Schedule of Environmental Matters
2.15.............. Schedule of Real Property
2.16.............. Schedule of Mortgages, Liens and Other Encumbrances
2.17.............. Schedule of Material Contracts
2.18.............. Schedule of Litigation
2.19.............. Schedule of Insurance
2.20.............. Schedule of Compensation
2.21.............. Schedule of Banking Arrangements
2.22.............. Schedule of Intellectual Property
2.26.............. Schedule of Labor Contracts and Relations
2.28.............. Schedule of Officers and Directors
2.30.............. Schedule 2.30
<PAGE>
INDEX OF DEFINITIONS
Section
-------
Acquiror .......................................... Introduction
Acquiror Balance Sheet............................. 4.8
Acquiror Balance Sheet Date........................ 4.8
Acquiror fiscal year............................... 1.6(a)
Acquiror Material Adverse Effect................... 4.1
Acquiror net revenue............................... 1.6(a)
Acquiror Shares.................................... Background A
Acquisition Subsidiary............................. Background C
Affiliate ......................................... 11.1
Balance Sheet Date................................. 2.8(b)
Closing............................................ 1.3
Closing Agreements ................................ 6.3
Closing Date....................................... 1.3
Company ........................................... Introduction
Company's Auditors................................. 2.8(a)
Company's Financial Statements..................... 2.8(c)
Constituent Corporations........................... 1.1
Determination Date................................. 6.7(b)
Disbursement Agent................................. 1.6(b)
Effective Time..................................... 1.2
ERISA.............................................. 2.25
FDA................................................ 1.6(a)
IND................................................ 1.6(a)
Indemnified Party ................................. 5.8
Indemnifying Party................................. 5.8
Intellectual Property.............................. 2.22
Interim Balance Sheet ............................. 2.8(b)
Interim Financial Statements....................... 2.8(b)
Internal Revenue Code.............................. 2.11
IRS................................................ 2.11
Knowledge, Know.................................... 11.2
Law................................................ 2.13
Lien............................................... 2.16
Loss............................................... 6.4
Material Adverse Effect............................ 2.1
Material Contracts................................. 2.17
Merger Agreement................................... 1.1
Merger............................................. 1.1
NASDAQ............................................. Background A
Old Company Common Stock........................... 1.4(a)(i)
<PAGE>
Payees............................................. 1.6(a)
Pending Securities Compliance...................... 4.5
Permits............................................ 2.12
Person............................................. 11.3
Plan............................................... 2.25
PPM................................................ 4.2
Private Placement.................................. 5.6
Proprietary Rights................................. 4.13
Representations and Warranties..................... 6.1
Residual Cash Amount............................... 1.4(a)(ii)
Sangen............................................. 8.11
SEC................................................ 4.7
Second Drug........................................ 1.6(a)
Securities Act..................................... 4.5
Special Meeting.................................... 4.5
Stockholders....................................... Introduction
Surviving Corporation.............................. 1.1
Technology......................................... Background B
Third Party Claim.................................. 6.8
Value.............................................. 6.7(b)
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS is an AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement")
dated as of October 31, 1997 among PANAX PHARMACEUTICAL COMPANY LTD., a New
York corporation ("Acquiror"), CORBEC PHARMACEUTICALS, INC., a Delaware
corporation (the "Company") and the following persons, who hold in the
aggregate approximately 74% of the capital stock of the Company on a fully
diluted basis (the "Stockholders"): HILLMAN MEDICAL VENTURES 1993, L.P.,
HILLMAN MEDICAL VENTURES 1995, L.P., HILLMAN MEDICAL VENTURES 1996, L.P., all
Delaware limited partnerships, and PLEXUS VENTURES, INC., a Pennsylvania
corporation.
BACKGROUND
A. Acquiror is engaged in the discovery and development of new
pharmaceutical compounds. Acquiror's shares of common stock, $.0001 par value
per share ("Acquiror Shares"), are quoted on the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ").
B. The Company is engaged in the development of pharmaceuticals
designed to modulate the immune system. The Company's technology platform
(collectively, the "Technology") consists principally of certain data and
know-how relating to, and rights to or ownership of: (i) the compound
CBP-1011, an orally administered glucocorticoid analog that is in a Phase III
clinical trial in the U.S. for the treatment of Idiopathic Thrombocytopenia
Purpura; (ii) certain gene therapy approaches discovered by the Company, which
are currently being collaboratively developed by the Company and GenVec Corp.;
and (iii) the Fc receptor and certain other technologies discovered by Alan D.
Schreiber, M.D.
C. The purpose of this Agreement is to adopt hereby a plan of
reorganization providing for the acquisition by Acquiror of all the
properties, assets and business of the Company in exchange for cash and
Acquiror Shares, effected pursuant to the merger provided for in this
Agreement under which:
1. Acquiror having organized a wholly owned subsidiary
under Delaware law ("Acquisition Subsidiary");
2. Acquisition Subsidiary will merge with and into the
Company;
3. The holders of all of the shares of common stock of
the Company, will, in exchange for their shares,
receive cash, Acquiror Shares and certain future
rights; and
4. Acquiror, as the sole Stockholder of Acquisition
Subsidiary, will receive all of the shares of capital
stock of the Company issued in, and outstanding
immediately after, the merger.
<PAGE>
TERMS
The parties, intending to be legally bound hereby, agree as follows:
1. THE MERGER
1.1. The Merger.
Acquiror has caused Acquisition Subsidiary to be duly
incorporated under Delaware law as a wholly owned subsidiary of Acquiror with
such powers, licenses, franchises and charter and bylaw provisions as Acquiror
may deem appropriate or as may be required by the applicable laws of Delaware
for such corporation to perform validly the transactions provided herein to be
performed by it. On or before the Closing Date (defined in Section 1.3),
Acquisition Subsidiary and the Company will execute an agreement and plan of
merger substantially in the form of Exhibit A hereto (the "Merger Agreement"),
and on the Closing Date, Acquisition Subsidiary will be merged with and into
the Company (the "Merger") in accordance with this Agreement and the Merger
Agreement. (Acquisition Subsidiary and the Company are referred to
collectively herein as the "Constituent Corporations.") The separate existence
of Acquisition Subsidiary shall thereupon cease, and the Company will be the
surviving corporation in the Merger (the "Surviving Corporation"). The
corporate existence of the Company, with all its purposes, powers and objects,
shall continue unaffected and unimpaired by the Merger, and as the Surviving
Corporation it shall be governed by the laws of the State of Delaware and
succeed to all of the rights, assets, liabilities and obligations of the
Constituent Corporations in accordance with the General Corporation Law of the
State of Delaware. The separate existence and corporate organization of
Acquisition Subsidiary shall cease on the Closing Date and thereupon the
Constituent Corporations shall be a single corporation, which shall be the
Company. The name of the Surviving Corporation shall be CorBec
Pharmaceuticals, Inc.
1.2. Effective Time of the Merger.
If all of the conditions of Sections 8 and 9 shall have been
satisfied or waived as provided for herein, and this Agreement shall not have
been terminated pursuant to Section 10, on the Closing Date, Acquiror will
cause Acquisition Subsidiary to, and the Company will, take all action,
including execution and delivery of the Merger Agreement and the filing and
recording of a certificate of merger, as may be necessary to cause the Merger
to become effective under Delaware law. The time when the Merger becomes
effective is hereinafter referred to as the "Effective Time."
1.3. Closing.
The closing (the "Closing") of the Merger will be held at
the Offices of Todtman, Nachamie, Hendler & Spizz, P.C. in New York, New York,
at 10:00 A.M. on or before November 17, 1997 or at such other time or place as
Acquiror and the Company shall agree in writing (the "Closing Date").
<PAGE>
1.4. Conversion of The Company's Common Stock; Mechanics.
The outstanding shares of common stock of the Company will be
converted in the Merger as follows:
(a) Company Common Stock.
(i) Upon the Effective Time, all the shares of
common stock of the Company issued and
outstanding immediately prior to the
Effective Time (the "Old Company Common
Stock") will immediately, by virtue of the
Merger and without any action on the part
of the holders of such shares, be
converted into the right to receive from
the Surviving Corporation an aggregate of
$750,000 in cash (subject to adjustment,
as described in Section 1.4(a)(ii)) plus,
subject to Section 1.4(c), an aggregate of
750,000 Acquiror Shares. These aggregate
amounts of cash and Acquiror Shares will
be distributed in respect of the shares of
Old Company Common Stock outstanding at
the Effective Time on a pro rata basis.
(ii) The cash portion of the consideration
described above was determined based on
the assumption that Company's cash balance
on the Closing date would be at least
equal to the "Residual Cash Amount," as
defined below. If such cash balance is
less than the Residual Cash Amount, then
the aggregate amount of cash delivered
with respect to canceled Old Company
Common Stock pursuant to the previous
paragraph shall be reduced by an amount
equal to the difference between the
Company's cash balance on the Closing Date
and the Residual Cash Amount. The
Company's president or chief financial
officer will deliver a certificate to
Acquiror at the Closing certifying as to
such cash balance on hand. The "Residual
Cash Amount" means $250,000 less all
expenses incurred by the Company (with
respect to which corresponding entries
have been made in the Company's accounting
records or for which documentary receipts
are provided) in the ordinary course of
business and consistent with Section 5.1
during the period from August 15, 1997 to
the Closing Date.
<PAGE>
(iii) All shares of Old Company Common Stock, by
virtue of the Merger and without any
action on the part of the holders thereof,
shall, at the Effective Time, no longer be
outstanding, but shall be canceled and
retired and shall cease to exist. Each
holder of record of Old Company Common
Stock shall, after the Effective Time,
cease to have any rights with respect to
such Old Company Common Stock, except to
receive cash and Acquiror Shares upon
surrender to the Surviving Corporation of
the certificate(s) representing such Old
Company Common Stock and to receive the
additional future consideration in respect
of certain developmental and commercial
milestones related to the Company's
technology, as contemplated by Section
1.6.
(b) Delivery of Cash, Certificates and Cash in Respect of
Fractional Shares. At the Closing, Acquiror will cause the Company, as the
Surviving Corporation, to deliver to each holder of shares of Old Company
Common Stock, upon surrender to such Surviving Corporation of one or more
certificates representing such stock for cancellation, (i) the cash portion of
the consideration into which such shares of Old Company Common Stock are
converted in the Merger, and (ii) certificates representing the number of
Acquiror Shares into which such shares of Old Company Common Stock are
converted in the Merger pursuant to Section 1.4(a)(i), together with cash in
lieu of fractional shares as provided in Section 1.4(c).
(c) No Fractional Shares. No certificates or scrip
representing less than one Acquiror Share shall be issued upon the surrender
for exchange of certificates representing shares of Old Company Common Stock.
In lieu of any such fractional share, each holder of shares of Old Company
Common Stock who would otherwise have been entitled to a fraction of an
Acquiror Share upon surrender of certificates pursuant to Section 1.4(b) shall
be entitled to receive from the Company an amount in cash (without interest),
payable by check, rounded to the nearest cent, determined by multiplying (i)
the fractional interest to which such holder would otherwise be entitled by
(ii) the average of the closing bid and asked prices for Acquiror Shares, as
reported on NASDAQ, on the first day preceding the Closing Date for which such
prices were reported.
(d) Closing of the Company's Transfer Books. At the
Effective Time, the stock transfer books of the Company will be closed and no
transfer of shares of Old Company Common Stock will thereafter be registered
on the stock transfer books of the Surviving Corporation.
<PAGE>
1.5. Conversion of Acquisition Subsidiary Stock.
At the Effective Time, each share of capital stock of
Acquisition Subsidiary issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder of such share, be converted into one share of common stock,
par value $.01 per share, of the Surviving Corporation. Upon surrender to the
Surviving Corporation of the certificate for any such shares of capital stock
of Acquisition Subsidiary registered in its name, Acquiror shall receive a
certificate for a like number of shares of common stock of the Surviving
Corporation.
1.6. Additional Consideration.
(a) Milestone Payments. As additional consideration
hereunder, Acquiror shall, upon the achievement of the milestones set forth
below, and within the periods specified for payment opposite such milestones,
make the cash payments and issue the Acquiror Shares to the holders of Old
Company Common Stock immediately prior to the Effective Time (the "Payees"),
as such payments and issuances are set forth opposite such milestones,
respectively (each such payment and issuance to be effected only once). The
cash and shares shall be distributed among the Payees pro rata based on their
ownership of Old Company Common Stock immediately prior to the Effective Time:
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------
Milestone or Target Consideration to be Paid
- ---------------------------------------------------------------------------------------------------------------------
Letter of approval from Food and Drug Administration $500,000 and 180,000 shares within 30 days after receipt
("FDA") allowing for the commercial sale of such letter
of CBP-1011
- ---------------------------------------------------------------------------------------------------------------------
Acquiror net revenue from CBP-1011 equals or exceeds 80,000 shares within 30 days after completion of
$20,000,000 in any Acquiror fiscal year Acquiror's audited financial statements for the first
fiscal year in which such revenue level is achieved
- ---------------------------------------------------------------------------------------------------------------------
Acquiror net revenue from CBP-1011 equals or exceeds $7,500,000 payable in five consecutive annual installments
$30,000,000 in any Acquiror fiscal year of $1,500,000 commencing 30 days after completion of
Acquiror's audited financial statements for the first
fiscal year in which such revenue level is achieved
- ---------------------------------------------------------------------------------------------------------------------
Acquiror net revenue from CBP-1011 equals or exceeds 180,000 shares within 30 days after completion of
$40,000,000 in any Acquiror fiscal year Acquiror's audited financial statements for the first
fiscal year in which such revenue level is achieved
- ---------------------------------------------------------------------------------------------------------------------
Introductory new drug application ("IND") filed for a $500,000 and 30,000 shares within 30 days after such
compound based on the Technology and different from filing
CBP-1011 ("Second Drug")
- ---------------------------------------------------------------------------------------------------------------------
Successful completion of Phase II clinical trials with $80,000 within 30 days after delivery of definitive report
respect to Second Drug from contract research organization confirming same
- ---------------------------------------------------------------------------------------------------------------------
New drug application filed with FDA with respect to 120,000 shares within 30 days after such filing
Second Drug
- ---------------------------------------------------------------------------------------------------------------------
Letter of approval from FDA allowing for the $500,000 and 130,000 shares within 30 days after receipt
commercial sale of the Second Drug of such letter
- ---------------------------------------------------------------------------------------------------------------------
Acquiror net revenue from Second Drug equals or $7,500,000 payable in five consecutive annual installments
exceeds $75,000,000 in any Acquiror fiscal year of $1,500,000 commencing 30 days after completion of
Acquiror's audited financial statements for the first
fiscal year in which such revenue level is achieved
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes of the foregoing table, "Acquiror net revenue"
means the cash consideration received from the sale of the specified product,
less qualifying costs directly attributable to such sale. Such qualifying
costs shall consist of (i) discounts and allowances in amounts customary in
the trade for quantity purchases, prompt payments and for wholesalers and
distributors, (ii) credits or refunds for returns, (iii) prepaid outbound
transportation expenses and transportation insurance premiums paid by
Acquiror, and (iv) sales and use taxes and other fees imposed by governmental
agencies paid by Acquiror. For purposes of the following table, "Acquiror
fiscal year" means the 12-month period ending each June 30 (or such other date
to which the fiscal year-end of Acquiror may be changed).
(b) Disbursement Agent. Rock Hill Ventures, Inc. a
Pennsylvania corporation, wholly owned by Hal S. Broderson, M.D., and Charles
B. Hadley, is hereby designated as the disbursement agent for the Payees (the
"Disbursement Agent"). Acquiror's obligations under Section 1.6(a) with
respect to each cash payment and stock issuance shall be satisfied when it
delivers to the Disbursement Agent checks payable to the respective Payees and
stock certificates in the names of the respective Payees.
<PAGE>
2. REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE COMPANY
AND THE STOCKHOLDERS
The Company and each of the Stockholders severally and not jointly
represents, warrants and covenants as follows:
2.1. Organization and Qualification; Corporate Power.
The Company (i) is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its incorporation
set forth on the Schedule of Corporate Organization, (ii) is duly qualified as
a foreign corporation and is in good standing in each of the jurisdictions
stated therefor in the Schedule of Corporate Organization and (iii) has the
corporate power, holds all "Permits" (defined in Section 2.12) necessary, and
is in all material respects entitled, to carry on its business as now being
conducted. Neither the location of the properties owned or leased by the
Company nor the nature of its business makes necessary qualification by it to
do business as a foreign corporation in any other jurisdiction, except for
such jurisdictions in which the failure to be so qualified would not have a
material adverse effect on the business, properties, financial condition or
results of operations of the Company (a "Material Adverse Effect"). The copies
(certified by the corporate secretary) of the Company's Articles (or
Certificate) of Incorporation and bylaws which have been delivered to Acquiror
are correct as at the date of this Agreement.
2.2. Capitalization.
(a) Current. The authorized, issued and outstanding shares
of capital stock of the Company is as set forth in the Schedule of Corporate
Organization. All such outstanding shares of capital stock have been duly
authorized, are duly and validly issued and outstanding, are fully paid and
non-assessable and have not been issued in violation of the preemptive rights
(whether by statute or agreement) of any security holder of the Company. The
Company holds no shares of capital stock in treasury. Except as set forth in
the Schedule of Corporate Organization, there are not outstanding any options
or rights to purchase or otherwise acquire from the Company, or any commitment
of any character by the Company to issue, any shares of its capital stock or
any securities or obligations convertible into or exchangeable for, or
otherwise entitling any person to acquire from the Company, any shares of its
capital stock.
<PAGE>
(b) Conversion and Exercise Prior to Effective Time.
Immediately prior to the Effective Time, all outstanding shares of convertible
preferred stock of the Company shall have been converted into shares of common
stock of the Company and all outstanding options to purchase common stock of
the Company shall have been duly exercised and shares of Company common stock
issued pursuant thereto (or to the extent any outstanding options shall not
have been so exercised, they shall have been terminated immediately prior to
the effective time), or all actions shall have been taken to effect such
conversions, exercises, terminations and issuances concurrent with the
Effective Time; provided, however, that no Stockholder is making any covenant
on behalf of any other Stockholder that such other Stockholder will elect to
convert its preferred stock. As a result, concurrent with the Effective Time
(but before giving legal effect to the Merger), the authorized, issued and
outstanding shares of capital stock of the Company shall (subject to the next
sentence) consist solely of 2,513,461 shares of common stock, and there shall
be outstanding no options or rights to purchase or otherwise acquire from the
Company, or any commitment by the Company to issue, any shares of its capital
stock or securities or obligations convertible into or exchangeable for, or
otherwise entitling any person to acquire from the Company, any shares of its
capital stock. At the Closing, the Company will deliver a certificate as to
the number of shares of the Company's common stock so issued in respect of
options and the total number of shares of common stock outstanding concurrent
with the Effective Time (but before giving legal effect to the Merger).
Concurrent with the Effective Time, after consummation of the transactions
contemplated by this Section 2.2(b) (but before giving legal effect to the
Merger), all outstanding shares of the Company's common stock will have been
duly authorized, duly and validly issued and outstanding, will be fully paid
and non-assessable, and will not have been issued in violation of the
preemptive rights (whether by statute or agreement) of any security holder of
the Company.
2.3. Subsidiaries.
The Company does not own any shares of capital stock or
other equity interest in any corporation, partnership, association or other
business entity.
2.4. Corporate Power as to this Agreement.
The Company has the corporate power to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.
2.5. Authorization and Validity of Agreements.
The execution and delivery of this Agreement by the Company
and the consummation by it of the transactions contemplated hereby have been
duly authorized by the Company's board of directors. On the Closing Date, the
execution and delivery of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby shall have been duly authorized
by all necessary and appropriate corporate action, including, without
limitation, approval by a majority of holders of the Company's outstanding
shares of capital stock. This Agreement has been duly executed and delivered
by the Company and, assuming it constitutes a valid and binding obligation of
Acquiror, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The Merger
Agreement, when executed and delivered, shall have been duly executed and
delivered by the Company and, assuming it constitutes a valid and binding
obligation of Acquisition Subsidiary, the Merger Agreement will constitute a
valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms.
<PAGE>
2.6. No Violation of Law or Default by Execution and Performance
of this Agreement.
The execution, delivery and, subject to obtaining the
consents and approvals referred to in the Schedule of Required Approvals and
Consents, the performance of this Agreement by the Company will not violate
any applicable Law (defined in Section 2.13) or constitute a default by the
Company, or result in a right of acceleration, termination or similar right of
any party (or will, but for the passage of time or the giving of notice,
constitute a default by the Company or result in such a right of acceleration,
termination or similar right of any party), under the Certificate of
Incorporation or bylaws of the Company or under any contract, agreement,
license or instrument to which it is a party.
2.7. Approvals and Consents.
Except as set forth on the Schedule of Required Approvals
and Consents, no approval, consent or authorization of, or declaration or
filing with, any governmental or judicial authority or any other person is
required in connection with the execution and delivery of this Agreement by
the Company or any of the Stockholders or the performance by the Company or
any Stockholder of such person's obligations hereunder or the consummation by
such person of the transactions contemplated hereby.
2.8. Financial Statements of the Company and its Subsidiaries.
The Company has delivered to Acquiror the following
financial statements:
(a) Audited. The balance sheet of the Company as at December
31 of each of the years 1994, 1995 and 1996 and the statements of income and
retained earnings (deficit) and cash flows of the Company for each of the
years then ended, audited and reported upon (with an unqualified opinion,
except that it may contain an explanatory paragraph regarding the Company's
ability to continue as a going concern) by Arthur Andersen & Co., L.L.P. (the
"Company's Auditors").
(b) Interim. The balance sheet of the Company as at June 30,
1997 and the statements of operations and cash flows for the six months then
ended (the "Interim Financial Statement"). (Such June 30, 1997 balance sheet
and such date are sometimes herein referred to, respectively, as the "Interim
Balance Sheet" and the "Balance Sheet Date.")
(c) All such financial statements (collectively, the
"Company's Financial Statements") fairly present the financial condition,
assets and liabilities of the Company as at their respective dates and the
results of its operations for such periods in conformity with generally
accepted accounting principles, except that the Interim Financial Statements
are subject to year-end adjustments, none of which individually or in the
aggregate is material in amount or would have a Material Adverse Effect.
<PAGE>
2.9. No Undisclosed Liabilities.
As at the Balance Sheet Date, the Company had no commitment,
liability or obligation of any nature, whether due or to become due, absolute
or contingent, including any liability for taxes or interest or penalties
relating thereto in respect of or measured by its income for any period prior
to the Balance Sheet Date, which, if known, would be required under generally
accepted accounting principles to be reflected on the Interim Balance Sheet,
except to the extent reflected or reserved against in the Interim Balance
Sheet or as disclosed by this Agreement. The Company does not know, nor has it
any reasonable ground to know of any basis for the assertion against the
Company of any liability not fully reflected or reserved against in the
Interim Balance Sheet, except for (i) liabilities arising since the Balance
Sheet Date in the ordinary course of business and (ii) other liabilities
disclosed in this Agreement.
2.10. No Material Changes.
Except as set forth on the Schedule of Material Changes,
since the Balance Sheet Date there has not been:
(a) any change in the financial condition, assets,
liabilities, business, properties or results of operations of the Company,
except changes in the ordinary course of business, none of which individually
or in the aggregate has had a Material Adverse Effect;
(b) any damage, destruction or loss of property of the
Company (whether or not covered by insurance) involving in the aggregate an
amount exceeding $10,000 or that otherwise has had a Material Adverse Effect;
(c) any declaration, setting aside or payment of a dividend
or other distribution in respect of any shares of capital stock of the
Company, or any direct or indirect redemption, purchase or other acquisition
of any of such stock;
(d) except as set forth in the Schedule of Compensation (see
Section 2.20), any increase in the compensation payable or to become payable
by the Company to any of its officers, employees, agents or consultants, or
any bonus arrangement made with any such person, except any increase
necessarily incurred by reason of any law or regulation affecting minimum
wages payable to employees;
(e) any strike, lockout or any similar event or condition of
any character involving employees of the Company materially adversely
affecting the business, financial condition or results of operations of such
corporation;
<PAGE>
(f) a failure by the Company to maintain in full force and
effect all policies of insurance in effect on the Balance Sheet Date, or any
renewals or replacements thereof, or to give any notice or present any claim
under any such policy when due;
(g) a sale or transfer by the Company of any of its assets
or liabilities other than in the ordinary course of its business;
(h) any incurrence by the Company of any indebtedness for
money borrowed;
(i) any mortgage, pledge, hypothecation or other encumbrance
of any of the assets, tangible or intangible, of the Company;
(j) any agreement or arrangement to which the Company is a
party granting to any person any right to purchase any of the assets of the
Company other than in the ordinary course of business or as contemplated by
this Agreement;
(k) any capital expenditure or commitment therefor by the
Company in excess of $10,000 in any one case or $25,000 in the aggregate;
(l) any other material expenditure or any commitment by the
Company other than in the ordinary course of its business;
(m) any other material transaction by the Company other than
in the ordinary course of its business or any waiver of any substantial claim
or right or termination of any material contract or commitment;
(n) any failure or refusal by the Company to pay any of its
obligations, including obligations to vendors and persons providing goods or
services to it; or
(o) any failure or refusal by the Company to make, in a
timely manner, all filings and declarations with and notices to governmental
authorities required to be made in connection with the conduct of its
business.
<PAGE>
2.11. Tax Returns, Reports to Taxing Authorities, Audits and Tax
Payments.
Except as otherwise set forth in the Schedule of Tax
Matters, the Company has filed with the appropriate governmental agencies,
domestic and foreign, all material tax returns and reports required to be
filed by it. The Internal Revenue Service (the "IRS") has not audited the
federal income tax returns of the Company. No waiver of statutes of limitation
for federal income or other tax liability has been executed by the Company.
The Company has not filed any consent or agreement under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). To
the Company's knowledge, there are no proposed assessments of income or other
taxes pending against the Company. All liabilities for taxes shown on federal,
state and other tax returns filed by or on behalf of the Company, or arising
by reason of any government review thereof, or otherwise due to be paid, have
been paid or provided for in the Interim Balance Sheet, and all federal, state
and other taxes for periods subsequent to the period covered by such returns
up to the Balance Sheet Date have been paid or reflected and reserved against
in full in the Interim Balance Sheet. All such returns have been prepared in
accordance with all applicable laws and regulations and accurately reflect in
all material respects the net taxable income or losses or other measure of
taxation of any such corporation that are the subject of such returns. All
contributions due from the Company pursuant to the unemployment insurance laws
of any jurisdiction, all sales or use taxes that are due or payable by the
Company, and all similar contributions and taxes due by the Company in any
jurisdiction, have been paid or provided for in the Interim Balance Sheet. The
Company has withheld from each payment to each of its employees, customers and
others doing business with it the amount of all taxes (including but not
limited to, federal income taxes, state and municipal income taxes, Federal
Insurance Contribution Act contributions and all other employee taxes or
contributions) legally required to be withheld therefrom and has paid the same
to the proper tax receiving officer or governmental agency, except for such
amounts withheld but not yet payable.
2.12. Permits and Licenses.
There is set forth on the Schedule of Permits a complete
list of the permits, licenses and approvals issued or granted by any
governmental authority, commercial enterprise or other person ("Permits") held
by the Company, excluding licenses within the definition of "Intellectual
Property" (defined in Section 2.22) and listed in the Schedule of Intellectual
Property. The Schedule of Permits sets forth the expiration and/or renewal
date for each of the Permits.
2.13. Compliance with Laws and Regulations.
The Company is not, nor has it been (by virtue of any
action, omission, occurrence of any event, the existence of any circumstances
or any contract to which it is a party), in violation of any law, ordinance,
regulation, order, judgment or decree (collectively, "Law") or Permit.
2.14. Environmental Matters.
(a) Except as set forth on the Schedule of Environmental
Matters, there has not existed or occurred on any property owned by the
Company or on any premises leased by the Company (specifically, the actual
space demised to the Company while such premises were leased by the Company)
(i) a condition which involves a material risk of damage to the environment or
(ii) the release, disposal, seepage or discharge of hazardous or toxic
materials into the air, the ground, any river, lake, ocean or other body of
water or into any system for the removal of sewage or other wastes from such
property that involves a material risk of damage to the environment or that
has resulted in a violation of the Comprehensive Environmental Response,
Compensation and Liability Action of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, or any other law, or that otherwise may result
in liability of the Company or any of the Subsidiaries, and no hazardous or
toxic materials have been generated, produced, manufactured, refined,
transported, treated, stored, handled, disposed of, transferred or processed
on or from any such property in a manner which violates any such law or may
otherwise result in liability of the Company.
<PAGE>
(b) The Company has never owned any real property or leased
any premises (referring specifically to the actual space demised to the
Company while such premises were leased by the Company) (i) on which was
located any underground storage tanks or (ii) on or from which any hazardous
or toxic materials were generated, produced, manufactured, refined,
transported, treated, stored, handled, disposed of, transferred or processed.
2.15. Properties.
Set forth in the Schedule of Real Property is a correct
summary description of all real properties owned by or leased to the Company.
2.16. Marketable Title to Assets.
The Company has good and marketable title to all its
properties and assets, including those reflected in the Interim Balance Sheet
(except as since disposed of in the ordinary course of business), and, except
as set forth in the Schedule of Mortgages, Liens and Other Encumbrances, such
properties and assets are subject to no mortgage, pledge, lien, restriction,
claim, security interest or other encumbrance (collectively, "Lien").
2.17. Material Contracts.
Except as set forth in the Schedule of Material Contracts,
the Company has no oral or written (i) employment, severance or collective
bargaining agreement with or relating to any employee, (ii) consulting,
brokerage or agency agreement, (iii) agreement or arrangement with any officer
or director, (iv) agreement, plan or arrangement providing for any bonus,
stock option, stock ownership, stock purchase, stock appreciation right,
pension or retirement benefit, vacation, insurance or other employee benefit;
(v) agreement, contract, indenture or other instrument relating to the
borrowing of money or the guarantee of any obligation for the borrowing of
money or to the grant of any mortgage, lien, security interest or other
encumbrance in or on any of its property, (vi) lease of or contract for
installment or other deferred purchase or sale of any real or personal
property, (vii) license of any patent, copyright, trademark, service mark,
trade secret, proprietary right or other intellectual property (which licenses
may be disclosed on the Schedule of Material Contracts by cross-reference to
the Schedule of Intellectual Property), (viii) agreement for the future
purchase or delivery of goods or rendition of service or (ix) other contract,
arrangement or commitment which does or may have a material effect on the
business, assets, condition or results of operations of the Company. True
copies of all written, and complete summaries of all oral, agreements,
arrangements, plans and other things referred to in the Schedule of Material
Contracts (the "Material Contracts") have been delivered to Acquiror. The
Company is not a party to or bound by any presently existing agreement or
other arrangement which has had, or to its "Knowledge" (defined in Section
11.2) may have, a Material Adverse Effect. No event has occurred which
constitutes a default or results in a right of acceleration or any similar
right by any party (or would, but for the passage of time or the giving of
notice, constitute a default or result in such a right) under any Material
Contract.
<PAGE>
2.18. Litigation.
Except as set forth in the Schedule of Litigation, there is
no litigation, proceeding or investigation pending or, to the Knowledge of the
Company, threatened against or affecting the Company or any property of the
Company, whether or not fully covered by insurance.
2.19. Insurance.
Set forth in the Schedule of Insurance is a complete list of
all insurance policies (including without limitation fire, casualty,
liability, worker's compensation, product liability, directors' and officers'
and errors and omissions) currently held by the Company and any claims pending
by any such corporation under each such policy. True copies of each such
insurance policy have been delivered to Acquiror. All premiums due have been
paid and all such policies are in full force and effect.
2.20. Compensation.
Set forth in the Schedule of Compensation are the names of
all persons who received compensation from the Company during calendar year
1997 and the full amount paid to each such person for services rendered in
calendar year 1997. To the extent further amounts are or will be payable to
any such persons in calendar 1997, such amounts will not be substantially
disproportionate, on an annualized basis, with the amounts shown on such
schedule except for fees paid in connection with matters related to the
Merger.
2.21. Banking Arrangements.
Set forth in the Schedule of Banking Arrangements is a
correct statement of each bank or other financial institution in which the
Company has a deposit account, credit facility or safe-deposit box and the
names of all persons authorized to draw thereon or to have access thereto.
2.22. Patents, Trademarks, Licenses.
Set forth in the Schedule of Intellectual Property is a
correct list and summary description of all (i) patents and patent
applications, (ii) trademarks (whether or not registered) and applications to
register the same, (iii) service marks (whether or not registered) and
applications to register the same, (iv) trade names, (v) copyrights (whether
or not registered) and applications to register the same, (vi) know-how
relating to research and development of chemical compounds, (vii) trade
secrets and (viii) licenses (relating to patents, trademarks, service marks,
trade names, copyrights, know how, trade secrets or other intellectual
property) presently owned, held or used by the Company (collectively,
"Intellectual Property"). Except as described in the Schedule of Intellectual
Property, all Intellectual Property listed therein is owned by the Company
free and clear of all Liens and is not known to be the subject of any
challenge. Except as described in the Schedule of Intellectual Property, there
are no unresolved claims made and there has not been communicated to the
Company the threat of any claim that the holder of such Intellectual Property
is in violation or infringement of any patent, trademark, service mark,
tradename or other right of any other person. The Company is the owner of (and
as such has rights to the unrestricted use of ), or has a valid license to
use, the patents, licenses, tradenames, trademarks, service marks, copyrights,
know-how, formulae and other proprietary and trade rights necessary for the
conduct of the business of the Company as now conducted, without any known
conflict with the rights of others. The Company has not knowingly forfeited or
otherwise relinquished any such patent, license, tradename, trademark, service
mark, copyright, know-how, formula or other proprietary right necessary for
the conduct of the business of the Company as currently conducted.
<PAGE>
2.23. Intangible Assets.
Set forth in the Schedule of Intellectual Property is a
correct list and summary description of all intangible personal property
rights (other than the Intellectual Property) owned or held by the Company
having an acquisition cost or value on the Company's books as of June 30, 1997
of at least $25,000 or otherwise being material to the conduct of the business
of the Company (e.g., software, software systems, data bases and other
information systems employed in the discovery and development of
pharmaceutical compounds).
2.24. Absence of Creditors' Arrangements and Bankruptcies.
The Company has no arrangement with creditors not made in
the ordinary course of business, nor has any involuntary or voluntary petition
in bankruptcy been filed by any "Person" (defined in Section 11.3) against the
Company.
2.25. Employee Benefit Plans.
The Company is not a member of a controlled group, group of
commonly controlled trades or businesses or affiliated service group within
the meaning of Section 414(b), (c) or (m) of the Internal Revenue Code). The
Company has never maintained any employee benefit plan other than its "Equity
Incentive Plan," pursuant to which stock options have been granted only to
certain employees and consultants.
<PAGE>
The Company does not now maintain and has never maintained
any employee benefit plan subject to compliance with the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the Internal Revenue Code
or any rules and regulations of the IRS, the United States Department of Labor
and the Pension Benefit Guaranty Corporation.
The Company has never been a contributing employer to a
"multiemployer pension plan" within the meaning of Section 4001(a) of ERISA.
The Company has no obligation to bear the cost of providing
benefits under any "employee welfare plan" (as defined in Section 3(1) of
ERISA) on behalf of any person subsequent to the termination of their
employment with the Company.
2.26. Labor Contracts and Relations.
Except as set forth on the Schedule of Labor Contracts and
Relations, neither the Company nor any of the Subsidiaries is or has been (a)
a party to any contract or arrangement with a labor union or any local or
subdivision thereof, (b) charged with any unresolved unfair labor practices or
other violations of laws relating to employment practices or (c) to the
Knowledge of the Company had any union organizing activities among any
employees of the Company. Except as stated on such Schedule, to the Knowledge
of the Company, the Company has not taken any action or failed to take any
action which would provide a reasonable basis for any claim of any such unfair
labor practice or other violation. The Company has complied with all laws and
regulations relating to the employment of labor applicable to it, including
any provisions thereof relating to wages, hours, collective bargaining and the
payment of social security and similar taxes and the Company is not liable for
any arrears in wages or any taxes or penalties for failure to comply with the
foregoing.
2.27. No Change in Contractual Relations.
The Company has no reason to Know that any Person who is a
party to a Material Contract intends to or may breach, terminate or not renew
such Material Contract, whether before or after Closing.
2.28. Minute Books, Stock Records, Officers, Directors.
The Company has made available for inspection by Acquiror
the minute book and stock books of the Company, which contain all of each such
corporation's minutes and stock records. Such minute book contains minutes of
all meetings of the board of directors and the stockholders of the Company,
and such minutes reflect all actions taken at such meetings and contain
references to all material matters discussed at such meetings. The Schedule of
Officers and Directors sets forth a complete list of all the current officers
and directors of the Company.
<PAGE>
2.29. Brokers.
Neither the Company nor any of the Stockholders has made any
agreement or taken any action which may cause anyone to become entitled to a
commission as a result of the transactions contemplated by this Agreement;
provided that each Stockholder makes this representation and warranty only
with respect to the Company and itself.
2.30. Full Disclosure.
(a) The Company, solely with respect to itself, represents
and warrants that no representation or warranty by the Company contained in
this Section 2 and no statement contained in any certificate furnished or to
be furnished pursuant hereto to Acquiror by or on behalf of the Company at or
before the Closing contains or will contain any untrue statement of a material
fact, or, subject to the disclaimer set forth in Schedule 2.30, omits or at
the Closing will omit to state a material fact necessary to provide Acquiror
with material information as to the Company and its affairs.
(b) Each Stockholder, severally and solely with respect to
itself, represents and warrants that no representation or warranty by such
Stockholder contained in this Section 2 (and in Section 3) and no statement
contained in any certificate furnished or to be furnished pursuant hereto to
Acquiror by or on behalf of such Stockholder at or before the Closing contains
or will contain any untrue statement of a material fact, or, subject to the
disclaimer set forth in Schedule 2.30, omits or at the Closing will omit to
state a material fact necessary to provide Acquiror with material information
as to the Company and its affairs.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE STOCKHOLDERS
Each Stockholder severally and not jointly represents, warrants and
covenants as to itself as follows:
3.1. Organization.
Such Stockholder is a limited partnership (except for Plexus
Ventures, Inc., which is a corporation), duly organized, validly existing and
in good standing under the laws of the state of its organization.
3.2. Power as to this Agreement.
Such Stockholder has the requisite power to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
<PAGE>
3.3. Authorization and Validity of Agreement.
The execution and delivery of this Agreement by such
Stockholder and the consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary partnership (or corporate, as the
case may be) action and, assuming this Agreement is a valid and binding
obligation of Acquiror, this Agreement constitutes the valid and binding
obligation of such Stockholder, enforceable against it in accordance with its
terms.
3.4. No Violation of Law or Default by Execution and Performance
of this Agreement.
The execution, delivery and performance of this Agreement by
such Stockholder will not violate any applicable Law or constitute a default
by such Stockholder, or result in the right of acceleration, termination or
similar right of any party (or will, but for the passage of time or the giving
of notice, constitute a default by such Stockholder or result in such a right
of acceleration, termination or similar right of any party), under the organic
or governing documents of such Stockholder or under any contract, agreement or
instrument to which it is a party.
3.5. Approvals and Consents.
Except as set forth in the Schedule of Required Approvals
and Consents, no approval, consent or authorization of, or declaration of
filing with, any governmental or judicial authority or any other person is
required in connection with the execution and delivery of this Agreement by
such Stockholder or the performance by such Stockholder of its obligations
hereunder or the consummation by such Stockholder of the transactions
contemplated hereby.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIROR
Acquiror represents, warrants and covenants that:
<PAGE>
4.1. Organization and Qualification; Corporate Power.
Acquiror (i) is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of New York and (ii)
has the corporate power, holds all Permits necessary, and is in all material
respects entitled, to carry on its business as now being conducted. Acquiror
is qualified to do business as a foreign corporation in all jurisdictions in
which the locations of the properties owned or leased by it or the nature of
its business makes necessary such qualification, except for such jurisdictions
in which the failure to be so qualified would not have a material adverse
effect on the business, properties, financial condition or results of
operations of Acquiror (an "Acquiror Material Adverse Effect"). The copies
(certified by the corporate secretary) of the Company's Articles (or
Certificate) of Incorporation and bylaws which have been delivered to Acquiror
are correct as at the date of this Agreement.
4.2. Capitalization.
On the Closing Date, Acquiror will have the duly authorized
and outstanding capitalization set forth under the caption "Capitalization" in
Acquiror's confidential private placement memorandum dated October 27 1997,
copies of which have been provided to the Company (the "PPM"). Other than as
described or referred to in the PPM, there are not outstanding any options or
rights to purchase or otherwise acquire from Acquiror, or any commitment of
any character of Acquiror to issue, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for, or otherwise
entitling any person to acquire from Acquiror, any shares of its capital
stock. The currently outstanding shares of Acquiror's capital stock have been
duly authorized and are validly issued, fully paid and non-assessable and have
not been issued in violation of the preemptive rights (whether by statute or
agreement) of any security holder of Acquiror. At the Closing, the Acquiror
Shares issued in the Merger, and upon issuance thereof, the Acquiror Shares
issued pursuant to Section 1.6, will have been duly authorized, validly issued
and outstanding and will be fully paid and non-assessable and will not have
been issued in violation of the preemptive rights (whether by statute or
agreement) or any security holder of Acquiror.
4.3. Corporate Power as to this Agreement.
Acquiror has the corporate power to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. Acquisition Subsidiary will have the
corporate power to execute and deliver the Merger Agreement, to perform its
obligations thereunder and to consummate the transactions contemplated
thereby.
<PAGE>
4.4. Authorization and Validity of Agreements.
The execution and delivery of this Agreement by Acquiror and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary or appropriate corporate action. This Agreement
has been duly executed and delivered by Acquiror and, assuming it constitutes
a valid and binding obligation of the Company and the Stockholders,
constitutes a valid and binding obligation of Acquiror, enforceable against
Acquiror in accordance with its terms. The Merger Agreement, when executed and
delivered, shall have been duly executed and delivered by Acquisition
Subsidiary and, assuming it constitutes a valid and binding obligation of the
Company, the Merger Agreement will constitute a valid and binding obligation
of Acquisition Subsidiary, enforceable against it in accordance with its
terms.
4.5. No Violation of Law or Default by Execution and Performance
of this Agreement.
The execution, delivery and, subject to (i) "Pending
Securities Compliance" (defined below), (ii) obtaining the consent of
Acquiror's stockholders to all proposals presented for stockholder
consideration at Acquiror's pending special meeting of stockholders scheduled
to occur in October 1997 (the "Special Meeting") and (iii) obtaining the
consents and approvals referred to in the Schedule of Required Approvals and
Consents, the performance of this Agreement by Acquiror will not violate any
applicable Law or constitute a default by Acquiror or result in a right of
acceleration, termination or similar right of any party (or will, but for the
passage of time or the giving of notice, constitute a default by Acquiror or
result in such a right of acceleration, termination or similar right of any
party) under the Articles of Incorporation or bylaws of Acquiror or under any
contract, agreement, license or instrument to which it is a party. "Pending
Securities Compliance" means effecting the inclusion on NASDAQ for quotation
of the Acquiror Shares to be delivered hereunder, satisfying the conditions
for an exemption from registration of such shares under the Securities Act of
1933, as amended (the "Securities Act"), and qualifying such shares under
applicable state Blue Sky laws.
4.6. Approvals and Consents.
Except for the Pending Securities Compliance, the consent of
Acquiror's stockholders as described in Section 4.5 and as otherwise set forth
on the Schedule of Required Approvals and Consents, no approval, consent or
authorization of, or declaration or filing with, any governmental or judicial
authority or any other person is required in connection with the execution and
delivery of this Agreement by Acquiror or the performance by Acquiror of its
obligations hereunder or the consummation by Acquiror of the transactions
contemplated hereby.
4.7. Financial Statements.
Acquiror's balance sheet as at June 30, 1997 and its
statements of operations, statements of changes in stockholders' equity and
statements of cash flows for the years ended June 30, 1997 and 1996, which are
included in Acquiror's proxy statement related to the Special Meeting filed
with the U.S. Securities and Exchange Commission ("SEC") fairly present the
financial condition of Acquiror as at June 30, 1997 and the results of its
operations, changes in stockholders' equity and cash flows for the respective
periods ended on such dates in conformity with generally accepted accounting
principles.
<PAGE>
4.8. No Undisclosed Liabilities.
As at June 30, 1997, Acquiror had no material commitment,
liability or obligation of any nature, whether due or to become due, absolute
or contingent, including any liability for taxes or interest or penalties
relating thereto in respect of or measured by the income of Acquiror for any
period prior to such date, which, if known, would be required under generally
accepted accounting principles to be reflected in such balance sheet, except
to the extent reflected or reserved against in the balance sheet dated such
date referred to in Section 4.7 or as described or referred to in the PPM or
this Agreement. Acquiror does not know or have any reasonable ground to know
of any basis for the assertion against Acquiror of any liability not fully
reflected or reserved against in such balance sheets, except for (i)
liabilities arising since the date thereof in the ordinary course of business
and (ii) other liabilities described or referred to in the PPM or this
Agreement. The date June 30, 1997 and the Acquiror balance sheet referred to
above are referred to herein, respectively, as the "Acquiror Balance Sheet
Date" and the "Acquiror Balance Sheet."
4.9. No Material Changes.
Except as set forth on the Schedule of Material Changes or
as otherwise described or referred to in the PPM, since the Acquiror Balance
Sheet Date, there has not been:
(a) any change in the financial condition, assets,
liabilities, business, properties or results of operations of Acquiror, except
changes in the ordinary course of business, none of which individually or in
the aggregate has had an Acquiror Material Adverse Effect;
(b) any declaration, setting aside or payment of a dividend
or other distribution in respect of any shares of capital stock of Acquiror,
or any direct or indirect redemption, purchase or other acquisition of any of
such stock;
(c) any strike, lockout or any similar event or condition of
any character involving employees of Acquiror materially adversely affecting
the business, financial condition or results of operations of such
corporation;
(d) a failure by Acquiror to maintain in full force and
effect all policies of insurance in effect on the Acquiror Balance Sheet Date,
or any renewals or replacements thereof, or to give any notice or present any
claim under any such policy when due;
<PAGE>
(e) a sale or transfer by Acquiror of any of its assets or
liabilities other than in the ordinary course of its business;
(f) any agreement or arrangement to which Acquiror is a
party granting to any person any right to purchase any of the assets of
Acquiror other than in the ordinary course of business; or
(g) any failure or refusal by Acquiror to make, in a timely
manner, all filings and declarations with and notices to governmental
authorities required to be made in connection with the conduct of its
business.
4.10. Tax Returns, Reports to Taxing Authorities, Audits and Tax
Payments.
Except as otherwise set forth in the Schedule of Tax Matters
or as described or referred to in the PPM, Acquiror has filed with the
appropriate governmental agencies, domestic and foreign, all material tax
returns and reports required to be filed by it. The IRS has not audited the
federal income tax returns of Acquiror. All liabilities for taxes shown on
federal, state and other tax returns filed by or on behalf of Acquiror, or
arising by reason of any government review thereof, or otherwise due to be
paid, have been paid or provided for in the Acquiror Balance Sheet, and all
federal, state and other taxes for periods subsequent to the period covered by
such returns up to the Acquiror Balance Sheet Date have been paid or reflected
and reserved against in full in such balance sheet.
4.11. Litigation.
Except as set forth in the Schedule of Litigation or
described or referred to in the PPM, there is no litigation, proceeding or
investigation pending or, to the Knowledge of Acquiror, threatened against or
affecting any property of Acquiror, whether or not fully covered by insurance.
4.12. Brokers.
Except as described or referred to in the PPM, Acquiror has
not made any agreement or taken any action which may cause anyone to become
entitled to a commission as a result of the transactions contemplated by this
Agreement.
4.13. Proprietary Rights.
Except as described or referred to in the PPM, Acquiror
owns, has acquired or will acquire on or before the Closing Date, adequate and
enforceable rights to use all patents, patent applications, trademarks,
service marks, copyrights, trade secrets, processes, mask works, inventions,
formulations, technology or know-how, or other intangible property or assets
used or proposed to be used in the conduct of its business (other than that
portion of such business consisting of the operations of the Surviving
Corporation after the Merger) as described or contemplated by the PPM (the
"Proprietary Rights"), except where the failure to own or utilize any of such
rights would not have a material adverse effect on the business, property or
financial condition of Acquiror. Except as described or referred to in the
PPM, all licenses and rights to such Proprietary Rights, which are necessary
for the conduct of Acquiror's business as presently conducted, or as proposed
to be conducted, are enforceable, or will be enforceable by Acquiror on or
prior to the Closing, pursuant to certain licensing arrangements. Except as
set forth in the PPM, no adverse claim of ownership has been asserted or, to
the best of Acquiror's knowledge, threatened against Acquiror, with respect to
the subject matter claimed therein. Except as described or referred to in the
PPM, (i) to Acquiror's knowledge, Acquiror has not infringed or
misappropriated nor is it currently infringing or misappropriating the
Proprietary Rights of others and (ii) Acquiror has not received notice of any
infringement, misappropriation or violation by Acquiror, with respect to
asserted Proprietary Rights of others.
<PAGE>
5. ADDITIONAL COVENANTS
5.1. Conduct of Business by the Company Pending Closing.
From and after the date hereof to and including the Closing
Date, except as contemplated by this Agreement or as Acquiror may otherwise
agree in writing, the Company will (and the Stockholders will use their
reasonable best efforts to cause the Company to) comply with the following
(provided that this Section 5.1 is not intended to impose any obligation on
the Stockholders to provide any additional funding to the Company):
(a) Ordinary Course. Maintain its corporate existence, pay
and discharge all debts, liabilities and obligations as they become due
(subject to Section 5.1(l)), conduct its business only in the ordinary course,
consistent with past practices and policies and the provisions of this
Agreement and in compliance in all material respects with all applicable Law,
Permits and Material Contracts, and not make any material change in the nature
or manner of conducting the business conducted by it.
(b) Development of Technology. Continue to diligently pursue
the development of the Technology in accordance with the Company's current
plans (as described to Acquiror), including, but not limited to: (i) continued
funding of the development efforts in the laboratory of Alan D. Schreiber,
M.D.; (ii) continued payments to the Company's consultants, (subject to the
other provisions of this Section 5.1); and (iii) continuation of the U.S.
Phase III clinical trial of CBP-1011.
(c) Facilities. Maintain its facilities and assets in the
same state of repair, order and condition as they were on the date hereof,
reasonable wear and tear excepted.
<PAGE>
(d) Preserve Business and Organization. Use its reasonable
efforts to preserve its organization intact, to keep available to Acquiror the
services of its present officers and employees and to preserve for the benefit
of Acquiror the goodwill of its customers, suppliers and others having
business relations with it.
(e) Notice of Proceedings. Promptly advise Acquiror in
writing of the threat or commencement against the Company of any dispute,
claim, action, suit, proceeding, arbitration or investigation that could have
a Material Adverse Effect or that challenges, or may affect the validity of,
this Agreement or the Merger Agreement or any action taken or to be taken in
connection with this Agreement or the Merger Agreement or the ability of any
party hereto to consummate the transactions contemplated herein or therein.
(f) Notice of Breach. Promptly advise Acquiror in writing of
any event or the existence of any fact that makes untrue or breaches, or will
make untrue or cause to be breached as of the Closing, any representation or
warranty of the Company or any Stockholder set forth in this Agreement.
(g) Charter and Bylaws. Not adopt any amendment to its
Certificate or Articles of Incorporation or its bylaws except as provided for
in the Merger Agreement.
(h) Capitalization. Not make any change to its authorized,
issued or outstanding shares of capital stock or issue any rights or options
to acquire shares of its capital stock, except as contemplated in Sections
2.2(b) and 8.9(a).
(i) Dividends. Not declare or pay any dividend or other
distribution or payment in respect of its capital stock or make any payment to
redeem, purchase or otherwise acquire any shares of its capital stock, except
as contemplated in Sections 2.2(b) or 8.9(a).
(j) Transfer of Assets. Not transfer, grant any license with
respect to, or otherwise dispose of any of its assets constituting the
Technology under any circumstances, and not engage in any such action with
respect to any other assets other than in the ordinary course of business or
as permitted by Section 5.1(k).
(k) Capital Expenditures and Dispositions. Not purchase,
lease or otherwise acquire or transfer, lease or otherwise dispose of any item
of real or personal property other than in the ordinary course of business,
except for purchases and dispositions of a value not exceeding $10,000 in any
case or $25,000 in the aggregate.
(l) Payment of Liabilities. Not pay, discharge or satisfy
any liability or obligation other than in the ordinary course of business,
consistent with past practices.
(m) Liens. Except for the encumbrances disclosed in the
Schedule of Mortgages, Liens and Encumbrances, not permit any of its assets to
be or become subject to any mortgage, lien, security interest or other
encumbrance, except with respect to assets not constituting the Technology and
arising in the ordinary course of business.
<PAGE>
(n) Employee Benefits. Not enter into any new employee
benefit or welfare plan or arrangement nor make any material modification to
any such existing plans or arrangements, except necessary and appropriate
amendments to the Company's Equity Incentive Plan and any existing stock
option agreement in order to accommodate the issuance of shares of the
Company's common stock in respect of non-exercisable options or to terminate
outstanding options as permitted by such plan, as contemplated by Section
2.2(b).
(o) Compensation. Not increase the compensation payable or
to become payable to any director, officer, employee or consultant, except in
the ordinary course of business, as it is consistent with past practices.
(p) Banking Arrangements. Not make any change in any of the
banking and safe deposit arrangements referred to in Section 2.21.
(q) Waiver or Termination. Not waive any substantial claim
or right or terminate any existing material contract or commitment (except as
specifically provided for in this Agreement).
(r) Default. Not do or omit to do any act nor permit any
event to occur or condition to exist that will result in or cause a breach of
any material contract, lease or other commitment of the Company the breach of
which would have a Material Adverse Effect.
(s) Compliance with Laws. Use its best efforts to comply
with all Law.
(t) Representations, Warranties and Covenants Hereunder. Not
take any action (regardless of whether such action might otherwise be
permitted under this Section 5.1), or (through inaction) permit to occur any
event that would result in the inaccuracy or breach at Closing of any of the
representations, warranties or covenants of the Company or the Stockholders
set forth in Section 2 or 3.
(u) Commitments. Not (i) enter into any commitment to do any
act which would violate any provision of this Section 5.1 or (ii) enter into
any contract or commitment the performance of which may extend beyond the
Closing, except those made in the ordinary course of business the terms of
which are consistent with its past practice and reasonable in light of current
conditions.
5.2. Conduct of Business by Acquiror Pending Closing.
From and after the date hereof to and including the Closing
Date, except as contemplated by this Agreement or as described or referred to
in the PPM or as the Company may otherwise agree in writing, Acquiror will
comply with the following:
<PAGE>
(a) General. Maintain its corporate existence, pay and
discharge all debts, liabilities and obligations as they become due, conduct
its business only in the ordinary course, consistent with past practices and
policies and the provisions of this Agreement and in compliance in all
material respects with all applicable Law, Permits and Material Contracts, and
not make any material change in the nature or manner of conducting the
business conducted by it.
(b) Notice of Proceedings. Promptly advise the Company in
writing of the threat or commencement against Acquiror of any dispute, claim,
action, suit, proceeding, arbitration or investigation that could have an
Acquiror Material Adverse Effect or that challenges, or may affect the
validity of, this Agreement or the Merger Agreement or any action taken or to
be taken in connection with this Agreement or the Merger Agreement or the
ability of any party hereto to consummate the transactions contemplated herein
or therein.
(c) Notice of Breach. Promptly advise the Company in writing
of any event or the existence of any fact that makes untrue or breaches, or
will make untrue or cause to be breached as of the Closing, any representation
or warranty of Acquiror set forth in this Agreement.
5.3. Reasonable Access to Information and Documents.
Each of the Company and Acquiror will give to the other and
the other's counsel, accountants and other representatives full access during
normal business hours to all its properties, books, contracts, commitments and
records and will furnish to the other all such documents and copies of
documents (certified if requested) and information with respect to its affairs
as the other may reasonably request.
5.4. Best Efforts.
Subject to the terms and conditions of this Agreement, each
of the Company, the Stockholders and Acquiror will use its best efforts to
take, or cause to be taken, all actions that are necessary or desirable under
applicable Law to consummate and make effective the transactions contemplated
by this Agreement, including, without limitation, using best efforts to obtain
promptly all necessary waivers, consents, licenses and approvals, effecting
all necessary registrations and filings and satisfying the conditions set
forth in Sections 8 and 9.
5.5. Discussions by the Company with Other Parties.
In all discussions or presentations by the Company with
potential partners or acquirors pending the Closing (which discussions and
presentations are not prohibited), the Company will inform the other parties
of its intention to be acquired by Acquiror as contemplated in this Agreement.
The Company shall not enter into any agreements with such parties unless the
terms thereof shall have been approved in writing by Acquiror, and the Company
will inform such parties of Acquiror's right of prior approval.
<PAGE>
5.6. Development of Technology by Acquiror.
After the Closing, the Surviving Corporation (or any
successor thereof that is an Affiliate of Acquiror) will, and Acquiror will
cause such corporation to, exercise reasonably diligent efforts to pursue
development of the Technology in a businesslike fashion. Specifically,
Acquiror will exercise reasonable efforts to cause, to the extent practicable,
the Surviving Corporation to complete the pending Phase III clinical trials
with respect to 100 patients in the United States related to CBP-1011, and
will reserve and apply up to at least $1 million of the proceeds from the
private financing pursuant to the PPM (the "Private Placement") to the
completion of such clinical trials.
5.7. Reimbursement for Additional Contributions.
At the Closing, Acquiror will reimburse the Stockholders on
a pro rata basis (or non-pro rata if so instructed by the Stockholders) in an
amount equal to any new cash contributions to the Company by the Stockholders
after the date of this Agreement and prior to the Closing Date made for the
purpose of funding the Company's operations in the ordinary course of business
and consistent with Section 5.1.
5.8. Approval by the Company's Stockholders.
At the earliest practicable date following the date hereof,
the Company will submit to this Agreement, the Merger Agreement, the Merger
and related matters for stockholder approval (either at a special meeting or
by written consent in lieu thereof ), which approval will be recommended by
the Company's board of directors and management, subject to the fiduciary
obligations of its directors and officers. The Stockholders hereby agree to
cast in favor of approval of this Agreement, the Merger Agreement, the Merger
and related matters all votes they are entitled to cast by virtue of the
securities of the Company held by them, and the Stockholders hereby agree to
use their reasonable best efforts to cause the Company's Board of Directors to
approve and recommend approval of, such matters.
6. INDEMNIFICATION AND REMEDIES
6.1. Definition of "Representations and Warranties."
The "Representations and Warranties" of the Company and each
Stockholder means all of the representations and warranties of any such Person
set forth in Sections 2, 3 and 7, the statements made in the Schedules
referred to in Sections 2 and 3, and the statements set forth in any
certificate referred to in Sections 2.2(b) or 8. The "Representations and
Warranties" of Acquiror means all of the representations and warranties set
forth in Section 4, the statements made in the Schedules referred to in
Section 4, and the statements set forth in any certificate referred to in
Section 9.
<PAGE>
6.2. Survival of Representations, Warranties and Covenants; Right
to Indemnification Not Affected by Knowledge.
Subject to Section 6.7(c), all Representations and
Warranties of the respective parties, and all covenants of the parties set
forth in this Agreement, will survive the closing. The right of a party hereto
to indemnification pursuant hereto will not be affected by any investigation
conducted, or any Knowledge acquired (or capable of being acquired) at any
time, whether before or after the date of the execution and delivery of this
Agreement or the Closing Date, with respect to the accuracy of or compliance
with any representation, warranty or covenant hereunder. The waiver by a party
hereto of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
condition, will not affect the right of such party to indemnification pursuant
hereto by reason of such breach of representation, warranty or covenant,
except to the extent expressly set forth in a writing executed by such party.
6.3. Exclusive Remedies.
The rights and obligations with respect to indemnification
set forth in this Section will be the exclusive rights and obligations of the
respective parties hereto with respect to the Representations and Warranties
of such parties, and a claim for indemnification pursuant to this Section
shall be the exclusive remedy for any breach of any such Representation and
Warranty. In addition, the respective obligations of the parties hereto under
this Agreement, and the agreements to be executed pursuant hereto (the
"Closing Agreements") to fulfill their respective covenants and obligations
set forth herein or therein will be the exclusive obligations of the parties
hereto with respect to the business or ownership of the Company, the business
of Acquiror, the Acquiror Shares, the events giving rise to this Agreement and
the transactions provided for in or contemplated by this Agreement or any of
the Closing Agreements. Without limiting the generality or effect of the
foregoing, as a material inducement to each of the other parties entering into
this Agreement, each of the Company, the Stockholders and Acquiror hereby
waives (as of the date hereof and the Closing Date) any claim or cause of
action that it might be entitled to assert (including, without limitation, any
claim or cause of action for fraud, misrepresentation or other cause under the
common law or any securities, trade regulation, environmental or other law) by
reason of this Agreement, the events giving rise to this Agreement and the
transactions provided for or contemplated by this Agreement or any of the
Closing Agreements, except for claims or causes of action that may be made or
brought under this Agreement or any of the Closing Agreements to enforce the
covenants and obligations of the respective parties set forth herein or
therein.
6.4. Indemnification by the Stockholders.
The Stockholders, severally and not jointly, will indemnify
and hold each of Acquiror and the Surviving Corporation harmless from and
against any damage (including without limitation incidental and consequential
damages), deficiency, cost, expense or diminution of value, whether or not
involving a third-party claim (a "Loss") resulting from (i) the breach of any
Representation or Warranty of the Company or any of the Stockholders or any
failure to perform any covenant or obligation of the Company or any of the
Stockholders contained herein and (ii) any claims, actions, judgments, costs
and expenses incident to the foregoing (including without limitation costs of
investigation and reasonable attorneys' fees).
<PAGE>
6.5. Indemnification by Acquiror.
Acquiror will indemnify and hold the Stockholders harmless
from and against any Loss resulting from (i) the breach of any Representation
or Warranty of Acquiror or the failure to perform any covenant or obligation
of Acquiror herein and (ii) any claims, actions, judgments, costs and expenses
incident to the foregoing.
6.6. Determination of Losses.
Losses shall be determined taking into account the actual
amount of damage, deficiency, cost or expense incurred or suffered or the
diminution of value of any property by reason of the event or condition giving
rise to the obligation to indemnify as well as any insurance proceeds actually
received by the indemnified party (otherwise than from an insurer who is an
affiliate thereof), after adjustment for tax benefits and burdens arising
therefrom or from the indemnification thereof (to the extent that such tax
effects can reasonably be quantified).
6.7. Limitations on Claims.
(a) No claim for indemnification based upon a breach of any
Representation or Warranty may be made against any of the Stockholders under
Section 6.4, or against Acquiror under Section 6.5, until the aggregate amount
of Losses for claims that then may be asserted under such Section 6.4 or 6.5,
as the case may be, exceeds $50,000, whereupon all such Losses may be claimed.
(b) The maximum aggregate liability of each Stockholder to
Acquiror under Section 6.4 or of Acquiror to each Stockholder under Section
6.5 shall not exceed the sum of all the cash plus the aggregate "Value"
(defined below) of all the Acquiror Shares delivered to such Stockholder
pursuant to Section 1.
The "Value" of an Acquiror Share shall be 70% of
the fair market value of such share determined in accordance with the
following: (i) if the Acquiror Shares are quoted on NASDAQ or the Nasdaq
National Market (or other reputable quotation service), the last reported sale
price for an Acquiror Share on the "Determination Date," defined below, and if
no sale takes place on such day or if the last sale price is not reported, the
average of the closing bid and asked prices on such day; (ii) if the Acquiror
Shares are listed or admitted for trading on any national securites exchange,
the closing sales price, regular way, on the Determination Date, or if no sale
takes place on such day, the average of the closing bid and asked prices on
such day; or (iii) if the Acquiror Shares are not quoted, listed or admitted
as described above, the fair market value of such share on the Determination
Date as reasonably determined by the board of directors of Acquiror in good
faith.
<PAGE>
The "Determination Date" shall be the date on which
the Acquiror Share in question was issued under Section 1. If the date
selected in accordance with the foregoing formula is not a day on which the
New York Stock Exchange was open generally for trading, then the Determination
Date shall be the next day preceding such date on which the New York Stock
Exchange was open.
(c) No claim for indemnification under Section 6.4 or 6.5
may be asserted unless notice shall have been given on or before the date
specified below to the person from whom such indemnification may be sought
that a breach of such representation, warranty or covenant has or may have
occurred (identifying such representation, warranty or covenant with
reasonable particularity):
(i) If such claim relates to matters
referred to in Sections 2.1 - 2.8,
2.10, 2.12 - 2.15, 2.17 - 2.21,
2.23-2.30, or Sections 3.1 - 3.5, or
Sections 4.1 - 4.7, 4.9, 4.11 or
4.12; the second anniversary of the
Closing.
(ii) If such claim relates to matters
referred to in Sections 2.9, 2.16 or
2.22 or Section 4.8; the third
anniversary of the Closing.
(iii) If such claim relates to matters
referred to in Sections 2.11 or 4.10;
the day afer last date on which the
taxing authority or other
governmental agency in question may
take action with respect to such
matters.
6.8. Procedures Relating to Indemnification for Third Party Claims
under Sections 6.4 and 6.5.
(a) A party seeking indemnification pursuant to Sections 6.4
and 6.5 (an "Indemnified Party") with respect to any claim or assessment, or
the commencement of any action, suit, audit or proceeding, by a third party in
respect of which indemnity may be sought hereunder (a "Third Party Claim")
shall give prompt notice to the party from whom such indemnification is sought
(the "Indemnifying Party") of the assertion of such Third Party Claims and
will give the Indemnifying Party such information with respect thereto as the
Indemnifying Party may reasonably request, but no failure to give such notice
shall relieve the Indemnifying Party of any liability hereunder (except to the
extent the Indemnifying Party has suffered actual prejudice thereby). The
Indemnifying Party shall have the right, exercisable by written notice to the
Indemnified Party (which notice shall state that the Indemnifying Party
expressly agrees that, as between the Indemnifying Party and the Indemnified
Party, the Indemnifying Party shall be solely obligated to satisfy and
discharge the Third Party Claim) within fourteen (14) days of receipt of
notice from the Indemnified Party of the commencement of or assertion of any
Third Party Claim, to assume the defense of such Third Party Claim, using
counsel selected by the Indemnifying Party and reasonably acceptable to the
Indemnified Party; provided, that the Indemnifying Party shall not have the
right to assume the defense of a Third Party Claim if (i) the named parties to
any such action (including any impleaded parties) include both the Indemnified
Party and the Indemnifying Party and (ii) the Indemnified Party shall have
been advised by counsel in writing that under applicable standards of
professional responsibility, a conflict will arise in the event both the
Indemnified Party and the Indemnifying Party are represented by the same
counsel with respect to the Third Party Claim, in which case such Indemnified
Party shall have the right to participate in the defense of such Third Party
Claim and all Losses in connection therewith shall be reimbursed by the
Indemnifying Party. In addition, if the Indemnifying Party fails to give the
Indemnified Party the Notice complying with the provisions stated above within
the stated time period, the Indemnified Party shall have the right to assume
control of the defense of the Third Party Claim and all Losses in connection
therewith shall be reimbursed by the Indemnifying Party upon demand of the
Indemnified Party.
<PAGE>
(b) If at any time after the Indemnifying Party assumes the
defense of a Third Party Claim, any of the conditions set forth in clauses (i)
or (ii) of Section 6.8(a) above come into existence, the Indemnified Party
shall have the same rights as set forth above as if the Indemnifying Party
never assumed the defense of such claim.
(c) The Indemnifying Party or the Indemnified Party, as the
case may be, shall in any event have the right to participate, at its own
expense, in the defense of any Third Party Claim which the other is defending.
(d) The Indemnifying Party, if it shall have assumed the
defense of any Third Party Claim in accordance with the terms hereof, shall
have the right, upon thirty (30) days prior written notice to the Indemnified
Party, to consent to the entry of judgment with respect to, or otherwise
settle such Third Party Claim unless (i) the Third Party Claim involves
equitable or other non-monetary damages or (ii) in the reasonable judgment of
the Indemnified Party such settlement would have a continuing material adverse
effect on the Indemnified Party's business (including any material impairment
of its relationships with customers and suppliers), in which case such
settlement may be made only with the written consent of the Indemnified Party,
which consent shall not be unreasonably withheld.
(e) Whether or not the Indemnifying Party chooses to defend
or prosecute any claim involving a third party, all the parties hereto shall
cooperate in the defense or prosecution thereof and shall furnish such
records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in
connection therewith.
<PAGE>
7. CERTAIN SECURITIES LAW MATTERS
7.1. Securities Act Covenants and Representations.
Each Stockholder hereby represents and covenants to and with
Acquiror that:
(a) The Acquiror Shares to be received by such Stockholder
in the Merger will be acquired by such Stockholder solely for such
Stockholder's own account for investment.
(b) Such Stockholder is familiar with the business of
Acquiror, has had the opportunity to ask Acquiror's officers questions about
Acquiror and its affairs and has obtained to such Stockholder's satisfaction
such information as such Stockholder has requested, including copies of
Acquiror's Statements and Reports.
(c) Such Stockholder has been advised that the offering,
sale and delivery of Acquiror Shares pursuant to the Merger has not been
registered under the Securities Act;
(d) Such Stockholder will not sell, transfer or otherwise
dispose of such Acquiror Shares unless (i) such sale, transfer or other
disposition has been registered under the Securities Act, (ii) such sale,
transfer or other disposition is made in conformity with the provisions of
Rule 144 under the Securities Act (as such rule may hereafter from time to
time be amended) or (iii) in the opinion of counsel, in form and substance
reasonably satisfactory to Acquiror, or under the terms of a "no-action"
letter obtained by such Stockholder from the staff of the SEC, such sale,
transfer or other disposition will not violate, or is exempt from registration
under, the Securities Act.
7.2. Legend on Stock Certificates.
The Stockholders acknowledge that the certificates
representing the Acquiror Shares will bear a legend substantially in the
following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or under any applicable state law, and may not be
sold, transferred or otherwise disposed of unless a
registration statement under the Act has become effective
(and action required for the registration or qualification
of such disposition has become effective under applicable
state law) or unless the holder hereof establishes to the
satisfaction of the Corporation that such registration is
not required.
<PAGE>
7.3. Registration Rights.
Concurrently with the execution hereof, Acquiror and the
Stockholders are entering into a Registration Rights Agreement substantially
in the form of Exhibit B.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIROR
The obligations of Acquiror to complete the transactions contemplated
by this Agreement are subject to the fulfillment prior to or at the Closing of
the following conditions (any of which may, at its option, be waived by
Acquiror):
8.1. Performance of Agreements.
The Company and the Stockholders shall have performed all
agreements and complied with and satisfied all conditions required by this
Agreement to be performed, complied with or satisfied by any of them at or
prior to the Closing, and Acquiror shall have received certificates to that
effect from the Company (signed by the president or any vice president) and
from each Stockholder (signed by a duly authorized representative).
8.2. Representations and Warranties.
The representations and warranties contained in Sections 2
and 3 shall be true at and as of the time of Closing in all material respects,
and Acquiror shall have received certificates to that effect from the Company
(signed by the president or any vice president) and from each Stockholder
(signed by a duly authorized representative).
8.3. No Adverse Legal Proceedings.
No injunction, restraining order or other order issued by a
court of competent jurisdiction or governmental authority that prohibits the
consummation of any of the transactions contemplated by this Agreement shall
be in effect, and there shall not be pending any administrative, regulatory or
judicial proceeding which seeks to prohibit, restrain or invalidate the
consummation of any such transaction or to recover damages from any of the
parties hereto by reason thereof. Notwithstanding the foregoing, Acquiror may
not rely on this Section 8.3 with respect to any litigation instituted by it
or any Affiliate thereof.
8.4. Certificate of Secretary.
Acquiror shall have received a certificate of the secretary
of the Company certifying with respect to copies (attached thereto) of
resolutions adopted by the Board of Directors and the stockholders thereof
authorizing the execution, delivery and performance of this Agreement and the
Merger Agreement and the consummation of the transactions contemplated hereby
and thereby.
<PAGE>
8.5. Good Standing Certificates.
Acquiror shall have received the Certificate of
Incorporation of the Company certified by the Secretary of State of Delaware
as of a date within 10 days preceding the Closing and a Good Standing
Certificate for the Company as of a date within five days preceding the
Closing issued by such Secretary of State.
8.6. Consents and Approvals.
(a) The Pending Securities Compliance shall have been
completed, the consent of Acquiror's stockholders shall have been obtained
with respect to all matters presented for stockholder consideration at the
Special Meeting and the consents and approvals referred to in the Schedule of
Required Approvals and Consents shall have been obtained.
(b) The Company shall have either (i) properly notified all
of its stockholders of their appraisal rights under Section 262 of the
Delaware General Corporation Law more than 20 days prior to the Closing Date
and none of such stockholders shall have exercised such appraisal rights, or
(ii) obtained the consent of all its stockholders to the Merger.
8.7. Acquiror Shares Listed on NASDAQ.
The Acquiror Shares to be issued pursuant to Section 1 shall
have been included for quotation on NASDAQ subject to official notice of
issuance.
8.8. Opinion of Counsel for the Company.
Acquiror shall have received an opinion of the Company's
counsel, Duane, Morris & Heckscher LLP, dated the Closing Date, to the effect
set forth on Exhibit C.
8.9. Surrender of Derivatives; Certificate Specifying Definitive
Stock Ownership; Additional Certifications.
(a) Surrender of Derivatives. All outstanding shares of
convertible preferred stock of the Company and all outstanding options to
purchase common stock of the Company shall have been duly converted and
exercised (or all non-exercised options shall have been terminated), as the
case may be, or all actions necessary to effectuate such conversions and
exercises (and terminations) shall have been taken, such that immediately
prior to the Effective Time, the Company's outstanding capital stock shall
consist solely of a maximum of 2,628,461 shares of common stock.
(b) Certificate Specifying Definitive Stock Ownership.
Acquiror shall have received a certificate signed by the president or any vice
president of the Company setting forth a definitive list of the holders of the
Company's common stock immediately prior to the effective time and the number
of shares held by each (giving effect to the transactions contemplated by
Section 2.2(b)). Acquiror and the Surviving Corporation shall be entitled to
rely on such certificate (and such certificate shall state the same) in making
the cash payments and stock issuances provided for in Sections 1.4 and 1.6.
<PAGE>
(c) Additional Certifications. Acquiror shall have received
the certificate signed by the president or any vice president of the Company
provided for in Sections 1.4(a)(ii) and 2.2(b). Acquiror and the Surviving
Corporation shall be entitled to rely on such certificates (and such
certificates shall state the same) in making the cash payments and stock
issuances provided for in Sections 1.4 and 1.6.
8.10. Completion of Financing.
Acquiror shall have completed the Private Placement (or
other private placement of equity or debt securities) and received thereby a
minimum aggregate amount of $8 million in new capital, or all the conditions
precedent (other than the consummation of the Merger and the Sangen
Acquisition referred to in Section 8.11) to the completion of such financing
shall have been satisfied such that it may be consummated simultaneously with
the consummation of the Merger.
8.11. Acquisition of Sangen Pharmaceutical Company.
Acquiror shall have acquired Sangen Pharmaceutical Company
("Sangen"), or all the conditions precedent (other than the consummation of
the Merger and the financing referred to in Section 8.10) to such acquisition
shall have been satisfied such that this acquisition may be consummated
simultaneously with the consummation of the Merger.
8.12. Resignations.
Acquiror shall have received the resignations of such of the
directors and officers of the Company as it shall have requested.
8.13. New Litigation.
Except as described or referred to in the PPM, there shall
not have commenced against Acquiror or Sangen any new legal proceedings (or
against their respective officers, directors or Affiliates with respect to
matters pertaining to Acquiror or Sangen) that if disposed of adversely to
Acquiror or Sangen would have a material adverse effect on the business,
properties, financial condition or results of operations of Acquiror or
Sangen.
8.14. Registration Rights Agreement.
Each of the Stockholders shall have executed and delivered a
Registration Rights Agreement substantially in the form of Exhibit B hereto.
<PAGE>
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS
The obligations of the Company and the Stockholders to complete the
transactions contemplated by this Agreement are subject to the fulfillment
prior to or at the Closing of the following conditions (any of which may, at
its option, be waived by the Company):
9.1. Performance of Agreements.
Acquiror shall have performed all obligations and complied
with all conditions required by this Agreement to be performed or complied
with by it at or prior to the Closing, and the Company shall have received a
certificate to that effect signed by the president or any vice president of
Acquiror.
9.2. Representations and Warranties.
The representations and warranties of Acquiror contained in
Section 4 hereof shall be true at and as of the Closing, and the Company shall
have received a certificate to that effect signed by the president or any vice
president of Acquiror.
9.3. No Adverse Legal Proceedings.
No injunction, restraining order or other order issued by a
court of competent jurisdiction or governmental authority that prohibits the
consummation of the transactions contemplated hereby shall be in effect, and
there shall not be pending any administrative, regulatory or judicial
proceeding to prohibit, restrain or invalidate the consummation of any such
transaction or to recover damages from any of the parties hereto by reason
thereof. Notwithstanding the foregoing, neither the Company nor any
Stockholder may rely on this Section 9.3 with respect to any litigation
instituted thereby or any Affiliate thereof.
9.4. Certificates of Secretaries and Good Standing Certificates.
(a) The Company shall have received a Certificate of the
secretary of Acquisition Subsidiary certifying with respect to copies
(attached thereto) of resolutions adopted by the Board of Directors and the
sole stockholder thereof authorizing the execution, delivery and performance
of the Merger Agreement and the consummation of the transactions contemplated
thereby. Further, the Company shall have received a Certificate of the
secretary of Acquiror certifying with respect to copies (attached thereto) of
resolutions adopted by the Board of Directors of Acquiror authorizing the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby and of proposals approved by the
stockholders of Acquiror at the Special Meeting.
(b) The Company shall have received Articles of
Incorporation of Acquiror and a Certificate of Incorporation for Acquisition
Subsidiary certified by the Secretaries of State of New York and Delaware,
respectively, as of a date within 10 days preceding the Closing and a Good
Standing Certificate for each of Acquiror and Acquisition Subsidiary as of a
date within five days preceding the Closing issued by such Secretaries of
State.
<PAGE>
9.5. Opinion of Counsel for Acquiror.
The Company shall have received opinions of Brock,
Fensterstock, Silverstein and McAuliffe, LLC and Saul, Ewing, Remick & Saul
LLP, counsel for Acquiror, to the effect set forth in Exhibit D.
9.6. Completion of Financing.
Acquiror shall have completed the Private Placement (or
other private placement of equity or debt securities) and received thereby a
minimum aggregate amount of $8 million in new capital, or all the conditions
precedent (other than the consummation of the Merger and the Sangen
acquisition referred to in Section 9.7) to the completion of such financing
shall have been satisfied such that it may be consummated simultaneously with
the consummation of the Merger.
9.7. Acquisition of Sangen Pharmaceutical Company.
Acquiror shall have acquired Sangen, or all the conditions
precedent (other than the consummation of the Merger and the financing
referred to in Section 9.6) to such acquisition shall have been satisfied such
that the acquisition may be consummated simultaneously with the consummation
of the Merger.
9.8. Acquiror Shares Listed on NASDAQ.
The Acquiror Shares to be issued pursuant to Section 1 shall
have been included for quotation on NASDAQ subject to official notice of
issuance.
9.9. Registration Rights Agreement.
Acquiror shall have executed and delivered a Registration
Rights Agreement substantially in the form of Exhibit B hereto.
9.10. New Litigation.
There shall not have commenced against Acquiror or Sangen
any new legal proceedings (or against their respective officers, directors or
Affiliates with respect to matters pertaining to Acquiror or Sangen) that if
disposed of adversely to Acquiror or Sangen would have a material effect on
the business, properties, financial condition or results of operations of
Acquiror or Sangen.
<PAGE>
9.11. Payment to ALW Partnership.
Acquiror shall have paid, or made arrangements for the
prompt payment in full of, $150,000 to the ALW Partnership pursuant to the ALW
License, as such terms are defined in the PPM, upon the initial closing of the
Private Placement.
10. TERMINATION OF AGREEMENT
10.1. Termination of Agreement.
This Agreement may be terminated and the Merger contemplated
hereby may be terminated and abandoned:
(a) Mutual Consent. By mutual consent of Acquiror and the
Company.
(b) Breach. By Acquiror or the Company by giving written
notice to the other parties of such termination on the Closing Date if, as of
the Closing Date, any condition precedent to the performance of the
obligations of such party giving such notice shall not have been fulfilled and
shall not have been waived by such party; provided, however, that such
termination shall not vitiate the terminating party's right to enforce its
remedies hereunder.
(c) Lapse of Time. By Acquiror or the Company by giving
written notice to the other parties if the Closing shall not have occurred on
or before 11:59 P.M. on November 17, 1997 or such later date as the parties
hereto may otherwise agree.
11. Certain Definitions
As used herein the following terms have the meanings indicated:
11.1. Affiliate.
"Affiliate" of any Person means any Person, directly or
indirectly controlling, controlled by or under common control with such
Person, and includes any Person who is an officer, director or employee of
such Person and any Person that would be deemed to be an "affiliate" or an
"associate" of such Person, as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934. As
used in this definition, "controlling" (including, with its correlative
meanings, "controlled by" and "under common control with") means possession,
directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities, partnership
or other ownership interests, by contract or otherwise). As used herein with
respect to any natural Person, "Affiliates" shall also include, without
limitation, such natural Person's spouse, children, grandchildren, brothers,
sisters or parents and any trust the beneficiaries of which are such natural
Person or such natural Person's children, grandchildren or parents.
<PAGE>
11.2. Knowledge.
A Person shall be deemed to have Knowledge of (which
includes the expression "to Know") a particular fact or other matter if:
(a) in the case of a Person who is an individual, such
Person is actually aware of such fact or other matter, or
(b) could have discovered or otherwise became aware of such
fact or other matter in the course of conducting a reasonably comprehensive
investigation as to the existence of such fact or other matter, including
without limitation inquiry of the employees of the Company who, in the course
of performing the duties of such employment may reasonably be expected to have
actual awareness of such fact or other matter; and
(c) in the case of a Person who is not an individual, any
director or officer of such Person (or individual holding a similar executive
responsibility for any Person which is not a corporation) has or is deemed to
have Knowledge of such fact or other matter in accordance with Section 11.2(a)
and (b).
11.3. Person.
"Person" means an individual, a corporation, a partnership,
an association, a trust or other entity or organization.
12. General
12.1. Nature and Survival of Representations.
All statements contained in any certificate or other
instrument delivered by or on behalf of the Company or the Stockholders
pursuant to this Agreement or in connection with the transactions contemplated
hereby shall be deemed representations and warranties by the Company and the
Stockholders hereunder, and all statements contained in any certificate or
other instrument delivered by or on behalf of Acquiror pursuant to this
Agreement shall be deemed representations and warranties by Acquiror. All
representations, warranties and agreements made by a party hereto shall
survive the Closing hereunder.
12.2. Governing Law.
This Agreement will be governed by Delaware law.
12.3. Parties in Interest.
This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, heirs and
assigns.
<PAGE>
12.4. Entire Agreement.
This Agreement together with the Exhibit attached hereto and
the Schedules referred to herein contains the entire agreement among the
parties hereto with respect to the subject matter hereof and supersedes any
prior agreements or understandings among the parties hereto relating to the
subject matter hereof.
12.5. Notices.
All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered (by physical
delivery or by facsimile or any other electronic means) or mailed in the
continental United States, postage prepaid, certified mail, return receipt
requested, to a party at the following address or to such other address as
such party may hereafter specify by notice:
If to the Company or to any Stockholder, to:
CorBec Pharmaceuticals, Inc.
Suite 1350, One Tower Bridge
100 Front Street
West Conshohocken, PA 19428
Attention: Hal S. Broderson, M.D., President
Fax: 610-940-0301
If to Acquiror, to:
Panax Pharmaceutical Company Ltd.
425 Park Avenue, 27th Floor
New York NY 10022
Attention: Dr. Taffy J. Williams, President
Fax: 212-751-4131
12.6. Section Headings and Titles.
The headings and titles of Sections hereof, Exhibits hereto
and Schedules or other documents referred to herein are inserted for
convenience of reference only, form no part of this Agreement and shall not be
considered for purposes of construing or interpreting the text hereof.
12.7. Schedules.
Each Schedule referred to herein and listed in the Table of
Contents hereof has been delivered to Acquiror by the Company and has been
identified by a legend thereon referring to this Agreement, signed for
purposes of such identification by representatives of the parties. The
Schedules are not attached hereto.
<PAGE>
12.8. Modification.
No amendment or modification of or supplement to this
Agreement will be effective unless it is in writing and duly executed by the
party against whom enforcement of such amendment is sought.
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound
hereby, the parties have duly executed this Agreement as of the date first
above written.
<TABLE>
<CAPTION>
PANAX PHARMACEUTICAL COMPANY LTD. CORBEC PHARMACEUTICALS, INC.
<S> <C>
By: /s/ Taffy J. Williams By: /s/ Hal S. Broderson
----------------------------------- ----------------------------------------
Taffy J. Williams, Ph.D., President Hal S. Broderson, M.D., President
PLEXUS VENTURES, INC. HILLMAN MEDICAL VENTURES 1993, L.P.
By: Hillman/Dover Limited Partnership,
As General Partner
By: /s/ John F. Chappell
-----------------------------------
John F. Chappell, President By: Wilmington Securities, Inc.,
As General Partner
By: /s/ Darlene Clarke
-----------------------------------------
Darlene Clarke, Vice President
HILLMAN MEDICAL VENTURES 1995, L.P.
By: Hillman/Dover Limited Partnership,
As General Partner
By: Wilmington Securities, Inc.,
As General Partner
By: /s/ Darlene Clarke
-----------------------------------------
Darlene Clarke, Vice President
HILLMAN MEDICAL VENTURES 1996, L.P.
By: Hillman/Dover Limited Partnership,
As General Partner
By: Wilmington Securities, Inc.,
As General Partner
By: /s/ Darlene Clarke
-----------------------------------------
Darlene Clarke, Vice President
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This is a REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as
of November 6, 1997 among PANAX PHARMACEUTICAL COMPANY LTD., a New York
corporation (the "Company"), and the other persons named on the signature page
hereof (the "Former CorBec Stockholders").
BACKGROUND
A. The Former CorBec Stockholders hold an aggregate of 100% of the
outstanding capital stock, on a fully diluted basis, of CorBec
Pharmaceuticals, Inc., a Delaware corporation ("CorBec").
B. The Company, CorBec and certain of the Former CorBec Stockholders
are parties to an Agreement and Plan of Reorganization dated as of October 31,
1997 (the "Reorganization Agreement"). All Capitalized terms not defined
herein shall have the meanings ascribed to them in the Reorganization
Agreement.
C. Under the Reorganization Agreement, the Company will acquire
CorBec pursuant to a merger in which a newly formed subsidiary of the Company
will be merged into CorBec. In this Merger, the holders of all of CorBec's
common stock outstanding immediately prior to the Effective Time will receive
shares of common stock of the Company. A portion of these Acquiror Shares will
be delivered to the Former CorBec Stockholders pursuant to Section 1.4 of the
Reorganization Agreement upon surrender of their certificates evidencing
shares of Old Company Common Stock (the "Upfront Shares"). Additional Acquiror
Shares may be delivered to the Former CorBec Stockholders pursuant to Section
1.6 of the Reorganization Agreement in the future pursuant to milestone
payments (the "Milestone Shares").
D. This Agreement applies to all the shares of Acquiror Stock that
may be delivered to the Former CorBec Stockholders pursuant to Section 1 of
the Reorganization Agreement (i.e., both the Upfront Shares and the Milestone
Shares). This Agreement is being entered into in satisfaction of conditions
precedent to the consummation of the Reorganization Agreement, as set forth in
Sections 7.3, 8.14 and 9.9 of the Reorganization Agreement.
TERMS
In consideration of the foregoing premises and the mutual agreements
set forth herein and in the Reorganization Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. In addition to the terms defined above, as used herein, unless
the context otherwise requires, the following terms have the following
respective meanings:
<PAGE>
Applicable Period: The seven-year period commencing upon the
earlier to occur of (i) the expiration or withdrawal of the
Shelf Registration Statement or (ii) June 30, 1999.
Common Stock: The Company's Common Stock, $.0001 par value.
Commission: The Securities and Exchange Commission or any
other federal agency at the time administering the
Securities Act.
Exchange Act: The Securities Exchange Act of 1934, or any
similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the
Securities Exchange Act of 1934 shall include a reference to
the comparable section, if any, of any such similar federal
statute.
Pending Private Placement: The pending private offering by
the Company of up to 17 million shares of Common Stock
pursuant to the Company's Amended and Restated Confidential
Private Placement Memorandum dated October 27, 1997, as
supplemented on November 5, 1997.
Private Placement Purchasers: The purchasers of shares in
the Pending Private Placement.
Registrable Securities: The shares of Common Stock issued or
issuable to the Former CorBec Stockholders pursuant to
Section 1 of the Reorganization Agreement (even though the
Milestone Shares have not yet been issued), and any shares
of voting common stock issued or issuable with respect to
any such Common Stock by way of stock dividend or stock
split or in connection with a combination of shares,
recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall
have become effective under the Securities Act and such
securities shall have been disposed of in accordance with
such registration statement, (b) they shall have become
eligible to be distributed to the public pursuant to Rule
144 (or any successor provision) under the Securities Act
and not subject to any volume limits under such Rule, (c)
they shall have been otherwise transferred, new certificates
for them not bearing a legend restricting further transfer
shall have been delivered by the Company and subsequent
disposition of them shall not require registration or
qualification of them under the Securities Act or any
similar state law then in force, or (d) they shall have
ceased to be outstanding.
<PAGE>
Registration Expenses: All expenses incident to the
Company's performance of or compliance with Section 2,
including, without limitation, all registration, filing and
National Association of Securities Dealers fees, all fees
and expenses of complying with securities or blue sky laws,
all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements
of counsel for the Company and of its independent public
accountants, including the expenses of any "cold comfort"
letters required by or incident to such performance and
compliance, premiums and other costs of policies of
insurance against liabilities arising out of the public
offering of the Registrable Securities being registered and
any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding
underwriting discounts and commissions, brokers fees and
transfer taxes, if any, provided that, in any case where
Registration Expenses are not to be borne by the Company,
such expenses shall not include salaries of Company
personnel or general overhead expenses of the Company,
auditing fees, premiums or other expenses relating to
liability insurance required by underwriters of the Company
or other expenses for the preparation of financial
statements or other data normally prepared by the Company in
the ordinary course of its business or which the Company
would have incurred in any event.
Requisite Holders: Any holder or holders of at least
50.1% (by number of shares) of the Registrable Securities.
Securities Act: The Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the
Commission thereunder, all as of the same shall be in effect
at the time. References to a particular section of the
Securities Act of 1933 shall include a reference to the
comparable section, if any, of any such similar federal
Statute.
Shelf Registration Statement: The registration statement,
which, under the subscription agreement in the Pending
Private Placement, the Company is obligated to use its best
efforts to (i) file with the SEC within 30 days after the
final closing date of the Pending Private Placement, (ii)
have declared effective by the SEC and (iii) cause to remain
effective for 18 months thereafter.
Subscription Agreement. The subscription agreement, as
executed by each of the Private Placement Purchasers in
connection with their purchases of shares in the Pending
Private Placement, substantially in the form of Exhibit B to
the Company's Amended and Restated Private Placement
Memorandum dated October 27, 1997, as supplemented on
November 5, 1997.
<PAGE>
2. Registration under Securities Act.
2.1. Registration of Upfront Shares.
(a) Shelf. The Company will include the Upfront Shares in
the Shelf Registration Statement to allow for the unrestricted public offer
and sale of the Upfront Shares by the Former CorBec Stockholders. The Company
will use its best efforts to (i) prepare and file the Shelf Registration
Statement with the SEC within 30 days after the final closing of the Pending
Private Placement, (ii) cause the Shelf Registration Statement to be declared
effective under the Securities Act and (iii) cause it to remain effective for
a period of 18 months. The Company will pay all Registration Expenses in
connection with the Shelf Registration Statement. The Company will notify the
Former CorBec Stockholders that the Shelf Registration Statement has become
effective promptly after it has been declared so by the SEC.
(b) Lock-Up. In order to facilitate completion of the
Pending Private Placement, and notwithstanding the filing of the Shelf
Registration Statement, the Former CorBec Stockholders may not transfer and
sell any Upfront Shares until the 61st day following the date the Shelf
Registration Statement is declared effective by the SEC.
2.2. Demand Registration.
(a) General. If at any time after the earlier to occur of
(i) the termination of effectiveness of the Shelf Registration Statement or
(ii) the issuance of Milestone Shares upon the realization of the first
milestone triggering the issuance of shares to occur under Section 1.6 of the
Reorganization Agreement, the Company shall receive a written request for the
registration of Registrable Securities (the "Demand Notice") from the
Requisite Holders, the Company shall prepare and file with the SEC a
Registration Statement covering the Registrable Securities which are the
subject of such request and shall use its best efforts to cause such
Registration Statement to become effective under the Act. In addition, upon
the receipt of such request, the Company shall promptly give written notice to
all other record holders of Registrable Securities that such registration is
to be effected. The Company shall include in such Registration Statement such
Registrable Securities for which it has received written requests to register
by such other record holders within 30 days after the delivery of the
Company's written notice to such other record holders.
(b) Conversion to Piggy-Back Registration. In the event that
at the time of the Demand Notice the Company is in the process of preparing a
Registration Statement relating to an underwritten public offering, then the
Company will notify the sender(s) of the Demand Notice of the same, which
notice will be deemed to be the notice referred to in the first sentence of
Section 2.3(a). The Demand Notice shall then be deemed rescinded and the
parties will proceed under Section 2.3. This process will not constitute a
demand registration for purposes of Section 2.2(c) or for any other purpose.
<PAGE>
(c) Occurrences. The obligations of the Company under this
Section 2.2 shall be limited to one registration statement prior to the
issuance of Milestone Shares upon the realization of the first milestone
triggering the issuance of shares to occur under Section 1.6 of the
Reorganization Agreement. Thereafter, when any tranche of Milestone Shares
becomes issuable, the Company will be obligated under this Section 2.2 to file
one registration statement. These "per tranche" obligations shall not be
cumulative, however, and any outstanding obligation of the Company to file a
registration statement under this Section 2.2. shall expire upon the
incurrence of the obligation to file an additional registration statement in
connection with the issuance of a new tranche of Milestone Shares.
2.3. Piggyback Registrations.
(a) General. Subject to the limitations set forth in this
Agreement, at any time during the Applicable Period if the Company proposes to
register any of its securities under the Securities Act (other than for
purposes of a "rights" offering or pursuant to a registration on Form S-4 or
Form S-8 or any successor or similar form), for sale for its own account, it
will each such time give prompt written notice to all holders of Registrable
Securities of its intention to do so and of the intended method of disposition
thereof and of such holders' rights under this Section 2.3. Upon the written
request of any such holder made within 10 days after the receipt of any such
notice (which request shall specify the Registrable Securities intended to be
disposed of by such holder), the Company will use its best efforts to effect
the registration under the Securities Act of all Registrable Securities which
the Company has been so requested to register by the holders thereof, to the
extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities so to be
registered, provided that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of
such securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities. The Company will pay all Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to this Section
2.3.
(b) Underwritten Offerings. If the securities covered by a
registration statement filed by the Company pursuant to this Section 2.3
(other than those securities held by the holders of Registrable Securities)
are to be sold by underwriters in an underwritten public offering, the Company
shall use its reasonable best efforts to cause the managing underwriter of the
proposed offering to permit the securities owned by the holders of Registrable
Securities to be included in the proposed offering on the same terms;
provided, however, that the Registrable Securities included in such
registration shall be sold or distributed in a manner identical to the manner
in which the other securities that are the subject of such registration are
sold or distributed. Notwithstanding the foregoing, if the Registrable
Securities requested for inclusion pursuant to this Section 2.3 together with
any other shares that have similar piggyback registration rights and any other
shares proposed to be offered by persons other than the Company (such other
shares and the Registrable Securities being collectively referred to as the
"Requested Stock") would, in the good faith judgment of the managing
underwriter of such public offering, reduce the number of shares to be offered
by the Company or interfere with the successful marketing of the shares of
stock offered by the Company, the number of shares of Requested Stock
otherwise to be included in the underwritten public offering may be reduced
pro rata (by the number of shares) among the holders thereof requesting such
registration or excluded in their entirety if so required by the managing
underwriter.
<PAGE>
To the extent only a portion of the Requested Stock is
included in the underwritten public offering, those shares of Requested Stock
that are thus excluded from the underwritten public offering shall not be
disposed of by the holders thereof for a period, not to exceed 180 days after
consummation of the underwritten public offering, that the managing
underwriter reasonably determines is necessary in order to effect such
offering; provided, however, that (except as to holders who are affiliates of
the Company) such date shall not be later than the earliest date at which
similar restrictions on sales of securities of the Company by any
non-affiliate of the Company are terminated, released or waived. For purposes
of the foregoing sentence, the term "dispose of" means to sell, offer,
contract to sell, pledge, grant any option to purchase or otherwise dispose of
Registrable Securities or any securities convertible into or exchangeable or
exerciseable for, or any rights to purchase or acquire, Registrable
Securities. Such term contemplates, among other things, any hedging or other
type of transaction that is designed or reasonably expected to lead to or
result in a disposition of Registrable Securities during the "Black-out
Period," including, without limitation, any short sale (whether or not against
the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to Registrable Securities or
with respect to any security that includes, relates to or derives any
significant part of its value from Registrable Securities.
2.4. Registration Procedures.
(a) General. If and whenever the Company is required to use
its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Section 2.1, 2.2 or 2.3, the Company
will as expeditiously as possible:
(i) prepare and, as soon thereafter as
possible, file with the Commission the
requisite registration statement to effect
such registration and thereafter use its
best efforts to cause such registration
statement to become effective (provided
that the Company may discontinue any
registration of its securities that are
not Registrable Securities (and, under the
circumstances specified in Section 2.3(a),
its securities that are Registrable
Securities) at any time prior to the
effective date of the registration
statement relating thereto;
<PAGE>
(ii) prepare and file with the Commission such
amendments and supplements to such
registration statement and the prospectus
used in connection therewith as may be
necessary to keep such registration
statement effective and to comply with the
provisions of the Securities Act with
respect to the disposition of all
securities covered by such registration
statement for a period of 135 days or, if
earlier in any case, until such time as
all of such securities have been disposed
of by the seller or sellers thereof set
forth in such registration statement;
(iii) furnish to each seller of Registrable
Securities covered by such registration
statement such number of conformed copies
of such registration statement and of each
such amendment and supplement thereto (in
each case including all exhibits), such
number of copies of the prospectus
contained in such registration statement
(including each preliminary prospectus and
any summary prospectus) and any other
prospectus filed under Rule 424 under the
Securities Act, in conformity with the
requirements of the Securities Act, and
such other documents, as such seller may
reasonably request;
(iv) use its diligent efforts to register or
qualify all Registrable Securities and
other securities covered by such
registration statement under such other
securities or blue sky laws of such
jurisdictions as each seller thereof shall
reasonably request, to keep such
registration or qualification in effect
for so long as such registration statement
remains in effect, and take any other
action which may be reasonably necessary
or advisable to enable such seller to
consummate the disposition in such
jurisdictions of the securities owned by
such seller, except that the Company shall
not for any such purpose be required to
qualify generally to do business as a
foreign corporation in any jurisdiction
wherein it would not but for the
requirements of this Section 2.4(a)(iv) be
obligated to be so qualified or to consent
to general service of process in any such
jurisdiction;
(v) use its diligent efforts to cause all
Registrable Securities covered by such
registration statement to be registered
with or approved by such other
governmental agencies or authorities as
may be necessary to enable the seller or
sellers thereof to consummate the
disposition of such Registrable
Securities;
<PAGE>
(vi) in the case of any registration pursuant
hereto for sale in any underwritten
offering, furnish to each seller of
Registrable Securities a signed
counterpart, addressed to such seller (and
underwriters, if any) of (A) an opinion of
counsel for the Company, dated the
effective date of such registration
statement (and the date of the closing
under the underwriting agreement),
reasonably satisfactory in form and
substance to such seller, and (B) a
"comfort" letter, dated the effective date
of such registration statement (and dated
the date of the closing under the
underwriting agreement), signed by the
independent public accountants who have
certified the Company's financial
statements included in such registration
statement, covering substantially the same
matters with respect to such registration
statement (and the prospectus included
therein) and, in the case of the
accountants' letter, with respect to
events subsequent to the date of such
financial statements, as are customarily
covered in opinions of issuer's counsel
and in accountants' letters delivered to
the underwriters in underwritten public
offerings of securities;
(vii) notify each seller of Registrable
Securities covered by such registration
statement, at any time when a prospectus
relating thereto is required to be
delivered under the Securities Act within
the time period mentioned in Section
2.4(a)(ii), upon discovery that, or upon
the happening of any event as a result of
which, the prospectus included in such
registration statement, as then in effect,
includes an untrue statement of a material
fact or omits to state any material fact
required to be stated therein or necessary
to make the statements therein not
misleading in the light of the
circumstances under which they were made,
and at the request of any such seller
promptly prepare and provide to such
seller a reasonable number of copies of a
supplement to or an amendment of such
prospectus as may be necessary so that, as
thereafter delivered to the purchasers of
such securities, such prospectus shall not
include 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 in the light of the
circumstances under which they were made;
<PAGE>
(viii) otherwise use its best efforts to comply
with all applicable rules and regulations
of the Commission, and attempt in good
faith to furnish to each such seller a
reasonable period prior to the filing
thereof a copy of any amendment or
supplement to such registration statement
or prospectus and shall not file any
amendment or supplement to which any such
seller shall have reasonably objected on
the grounds that the disclosures contained
in such amendment or supplement relating
to such seller do not comply in all
material respects with the requirements of
the Securities Act or of the rules or
regulations thereunder;
(ix) provide and cause to be maintained a
transfer agent for all Registrable
Securities covered by such registration
statement from and after a date not later
than the effective date of such
registration statement; and
(x) use its best efforts to list all
Registrable Securities covered by such
registration statement on any securities
exchange on which any of the Registrable
Securities are then listed.
(b) Holders' Information and Agreements. The Company may
require each holder of Registrable Securities as to which any registration is
being effected (A) to furnish the Company such information regarding such
holder and the distribution of such securities as the Company may from time to
time reasonably request in writing, and (B) in the case of an underwritten
offering, to execute all agreements, indemnities and other documents
reasonably required under the terms of the underwriting arrangements.
(c) Abeyance. Each holder of Registrable Securities agrees
by acquisition of such Registrable Securities that upon receipt of any notice
from the Company of the happening of any event of the kind described in
Section 2.4(a)(vii), such holder will immediately discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until such holder's receipt of the
copies of the supplemented or amended prospectus contemplated by Section
2.4(a)(vii) and, if so directed by the Company, will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies, then
in such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the 135-day period referred to in Section
2.4(a)(ii) shall be extended by the length of the period from and including
the date when each holder of Registrable Securities covered by such
registration statement has received such notice to the date on which each such
holder shall have received the copies of the supplemented or amended
prospectus contemplated by Section 2.4(a)(vii).
2.5. Preparation: Reasonable Investigation.
In connection with the preparation and filing of each
registration statement under the Securities Act pursuant to this Agreement,
the Company will give the holders of Registrable Securities registered under
such registration statement and their counsel, the opportunity to participate
in the preparation of such registration statement, each prospectus included
therein or filed with the Commission, and each amendment thereof or supplement
thereto, and, subject to the execution of confidentiality agreements, will
give each of the holders such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning
of the Securities Act.
<PAGE>
2.6. Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any Registrable Securities under the Securities Act pursuant
hereto, the Company will, and hereby does, indemnify and hold harmless each
holder of any Registrable Securities covered by any registration statement
filed pursuant hereto, its partners, directors and officers, and each other
Person, if any, who controls such holder within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which such holder or any such partner, director or officer or controlling
person may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof), arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the case of any prospectus in light of the
circumstances under which they were made, not misleading, and the Company will
reimburse such holder and each such partner, director, officer, and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out
of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such holder. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such holder or any such director, officer or controlling person and
shall survive the transfer of such securities by such holder.
(b) Indemnification by the Sellers. In the event of any
registration of any Registrable Securities under the Securities Act pursuant
hereto, each holder of Registrable Securities covered by any registration
statement filed pursuant hereto will, and hereby does, indemnify and hold
harmless the Company, each director of the Company, each officer of the
Company and each other Person, if any, who controls the Company within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Company, or any director, officer
or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings, whether commenced or threatened, in respect thereof), arise
out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the case of any prospectus in light of the
circumstances under which they were made, not misleading, if such statement or
alleged statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such holder and each such holder of Registrable Securities will
reimburse the Company and each director, officer or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding. Such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of such
securities by such holder.
<PAGE>
(c) Notices of Claims. etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in this Section 2.6, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Section 2.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to participate therein and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified 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 for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a full release from all liability in respect to such
claim or litigation.
(d) Other Indemnification. Indemnification similar to that
specified in this Section 2.6 (with appropriate modifications) shall be given
by the Company and each holder of Registrable Securities with respect to any
required registration or other qualification with respect to such holder's
Registrable Securities under any federal or state law or regulation of any
governmental authority other than the Securities Act.
<PAGE>
(e) Indemnification Payments. The indemnification required
by this Section 2.6 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
3. Rule 144.
The Company will use its best efforts to file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information) to the
extent required from time to time to enable such holder to sell Registrable
Securities without registration under the Securities Act within the
limitations of the exemptions provided by Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any holder
of Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
4. Amendments and Waivers.
This Agreement may be amended and the Company may take any action
prohibited by this Agreement or omit to perform any act required by this
Agreement to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the Requisite
Holders. Each holder of any Registrable Securities at the time or thereafter
outstanding shall be bound by any consent authorized pursuant to this Section
4, whether or not such Registrable Securities shall have been marked to
indicate such consent.
5. Nominees for Beneficial Owners.
In the event that any Registrable Securities are held by a nominee
for the beneficial owner thereof, the beneficial owner thereof may, at its
election, be treated as the holder of such Registrable Securities for purposes
of any request or other action by any holder or holders of Registrable
Securities pursuant to this Agreement or any determination of any number or
percentage of shares of Registrable Securities held by any holder or holders
of Registrable Securities contemplated by this Agreement. If the beneficial
owner of any Registrable Securities so elects, the Company may require
assurances reasonably satisfactory to it of such owner's beneficial ownership
of such Registrable Securities.
6. Notices.
All communications provided for hereunder shall be sent by
first-class mail and (a) if to a party other than the Company, to the
registered address of such party on record with the Company's transfer agent,
or at such other address (or if to a non-registered beneficial owner of
Registrable Securities, to such address) as such party shall have furnished to
the Company in writing, or (b) if addressed to the Company, at 425 Park
Avenue, 27th Floor, New York, NY 10022, Attention: President or at such other
address, or to the attention of such other officer, as the Company shall have
furnished to each holder of Registrable Securities at the time outstanding.
<PAGE>
7. Assignment.
This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors and
permitted assigns. Notwithstanding any other provision contained herein, the
rights of holders of Registrable Securities to have the Company register
Registrable Securities pursuant to this Agreement may only be assigned: (a) to
a holder of Registrable Securities who acquired such Registrable Securities
pursuant to Section 1 of the Reorganization Agreement (or any officer,
director, partner, limited partner or stockholder thereof); (b) if the
transferor or assignor agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable period of time after such assignment; (c) if the Company
is, within a reasonable period of time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee
or assignee and (ii) the securities with respect to which such registration
rights are being transferred or assigned; (d) if immediately following such
transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws and (e) if at or before the time the Company received
the written notice contemplated by clause (c) of this sentence the transferee
agrees to be bound by all of the provisions contained herein and by
restrictions on transfer similar to those set forth in Section 7.1(d) of the
Reorganization Agreement.
8. Descriptive Headings.
The descriptive headings of the several sections and paragraphs of
this Agreement are inserted for reference only and shall not limit or
otherwise affect the meaning hereof.
9. Governing Law.
This Agreement shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the laws of the State of
Delaware, without regard to conflicts of laws principles.
10. Counterparts.
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument. If the
Company and the Stockholders (as defined in the Reorganization Agreement)
execute counterparts hereof, then this Agreement will be effective
<PAGE>
and enforceable against each party that executes a counterpart even if fewer
than all the Former CorBec Stockholders execute counterparts.
[THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound
hereby, the parties have duly executed this Agreement as of the date first
above written.
<TABLE>
<CAPTION>
PANAX PHARMACEUTICAL COMPANY LTD.
<S> <C>
By: /s/ Taffy J. Williams
------------------------------------------
Taffy J. Williams, Ph.D., President
PLEXUS VENTURES, INC. HILLMAN MEDICAL VENTURES 1993, L.P.
By: Hillman/Dover Limited Partnership,
As General Partner
By: /s/ John F. Chappell
----------------------------------
John F. Chappell, President By: Wilmington Securities, Inc.,
As General Partner
TRUSTEES OF THE UNIVERSITY By: /s/ Darlene Clarke
OF PENNSYLVANIA -----------------------------------------
Darlene Clarke, Vice President
HILLMAN MEDICAL VENTURES 1995, L.P.
By: /s/ Scott C. Lederman
----------------------------------
Name: Scott C. Lederman By: Hillman/Dover Limited Partnership,
Title: Treasurer As General Partner
/s/ Alan Schreiber By: Wilmington Securities, Inc.,
- ---------------------------------- As General Partner
Alan Schreiber, M.D.
By: /s/ Darlene Clarke
------------------------------------------
/s/ Jong-Gu Park Darlene Clarke, Vice President
- -------------------------------------
Jong-Gu Park, Ph.D. HILLMAN MEDICAL VENTURES 1996, L.P.
/s/ Mark Roffman By: Hillman/Dover Limited Partnership,
- ------------------------------------- As General Partner
Mark Roffman, Ph.D.
By: Wilmington Securities, Inc.,
As General Partner
ESTATE OF JAMES H. BOYLE
By: /s/ Darlene Clarke
------------------------------------------
/s/ Ann L. Boyle Darlene Clarke, Vice President
- --------------------------------
Name: Mrs. James H. Boyle
Title:
</TABLE>
<PAGE>
- ------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
Dated as of September 3, 1997
By and Between
PANAX PHARMACEUTICAL COMPANY, LTD.
and
LEONARD S. JACOB
AND
SANGEN PHARMACEUTICAL COMPANY, INC
- ------------------------------------------------------------------------------
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of September 3, 1997 by and between
PANAX PHARMACEUTICAL COMPANY, LTD., a New York corporation ("Purchaser"), and
LEONARD S. JACOB, an individual ("Stockholder") AND SANGEN PHARMACEUTICAL
COMPANY, INC., a Delaware corporation (the"Company").
W I T N E S S E T H:
WHEREAS, the Stockholder owns 100 shares of common stock, $1.00 par
value per share (the "Stock"), of the Company, being all of the outstanding
shares of capital stock of the Company;
WHEREAS, the Stockholder desires to sell, and Purchaser desires to
purchase, the Stock pursuant to this Agreement; and
WHEREAS, it is the intention of the parties hereto that, upon
consummation of the purchase and sale of the Stock pursuant to this Agreement,
Purchaser shall own all of the outstanding shares of capital stock of the
Company.
NOW, THEREFORE, in consideration of the recitals and of the
respective covenants, representations, warranties and agreements herein
contained, and intending to be legally bound hereby, the parties hereto,
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1. Purchase and Sale of Stock. Subject to the terms and conditions
herein stated, the Stockholder agrees to sell, assign, transfer and deliver
the Stock to Purchaser on the Closing Date (as defined in Section 1.3 below),
and Purchaser agrees to purchase the Stock from the Stockholder on the Closing
Date.
1.2. Purchase Price. In consideration for the purchase by Purchaser
of the Stock, Purchaser shall deliver to Stockholder on the Closing Date the
Common Stock Purchase Option in the form of Exhibit A attached hereto (the
"Purchase Option"), duly executed by the Purchaser. Purchaser shall have the
right to repurchase the right to acquire up to 900,000 shares represented by
the Purchase Option, based on the terms and conditions more fully set forth in
the Employment Agreement attached hereto as Exhibit B.
1.3. Closing. Closing shall be held on October 31, 1997 at the
offices of Todtman, Nachamie, Hendler & Spizz, P.C. 425 Park Avenue, New York,
NY 10022 at 10:00 a.m., or at such other date or other time and place as
Purchaser and Stockholder shall agree in writing ("Closing Date").
<PAGE>
1.4. Possible Additional Consideration. If, on the Closing Date,
Purchaser's "Fully Diluted Capitalization" shall be greater than 16,000,000
shares, then and in such event Purchaser shall issue to Stockholder at Closing
options (the "Options") to purchase that number of shares of the Purchaser's
Common Stock which is equal to the difference between 1,200,000 and 7.5 % of
the Fully Diluted Capitalization. The exercise price of the Options shall be
equal to the price at which the Purchaser's Common Stock is sold in the
Offering (as that term is defined in the PPM referred to in Section 3.2
below), the Options shall be exercisable for a period of 10 years from
issuance, shall be in form substantially identical to the form of Exhibit A
hereto, and shall otherwise be in such form as shall be mutually satisfactory
to Purchaser and Stockholder. Fully Diluted Capitalization shall have the
meaning set forth in the PPM. The right to purchase all the shares subject to
the Options shall be subject to Purchaser's repurchase rights as more fully
set forth in the Employment Agreement attached hereto as Exhibit B.
ARTICLE II
REPRESENTATIONS OF THE STOCKHOLDER AND THE COMPANY
The Stockholder and the Company, jointly and severally, represent,
warrant and agree to and with Purchaser, as follows:
2.1. Ownership of Stock. The Stockholder is the lawful owner of the
Stock, free and clear of all liens, encumbrances, restrictions and claims of
every kind; the Stockholder has full legal right, power and authority to enter
into this Agreement and to sell, assign, transfer and convey the Stock
pursuant to this Agreement; the delivery to Purchaser of the Stock pursuant to
the provisions of this Agreement will transfer to Purchaser valid title
thereto, free and clear of all liens, encumbrances, restrictions and claims of
every kind.
2.2. Existence and Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. The Company has the power to own its property and to carry on its
business as now being conducted. The Company is duly qualified to do business
and is in good standing in each jurisdiction in which the character or
location of the properties owned or leased by the Company or the nature of the
business conducted by the Company makes such qualification necessary.
<PAGE>
2.3. Capital Stock.
(a) The Company has an authorized capitalization consisting
of 1,000 shares of common stock, $1.00 par value per share, of which 100
shares are issued and outstanding. All such outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable. There are
no outstanding options, warrants, rights, calls, commitments, conversion
rights, rights of exchange, plans or other agreements of any character
providing for the purchase, issuance or sale of any shares of the capital
stock of the Company, other than as contemplated by this Agreement.
(b) The Stockholder is the record and beneficial owner of
all of the issued and outstanding shares of the capital stock of the Company.
2.4. Subsidiaries and Investments. The Company does not have,
directly or indirectly, any capital stock or other equity or ownership or
proprietary interest in any corporation, partnership, association, trust,
joint venture or other entity.
2.5. Financial Statements and No Material Changes. The Stockholder
has heretofore furnished the Purchaser with the balance sheet of the Company
as of June 30, 1997 (the balance sheet of the Company as at June 30, 1997 is
hereinafter referred to as the "Balance Sheet"). The Balance Sheet has been
prepared in accordance with generally accepted accounting principles
consistently followed throughout the period indicated. The Balance Sheet
fairly presents the financial condition of the Company at the date thereof
and, except as indicated therein, reflects all claims against and all debts
and liabilities of the Company, fixed or contingent, as at the date thereof.
Since June 30, 1997 (the "Balance Sheet Date") there has been no material
adverse change in the assets or liabilities, or in the business or condition,
financial or otherwise, or in the results of operations or prospects, of the
Company except in the ordinary course of business.
2.6. Material Contracts. Except for the agreements set forth in
Schedule 2.6 attached hereto (such agreements are hereinafter referred to as
the "Allegheny Agreements"), the Company is not bound by (a) any agreement,
contract or commitment relating to the employment of any person by the
Company, or any bonus, deferred compensation, pension, profit sharing, stock
option, employee stock purchase, retirement or other employee benefit plan,
(b) any agreement, indenture or other instrument which contains restrictions
with respect to payment of dividends or any other distribution in respect of
its capital stock, (c) any agreement, contract or commitment relating to
capital expenditures, (d) any loan or advance to, or investment in, any
individual, partnership, joint venture, corporation, trust, unincorporated
organization, government or other entity (each a "Person") or any agreement,
contract or commitment relating to the making of any such loan, advance or
investment, (e) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any Person (other than the endorsement of
negotiable instruments for collection in the ordinary course of business), (f)
any management service, consulting or any other similar type contract (g) any
agreement, contract or commitment limiting the freedom of the Company to
engage in any line of business or to compete with any Person, or (h) any
agreement, contract or commitment not entered into in the ordinary course of
business.
<PAGE>
2.7. Restrictive Documents. Neither the Company nor the Stockholder
is subject to, or a party to, any charter, by-law, mortgage, lien, lease,
license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind or
character, which materially and adversely affects the business practices,
operations or condition of the Company or any of its assets or property, or
which would prevent consummation of the transactions contemplated by this
Agreement, compliance by the Stockholder with the terms, conditions and
provisions hereof or the continued operation of the Company's business after
the date hereof or the Closing Date (as hereinafter defined) on substantially
the same basis as heretofore operated or which would restrict the ability of
the Company to acquire any property or conduct business in any area.
2.8. Litigation. Except as set forth in Schedule 2.8 attached hereto,
there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before any governmental or other
instrumentality or agency, pending, or, to the best knowledge, information and
belief of the Stockholder or the Company, threatened, against or affecting the
Company, or any of its properties or rights which could materially and
adversely affect the right or ability of the Company to carry on its business
as now conducted, or which could materially and adversely affect the
condition, whether financial or otherwise, or properties of the Company. The
Company is not subject to any judgment, order or decree entered in any lawsuit
or proceeding which may have a material adverse effect on any of its
operations, business practices or on its ability to acquire any property or
conduct business in any area.
2.9. Taxes. The Company has not filed, nor has it been required to
file, any federal, state, local or foreign tax returns and tax reports. There
are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of the Company.
2.10. Liabilities. The Company has no outstanding claims, liabilities
or indebtedness, contingent or otherwise, except as set forth in the Balance
Sheet or referred to in the footnotes thereto, other than liabilities incurred
subsequent to the Balance Sheet Date in the ordinary course of business not
involving borrowings by the Company.
2.11. Compliance with Laws. The Company has materially complied with
each, and is not in material violation of any, law, ordinance, or governmental
or regulatory rule or regulation, whether federal, state, local or foreign, to
which the Company's business, operations, assets or properties is subject
(collectively, "Regulations").
2.12. Employees; Compensation; Benefit Plans. The Company has never
had any employees, has never paid compensation to any person as an employee,
agent, consultant or otherwise, and has never been party to or maintained a
plan which is subject to the Employee Retirement Income Security Act of 1974,
as amended, or any rules of the Internal Revenue Service or the United States
Department of Labor.
2.13. Banking Arrangements. The Company has never maintained an
account with a bank or other financial institution.
2.14. Brokers. Neither the Company nor the Stockholder has made any
agreement or taken any action which may cause anyone to become entitled to a
commission as a result of the transactions contemplated by this Agreement.
<PAGE>
2.15. Full Disclosure. No representation or warranty by the Company
or the Stockholder contained in this Article II and no statement contained in
any certificate furnished or to be furnished pursuant hereto to Purchaser by
or on behalf of the Company or Stockholder at or before the Closing Date or in
connection with the transactions contemplated hereby contains or at the
Closing Date will contain any untrue statement of a material fact, or omits or
at the Closing Date will omit to state a material fact necessary to provide
Purchaser with material information as to the Company and its affairs or as to
the Stock.
2.16. Copies of Documents. The Stockholder caused to be made
available for inspection and copying by the Purchaser and its advisers, true,
complete and correct copies of all documents referred to in this Article II or
in any Schedule attached hereto.
ARTICLE III
REPRESENTATIONS OF THE PURCHASER
The Purchaser represents, warrants and agrees to and with the Company
and the Stockholder as follows:
3.1. Organization and Qualification; Corporate Power. Purchaser (i)
is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of New York and (ii) has the corporate power,
holds all Permits necessary, and is in all material respects entitled, to
carry on its business as now being conducted. Purchaser is qualified to do
business as a foreign corporation in all jurisdictions in which the location
of the properties owned or leased by it or the nature of its business makes
necessary such qualification, except for such jurisdictions in which the
failure to be so qualified would not have a material adverse effect on the
business, properties, financial condition or results of operations of
Purchaser (an "Purchaser Material Adverse Effect").
<PAGE>
3.2. Capitalization. Purchaser has the duly authorized and
outstanding capitalization set forth under the caption "Capitalization" in
Purchaser's Amended And Restated Confidential Private Placement Memorandum
dated October 27, 1997, copies of which have been provided to the Stockholder
(the "PPM"). Other than as described in the PPM, there are not outstanding any
options or rights to purchase or otherwise acquire from Purchaser, or any
commitment of any character of Purchaser to issue, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for,
or otherwise entitling any person to acquire from Purchaser, any shares of its
capital stock. The currently outstanding shares of Purchaser's capital stock
have been duly authorized and are validly issued, fully paid and
non-assessable and have not been issued in violation of the preemptive rights
(whether by statute or agreement) of any security holder of Purchaser. The
shares issuable upon exercise of the Purchase Option (the "Purchase Option
Shares") and the Options (the "Option Shares") will, when issued in accordance
with the terms of the Purchase Option and Options, respectively, be duly
authorized, validly issued and outstanding and will be fully paid and
non-assessable and will not have been issued in violation of the preemptive
rights (whether by statute or agreement) or any security holder of Purchaser.
3.3. Corporate Power as to this Agreement. Purchaser has the
corporate power to execute and deliver this Agreement, the Purchase Option,
the Options and the Employment Agreement attached hereto as Exhibit B, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby.
3.4. Authorization and Validity of Agreement. The execution and
delivery of this Agreement, the Purchase Option, the Options and the
Employment Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary or appropriate corporate action. This Agreement has been duly
executed and delivered by Purchaser and, assuming it constitutes a valid and
binding obligation of the Company and the Stockholder, constitutes a valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms. The Purchase Option, the Options and the Employment Agreement,
when executed and delivered, shall each have been duly executed and delivered
by Purchaser and will constitute a valid and binding obligation of Purchaser
enforceable against it in accordance with its terms.
3.5. No Violation of Law or Default by Execution and Performance of
this Agreement. The execution, delivery and performance of this Agreement, the
Purchase Option, the Options and the Employment Agreement by Purchaser will
not violate any applicable law or constitute a default by Purchaser or result
in a right of acceleration, termination or similar right of any party (or
will, but for the passage of time or the giving of notice, constitute a
default by Purchaser or result in such a right of acceleration, termination or
similar right of any party) under the Articles of Incorporation or bylaws of
Purchaser or under any contract, agreement, license or instrument to which it
is a party.
<PAGE>
3.6. Approvals and Consents. No approval, consent or authorization
of, or declaration or filing with, any governmental or judicial authority or
any other person is required in connection with the execution and delivery of
this Agreement, the Purchase Option, the Options and the Employment Agreement
by Purchaser or the performance by Purchaser of its obligations hereunder or
thereunder or the consummation by Purchaser of the transactions contemplated
hereby or thereby.
3.7. No Undisclosed Liabilities. As at June 30, 1997, Purchaser had
no material commitment, liability or obligation of any nature, whether due or
to become due, absolute or contingent, including any liability for taxes or
interest or penalties relating thereto in respect of or measured by the income
of Purchaser for any period prior to such date, except to the extent reflected
or reserved against in the balance sheet dated such date and included in the
quarterly report on Form 10-QSB for the quarter ended such date filed by
Purchaser with the U.S. Securities and Exchange Commission ("SEC") or as
disclosed in the PPM or this Agreement. Purchaser does not know or have any
reasonable ground to know of any basis for the assertion against Purchaser of
any liability not fully reflected or reserved against in such balance sheet,
except for (i) liabilities arising since the date thereof in the ordinary
course of business and (ii) other liabilities disclosed in the PPM or this
Agreement. The date June 30, 1997 and the Purchaser balance sheets referred to
above are referred to herein, respectively, as the "Purchaser Balance Sheet
Date" and the "Purchaser Balance Sheet."
3.8. No Material Changes. Except as set forth on the Schedule of
Material Changes or as otherwise described or referred to in the PPM, since
the Purchaser Balance Sheet Date, there has not been:
(a) any change in the financial condition, assets,
liabilities, business, properties or results of operations of Purchaser,
except changes in the ordinary course of business, none of which individually
or in the aggregate has had an Purchaser Material Adverse Effect;
(b) any strike, lockout or any similar event or condition of
any character involving employees of Purchaser materially adversely affecting
the business, financial condition or results of operations of such
corporation;
(c) a failure by Purchaser to maintain in full force and
effect all policies of insurance in effect on the Purchaser Balance Sheet
Date, or any renewals or replacements thereof, or to give any notice or
present any claim under any such policy when due;
(d) a sale or transfer by Purchaser of any of its assets or
liabilities other than in the ordinary course of its business;
<PAGE>
(e) any agreement or arrangement to which Purchaser is a
party granting to any person any right to purchase any of the assets of
Purchaser other than in the ordinary course of business; or
(f) any failure or refusal by Purchaser to pay any of its
obligations, including obligations to vendors and persons providing goods or
services to it; or
(g) any failure or refusal by Purchaser to make, in a timely
manner, all filings and declarations with and notices to governmental
authorities required to be made in connection with the conduct of its
business.
3.9. Tax Returns, Reports to Taxing Authorities, Audits and Tax
Payments. Except as otherwise set forth in the Schedule of Tax Matters or as
described or referred to in the PPM, Purchaser has filed with the appropriate
governmental agencies, domestic and foreign, all material tax returns and
reports required to be filed by it. All liabilities for taxes shown on
federal, state and other tax returns filed by or on behalf of Purchaser, or
arising by reason of any government review thereof, or otherwise due to be
paid, have been paid or provided for in the Purchaser Balance Sheet, and all
federal, state and other taxes for periods subsequent to the period covered by
such returns up to the Purchaser Balance Sheet Date have been paid or
reflected and reserved against in full in such balance sheet.
3.10. Litigation. Except as set forth in the Schedule of Litigation
or described or referred to in the PPM, there is no litigation, proceeding or
investigation pending or, to the knowledge of Purchaser, threatened against or
affecting any property of Purchaser, whether or not fully covered by
insurance.
3.11. Brokers. Purchaser has not made any agreement or taken any
action which may cause anyone to become entitled to a commission as a result
of the transactions contemplated by this Agreement.
ARTICLE IV
CONDUCT OF BUSINESS; EXCLUSIVE DEALING
4.1. Conduct of Business of the Company. From and after the date
hereof to the Closing Date, the Stockholder shall cause the Company to conduct
its operations only according to its ordinary and usual course of business.
Prior to the Closing Date, except as may be first approved by the Purchaser or
as is otherwise permitted or required by this Agreement, the Stockholder will
cause (i) the Company's Certificate of Incorporation and By-Laws to be
maintained in their form on the date of this Agreement, (ii) the Company to
refrain from making any bonus, pension, retirement or insurance payment or
arrangement to or with any such persons and (iii) the Company to refrain from
entering into any contract or commitment.
<PAGE>
4.2. Exclusive Dealing. During the period from the date of this
Agreement to the Closing Date, the Stockholder shall not, and shall cause the
Company to refrain from taking any action to, directly or indirectly,
encourage, initiate engage in discussions or negotiations with, or provide any
information to, any Person, other than the Purchaser, concerning any purchase
of the Stock or any merger, sale of substantial assets or similar transaction
involving the Company.
4.3. Update Schedules. The Stockholder shall promptly disclose to
Purchaser any information contained in his and the Company's representations
and warranties or the Schedules which, because of an event occurring after the
date hereof, is incomplete or is no longer correct as of all times after the
date hereof until the Closing Date; provided, however, that none of such
disclosures shall be deemed to modify, amend or supplement representations and
warranties of the Stockholder and the Company or the Schedules hereto for the
purposes of Article V hereof, unless Purchaser shall have consented thereto in
writing.
ARTICLE V
CONDITIONS TO PURCHASER'S OBLIGATIONS
5.1. Conditions to Purchaser's Obligations. The purchase of the Stock
by Purchaser on the Closing Date is conditioned upon satisfaction, on or prior
to such date, of the following conditions:
(a) Good Standing and Other Certificates. The Stockholder
shall have delivered to the Purchaser (i) copies of the Company's charter,
including all amendments thereto, in each case certified by the Secretary of
State or other appropriate official of its jurisdiction of incorporation, (ii)
a certificate from the Secretary of State or other appropriate official of
their respective jurisdictions of incorporation to the effect that each of the
Company is in good standing or subsisting in such jurisdiction, and (iii) a
copy of the By-Laws of the Company, certified by the Secretary of the Company
as being true and correct and in effect on the Closing Date.
(b) No Material Adverse Change. Prior to the Closing Date,
there shall be no material adverse change in the assets or liabilities, the
business or condition, financial or otherwise, the results of operations, or
prospects of the Company.
(c) Truth of Representations and Warranties. The
representations and Warranties of the Stockholder contained in this Agreement
or in any Schedule attached hereto shall be true and correct on and as of the
Closing Date with the same effect as though such representations and
Warranties had been made on and as of such date, and the Stockholder shall
have delivered to the Purchaser a certificate, dated the Closing Date, to such
effect.
<PAGE>
(d) Performance of Agreements. All of the agreements of the
Stockholder to be performed on or before the Closing Date pursuant to the
terms hereof shall have been duly performed, and the Stockholders shall have
delivered to the Purchaser a certificate, dated the Closing Date, to such
effect.
(e) No Threatened or Pending Litigation. No suit, action or
other proceeding, or injunction or final judgment relating thereto, shall be
threatened or be pending before any court or governmental or regulatory
official, body or authority in which it is sought to restrain or prohibit or
to obtain damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby, and no investigation
that might result in any such suit, action or proceeding shall be pending or
threatened.
(f) Documents to be Delivered on the Closing Date. On the
Closing Date, Company shall deliver to Purchaser: (i) copies of the Allegheny
Agreements duly executed by all parties thereto other than Purchaser, (ii)
certificates representing the Stock duly endorsed in blank by the Stockholder,
and (iii) the Employment Agreement attached hereto as Exhibit B executed by
Stockholder.
(g) Proceedings. All proceedings to be taken in connection
with the transactions contemplated by this Agreement and all documents
incident thereto shall be satisfactory in form and substance to the Purchaser
and its counsel, and the Purchaser shall have received copies of all such
documents and other evidences as they or their counsel may reasonably request
in order to establish the consummation of such transactions and the taking of
all proceedings in connection therewith.
(h) Closing of Offering. There shall have been an Initial
Closing of the Offering (as those terms are defined in the PPM), which Initial
Closing is intended to occur simultaneously with the Closing hereunder.
ARTICLE VI
CONDITIONS TO THE STOCKHOLDER'S AND COMPANY'S OBLIGATIONS
6.1. Conditions to the Stockholder's and Company's Obligations. The
sale of the Stock by the Stockholder on the Closing Date is conditioned upon
satisfaction, on or prior to such date, of the following conditions:
<PAGE>
(a) Truth of Representations and Warranties. The
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct on and as of the Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date, and Purchaser shall have delivered to the Stockholder a certificate,
dated the Closing Date, to such effect.
(b) Performance of Agreements. All of the agreements of the
Purchaser to be performed on or before the Closing Date pursuant to the terms
hereof shall have been duly performed, and the Purchaser shall have delivered
to the Stockholder a certificate, dated the Closing Date, to such effect.
(c) No Material Adverse Change. Prior to the Closing Date,
there shall be no material adverse change in the assets or liabilities, the
business or condition, financial or otherwise, the results of operations, or
prospects of the Purchaser.
(d) No Threatened or Pending Litigation. No suit, action or
other proceeding, or injunction or final judgment relating thereto, shall be
threatened or be pending before any court or governmental or regulatory
official, body or authority in which it is sought to restrain or prohibit or
to obtain damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby, and no investigation
that might result in any such suit, action or proceeding shall be pending or
threatened.
(e) Documents to be Delivered on the Closing Date. On the
Closing Date, Company shall deliver to Purchaser: (i) copies of the Allegheny
Agreements duly executed by all parties thereto other than Purchaser, and the
Employment Agreement attached hereto as Exhibit B executed by Purchaser.
(f) Proceedings. All proceedings to be taken in connection
with the transactions contemplated by this Agreement and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Stockholder and his counsel, and the Stockholder shall have received copies of
all such documents and other evidences as it or its counsel may reasonably
request in order to establish the consummation of such transactions and the
taking of all proceedings in connection therewith.
(g) Closing of Offering. There shall have been an Initial
Closing of the Offering (as those terms are defined in the PPM), which Initial
Closing is intended to occur simultaneously with Closing hereunder.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNITY; SET-OFF
7.1. Survival of Representations. The respective representations and
warranties of the Stockholder, the Company and the Purchaser contained in this
Agreement or in any Schedule attached hereto shall survive the purchase and
sale of the Stock contemplated hereby for one (1) year.
<PAGE>
7.2. Indemnification.
(a) The Stockholder agrees to indemnify and hold the
Purchaser and its officers, directors and agents harmless from damages, losses
or expenses (including, without limitation, reasonable counsel fees and
expenses) in excess of $50,000 in the aggregate, suffered or paid, directly or
indirectly, through application of the Purchaser's assets, as a result of or
arising out of the failure of any representation or warranty made by the
Stockholder or the Company in this Agreement or in any Schedule attached
hereto to be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date.
(b) The Purchaser agrees to indemnify and hold the
Stockholder harmless from damages, losses or expenses (including, without
limitation, reasonable counsel fees and expenses) in excess of $50,000, in the
aggregate, suffered or paid, directly or indirectly by Stockholder, as a
result of or arising out of the failure of any representation or warranty made
by the Purchaser in this Agreement to be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date.
(c) The obligations to indemnify and hold harmless pursuant
to this Section 7.2 shall survive the consummation of the transactions
contemplated by this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1. Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of
the Commonwealth of Pennsylvania applicable to agreements executed and to be
performed solely within such Commonwealth.
8.2. Jurisdiction; Agents for Service of Process. Any judicial
proceeding brought against any of the parties to this Agreement on any dispute
arising out of this Agreement or any matter related hereto may be brought in
the courts of the Commonwealth of Pennsylvania, or in the United States
District Court for the Eastern District of Pennsylvania, and, by execution and
delivery of this Agreement, each of the parties to this Agreement accepts the
exclusive jurisdiction of such courts, and irrevocably agrees to be bound by
any judgment rendered thereby in connection with this Agreement.
8.3. Press Releases. Except as required by applicable law, none of
the parties hereto shall give notice to any third parties or otherwise make
any public statement or releases concerning this Agreement or the transactions
contemplated hereby without obtaining the prior written consent of Purchaser
as to the contents and manner of presentation and publication thereof, which
consent shall not be unreasonably withheld.
<PAGE>
8.4. Waiver. The Stockholder, on the one hand, or Purchaser, on the
other, may by an instrument in writing executed by them or it in the same
manner as the Agreement (i) extend or waive the time for performance of any of
the agreements of the others; (ii) waive any inaccuracies in representations
or warranties by the other parties contained herein or in any document
delivered pursuant hereto; and (iii) waive the satisfaction or fulfillment of
any condition the nonsatisfaction or nonfulfillment of which is a condition to
the right of the parties so waiving to refuse to Close or terminate this
Agreement.
8.5. Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
8.6. Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof
to produce or account for any of the other counterparts.
8.7. Headings, Gender and "Person". All section headings contained in
this Agreement are for convenience of reference only, do not form a part of
this Agreement and shall not affect in any way the meaning or interpretation
of this Agreement. Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as
the context requires. Any reference to a "person" herein shall include an
individual, firm, corporation, partnership, trust, governmental authority or
body, association, unincorporated organization or any other entity.
8.8. Schedules. All Schedules referred to herein are intended to be
and hereby are specifically made a part of this Agreement.
8.9. Severability. Any provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall be ineffective to the extent of
such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
<PAGE>
8.10. No Benefit To Others. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit
of the parties hereto and their heirs, executors, administrators, legal
representatives, successors and assigns, and they shall not be construed as
conferring any rights on any other persons.
8.11. Notices. Any notice, request, demand, waiver, consent, approval
or other communication which is required or permitted hereunder shall be in
writing and shall be deemed given only if delivered personally or sent by a
telegram or by registered or certified mail, postage pre-paid, as follows:
If to Purchaser, to:
Panax Pharmaceutical Company, Ltd.
425 Park Avenue, 27th Floor
New York, NY 10022
Attn: President
If to Stockholder or Company, to:
Leonard S. Jacob, M.D., Ph.D.
405 Caranel Circle
Penn Valley, PA 19072
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as
of the date so delivered, telegraphed or mailed.
8.12. Entire Agreement. This Agreement, including the other documents
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
<PAGE>
8.13. Amendments. This Agreement may not be changed orally, but only
by an agreement in writing signed by Purchaser and the Stockholder (subject to
the following). Any provision of this Agreement can be waived, amended,
supplemented or modified by agreement of Purchaser and the holders or former
holders of a majority of the shares of Stock. Action by the holders or former
holders of a majority of the shares of Stock pursuant to this Section 8.13
shall be binding for all purposes upon all of the Stockholders.
IN WITNESS WHEREOF, the Purchaser, the Company and the Stockholder
have executed this Agreement, all as of the day and year first above written.
PANAX PHARMACEUTICAL COMPANY, LTD.
By:
---------------------------------------
Name:
Title:
SANGEN PHARMACEUTICAL COMPANY
By:
---------------------------------------
Name:
Title:
STOCKHOLDER:
------------------------------------------
LEONARD S. JACOB
<PAGE>
SCHEDULE 2.6
Letter Agreement dated August 26,1997 between Sangen Pharmaceutical Company,
Inc. and Allegheny University of the Health Sciences, including the documents
referred to therein and attached thereto.
<PAGE>
SCHEDULE 2.8
Drs. Sanna Goyert and Jack Silver previously threatened litigation against
Sangen regarding Dr. Goyert's alleged rights with respect to licensing certain
technology. Purchaser has been provided with copies of the correspondence
relating to this claim and threat. There has been no communication between
Sangen or Dr. Jacob and either of Drs. Goyert or Silver since the first week
in June, 1997.
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of November
6, 1997, between INKINE PHARMACEUTICAL COMPANY, INC., a New York corporation
("Employer"), and LEONARD S. JACOB ("Employee").
Background. Employer and Employee mutually agree to the
employment of Employee as Chairman and Chief Executive Officer of Employer
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Employment. Employer hereby employs Employee, and Employee hereby
accepts such employment and agrees to perform his duties and responsibilities
hereunder, in accordance with the terms and conditions hereinafter set forth.
1.1 Employment Term. The employment term of this Agreement
shall be for a period of three years and may be renewed in accordance with
Section 1.2. The term "Employment Term" shall refer to the initial Employment
Term, which shall commence on the date hereof and shall continue until and end
on the third anniversary date of this Agreement (unless terminated prior
thereto in accordance with Section 7 hereof) and, to the extent this Agreement
is renewed pursuant to Section 1.2, to the last day of any successive one year
period.
1.2 Renewal. This Agreement shall be automatically renewed
for successive one year terms at the expiration of the initial Employment
Term, and any subsequent Employment Term, unless written notice to the
contrary is provided by either the Employer or the Employee at least ninety
days prior to the expiration of such Employment Term.
1.3 Duties and Responsibilities.
(a) During the Employment Term, Employee shall
serve as Chairman and Chief Executive Officer of Employer and shall perform
all duties and accept all responsibilities incidental to such position or as
may be assigned to him by Employer's Board of Directors, and he shall report
to and cooperate fully with the Board of Directors. Employee shall operate
primarily out of Employer's executive office, currently situated in New York,
NY, but to be relocated to the Philadelphia, Pennsylvania vicinity promptly
after the date hereof.
<PAGE>
(b) Employee represents and covenants to Employer
that he is not subject to any agreement, covenant, understanding or
restriction which would prohibit Employee from executing this Agreement and
performing his duties and responsibilities hereunder, or would in any manner,
directly or indirectly, limit or affect the duties and responsibilities which
may now or in the future be assigned to Employee by Employer.
1.4 Extent of Service; Noncompetition. During the Employment
Term, Employee agrees to use his best efforts to carry out his duties and
responsibilities under Section 1.3 hereof and to devote his full time,
attention and energy thereto. The foregoing shall not be construed as
preventing Employee from (a) serving as a consultant or director for one or
more other business enterprises, (b) engaging in charitable or civic
activities, (c) teaching, or (d) making investments in other businesses or
enterprises; provided that such activities in the aggregate shall not prevent
him from discharging his duties and responsibilities to Employer. During the
Employment Term, Employee may serve as a director of, but may not serve as a
consultant to, a business enterprise that is engaged in the development or
commercialization of technology which is directly competitive with the
technology then being developed or commercialized by Employer. Nothing
contained herein shall be construed to limit or otherwise modify Employee's
fiduciary and other obligations under applicable state corporation laws or
state and federal securities laws.
1.5 Base Salary. For the services rendered by Employee
hereunder, Employer shall pay Employee an annual salary at the rate of
$225,000 for the initial year of the Employment Term, less withholding
required by law or agreed to by Employee, payable in installments at such
times as Employer customarily pays its other executive officers. The annual
base salary shall be increased by the Board of Directors in its sole
discretion, provided that such annual increase shall be no less than an amount
which reflects the percentage increase (if any) in the Consumer Price Index
published by the United States Department of Labor for the Philadelphia SMSA
for the period since the prior base salary was determined.
1.6 Bonus and Other Benefits. During the Employment Term,
Employee shall be entitled to certain benefits and shall be eligible for
certain bonus compensation, as follows:
(a) Employee shall be paid an annual bonus which
shall be determined by Employer's Board of Directors or an appropriate
committee of such Board, provided that Employee's bonus for the initial year
of the Employment Term shall be no less than $56,250.
(b) Employee shall be entitled to all normal and
usual benefits provided by Employer to its executive employees, including, but
not limited to, participation in profit sharing, disability, health,
hospitalization and retirement plans and such other benefits as the Board of
Directors of Employer may from time to time determine based upon the benefits
paid to other executive officers of Employer. Employee shall also be entitled
to such executive benefits, including executive disability and life insurance
as shall be approved by Employer's Board of Directors or an appropriate
committee of the Board.
<PAGE>
(c) Employee shall be eligible to receive such
stock options or other forms of stock grants as shall be determined by
Employer's Board or Directors or an appropriate committee of such Board.
(d) Employee shall be entitled to paid vacation
time during the Employment Term in accordance with Employer's then existing
vacation policy for its executive employees.
1.7 Severance Compensation.
(a) If Employer terminates this Agreement, other
than for "cause" pursuant to Section 7.3 hereof: (i) during the first year of
the Employment Term, Employer shall pay to Employee an amount equal to 100% of
Employee's base annual salary, (ii) during the second year of the Employment
Term, Employer shall pay to Employee an amount equal to 150% of Employee's
base annual salary in effect at the date of such termination, and (iii) during
the third year of the Employment Term, Employer shall pay to Employee an
amount equal to 200% Employee's base annual salary in effect at the date of
such termination.
(b) Such severance compensation shall be payable
in full within thirty days after the date of termination of this Agreement
other than for "cause" pursuant to Section 7 hereof.
(c) Notwithstanding their terms, any options,
warrants or other rights to purchase shares of the Company's capital stock
held by Employee shall become immediately exercisable in full in the event
Employer terminates this Agreement other than for "cause" pursuant to Section
7 hereof. Such options, warrants or other rights shall be exercisable for the
balance of the term set forth in such option, warrant or right, and otherwise
in accordance with the term(s) thereof.
1.8 Expenses. Employee shall be reimbursed for the
reasonable business expenses incurred by him in connection with his
performance of services hereunder during the Employment Term upon presentation
of an itemized account and written proof of such expenses.
2. Certain Rights of Employer. Reference is made to that certain
Common Stock Purchase Option of even date issued by Employer to Employee which
entitles Employee to purchase up to 1,200,000 shares of Employer's Common
Stock (the "Purchase Option"), and to that certain Common Stock Purchase
Option of even date issued by Employer to Employee which entitles Employee to
purchase up to ______________ shares of Employer's Common Stock (the
"Option"). Shares of Employer's Common Stock issuable on exercise of the
Purchase Option and the Option are hereinafter referred to as "shares."
<PAGE>
2.1 Repurchase of Rights Pursuant to Purchase Option and
Option. In the event Employee's employment is terminated during the Employment
Term either (i) voluntarily by Employee, or (ii) by Employer for "cause" as
defined in Section 7 below (either such event is hereinafter referred to as a
"Termination Event"), then Employer shall have the right to purchase from
Employee for the aggregate sum of $100.00 certain of Employee's rights to
purchase shares pursuant to both the Purchase Option and the Option, as
follows. If the Termination Event occurs during the first month of the
Employment Term, Employer may acquire from Employee the right to purchase up
to 900,000 shares pursuant to the Purchase Option and up to [100% of total]
shares pursuant to the Option; if the Termination Event occurs during the
second month of the Employment Term, Employer may acquire from Employee the
right to purchase up to 875,000 shares pursuant to the Purchase Option and up
to [35/36 of total] shares pursuant to the Option, etc., such that the number
of shares subject to the Purchase Option that Employer may acquire the right
to purchase shall be reduced by 25,000 during each month during the Employment
Term and the number of shares subject to the Option that Employer may acquire
the right to purchase shall be reduced by [1/36 of total] during each month
during the Employment Term
2.2 Repurchase of Shares. It is possible that Employee may
exercise either or both the Purchase Option and the Option to such an extent
that upon a Termination Event the number of shares as to which Employer has
the right to purchase is greater than Employee's unexercised rights under
either or both the Purchase Option and the Option (such excess number of
shares is referred to as "Option Shares"). In such event, Employer shall have
the right to purchase from Employee and the Employee shall be obligated to
sell to Employer, for a purchase price equal to the exercise price paid by
Employee to Employer to acquire the Option Shares, a number of shares of the
Company's Common Stock equal to the Option Shares.
2.3 Exercise of Employer's Rights. Employer may exercise its
rights pursuant to this Section 2 by notifying Employee of its election to do
so within five business days after the date of the Termination Event, and
tendering to Employee payment in full for the rights and shares (if any) being
purchased hereunder. Upon notice and tender of payment as aforesaid, those
rights pursuant to the Purchase Option and the Option which have been
purchased by Employer shall automatically be deemed void and of no further
effect. In the event Employer has notified Employee of its intention to
purchase shares of Employer's Common Stock from Employee pursuant to Section
2.3 above, Employee shall deliver to Employer certificates representing such
shares, duly endorsed for transfer with all transfer taxes paid, within five
business days after receipt by Employee of notice and tender as aforesaid.
<PAGE>
3. Developments. Employee will disclose promptly in writing to
Employer all inventions, ideas, discoveries, and improvements, whether or not
patentable, conceived by Employee during the period of Employee's employment
with Employer, or a parent or subsidiary thereof, whether alone or with
others, and whether or not during regular business hours, or on Employer
premises or with the aid of Employer materials, which pertain in any way to
Employee's work with Employer or to any business activity which is or at the
time of such conception may be carried on by Employer or a parent or
subsidiary thereof. All such inventions, ideas, discoveries, and improvements
are the property of Employer to which Employee hereby assigns and transfers
forever all Employee's rights, titles and interests. Employee, upon request by
Employer and at Employer's sole expense, will prepare and execute applications
for patents for such inventions, ideas, discoveries, and improvements, both in
the United States and in foreign countries, and will do everything necessary
to ensure the issuance of such patents, irrespective of whether required to be
done during or after the termination of Employee's period of employment with
Employer.
4. Confidentiality. The Employee agrees that he will not at any time,
either during or subsequent to the Employment Term, unless given express
consent in writing by the Employer, either directly or indirectly use or
communicate to any person or entity any confidential information of any kind
concerning matters affecting or relating to the names, addresses, buying
habits or practices of any of Employer's clients or customers; Employer's
marketing methods, programs, formulas, patterns, compilations, devices,
methods, techniques or processes and related data; the amount of compensation
paid by Employer to employees and independent contractors and other terms of
their employment or contractual relationships; other information concerning
Employer's manner of operations. (The foregoing shall not be deemed to
prohibit the disclosure of information which (i) is, at the time of
disclosure, in the public domain other than as a result of Employee's breach
of this Agreement, or (ii) can be demonstrated by Employee to be known by
Employee on the date of his commencement of employment.) The Employee agrees
that the above information and items are important, material and confidential
trade secrets and that they affect the successful conduct of the Employer's
business and its good will. The Employee agrees that all business procured by
the Employee while employed by the Employer is and shall remain the permanent
and exclusive property of the Employer. Employee further agrees that
Employer's relationship with each of its employees and independent contractors
is a significant and valuable asset of the Employer. Any interference with the
Employer's business, property, confidential information, trade secrets,
clients, customers, employees or independent contractors by the Employee or
any of Employee's agents during or after the term of this Agreement shall be
deemed a material breach of this Agreement.
5. Nonsolicitation. Employee agrees that for the one-year period
following termination of employment (whether with or without cause) he will
not directly or indirectly solicit the employment of any employee of the
Employer and will not attempt to persuade any employee to leave the employment
of the Employer.
<PAGE>
6. Equitable Relief.
(a) Employee acknowledges that the restrictions contained in
Sections 4 and 5 hereof are reasonable and necessary to protect the legitimate
interests of Employer and that any violation of such restrictions would result
in irreparable injury to Employer. If the period of time or other restrictions
specified in Sections 4 and 5 should be adjudged unreasonable at any
proceeding, then the period of time or such other restrictions shall be
reduced by the elimination or reduction of such portion thereof so that such
restrictions may be enforced in a manner adjudged to be reasonable. Employee
acknowledges that Employer shall be entitled to preliminary and permanent
injunctive relief for a violation of any such restrictions without having to
prove actual damages or to post a bond; Employer shall also be entitled to an
equitable accounting of all earnings, profits and other benefits arising from
such violation, which rights shall be cumulative and in addition to any other
rights or remedies to which Employer may be entitled in law or equity. In the
event of a violation, the period referred to in Section 5 hereof shall be
extended by a period of time equal to that period beginning with the
commencement of any such violation and ending when such violation shall have
been finally terminated in good faith.
(b) Employee agrees that until the expiration of the
covenants contained in Sections 4 and 5 of this Agreement, he will provide,
and that Employer may similarly provide, a copy of the covenants contained in
such Sections to any business or enterprise (i) which he may directly or
indirectly own, manage, operate, finance, join, control or participate in the
ownership, management, operation, financing, control or control of, or (ii)
with which he may be connected with as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise, or in
connection with which he may use or permit his name to be used.
7. Termination. This Agreement shall terminate prior to the
expiration of the term set forth in Section 1.1 above upon the occurrence of
any one of the following events:
7.1 Disability. In the event that Employee is unable fully
to perform his duties and responsibilities hereunder to the full extent
required by the Board of Directors of the Employer by reason of illness,
injury or incapacity for six consecutive months, during which time he shall
continue to be compensated as provided in Section 1.5 hereof (less any
payments due Employee under disability benefit programs, including Social
Security disability, workers' compensation and disability retirement
benefits), this Agreement may be terminated by Employer, and Employer shall
have no further liability or obligation to Employee for compensation
hereunder; provided, however, that Employee will be entitled to receive the
payments prescribed under any disability benefit plan which may be in effect
for employees of Employer and in which he participated. Employee agrees, in
the event of any dispute under this Section 7.1, to submit to a physical
examination by a licensed physician mutually agreed on by Employee and the
Board of Directors of Employer.
7.2 Death. In the event that Employee dies during the
Employment Term, Employer shall pay to his executors, legal representatives or
administrators an amount equal to the installment of his salary set forth in
Section 1.5 hereof for the month in which he dies, and thereafter Employer
shall have no further liability or obligation hereunder to his executors,
legal representatives, administrators, heirs or assigns or any other person
claiming under or through him; provided, however, that Employee's estate or
designated beneficiaries shall be entitled to receive the payments prescribed
for such recipients under any death benefit plan which may be in effect for
employees of the Employer and in which Employee participated.
<PAGE>
7.3 Cause. Notwithstanding any other provision hereof,
Employer may terminate this Agreement at any time for "cause." For purposes of
this Agreement, "cause" shall mean a material violation of a written directive
of the Company's Board of Directors, conviction of a crime involving moral
turpitude, willful misconduct which has a material adverse effect on the
Company as determined by a majority of the Company's Board of Directors
including each independent Director.
8. Survival. Notwithstanding the termination of this Agreement by
reason of Employee's disability under Section 7.1 or for cause under Section
7.3, his obligations under Sections 4 and 5 hereof shall survive and remain in
full force and effect for the periods therein provided, and the provisions for
equitable relief against Employee in Section 6 hereof shall continue in force.
9. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania.
10. Disputes and Arbitration. Any disputes arising hereunder,
including disputes arising from or relating to termination, shall be resolved
by binding arbitration. Notice of the demand for arbitration by either party
shall be given in writing to the other party to this Agreement. Upon such
demand, the dispute shall be settled by arbitration before a single arbitrator
pursuant to the rules of the American Arbitration Association (the "AAA").
Discovery shall be permitted prior to arbitration and Pennsylvania law shall
be applied. The arbitrator shall be selected by the joint agreement of the
parties, but if the parties do not so agree within twenty days after the date
of the notice referred to above, the selection shall be made pursuant to the
rules of, and from the panels of arbitrators maintained by the AAA. Any award
rendered by the arbitrator shall be conclusive and binding upon the parties
hereto; provided, however, that any such award shall be accompanied by written
opinion of the arbitrator giving the reasons for the award. Each party shall
pay its own expenses of arbitration and the expenses of the arbitrator shall
be equally shared by the parties. Nothing herein shall prevent the parties
from settling any dispute by mutual agreement at any time.
<PAGE>
11. Notices. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be deemed to have been given when hand delivered or
mailed by registered or certified mail, as follows (provided that notice of
change of address shall be deemed given only when received):
If to Employer, to:
Inkine Pharmaceutical Company, Inc.
425 Park Avenue, 27th Floor
New York, NY 10022
Attention: President
If to Employee, to:
Leonard S. Jacob, M.D., Ph.D.
405 Caranel Circle
Penn Valley, PA 19072
or to such other names or addresses as Employer or Employee, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.
12. Contents of Agreement; Amendment and Assignment.
(a) This Agreement supersedes all prior agreements and sets
forth the entire understanding among the parties hereto with respect to the
subject matter hereof and cannot be changed, modified, extended or terminated
except upon written amendment approved by the Board of Directors of Employer
and executed on its behalf by a duly authorized officer. Without limitation,
nothing in this Agreement shall be construed as giving Employee any right to
be retained in the employ of Employer beyond the expiration of the Employment
Term, and Employee specifically acknowledges that, unless this Agreement is
renewed in accordance with Section 1.2 hereof, he shall be an employee-at-will
of Employer thereafter, and thus subject to discharge by Employer with or
without cause and without compensation of any nature.
(b) Employee acknowledges that from time to time, Employer
may establish, maintain and distribute employee manuals or handbooks or
personnel policy manuals, and officers or other representatives of Employer
may make written or oral statements relating to personnel policies and
procedures. Such manuals, handbooks and statements are intended only for
general guidance. No policies, procedures or statements of any nature by or on
behalf of Employer (whether written or oral, and whether or not contained in
any employee manual or handbook or personnel policy manual), and no acts or
practices of any nature, shall be construed to modify this Agreement or to
create express or implied obligations of any nature to Employee.
(c) All of the terms and provisions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the
respective heirs, executors, administrators, legal representatives, successors
and assigns of the parties hereto, except that the duties and responsibilities
of Employee hereunder are of a personal nature and shall not be assignable or
delegatable in whole or in part by Employee.
<PAGE>
13. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect any other provision or application of this Agreement which can be
given effect without the invalid or unenforceable provision or application and
shall not invalidate or render unenforceable such provision or application in
any other jurisdiction.
14. Remedies Cumulative; No Waiver. No remedy conferred upon Employer
by this Agreement is intended to be exclusive of any other remedy, and each
and every such remedy shall be cumulative and shall be in addition to any
other remedy given hereunder or now or hereafter existing at law or in equity.
No delay or omission by Employer in exercising any right, remedy or power
hereunder or existing at law or in equity shall be construed as a waiver
thereof, and any such right, remedy or power may be exercised by Employer from
time to time and as often as may be deemed expedient or necessary by Employer
in its sole discretion.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above
written.
Attest: INKINE PHARMACEUTICAL COMPANY, INC
/s/ Secretary By: /s/ Taffy J. Williams
- ------------------------------ ----------------------------------------
Secretary
/s/ Leonard S. Jacob
---------------------------------------
LEONARD S. JACOB
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of November
6, 1997, between INKINE PHARMACEUTICAL COMPANY, INC.., a New York corporation
("Employer"), and TAFFY J. WILLIAMS ("Employee").
Background. Employee has been employed by Employer in
various capacities. Employer and Employee mutually agree to the employment of
Employee as President and Chief Operating Officer of Employer upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Employment. Employer hereby employs Employee, and Employee hereby
accepts such employment and agrees to perform his duties and responsibilities
hereunder, in accordance with the terms and conditions hereinafter set forth.
1.1 Employment Term. The employment term of this Agreement
shall be for a period of three years and may be renewed in accordance with
Section 1.2. The term "Employment Term" shall refer to the initial Employment
Term, which shall commence on the date hereof and shall continue until and end
on the third anniversary date of this Agreement (unless terminated prior
thereto in accordance with Section 7 hereof) and, to the extent this Agreement
is renewed pursuant to Section 1.2, to the last day of any successive one year
period.
1.2 Renewal. This Agreement shall be automatically renewed
for successive one year terms at the expiration of the initial Employment
Term, and any subsequent Employment Term, unless written notice to the
contrary is provided by either the Employer or the Employee at least ninety
days prior to the expiration of such Employment Term.
1.3 Duties and Responsibilities.
(a) During the Employment Term, Employee shall
serve as President and Chief Operating Officer of Employer and shall perform
all duties and accept all responsibilities incidental to such position or as
may be assigned to him by Employer's Board of Directors, and he shall report
to the Company's Chief Executive Officer and shall cooperate fully with the
Board of Directors. Employee shall operate primarily out of Employer's
executive office, currently situated in New York, NY, but to be relocated to
the Philadelphia, Pennsylvania vicinity promptly after the date hereof.
<PAGE>
(b) Employee represents and covenants to Employer
that he is not subject to any agreement, covenant, understanding or
restriction which would prohibit Employee from executing this Agreement and
performing his duties and responsibilities hereunder, or would in any manner,
directly or indirectly, limit or affect the duties and responsibilities which
may now or in the future be assigned to Employee by Employer.
1.4 Extent of Service; Noncompetition. During the Employment
Term, Employee agrees to use his best efforts to carry out his duties and
responsibilities under Section 1.3 hereof and to devote his full time,
attention and energy thereto. The foregoing shall not be construed as
preventing Employee from (a) serving as a consultant or director for one or
more other business enterprises, (b) engaging in charitable or civic
activities, (c) teaching, or (d) making investments in other businesses or
enterprises; provided that such activities in the aggregate shall not prevent
him from discharging his duties and responsibilities to Employer. During the
Employment Term, Employee may serve as a director of, but may not serve as a
consultant to, a business enterprise that is engaged in the development or
commercialization of technology which is directly competitive with the
technology then being developed or commercialized by Employer. Nothing
contained herein shall be construed to limit or otherwise modify Employee's
fiduciary and other obligations under applicable state corporation laws or
state and federal securities laws.
1.5 Base Salary. For the services rendered by Employee
hereunder, Employer shall pay Employee an annual salary at the rate of
$200,000 for the initial year of the Employment Term, less withholding
required by law or agreed to by Employee, payable in installments at such
times as Employer customarily pays its other executive officers. The annual
base salary shall be increased by the Board of Directors in its sole
discretion, provided that such annual increase shall be no less than an amount
which reflects the percentage increase (if any) in the Consumer Price Index
published by the United States Department of Labor for the Philadelphia SMSA
for the period since the prior base salary was determined.
1.6 Bonus and Other Benefits. During the Employment Term,
Employee shall be entitled to certain benefits and shall be eligible for
certain bonus compensation, as follows:
(a) Employee shall be paid an annual bonus which
shall be determined by Employer's Board of Directors or an appropriate
committee of such Board, provided that Employee's bonus for the initial year
of the Employment Term shall be no less than $34,000.
(b) Employee shall be entitled to all normal and
usual benefits provided by Employer to its executive employees, including, but
not limited to, participation in profit sharing, disability, health,
hospitalization and retirement plans and such other benefits as the Board of
Directors of Employer may from time to time determine based upon the benefits
paid to other executive officers of Employer. Employee shall also be entitled
to such executive benefits, including executive disability and life insurance
as shall be approved by Employer's Board of Directors or an appropriate
committee of the Board.
<PAGE>
(c) Employee shall be eligible to receive such
stock options or other forms of stock grants as shall be determined by
Employer's Board or Directors or an appropriate committee of such Board.
(d) Employee shall be entitled to paid vacation
time during the Employment Term in accordance with Employer's then existing
vacation policy for its executive employees.
1.7 Severance Compensation.
(a) If Employer terminates this Agreement, other
than for "cause" pursuant to Section 7.3 hereof: (i) during the first year of
the Employment Term, Employer shall pay to Employee an amount equal to 100% of
Employee's base annual salary, (ii) during the second year of the Employment
Term, Employer shall pay to Employee an amount equal to 150% of Employee's
base annual salary in effect at the date of such termination, and (iii) during
the third year of the Employment Term, Employer shall pay to Employee an
amount equal to 200% Employee's base annual salary in effect at the date of
such termination.
(b) Such severance compensation shall be payable in
full within thirty days after the date of termination of this Agreement other
than for "cause" pursuant to Section 7 hereof.
(c) Notwithstanding their terms, any options,
warrants or other rights to purchase shares of the Company's capital stock
held by Employee shall become immediately exercisable in full in the event
Employer terminates this Agreement other than for "cause" pursuant to Section
7 hereof. Such options, warrants or other rights shall be exercisable for the
balance of the term set forth in such option, warrant or right, and otherwise
in accordance with the term(s) thereof.
1.8 Expenses. Employee shall be reimbursed for the
reasonable business expenses incurred by him in connection with his
performance of services hereunder during the Employment Term upon presentation
of an itemized account and written proof of such expenses.
2. [intentionally left blank] .
<PAGE>
3. Developments. Employee will disclose promptly in writing to
Employer all inventions, ideas, discoveries, and improvements, whether or not
patentable, conceived by Employee during the period of Employee's employment
with Employer, or a parent or subsidiary thereof, whether alone or with
others, and whether or not during regular business hours, or on Employer
premises or with the aid of Employer materials, which pertain in any way to
Employee's work with Employer or to any business activity which is or at the
time of such conception may be carried on by Employer or a parent or
subsidiary thereof. All such inventions, ideas, discoveries, and improvements
are the property of Employer to which Employee hereby assigns and transfers
forever all Employee's rights, titles and interests. Employee, upon request by
Employer and at Employer's sole expense, will prepare and execute applications
for patents for such inventions, ideas, discoveries, and improvements, both in
the United States and in foreign countries, and will do everything necessary
to ensure the issuance of such patents, irrespective of whether required to be
done during or after the termination of Employee's period of employment with
Employer.
4. Confidentiality. The Employee agrees that he will not at any time,
either during or subsequent to the Employment Term, unless given express
consent in writing by the Employer, either directly or indirectly use or
communicate to any person or entity any confidential information of any kind
concerning matters affecting or relating to the names, addresses, buying
habits or practices of any of Employer's clients or customers; Employer's
marketing methods, programs, formulas, patterns, compilations, devices,
methods, techniques or processes and related data; the amount of compensation
paid by Employer to employees and independent contractors and other terms of
their employment or contractual relationships; other information concerning
Employer's manner of operations. (The foregoing shall not be deemed to
prohibit the disclosure of information which (i) is, at the time of
disclosure, in the public domain other than as a result of Employee's breach
of this Agreement, or (ii) can be demonstrated by Employee to be known by
Employee on the date of his commencement of employment.) The Employee agrees
that the above information and items are important, material and confidential
trade secrets and that they affect the successful conduct of the Employer's
business and its good will. The Employee agrees that all business procured by
the Employee while employed by the Employer is and shall remain the permanent
and exclusive property of the Employer. Employee further agrees that
Employer's relationship with each of its employees and independent contractors
is a significant and valuable asset of the Employer. Any interference with the
Employer's business, property, confidential information, trade secrets,
clients, customers, employees or independent contractors by the Employee or
any of Employee's agents during or after the term of this Agreement shall be
deemed a material breach of this Agreement.
5. Nonsolicitation. Employee agrees that for the one-year period
following termination of employment (whether with or without cause) he will
not directly or indirectly solicit the employment of any employee of the
Employer and will not attempt to persuade any employee to leave the employment
of the Employer.
<PAGE>
6. Equitable Relief.
(a) Employee acknowledges that the restrictions contained in
Sections 4 and 5 hereof are reasonable and necessary to protect the legitimate
interests of Employer and that any violation of such restrictions would result
in irreparable injury to Employer. If the period of time or other restrictions
specified in Sections 4 and 5 should be adjudged unreasonable at any
proceeding, then the period of time or such other restrictions shall be
reduced by the elimination or reduction of such portion thereof so that such
restrictions may be enforced in a manner adjudged to be reasonable. Employee
acknowledges that Employer shall be entitled to preliminary and permanent
injunctive relief for a violation of any such restrictions without having to
prove actual damages or to post a bond; Employer shall also be entitled to an
equitable accounting of all earnings, profits and other benefits arising from
such violation, which rights shall be cumulative and in addition to any other
rights or remedies to which Employer may be entitled in law or equity. In the
event of a violation, the period referred to in Section 5 hereof shall be
extended by a period of time equal to that period beginning with the
commencement of any such violation and ending when such violation shall have
been finally terminated in good faith.
(b) Employee agrees that until the expiration of the
covenants contained in Sections 4 and 5 of this Agreement, he will provide,
and that Employer may similarly provide, a copy of the covenants contained in
such Sections to any business or enterprise (i) which he may directly or
indirectly own, manage, operate, finance, join, control or participate in the
ownership, management, operation, financing, control or control of, or (ii)
with which he may be connected with as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise, or in
connection with which he may use or permit his name to be used.
7. Termination. This Agreement shall terminate prior to the
expiration of the term set forth in Section 1.1 above upon the occurrence of
any one of the following events:
7.1 Disability. In the event that Employee is unable fully
to perform his duties and responsibilities hereunder to the full extent
required by the Board of Directors of the Employer by reason of illness,
injury or incapacity for six consecutive months, during which time he shall
continue to be compensated as provided in Section 1.5 hereof (less any
payments due Employee under disability benefit programs, including Social
Security disability, workers' compensation and disability retirement
benefits), this Agreement may be terminated by Employer, and Employer shall
have no further liability or obligation to Employee for compensation
hereunder; provided, however, that Employee will be entitled to receive the
payments prescribed under any disability benefit plan which may be in effect
for employees of Employer and in which he participated. Employee agrees, in
the event of any dispute under this Section 7.1, to submit to a physical
examination by a licensed physician mutually agreed on by Employee and the
Board of Directors of Employer.
<PAGE>
7.2 Death. In the event that Employee dies during the
Employment Term, Employer shall pay to his executors, legal representatives or
administrators an amount equal to the installment of his salary set forth in
Section 1.5 hereof for the month in which he dies, and thereafter Employer
shall have no further liability or obligation hereunder to his executors,
legal representatives, administrators, heirs or assigns or any other person
claiming under or through him; provided, however, that Employee's estate or
designated beneficiaries shall be entitled to receive the payments prescribed
for such recipients under any death benefit plan which may be in effect for
employees of the Employer and in which Employee participated.
7.3 Cause. Notwithstanding any other provision hereof,
Employer may terminate this Agreement at any time for "cause." For purposes of
this Agreement, "cause" shall mean a material violation of a written directive
of the Company's Board of Directors, conviction of a crime involving moral
turpitude, willful misconduct which has a material adverse effect on the
Company as determined by a majority of the Company's Board of Directors
including each independent Director.
8. Survival. Notwithstanding the termination of this Agreement by
reason of Employee's disability under Section 7.1 or for cause under Section
7.3, his obligations under Sections 4 and 5 hereof shall survive and remain in
full force and effect for the periods therein provided, and the provisions for
equitable relief against Employee in Section 6 hereof shall continue in force.
9. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania.
10. Disputes and Arbitration. Any disputes arising hereunder,
including disputes arising from or relating to termination, shall be resolved
by binding arbitration. Notice of the demand for arbitration by either party
shall be given in writing to the other party to this Agreement. Upon such
demand, the dispute shall be settled by arbitration before a single arbitrator
pursuant to the rules of the American Arbitration Association (the "AAA").
Discovery shall be permitted prior to arbitration and Pennsylvania law shall
be applied. The arbitrator shall be selected by the joint agreement of the
parties, but if the parties do not so agree within twenty days after the date
of the notice referred to above, the selection shall be made pursuant to the
rules of, and from the panels of arbitrators maintained by the AAA. Any award
rendered by the arbitrator shall be conclusive and binding upon the parties
hereto; provided, however, that any such award shall be accompanied by written
opinion of the arbitrator giving the reasons for the award. Each party shall
pay its own expenses of arbitration and the expenses of the arbitrator shall
be equally shared by the parties. Nothing herein shall prevent the parties
from settling any dispute by mutual agreement at any time.
<PAGE>
11. Notices. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be deemed to have been given when hand delivered or
mailed by registered or certified mail, as follows (provided that notice of
change of address shall be deemed given only when received):
If to Employer, to:
Inkine Pharmaceutical Company, Inc.
425 Park Avenue, 27th Floor
New York, NY 10022
Attention: President
If to Employee, to:
Taffy J. Williams, Ph.D.
103 Colwyn Terrace
Lansdale, PA 19446
or to such other names or addresses as Employer or Employee, as the case may
be, shall designate by notice to each other person entitled to receive notices
in the manner specified in this Section.
12. Contents of Agreement; Amendment and Assignment.
(a) This Agreement supersedes all prior agreements and sets
forth the entire understanding among the parties hereto with respect to the
subject matter hereof and cannot be changed, modified, extended or terminated
except upon written amendment approved by the Board of Directors of Employer
and executed on its behalf by a duly authorized officer. Without limitation,
nothing in this Agreement shall be construed as giving Employee any right to
be retained in the employ of Employer beyond the expiration of the Employment
Term, and Employee specifically acknowledges that, unless this Agreement is
renewed in accordance with Section 1.2 hereof, he shall be an employee-at-will
of Employer thereafter, and thus subject to discharge by Employer with or
without cause and without compensation of any nature.
(b) Employee acknowledges that from time to time, Employer
may establish, maintain and distribute employee manuals or handbooks or
personnel policy manuals, and officers or other representatives of Employer
may make written or oral statements relating to personnel policies and
procedures. Such manuals, handbooks and statements are intended only for
general guidance. No policies, procedures or statements of any nature by or on
behalf of Employer (whether written or oral, and whether or not contained in
any employee manual or handbook or personnel policy manual), and no acts or
practices of any nature, shall be construed to modify this Agreement or to
create express or implied obligations of any nature to Employee.
(c) All of the terms and provisions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the
respective heirs, executors, administrators, legal representatives, successors
and assigns of the parties hereto, except that the duties and responsibilities
of Employee hereunder are of a personal nature and shall not be assignable or
delegatable in whole or in part by Employee.
<PAGE>
13. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect any other provision or application of this Agreement which can be
given effect without the invalid or unenforceable provision or application and
shall not invalidate or render unenforceable such provision or application in
any other jurisdiction.
14. Remedies Cumulative; No Waiver. No remedy conferred upon Employer
by this Agreement is intended to be exclusive of any other remedy, and each
and every such remedy shall be cumulative and shall be in addition to any
other remedy given hereunder or now or hereafter existing at law or in equity.
No delay or omission by Employer in exercising any right, remedy or power
hereunder or existing at law or in equity shall be construed as a waiver
thereof, and any such right, remedy or power may be exercised by Employer from
time to time and as often as may be deemed expedient or necessary by Employer
in its sole discretion.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
Attest: INKINE PHARMACEUTICAL COMPANY, INC
By: /s/ Taffy J. Williams
- ------------------------------ ---------------------------------
Secretary TAFFY J. WILLIAMS
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER
THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THIS CORPORATION,
IS AVAILABLE.
VOID AFTER 5:00 P.M. NEW YORK TIME, ON NOVEMBER 5, 2007. OPTION TO
PURCHASE 1,200,000 SHARES OF COMMON STOCK.
LJ- 1 November 6, 1997
OPTION TO PURCHASE SHARES OF COMMON
STOCK OF INKINE PHARMACEUTICAL COMPANY, INC.
This certifies that Leonard S. Jacob or any subsequent holder of this
Option (the "Holder"), for value received, is entitled, subject to the
adjustment and to the other terms set forth below, to purchase from InKine
Pharmaceutical Company, Inc. (f/k/a Panax Pharmaceutical Company Ltd.), a New
York corporation (the "Company"), One Million Two Hundred Thousand (1,200,000)
fully paid and nonassessable shares of the Company's common stock, par value
$0.0001 per share (the "Common Stock") at a price of $0.61 per share (the
"Exercise Price"). This Option shall be exercisable at any time on or after
the date first noted above, (the "Commencement Date") but not later than 5:00
p.m. (New York Time) on the Expiration Date (as defined below). The Exercise
Price and, in some cases, the number of shares purchasable hereunder are
subject to adjustment as provided in Section 3 of this Option. This Option and
all rights hereunder, to the extent not exercised in the manner set forth
herein shall terminate and become null and void on the Expiration Date.
"Expiration Date" means 5:00 pm (New York time) on November 5, 2007. In the
event that the Holder does not exercise this Option pursuant to the terms of
this Option, then this Option shall expire, be cancelled, and be null and
void.
This Option is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares; Conversion
Right.
1.1 Duration of Exercise of Option. This Option is exercisable at the
option of the Holder at any time or from time to time but not earlier than on
the Commencement Date or later than 5:00 p.m. (New York Time) on the
Expiration Date for all or a portion of the shares of Common Stock which may
be purchased hereunder (the "Option Shares"). This Option may be exercised by
presentation and surrender hereof to the Company at its principal office, or
at the office of its stock transfer agent, with the Subscription Agreement
attached hereto duly completed and executed and, unless the Conversion Right
in Section 1.2 is exercised, upon payment of the Exercise Price for the number
of Option Shares for which this Option is being exercised determined in
accordance with the provisions hereof. The Company agrees that the Option
Shares shall be and are deemed to be issued to the Holder as the record owner
of such shares as of the close of business on the date on which this Option
shall have been surrendered and payment made for such shares. Subject to the
provisions of Section 2, certificates for the shares of Common Stock so
purchased, together with any other securities or property to which the Holder
is entitled upon such exercise, shall be delivered to the Holder by the
Company or its transfer agent at the Company's expense within a reasonable
time after the rights represented by this Option have been exercised, but not
later than seven (7) days from the date of such exercise. Each stock
certificate so delivered shall be in such denominations of Common Stock as may
be requested by the Holder and shall be registered in the name of the Holder
or such other name as shall be designated by the Holder. If, upon exercise of
this Option, fewer than all of the Option Shares evidenced by this Option are
purchased prior to the Expiration Date of this Option, one or more new Options
substantially in the form of, and on the terms in, this Option will be issued
for the remaining number of shares of Common Stock not purchased upon exercise
of this Option. Upon receipt by the Company of this Option at its office, or
by the stock transfer agent of the Company at its office, in proper form for
exercise, the Holder shall be deemed to be the holder of record of the shares
of Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be physically
delivered to the Holder.
<PAGE>
1.2 Conversion Right. At any time during the term of this Option, the
Holder may, at its option, convert this Option, in whole or in part (a
"Conversion Right"), into the number of shares of Common Stock determined in
accordance with this Section 1.2, by surrendering this Option at the principal
office of the Company or at the office of its stock transfer agent,
accompanied by a notice, in the form attached, stating such Holder's intent to
effect such Conversion Right, the number of Option Shares to be exchanged and
the date on which the Holder requests that such Conversion Right occur (the
"Notice of Conversion"). The Conversion Right shall take place on the date
specified in the Notice of Conversion or, if later, the date the Notice of
Conversion is received by the Company (the "Conversion Date"). Certificates
for the shares issuable upon such Conversion Right and, if applicable, a new
Option of like tenor evidencing the balance of the shares remaining subject to
this Option, shall be issued as of the Conversion Date and delivered to the
Holder within seven (7) days following the Conversion Date. In connection with
any Conversion Right, this Option shall represent the right to subscribe for
and acquire the number of Option Shares equal to (i) the number of Option
Shares specified by the Holder in its Notice of Conversion (the "Conversion
Amount") less (ii) the number of Option Shares equal to the quotient obtained
by dividing (a) the product of the Conversion Amount and the then current
Exercise Price by (b) the then current Market Price (as defined below) of a
share of Common Stock.
"Market Price" shall mean: (i) if there is a ready public
market of registered stock, the Market Price shall be the "Stock Price" (as
defined below) obtained by taking the average over a period of thirty (30)
consecutive trading days ending on the second trading day prior to the date of
determination; and (ii) if there is no ready public market, Market Price shall
be the higher of the last bona fide sale made by the Company and the fair
market value of the Common Stock as determined by the Board of Directors in
its good faith judgment.
<PAGE>
"Stock Price" shall mean: (i) the last sales price, on
each such trading day, of a share of Common Stock, or if no such sale takes
place on any such trading day, the mean of the highest bid and lowest asked
prices therefor on any such trading day, in each case as officially reported
on all national securities exchanges on which the Common Stock is then listed
or admitted to trading or as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), or (ii) if the
Common Stock is not then listed or admitted to trading on any national
securities exchange or in the over-the-counter market, as reported by NASDAQ,
the closing price of the Common Stock on such date, or (iii) if the Common
Stock is not then quoted by NASDAQ, the mean between the highest and lowest
bid prices reported by market makers and dealers for the Common Stock listed
as such by the National Quotation Bureau, Incorporated, or any similar
successor organization, or (iv) if there is no ready public market, then the
Stock Price shall be the Market Price.
2. Shares to Be Fully Paid; Reservation of Shares.
The Company covenants and agrees that all Option Shares shall, upon
issuance and payment therefor, if any, be duly authorized, validly issued,
fully paid and nonassessable and free from all preemptive rights of any
stockholder and free of all taxes, liens and charges with respect to the issue
thereof. The Company covenants that it will reserve and keep available a
sufficient number of shares of its authorized but unissued Common Stock for
such exercise. The Company will take all such reasonable action as may be
necessary to assure that such Option Shares may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements
of the Nasdaq SmallCap Market or any other domestic securities exchange or
automated quotation system upon which the Common Stock may be listed.
3. Adjustment of Exercise Price and Number of Shares.
The Exercise Price and, in some cases, the number of shares
purchasable upon the exercise of this Option shall be subject to adjustment
from time to time upon the occurrence of certain events described in this
Section 3.
3.1 Split or Combination of Common Stock and Stock Dividend. In case
the Company shall at any time subdivide, redivide, recapitalize, split or
change its outstanding shares of Common Stock into a greater number of shares
or declare a dividend upon its Common Stock payable solely in shares of Common
Stock, the Exercise Price in effect immediately prior to such subdivision or
declaration shall be proportionately reduced, and the number of Option Shares
issuable upon exercise of this Option shall be proportionately increased.
Conversely, in case the outstanding shares of Common Stock of the Company
shall be combined into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination shall be proportionately
increased, and the number of Option Shares issuable upon exercise of this
Option shall be proportionately reduced.
<PAGE>
3.2 (Intentionally left blank)
3.3 Notice of Adjustment. Promptly after adjustment of the Exercise
Price or any increase or decrease in the number of shares purchasable upon the
exercise of this Option, the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered Holder of this
Option at the address of such Holder as shown on the books of the Company. The
notice shall be signed by the Company's Chairman or President and shall state
the effective date of the adjustment and the Exercise Price resulting from
such adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Option, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
3.4 Notices. If at any time:
(a) the Company shall declare any cash dividend upon its
Common Stock;
(b) the Company shall declare any dividend upon its Common
Stock payable in securities (other than a dividend payable solely in
shares of Common Stock) or make any special dividend or other
distribution to the holders of its Common Stock;
(c) there shall be any consolidation or merger of the
Company with another corporation, or a sale of all or substantially
all of the Company's assets to another corporation; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give, by certified
or registered mail, return receipt requested, postage prepaid, addressed to
the registered Holder of this Option at the address of such Holder as shown on
the books of the Company, (i) at least thirty (30) days' prior written notice
of the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such dissolution, liquidation or
winding-up; (ii) at least ten (10) days' prior written notice of the date on
which the books of the Company shall close or a record shall be taken for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger or sale, and (iii) in the case of any
such reorganization, reclassification, consolidation; merger, sale,
dissolution, liquidation or winding-up, at least thirty (30) days' written
notice of the date when the same shall take place. Any notice given in
accordance with clause (i) above shall also specify, in the case of any such
dividend, distribution or option rights, the date on which the holders of
Common Stock shall be entitled thereto. Any notice given in accordance with
clause (iii) above shall also specify the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, as the
case may be. If the registered Holder of this Option does not exercise this
Option prior to the occurrence of an event described above, except as provided
in Sections 3.1 and 3.5, the Holder shall not be entitled to receive the
benefits accruing to existing holders of the Common Stock in such event.
Notwithstanding anything herein to the contrary, if and to the extent the
Holder chooses to exercise this Option within the ten (10) day period
following receipt of the notice specified in clause (ii) above, the Holder may
elect to pay the aggregate Exercise Price by delivering to the Company cash or
a cashier's check in the amount of the aggregate par value of the shares of
Common Stock to be purchased and the Holder's full recourse promissory note in
the amount of the balance of the aggregate Exercise Price, which promissory
note shall be payable to the order of the Company in a single sum on the 30th
day following the date of receipt of such notice and shall bear interest at
the lowest applicable federal short term rate (using monthly compounding) as
established pursuant to Section 1274(d) of the Internal Revenue Code of 1986,
as amended, or any successor provision; provided, however, that if the Holder
elects to deliver such a promissory note to the Company, the Holder will
pledge to the Company all Common Stock issued in connection with the exercise
of this Option, and the Company shall retain possession of the certificates
evidencing such Common Stock, until such time as the Note is paid in full.
<PAGE>
3.5 Changes in Common Stock. In case at any time following the
Commencement Date hereof, the Company shall be a party to any transaction
(including, without limitation, a merger, consolidation, sale of all or
substantially all of the Company's assets or recapitalization of the Common
Stock) in which the previously outstanding Common Stock shall be changed into
or exchanged for different securities of the Company or common stock or other
securities of another corporation or interests in a noncorporate entity or
other property (including cash) or any combination of any of the foregoing
(each such transaction being herein called the "Transaction" and the date of
consummation of the Transaction being herein called the "Consummation Date"),
then, as a condition of the consummation of the Transaction, lawful and
adequate provisions shall be made so that the Holder, upon the exercise hereof
at any time on or after the Consummation Date, shall be entitled to receive,
and this Option shall thereafter represent the right to receive, in lieu of
the Common Stock issuable upon such exercise prior to the Consummation Date,
the highest amount of securities or other property to which such Holder would
actually have been entitled as a stockholder upon the consummation of the
Transaction if such Holder had exercised such Option immediately prior
thereto. The provisions of this Section 3.5 shall similarly apply to
successive Transactions.
4. Issue Tax.
The issuance of certificates for shares of Common Stock upon the
exercise of this Option shall be made without charge to the Holder of this
Option for any issue tax in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the then Holder of this Option.
5. No Voting or Dividend Rights; Limitation of Liability.
Nothing contained in this Option shall be construed as conferring
upon the Holder hereof the right to vote or to consent or to receive notice as
a stockholder in respect of meetings of stockholders for the election of
directors of the Company or any other matters or any rights whatsoever as a
stockholder of the Company. Except for the adjustment to the Exercise Price
pursuant to Section 3.1 in the event of a dividend on the Common Stock payable
in shares of Common Stock, no dividends or interest shall be payable or
accrued in respect of this Option or the interest represented hereby or the
shares purchasable hereunder until, and only to the extent that, this Option
shall have been exercised. No provisions hereof, in the absence of affirmative
action by the Holder to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder hereof, shall
give rise to any liability of such Holder for the Exercise Price or as a
stockholder of the Company whether such liability is asserted by the Company
or by its creditors.
<PAGE>
6. Restrictions on Transferability of Securities; Compliance With Securities
Act.
6.1 Restrictions on Transferability. This Option and the Option
Shares (the "Securities") shall not be transferable in the absence of
registration under the Securities Act of 1933, as amended (the "Securities
Act") or an applicable exemption from registration thereunder.
6.2 Restrictive Legend. Each certificate representing the Option
Shares or any other securities issued in respect of the Option Shares upon any
stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall be stamped or otherwise imprinted with a legend
substantially in the following form (in addition to any legend required under
applicable state securities laws):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE."
6.3 Information. At all times until the Expiration Date, the Company
will provide the Holder of this Option with such information and take such
other actions as may be required in connection with the sale of the Option
Shares (A) to comply with the requirements for the exemption from the
registration requirements of the Securities Act and (B) to qualify such
securities for sale, or to comply with the requirements for an exemption from
such qualification, under the applicable securities laws of the state in which
the Holder resides. Delivery shall be deemed to have occurred at such times as
provided for notices pursuant to Section 9 hereafter.
6.4 Extension of Expiration Date. In the event that the Company fails
at any time to comply with the provisions of Section 6.3 hereof, then the
Expiration Date shall be extended until a date which is not less than thirty
(30) days after the Company shall have first complied with the provisions of
Section 6.3, provided, however, that the Expiration Date shall not occur until
the Company has been in compliance with the requirements of Section 6.3 for a
continuous period of not less than thirty (30) days.
<PAGE>
7. Registration Rights.
The Company shall, upon request of Holder, include in a Registration
Statement on Form S-8 or other appropriate Form of Registration Statement
Holder's interests herein and the right to sell any Option Shares issued upon
exercise of this Option (but the Company shall not be required to include same
in that certain "Shelf Registration Statement" as that term is defined in the
Company's Amended and Restated Confidential Private Placement memorandum dated
October 27, 1997, as amended or supplemented).
8. Modification and Waiver.
This Option and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of the same is sought.
9. Notices.
Except as otherwise provided herein, any notice, request or other
document required or permitted to be given or delivered to the Holder hereof
or the Company shall be delivered personally or by nationally recognized
overnight courier service or sent by registered or certified mail, return
receipt requested, to such Holder at its address as shown on the books of the
Company or to the Company at its principal office. Notices delivered
personally shall be effective upon receipt, notices sent by overnight courier
service shall be deemed to have been received one (1) day after deposit with
such courier and notices sent by United States mail shall be deemed to have
been received three (3) days after deposit with the U.S. Postal Service.
10. Descriptive Headings and Governing Law.
The descriptive headings of the several sections and paragraphs of
this Option are inserted for convenience only and do not constitute a part of
this Option. This Option shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the laws of the State of
New York without giving effect to conflict of laws. The parties hereby submit
to the exclusive jurisdiction of the courts of the State of New York located
in New York County and the federal courts located in the Southern District of
New York, with respect to any action or legal proceeding commenced by either
party with respect to this Agreement. Each party irrevocably waives any
objection it now has or hereafter may have respecting the venue of any such
action or proceeding or the inconvenience of such forum, and each party
consents to the service of process in any such action or proceeding in the
manner set forth for the delivery of notices herein.
<PAGE>
11. Lost Options or Stock Certificate.
The Company represents and Options to the Holder that upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Option or stock certificate and, in the case
of any such loss, theft or destruction, and if requested, upon receipt of an
indemnity bond reasonably satisfactory to the Company, or in the case of any
such mutilation, upon surrender and cancellation of such Option or stock
certificate, the Company at its expense will make and deliver a new Option or
stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Option or stock certificate.
12. Fractional Shares.
No fractional shares shall be issued upon exercise of this Option.
The Company shall, in lieu of issuing any fractional share pay the Holder
entitled to such fraction a sum in cash equal to the fair market value of any
such fractional interest as it shall appear on the public market, or if there
is no public market for such shares, then as shall be reasonably determined by
the Company.
IN WITNESS WHEREOF, the Company has caused this Option to be executed
by its officer, thereunto duly authorized as of this 6th day of November,
1997.
INKINE PHARMACEUTICAL COMPANY, INC.
(f/k/a Panax Pharmaceutical Company Ltd.)
By:
-------------------------------------
Name:
Title:
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Options
[DATE]
InKine Pharmaceutical Company, Inc.
425 Park Avenue
New York, New York 10022
Attention:
The undersigned, the holder of the within Option, hereby irrevocably
elects to exercise the purchase right represented by such Option for, and to
purchase thereunder, ________ shares of Common Stock, par value $.0001 per
share (the "Common Stock") of InKine Pharmaceutical Company, Inc. (f/k/a Panax
Pharmaceutical Company Ltd.) and, subject to the following paragraph, herewith
makes payment of ___________ Dollars ($_______ ) therefor and requests that
the certificates for such shares be issued in the name of, and delivered
to,______________________ whose address is ____________________________, and
if such number of shares of Common Stock shall not represent all of the shares
of Common Stock which may be exercised pursuant to the Option, a new Option
for the balance of such shares of Common Stock shall be registered in the name
of, and delivered to, the Registered Holder at the address set forth below.
The undersigned does/does not (circle one) request the exercise of
the within Option pursuant to the Conversion Right set forth in Section 1.2)
of the Option.
If the exercise of this Option is not covered by a registration
statement effective under the Securities Act of 1933, as amended (the
"Securities Act"), the undersigned represents that it is acquiring such Common
Stock for investment for its own account, not as nominee or agent, and not
with a view to the distribution thereof and the undersigned has not signed or
otherwise arranged for the selling, granting any participation in, or
otherwise distributing the same.
DATED:
----------------------------------
Signature
(Address)
NOTE: The above signature should correspond exactly with the name as written on
the face of the attached Option.
<PAGE>
CONVERSION RIGHT EXERCISE FORM
To Be Executed by the Registered Holder
in Order to Exercise the Conversion Right
The undersigned hereby irrevocably elects to surrender its Option for
such shares of Common Stock pursuant to the Conversion Right of the within
Option, as provided for in Section 1.2 of such Option.
Please issue a certificate or certificates for such Common Stock in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
-----------------------------------------
-----------------------------------------
-----------------------------------------
[please print or type name and address]
and deliver to
-----------------------------------------
-----------------------------------------
-----------------------------------------
[please print or type name and address]
and if such number of Options shall not be all the Options evidenced by the
attached Option a new Option for the balance of such Options shall be
registered in the name of, and delivered to, the Registered Holder at the
address stated below.
Dated: X
------------------------- -----------------------------
-----------------------------
-----------------------------
Address
------------------------------
Taxpayer Identification Number
NOTE: The above signature should correspond exactly with the name as written on
the face of the attached Option.
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Options
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
-----------------------------------------
-----------------------------------------
-----------------------------------------
[please print or type name and address]
_________________________ of the Options represented by the attached Option,
and hereby irrevocably constitutes and appoints _____________________________
_______________________________ attorney to transfer the attached Option and
the Options represented thereby on the books of the Company, with full power
of substitution in the premises.
Dated: X
-------------------- --------------------------
NOTE: The above signature should correspond exactly with the name as written on
the face of the attached Option.
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED
HEREUNDER (COLLECTIVELY, THE "SECURITIES") HAS BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES ACT, OR APPLICABLE STATE
SECURITIES LAWS, AND THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL EITHER (1) THE HOLDER THEREOF
SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT REGISTRATION OF THE SECURITIES UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED OR (2) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS WITH
RESPECT TO THE SECURITIES SHALL HAVE BECOME EFFECTIVE.
NOVEMBER 6, 1997
COMMON STOCK PURCHASE WARRANT
To subscribe for and purchase shares
of Common Stock, par value $.0001 per share, of
INKINE PHARMACEUTICAL COMPANY, INC.
THIS CERTIFIES that, for value received, ALLEGHENY UNIVERSITY OF THE
HEALTH SCIENCES, a 501(c)(3) Pennsylvania nonprofit corporation with an
address at Broad and Vine Streets, Philadelphia, PA 19102 (the "Holder")
subject to the terms and conditions hereof, shall be entitled to purchase from
INKINE PHARMACEUTICAL COMPANY, INC., a New York corporation (the "Company"),
after the occurrence of certain events as set forth in Section 1 below, prior
to 5:00 P.M. (New York City Time) on the expiration date of this Warrant set
forth in Section 8 below (the "Expiration Date"), One Hundred Twenty Five
Thousand (125,000) shares of Common Stock (as defined below) of the Company
(individually, a "Warrant Share" and collectively, the "Warrant Shares"), at
an aggregate exercise price of $.61 per share, (the "Exercise Price"), or an
aggregate purchase price of Seventy Six Thousand Two hundred Fifty Dollars
($76,250.00). For purposes of this Warrant, the term "Common Stock' shall mean
the class of capital stock of the Company designated as its Common Stock, par
value $.0001 per share, as constituted on the date hereof.
<PAGE>
Section 1. Exercise of Warrants. This Warrant may be exercised: (i)
as to Sixty Two Thousand Five Hundred (62,500) shares of Common Stock prior to
the Expiration Date but only from and after the date on which the United
States Food and Drug Administration, or an equivalent agency in a foreign
country or organization of foreign countries (the "FDA"), has approved an
Investigational New Drug application ("IND") submitted by the Company and
based on technology which is the subject of that certain License Agreement
dated of even date herewith between the Company and Holder (the "Technology"),
and (ii) as to the remaining Sixty Two Thousand Five Hundred (62,500) shares
of Common Stock prior to the Expiration Date but only from and after the date
on which the the FDA has approved a New Drug Application submitted by the
Company with respect to the Technology. This Warrant shall be exercisable, at
the election of the Holder, either in full or from time to time in part and,
in the event that this Warrant is exercised in respect of fewer than all of
the Warrant Shares issuable on such exercise at any time prior to the
Expiration Date, a new certificate evidencing the remaining Warrant or
Warrants will be issued, and the Company is hereby irrevocably authorized to
countersign and to deliver the required new Warrant pursuant to the provisions
of this Warrant. This Warrant, when surrendered upon its exercise, shall be
canceled by the Company and shall then be disposed of in a manner satisfactory
to the Company. The certificate(s) representing the Warrant Shares shall bear
a restrictive legend substantially in the form set forth in Exhibit B attached
hereto.
(a) Exercise for Cash
This Warrant may be exercised in whole or in part
into the number of Warrant Shares determined in accordance with this Section 1
by delivering it to the Company at its principal executive office with the
form of election attached hereto as Exhibit A duly completed and signed, and
by paying to the Company the Exercise Price or such pro rata portion of the
Exercise Price for the number of Warrant Shares in respect of which this
Warrant is then exercised. Payment of the Exercise Price shall be made in cash
or Holder's check payable to the order of the Company.
Upon surrender of this Warrant and payment of the
Exercise Price, the Company shall issue and cause to be delivered within a
reasonable time, not to exceed fifteen calendar days, to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares issuable
upon exercise. Such certificate or certificates shall be deemed to have been
issued, and any person so designated to be named therein shall be deemed to
have become a holder of record of such Warrant Shares, as of the date of the
surrender of this Warrant.
(b) Cashless Exercise
This Warrant may be exchanged, in whole or in part
(a "Warrant Exchange"), into the number of Warrant Shares determined in
accordance with this Section 1 by presentation and surrender of this Warrant
to the Company at its principal office, or at the office of its stock transfer
agent, if any, accompanied by a notice (a "Notice of Exchange") stating that
this Warrant is being exchanged and the number of shares of Common Stock to be
exchanged. In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of shares of
Common Stock (rounded to the nearest whole number) equal to (i) the number of
shares specified by the Holder in its Notice of Exchange (the "Total Number")
less the number of shares equal to the quotient obtained by dividing (A) the
product of the Total Number and the then applicable Exercise Price by (B) the
then fair market value (determined as set forth below) per share of Common
Stock. For purposes of this Section 1(b), the "fair market value" per share of
Common Stock as of any date shall be the average of the closing bid prices of
the Common Stock, as reported on the NASDAQ Small-Cap Market, during the five
(5) trading days immediately preceding such date. If this Warrant should be
exchanged in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder.
Upon receipt by the Company of this Warrant, together with a duly executed
Notice of Exchange, at its office, or by the stock transfer agent of the
Company at its office, the Holder shall be deemed to be the holder of record
of the shares of Common Stock issuable upon such exchange, notwithstanding
that the stock transfer books of the Company shall then be closed or that
certificates representing such shares of Common Stock shall not then be
actually delivered to the Holder. The Company shall pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on exchange of this Warrant.
<PAGE>
Section 2. Payment of Taxes. The Company shall pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of this Warrant. The Company, however, shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in
the issue of any certificates for Warrant Shares in a name other than that of
the Holder.
Section 3. Mutilated, Missing or Lost Warrant. In the event that this
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue
and countersign, in exchange and substitution for and upon cancellation of the
mutilated Warrant, or in lieu of and substitution for its loss, theft or
destruction, a new Warrant of like tenor and representing an equivalent number
of Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft or destruction of this Warrant.
Section 4. Reservation of Warrant Shares. The Company will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of is authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of this Warrant,
the maximum number of shares of Common Stock which may then be deliverable
upon the exercise of this Warrant.
The Company covenants that all Warrant Shares which may be issued
upon exercise of Warrants will, upon issue and payment therefor, be fully
paid, nonassessable, free of preemptive rights and free from all taxes, liens,
charges and security interests with respect to the issue thereof.
Section 5. Fractional Shares. No fractional Warrant Shares, or scrip
for any such fractional Warrant Shares, shall be issued upon the exercise of
this Warrant. If any fraction of a share of Common Stock would, except for the
provisions of this Section 5, be issuable on the exercise of any Warrant, the
Company will (i) if the fraction of a share otherwise issuable is equal to or
less than one-half, round-down and issue to the Holder only the whole number
of shares of Common Stock to which the Holder is entitled or (ii) if the
fraction of a share otherwise issuable is greater than one-half, round-up and
issue to the Holder one additional share of Common Stock in addition to the
largest whole number of shares of Common Stock to which the Holder is
otherwise entitled.
Section 6. Adjustment of Number of Warrant Shares. The number of
Warrant Shares issuable upon exercise of the Warrant is subject to adjustment
from time to time upon the occurrence of the events enumerated in this Section
6.
<PAGE>
(a) Change in Common Stock.
In case the Company shall (i) pay a dividend in
Common Stock or make a distribution in Common Stock, (ii) subdivide its
outstanding Common Stock, (iii) combine its outstanding Common Stock into a
smaller number of shares of Common Stock or (iv) issue, by reclassification of
its Common Stock, other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the surviving corporation), the number of shares of Common Stock
purchasable upon exercise of the Warrant immediately prior thereto shall be
adjusted so that the Holder of the Warrant shall be entitled to receive the
kind and number of shares of Common Stock or other securities of the Company
which it would have owned or have been entitled to receive after the happening
of any of the events described above, had such Warrant been exercised
immediately prior to the happening of such event or any record date with
respect thereto. An adjustment made pursuant to this subparagraph (a) shall
become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event. Such adjustment shall
be made successively whenever any event listed above shall occur.
(b) Rights Issue.
In case the Company shall issue rights, options or
warrants to all holders of its outstanding Common Stock, entitling them to
subscribe for or purchase Common Stock at a price per share which is lower at
the record date mentioned below than the then current market price per share
of Common Stock (as defined in subparagraph (d) below), the number of shares
of Common Stock thereafter purchasable upon the exercise of the Warrant shall
be determined by multiplying the number of shares of Common Stock theretofore
purchasable upon exercise of the Warrant by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date of issuance of such right, options or warrants plus the number of shares
of Common Stock which could be purchased at the current market price per share
of Common Stock at such record date with: (i) the aggregate purchase price of
the total number of shares of Common Stock so offered for subscription or
purchase, plus (ii) any consideration received by the Company for such rights,
options or warrants. Such adjustment shall be made whenever such rights,
options or warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
rights, options or warrants.
<PAGE>
(c) Other Distributions.
In case the Company shall distribute to all holders
of its Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation)
evidences of its indebtedness or assets (excluding cash dividends or
distributions payable out of consolidated earnings or earned surplus and
dividends or distributions referred to in subparagraph (a) above or in the
paragraph immediately following this paragraph) or rights, options or
warrants, or convertible or exchangeable securities containing the right to
subscribe for or purchase debt securities, assets or other securities of the
Company (excluding those referred to in subparagraph (b) above), then in each
case the number of shares of Common Stock thereafter purchasable upon the
exercise of the Warrant shall be determined by multiplying the number of
shares of Common Stock theretofore purchasable upon the exercise of the
Warrant by a fraction, of which the numerator shall be the then current market
price per share of Common Stock (as defined in subparagraph (d) below) on the
date of such distribution, and of which the denominator shall be the then
current market price per share of Common Stock, less the then fair market
value of the portion of the assets or evidences of indebtedness so distributed
or of such subscription rights, options or warrants, or of such convertible or
exchangeable securities applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distribution retroactive to the record date
for the determination of stockholders entitled to receive such distribution.
In the event of a distribution by the Company to
all holders of its shares of Common Stock of a subsidiary or securities
convertible into or exercisable for such stock, then in lieu of an adjustment
in the number of shares of Common Stock purchasable upon the exercise of the
Warrant, the Holder of the Warrant, upon the exercise thereof at any time
after such distribution shall be entitled to receive from the Company the
stock or other securities to which the Holder would have been entitled if the
Holder had exercised the Warrant immediately prior thereto, all subject to
further adjustment as provided in this Section 6; provided, however, that no
adjustment in respect of cash dividends or interest on such stock or other
securities shall be made during the term of the Warrant or upon the exercise
of a Warrant.
(d) Market Price.
As used in this Section 6, the term "market price"
shall mean, for any date, (i) the last sale price for the Common Stock on the
principal securities exchange on which the Common Stock is listed or admitted
to trading, or (ii) if not so listed or admitted to trading on any securities
exchange, the last sale price, or in the absence of a last sale price, the
closing bid price, for the Common Stock on the NASDAQ National Market, or
(iii) if the Common Stock shall not be listed on such Market, the the last
sale price, or in the absence of a last sale price, the closing bid price, for
the Common Stock on the NASDAQ SmallCap Market, or (iv) if the Common Stock
shall not be listed on either such Market, the closing bid price in the
over-the-counter market, in each such case, unless otherwise provided herein,
averaged over a period of 20 consecutive trading days ending on the trading
day prior to the date as of which the market price is being determined. If at
any time the Common Stock is not listed on any such exchange or such Market or
quoted in the over-the-counter market, the market price of the Common Stock
shall be deemed to be the fair market value thereof, as determined in good
faith by an independent brokerage firm, Standard & Poor's Corporation or
Moody's Investors Service, as of a date which is within fifteen calendar days
preceding the date as of which the determination is to be made.
(e) No Adjustments; Deferral of Adjustments.
No adjustment in the number of shares of Common
Stock purchasable upon the exercise of the Warrant need be made under
subparagraphs (b) and (c) if the Company issues or distributes to the Holder
of the Warrant the rights, options, warrants, or convertible or exchangeable
securities, or evidences of indebtedness or assets referred to in those
subparagraphs which the Holder of the Warrant would have been entitled to
receive had the Warrant been exercised immediately prior to the happening of
such event or the record date with respect thereto. No adjustment need be made
for a change in the par value of the shares of Common Stock.
No adjustment in the number of shares of Common
Stock purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent in the number of
shares of Common Stock purchasable upon the exercise of the Warrant; provided,
however, that any adjustments which by reason of this subparagraph (e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest
one-thousandth of a share.
<PAGE>
(f) Notice Upon Adjustment.
Whenever there is an adjustment in the number or
kind of securities issuable upon exercise of the Warrant as provided in this
Section 6, the Company shall (a) issue a certificate signed by the Chairman of
the Board, President or a Vice President of the Company and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary of the
Company, showing in detail the facts requiring such adjustment and the number
and kind of securities issuable upon exercise of each Warrant after such
adjustment; and (b) cause a notice stating that such adjustment has been
effected and stating the number and kind of securities issuable upon exercise
of each Warrant to be sent by First Class Mail postage prepaid, to the Holder
of the Warrant Certificate at the address set forth in Section 10 hereof.
(g) Notice Upon Certain Events.
If, at any time prior to the Expiration Date, (i)
the Company shall declare any dividend on the Common Stock payable in cash or
shares of Common Stock or capital stock of the Company; or (ii) the Company
shall authorize the issuance to all holders of shares of Common Stock of
rights, options or warrants to subscribe for or purchase shares of Common
Stock or of any other subscription rights or warrants; or (iii) the Company
shall authorize the distribution to all holders of shares of Common Stock
evidences of its indebtedness or assets; or (iv) the Board of Directors of the
Company shall have approved any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the Company is
required, or any sale, transfer or lease of all or substantially all of the
assets of the Company or any reclassification or change of Common Stock
issuable upon exercise of the Warrants (other than a change in par value, or
as a result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock; or (v) the voluntary or involuntary
dissolution, liquidation or winding up of the Company; or (vi) the Company
proposes to take any action which would require an adjustment in the number or
kind of securities issuable upon exercise of the Warrant pursuant to this
Section 6; then the Company shall cause to be given to the Holder, at least
twenty calendar days prior to the applicable record date specified, or
promptly in the case of events for which there is no record date, a written
notice stating (A) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such dividends, rights, options,
warrants or distribution are to be determined, or (B) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common
Stock, or (C) the date on which any such consolidation, merger, sale,
transfer, lease, reclassification, change, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such consolidation, merger, sale, transfer, lease, reclassification,
change, dissolution, liquidation or winding up.
(h) Merger, Consolidation, etc.
If any capital reorganization or reclassification
of the capital stock of the Company, or consolidation or merger of the Company
with or into another corporation, or the sale of all or substantially all of
its assets to another corporation shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale, lawful
and adequate provision shall be made whereby the Holder of the Warrant shall
thereafter have the right to purchase and receive on exercise of such Warrant
upon the basis and upon the terms and conditions specified in this Agreement
and in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the Warrant, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock
equal to the number of shares such Common Stock immediately, theretofore
purchasable and receivable upon the exercise of the Warrant had such
reorganization, reclassification, consolidation, merger or sale not taken
place and in any such case appropriate provision shall be made with respect to
the rights and interests of the Holder of the Warrant to the end that the
provisions of this Agreement (including, without limitation, provision for
adjustment of the number of shares issuable upon the exercise of the Warrant)
shall thereafter be applicable as nearly as may be in relation to any shares
of stock, securities, or assets thereafter deliverable upon exercise of
Warrant. The Company shall not effect any such consolidation, merger or sale,
unless, prior to or simultaneously with the consummation thereof, the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall
assume, by written instrument acceptable to the Holder, the obligation to
deliver to the Holder of the Warrant such shares of stock, securities or asset
as, in accordance with the foregoing provisions, the Holder would be entitled
to purchase.
<PAGE>
Section 7. Holder; No Rights as Shareholder; Reports to Shareholders.
The Holder shall be deemed the owner of this Warrant for all
purposes. The Holder shall not be entitled by virtue of ownership of this
Warrant to any rights whatsoever as a shareholder of the Company either at law
or in equity, including, without limitation, the right to vote and to receive
dividends and other distributions. While this Warrant remains outstanding, the
Company shall send to the Holder copies of all reports, correspondence and
other documents which the Company sends to its shareholders.
Section 8. Expiration Date.
This Warrant, in all events, shall expire and be wholly void
after 5 P.M. (eastern time) on November 5, 2007.
Section 9. Notices.
All notices, consents or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, or (b) one
business day after being sent by a reputable overnight delivery service,
postage or delivery charges prepaid (provided that confirmation of delivery is
obtained from such service), to the Company at its principal executive office,
and to Holder at the last address reflected in the Company's records for
Holder.
Notices may also be given by prepaid telegram or facsimile and shall
be effective on the date transmitted if confirmed within 24 hours thereafter
by a signed original sent in the manner provided above. Any party may change
its address for notice and the address to which copies must be sent by giving
notice of the new addresses to the other parties in accordance with this
Section 10, except that any such change of address notice shall not be
effective unless and until received.
<PAGE>
Section 11. Transfer.
This Warrant may not be sold, transferred, pledged,
hypothecated or otherwise disposed of without the express prior written
consent of the Company at any time (which consent shall not be unreasonably
withheld) by the Holder except to an entity which is an "Affiliate" of the
Holder, as that term is defined in Rule 405 promulgated under the Securities
Act, provided that, in the opinion of counsel reasonably satisfactory to the
Company, any such transfer would not result in a violation of the provisions
of the Securities Act and applicable state securities laws. Any transfer of
this Warrant shall be effective upon delivery of this Warrant and the Form of
Transfer of Warrant attached hereto as Exhibit C duly completed and executed
and, if required by the Company, the opinion referred to in the preceding
sentence, to the principal office of the Company and, thereafter the Company
shall issue a new Warrant registered in the name of the transferee. If the
Warrant is being transferred in part, the Company shall issue new Warrants, in
each case evidencing the right to purchase the appropriate number of Warrant
Shares, registered in the names of the Holder and the transferee, as
applicable. Upon any transfer of all or any part of this Warrant to any
transferee, such transferee shall be deemed the "Holder" of such Warrant as
such term is used herein and shall be deemed the owner thereof for all
purposes. Each Holder of this Warrant and any Warrant Shares issued upon
exercise of this Warrant, by taking or holding the same, consents to and
agrees to be bound by the provisions of this Section 11.
Section 12. Severability.
In the event that one or more of the provisions of this
Warrant shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Warrant, but this Warrant shall be
construed as if such invalid, illegal or unenforceable provision had never
been contained herein.
Section 13. Governing Law.
This Warrant shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements
made and to be entirely performed within such State.
IN WITNESS WHEREOF, INKINE PHARMACEUTICAL COMPANY, INC. has caused
this Warrant to be signed by its duly authorized officers and dated as of
November __, 1997.
INKINE PHARMACEUTICAL COMPANY, INC.
By: /s/ Taffy Williams
---------------------------------
Taffy Williams
Attest:
-------------------------
By:
----------------------------
[Corporate Seal]
<PAGE>
EXHIBIT A
Form of Exercise
(to be executed by the Holder)
The Holder hereby exercises its rights to subscribe for and purchase
____ shares of Class A common stock, par value $.00001 ("Common Stock"), of
INKINE PHARMACEUTICAL COMPANY, INC. evidenced by the attached Warrant and
herewith makes payment of the Purchase Price of $____________ therefor in
full. Please issue a certificate in the name of the Holder for the Common
Stock in accordance with the instructions given below and issue a replacement
Warrant in the name of the Holder for the unexercised balance, if any, of the
right to purchase Warrant Shares evidenced by the attached Warrant which were
not exercised hereby.
Dated:
--------------------------------- ----------------------------------
Signature of Holder
Instructions for registration of shares
Social Security or Employer Identification
Number of Holder:
------------------
Address of Holder:
- ------------------------------------
Street
- ------------------------------------
City, State and Zip Code
<PAGE>
EXHIBIT B
Form of Restrictive Legend
To Be Imprinted on Warrant Shares
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL EITHER (1) THE HOLDER
THEREOF SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLE SATISFACTORY TO
THE COMPANY THAT REGISTRATION OF SUCH SHARES UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED OR (2) A REGISTRATI0N
STATEMENT UNDER THE SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS
WITH RESPECT TO SUCH SHARES SHALL HAVE BECOME EFFECTIVE.
<PAGE>
EXHIBIT C
Form of Transfer of Warrant
To Permitted Transferee
For value received, the Holder hereby sells, assigns and transfers
unto _____________ its right to purchase ____________ shares of Class A Common
Stock, par value $.00001 per share, of INKINE PHARMACEUTICAL COMPANY, INC.
evidenced by the attached Warrant. All capitalized terms used and not defined
herein shall have the meanings ascribed to them in the Warrant.
Dated:
--------------------------------- ----------------------------------
Signature of Holder
In the presence of
- --------------------------------------
Social Security or Other
Identifying Number of
Transferee:
------------------------------
Address of Transferee:
- --------------------------------------
Street
- --------------------------------------
City, State and Zip Code
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED
HEREUNDER (COLLECTIVELY, THE "SECURITIES") HAS BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES ACT, OR APPLICABLE STATE
SECURITIES LAWS, AND THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL EITHER (1) THE HOLDER THEREOF
SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT REGISTRATION OF THE SECURITIES UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED OR (2) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS WITH
RESPECT TO THE SECURITIES SHALL HAVE BECOME EFFECTIVE.
NOVEMBER 6, 1997
COMMON STOCK PURCHASE WARRANT
To subscribe for and purchase shares
of Common Stock, par value $.0001 per share, of
INKINE PHARMACEUTICAL COMPANY, INC.
THIS CERTIFIES that, for value received, GEORGE TUSZYNSKI, an
individual residing at ____________________________________(the "Holder")
subject to the terms and conditions hereof, shall be entitled to purchase from
INKINE PHARMACEUTICAL COMPANY, INC., a New York corporation (the "Company"),
at any time or times prior to 5:00 P.M. (New York City Time) on the expiration
date of this Warrant set forth in Section 8 below (the "Expiration Date"), One
Hundred Twenty Five Thousand (125,000) shares of Common Stock (as defined
below) of the Company (individually, a "Warrant Share" and collectively, the
"Warrant Shares"), at an aggregate exercise price of $.61 per share, (the
"Exercise Price"), or an aggregate purchase price of Seventy Six Thousand Two
Hundred Fifty Dollars ($76,250.00). For purposes of this Warrant, the term
"Common Stock' shall mean the class of capital stock of the Company designated
as its Common Stock, par value $.0001 per share, as constituted on the date
hereof.
<PAGE>
Section 1. Exercise of Warrants. This Warrant shall be exercisable,
at the election of the Holder, either in full or from time to time in part
and, in the event that this Warrant is exercised in respect of fewer than all
of the Warrant Shares issuable on such exercise at any time prior to the
Expiration Date, a new certificate evidencing the remaining Warrant or
Warrants will be issued, and the Company is hereby irrevocably authorized to
countersign and to deliver the required new Warrant pursuant to the provisions
of this Warrant. This Warrant, when surrendered upon its exercise, shall be
canceled by the Company and shall then be disposed of in a manner satisfactory
to the Company. The certificate(s) representing the Warrant Shares shall bear
a restrictive legend substantially in the form set forth in Exhibit B attached
hereto.
(a) Exercise for Cash
This Warrant may be exercised in whole or in part
into the number of Warrant Shares determined in accordance with this Section 1
by delivering it to the Company at its principal executive office with the
form of election attached hereto as Exhibit A duly completed and signed, and
by paying to the Company the Exercise Price or such pro rata portion of the
Exercise Price for the number of Warrant Shares in respect of which this
Warrant is then exercised. Payment of the Exercise Price shall be made in cash
or Holder's check payable to the order of the Company.
Upon surrender of this Warrant and payment of the
Exercise Price, the Company shall issue and cause to be delivered within a
reasonable time, not to exceed fifteen calendar days, to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares issuable
upon exercise. Such certificate or certificates shall be deemed to have been
issued, and any person so designated to be named therein shall be deemed to
have become a holder of record of such Warrant Shares, as of the date of the
surrender of this Warrant.
(b) Cashless Exercise
This Warrant may be exchanged, in whole or in part
(a "Warrant Exchange"), into the number of Warrant Shares determined in
accordance with this Section 1 by presentation and surrender of this Warrant
to the Company at its principal office, or at the office of its stock transfer
agent, if any, accompanied by a notice (a "Notice of Exchange") stating that
this Warrant is being exchanged and the number of shares of Common Stock to be
exchanged. In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of shares of
Common Stock (rounded to the nearest whole number) equal to (i) the number of
shares specified by the Holder in its Notice of Exchange (the "Total Number")
less the number of shares equal to the quotient obtained by dividing (A) the
product of the Total Number and the then applicable Exercise Price by (B) the
then fair market value (determined as set forth below) per share of Common
Stock. For purposes of this Section 1(b), the "fair market value" per share of
Common Stock as of any date shall be the average of the closing bid prices of
the Common Stock, as reported on the NASDAQ Small-Cap Market, during the five
(5) trading days immediately preceding such date. If this Warrant should be
exchanged in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder.
Upon receipt by the Company of this Warrant, together with a duly executed
Notice of Exchange, at its office, or by the stock transfer agent of the
Company at its office, the Holder shall be deemed to be the holder of record
of the shares of Common Stock issuable upon such exchange, notwithstanding
that the stock transfer books of the Company shall then be closed or that
certificates representing such shares of Common Stock shall not then be
actually delivered to the Holder. The Company shall pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on exchange of this Warrant.
Section 2. Payment of Taxes. The Company shall pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of this Warrant. The Company, however, shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in
the issue of any certificates for Warrant Shares in a name other than that of
the Holder.
Section 3. Mutilated, Missing or Lost Warrant. In the event that this
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue
and countersign, in exchange and substitution for and upon cancellation of the
mutilated Warrant, or in lieu of and substitution for its loss, theft or
destruction, a new Warrant of like tenor and representing an equivalent number
of Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft or destruction of this Warrant.
Section 4. Reservation of Warrant Shares. The Company will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of is authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of this Warrant,
the maximum number of shares of Common Stock which may then be deliverable
upon the exercise of this Warrant.
The Company covenants that all Warrant Shares which may be issued
upon exercise of Warrants will, upon issue and payment therefor, be fully
paid, nonassessable, free of preemptive rights and free from all taxes, liens,
charges and security interests with respect to the issue thereof.
Section 5. Fractional Shares. No fractional Warrant Shares, or scrip
for any such fractional Warrant Shares, shall be issued upon the exercise of
this Warrant. If any fraction of a share of Common Stock would, except for the
provisions of this Section 5, be issuable on the exercise of any Warrant, the
Company will (i) if the fraction of a share otherwise issuable is equal to or
less than one-half, round-down and issue to the Holder only the whole number
of shares of Common Stock to which the Holder is entitled or (ii) if the
fraction of a share otherwise issuable is greater than one-half, round-up and
issue to the Holder one additional share of Common Stock in addition to the
largest whole number of shares of Common Stock to which the Holder is
otherwise entitled.
Section 6. Adjustment of Number of Warrant Shares. The number of
Warrant Shares issuable upon exercise of the Warrant is subject to adjustment
from time to time upon the occurrence of the events enumerated in this Section
6.
(a) Change in Common Stock.
In case the Company shall (i) pay a dividend in
Common Stock or make a distribution in Common Stock, (ii) subdivide its
outstanding Common Stock, (iii) combine its outstanding Common Stock into a
smaller number of shares of Common Stock or (iv) issue, by reclassification of
its Common Stock, other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the surviving corporation), the number of shares of Common Stock
purchasable upon exercise of the Warrant immediately prior thereto shall be
adjusted so that the Holder of the Warrant shall be entitled to receive the
kind and number of shares of Common Stock or other securities of the Company
which it would have owned or have been entitled to receive after the happening
of any of the events described above, had such Warrant been exercised
immediately prior to the happening of such event or any record date with
respect thereto. An adjustment made pursuant to this subparagraph (a) shall
become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event. Such adjustment shall
be made successively whenever any event listed above shall occur.
(b) Rights Issue.
In case the Company shall issue rights, options or
warrants to all holders of its outstanding Common Stock, entitling them to
subscribe for or purchase Common Stock at a price per share which is lower at
the record date mentioned below than the then current market price per share
of Common Stock (as defined in subparagraph (d) below), the number of shares
of Common Stock thereafter purchasable upon the exercise of the Warrant shall
be determined by multiplying the number of shares of Common Stock theretofore
purchasable upon exercise of the Warrant by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date of issuance of such right, options or warrants plus the number of shares
of Common Stock which could be purchased at the current market price per share
of Common Stock at such record date with: (i) the aggregate purchase price of
the total number of shares of Common Stock so offered for subscription or
purchase, plus (ii) any consideration received by the Company for such rights,
options or warrants. Such adjustment shall be made whenever such rights,
options or warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
rights, options or warrants.
(c) Other Distributions.
In case the Company shall distribute to all holders
of its Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation)
evidences of its indebtedness or assets (excluding cash dividends or
distributions payable out of consolidated earnings or earned surplus and
dividends or distributions referred to in subparagraph (a) above or in the
paragraph immediately following this paragraph) or rights, options or
warrants, or convertible or exchangeable securities containing the right to
subscribe for or purchase debt securities, assets or other securities of the
Company (excluding those referred to in subparagraph (b) above), then in each
case the number of shares of Common Stock thereafter purchasable upon the
exercise of the Warrant shall be determined by multiplying the number of
shares of Common Stock theretofore purchasable upon the exercise of the
Warrant by a fraction, of which the numerator shall be the then current market
price per share of Common Stock (as defined in subparagraph (d) below) on the
date of such distribution, and of which the denominator shall be the then
current market price per share of Common Stock, less the then fair market
value of the portion of the assets or evidences of indebtedness so distributed
or of such subscription rights, options or warrants, or of such convertible or
exchangeable securities applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distribution retroactive to the record date
for the determination of stockholders entitled to receive such distribution.
In the event of a distribution by the Company to
all holders of its shares of Common Stock of a subsidiary or securities
convertible into or exercisable for such stock, then in lieu of an adjustment
in the number of shares of Common Stock purchasable upon the exercise of the
Warrant, the Holder of the Warrant, upon the exercise thereof at any time
after such distribution shall be entitled to receive from the Company the
stock or other securities to which the Holder would have been entitled if the
Holder had exercised the Warrant immediately prior thereto, all subject to
further adjustment as provided in this Section 6; provided, however, that no
adjustment in respect of cash dividends or interest on such stock or other
securities shall be made during the term of the Warrant or upon the exercise
of a Warrant.
(d) Market Price.
As used in this Section 6, the term "market price"
shall mean, for any date, (i) the last sale price for the Common Stock on the
principal securities exchange on which the Common Stock is listed or admitted
to trading, or (ii) if not so listed or admitted to trading on any securities
exchange, the last sale price, or in the absence of a last sale price, the
closing bid price, for the Common Stock on the NASDAQ National Market, or
(iii) if the Common Stock shall not be listed on such Market, the the last
sale price, or in the absence of a last sale price, the closing bid price, for
the Common Stock on the NASDAQ SmallCap Market, or (iv) f the Common Stock
shall not be listed on either such Market, the closing bid price in the
over-the-counter market, in each such case, unless otherwise provided herein,
averaged over a period of 20 consecutive trading days ending on the trading
day prior to the date as of which the market price is being determined. If at
any time the Common Stock is not listed on any such exchange or such Market or
quoted in the over-the-counter market, the market price of the Common Stock
shall be deemed to be the fair market value thereof, as determined in good
faith by an independent brokerage firm, Standard & Poor's Corporation or
Moody's Investors Service, as of a date which is within fifteen calendar days
preceding the date as of which the determination is to be made.
(e) No Adjustments; Deferral of Adjustments.
No adjustment in the number of shares of Common
Stock purchasable upon the exercise of the Warrant need be made under
subparagraphs (b) and (c) if the Company issues or distributes to the Holder
of the Warrant the rights, options, warrants, or convertible or exchangeable
securities, or evidences of indebtedness or assets referred to in those
subparagraphs which the Holder of the Warrant would have been entitled to
receive had the Warrant been exercised immediately prior to the happening of
such event or the record date with respect thereto. No adjustment need be made
for a change in the par value of the shares of Common Stock.
No adjustment in the number of shares of Common
Stock purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent in the number of
shares of Common Stock purchasable upon the exercise of the Warrant; provided,
however, that any adjustments which by reason of this subparagraph (e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest
one-thousandth of a share.
(f) Notice Upon Adjustment.
Whenever there is an adjustment in the number or
kind of securities issuable upon exercise of the Warrant as provided in this
Section 6, the Company shall (a) issue a certificate signed by the Chairman of
the Board, President or a Vice President of the Company and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary of the
Company, showing in detail the facts requiring such adjustment and the number
and kind of securities issuable upon exercise of each Warrant after such
adjustment; and (b) cause a notice stating that such adjustment has been
effected and stating the number and kind of securities issuable upon exercise
of each Warrant to be sent by First Class Mail postage prepaid, to the Holder
of the Warrant Certificate at the address set forth in Section 10 hereof.
(g) Notice Upon Certain Events.
If, at any time prior to the Expiration Date, (i)
the Company shall declare any dividend on the Common Stock payable in cash or
shares of Common Stock or capital stock of the Company; or (ii) the Company
shall authorize the issuance to all holders of shares of Common Stock of
rights, options or warrants to subscribe for or purchase shares of Common
Stock or of any other subscription rights or warrants; or (iii) the Company
shall authorize the distribution to all holders of shares of Common Stock
evidences of its indebtedness or assets; or (iv) the Board of Directors of the
Company shall have approved any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the Company is
required, or any sale, transfer or lease of all or substantially all of the
assets of the Company or any reclassification or change of Common Stock
issuable upon exercise of the Warrants (other than a change in par value, or
as a result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock; or (v) the voluntary or involuntary
dissolution, liquidation or winding up of the Company; or (vi) the Company
proposes to take any action which would require an adjustment in the number or
kind of securities issuable upon exercise of the Warrant pursuant to this
Section 6; then the Company shall cause to be given to the Holder, at least
twenty calendar days prior to the applicable record date specified, or
promptly in the case of events for which there is no record date, a written
notice stating (A) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such dividends, rights, options,
warrants or distribution are to be determined, or (B) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common
Stock, or (C) the date on which any such consolidation, merger, sale,
transfer, lease, reclassification, change, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such consolidation, merger, sale, transfer, lease, reclassification,
change, dissolution, liquidation or winding up.
(h) Merger, Consolidation, etc.
If any capital reorganization or reclassification
of the capital stock of the Company, or consolidation or merger of the Company
with or into another corporation, or the sale of all or substantially all of
its assets to another corporation shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale, lawful
and adequate provision shall be made whereby the Holder of the Warrant shall
thereafter have the right to purchase and receive on exercise of such Warrant
upon the basis and upon the terms and conditions specified in this Agreement
and in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the Warrant, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock
equal to the number of shares such Common Stock immediately, theretofore
purchasable and receivable upon the exercise of the Warrant had such
reorganization, reclassification, consolidation, merger or sale not taken
place and in any such case appropriate provision shall be made with respect to
the rights and interests of the Holder of the Warrant to the end that the
provisions of this Agreement (including, without limitation, provision for
adjustment of the number of shares issuable upon the exercise of the Warrant)
shall thereafter be applicable as nearly as may be in relation to any shares
of stock, securities, or assets thereafter deliverable upon exercise of
Warrant. The Company shall not effect any such consolidation, merger or sale,
unless, prior to or simultaneously with the consummation thereof, the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall
assume, by written instrument acceptable to the Holder, the obligation to
deliver to the Holder of the Warrant such shares of stock, securities or asset
as, in accordance with the foregoing provisions, the Holder would be entitled
to purchase.
Section 7. Holder; No Rights as Shareholder; Reports to Shareholders.
The Holder shall be deemed the owner of this Warrant for all
purposes. The Holder shall not be entitled by virtue of ownership of this
Warrant to any rights whatsoever as a shareholder of the Company either at law
or in equity, including, without limitation, the right to vote and to receive
dividends and other distributions. While this Warrant remains outstanding, the
Company shall send to the Holder copies of all reports, correspondence and
other documents which the Company sends to its shareholders.
Section 8. Expiration Date.
This Warrant, in all events, shall expire and be wholly void
after 5 P.M. (eastern time) on November 5, 2002.
Section 9. Notices.
All notices, consents or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, or (b) one
business day after being sent by a reputable overnight delivery service,
postage or delivery charges prepaid (provided that confirmation of delivery is
obtained from such service), to the Company at its principal executive office,
and to Holder at the last address reflected in the Company's records for
Holder.
Notices may also be given by prepaid telegram or facsimile and shall
be effective on the date transmitted if confirmed within 24 hours thereafter
by a signed original sent in the manner provided above. Any party may change
its address for notice and the address to which copies must be sent by giving
notice of the new addresses to the other parties in accordance with this
Section 10, except that any such change of address notice shall not be
effective unless and until received.
<PAGE>
Section 11. Transfer.
This Warrant may not be sold, transferred, pledged,
hypothecated or otherwise disposed of without the express prior written
consent of the Company at any time (which consent shall not be unreasonably
withheld) by the Holder except to an entity which is an "Affiliate" of the
Holder, as that term is defined in Rule 405 promulgated under the Securities
Act, provided that, in the opinion of counsel reasonably satisfactory to the
Company, any such transfer would not result in a violation of the provisions
of the Securities Act and applicable state securities laws. Any transfer of
this Warrant shall be effective upon delivery of this Warrant and the Form of
Transfer of Warrant attached hereto as Exhibit C duly completed and executed
and, if required by the Company, the opinion referred to in the preceding
sentence, to the principal office of the Company and, thereafter the Company
shall issue a new Warrant registered in the name of the transferee. If the
Warrant is being transferred in part, the Company shall issue new Warrants, in
each case evidencing the right to purchase the appropriate number of Warrant
Shares, registered in the names of the Holder and the transferee, as
applicable. Upon any transfer of all or any part of this Warrant to any
transferee, such transferee shall be deemed the "Holder" of such Warrant as
such term is used herein and shall be deemed the owner thereof for all
purposes. Each Holder of this Warrant and any Warrant Shares issued upon
exercise of this Warrant, by taking or holding the same, consents to and
agrees to be bound by the provisions of this Section 11.
Section 12. Severability.
In the event that one or more of the provisions of this
Warrant shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Warrant, but this Warrant shall be
construed as if such invalid, illegal or unenforceable provision had never
been contained herein.
Section 13. Governing Law.
This Warrant shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements
made and to be entirely performed within such State.
IN WITNESS WHEREOF, INKINE PHARMACEUTICAL COMPANY, INC. has caused
this Warrant to be signed by its duly authorized officers and dated as of
November __, 1997.
INKINE PHARMACEUTICAL COMPANY, INC.
By: /s/ Taffy Williams
--------------------------------
Taffy Williams, President
Attest:
----------------------------
By:
------------------------------
[Corporate Seal]
<PAGE>
EXHIBIT A
Form of Exercise
(to be executed by the Holder)
The Holder hereby exercises its rights to subscribe for and purchase
____ shares of Class A common stock, par value $.00001 ("Common Stock"), of
INKINE PHARMACEUTICAL COMPANY, INC. evidenced by the attached Warrant and
herewith makes payment of the Purchase Price of $____________ therefor in
full. Please issue a certificate in the name of the Holder for the Common
Stock in accordance with the instructions given below and issue a replacement
Warrant in the name of the Holder for the unexercised balance, if any, of the
right to purchase Warrant Shares evidenced by the attached Warrant which were
not exercised hereby.
Dated:
--------------------------------- ------------------------------------
Signature of Holder
Instructions for registration of shares
Social Security or Employer Identification
Number of Holder:
-----------------------
Address of Holder:
- ------------------------------------
Street
- ------------------------------------
City, State and Zip Code
<PAGE>
EXHIBIT B
Form of Restrictive Legend
To Be Imprinted on Warrant Shares
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL EITHER (1) THE HOLDER
THEREOF SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLE SATISFACTORY TO
THE COMPANY THAT REGISTRATION OF SUCH SHARES UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED OR (2) A REGISTRATI0N
STATEMENT UNDER THE SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS
WITH RESPECT TO SUCH SHARES SHALL HAVE BECOME EFFECTIVE.
<PAGE>
EXHIBIT C
Form of Transfer of Warrant
To Permitted Transferee
For value received, the Holder hereby sells, assigns and transfers
unto _____________ its right to purchase ____________ shares of Class A Common
Stock, par value $.00001 per share, of INKINE PHARMACEUTICAL COMPANY, INC.
evidenced by the attached Warrant. All capitalized terms used and not defined
herein shall have the meanings ascribed to them in the Warrant.
Dated:
--------------------------------- ------------------------------------
Signature of Holder
In the presence of
- --------------------------------------
Social Security or Other
Identifying Number of
Transferee:______________________________
Address of Transferee:
- --------------------------------------
Street
- --------------------------------------
City, State and Zip Code
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED
HEREUNDER (COLLECTIVELY, THE "SECURITIES") HAS BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES ACT, OR APPLICABLE STATE
SECURITIES LAWS, AND THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL EITHER (1) THE HOLDER THEREOF
SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT REGISTRATION OF THE SECURITIES UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED OR (2) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS WITH
RESPECT TO THE SECURITIES SHALL HAVE BECOME EFFECTIVE.
NOVEMBER 6, 1997
COMMON STOCK PURCHASE WARRANT
To subscribe for and purchase shares
of Common Stock, par value $.0001 per share, of
INKINE PHARMACEUTICAL COMPANY, INC.
THIS CERTIFIES that, for value received, GEORGE TUSZYNSKI, an
individual residing at ____________________________________(the "Holder")
subject to the terms and conditions hereof, shall be entitled to purchase from
INKINE PHARMACEUTICAL COMPANY, INC., a New York corporation (the "Company"),
after the occurrence of certain events as set forth in Section 1 below, prior
to 5:00 P.M. (New York City Time) on the expiration date of this Warrant set
forth in Section 8 below (the "Expiration Date"), One Hundred Twenty Five
Thousand (125,000) shares of Common Stock (as defined below) of the Company
(individually, a "Warrant Share" and collectively, the "Warrant Shares"), at
an aggregate exercise price of $.61 per share, (the "Exercise Price"), or an
aggregate purchase price of Seventy Six Thousand Two hundred Fifty Dollars
($76,250.00). For purposes of this Warrant, the term "Common Stock' shall mean
the class of capital stock of the Company designated as its Common Stock, par
value $.0001 per share, as constituted on the date hereof.
<PAGE>
Section 1. Exercise of Warrants. This Warrant may be exercised: (i)
as to Sixty Two Thousand Five Hundred (62,500) shares of Common Stock prior to
the Expiration Date but only from and after the date on which the United
States Food and Drug Administration, or an equivalent agency in a foreign
country or organization of foreign countries (the "FDA"), has approved an
Investigational New Drug application ("IND") submitted by the Company and
based on technology which is the subject of that certain License Agreement
dated of even date herewith between the Company and Allegheny University of
The Health Sciences (the "Technology"), and (ii) as to the remaining Sixty
Seven Thousand Five Hundred (67,500) shares of Common Stock prior to the
Expiration Date but only from and after the date on which the the FDA has
approved a New Drug Application submitted by the Company with respect to the
Technology. This Warrant shall be exercisable, at the election of the Holder,
either in full or from time to time in part and, in the event that this
Warrant is exercised in respect of fewer than all of the Warrant Shares
issuable on such exercise at any time prior to the Expiration Date, a new
certificate evidencing the remaining Warrant or Warrants will be issued, and
the Company is hereby irrevocably authorized to countersign and to deliver the
required new Warrant pursuant to the provisions of this Warrant. This Warrant,
when surrendered upon its exercise, shall be canceled by the Company and shall
then be disposed of in a manner satisfactory to the Company. The
certificate(s) representing the Warrant Shares shall bear a restrictive legend
substantially in the form set forth in Exhibit B attached hereto.
<PAGE>
(a) Exercise for Cash
This Warrant may be exercised in whole or in part
into the number of Warrant Shares determined in accordance with this Section 1
by delivering it to the Company at its principal executive office with the
form of election attached hereto as Exhibit A duly completed and signed, and
by paying to the Company the Exercise Price or such pro rata portion of the
Exercise Price for the number of Warrant Shares in respect of which this
Warrant is then exercised. Payment of the Exercise Price shall be made in cash
or Holder's check payable to the order of the Company.
Upon surrender of this Warrant and payment of the
Exercise Price, the Company shall issue and cause to be delivered within a
reasonable time, not to exceed fifteen calendar days, to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares issuable
upon exercise. Such certificate or certificates shall be deemed to have been
issued, and any person so designated to be named therein shall be deemed to
have become a holder of record of such Warrant Shares, as of the date of the
surrender of this Warrant.
(b) Cashless Exercise
This Warrant may be exchanged, in whole or in part
(a "Warrant Exchange"), into the number of Warrant Shares determined in
accordance with this Section 1 by presentation and surrender of this Warrant
to the Company at its principal office, or at the office of its stock transfer
agent, if any, accompanied by a notice (a "Notice of Exchange") stating that
this Warrant is being exchanged and the number of shares of Common Stock to be
exchanged. In connection with any Warrant Exchange, this Warrant shall
represent the right to subscribe for and acquire the number of shares of
Common Stock (rounded to the nearest whole number) equal to (i) the number of
shares specified by the Holder in its Notice of Exchange (the "Total Number")
less the number of shares equal to the quotient obtained by dividing (A) the
product of the Total Number and the then applicable Exercise Price by (B) the
then fair market value (determined as set forth below) per share of Common
Stock. For purposes of this Section 1(b), the "fair market value" per share of
Common Stock as of any date shall be the average of the closing bid prices of
the Common Stock, as reported on the NASDAQ Small-Cap Market, during the five
(5) trading days immediately preceding such date. If this Warrant should be
exchanged in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder.
Upon receipt by the Company of this Warrant, together with a duly executed
Notice of Exchange, at its office, or by the stock transfer agent of the
Company at its office, the Holder shall be deemed to be the holder of record
of the shares of Common Stock issuable upon such exchange, notwithstanding
that the stock transfer books of the Company shall then be closed or that
certificates representing such shares of Common Stock shall not then be
actually delivered to the Holder. The Company shall pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on exchange of this Warrant.
<PAGE>
Section 2. Payment of Taxes. The Company shall pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of this Warrant. The Company, however, shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in
the issue of any certificates for Warrant Shares in a name other than that of
the Holder.
Section 3. Mutilated, Missing or Lost Warrant. In the event that this
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue
and countersign, in exchange and substitution for and upon cancellation of the
mutilated Warrant, or in lieu of and substitution for its loss, theft or
destruction, a new Warrant of like tenor and representing an equivalent number
of Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft or destruction of this Warrant.
Section 4. Reservation of Warrant Shares. The Company will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of is authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of this Warrant,
the maximum number of shares of Common Stock which may then be deliverable
upon the exercise of this Warrant.
The Company covenants that all Warrant Shares which may be issued
upon exercise of Warrants will, upon issue and payment therefor, be fully
paid, nonassessable, free of preemptive rights and free from all taxes, liens,
charges and security interests with respect to the issue thereof.
Section 5. Fractional Shares. No fractional Warrant Shares, or scrip
for any such fractional Warrant Shares, shall be issued upon the exercise of
this Warrant. If any fraction of a share of Common Stock would, except for the
provisions of this Section 5, be issuable on the exercise of any Warrant, the
Company will (i) if the fraction of a share otherwise issuable is equal to or
less than one-half, round-down and issue to the Holder only the whole number
of shares of Common Stock to which the Holder is entitled or (ii) if the
fraction of a share otherwise issuable is greater than one-half, round-up and
issue to the Holder one additional share of Common Stock in addition to the
largest whole number of shares of Common Stock to which the Holder is
otherwise entitled.
Section 6. Adjustment of Number of Warrant Shares. The number of
Warrant Shares issuable upon exercise of the Warrant is subject to adjustment
from time to time upon the occurrence of the events enumerated in this Section
6.
<PAGE>
(a) Change in Common Stock.
In case the Company shall (i) pay a dividend in
Common Stock or make a distribution in Common Stock, (ii) subdivide its
outstanding Common Stock, (iii) combine its outstanding Common Stock into a
smaller number of shares of Common Stock or (iv) issue, by reclassification of
its Common Stock, other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the surviving corporation), the number of shares of Common Stock
purchasable upon exercise of the Warrant immediately prior thereto shall be
adjusted so that the Holder of the Warrant shall be entitled to receive the
kind and number of shares of Common Stock or other securities of the Company
which it would have owned or have been entitled to receive after the happening
of any of the events described above, had such Warrant been exercised
immediately prior to the happening of such event or any record date with
respect thereto. An adjustment made pursuant to this subparagraph (a) shall
become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event. Such adjustment shall
be made successively whenever any event listed above shall occur.
(b) Rights Issue.
In case the Company shall issue rights, options or
warrants to all holders of its outstanding Common Stock, entitling them to
subscribe for or purchase Common Stock at a price per share which is lower at
the record date mentioned below than the then current market price per share
of Common Stock (as defined in subparagraph (d) below), the number of shares
of Common Stock thereafter purchasable upon the exercise of the Warrant shall
be determined by multiplying the number of shares of Common Stock theretofore
purchasable upon exercise of the Warrant by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date of issuance of such right, options or warrants plus the number of shares
of Common Stock which could be purchased at the current market price per share
of Common Stock at such record date with: (i) the aggregate purchase price of
the total number of shares of Common Stock so offered for subscription or
purchase, plus (ii) any consideration received by the Company for such rights,
options or warrants. Such adjustment shall be made whenever such rights,
options or warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
rights, options or warrants.
<PAGE>
(c) Other Distributions.
In case the Company shall distribute to all holders
of its Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation)
evidences of its indebtedness or assets (excluding cash dividends or
distributions payable out of consolidated earnings or earned surplus and
dividends or distributions referred to in subparagraph (a) above or in the
paragraph immediately following this paragraph) or rights, options or
warrants, or convertible or exchangeable securities containing the right to
subscribe for or purchase debt securities, assets or other securities of the
Company (excluding those referred to in subparagraph (b) above), then in each
case the number of shares of Common Stock thereafter purchasable upon the
exercise of the Warrant shall be determined by multiplying the number of
shares of Common Stock theretofore purchasable upon the exercise of the
Warrant by a fraction, of which the numerator shall be the then current market
price per share of Common Stock (as defined in subparagraph (d) below) on the
date of such distribution, and of which the denominator shall be the then
current market price per share of Common Stock, less the then fair market
value of the portion of the assets or evidences of indebtedness so distributed
or of such subscription rights, options or warrants, or of such convertible or
exchangeable securities applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distribution retroactive to the record date
for the determination of stockholders entitled to receive such distribution.
In the event of a distribution by the Company to
all holders of its shares of Common Stock of a subsidiary or securities
convertible into or exercisable for such stock, then in lieu of an adjustment
in the number of shares of Common Stock purchasable upon the exercise of the
Warrant, the Holder of the Warrant, upon the exercise thereof at any time
after such distribution shall be entitled to receive from the Company the
stock or other securities to which the Holder would have been entitled if the
Holder had exercised the Warrant immediately prior thereto, all subject to
further adjustment as provided in this Section 6; provided, however, that no
adjustment in respect of cash dividends or interest on such stock or other
securities shall be made during the term of the Warrant or upon the exercise
of a Warrant.
(d) Market Price.
As used in this Section 6, the term "market price"
shall mean, for any date, (i) the last sale price for the Common Stock on the
principal securities exchange on which the Common Stock is listed or admitted
to trading, or (ii) if not so listed or admitted to trading on any securities
exchange, the last sale price, or in the absence of a last sale price, the
closing bid price, for the Common Stock on the NASDAQ National Market, or
(iii) if the Common Stock shall not be listed on such Market, the the last
sale price, or in the absence of a last sale price, the closing bid price, for
the Common Stock on the NASDAQ SmallCap Market, or (iv) if the Common Stock
shall not be listed on either such Market, the closing bid price in the
over-the-counter market, in each such case, unless otherwise provided herein,
averaged over a period of 20 consecutive trading days ending on the trading
day prior to the date as of which the market price is being determined. If at
any time the Common Stock is not listed on any such exchange or such Market or
quoted in the over-the-counter market, the market price of the Common Stock
shall be deemed to be the fair market value thereof, as determined in good
faith by an independent brokerage firm, Standard & Poor's Corporation or
Moody's Investors Service, as of a date which is within fifteen calendar days
preceding the date as of which the determination is to be made.
<PAGE>
(e) No Adjustments; Deferral of Adjustments.
No adjustment in the number of shares of Common
Stock purchasable upon the exercise of the Warrant need be made under
subparagraphs (b) and (c) if the Company issues or distributes to the Holder
of the Warrant the rights, options, warrants, or convertible or exchangeable
securities, or evidences of indebtedness or assets referred to in those
subparagraphs which the Holder of the Warrant would have been entitled to
receive had the Warrant been exercised immediately prior to the happening of
such event or the record date with respect thereto. No adjustment need be made
for a change in the par value of the shares of Common Stock.
No adjustment in the number of shares of Common
Stock purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent in the number of
shares of Common Stock purchasable upon the exercise of the Warrant; provided,
however, that any adjustments which by reason of this subparagraph (e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest
one-thousandth of a share.
(f) Notice Upon Adjustment.
Whenever there is an adjustment in the number or
kind of securities issuable upon exercise of the Warrant as provided in this
Section 6, the Company shall (a) issue a certificate signed by the Chairman of
the Board, President or a Vice President of the Company and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary of the
Company, showing in detail the facts requiring such adjustment and the number
and kind of securities issuable upon exercise of each Warrant after such
adjustment; and (b) cause a notice stating that such adjustment has been
effected and stating the number and kind of securities issuable upon exercise
of each Warrant to be sent by First Class Mail postage prepaid, to the Holder
of the Warrant Certificate at the address set forth in Section 10 hereof.
(g) Notice Upon Certain Events.
If, at any time prior to the Expiration Date, (i)
the Company shall declare any dividend on the Common Stock payable in cash or
shares of Common Stock or capital stock of the Company; or (ii) the Company
shall authorize the issuance to all holders of shares of Common Stock of
rights, options or warrants to subscribe for or purchase shares of Common
Stock or of any other subscription rights or warrants; or (iii) the Company
shall authorize the distribution to all holders of shares of Common Stock
evidences of its indebtedness or assets; or (iv) the Board of Directors of the
Company shall have approved any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the Company is
required, or any sale, transfer or lease of all or substantially all of the
assets of the Company or any reclassification or change of Common Stock
issuable upon exercise of the Warrants (other than a change in par value, or
as a result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock; or (v) the voluntary or involuntary
dissolution, liquidation or winding up of the Company; or (vi) the Company
proposes to take any action which would require an adjustment in the number or
kind of securities issuable upon exercise of the Warrant pursuant to this
Section 6; then the Company shall cause to be given to the Holder, at least
twenty calendar days prior to the applicable record date specified, or
promptly in the case of events for which there is no record date, a written
notice stating (A) the date as of which the holders of record of shares of
Common Stock to be entitled to receive any such dividends, rights, options,
warrants or distribution are to be determined, or (B) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common
Stock, or (C) the date on which any such consolidation, merger, sale,
transfer, lease, reclassification, change, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such consolidation, merger, sale, transfer, lease, reclassification,
change, dissolution, liquidation or winding up.
<PAGE>
(h) Merger, Consolidation, etc.
If any capital reorganization or reclassification
of the capital stock of the Company, or consolidation or merger of the Company
with or into another corporation, or the sale of all or substantially all of
its assets to another corporation shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale, lawful
and adequate provision shall be made whereby the Holder of the Warrant shall
thereafter have the right to purchase and receive on exercise of such Warrant
upon the basis and upon the terms and conditions specified in this Agreement
and in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the Warrant, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock
equal to the number of shares such Common Stock immediately, theretofore
purchasable and receivable upon the exercise of the Warrant had such
reorganization, reclassification, consolidation, merger or sale not taken
place and in any such case appropriate provision shall be made with respect to
the rights and interests of the Holder of the Warrant to the end that the
provisions of this Agreement (including, without limitation, provision for
adjustment of the number of shares issuable upon the exercise of the Warrant)
shall thereafter be applicable as nearly as may be in relation to any shares
of stock, securities, or assets thereafter deliverable upon exercise of
Warrant. The Company shall not effect any such consolidation, merger or sale,
unless, prior to or simultaneously with the consummation thereof, the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall
assume, by written instrument acceptable to the Holder, the obligation to
deliver to the Holder of the Warrant such shares of stock, securities or asset
as, in accordance with the foregoing provisions, the Holder would be entitled
to purchase.
<PAGE>
Section 7. Holder; No Rights as Shareholder; Reports to Shareholders.
The Holder shall be deemed the owner of this Warrant for all
purposes. The Holder shall not be entitled by virtue of ownership of this
Warrant to any rights whatsoever as a shareholder of the Company either at law
or in equity, including, without limitation, the right to vote and to receive
dividends and other distributions. While this Warrant remains outstanding, the
Company shall send to the Holder copies of all reports, correspondence and
other documents which the Company sends to its shareholders.
Section 8. Expiration Date.
This Warrant, in all events, shall expire and be wholly
void after 5 P.M. (eastern time) on November 5, 2007.
Section 9. Notices.
All notices, consents or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, or (b) one
business day after being sent by a reputable overnight delivery service,
postage or delivery charges prepaid (provided that confirmation of delivery is
obtained from such service), to the Company at its principal executive office,
and to Holder at the last address reflected in the Company's records for
Holder.
Notices may also be given by prepaid telegram or facsimile and shall
be effective on the date transmitted if confirmed within 24 hours thereafter
by a signed original sent in the manner provided above. Any party may change
its address for notice and the address to which copies must be sent by giving
notice of the new addresses to the other parties in accordance with this
Section 10, except that any such change of address notice shall not be
effective unless and until received.
Section 11. Transfer.
This Warrant may not be sold, transferred, pledged,
hypothecated or otherwise disposed of without the express prior written
consent of the Company at any time (which consent shall not be unreasonably
withheld) by the Holder except to an entity which is an "Affiliate" of the
Holder, as that term is defined in Rule 405 promulgated under the Securities
Act, provided that, in the opinion of counsel reasonably satisfactory to the
Company, any such transfer would not result in a violation of the provisions
of the Securities Act and applicable state securities laws. Any transfer of
this Warrant shall be effective upon delivery of this Warrant and the Form of
Transfer of Warrant attached hereto as Exhibit C duly completed and executed
and, if required by the Company, the opinion referred to in the preceding
sentence, to the principal office of the Company and, thereafter the Company
shall issue a new Warrant registered in the name of the transferee. If the
Warrant is being transferred in part, the Company shall issue new Warrants, in
each case evidencing the right to purchase the appropriate number of Warrant
Shares, registered in the names of the Holder and the transferee, as
applicable. Upon any transfer of all or any part of this Warrant to any
transferee, such transferee shall be deemed the "Holder" of such Warrant as
such term is used herein and shall be deemed the owner thereof for all
purposes. Each Holder of this Warrant and any Warrant Shares issued upon
exercise of this Warrant, by taking or holding the same, consents to and
agrees to be bound by the provisions of this Section 11.
<PAGE>
Section 12. Severability.
In the event that one or more of the provisions of this
Warrant shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Warrant, but this Warrant shall be
construed as if such invalid, illegal or unenforceable provision had never
been contained herein.
Section 13. Governing Law.
This Warrant shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements
made and to be entirely performed within such State.
IN WITNESS WHEREOF, INKINE PHARMACEUTICAL COMPANY, INC. has caused
this Warrant to be signed by its duly authorized officers and dated as of
November __, 1997.
INKINE PHARMACEUTICAL COMPANY, INC.
By:
--------------------------------
Taffy Williams, President
Attest: By:
---------------------------- --------------------------------
[Corporate Seal]
<PAGE>
EXHIBIT A
Form of Exercise
(to be executed by the Holder)
The Holder hereby exercises its rights to subscribe for and purchase
____ shares of Class A common stock, par value $.00001 ("Common Stock"), of
INKINE PHARMACEUTICAL COMPANY, INC. evidenced by the attached Warrant and
herewith makes payment of the Purchase Price of $____________ therefor in
full. Please issue a certificate in the name of the Holder for the Common
Stock in accordance with the instructions given below and issue a replacement
Warrant in the name of the Holder for the unexercised balance, if any, of the
right to purchase Warrant Shares evidenced by the attached Warrant which were
not exercised hereby.
Dated:
------------------------------- ------------------------------------
Signature of Holder
Instructions for registration of shares
Social Security or Employer Identification
Number of Holder:
-------------------
Address of Holder:
- ------------------------------------
Street
- ------------------------------------
City, State and Zip Code
<PAGE>
EXHIBIT B
Form of Restrictive Legend
To Be Imprinted on Warrant Shares
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL EITHER (1) THE HOLDER
THEREOF SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLE SATISFACTORY TO
THE COMPANY THAT REGISTRATION OF SUCH SHARES UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED OR (2) A REGISTRATI0N
STATEMENT UNDER THE SECURITIES ACT AND SUCH APPLICABLE STATE SECURITIES LAWS
WITH RESPECT TO SUCH SHARES SHALL HAVE BECOME EFFECTIVE.
<PAGE>
EXHIBIT C
Form of Transfer of Warrant
To Permitted Transferee
For value received, the Holder hereby sells, assigns and transfers
unto _____________ its right to purchase ____________ shares of Class A Common
Stock, par value $.00001 per share, of INKINE PHARMACEUTICAL COMPANY, INC.
evidenced by the attached Warrant. All capitalized terms used and not defined
herein shall have the meanings ascribed to them in the Warrant.
Dated:
------------------------------- ------------------------------------
Signature of Holder
In the presence of
- --------------------------------------
Social Security or Other
Identifying Number of
Transferee:
-------------------------------
Address of Transferee:
- --------------------------------------
Street
- --------------------------------------
City, State and Zip Code
<PAGE>
EXHIBIT 99
This Exhibit 99 to Form 8-K contains a copy of Item 5 of Part II of
the Company's quarterly report on Form 10-QSB for the quarter ended September
30, 1997, as amended by Form 10-QSB/A filed on November 17, 1997. Portions of
this Item are incorporated by reference into Item 2 of this report.
Item 5. Other Information
Private Placement
On November 6, 1997, the Company completed the Initial Closing of a
private placement and on November 14, 1997 completed a second closing of the
private placement with total aggregate gross proceeds of $16,960,000 by
selling 16,960,000 shares of Common Stock of the Company. In addition, the
placement agents received as commissions (i) 1,442,652 shares of Common Stock,
(ii) $305,000 and (iii) warrants for the purchase of a total of 1,740,265
shares of Common Stock at an exercise price of $1.00 per share. The common
stock was issued to accredited investors pursuant to Section 4(2) of the
Securities Act of 1933, as amended and Rule 506 of Regulation D. Simultaneous
with the Initial Closing, the Company changed its name to InKine
Pharmaceutical Company, Inc. The Company's estimated expenses in connection
with the private placement are $350,000.
Acquisitions
Simultaneous with the Initial Closing, the company acquired Sangen
and CorBec. In addition, certain rights possessed by ALW Partnership to cancel
the Company's exclusive worldwide license for the Purgative Product lapsed.
See Part I, Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Simultaneous with the acquisition, Dr. Leonard S. Jacob, became
Chairman of the Board and Chief Executive Officer of the Company under a long
term employment agreement and was issued a ten-year option entitling him to
purchase the number of shares of Common Stock equal to 7 1/2% of the fully
diluted capitalization of the Company. The exercise price of Dr. Jacob's
option is (i) $0.61 per share for 1,200,000 shares and (ii) $1.00 per share
for shares in excess of 1,200,000 shares. Dr. Taffy J. Williams, formerly the
Company's President and Chief Executive Officer, became President and Chief
Operating Officer of the Company following the above acquisitions. In January
1997, Dr. Williams received an option to purchase 5% of the fully diluted
capitalization of the Company. The exercise price of Dr. Williams' option is
(i) $0.61 per share for 500,000 shares and (ii) $1.00 per share for shares in
excess of 500,000 shares. In the cases of both Dr. Jacob and Dr. Williams,
"fully diluted capitalization" is determinable upon the final closing of the
private placement described above in this Item 5. "Fully diluted
capitalization" means all issued and outstanding shares of Common Stock of the
Company plus all shares issuable upon exercise of outstanding derivative
instruments (other than certain warrants and options granted to the
underwriter in the Company's initial public offering). As of the date hereof,
Dr. Jacob and Dr. Williams have received options to purchase 1,200,000 shares
and 500,000 shares, respectively. As described above, both currently have the
right to receive additional options, which will be delivered to them (along
with any additional options to which they are entitled based on the final
closing) in connection with the final closing of the private placement.
The Sangen acquisition included the grant to Dr. Tuszynski, the
inventor of the Thrombospondin Technology, and Allegheny University of the
Health Sciences ("AUHS") of 125,000 shares and options to purchase an
aggregate of 375,000 shares, of which options for 250,000 shares will be
exercisable upon achievement of specified milestones in the development of a
new drug candidate. In addition, Dr. Tuszynski, and AUHS will be entitled to
cash royalties based on net sales and sub-license fees derived from the
technology. The Company has agreed to fund additional research in Dr.
Tuszynski's laboratory in an amount ranging from $150,000 (in the first year)
to $1,350,000 (over seven years, inclusive). Dr. Tuszynski is to be engaged as
a consultant to the Company for a two-year period at a fee of $50,000 per
year.
<PAGE>
The acquisition of CorBec resulted in the payment of $750,000 and the
issuance of 750,000 shares of Common Stock of the Company with provisions for
additional cash payments and stock issuances based upon the achievement of
certain milestones for CorBec's most advanced drug candidate, CBP-1011, an
orally administered glucocorticoid analog, which is in a Phase III pivotal
clinical trial in the United States. These milestones include the receipt of
an FDA letter of approval to sell the drug, and certain designated annual
amounts of sales. The maximum cash and shares to be issued will be an
aggregate of $8,000,000 in cash and 440,000 shares of Common Stock. Additional
cash payments of up to $8,500,000 and 280,000 shares of Common Stock are to be
made based on the achievement of certain annual levels of sales of a second
drug developed from the CorBec technology. In addition, the Company has agreed
to enter into three-year consulting agreements with Dr. Alan Schreiber, the
inventor of the CorBec technology and with the former chief executive officer
of CorBec, providing for aggregate consulting fees over three years equal to
$510,000, and for the grant of options with respect to an aggregate of 170,000
shares of Common Stock. Dr. Schreiber will receive an option for an additional
200,000 shares upon FDA approval, if any, of an IND and commencement of
clinical trial with respect to a third generation compound. The Company is
also to fund up to $240,000 of sponsored research in Dr. Schreiber's
laboratory over the course of three years.
Simultaneous with the Initial closing, the Company paid $150,000 (in
addition to $100,000 paid in January 1997) to ALW Partnership in connection
with the Purgative Product license. The Company (i) will make certain payments
to ALW Partnership aggregating up to $250,000 upon the completion of certain
development milestones, (ii) has issued to ALW Partnership options to purchase
an aggregate of 750,000 shares of Common Stock at a price of $0.61 per share,
which are exercisable as to 250,000 shares and will become exercisable as to
500,000 shares if certain developmental milestones are met and (iii) is
required to pay to ALW Partnership cash royalties of 2% of net sales of the
related drug, if any, which percentage will increase to 4% with respect to net
sales between $5,000,000 and $10,000,000 and to 6% as to net sales in excess
of $10,000,000.
The Company will incur a non-recurring charge attributable to each
acquisition which will be treated as purchased research and development and
expensed in the current year.
