<PAGE> 1
As filed with the Securities and Exchange Commission on October 20, 1999
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
INKINE PHARMACEUTICAL COMPANY, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 13-3754005
(State or other jurisdiction of (I.R.S. Employer
incorporation organization) Identification No.)
1720 WALTON ROAD, SUITE 200, BLUE BELL, PENNSYLVANIA 19422, (610) 260-9350
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
-----------------------
LEONARD S. JACOB, M.D., PH.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
INKINE PHARMACEUTICAL COMPANY, INC.
1720 WALTON ROAD, BLUE BELL, PENNSYLVANIA 19422, (610) 260-9350
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------------
Copies of all communications to:
CHARLES C. ZALL, ESQUIRE
SAUL, EWING, REMICK & SAUL LLP
1500 MARKET STREET, 38TH FLOOR, PHILADELPHIA, PENNSYLVANIA
19102-2186, (215) 972-7701
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering.[ ] ___________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering.[ ] ____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
TITLE OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED OFFERING PRICE PER SHARE AGGREGATE OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, Par Value
$.0001 Per Share 3,069,229(1)(2) (3) $5,069,615.64(3) $1,409.35(4)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 761,538 shares of common stock that may be acquired by certain
selling shareholders named herein upon the exercise of outstanding
warrants.
(2) Pursuant to Rule 416, this Registration Statement shall be deemed to
cover an indeterminate number of additional shares of common stock
issuable pursuant to the anti-dilution provisions of the warrants or in
the event the number of outstanding shares of InKine is increased by
stock split, stock dividend and similar transactions.
(3) In accordance with Rules 457(c) and (g), the price shown is estimated
solely for the purposes of calculating the registration fee, and is
based upon (i) shares offered pursuant to 761,538 outstanding warrants
exercisable at $1.78 per share and (ii) with respect to the remaining
shares being registered at a per share price based on the average of
the reported high and low sales prices of the common stock as reported
on the Nasdaq SmallCap Market on October 15, 1999, which was $1.6094.
(4) Represents the Proposed Maximum Aggregate Offering Price multiplied by
$.000278.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THE SELLING SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 20, 1999
PROSPECTUS
- ----------
3,069,229 SHARES
INKINE PHARMACEUTICAL COMPANY, INC.
COMMON STOCK, PAR VALUE $.0001 PER SHARE
This Prospectus is part of a Registration Statement that InKine filed
with the SEC, and relates to an aggregate offering of up to 3,069,229 shares of
InKine's common stock, $.0001 par value per share. The shares of common stock
may be offered and sold from time to time by certain of InKine's shareholders
who have already acquired these shares or will acquire them from InKine when
they exercise common stock purchase warrants that they own. InKine will not
receive any of the proceeds from the sale of these shares of common stock under
this Prospectus. However, InKine will bear the costs relating to the
registration of these shares of common stock, which InKine estimates to be
approximately $41,500.
InKine does not know how the selling shareholders plan to sell these
shares, but the selling shareholders may sell these shares primarily on The
Nasdaq SmallCap Market tier of The Nasdaq Stock Market, Inc. at the market price
at the time of sale. The selling shareholders may, however, sell the shares in
negotiated transactions or otherwise. It is possible that the selling
shareholders and the brokers and dealers through whom the shares may be sold may
be considered "underwriters". Therefore, their compensation may be considered
underwriters' compensation.
InKine's common stock is traded on the Nasdaq SmallCap Market under the
symbol "INKP". On October 15, 1999, the reported closing price of the common
stock was $1.5625 per share. InKine's principal executive offices are located at
1720 Walton Road, Suite 200, Blue Bell, PA 19422, and its telephone number is
(610) 260-9350.
--------------------------
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
--------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS OCTOBER __, 1999
<PAGE> 3
TABLE OF CONTENTS
AVAILABLE INFORMATION..........................................................1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................1
RISK FACTORS...................................................................3
RECENT EVENTS.................................................................14
USE OF PROCEEDS...............................................................14
SELLING SHAREHOLDERS..........................................................15
PLAN OF DISTRIBUTION..........................................................16
LEGAL MATTERS.................................................................17
EXPERTS.......................................................................17
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AVAILABLE INFORMATION
InKine has filed a Registration Statement, of which this Prospectus is
a part, and related exhibits with the SEC pursuant to the Securities Act of
1933, the Securities Act. The Registration Statement contains additional
information about InKine and InKine's common stock. InKine also files annual and
quarterly reports, proxy statements and other information with the SEC. You may
read and copy the Registration Statement or any other document InKine files with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Room.
The SEC also maintains a website that contains reports, proxy and
information statements, and other information regarding registrants that file
electronically with the SEC through its Electronic Data Gathering, Analysis and
Retrieval System. The SEC's website is located at http: //www.sec.gov. InKine's
website is located at http://www.inkine.com.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows InKine to "incorporate by reference" the information
InKine provides in documents filed with the SEC, which means that InKine can
disclose important information by referring to those documents. The information
incorporated by reference is an important part of this Prospectus. Any statement
contained in a document which is incorporated by reference in this Prospectus is
automatically updated and superseded if information contained in this
Prospectus, or information that InKine later files with the SEC, modifies and
replaces this information. InKine incorporates by reference the following
documents InKine has filed with the SEC:
1 Annual Report on Form 10-K for the year ended June 30, 1999;
2. Current Report on Form 8-K filed on October 1, 1999;
3. Proxy Statement, dated October 8, 1999 for InKine's 1999
Annual Meeting of Shareholders; and
4. The description of InKine's common stock, which is registered
under Section 12 of the Securities Exchange Act of 1934, the
Exchange Act, contained in InKine's Registration Statement on
Form 8-A, including any amendments or reports filed for the
purpose of updating such description.
All documents filed by InKine with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities remaining
unsold, will be considered to be incorporated by reference into this Prospectus
and to be a part of this Prospectus from the dates of the filing of such
documents.
<PAGE> 5
To receive a free copy of any of the documents incorporated by
reference in this Prospectus call or write Robert F. Apple, Senior Vice
President and Chief Financial Officer, InKine Pharmaceutical Company, Inc., 1720
Walton Road, Suite 200, Blue Bell, PA 19422, telephone (610) 260-9350. Exhibits
to the documents will not be sent unless those exhibits have been specifically
incorporated by reference in this Prospectus.
You should rely only on the information incorporated by reference or
set forth in this Prospectus or the applicable prospectus supplement. InKine has
not authorized anyone else to provide you with different information. The
selling shareholders may only use this Prospectus to sell securities if it is
accompanied by a prospectus supplement to the extent one is required. The
selling shareholders are only offering these securities in states where the
offer is permitted. You should not assume that the information in this
Prospectus or the applicable prospectus supplement is accurate as of any date
other than the dates set forth on the front of these documents.
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RISK FACTORS
Investing in InKine's common stock is very risky. You should be able to
bear a complete loss of your investment. This Prospectus, including the
documents incorporated by reference, contains forward-looking statements that
involve risks or uncertainties. Actual events or results may differ from those
discussed in this Prospectus and the documents incorporated by reference.
Factors that could cause or contribute to such differences include, but are not
limited to, the factors discussed below as well as those discussed elsewhere in
this Prospectus and in the documents incorporated by reference.
InKine has no products, and it may take years before InKine has a fully
developed product that InKine can manufacture, market and sell to realize
revenues.
InKine has not completed the development of any product to date.
Accordingly, InKine has not begun to market or generate revenues from any of its
products. It will be several years, if ever, before InKine could realize
significant revenues from product sales or royalties.
InKine's technologies and products under development require
significant, time-consuming and costly research, development and testing prior
to their commercialization. InKine's research and development efforts could fail
to produce safe, effective products with therapeutic or diagnostic benefits.
Even if InKine successfully develops its products and they receive all
necessary approvals, InKine may not be able to effectively market or manufacture
its products. InKine will seek to enter into strategic alliances or
collaborative arrangements with marketing and manufacturing companies. InKine
may experience difficulty entering into these arrangements. Even if InKine
succeeds, there can be no assurance that the arrangements will be successful.
InKine or its collaborators may encounter problems and delays relating to
research and development, regulatory approval, manufacturing, marketing and
commercialization and obsolescence of product candidates. The failure by InKine
or its collaborators to successfully address these problems and delays could
have a material adverse effect on InKine's business, financial condition and
results of operations.
InKine needs substantial additional financing to continue its
operations beyond fiscal year 2000.
InKine will require substantial additional funds to develop,
manufacture and market its products. These funds will be necessary for the
following:
- Research and development, including preclinical studies and
clinical trials;
- Seeking regulatory approval;
- Developing manufacturing and distribution capabilities; and
- Funding growth opportunities.
InKine expects that its current capital resources will be adequate to
fund its operations through fiscal year 2000. Unanticipated events may occur
that will make InKine's capital resources insufficient to fund its activities
through that date. InKine's future capital requirements will depend on several
factors, including the following:
- Continued progress in its research and development activities;
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- Progress with preclinical studies and clinical trials;
- Prosecution and enforcement of patent claims;
- Technological and market developments;
- InKine's ability to establish product development
arrangements;
- The cost of manufacturing scale-up and effective marketing
activity; and
- Joint marketing development or other collaborative
arrangements.
In order to obtain the substantial additional funds that InKine will
require through fiscal year 2000 and beyond, InKine intends to seek financing
from a variety of sources, including, public or private financings, including
equity or debt financings and collaborative arrangements with corporate partners
and others.
Additional equity financings may cause further dilution to current
shareholders. No assurance can be given that additional financing will be
available when needed, if at all, or on terms acceptable to InKine. If adequate
additional funds are not available, InKine will be required to delay, scale back
or eliminate all or certain of its research or development activities and
marketing efforts. InKine may also be forced to license to third parties certain
products or technologies that InKine would otherwise attempt to develop itself.
InKine has no manufacturing capability or experience, and will
therefore have to rely on third party manufacturers to complete all regulatory
requirements of drug product development.
Regulatory requirements call for the production of qualification lots
of drug product on a commercial scale which is equivalent to the process used to
manufacture the drug product tested in all Phase III clinical studies. Failure
to replicate a drug product process on a commercially viable scale could result
in a rejection of approval by the FDA or delay the timing of an NDA submission.
To date, InKine has not completed the validation lots of DIACOL and there is no
assurance that InKine will be able to produce DIACOL on a commercially viable
scale or that it will be able to repeat the process used to manufacture the
Phase III clinical lots of DIACOL. InKine's inability to manufacture DIACOL
would significantly delay InKine's commercialization of this product. InKine is
working with Pharmaceutical Manufacturing Research Services ("PMRS"), a contract
manufacturer, with regard to development by PMRS of a GMP (Good Manufacturing
Practice) tablet formulation process to manufacture drug product for DIACOL on a
commercial scale.
Additionally, in the event that DIACOL is not manufactured at PMRS,
InKine will need to secure other manufacturing arrangements. The process
developed by PMRS is proprietary, and in the event InKine desires to utilize, or
have another party utilize such technology, InKine may be required to make
license payments to PMRS. No assurance can be given that any such process would
be accepted by the FDA.
InKine also expects to conduct manufacturing development activities for
its other products under development. InKine is currently working with outside
contractors for the production of CBP-1011. InKine expects to expend significant
resources in the production of CBP-1011 and any other compounds under
development, and there can be no assurance that these efforts will be
successful.
Once developed, InKine's products will need to be manufactured in large
scale commercial quantities under strict GMP requirements prescribed by the FDA.
Because InKine has no
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manufacturing capabilities, it will need to depend on collaborators, licensees
or contract manufacturers for the manufacture of its products. InKine may not be
able to enter into acceptable manufacturing arrangements and, even if it does,
InKine will have limited control over the manufacturers. There can be no
assurance that the manufacturers will perform their obligations in a
satisfactory manner.
InKine has begun the process of seeking acceptable manufacturers for
its products. For example, InKine has identified a commercial manufacturer to
handle the production of DIACOL upon receiving FDA approval of the drug. In
addition, InKine is in the process of securing a commercial manufacturer for the
production of CBP-1011. There can be no assurance that InKine will be able to
enter into any of these manufacturing arrangements on acceptable terms, if at
all.
The FDA and other government agencies require extensive clinical
testing before biopharmaceutical products may be sold to consumers.
The research, testing, manufacture, distribution, advertising and
marketing of pharmaceutical products are subject to extensive regulation by
governmental authorities in the United States and other countries. For example,
the FDA requires Phase I, II and III clinical trials on all biopharmaceutical
products. The FDA must also confirm that current good manufacturing practices
were maintained during testing and manufacturing. This process can take many
years and requires substantial resources.
The FDA may not act favorably or quickly in reviewing submitted
applications. InKine may experience significant difficulties or costs as it
attempts to obtain FDA approvals. Such difficulties and costs could delay or
preclude InKine for marketing any products it may develop. The FDA may require
post-marketing testing and surveillance to monitor the effects of approved
products. The FDA may also place conditions on any approvals that could restrict
the commercial applications of such products. If InKine fails to comply with
these standards, the FDA may withdraw its product approval.
InKine is currently developing its products, however, none of InKine's
products have been approved by the FDA.
InKine's products are in various stages of development and the FDA
approval process, as set out below.
The Fc Receptor Technology
InKine is evaluating a number of product opportunities for the Fc
Receptor Technology, including the development of drugs for autoimmune diseases
and other diseases, including asthma, allergy and certain serious infectious
diseases, which will require strategic alliances with other entities. No
assurance can be given regarding InKine's ability to establish these alliances,
or their successful timing. The compound CBP-1011, which targets the Fc
Receptors, is currently in Phase III clinical trials for the treatment of ITP.
There can be no assurance that CBP-1011 will prove to be safe and have the
desired effect in clinical trial. There can be no assurance that it will receive
the required FDA and other regulatory approvals. Even if the approvals are
obtained, there can be no assurance that InKine or its collaborators will be
able to successfully commercialize CBP-1011.
The Thrombospondin Technology
InKine is evaluating a number of product opportunities for the
Thrombospondin Technology, which is in the preclinical stage of development,
including its use as an agent to inhibit tumor metastasis and as a cancer
imaging agent. InKine will seek to expand the research and development of
Thrombospondin Technology applications primarily through strategic alliances
with other entities. No
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assurance can be given as to InKine's ability to establish these alliances or
the success of the ongoing research concerning the Thrombospondin Technology.
DIACOL
A Phase I and Phase IIb dose ranging have been completed for DIACOL. In
April 1999, InKine concluded two pivotal Phase III clinical trials of DIACOL. In
each trial, DIACOL tablets were as effective as cherry flavored NuLYTELY Liquid
in the quality of colonic cleansing prior to colonoscopy. With a high degree of
statistical significance, each trial also indicated that DIACOL tablets were
better tolerated than NuLYTELY and were greatly preferred by patients. InKine is
preparing to submit a NDA for DIACOL to the FDA. There can be no assurance that
the NDA will be accepted by the FDA or that additional Phase III clinical trials
will not be required.
To date, no NDA has been submitted to the FDA for any product candidate
being developed by InKine and there can be no assurance that any the product or
compound will ever be submitted. InKine has not obtained approval by the FDA or
any other regulatory authority for marketing any drug. There can be no assurance
that there will even be approval for the FDA or any other regulatory authority
for any products developed by InKine or that InKine will be able to obtain the
labeling claims desired for its products or compounds. Data obtained from
preclinical studies and clinical trials are subject to varying interpretations,
which could delay, limit or prevent FDA regulatory approval. Delays or
rejections may be encountered based upon changes in FDA policy for drug approval
during the period of development and FDA regulatory review. Similar delays also
may be encountered in foreign countries. Any denials or delays in obtaining the
requisite approvals would likely have a material adverse effect on InKine.
InKine may never achieve a profitable level of operations.
InKine has incurred net operating losses since its inception on July 1,
1993. As of June 30, 1999, InKine had an accumulated deficit of approximately
$23.1 million. InKine expects to incur additional losses in the foreseeable
future. These losses are expected to increase and be substantial as InKine moves
closer to commercialization of its first product candidate, DIACOL. InKine also
expects its losses to increase as it expands its research and development
activities.
In addition, InKine has granted or committed to grant shares and
options to founding scientists and consultants to acquire an aggregate of
1,595,000 shares of Common Stock. The issuance of these shares and options with
respect to 950,000 shares will be subject to the satisfaction of product
development milestones tied to FDA filings and approvals and InKine's
achievement of certain net sales targets. InKine will incur substantial non-cash
charges to earnings equal to the fair value of these options, which will be
charged to operations at the time these milestones are achieved. Increases in
InKine's net operating loss or operating losses per share could have an adverse
effect on InKine's ability to secure additional financing.
InKine has no marketing, distribution or sales capabilities and little
experience in these areas. InKine will need to rely on third parties or develop
an internal sales and marketing group.
InKine has limited experience in marketing, distributing and selling
pharmaceutical products. InKine will need to develop an internal staff or rely
on collaborators, licensees or on arrangements with other third parties to
provide for the marketing, distribution and sales of its products. InKine may
not be able to enter into acceptable marketing, distribution or sales
arrangements with third parties and, even if it does, InKine will have limited
control over the third parties. There can be no assurance that the third party
will perform its obligations in a satisfactory manner.
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Substantially all of InKine's competitors have greater financial and
technological resources, better sales and marketing capabilities and more
experience in research and development than InKine.
InKine is developing products that will compete in three very
competitive segments of the biopharmaceutical industry. The three segments are
those which include (i) receptor based technologies, which include the Fc
Receptor Technology, (ii) purgative agents for clearing the colon, which include
DIACOL, and (iii) the treatment and prevention of cancer, which includes the
Thrombospondin Technology. Based on total assets and revenues, InKine is
significantly smaller than the majority of its competitors in these segments.
Therefore, InKine is likely to encounter significant competition with respect to
each of its product candidates primarily from the following competitors among:
PRODUCT CANDIDATES
<TABLE>
<CAPTION>
DIACOL Fc Receptor Technology Thrombospondin Technology
<S> <C> <C> <C>
COMPETITORS Braintree Laboratories, La Jolla Pharmaceutical Boston Life Sciences,
Inc. Company Inc.
Reedco, Inc. GeneLabs Technologies, Entremed, Inc.
C.B. Fleet Company, Inc. Human Genome Sciences
Inc. IDEC Pharmaceuticals
Schwarz Pharma Inc. Corporation
Immune Response
Corporation
Autoimmune, Inc.
Anergen, Inc.
</TABLE>
The financial strength of InKine's competitors is particularly
important in the biopharmaceutical industry, where technological innovations
occur rapidly. These technological innovations can dramatically effect the price
and effectiveness of a product line, and they can render a competing product
line obsolete. Therefore, InKine's competitors may use their financial resources
to develop competitive products that are cheaper and more effective than
InKine's products. These competitive products may render InKine's products
obsolete. Even if InKine's competitors do not develop better and more cost
effective products, they may be more successful than InKine in manufacturing and
marketing their products. InKine's competitors have greater financial resources,
and have developed successful sales and marketing programs. InKine has not
developed any sales and marketing programs.
In addition to InKine's competitors in the biotechnology industry,
colleges and universities, hospitals, government agencies and other research
organizations are conducting research and seeking patent protection for a
variety of products which may compete with InKine's products. Any of these
organizations could develop products which could render InKine's products
obsolete or non-competitive.
InKine's rights to develop all of its products are held pursuant to
license agreements. If any of these license agreements are terminated, the
licensor could demand the return of the licensed compound or technology and
InKine would no longer be able to develop, manufacture or sell the product
covered by that license.
InKine has acquired the worldwide exclusive rights to DIACOL, the Fc
Receptor Technology and the Thrombospondin Technology under various license
agreements. Each of the licensors under
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these agreements may terminate the license prior to its expiration date under
certain circumstances, including InKine's failure to comply with product
development commitments specified in the licenses. For example, certain of
InKine's licensing arrangements require specified levels of research and
development expenditures by InKine. If a license agreement is terminated, the
licensor could demand the return of the licensed compound or technology to the
licensor, and InKine would have to cease developing, manufacturing or selling
the product covered by that license. The termination provisions of each of the
licenses for InKine's products are outlined below.
The Fc Receptor Technology
The license with respect to the compounds comprising the Fc Receptor
Technology may be terminated by the licensor based on InKine's future
performance with respect to product development and InKine's failure to make
certain royalty payments. InKine is currently in compliance with all of the
requirements necessary to continue this license, but there can be no assurance
that it will continue to meet these obligations.
The ALW License for DIACOL
The ALW License, which covers DIACOL, may be terminated by the licensor
based on InKine's failure to commit certain development funding and make certain
royalty payments. InKine is currently in compliance with all of the requirements
necessary to continue this license, but there can be no assurance that it will
continue to meet these obligations. In addition, InKine's rights under the ALW
License will no longer be exclusive, and the minimum royalty payment will no
longer be due (although decreased accrual royalty payments will be due) if there
is no valid or enforceable patent on DIACOL or any other product under the ALW
License. InKine will owe royalties to the ALW Partnership on all sales of DIACOL
in the future.
The Thrombospondin Technology Royalty Agreement
InKine will owe the licensors royalties for the Thrombospondin
Technology based on sales. InKine will also owe the licensors options to
purchase an aggregate of up to 250,000 shares of common stock of InKine. The
options shall be issuable by InKine equally to MCP and Dr. Tuszynski upon the
achievement of certain milestones and targets. In addition, InKine will be
obligated to pay MCP royalties of 2% on net sales of the product based on the
Thrombospondin Technology by InKine or any of its sublicensees, and 10% of any
consideration received by InKine upon the achievement of certain milestones in
connection with the Thrombospondin Technology. Finally, InKine is to pay MCP
$200,000 per year to fund sponsored research for a minimum of two years, plus an
additional $200,000 for a third year upon FDA acceptance, if any, of a
Company-sponsored IND and $200,000 for a fourth year upon successful completion,
if any, of a Phase II clinical trial. InKine is currently in compliance with all
of the requirements necessary to continue this license, but there can be no
assurance that it will confirm to meet these obligations.
The termination of any of InKine's licenses or the loss of exclusivity
under any of the licenses could have a material adverse effect on InKine's
business, financial condition and results of operations because InKine may no
longer be able to develop, manufacture or sell its products.
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InKine does not have patent protection for all its products. Without
patent protection, InKine faces the risk of competitors developing similar
products which could render InKine's products obsolete or potentially infringe
on the patents of others. Even if InKine has or receives patent protection, the
patent may not afford adequate protection for InKine's invention, particularly
in the biopharmaceutical patent area, where the scope of patents is often
difficult to determine.
One of the products in InKine's family of compounds, CBP-1011, is not
patentable. InKine expects this compound will receive protection based on
approval for an Orphan Drug indication. As a result, InKine will have an
exclusive right to commercialize the compound for that particular indication for
seven years. No assurance can be given that the compound will in fact receive
such protection. The other compounds, consisting of DIACOL and the TSP-1
peptide, are the subject of patents and/or patent applications. Although InKine
believes that such patents and patent applications will cover InKine's rights to
use such technologies and product candidates in the United States, there can be
no assurance patents that have been issued, or additional patents, if any, that
will issue from pending patent applications, will afford adequate protection
against competitors or companies with competitive product candidates or
technologies.
A U.S. Patent issued in April 1997 covering the use of DIACOL prior to
colonoscopy and other uses and procedures, but patents on DIACOL are pending in
applications filed under the Patent Cooperation Treaty ("PCT") which designate
Europe, Japan and Canada. In addition, InKine has obtained the rights to foreign
patents pending and intends to apply for additional patents in foreign
jurisdictions covering its products and technologies. No assurance can be given
that any additional foreign patents will be issued or, if issued, that they will
afford adequate protection against foreign competitors or foreign companies with
competitive product candidates or technologies. In addition, there can be no
assurance that any domestic or foreign patents issued will not be challenged,
invalidated or circumvented, or that the scope of any claims granted thereunder
will provide meaningful proprietary protection or competitive advantages to
InKine, or, if challenged, that a court will find the patents to be valid and
enforceable. To date, there has emerged no consistent policy regarding the
breadth of claims that are properly accorded to biotechnology patents. The
commercial success of InKine will also depend upon avoiding infringement of
patents issued to competitors. InKine has not conducted an independent search to
determine the existence of any patents similar to those covering DIACOL or the
Thrombospondin Technology.
InKine's product candidates, DIACOL and CBP-1011 are still in the
development stage, and neither their formulations nor their methods of
manufacture have been finalized. No assurance can be given that the manufacture,
use or sale of InKine's product candidates will not infringe patent rights of
others. There can be no assurance that a license will be available to InKine, if
at all, upon terms and conditions acceptable to InKine or that InKine will
prevail in any patent litigation. If InKine does not obtain a license under any
such patents held by others, if such infringement claims are found to be valid,
or if InKine is not able to have such competing patents declared invalid, InKine
may be liable for significant money damages, may encounter significant delays in
bringing DIACOL and CBP-1011 to market, or may be precluded from participating
in the manufacture, use or sale of these products or methods of treatment
covered by such patents.
If InKine's employees, scientific consultants or collaborators develop
inventions or processes independently that may be applicable to InKine's product
candidates, disputes may arise about ownership of proprietary rights to those
inventions and processes. Such inventions and processes will not necessarily
become InKine's property, but may remain the property of those persons or their
employers. Protracted and costly litigation could be necessary to enforce and
determine the scope of
-9-
<PAGE> 13
InKine's proprietary rights. Failure to obtain or maintain patent and trade
secret protection, for any reason, could have a material adverse effect on
InKine.
Certain of InKine's patents, in particular the TSP-1 technology and
Fc-receptor technology may cover inventions developed with funds from United
States government agencies or within academic institutions from which InKine
acquired rights to such patents. As a result of these arrangements, the United
States government or such academic institutions may have rights to certain
inventions, including rights to the royalty-free use, but not sale, of the
invention or technology for its own purposes.
InKine will depend on reimbursement from third-party payors to reach
its sales goals. Third-party payors routinely limit reimbursement coverages and
exert pressure to reduce prices. InKine may receive less than full reimbursement
from government and other third party payors, and therefore InKine may have less
revenues from sales than if it had direct payments from its potential customers.
Successful sales, if any, of InKine's products in the United States and
other countries will depend on the availability of adequate reimbursement from
third-party payors such as governmental entities, managed care organizations and
private insurance plans. Reimbursement by a third-party payor may depend upon a
number of factors, including the payor's determination that use of a product is
safe and efficacious, medically necessary, appropriate for the specific patient,
cost effective and neither experimental nor investigational. Since reimbursement
approval is required from each payor individually, seeking these approvals is a
time-consuming and costly process. Third-parties routinely limit reimbursement
coverage and in many instances are exerting significant pressure on medical
suppliers to lower their prices. Significant uncertainty exists concerning
third-party reimbursement for the use of any pharmaceutical product
incorporating new technology. There is no assurance that third-party
reimbursement will be available for InKine's products, or that this
reimbursement, if obtained, will be adequate. Less than full reimbursement by
governmental and other third-party payors for products developed by InKine would
adversely affect the market acceptance of these products and would also have a
material adverse effect on InKine's results of operations. Health care
reimbursement systems vary from country to country. As a result, InKine cannot
assume that third-party reimbursement will be made available for InKine's
products under any foreign reimbursement system.
Approximately 10.5 million, or 45% of InKine's total outstanding
shares, have been or will be registered for resale upon the exercise of
currently exercisable warrants and options. The exercise of these warrants or
options could affect InKine's ability to obtain additional equity investors and
could cause the market price of the common stock to drop.
InKine has registered the following shares for resale without
restriction upon the exercise of currently exercisable warrants and stock
options:
- Approximately 1.7 million shares underlying warrants issued to
placement agents;
- Approximately .5 million (after anti-dilution adjustment)
shares underlying a warrant issued to an investment banking
firm in October 1995;
- Approximately 3.9 million shares issuable upon exercise of
options granted under InKine's Stock Option Plan; and
- Approximately 1.8 million shares issuable upon exercise of
options granted under InKine's Consultant Stock Option Plan.
-10-
<PAGE> 14
In addition, InKine has reserved approximately 2.4 million shares for
issuance upon exercise of options granted to Dr. Jacob, InKine's Chairman and
Chief Executive Officer, and approximately .2 million shares to certain
consultants, which have not been registered. Many of these options and warrants
are likely to be exercised at a time when InKine might be able to obtain
additional equity capital on more favorable terms. The exercise of the warrants
and options and the sale of the underlying shares could have a negative impact
on InKine's ability to raise new equity capital.
The relatively low level of trading in InKine's common stock may make
it highly volatile.
InKine's common stock trades on the Nasdaq SmallCap Market. The market
price of the common stock, like that of many other development-stage public
pharmaceutical or biotechnology companies, has been highly volatile and may
remain so for the foreseeable future. In addition, InKine's common stock has
been thinly traded on the Nasdaq SmallCap Market, which may affect the ability
of InKine's shareholders to sell shares of the common stock in the public
market. There can be no assurance that a more active trading market will develop
in the future.
InKine may be delisted from the Nasdaq SmallCap Market if it cannot
meet Nasdaq's listing criteria. Specifically, InKine's stock is at risk for
dropping below the minimum bid price requirement of $1.00 per share. If Nasdaq
delists InKine's stock, shareholders will have a much more difficult time
selling their shares.
InKine must meet specific requirements in order to maintain a listing
of its common stock on the Nasdaq SmallCap Market. InKine cannot be sure that it
will continue to meet these requirements. For example, Nasdaq requires a minimum
bid price of $1.00 per share and InKine's common stock dropped below $1.00 per
share on several occasions in the first two quarters of fiscal year 1999 but was
not delisted.
In the event of any delisting, investors would have to conduct trading
in the over-the-counter market. InKine's stock would trade on an electronic
bulletin board established for securities that do not meet the Nasdaq listing
requirements or in what are commonly referred to as the "pink sheets." As a
result, an investor would find it more difficult to dispose of, or to obtain
accurate price quotations for, InKine's securities. If InKine's stock was
delisted, and if it traded at prices below $5.00 per share, it would also be
subject to so-called "penny stock" rules. These rules impose additional sales
practice requirements on broker-dealers who sell these securities to persons
other than established customers and accredited investors. For transactions
covered by these rules, the broker-dealer must make a special suitability
determination for the purchase and must have received the purchaser's written
consent to the transaction prior to sale. Consequently, delisting from the
Nasdaq SmallCap Market, if it were to occur, could affect the ability of
broker-dealers to sell the common stock and the ability of InKine's shareholder
to sell their securities in the secondary market.
InKine's products bear certain product liability risks inherent in
biopharmaceutical products, and therefore, InKine could face significant
liability if claims are asserted against it for problems relating to the
clinical trials or subsequent sale of its products to consumers.
InKine's business may be affected by potential product liability risks
which are inherent in the testing, manufacturing and marketing of the products
being developed by InKine. There can be no assurance that if InKine's product
candidates are developed and marketed, product liability claims will not be
asserted against InKine, its collaborators or licensees. The use of products
developed by InKine in clinical trials and the subsequent sale of these products
is likely to cause InKine to bear all or a portion of those risks. These
litigation claims could have a material adverse effect on the business or
financial condition of InKine.
-11-
<PAGE> 15
The license covering the Fc Receptor Technology requires InKine to
maintain general liability and product liability insurance in amounts not less
than $2,000,000 per occurrence and $4,000,000 in the aggregate upon commencement
of human clinical trials. InKine currently maintains a product liability policy
covering it and its subsidiaries in the amount of $2,000,000 per occurrence and
$4,000,000 in the aggregate. InKine intends to maintain product liability
insurance in per-occurrence and aggregate amounts as are believed by InKine to
be adequate under the circumstances. There can be no assurance, however, that
insurance coverage would be adequate to protect InKine against future claims or
that a medical malpractice claim or other claims.
InKine's Certificate of Incorporation and New York corporate law have
provisions that could restrict a potential takeover of InKine. These provisions
could discourage bids for the common stock at premium prices, reduce the market
price of the common stock and potentially limit the voting and other rights of
the holders of common stock.
The Certificate of Incorporation of InKine authorizes 5,000,000 shares
of "blank check" preferred stock, which may be issued without shareholder
approval. InKine's Board of Directors can designate the rights and preferences
of the preferred stock. The Board of Director's authority to issue and fix the
rights and preferences of this stock may have the effect of delaying, deterring
or preventing a change in control of InKine. In addition, issuing preferred
stock may discourage bids for the common stock at a premium over the market
price and may adversely affect market price for the common stock, and the voting
rights and other rights of the holders of the common stock.
New York corporate law places restrictions on transactions with
beneficial holders of 20% of the outstanding voting shares of a corporation.
This restriction could reduce the potential for a takeover of InKine and
therefore reduce the chances of shareholders receiving a premium for their
shares over the market price.
InKine may acquire additional pharmaceutical products either through
the acquisition of a business, license or otherwise, and there can be no
assurance that InKine can successfully and profitably integrate any new business
into its own.
One of InKine's strategies is to acquire, or acquire rights to develop
and commercialize, additional pharmaceutical products. While InKine may
accomplish this objective by entering into licensing arrangements with the
owners of patents and proprietary technology, such as they did with respect to
DIACOL, InKine may also acquire established businesses through business
acquisitions, including corporate mergers, for the purpose of acquiring the
rights to product candidates and products. There can be no assurance that InKine
will be able to effect any acquisitions on terms believed to be favorable to
InKine, or successfully integrate into its operations any business it may
acquire.
Under New York law, various forms of business combinations can be
effected without shareholder approval. Accordingly, InKine's shareholders likely
will not receive or otherwise have the opportunity to evaluate any financial or
other information which may be made available to InKine in connection with any
future acquisition and must rely entirely upon the ability of management in
selecting, structuring and consummating acquisitions that are consistent with
InKine's business objectives. Although InKine will endeavor to evaluate the
risks inherent in a particular acquisition, there can be no assurance that
InKine will properly ascertain or assess all significant risk factors prior to
consummating any acquisition.
-12-
<PAGE> 16
InKine relies heavily on independent contractors for important aspects
of its business. There can be no assurance that these contractors will provide
timely service or otherwise honor their obligations to InKine.
InKine relies on independent contractors, independent organizations,
advisors and consultants who are employed on a part-time basis to provide
services, including substantially all aspects of manufacturing, regulatory
approval and clinical management. The provision of these services on a part-time
basis presents potential conflicts of interest with respect to other
professional or employment positions that these contractors may hold, including
conflicts as to availability, interest and loyalty, and could result in material
detriment to InKine should these conflicts be resolved against InKine's best
interest. No assurance can be given that the services of independent
contractors, organizations, advisors and consultants will be available to InKine
on a timely basis.
To the extent that consultants, key employees, vendors or other third
parties apply technological information independently developed by them or by
others to InKine's proposed products, disputes may arise as to the proprietary
rights to such information, which may not be resolved in favor of InKine.
Members of InKine's Scientific Advisory Board and other consultants are employed
by or have consulting agreements with third parties, and any inventions
discovered by such individuals are not likely to become the property of InKine.
InKine's advisors and consultants generally sign agreements that
provide for confidentiality of InKine's proprietary information. However, there
can be no assurance that InKine will be able to maintain the confidentiality of
InKine's technology, the assurance that InKine will be able to maintain the
confidentiality of InKine's technology, the dissemination of which could have a
material adverse effect on InKine's business.
InKine's Quarterly results fluctuate greatly making it very difficult
to predict InKine's performance from quarter to quarter.
InKine's operating results fluctuate significantly and may continue to
fluctuate due to several factors, including the following:
- Timing of research and development expenditures;
- Timing of successful product development, if any;
- Timing of new product announcements, if any;
- Release of new products, if any, by InKine and its
competitors; and
- Consummation of acquisitions.
As a result of such fluctuations, InKine's future performance related
to development and commercialization of its products and sales cannot be
predicted from quarter to quarter.
-13-
<PAGE> 17
RECENT EVENTS
On September 20, 1999, InKine sold a total of 2,307,691 shares of
common stock and warrants to purchase 761,538 shares of common stock to The Tail
Wind Fund, Ltd., Resonance Limited, Oxford Bioscience Partners II L.P. and
Oxford Bioscience Partners (Bermuda) II Limited Partnership for an aggregate
purchase price of $3 million. The warrants are exercisable at $1.78 per share
and may be exercised in whole or in part at any time prior to September 20,
2003. InKine agreed to file the Registration Statement, of which this Prospectus
is a part, which enables the selling shareholders to sell their shares,
including the shares which are issuable upon exercise of the warrants. In
connection with this registration, InKine also agreed to indemnify the selling
shareholders from liability caused by any untrue statements of material fact or
the failure to state a material fact in this Registration Statement.
USE OF PROCEEDS
InKine will not receive any proceeds from the sale of the shares of
common stock by the selling shareholders. All proceeds will be received by the
selling shareholders.
-14-
<PAGE> 18
SELLING SHAREHOLDERS
The table below sets forth information regarding ownership of InKine's
common stock by the selling shareholders on October 15, 1999 and the number of
shares of common stock to be sold by them under this Prospectus.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
SHARES SHARES OWNED SHARES OWNED
SHARES OFFERED PRIOR TO AFTER
SELLING SHAREHOLDERS OWNED(1) HEREBY(1) OFFERING(2) CLOSING(2)
-------------------- -------- --------- ----------- ----------
<S> <C> <C> <C> <C>
The Tail Wind Fund, Ltd. 2,046,153(3) 2,046,153(3) 7.7% *
Resonance Limited 511,538(4) 511,538(4) 1.9% *
Oxford Bioscience Partners II L.P. 2,042,406(5)(6) 292,406(5) 7.7% 6.6%
Oxford Bioscience Partners (Bermuda) 1,969,132(8) 219,132(7) 7.5% 6.6%
II Limited Partnership
</TABLE>
- -------------------------------------
* Represents ownership of less than 1% of the outstanding shares of
InKine's common stock.
(1) Assumes the exercise of all outstanding warrants owned by the selling
shareholders.
(2) Based on shares of common stock outstanding as of October 15, 1999 and
includes 761,538 shares of common stock which are issuable upon the
exercise of outstanding warrants owned by the selling shareholders.
(3) Includes 507,692 shares of common stock which are issuable upon the
exercise of outstanding warrants owned by the selling shareholder.
(4) Includes 126,923 shares of common stock which are issuable upon the
exercise of outstanding warrants owned by the selling shareholder.
(5) Includes 72,552 shares of common stock which are issuable upon the
exercise of outstanding warrants owned by the selling shareholder.
(6) This information is presented in reliance on information disclosed in a
Schedule 13-G filed by this selling shareholder, and includes 749,665
shares of common stock held by Oxford Bioscience Partners (Bermuda) II
Limited Partnership, an affiliate of the selling shareholder.
(7) Includes 54,371 shares of common stock which are issuable upon the
exercise of outstanding warrants owned by the selling shareholder.
(8) This information is presented in reliance on information disclosed in a
Schedule 13-G filed by this selling shareholder, and includes 1,000,335
shares of common stock held by Oxford Bioscience Partners II L.P., an
affiliate of the selling shareholder.
-15-
<PAGE> 19
PLAN OF DISTRIBUTION
InKine is registering all of the shares on behalf of the selling
shareholders. InKine will receive no proceeds from this offering. "Selling
shareholders," as used in this Prospectus, includes donees, pledgees,
transferees or other successors in interest selling shares received from the
named selling shareholders after the date of this Prospectus. The selling
shareholders may sell their shares from time to time. The selling shareholders
will act independently of InKine in making decisions with respect to the timing,
manner and size of each sale. The sales may be made on one or more exchanges or
in the over-the-counter market or otherwise, at prices and at terms then
prevailing or at prices related to the then current market price, or in
negotiated transactions. The selling shareholders may sell their shares by one
or more of, or a combination of, the following methods:
- purchases by a broker-dealer as principal and the resale by
such broker or dealer for its account pursuant to this
Prospectus;
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
- block trades in which the broker-dealer so engaged will
attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the
transaction;
- in options transactions; and
- for shares that qualify for resale under Rule 144 of the
Securities Act, under that rule rather than this Prospectus.
The selling shareholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
these transactions, broker-dealers may engage in short sales of the shares in
the course of hedging the positions they assume with the selling shareholders.
The selling shareholders also may sell shares short and redeliver the shares to
close out these short positions. The selling shareholders may enter into option
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer these shares through this Prospectus. The selling shareholders also may
loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
shares so loaned, or upon a default the broker-dealer may sell the pledged
shares by use of this Prospectus.
In effecting sales, broker-dealers engaged by the selling shareholders
may arrange for other broker-dealers to participate. Broker-dealers will receive
commissions or discounts from the selling shareholders in amounts to be
negotiated immediately prior to the sale. In offering the shares covered hereby,
the selling shareholders and any broker-dealers who execute sales for the
selling shareholders may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. Any profits realized by the
selling shareholders and the compensation of any broker-dealer may be deemed to
be underwriting discounts and commissions. Because the selling shareholders may
be deemed to be underwriters, they will be subject to the Prospectus delivery
requirements of the Securities Act. The selling shareholders have advised InKine
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale
-16-
<PAGE> 20
of the shares. There is no underwriter or coordinating broker acting in
connection with the proposed sale of shares by the selling shareholders.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the shares may not simultaneously engage
in market making activities with respect to InKine's common stock for a period
of two business days before the commencement of this distribution. In addition,
the selling shareholders will be subject to applicable provisions of the
Exchange Act and the associated rules and regulations under the Exchange Act,
including Regulation M, which provisions may limit the timing of purchases and
sales of shares of InKine's common stock by the selling shareholders. InKine
will make copies of this Prospectus available to the selling shareholders and
has informed the selling shareholders of the need for delivery of copies of this
Prospectus to potential purchasers at or before the time of any sale of the
shares.
InKine will file a supplement to this Prospectus, if required, under
Rule 424(b) under the Securities Act.
InKine has agreed to indemnify in certain circumstances the selling
shareholders against certain liabilities, including liabilities under the
Securities Act. The selling shareholders have agreed to indemnify in certain
circumstances InKine and certain related persons against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be
passed upon for InKine by Saul, Ewing, Remick & Saul LLP, Philadelphia,
Pennsylvania.
EXPERTS
The financial statements of InKine Pharmaceutical Company, Inc. as of
June 30, 1999 and 1998, and for the years then ended and for the period from
July 1, 1993 (commencement of operations) through June 30, 1999 included in the
Company's 1999 Annual Report on Form 10-K, have been incorporated by reference
herein and in the registration statement in reliance upon the report of KPMG
LLP, independent certified public accountants, also incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
The statements of operations, changes in shareholders' equity and cash
flows of InKine for the year ended June 30, 1997 and for the period (not
separately presented in the Form 10-K) from July 1, 1993 (inception) to June 30,
1997 contained in InKine's annual report on Form 10-K for the fiscal year ended
June 30, 1999, incorporated by reference in this Prospectus, have been audited
by Richard A. Eisner & Company, LLP, independent auditors, and is incorporated
by reference herein in reliance upon such report given upon the authority of
said firm as experts in accounting and auditing.
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<PAGE> 21
Until __________________, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
You should rely only on the information contained in this prospectus or
incorporated by reference. InKine has not authorized anyone to provide you with
additional or different information. InKine is not making an offer of these
securities in any jurisdiction where the offer or sale is not permitted. You
should not assume that the information contained in or incorporated by reference
in this prospectus is accurate as of any date other than the date on the front
cover of this prospectus, regardless of the date of delivery of this prospectus
or the date of any sale of the securities.
3,069,229
INKINE PHARMACEUTICAL COMPANY, INC.
Common Stock
------------------
PROSPECTUS
------------------
October __, 1999
<PAGE> 22
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses incurred in connection with the sale of the
securities being registered will be borne by InKine. Other than the SEC
registration fee, the amounts stated are estimates.
<TABLE>
<S> <C>
SEC registration fee................................................................ $ 1,409
Accounting fees and expenses........................................................ 10,000
Legal fees and expenses............................................................. 25,000
Printing............................................................................ 3,000
Miscellaneous expenses.............................................................. 2,000
---------
Total...................................................................... $ 41,409
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 721-726 of the New York Business Corporation Law empower a
corporation to indemnify any person, made, or threatened to be made, a party to
an action or proceeding, other than one by or in the right of the corporation,
whether civil or criminal, by reason of the fact that he or she was a director
or officer of the corporation or served such corporation in any capacity. A
corporation is empowered to indemnify such director or officer against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorney's fees, if such director or officer acted, in good faith, for a purpose
which he or she reasonably believed to be in the best interest of the
corporation and, in criminal actions or proceedings, had no reasonable cause to
believe that his or her conduct was unlawful.
InKine's Certificate of Incorporation provides that the directors of
InKine shall not be liable for damages for any breach of duty as directors,
except that a director shall be liable if a judgment or other final adjudication
adverse to such director establishes that his acts or omissions were in bad
faith or involved intentional misconduct or a knowing violation of law, or that
he personally gained a financial profit or other advantage to which he was not
legally entitled or that his acts violated Section 719 of the New York Business
Corporation Law.
InKine's Bylaws provide that the directors and officers of InKine shall
be indemnified and held harmless by InKine to the fullest extent currently
authorized by the New York Business Corporation Law. These provision indemnify
these persons against all expenses, liabilities, and losses that are reasonably
incurred or suffered. Further, the Bylaws provide for the advancement of
expenses to persons eligible for indemnification. In addition, the Bylaws
authorize InKine to maintain insurance to protect itself and any director or
officer of InKine against any expense, liability, or loss, whether or not InKine
would have the power to indemnify such persons against such expense, liability,
or loss under the New York Business Corporation Law.
II-1
<PAGE> 23
ITEM 16. EXHIBITS.
The following is a list of exhibits filed as part of the Registration
Statement:
<TABLE>
<CAPTION>
No. Title
- --- -----
<S> <C>
4.1 Purchase Agreement dated September 20, 1999 between InKine and certain
Investors listed on the signature page thereto.
4.2 Registration Rights Agreement dated September 20, 1999 between InKine
and certain Investors listed on the signature page thereto.
4.3 Form of Common Stock Purchase Warrant (In accordance with Item 601 of
Regulation S-K, similar warrants granted to the selling shareholders
have not been filed because they are identical in all material respects
except for the number of warrants granted to each selling shareholder.)
5 Opinion of Saul, Ewing, Remick & Saul LLP as to the legality of the
securities registered hereunder (to be filed by amendment).
23.1 Consent of KPMG LLP.
23.2 Consent of Richard A. Eisner & Company, LLP.
23.3 Consent of Saul, Ewing, Remick & Saul LLP (included in Exhibit 5, to be
filed by amendment).
24 Power of Attorney (contained on signature page of initial filing).
</TABLE>
ITEM 17. UNDERTAKINGS.
A. Rule 415 Offering
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in
the Registration Statement;
II-2
<PAGE> 24
Provided, however, that paragraphs (1)(i) and (1)(ii) above do not
apply if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the SEC
by the registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. Filing Incorporating Subsequent Exchange Act Documents By Reference.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
C. Request for Acceleration of Effective Date
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
D. Incorporated Annual and Quarterly Reports
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with this Prospectus, to each person to whom this Prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in this Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in this Prospectus, to deliver, or
cause to be delivered to each person to whom this Prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
this Prospectus to provide such interim financial information.
II-3
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Blue Bell, Commonwealth of Pennsylvania, on October
19,1999.
INKINE PHARMACEUTICAL
COMPANY, INC.
By: /s/ Leonard S. Jacob, M.D., Ph.D.
--------------------------------------
Leonard S. Jacob, M.D., Ph.D.
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby makes, constitutes and appoints Leonard S. Jacob and Robert
F. Apple, and each of them, with full power to act without the other, his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any and all amendments to this Registration Statement,
including post-effective amendments, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or any
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Leonard S. Jacob, M.D., Ph.D. Chairman and Chief October 19, 1999
- ------------------------------------------ Executive Officer and
Leonard S. Jacob, M.D., Ph.D. Director
/s/Taffy J. Williams, Ph.D. President and October 19, 1999
- ------------------------------------------ Chief Operating Officer
Taffy J. Williams, Ph.D. and Director
/s/Robert F. Apple Sr. Vice President and October 19, 1999
- ------------------------------------------ Chief Financial Officer
Robert F. Apple (principal financial and
accounting officer)
</TABLE>
II-4
<PAGE> 26
<TABLE>
<CAPTION>
<S> <C> <C>
/s/Martin Rose, M.D., J.D. Sr. Vice President Clinical October 19, 1999
- ------------------------------------------ Research and Regulatory
Martin Rose, M.D., J.D. Affairs
/s/J. R. LeShufy Director October 19, 1999
- ------------------------------------------
J. R. LeShufy
/s/Steven B. Ratoff Director October 19, 1999
- ------------------------------------------
Steven B. Ratoff
/s/Thomas P. Stagnaro Director October 19, 1999
- ------------------------------------------
Thomas P. Stagnaro
/s/Robert A. Vukovich, Ph.D. Director October 19, 1999
- ------------------------------------------
Robert A. Vukovich, Ph.D.
/s/Jerry Weisbach, Ph.D. Director October 19, 1999
- ------------------------------------------
Jerry Weisbach, Ph.D.
</TABLE>
II-5
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Title
--- -----
<S> <C> <C>
4.1 Purchase Agreement dated September 20, 1999 between
InKine and certain Investors listed on the signature
page thereto.
4.2 Registration Rights Agreement dated September 20,
1999 between InKine and certain Investors listed on
the signature page thereto.
4.3 Form of Common Stock Purchase Warrant (In accordance
with Item 601 of Regulation S-K, similar warrants
granted to the selling shareholders have not been
filed because they are identical in all material
respects except for the number of warrants granted to
each selling shareholder.)
23.1 Consent of KPMG LLP.
23.2 Consent of Richard A. Eisner & Company, LLP.
24 Power of Attorney (contained on signature page of
initial filing).
</TABLE>
<PAGE> 1
Exhibit 4.1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the 20th
day of September, 1999 by and between InKine Pharmaceutical Company, Inc., a New
York corporation (the "Company"), and the Investors set forth on the signature
page affixed hereto (each an "Investor" and collectively the "Investors").
RECITALS
A. The Company and the Investors are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Section 4(2) of the 1933 Act (defined below);
B. Each Investor wishes to purchase, and the Company wishes to
sell and issue to each Investor, upon the terms and conditions stated in this
Agreement, that number of shares of the common stock of the Company, $0.0001 par
value per share (the "Common Stock") and that number of warrants to purchase
Common Stock in the form attached hereto as EXHIBIT A (the "Warrants"), as are
set forth on the signature page attached hereto and executed by each such
Investor for an aggregate offering of up to $3,000,000; and
C. Contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, in the form attached hereto as EXHIBIT B (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and applicable state securities laws;
In consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. In addition to those terms defined above and elsewhere
in this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings here set forth:
1.1 "Affiliate" means, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by, or is under
common control with, such Person.
1.2 "Agreements" means this Agreement, the Registration Rights
Agreement, and the Warrants.
1.3 "Closing" means the consummation of the transactions
contemplated by this Agreement, and "Closing Date" shall have the meaning set
forth in Section 3, below.
<PAGE> 2
1.4 "Control" means the possession , direct or indirect, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
1.5 "Market Price" means the average of the five lowest
closing bid prices of the Company's Common Stock over the twenty-five (25)
trading days immediately preceding the applicable date.
1.6 "Material Adverse Effect" means a material adverse effect
on the (i) condition (financial or otherwise), business, assets, or results of
operations of the Company and its subsidiaries, taken as a whole; (ii) ability
of the Company to perform any of its material obligations under the terms of
this Agreement; or (iii) rights and remedies of the Investor under the terms of
this Agreement.
1.7 "Person" means an individual, corporation, limited
liability company, partnership, trust, business trust, association, joint stock
company, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, governmental authority or any other form of entity not
specifically listed herein.
1.8 "SEC Filings" has the meaning set forth in Section 4.6.
1.9 "Securities" means the Shares, the Warrants and the
Warrant Shares (defined below).
1.10 "Shares" means the shares of Common Stock being purchased
by the Investors hereunder.
1.11 "Warrant Shares" means the shares of Common Stock
issuable upon exercise of or otherwise pursuant to the Warrants.
1.12 "1933 Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
1.13 "1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2. Purchase and Sale of the Shares and Warrants. Subject to the terms
and conditions of this Agreement, each of the Investors hereby severally, and
not jointly, agrees to purchase, and the Company hereby agrees to sell and issue
to the Investor, the number of Shares and Warrants to purchase the number of
Shares of Common Stock set forth on such Investor's signature page attached
hereto. The number of shares to be purchased by each Investor shall be
determined by dividing such Investor's aggregate purchase price (as such
aggregate purchase price is set forth on such Investor's signature page attached
hereto), by an amount equal to 80% of the Market Price on the date hereof (the
"Purchase Price"). The number of shares of Common Stock purchasable by each
Investor pursuant to the Warrants shall be equal to 33% of the number
<PAGE> 3
of Shares purchased by such Investor and the exercise price of such Warrants
shall be 110% of the Market Price.
3. Closing. On the date of this Agreement, the Purchase Price shall be
determined. The Company shall promptly deliver to Investors' counsel, in trust,
a certificate or certificates, registered in such name or names as the Investors
shall have designated, representing all of the Shares and all of the Warrants,
with instructions that such certificates are to be held for release to the
Investors only upon payment of the Purchase Price to the Company. Upon receipt
by counsel to the Investors of the certificates, the Investors shall promptly
cause a wire transfer in same day funds to be sent to the account of the Company
as instructed in writing by the Company, in an amount representing the entire
Purchase Price, less the amount due pursuant to Section 10.5 below, which shall
be paid directly to Tail Wind, Inc. On the date the Company receives such funds,
the certificates evidencing the Shares and the Warrants shall be released to the
Investors (and such date shall be deemed the "Closing Date").
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors that:
4.1 Organization, Good Standing and Qualification. The Company
and each of its subsidiaries is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted and own its properties. The Company and each of
its subsidiaries is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property makes such qualification or licensing
necessary unless the failure to so qualify would not have a Material Adverse
Effect.
4.2 Authorization. The Company has the requisite corporate
power and authority and has taken all requisite action on the part of the
Company, its officers, directors and stockholders necessary for (i) the
authorization, execution and delivery of the Agreements, (ii) authorization of
the performance of all obligations of the Company hereunder or thereunder, and
(iii) the authorization, issuance (or reservation for issuance) and delivery of
the Securities. The Agreements constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors' rights generally and general principles of equity.
4.3 Capitalization. Set forth on Schedule 4.3 hereto is (a)
the authorized capital stock of the Company on the date hereof; (b) the number
of shares of capital stock issued and outstanding; (c) the number of shares of
capital stock issuable pursuant to the Company's stock plans; and (d) the number
of shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Shares and the Warrants) exercisable for, or
convertible into or exchangeable for any shares of capital stock. All of the
issued and outstanding shares of the Company's capital stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights. Except as set forth on Schedule 4.3, no Person is entitled to
preemptive or similar statutory or contractual rights with respect to any
securities of
<PAGE> 4
the Company. Except as set forth on Schedule 4.3, there are no outstanding
warrants, options, convertible securities or other rights, agreements or
arrangements of any character under which the Company is or may be obligated to
issue any equity securities of any kind, or in the case of the Company, to
transfer any equity securities of any kind of any subsidiary of the Company, and
except as contemplated by this Agreement, the Company and its subsidiaries are
not currently in negotiations for the issuance of any equity securities of any
kind, or in the case of the Company, the transfer of any equity securities of
any kind of any subsidiary of the Company. Except as set forth on Schedule 4.3,
the Company has no knowledge of any voting agreements, buy-sell agreements,
option or right of first purchase agreements or other agreements of any kind
among any of the securityholders of the Company relating to the securities of
the Company held by them. Except as set forth on Schedule 4.3, the Company has
not granted any Person the right to require the Company to register any
securities of the Company under the 1933 Act, whether on a demand basis or in
connection with the registration of securities of the Company for its own
account or for the account of any other Person.
4.4 Valid Issuance. The Company has reserved a sufficient
number of shares of Common Stock for the issuance of the Shares pursuant to this
Agreement and upon exercise of the Warrants. The Company will take such steps as
may be necessary to reserve sufficient shares for issuance pursuant to Section 7
below when such issuance is determinable. The Shares and Warrants are duly
authorized, and such Securities, along with the Warrant Shares when issued in
accordance herewith and with the terms of the Warrants, will be duly authorized,
validly issued, fully paid, non-assessable and free and clear of all
encumbrances and restrictions, except for restrictions on transfer imposed by
applicable securities laws.
4.5 Consents. The execution, delivery and performance by the
Company of the Agreements and the offer, issuance and sale of the Securities
require no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than filings that have been made
pursuant to applicable state securities laws and the requirements of the Nasdaq
Stock Market, and post-sale filings that the Company undertakes to file within
applicable periods pursuant to applicable state and federal securities laws.
4.6 Delivery of SEC Filings; Business. The Company has
provided the Investors with copies of the Company's most recent Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1998, and all other reports filed
by the Company pursuant to the 1934 Act since the filing of the Annual Report on
Form 10-KSB and prior to the date hereof (collectively, the "SEC Filings"). The
Company and its subsidiaries are engaged only in the business described in the
SEC Filings and the SEC Filings contain a complete and accurate description of
the business of the Company and its subsidiaries as of the date of such SEC
Filings.
4.7 Use of Proceeds. The proceeds of the sale of the Common
Stock and the Warrants hereunder shall be used by the Company for working
capital and general corporate purposes.
4.8 No Material Adverse Change. Since the filing of the
Company's most recent Annual Report on Form 10-KSB or as otherwise identified
and described in subsequent
<PAGE> 5
reports filed by the Company pursuant to the 1934 Act or as set forth on
Schedule 4.8 hereto, there has not been:
(i) any change in the consolidated assets, liabilities,
financial condition or operating results of the Company from that reflected in
the financial statements included in the Company's Quarterly Report on Form
10-QSB for the quarter ended March 31, 1999, except changes in the ordinary
course of business which have not had, in the aggregate, a Material Adverse
Effect;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss, whether
or not covered by insurance to any assets or properties of the Company or any of
its subsidiaries;
(iv) any waiver by the Company or any of its subsidiaries
of a valuable right or of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or any of its
subsidiaries, except in the ordinary course of business and which is not
material to the assets, properties, financial condition, operating results or
business of the Company and its subsidiaries taken as a whole (as such business
is presently conducted and as it is proposed to be conducted);
(vi) any material change or amendment to a material
contract or arrangement by which the Company or any of their subsidiaries or any
of its assets or properties is bound or subject;
(vii) any material labor difficulties or labor union
organizing activities with respect to employees of the Company or any of its
subsidiaries;
(viii) any transaction entered into by the Company or any
of its subsidiaries other than in the ordinary course of business; or
(ix) any other event or condition of any character that
might have a Material Adverse Effect.
4.9 SEC Filings; Material Contracts.
(a) During the preceding three years, as of its filing
date, each report filed by the Company with the SEC pursuant to the 1934 Act,
complied as to form in all material respects with the requirements of the 1934
Act and did not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
<PAGE> 6
(b) During the preceding three years, each registration
statement and any amendment thereto filed by the Company with the SEC pursuant
to the 1933 Act, as of the date such statement or amendment became effective,
complied as to form in all material respects with the requirements of the 1933
Act and did not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading; and each prospectus filed pursuant to Rule 424(b) under
the 1933 Act, as of its issue date and as of the closing of any sale of
securities pursuant thereto did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(c) Except as set forth on Schedule 4.3 hereto, there are
no agreements or instruments currently in force and effect that constitute a
warrant, option, convertible security or other right, agreement or arrangement
of any character under which the Company is or may be obligated to issue any
material amounts of any equity security of any kind, or to transfer any material
amounts of any equity security of any kind.
4.10 Form S-3 Eligibility. The Company is currently eligible
to register the resale of its Common Stock on a registration statement on Form
S-3 under the 1933 Act.
4.11 No Conflict, Breach, Violation or Default. The execution,
delivery and performance of the Agreements by the Company and the issuance and
sale of the Securities will not conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under (i) the
Company's Articles of Incorporation ("Articles") or the Company's Bylaws
("Bylaws"), both as in effect on the date hereof, or (ii) except where it would
not have a Material Adverse Effect, (a) any statute, rule, regulation or order
of any governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any subsidiary of the Company or any of their
properties, or (b) any agreement or instrument to which the Company or any such
subsidiary is a party or by which the Company or any such subsidiary is bound or
to which any of the properties of the Company or any such subsidiary is subject.
4.12 Tax Matters. The Company and its subsidiaries have timely
prepared and filed all tax returns required to have been filed by the Company
and its subsidiaries with all appropriate governmental agencies and timely paid
all taxes owed by them. There are no material unpaid assessments against the
Company or any of its subsidiaries nor, to the knowledge of the Company, any
basis for the assessment of any additional taxes, penalties or interest for any
fiscal period or audits by any federal, state or local taxing authority except
such as which are not material. All material taxes and other assessments and
levies that the Company or any subsidiary is required to withhold or to collect
for payment have been duly withheld and collected and paid to the proper
governmental entity or third party when due. There are no tax liens or claims
pending or to the knowledge of the Company threatened against the Company or any
subsidiary or any of their respective assets or property. There are no
outstanding tax sharing agreements or other such arrangements between the
Company or any subsidiary and any other corporation or entity.
<PAGE> 7
4.13 Title to Properties. Except as disclosed in the SEC
Filings, the Company and its subsidiaries have good and marketable title to all
real properties and all other properties and assets owned by them, in each case
free from liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to be
made thereof by them; and except as disclosed in the SEC Filings, the Company
and its subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.
4.14 Certificates, Authorities and Permits. The Company and
its subsidiaries possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by them, unless the failure to possess such certificates,
authorities, or permits would not have a Material Adverse Effect, and have not
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit that, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate have
a Material Adverse Effect.
4.15 No Labor Disputes. No material labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge of the
Company, is imminent.
4.16 Intellectual Property. The Company and its subsidiaries
have sufficient title or adequate rights or licenses to use the inventions,
know-how, patents, copyrights, trademarks, trade names, confidential information
and other intellectual property (collectively, "Intellectual Property Rights"),
material to and used in the conduct of the business now operated by them, or
presently employed by them, and neither the Company nor any of its subsidiaries
has received any notice of infringement of or conflict with asserted rights of
others with respect to any Intellectual Property Rights. Schedule 4.16 sets
forth a list by serial number and title of the patents and/or patent
applications owned or possessed by the Company or any of its subsidiaries. To
the knowledge of the Company such patents and the present activities of the
Company do not infringe any patent, copyright, trademark, trade name or other
proprietary rights of any third party.
4.17 Environmental Matters. Neither the Company nor any of its
subsidiaries is in violation of any statute, rule, regulation, decision or order
of any governmental agency or body or any court, domestic or foreign, relating
to the use, disposal or release of hazardous or toxic substances or relating to
the protection or restoration of the environment or human exposure to hazardous
or toxic substances (collectively, "Environmental Laws"), owns or operates any
real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and the Company
is not aware of any pending investigation that might lead to such a claim.
4.18 Litigation. Except as disclosed in the SEC Filings or on
Schedule 4.18 hereto, there are no pending actions, suits or proceedings against
or to the knowledge of the
<PAGE> 8
Company affecting the Company, any of its subsidiaries or any of their
respective properties that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material Adverse
Effect, or which are otherwise material in the context of the sale of the
Securities; and to the Company's knowledge, no such actions, suits or
proceedings are threatened or contemplated.
4.19 Financial Statements. The financial statements included
in each SEC Filing present fairly and accurately in all material respects the
consolidated financial position of the Company and its subsidiaries as of the
dates shown and their consolidated results of operations and cash flows for the
periods shown, and such financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis.
Except as set forth in the financial statements of the Company included in the
SEC Filings filed prior to the date hereof, to the best of the Company's
knowledge, the Company has no liabilities, contingent or otherwise, except those
which individually or in the aggregate are not material to the financial
condition or operating results of the Company.
4.20 Insurance Coverage. The Company and its subsidiaries
maintain in full force and effect insurance coverage that is customary for
comparably situated companies for the business being conducted, and properties
owned or leased, by the Company and its subsidiaries, and the Company reasonably
believes such insurance coverage to be adequate against all liabilities, claims
and risks against which it is customary for comparably situated companies to
insure.
4.21 Compliance with Nasdaq Continued Listing Requirements.
The Company is in compliance with all applicable Nasdaq continued listing
requirements. There are no proceedings pending or to the Company's knowledge
threatened against the Company relating to the continued listing of the
Company's Common Stock on the Nasdaq SmallCap Market and the Company has not
received any notice of, nor to the knowledge of the Company is there any basis
for, the delisting of the Common Stock from the Nasdaq SmallCap Market.
4.22 Acknowledgement of Dilution. The number of shares of
Common Stock issuable pursuant to this Agreement may increase substantially in
the event the Company issues securities to third parties in the future under
certain circumstances pursuant to Section 7 hereof. The Company's executive
officers and directors have studied and fully understand the nature of the
transactions being contemplated hereunder and recognize that they have a
potential dilutive effect.
4.23 Brokers and Finders. Except as set forth on Schedule 4.23
hereof, the Company shall have no liability or responsibility for the payment of
any commission or finder's fee to any third party in connection with or
resulting from this Agreement or the transactions contemplated by this
Agreement. No agreement by the Company with any third party will give rise to
any liability or responsibility of any Investor for a finder's fee or commission
related to this Agreement and the transactions contemplated hereby.
4.24 No Directed Selling Efforts or General Solicitation.
Neither the Company nor any Person acting on its behalf has conducted any
general solicitation or general advertising
<PAGE> 9
(as those terms are used in Regulation D) in connection with the offer or sale
of any of the Securities.
4.25 No Integrated Offering. Neither the Company nor any of
its Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would adversely affect reliance by
the Company on Section 4(2) of the 1933 Act for the exemption from registration
for the transactions contemplated hereby or would require registration of the
Securities under the 1933 Act.
4.26 Disclosures. No representation or warranty made under any
Section hereof contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained herein, in
light of the circumstances under which the statements were made, not misleading.
5. Representations and Warranties of the Investor. Each of the
Investors hereby severally, and not jointly, represents and warrants to the
Company that:
5.1 Organization and Existence. The Investor is a duly
organized or incorporated, validly existing corporation or limited liability
company in good standing under the laws of the jurisdiction of its incorporation
or organization and has all requisite corporate or limited liability company
power and authority to enter into this Agreement and the Registration Rights
Agreement and invest in the Securities pursuant to this Agreement.
5.2 Authorization. The execution, delivery and performance by
the Investor of the Agreements have been duly authorized and the Agreements will
each constitute the legal, valid and binding obligations of the Investor,
enforceable against the Investor in accordance with their terms.
5.3 Purchase Entirely for Own Account. The Securities to be
received by the Investor hereunder will be acquired for investment for the
Investor's own account, not as nominee or agent, and not with a view to the
resale or distribution of any part thereof, and the Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same. The Investor is not a registered broker dealer or an entity engaged in
the business of being a broker dealer.
5.4 Investment Experience. The Investor acknowledges that it
can bear the economic risk and complete loss of its investment in the Securities
and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the investment contemplated
hereby. The Investor acknowledges that the securities to be received by the
Investor hereunder involve a high degree of risk and shall not be purchased by a
Person who cannot afford the loss of their entire investment.
5.5 Disclosure of Information. The Investor has received all
of the SEC Filings and has had an opportunity to receive additional documents
related to the Company and to ask questions of and receive answers from the
Company regarding the Company, its business
<PAGE> 10
and the terms and conditions of the offering of the Securities. Neither such
inquiries nor any other due diligence investigation conducted by the Investor
shall modify, amend or affect the Investor's right to rely on the Company's
representations and warranties contained in this Agreement.
5.6 Restricted Securities. The Investor understands that the
Securities are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
5.7 Legends. It is understood that, until registration for
resale pursuant to the Registration Rights Agreement, certificates evidencing
the Securities may bear one or all of the following legends:
(a) "The shares represented by this certificate may
not be transferred without (i) the opinion of counsel satisfactory to the
corporation that such transfer may lawfully be made without registration under
the Securities Act of 1933 or qualification under applicable state securities
laws; or (ii) such registration or qualification."
(b) If required by the authorities of any state in
connection with the issuance of sale of the Securities, the legend required by
such state authority.
Upon registration for resale pursuant to the Registration
Rights Agreement, the Company shall promptly cause certificates evidencing the
Shares previously issued hereunder to be replaced with certificates which do not
bear such restrictive legends, and each Investor will thereafter sell the Common
Stock evidenced by such certificates only pursuant to the Prospectus (as defined
in the Registration Rights Agreement) or pursuant to Rule 144(k) of the 1933
Act.
5.8 Accredited Investor. The Investor is an "accredited
investor" as defined in Rule 501(a) of Regulation D, as amended, under the 1933
Act.
5.9 No General Solicitation. The Investor did not learn of the
investment in the Securities as a result of any public advertising or general
solicitation.
5.10 Reliance. The Investor understands and acknowledges that
(i) the Securities to be acquired by it hereunder are being offered and sold to
it without registration under the 1933 Act in a private placement that is exempt
from the registration provisions of the 1933 Act and (ii) the availability of
such exemption depends in part on and the Company will rely upon the accuracy
and truthfulness of the representations contained herein and the Investor hereby
consents to such reliance.
5.11 Transactions in Common Stock. The Investor has not,
during the thirty (30) trading days immediately preceding the date hereof, sold
or established a short position in, any shares of Common Stock.
<PAGE> 11
5.12 Address/Jurisdiction of Investors. The address and
jurisdiction of formation set forth opposite each Investors name on the
signature pages attached hereto are true and correct and constitute the domicile
or residence of such Investor.
6. Registration Rights Agreement. The parties acknowledge and agree
that part of the inducement for the Investor to enter into this Agreement is the
Company's execution and delivery of the Registration Rights Agreement. The
parties acknowledge and agree that simultaneously with the execution hereof, the
Registration Rights Agreement is being duly executed and delivered by the
parties thereto.
7. Covenants and Agreements of the Company.
7.1 Subsequent Sale at Lower Price.
(a) Required Adjustments. Subject to the exclusions
contained in Section 7.1(f) below, if during the period ending on the later of
(i) thirty-six (36) months following the Closing Date and (ii) thirty-three (33)
months following the date of effectiveness of the Registration Statement
covering the Shares as contemplated by the Registration Rights Agreement (the
"MFN Period"), the Company sells any shares of its Common Stock in a capital
raising transaction at a Per Share Selling Price lower than the Purchase Price
per share set forth in Section 2 hereof, the Purchase Price per share of the
Shares sold to the Investors hereunder shall be adjusted downward to equal such
lower Per Share Selling Price and Investors shall be entitled to receive the
additional shares as provided by Section 7.1(c) and additional Warrants equal to
33% of the additional shares. The Company shall give to the Investors written
notice of any such sale within 24 hours of the closing of any such sale. For so
long as an Investor owns 51% or more of the Shares originally acquired by such
Investor hereunder, such Investor shall be entitled to the full benefit of the
Purchase Price adjustment required by this Section 7.1 in respect of all Shares
originally acquired; in the event an Investor then owns less than 51% of the
Shares originally acquired by it hereunder, such Investor shall be entitled to
additional shares only with respect to the number of Shares originally acquired
and then owned by such Investor as provided in Section 7.1(c). The parties agree
that for purposes of this Section 7 (including determination of the number of
originally acquired shares held by an Investor) shares of Common Stock sold or
otherwise disposed of by an Investor shall be deemed to be those originally
acquired hereunder until that number is reduced to zero.
(b) Definitions.
(i) For the purposes of this Section 7.1,
the term "Per Share Selling Price" as used in this Section 7.1 shall include the
amount actually paid by third parties for each share of Common Stock. In the
event a fee in excess of 6% is paid by the Company in connection with such
transaction, any such excess amount shall be deducted from the selling price pro
rata to all shares sold in the transaction to arrive at the Per Share Selling
Price. A sale in a capital raising transaction of shares of Common Stock shall
include the sale or issuance of rights, options, warrants or convertible
securities under which the Company is or may become obligated to issue shares of
Common Stock, and in such circumstances the Per Share Selling Price of the
Common Stock covered thereby shall also include the exercise or conversion price
<PAGE> 12
thereof (in addition to the consideration received by the Company upon such sale
or issuance less the excess fee amount as provided above). In case of any such
security issued within the MFN Period in a "Variable Rate Transaction" or an
"MFN Transaction" (each as defined below), the Per Share Selling Price shall be
deemed to be the lowest conversion or exercise price at which such securities
are converted or exercised or might have been converted or exercised in the case
of a Variable Rate Transaction, or the lowest adjustment price in the case of an
MFN Transaction, each over the life of such securities. If shares are issued for
a consideration other than cash, the Per Share Selling Price shall be the fair
value of such consideration as determined in good faith by independent certified
public accountants mutually acceptable to the Company and the Investors.
(ii) The term "Variable Rate Transaction"
shall mean a transaction in which the Company issues or sells (a) any debt or
equity securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (x) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the Common Stock at any time
after the initial issuance of such debt or equity securities, or (y) with a
fixed conversion, exercise or exchange price that is subject to being reset at
some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock (but
excluding standard stock split anti-dilution provisions), or (b) any securities
of the Company pursuant to an "equity line" structure which provides for the
sale, from time to time, of securities of the Company which are registered for
resale pursuant to the 1933 Act.
(iii) The term "MFN Transaction" shall mean
a transaction in which the Company issues or sells any equity securities in a
capital raising transaction or series of related transactions (the "New
Offering") which grants to an investor (the "New Investor") the right to receive
additional shares based upon future equity raising transactions of the Company
on terms more favorable than those granted to the New Investor in the New
Offering.
(iv) The term "MFN Period" shall have the
meaning set forth in Section 7.1(a), above.
(c) Adjustment Mechanism. If an adjustment of the
Purchase Price is required pursuant to Section 7.1(a), the Company shall deliver
to the Investors within ten (10) business days of the closing of the transaction
giving rise to the adjustment ("Delivery Date") each Investor's pro-rata share
of such number of additional shares of Common Stock equal to (i) the aggregate
Purchase Price paid by such Investor divided by the adjusted per share purchase
price as required under Section 7.1(a), minus (ii) the total number of shares of
Common Stock previously delivered to that Investor hereunder; provided however,
that the Company shall effect such adjustment in cash, in whole or in part, to
the extent required by Section 7.1(d). In the event the Company fails to deliver
the additional shares (or cash, as the case may be) within five (5) days of the
Delivery Date, the Company shall be liable to the Investors for a penalty equal
to 2% of the aggregate Purchase Price adjustment per month (in each instance to
such Investor pro rata in accordance with its participation in this offering),
payable in Common Stock or cash, at each Investor's election.
<PAGE> 13
(d) Limitation on Number of Shares. No Investor shall
be required to accept, by way of any such adjustment a number of shares of the
Company such that the total number of such shares held by an Investor as of the
date of such adjustment would exceed 9.90% of the total outstanding Common Stock
of the Company. In addition, in no event shall the Company issue to the
Investors additional shares pursuant to this Section 7 such that the total
number of shares issued to the Investors (when added to the Warrant Shares)
pursuant to this Agreement would exceed 19.9% of the Company's issued and
outstanding shares of Common Stock on the date hereof. The Company shall effect
the adjustment required by this Section by cash refund (in an amount equal to
the amount paid plus 15%) to the extent necessary to avoid causing the aforesaid
limitations to be exceeded. Only shares acquired pursuant to this Agreement will
be included in determining whether the limitations would be exceeded for
purposes of this Section 7.1(d).
(e) Capital Adjustments. In case of any stock split or
reverse stock split, stock dividend, reclassification of the common stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company, the provisions of Section 7.1 shall be applied
in a fair, equitable and reasonable manner so as to give effect, as nearly as
may be, to the purposes hereof.
(f) Exclusions. Section 7.1(a) and Section 7.2 shall
not apply to (i) sales of shares of Common Stock by the Company upon
conversion or exercise of any convertible securities, options or warrants
outstanding prior to the date hereof pursuant to the terms of such securities,
options or warrants on the date hereof; or (ii) sales of shares of Common Stock
by the Company pursuant to the provisions of any option plan in existence on the
date hereof or a subsequently adopted and shareholder-approved employee option
or similar plan.
7.2 Limitation on Transactions.
(a) Until the date of effectiveness of the
Registration Statement covering the Shares as contemplated by the Registration
Rights Agreement, without the prior written consent of the Investors (which
consent may be withheld in the Investors' discretion), the Company shall not
issue or sell or agree to issue or sell for cash in a non-public offering any
equity securities in a capital raising transaction.
(b) Until the earlier of (i) the expiration of the MFN
Period, and (ii) the date on which the Investors own less than fifteen percent
(15%) of the Securities acquired hereunder, without the prior written consent of
the Investors (which consent may be withheld in the Investors' discretion), the
Company shall not issue or sell, or agree to issue or sell, for cash in a
non-public offering (A) any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive additional
shares of Common Stock either (x) at a conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of or
quotations for the Common Stock at any time after the initial issuance of such
debt or equity securities, or (y) with a fixed conversion, exercise or exchange
price that is subject to being reset at some future date after the initial
issuance of such debt or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the
<PAGE> 14
business of the Company or the market for the Common Stock (but excluding
standard stock split anti-dilution provisions), or (B) any securities of the
Company pursuant to an "equity line" structure which provides for the sale, from
time to time, of securities of the Company which are registered for resale
pursuant to the 1933 Act (clauses (A) and (B) are collectively "Variable Rate
Transactions"); provided, however, that the foregoing limitation on Variable
Rate Transactions shall not apply to any such securities convertible into an
amount of Common Stock at any time equal to or less than eight percent (8%) of
the Company's outstanding shares of Common Stock or, in the case of a Variable
Rate Transaction with a minimum conversion or exercise price of $1.25 per share
of Common Stock, equal to or less than fifteen percent (15%) of the Company's
outstanding shares of Common Stock; or (C) any other debt financing in excess of
$750,000.
7.3 Right of First Refusal in Future Transactions. Until the
earlier of (i) the expiration of the MFN Period and (ii) the date on which the
Investors own less than fifteen percent (15%) of the Securities acquired
hereunder, the Company shall give ten (10) calendar days advance written notice
to the Investors prior to any non-public offer or sale of any of its equity
securities or any securities convertible into or exchangeable or exercisable for
such securities by providing to the Investors a comprehensive term sheet
containing all significant business terms of such a proposed transaction. The
Investors shall have the right (pro rata in accordance with such Investor's
participation in this offering, or together with other investors selected by the
Investors and reasonably acceptable to the Company) to purchase all (but not
less than all) of such securities which are the subject of such a proposed
transaction for the same consideration and on the same terms and conditions as
contemplated for such third-party sale. The Investor(s)' right hereunder must be
exercised in writing by the Investor(s) within seven calendar days following
receipt of the notice from the Company. If, subsequent to the Company giving
notice to the Investors hereunder but prior to the Investor exercising its right
to participate (or the expiration of the seven-day period without response from
the Investor), the terms and conditions of the proposed third-party sale are
changed from that disclosed in the comprehensive term sheet provided to the
Investors, the Company shall be required to provide a new notice to the
Investors hereunder and the Investors shall have the right, which must be
exercised within five calendar days of such new notice, to exercise its rights
to purchase the securities on such changed terms and conditions as provided
hereunder. In the event the Investors do not exercise their rights hereunder, or
affirmatively decline to engage in the proposed transaction with the Company,
then the Company may proceed with such proposed transaction on the same terms
and conditions as noticed to the Investors (assuming the Investors have
consented to the transaction, if required, pursuant to Section 7.2 of this
Agreement). The rights and obligations of this Section 7.3 shall in no way
diminish the other rights of the Investor pursuant to this Section 7.
7.4 Opinion of Counsel. On or prior to the Closing Date, the
Company will deliver to the Investors the opinion of legal counsel to the
Company, in form and substance reasonably acceptable to the Investors,
addressing those legal matters set forth in Schedule 7.4 hereto.
7.5 Reservation of Common Stock Pursuant to Section 7.1 and
Exercise of Warrants. The Company hereby agrees at all times to reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of providing for the exercise of the Warrants, such number of shares
of Common Stock as shall from time to time
<PAGE> 15
equal the number of shares sufficient to permit the exercise of the Warrants in
accordance with the terms of the Warrants. In addition, as soon as such number
is determinable, the Company agrees to reserve such shares as may be necessary
to permit the issuances to the Investors required by Section 7.1.
7.6 Reports. For so long as the Investors beneficially own ten
percent (10%) or more of the Securities, the Company will furnish to the
Investors the following reports, each of which shall be provided to the
Investors by air mail (within one week after filing with the SEC, in the case of
SEC filings):
(a) Quarterly Reports. The Company's quarterly report
on Form 10-Q or, in the absence of such report, consolidated balance sheets of
the Company and its subsidiaries as at the end of such period and the related
consolidated statements of operations, stockholders' equity and cash flows for
such period and for the portion of the Company's fiscal year ended on the last
day of such quarter, all in reasonable detail and certified by a principal
financial officer of the Company to have been prepared in accordance with
generally accepted accounting principles, subject to year-end and audit
adjustments.
(b) Annual Reports. The Company's Form 10-K or, in the
absence of a Form 10-K, consolidated balance sheets of the Company and its
subsidiaries as at the end of such year and the related consolidated statements
of earnings, stockholders' equity and cash flows for such year, all in
reasonable detail and accompanied by the report on such consolidated financial
statements of an independent certified public accountant selected by the Company
and reasonably satisfactory to the Investor.
(c) Securities Filings. Copies of (i) all notices,
proxy statements, financial statements, reports and documents as the Company or
any subsidiary shall send or make available generally to its stockholders or to
financial analysts, promptly after providing same to the stockholders and (ii)
all periodic and special reports, documents and registration statements (other
than on Form S-8) which the Company or any subsidiary furnishes or files, or any
officer or director of the Company or any of its subsidiaries (in such person's
capacity as such) furnishes or files with the SEC.
7.7 Press Releases. Any press release or other publicity
concerning this Agreement or the transactions contemplated by this Agreement
shall be submitted to the Investors for comment at least two (2) business days
prior to issuance, unless the release is required to be issued within a shorter
period of time by law or pursuant to the rules of a national securities
exchange. The Company shall issue a press release concerning the fact and
material terms of this Agreement within three (3) business days of the Closing.
7.8 No Conflicting Agreements. The Company will not, and will
not permit its subsidiaries to, take any action, enter into any agreement or
make any commitment that would conflict or interfere in any material respect
with the obligations to the Investors under the Agreements.
<PAGE> 16
7.9 Insurance. So long as the Investors beneficially own any
Securities, the Company shall, and shall cause each subsidiary to, have in full
force and effect (a) insurance reasonably believed by the Company to be adequate
on all assets and activities of a type customarily insured, covering property
damage and loss of income by fire or other casualty, and (b) insurance
reasonably believed by the Company to be adequate protection against all
liabilities, claims and risks against which it is customary for companies
similarly situated as the Company and the subsidiaries to insure.
7.10 Compliance with Laws. So long as the Investors
beneficially own any Securities, the Company will use reasonable efforts, and
will cause each of its subsidiaries to use reasonable efforts, to comply with
all applicable laws, rules, regulations, orders and decrees of all governmental
authorities, except to the extent non-compliance (in one instance or in the
aggregate) would not have a Material Adverse Effect.
7.11 Listing of Underlying Shares and Related Matters. The
Company hereby agrees, promptly following the Closing of the transactions
contemplated by this Agreement, to take such action to cause the Shares and the
Warrant Shares to be listed on the Nasdaq SmallCap Market as promptly as
possible but no later than the effective date of the registration contemplated
by the Registration Rights Agreement. The Company further agrees that if the
Company applies to have its Common Stock or other securities traded on any other
principal stock exchange or market, it will include in such application the
Warrant Shares and will take such other action as is necessary to cause such
Common Stock to be so listed. For so long as the Investors beneficially own any
of the Securities, the Company will take all action necessary to continue the
listing and trading of its Common Stock on the Nasdaq SmallCap Market and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of such exchange, as applicable, to ensure
the continued eligibility for trading of the Shares and the Warrant Shares
thereon.
In the event it is determined that the issuance of the Shares
would or does constitute an issuance which, pursuant to the rules or regulations
of the Nasdaq SmallCap Market (or any other national securities exchange upon
which the Common Stock is or becomes traded), renders the Shares ineligible for
inclusion on the Nasdaq (or any other national securities exchange upon which
the Common Stock is then traded), then the Company shall promptly redeem such
number of Shares held by the Investors (pro rata in accordance with their
participation in this offering) which are so ineligible at a per share
redemption price equal to 100% of the per share Purchase Price for those Shares
as set forth in Section 2 hereof and shall thereupon reduce the Warrant exercise
price of all outstanding warrants to the Market Price on the date of such
redemption.
7.12 Corporate Existence. So long as the Investors
beneficially own any of the Shares or Warrants (but in no event longer than five
years), the Company shall maintain its corporate existence, except in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, as long as the surviving or successor entity in such transaction (a)
assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith, regardless of whether or not
the Company would have had a sufficient number of shares of Common Stock
authorized and available for issuance in order to
<PAGE> 17
fulfill its obligations hereunder and effect the exercise in full of all
Warrants outstanding as of the date of such transaction; (b) has no legal,
contractual or other restrictions on its ability to perform the obligations of
the Company hereunder and under the agreements and instruments entered into in
connection herewith; and (c) is a publicly traded corporation whose common stock
and the shares of capital stock issuable upon exercise of the Warrants are (or
would be upon issuance thereof) listed for trading on the Nasdaq SmallCap
Market, New York Stock Exchange or American Stock Exchange or, if not such a
publicly traded corporation, any such transaction involves the payment of cash
for all outstanding shares of Common Stock and the Investors have the right to
elect to have the acquiror purchase all Shares and Warrant Shares then held by
the Investors at the price paid by the Investors for such Shares and Warrant
Shares.
8. Survival. All representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants and agreements as of the date hereof and shall survive the
execution and delivery of this Agreement for a period of two years from the date
of this Agreement; provided, however, that the provisions contained in Section 7
hereof shall survive in accordance therewith.
9. Arbitration.
9.1 Scope. Resolution of any and all disputes arising from or
in connection with the Agreements, whether based on contract, tort, common law,
equity, statute, regulation, order or otherwise ("Disputes"), shall be
exclusively governed by and settled in accordance with the provisions of this
Section 9; provided, that the foregoing shall not preclude equitable or other
judicial relief to enforce the provisions hereof or to preserve the status quo
pending resolution of Disputes hereunder.
9.2. Binding Arbitration. The parties hereby agree to submit
all Disputes to arbitration for final and binding resolution. Either party may
initiate such arbitration by delivery of a demand therefor (the "Arbitration
Demand") to the other party. The arbitration shall be conducted in New York, New
York by a sole arbitrator selected by agreement of the parties not later than
fifteen (15) business days after delivery of the Arbitration Demand, or, failing
such agreement, appointed pursuant to the Commercial Arbitration Rules of the
America Arbitration Association, as amended from time to time (the "AAA Rules").
If the arbitrator becomes unable to serve, his successor(s) shall be similarly
selected or appointed.
9.3. Procedure. The arbitration shall be conducted pursuant to
the Federal Arbitration Act and such procedures as the parties may agree or, in
the absence of or failing such agreement, pursuant to the AAA Rules.
Notwithstanding the foregoing, (a) each party shall have the right to conduct
limited discovery of information relevant to the Dispute; (b) each party shall
provide to the other, reasonably in advance of any hearing, copies of all
documents that a party intends to present in such hearing; (c) all hearings
shall be conducted on an expedited schedule; and (d) except as otherwise
required by law and as required to conduct the proceedings, all proceedings
shall be confidential, except that either party may at its expense make a
stenographic record thereof.
<PAGE> 18
9.4. Timing. The arbitrator shall complete all hearings not
later than 90 days after his or her selection or appointment, and shall make a
final award not later than 30 days thereafter. The arbitrator shall apportion
all costs and expenses of the arbitration, including the arbitrator's fees and
expenses, and fees and expenses of experts ("Arbitration Costs") between the
prevailing and non-prevailing party as the arbitrator shall deem fair and
reasonable. In circumstances where a Dispute has been asserted or defended
against on grounds that the arbitrator deems frivolous, the arbitrator may
assess all Arbitration Costs against the non-prevailing party and may include in
the award the prevailing party's attorney's fees and expenses in connection with
any and all proceedings under this Section 9. Notwithstanding the foregoing, in
no event may the arbitrator award multiple or punitive damages.
10. Miscellaneous.
10.1 Successors and Assigns. This Agreement may not be
assigned by a party hereto without the prior written consent of the other party
hereto, except that without the prior written consent of the Company, but after
notice duly given, an Investor may assign its rights and delegate its duties
hereunder to an Affiliate (so long as such Affiliate reaffirms the Investors'
representations in Section 5 hereof), and without the prior written consent of
the Investors, but after notice duly given and in compliance with this
Agreement, the Company may assign its rights and delegate its duties hereunder
to any successor-in-interest corporation in the event of a merger or
consolidation of the Company with or into another corporation, or any merger or
consolidation of another corporation with or into the Company that results
directly or indirectly in an aggregate change in the ownership or Control of
more than 50% of the voting rights of the equity securities of the Company, or
the sale of all or substantially all of the Company's assets. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
10.2 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.3 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
10.4 Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given only upon delivery to each party to be notified by (i)
personal delivery, (ii) telex or telecopier, upon receipt of confirmation of
complete transmittal, or (iii) an internationally recognized overnight air
courier, addressed to the party to be notified at the address as follows, or at
such other address as such party may designate by ten days' advance written
notice to the other party:
<PAGE> 19
If to the Company:
InKine Pharmaceutical Company, Inc.
Sentry Park East
1720 Walton Road
Blue Bell, PA 19422
Attn: Robert F. Apple, Senior Vice President
and Chief Financial Officer
Facsimile: 610-260-9354
If to the Investors, to the addresses set forth on
the signature pages hereto.
10.5 Fees and Expenses. The parties hereto shall pay their own
costs and expenses in connection herewith, except that the Company shall pay to
Tail Wind, Inc. a sum equal to 1% of the Purchase Price paid by each Investor as
and for reimbursement for legal and due diligence expenses incurred in
connection herewith and such amount shall be paid at Closing from gross proceeds
of the offering.
10.6 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investors.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities purchased under this Agreement at the
time outstanding, each future holder of all such securities, and the Company.
10.7 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
10.8 Entire Agreement. This Agreement, including the Exhibits
and Schedules hereto, and the Registration Rights Agreement constitute the
entire agreement among the parties hereof with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
and thereof.
10.9 Further Assurances. The parties shall execute and deliver
all such further instruments and documents and take all such other actions as
may reasonably be required to carry out the transactions contemplated hereby and
to evidence the fulfillment of the agreements herein contained.
10.10 Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to principles of conflicts of laws.
<PAGE> 20
10.11 Consent of Investors. In the event the Company is
required to obtain the consent or approval of the Investors pursuant to the
terms of this Agreement, such consent or approval shall be deemed given by the
Investors upon the Investors owning a majority of the Securities acquired under
the Purchase Agreement giving the Company such consent or approval.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
The Company: INKINE PHARMACEUTICAL
COMPANY, INC.
By:_/s/ Leonard S. Jacob, M.D., Ph.D.
----------------------------------
Name: Leonard S. Jacob, M.D., Ph.D.
Title: Chairman and CEO
The Investors:
By:_/s/ Michael Darville
----------------------------------
Name: Michael Darville
Title: V.P., Dir., Treasurer
By:_/s/ Jason McCarroll
----------------------------------
Name: Jason McCarroll
Title: Authorized Signatory
By:_/s/ Resonance Limited
----------------------------------
Name: M. Mandel
Title:
Oxford Bioscience Partners II L.P.
By:_/s/ OBP Management II L.P.
----------------------------------
Name:
Title:
By:_/s/ Jonathan J. Fleming
----------------------------------
Name: Jonathan J. Fleming
Title: General Partner
<PAGE> 21
Oxford Bioscience Partners (Bermuda) II
Limited Partnership
By:_/s/ OBP Management (Bermuda) II
--------------------------------
Limited Partnership
--------------------------------
Name:
Title:
THE TAIL WIND FUND LTD.
MEESPIERSON (BAHAMAS) LTD.
ATTN: JASON MCCARRAOLL,
WINDERMERE HOUSE, 404 EAST BAY ST.,
PO BOX SS5539, NASSAU, BAHAMAS
TEL: 242 393 8777 FAX: 242 393 9021
PLEASE COPY ALL CORRESPONDENCE TO:
DAVID CROOK, ESQ.
THE TAIL WIND FUND LTD
C/O EASI
4TH FLOOR NO. 1 REGENT STREET
LONDON, SW1Y 4NS, UK
TEL: +44 171 468 7660 FAX 7657
<PAGE> 22
SCHEDULE 4.3
CAPITALIZATION OF THE COMPANY
<TABLE>
<S> <C> <C>
Common Stock outstanding at September 15, 1999 - 23,332,736
1995 IPO Warrants, expire Jan. 2000, $4 per share 183,632
1995 Consultant Warrants, expire Oct. 2000, $0.59 per share 546,399
1997 Private Placement Warrants, expire Nov. 2002, $1 per share 1,334,958
Options granted pursuant to "1993 Plan" 3,852,182
Options granted pursuant to Consultant Stock Option Plan 1,807,500
Options granted to CEO & Consultant outside of Plans 2,586,773
Shares issuable based on Sales milestones of CBP-1011 440,000
Shares issuable based on FDA milestones of second
generation drug from Fc-receptor technology 280,000
Options issuable pursuant to Consultant Stock Option Plan 692,500
Options issuable pursuant to "1993 Plan" 293,285
----------
12,017,229
Total Common Stock Outstanding and Issuable Shares 35,349,965
Authorized Common Stock Shares
50,000,000
Remaining Common Stock for Issuance 14,650,035
Authorized Preferred Stock 5,000,000
Preferred Stock Outstanding 0
</TABLE>
<PAGE> 23
SCHEDULE 4.8
MATERIAL ADVERSE CHANGES
None
<PAGE> 24
SCHEDULE 4.16
LIST OF PATENTS AND PATENT APPLICATIONS
PURGATIVE
Non-Aqueous colonic Purgative Formulations, U.S. Patent # 5,616,346, issued
April 1, 1997.
Non-Aqueous colonic Purgative Formulations, PCT application pending in Europe &
Canada, WO 97/41838.
Non-Aqueous colonic Purgative Formulations, pending worldwide, filed March 7,
1997.
FC RECEPTORS
Inhibition of Immune Clearance using Progesterone Analogues, U.S. Patent #
4,902,681, issued February 20, 1990.
Inhibition of Immune Clearance using Progesterone Analogues, U.S. Patent #
4,908,358, issued March 13, 1990.
Methods of Treating Disease Characterized by Interactions of IgG-Containing
Immune Complexes with Macrophage Fc Receptors Using Antiestrogenic
Benzothiophenes, U.S. Patent # 5,075,321, issued December 29, 1991.
Chimeric IGG Fc Receptors, U.S. Patent # 5,641,863, issued June 24, 1997.
DNA Encoding Chimeric IGG Fc Receptors, U.S. Patent # 5,641,875, issued June 24,
1997
Methods of Stimulating Phagocytosis, U.S. Patent # 5,776,910, issued July 7,
1998.
Methods of Stimulating Phagocytosis, U.S. Patent # 5,821,071 issued October 13,
1998.
Methods of Inhibiting Phagocytosis, U.S. Patent # 5,858,981, issued January
1999.
Methods of Inhibiting Phagocytosis, pending worldwide PCT/US96/11108 filed
September 30, 1994 and PCT /US96/10494, filed June 7, 1996.
Methods of Stimulating Phagocytosis, pending worldwide PCT US94/11111, filed
September 30, 1994.
Method of treating atherosclerosis, pending.
<PAGE> 25
THROMBOSPONDIN
Use of Thrombospondin to Promote Wound Healing, U.S. Patent # 5,155,038, issued
October 13, 1992.
Peptide Fragments and analogs of Thrombospondin and Methods of Use, U.S. Patent
# 5,190,918, issued March 2, 1993.
Method for using Synthetic Analogs of Thrombospondin for Inhibiting Metastasis
Activity, U.S. Patent 5,190,920, issued March 2, 1993.
Use of Peptide Analogs of Thrombospondin for the Inhibition of Angiogenic
Activity, U.S. Patent 5,200,397, issued April 6, 1993.
Cys-Ser-Val-Thr-Cys-Gly Specific Tumor Cell Adhesion Receptor, U.S. Patent #
5,367,059, issued November 22, 1994.
Peptide fragments and analogs of thrombospondin, U.S. Patent # 5,426,100, issued
June 20, 1995.
Method of Using Synthetic Analogs of Thrombospondin for Inhibiting Angiogenesis
Activity, U.S. Patent # 5,506,208, April 9, 1996.
Synthetic analogs of Thrombospondin and Therapeutic Use Thereof, U.S. Patent #
5,648,461, issued July 15, 1997.
Peptides having thrombospondin-like activity and their therapeutic use, U.S.
Patent # 5,654,277, issued August 5, 1997.
Peptide Fragments and Analogs of Thrombospondin, U.S. Patent # 5,840,692, issued
November 24, 1998.
Synthetic analogs of Thrombospondin and Therapeutic uses Thereof, pending.
Retroinverso polypeptides that mimic or inhibit thrombospondin activity,
pending.
Peptide Fragments and Analogs of Thrombospondin, pending.
Compositions for treating Doxorubicin-Resistant Tumor Cells, pending.
Cys-Ser-Val-Thr-Cys-Gly Specific Tumor Cell Adhesion Receptor, pending.
Most of the applications are pending worldwide.
<PAGE> 26
SCHEDULE 4.18
LITIGATION
None to which the Company is aware.
<PAGE> 27
SCHEDULE 4.23
BROKERS/FINDERS AND COMMISSIONS
Ladenburg Thalman & Co., Inc.
590 Madison Avenue
New York, New York 10022
Finders Fee - 4-1/2 % of Aggregate Capital Raised
Expense Allowance - $11,250
Paul Revere Capital Corp.
525 Nortern Blvd.
Great Neck NY 11021
Finders Fee - 1-1/2% of Aggregate Capital Raised
Expense Allowance - $3,750
<PAGE> 1
Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered into as of this 20th day of September, 1999 by and between InKine
Pharmaceutical Company, Inc., a New York corporation (the "Company"), and the
"Investors" named in that Purchase Agreement of even date herewith by and
between the Company and the Investors (the "Purchase Agreement").
The parties hereby agree as follows:
1. Certain Definitions
As used in this Agreement, the following terms shall have the
following meanings:
"Additional Registrable Securities" shall mean the shares of
Common Stock, if any, issued to the Investors pursuant to Section 7.1 of the
Purchase Agreement.
"Common Stock" shall mean the Company's Common Stock, par
value $0.0001 per share.
"Investors" shall mean the purchasers identified in the
Purchase Agreement and any affiliate of any Investor who is a subsequent holder
of any Warrants, Registrable Securities or Additional Registrable Securities.
"Prospectus" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities or Additional Registrable Securities covered by such Registration
Statement and by all other amendments and supplements to the prospectus,
including post-effective amendments and all material incorporated by reference
in such prospectus.
"Register," "registered" and "registration" refer to a
registration made by preparing and filing a registration statement or similar
document in compliance with the 1933 Act (as defined below), and the declaration
or ordering of effectiveness of such registration statement or document.
"Registrable Securities" shall mean the shares of Common Stock
issued and issuable to the Investors pursuant to the Purchase Agreement (other
than additional shares of Common Stock issuable pursuant to Section 7.1 of the
Purchase Agreement) and issuable upon the exercise of the Warrants.
"Registration Statement" shall mean any registration statement
of the Company filed under the 1933 Act that covers the resale of any of the
Registrable Securities or
<PAGE> 2
Additional Registrable Securities pursuant to the provisions of this Agreement,
amendments and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated by
reference in such Registration Statement.
"SEC" means the U.S. Securities and Exchange Commission.
"1933 Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Warrants" mean the warrants to purchase shares of Common
Stock issued to the Investors pursuant to the Purchase Agreement, the form of
which is attached to the Purchase Agreement as Exhibit A.
2. Registration.
(a) Registration Statements.
(i) Registrable Securities. Promptly
following the closing of the purchase and sale of Common Stock and Warrants
contemplated by the Purchase Agreement (the "Closing Date") (but no later than
thirty (30) days after the Closing Date), the Company shall prepare and file
with the SEC one Registration Statement on Form S-3 (or, if Form S-3 is not then
available to the Company, on such form of registration statement as is then
available to effect a registration for resale of the Registrable Securities,
subject to the Investors' consent) covering the resale of the Registrable
Securities in an amount equal to the number of shares of Common Stock issued to
the Investors on the Closing Date plus the number of shares of Common Stock
necessary to permit the exercise in full of the Warrants. Such Registration
Statement also shall cover, to the extent allowable under the 1933 Act
(including Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions with
respect to the Registrable Securities. The Company shall use its best efforts to
obtain from each person who now has piggyback registration rights a waiver of
those rights with respect to the Registration Statement. No securities shall be
included in the Registration Statement without the consent of each Investor
other than the Registrable Securities and the securities subject to piggyback
registration rights on the date hereof for which the Company could not obtain
waivers. The Registration Statement (and each amendment or supplement thereto,
and each request for acceleration of effectiveness thereof) shall be provided in
accordance with Sections 3(b) and (c) to the Investors and their counsel prior
to its filing or other submission.
(ii) Additional Registrable Securities. Upon
the written demand of any Investor, provided that such demand is within thirty
(30) days following the issuance of any additional shares of Common Stock to
such Investor pursuant to Section 7.1 of the Purchase Agreement, the Company
shall prepare and file with the SEC one Registration Statement on Form S-3 (or,
if Form S-3 is not then available to the Company, on such form of
<PAGE> 3
registration statement as is then available to effect a registration for resale
of the Additional Registrable Securities, subject to the Investor's consent)
covering the resale of the Additional Registrable Securities in an amount equal
to the number of shares of Common Stock issued to and designated in the demand
by such Investor. Such Registration Statement also shall cover, to the extent
allowable under the 1933 Act (including Rule 416), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Additional Registrable Securities.
The Company shall use its best efforts to obtain from each person who now has
piggyback registration rights a waiver of those rights with respect to the
Registration Statement. No securities shall be included in the Registration
Statement without the consent of the Investor other than the Registrable
Securities and Additional Registrable Securities and the securities subject to
piggyback registration rights on the date hereof for which the Company could not
obtain waivers. The Registration Statement (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof) shall be
provided in accordance with Sections 3(b) and (c) to the Investor and its
counsel prior to its filing or other submission.
(b) Expenses. The Company will pay all its expenses
associated with each registration, and the Investors will pay all their expenses
subject to the reimbursement provided for in the Purchase Agreement (and to the
extent funds have been returned to the Company, in respect thereof, the Company
will pay them over subject to receipt of appropriate documentation). In no event
will the Company reimburse Investors for discounts, commissions, fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals.
(c) Effectiveness.
(i) The Company shall use its best efforts
to have each Registration Statement declared effective as soon as practicable.
If (A) the Registration Statement covering Registrable Securities is not
declared effective by the SEC within three (3) months following the Closing
Date, or the Registration Statement covering Additional Registrable Securities
is not declared effective by the SEC within three (3) months following the
demand of an Investor relating to the Additional Registrable Securities covered
thereby, or with respect to either Registration Statement which is subject to
full review by the SEC staff, within four (4) months following the Closing Date
or demand, as the case may be (each, a "Registration Date"), (B) after a
Registration Statement has been declared effective by the SEC, sales cannot be
made pursuant to such Registration Statement (by reason of a stop order, or the
Company's failure to update the Registration Statement) but except as excused
pursuant to subparagraph (ii) below, or (C) the Common Stock generally or the
Registrable Securities specifically is not listed or included for quotation on
the Nasdaq National Market System, the Nasdaq Small Cap Market, the New York
Stock Exchange or the American Stock Exchange, then the Company will make
pro-rata payments to each Investor, as liquidated damages and not as a penalty,
in an amount equal to 2% of the aggregate amount paid by such Investor on the
Closing Date to the Company for shares of Common Stock still held by such
Investor for any month or pro rata for any portion thereof following the
Registration Date during which any of the events described in (A) or (B) or (C)
above occurs and is continuing (the "Blackout Period"). The Blackout Period
shall terminate upon (x) the effectiveness of the applicable Registration
Statement in the case of (A) and (B) above; (y) listing or inclusion of the
Common Stock on the Nasdaq National Market System, the
<PAGE> 4
Nasdaq Small Cap Market, the New York Stock Exchange or the American Stock
Exchange in the case of (C) above; and (z) in the case of the events described
in (A) or (B) above, the earlier termination of the Registration Period (as
defined in Section 3(a) below). The amounts payable as liquidated damages
pursuant to this paragraph shall be payable, at the option of the Company, in
lawful money of the United States or in shares of Common Stock at the Market
Price (as that term is defined in the Purchase Agreement), and amounts payable
as liquidated damages shall be paid monthly within two (2) business days of the
last day of each month following the commencement of the Blackout Period until
the termination of the Blackout Period. Amounts payable as liquidated damages
hereunder shall cease when an Investor no longer holds Warrants or Registrable
Securities, or Additional Registrable Securities, as applicable. Notwithstanding
the above, if after twelve (12) months, the Company in good faith determines
that it is unable to remedy the events set forth in (A), (B) or (C), the Company
may notify the Investors that the liquidated damages will cease to accrue and,
at the Investor's election, the Company shall redeem, in whole or in part, as
instructed by the Investor, the shares of Common Stock and Warrants held by such
Investor for an amount equal to 120% of the amount originally invested by such
Investor. If an Investor does not elect to have its Common Stock and Warrants so
redeemed, the Company shall use reasonable efforts to remedy the events set
forth in (A), (B) and (C), but the Investor will no longer be entitled to
further liquidated damages pursuant to this Agreement.
(ii) For not more than twenty (20)
consecutive trading days or for a total of not more than thirty (30) trading
days in any twelve (12) month period, the Company may delay the disclosure of
material non-public information concerning the Company and terminate or suspend
effectiveness of any registration contemplated by this Section containing such
information, if disclosure of such information at the time is not, in the good
faith opinion of the Company, in the best interests of the Company (an "Allowed
Delay"); provided, that the Company shall promptly (a) notify the Investors in
writing of the existence of (but in no event, without the prior written consent
of an Investor, shall the Company disclose to such Investor any of the facts or
circumstances regarding) material non-public information giving rise to an
Allowed Delay, and (b) advise the Investors in writing to cease all sales under
the Registration Statement until the end of the Allowed Delay. The duration of
the Restricted Period as provided in the Purchase Agreement will be extended by
the number of days of any and all Allowed Delays.
(d) Underwritten Offering. If any offering pursuant
to a Registration Statement pursuant to Section 2(a) hereof involves an
underwritten offering, the Company shall have the right to select an investment
banker and manager to administer the offering, which investment banker or
manager shall be reasonably satisfactory to the Investors.
3. Company Obligations. The Company will use its best efforts
to effect the registration of the Registrable Securities and Additional
Registrable Securities in accordance with the terms hereof, and pursuant thereto
the Company will, as expeditiously as possible:
(a) use its best efforts to cause such Registration
Statement to become effective and to remain continuously effective for a period
that will terminate upon the earlier of the date on which all Registrable
Securities or Additional Registrable Securities, as the case may
<PAGE> 5
be, covered by such Registration Statement, as amended from time to time, have
been sold or are eligible for sale under Rule 144(k) promulgated under the 1933
Act (the "Registration Period");
(b) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement and the Prospectus as
may be necessary to keep the Registration Statement effective for the period
specified in Section 3(a) and to comply with the provisions of the 1933 Act and
the 1934 Act with respect to the distribution of all Registrable Securities and
Additional Registrable Securities; provided that, at least three (3) days prior
to the filing of a Registration Statement or Prospectus, or any amendments or
supplements thereto, the Company will furnish to the Investors copies of all
documents proposed to be filed, which documents will be subject to the comments
of the Investors;
(c) permit one counsel designated by the Investors to
review each Registration Statement and all amendments and supplements thereto no
fewer than five (5) days prior to their filing with the SEC and not file any
document to which such counsel reasonably objects in a timely manner;
(d) furnish by courier, pursuant to the notice
requirements of Section 10.4 of the Purchase Agreement, to the Investors and
their legal counsel (i) promptly after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company, one copy of any
Registration Statement and any amendment thereto, including financial statements
and schedules, each preliminary prospectus and Prospectus and each amendment or
supplement thereto, and each letter written by or on behalf of the Company to
the SEC or the staff of the SEC, and each item of correspondence from the SEC or
the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
Prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as each Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities and
Additional Registrable Securities owned by such Investor;
(e) in the event the Company selects an underwriter
for the offering, the Company shall enter into and perform its reasonable
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the underwriter of such offering;
(f) if required by the underwriter, at the request of
the Investors, the Company shall furnish, on the date that Registrable
Securities or Additional Registrable Securities, as applicable, are delivered to
an underwriter, if any, for sale in connection with the Registration Statement
(i) an opinion, dated as of such date, from counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriter and the Investors and (ii) a letter, dated such date, from the
Company's independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriter and the Investors;
<PAGE> 6
(g) make effort to prevent the issuance of any stop
order or other suspension of effectiveness and, if such order is issued, obtain
the withdrawal of any such order at the earliest possible moment (except as
allowed under Section 2(c)(ii) hereof);
(h) use its reasonable best efforts to register or
qualify or cooperate with the Investors and their counsel in connection with the
registration or qualification of such Registrable Securities or Additional
Registrable Securities, as applicable, for offer and sale under the securities
or blue sky laws of such jurisdictions as the Investors reasonably request in
writing and do any and all other reasonable acts or things necessary or
advisable to enable the distribution in such jurisdictions of the Registrable
Securities or Additional Registrable Securities covered by the Registration
Statement;
(i) cause all Registrable Securities or Additional
Registrable Securities covered by a Registration Statement to be listed on each
securities exchange, interdealer quotation system or other market on which
similar securities issued by the Company are then listed;
(j) immediately notify the Investors, at any time
when a Prospectus relating to the Registrable Securities or Additional
Registrable Securities is required to be delivered under the Securities Act,
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 then existing, and subject to
Section 2(c)(ii), at the request of any such holder, promptly prepare and
furnish to such holder 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 Registrable Securities or Additional
Registrable Securities, as applicable, 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 then existing; and
(k) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act,
take such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities and Additional Registrable
Securities, if applicable, hereunder; and make available to its security
holders, as soon as reasonably practicable, but not later than the Availability
Date (as defined below), an earnings statement covering a period of at least
twelve months, beginning after the effective date of each Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the 1933 Act (for the purpose of this subsection 3(k), "Availability
Date" means the 45th day following the end of the fourth fiscal quarter that
includes the effective date of such Registration Statement, except that, if such
fourth fiscal quarter is the last quarter of the Company's fiscal year,
"Availability Date" means the 90th day after the end of such fourth fiscal
quarter).
<PAGE> 7
4. Obligations of the Investors.
(a) It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities or Additional Registrable
Securities, as applicable, that each Investor shall furnish in writing to the
Company such information regarding itself, the Registrable Securities or
Additional Registrable Securities, as applicable, held by it and the intended
method of disposition of the Registrable Securities or Additional Registrable
Securities, as applicable, held by it, and any other information as shall be
reasonably required to effect the registration of such Registrable Securities or
Additional Registrable Securities, as applicable, and shall execute such
documents in connection with such registration as the Company may reasonably
request. At least ten (10) business days prior to the first anticipated filing
date of any Registration Statement, the Company shall notify each Investor of
the information the Company requires from such Investor if such Investor elects
to have any of the Registrable Securities or Additional Registrable Securities
included in the Registration Statement. An Investor shall provide such
information to the Company at least five (5) business days prior to the first
anticipated filing date of such Registration Statement if such Investor elects
to have any of the Registrable Securities or Additional Registrable Securities
included in the Registration Statement.
(b) Each Investor, by its acceptance of the
Registrable Securities and Additional Registrable Securities, if any, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of a Registration Statement hereunder, unless
such Investor has notified the Company in writing of its election to exclude all
of its Registrable Securities or Additional Registrable Securities, as
applicable, from the Registration Statement, in which case the Investor shall be
deemed to have waived its rights to have Registrable Securities or Additional
Registrable Securities, as the case may be, registered under this Agreement,
unless the Investor reasonably believes sales of its securities under such
Registration Statement may violate federal securities laws.
(c) In the event the Company determines to engage the
services of an underwriter, each Investor agrees to enter into and perform its
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
dispositions of the Registrable Securities or Additional Registrable Securities,
as applicable.
(d) Each Investor agrees that, upon receipt of any
notice from the Company of the happening of any event rendering a Registration
Statement no longer effective, such Investor will immediately discontinue
disposition of Registrable Securities or Additional Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities or
Additional Registrable Securities, until the Investor's receipt of the copies of
the supplemented or amended prospectus filed with the SEC and declared effective
and, if so directed by the Company, the Investor shall deliver to the Company
(at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Investor's possession of the
prospectus covering the Registrable Securities or Additional Registrable
Securities, as applicable, current at the time of receipt of such notice.
<PAGE> 8
(e) No Investor may participate in any underwritten
registration hereunder unless it (i) agrees to sell the Registrable Securities
or Additional Registrable Securities, as applicable, on the basis provided in
any underwriting arrangements in usual and customary form entered into by the
Company, (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (iii) agrees to pay its
pro rata share of all underwriting discounts and commissions and any expenses in
excess of those payable by the Company pursuant to the terms of this Agreement.
5. Indemnification.
(a) Indemnification by Company. The Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law the
Investors, each of their officers, directors, partners and employees and each
person who controls the Investors (within the meaning of the 1933 Act) against
all losses, claims, damages, liabilities, costs (including, without limitation,
reasonable attorney's fees) and expenses imposed on such person caused by (i)
any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or any preliminary prospectus 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 light of the circumstances under which they were made, not
misleading, except insofar as the same are based entirely upon any information
furnished in writing to the Company by such Investors, expressly for use
therein, or (ii) any violation by the Company of any federal, state or common
law, rule or regulation applicable to the Company in connection with any
Registration Statement, Prospectus or any preliminary prospectus, or any
amendment or supplement thereto, provided that such violation was not caused by
the negligence or willful misconduct of the Investor and shall reimburse in
accordance with subparagraph (c) below, each of the foregoing persons for any
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claims. The foregoing is subject to the
condition that, insofar as the foregoing indemnities relate to any untrue
statement, alleged untrue statement, omission or alleged omission made in any
preliminary prospectus or Prospectus that is eliminated or remedied in any
Prospectus or amendment or supplement thereto, the above indemnity obligations
of the Company shall not inure to the benefit of any indemnified party if a copy
of such corrected Prospectus or amendment or supplement thereto had been made
available to such indemnified party and was not sent or given by such
indemnified party at or prior to the time such action was required of such
indemnified party by the 1933 Act and if delivery of such Prospectus or
amendment or supplement thereto would have eliminated (or been a sufficient
defense to) any liability of such indemnified party with respect to such
statement or omission. Indemnity under this Section 5(a) shall remain in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the permitted transfer of the Registrable
Securities and Additional Registrable Securities.
(b) Indemnification by Holder. In connection with any
registration pursuant to the terms of this Agreement, each Investor will furnish
to the Company in writing such information as the Company reasonably requests
concerning the holders of Registrable
<PAGE> 9
Securities and Additional Registrable Securities or the proposed manner of
distribution for use in connection with any Registration Statement or Prospectus
and agrees, severally but not jointly, to indemnify and hold harmless, to the
fullest extent permitted by law, the Company, its directors, officers,
employees, stockholders and each person who controls the Company (within the
meaning of the 1933 Act) against all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable attorney's fees) and expenses imposed
on such person caused by (i) any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or any
preliminary prospectus or 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 light of the circumstances under
which they were made, not misleading, to the extent, but only to the extent that
such untrue statement or omission is contained in any information furnished in
writing by such Investor to the Company specifically for inclusion in such
Registration Statement or Prospectus or amendment or supplement thereto and that
such information was substantially relied upon by the Company in preparation of
any Registration Statement or Prospectus or any amendment or supplement thereto;
or (ii) any violation by the Investor of any federal, state or common law, rule
or regulation applicable to the Investor in connection with the Registration
Statement, Prospectus or any preliminary prospectus or any amendment or
supplement thereto, provided that such violation was not caused by the
negligence or willful misconduct of the Company, and shall reimburse in
accordance with subparagraph (c) below, each of the foregoing persons for any
legal and other expenses reasonably incurred in connection with investigating or
defending such claims. In no event shall the liability of an Investor be greater
in amount than the dollar amount of the proceeds (net of all expense paid by
such Investor and the amount of any damages such holder has otherwise been
required to pay by reason of such untrue statement or omission) received by such
Investor upon the sale of the Registrable Securities or Additional Registrable
Securities included in the Registration Statement giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any
person entitled to indemnification hereunder shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; provided that any
person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person unless (a)
the indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and
provided, further, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
hereunder, except to the extent that such failure to give notice shall
materially adversely affect the indemnifying party in the defense of any such
claim or litigation. It is understood that the indemnifying party shall not, in
connection with any proceeding in the same jurisdiction, be liable for fees or
expenses of more than one separate firm
<PAGE> 10
of attorneys at any time for all such indemnified parties. No indemnifying party
will, except with 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 release from all liability in respect of such claim or litigation.
(d) Contribution. If for any reason the
indemnification provided for in the preceding paragraphs (a) and (b) is
unavailable to an indemnified party or insufficient to hold it harmless, other
than as expressly specified therein, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations. No person guilty of
fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act
shall be entitled to contribution from any person not guilty of such fraudulent
misrepresentation. In no event shall the contribution obligation of a holder of
Registrable Securities or Additional Registrable Securities be greater in amount
than the dollar amount of the proceeds (net of all expenses paid by such holder
and the amount of any damages such holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission) received by it upon the sale of the Registrable Securities or
Additional Registrable Securities giving rise to such contribution obligation.
6. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be
amended only by a writing signed by the parties hereto. The Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written consent to
such amendment, action or omission to act, of each Investor.
(b) Notices. All notices and other communications
provided for or permitted hereunder shall be made as set forth in Section 10.4
of the Purchase Agreement.
(c) Assignments and Transfers by Investors. This
Agreement and all the rights and obligations of the Investors hereunder may not
be assigned or transferred to any transferee or assignee except to an affiliate
of an Investor who is a subsequent holder of any Warrants, Registrable
Securities or Additional Registrable Securities.
(d) Assignments and Transfers by the Company. This
Agreement may not be assigned by the Company without the prior written consent
of each Investor then holding Registrable Securities, except that without the
prior written consent of the Investors, but after notice duly given, the Company
shall assign its rights and delegate its duties hereunder to any
successor-in-interest corporation, and such successor-in-interest shall assume
such rights and duties, in the event of a merger or consolidation of the Company
with or into another corporation or the sale of all or substantially all of the
Company's assets.
(e) Benefits of the Agreement. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors
<PAGE> 11
and assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
(f) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(g) Titles and Subtitles. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
(h) Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms to the fullest extent permitted by law.
(i) Further Assurances. The parties shall execute and
deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions contemplated
hereby and to evidence the fulfillment of the agreements herein contained.
(j) Entire Agreement. This Agreement is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(k) Applicable Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York without
regard to principles of conflicts of law.
7. Consent of Investors. In the event the Company is
required to obtain the consent or approval of the Investors pursuant to the
terms of this Agreement, such consent or approval shall be deemed given by the
Investors upon the Investors owning a majority of the Securities acquired under
the Purchase Agreement giving the Company such consent or approval.
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
The Company: INKINE PHARMACEUTICAL
COMPANY, INC.
By: /s/ Robert Apple
Name: Robert Apple
Title: CFO
The Investors:
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
<PAGE> 13
The Investor: The Tail Wind Fund Ltd.
(Print full name here)
By: /s/ Michael Darville
Name: Michael Darville
Title: V.P., Treasurer & Director
The Tail Wind Fund Ltd.
MeesPierson (Bahamas) Ltd.
Attn: Jason McCarroll, By: /s/ Jason McCarroll
Windermere House, 404 East Bay St., Name: Jason McCarroll
PO Box SS 5539, Nassau Bahamas Title: Auth. Sig.
Tel: 242-393-8777 Fax: 242-393-9021
Aggregate Purchase Price: $2 million
Number of Shares of Common Stock: 1,538,461
Number of Warrants: 507 692 (equal to 33% of total number of Shares)
Effective per share Purchase Price of Shares: $1.30
Exercise price of Warrants: $1.78 (equal to 110% of Market Price)
Address for Notice: as above
Please copy all correspondence to: _______________________________
DAVID CROOK, ESQ. _______________________________
THE TAIL WIND FUND LTD. _______________________________
c/o EASI _______________________________
4TH FLOOR, No. 1 REGENT STREET _______________________________
LONDON, SW1Y 4NS.UK _______________________________
TEL: +44 171 468 7660 FAX 7657 _______________________________
Jurisdiction of organization: _______________________________
with a copy to:
Bryan Cave LLP
700 Thirteenth Street, N.W.
Washington, D.C. 20005
Attn: LaDawn Naegle
Telephone: 202/508-6046
Facsimile: 202/508-6200
<PAGE> 14
The Investor: Resonance Limited
Resonance Limited
By: /s/ M. Mandel
M. Mandel
Name:
Title: Pres.
By:
Name:
Title:
Aggregate Purchase Price: $500,000
Number of Shares of Common Stock: 384,615
Number of Warrants: 126,923 (equal to 33% of total number of Shares)
Effective per share Purchase Price of Shares: $1.30
Exercise price of Warrants: $1.78 (equal to 110% of Market Price)
Address for Notice:
Resonance Limited
c/o Peregrine Corporate Service, Ltd.
Burleigh Manor
Peel Road
Douglas, Isle of Mann
IM1 5EP, British Isles
Jurisdiction of organization: Isle of Mann
With a copy to:
Bryan Cave LLP
700 Thirteenth Street, N.W.
Washington, D.C. 20005
Attn: LaDawn Naegle
Telephone: 202/508-6046
Facsimile: 202/508-6200
<PAGE> 15
The Investor: Oxford Bioscience Partners II L.P.
Oxford Bioscience Partners II L.P.
By: OBP Management II L.P.
Name: OBP Management II L.P.
Title:
By: /s/ Jonathan J. Fleming
Name: Jonathan J. Fleming
Title: General Partner
Aggregate Purchase Price: $285,810.20
Number of Shares of Common Stock: 219,854
Number of Warrants: 72,552 (equal to 33% of total number of Shares)
Effective per share Purchase Price of Shares: $1.30
Exercise price of Warrants: $1.78 (equal to 110% of Market Price)
Address for Notice:
Oxford Bioscience Partners II L.P.
31 St. James Avenue
Boston, MA 02116
__________________________________
__________________________________
__________________________________
Jurisdiction of organization: Delaware
With a copy to:
Bryan Cave LLP
700 Thirteenth Street, N.W.
Washington, D.C. 20005
Attn: LaDawn Naegle
Telephone: 202/508-6046
Facsimile: 202/508-6200
<PAGE> 16
The Investor: Oxford Bioscience Partners (Bermuda) II
Limited Partnership
Oxford Bioscience Partners (Bermuda) II
Limited Partnership
By: OBP Management II (Bermuda)
Limited Partnership
Name:
Title:
By: /s/ Jonathan J. Fleming
Name: Jonathan J. Fleming
Title: General Partner
Aggregate Purchase Price: $214,189.30
Number of Shares of Common Stock: 164,761
Number of Warrants: 54,371 (equal to 33% of total number of Shares)
Effective per share Purchase Price of Shares: $1.30
Exercise price of Warrants: $1.78 (equal to 110% of Market Price)
Address for Notice:
Oxford Bioscience Partners (Bermuda)
II Limited Partnership
c/o Westbroke Ltd.
Richmond House 12
Par-La Ville Road, P.O. Box HM1022
Hamilton, Bermuda
Jurisdiction of organization: Bermuda
with a copy to:
Bryan Cave LLP
700 Thirteenth Street, N.W.
Washington, D.C. 20005
Attn: LaDawn Naegle
Telephone: 202/508-6046
Facsimile: 202/508-6200
<PAGE> 1
Exhibit 4.3
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR EXEMPTION FROM REGISTRATION UNDER THE FOREGOING LAWS.
VOID AFTER 5:00 P.M. EASTERN TIME ON SEPTEMBER __, 2003 ("EXPIRATION
DATE").
INKINE PHARMACEUTICAL COMPANY, INC.
WARRANT TO PURCHASE ______ SHARES OF
COMMON STOCK, PAR VALUE $.0001 PER SHARE ("COMMON STOCK")
For VALUE RECEIVED, _____________________ ("Warrantholder"), is
entitled to purchase, subject to the provisions of this Warrant, from InKine
Pharmaceutical Company, Inc., a New York corporation ("Company"), at any time
not later than 5:00 P.M., Eastern time, on the Expiration Date, at an exercise
price per share equal to $____ (the exercise price in effect being herein called
the "Warrant Price"), _________ shares ("Warrant Shares") of Common Stock. The
number of Warrant Shares purchasable upon exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time as described
herein.
Section 1. Registration. The Company shall maintain books for the
transfer and registration of the Warrant. Upon the initial issuance of the
Warrant, the Company shall issue and register the Warrant in the name of the
Warrantholder.
Section 2. Transfers. As provided herein, this Warrant may be
transferred only pursuant to a registration statement filed under the Securities
Act of 1933, as amended ("Securities Act") or an exemption from such
registration; provivded, however, this Warrant may only be transferred to an
affiliate of the Warrantholder. Subject to such restrictions, the Company shall
transfer this Warrant from time to time upon the books to be maintained by the
Company for that purpose, upon surrender thereof for transfer properly endorsed
or accompanied by appropriate instructions for transfer and such other documents
as may be reasonably required by the Company to establish that such transfer is
being made in accordance with the terms hereof, and a new Warrant shall be
issued to the transferee and the surrendered Warrant shall be canceled by the
Company.
Section 3. Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise this Warrant in whole or in part at any time upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached hereto (the "Exercise Agreement") and payment by cash,
certified check or wire transfer of funds for the Warrant Price for that number
of Warrant Shares then being purchased, to the Company during normal business
hours on any business day at the Company's principal executive
<PAGE> 2
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof). The Warrant Shares so purchased shall be deemed to
be issued to the holder hereof or such holder's designee, as the record owner of
such shares, as of the close of business on the date on which this Warrant shall
have been surrendered (or evidence of loss, theft or destruction thereof and
security or indemnity satisfactory to the Company), the Warrant Price shall have
been paid and the completed Exercise Agreement shall have been delivered.
Certificates for the Warrant Shares so purchased, representing the aggregate
number of shares specified in the Exercise Agreement, shall be delivered to the
holder hereof within a reasonable time, not exceeding seven (7) business days,
after this Warrant shall have been so exercised. The certificates so delivered
shall be in such denominations as may be requested by the holder hereof and
shall be registered in the name of such holder or such other name as shall be
designated by such holder. If this Warrant shall have been exercised only in
part, then, unless this Warrant has expired, the Company shall, at its expense,
at the time of delivery of such certificates, deliver to the holder a new
Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised.
Each exercise hereof shall constitute the representation and warranty
of the Warrantholder to the Company that the representations and warranties
contained in Article 5 of the Purchase Agreement (as defined below) are true and
correct in all material respects with respect to the Warrantholder as of the
time of such exercise.
Section 4. Compliance with the Securities Act of 1933. Neither this
Warrant nor the Common Stock issued upon exercise hereof nor any other security
issued or issuable upon exercise of this Warrant may be offered, sold or
transferred except as provided in this agreement and in conformity with the
Securities Act, and then only against receipt of an agreement of such person to
whom such offer of sale is made to comply with the provisions of this Section 4
with respect to any resale or other disposition of such security. The Company
may cause the legend set forth on the first page of this Warrant to be set forth
on each Warrant or similar legend on any security issued or issuable upon
exercise of this Warrant, unless counsel for the Company is of the opinion as to
any such security that such legend is unnecessary.
Section 5. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of this Warrant in respect of
which such shares are issued, and in such case, the Company shall not be
required to issue or deliver any certificate for Warrant Shares or any Warrant
until the person requesting the same has paid to the Company the amount of such
tax or has established to the Company's satisfaction that such tax has been
paid. The holder shall be responsible for income taxes due under federal, state
or other law, if any such tax is due.
Section 6. Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and
substitution of
<PAGE> 3
and upon cancellation of the mutilated Warrant, or in lieu of and substitution
for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for
the purchase of a like number of Warrant Shares, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction of the Warrant, and with respect to a lost, stolen or destroyed
Warrant, reasonable indemnity or bond with respect thereto, if requested by the
Company.
Section 7. Reservation of Common Stock. The Company hereby represents
and warrants that there have been reserved, and the Company shall at all
applicable times keep reserved until issued (if necessary) as contemplated by
this Section 7, out of the authorized and unissued Common Stock, sufficient
shares to provide for the exercise of the rights of purchase represented by the
Warrant. The Company agrees that all Warrant Shares issued upon exercise of the
Warrant shall be, at the time of delivery of the certificates for such Warrant
Shares, duly authorized, validly issued, fully paid and non-assessable shares of
Common Stock of the Company.
Section 8. Adjustments. Subject and pursuant to the provisions of this
Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.
(a) If the Company shall at any time or from time to time
while the Warrant is outstanding, pay a dividend or make a distribution on its
Common Stock in shares of Common Stock, subdivide its outstanding shares of
Common Stock into a greater number of shares or combine its outstanding shares
into a smaller number of shares or issue by reclassification of its outstanding
shares of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then the number of Warrant Shares
purchasable upon exercise of the Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Warrantholder thereafter exercising
the Warrant shall be entitled to receive the number of shares of Common Stock or
other capital stock which the Warrantholder would have received if the Warrant
had been exercised immediately prior to such event upon payment of a Warrant
Price that has been adjusted to reflect a fair allocation of the economics of
such event to the Warrantholder. Such adjustments shall be made successively
whenever any event listed above shall occur.
(b) If any capital reorganization, reclassification of the
capital stock of the Company, consolidation or merger of the Company with
another corporation in which the Company is not the survivor, or sale, transfer
or other disposition of all or substantially all of the Company's assets to
another corporation shall be effected, then, as a condition of such
reorganization, reclassification, consolidation, merger, sale, transfer or other
disposition, lawful and adequate provision shall be made whereby each
Warrantholder shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions herein specified and in lieu of the
Warrant Shares immediately theretofore issuable upon exercise of the Warrant,
such shares of stock, securities or assets as would have been issuable or
payable with respect to or in exchange for a number of Warrant Shares equal to
<PAGE> 4
the number of Warrant Shares immediately theretofore issuable upon exercise of
the Warrant, had such reorganization, reclassification, consolidation, merger,
sale, transfer or other disposition not taken place, and in any such case
appropriate provision shall be made with respect to the rights and interests of
each Warrantholder to the end that the provisions hereof (including, without
limitations, provision for adjustment of the Warrant Price) shall thereafter be
applicable, as nearly equivalent as may be practicable in relation to any shares
of stock, securities or properties thereafter deliverable upon the exercise
thereof. The Company shall not effect any such consolidation, merger, sale,
transfer or other disposition 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 or
otherwise acquiring such assets or other appropriate corporation or entity shall
assume the obligation to deliver to the holder of the Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase and the other obligations under this
Warrant. The provisions of this paragraph (b) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales,
transfers or other dispositions.
(c) In case the Company shall fix a payment date for the
making of a distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness or assets
(other than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends or distributions referred to in Section
8(a)), or subscription rights or warrants, the Warrant Price to be in effect
after such payment date shall be determined by multiplying the Warrant Price in
effect immediately prior to such payment date by a fraction, the numerator of
which shall be the total number of shares of Common Stock outstanding multiplied
by the Market Price per share of Common Stock (as defined below), less the fair
market value (as determined by the Company's Board of Directors in good faith)
of said assets or evidences of indebtedness so distributed, or of such
subscription rights or warrants, and the denominator of which shall be the total
number of shares of Common Stock outstanding multiplied by such Market Price per
share of Common Stock. "Market Price" shall mean the average of the five lowest
closing bid prices of the Common Stock over the twenty-five (25) trading days
immediately preceding such distribution. Such adjustment shall be made
successively whenever such a payment date is fixed.
(d) If pursuant to the Purchase Agreement by and between the
Company and the Investors named therein dated September __, 1999 (the 'Purchase
Agreement") there is an adjustment to the Purchase Price under Section 7.1
thereof, then the Warrant Price shall be adjusted to a price equal to 110% of
the adjusted per share purchase price calculated pursuant to Section 7.1 of the
Purchase Agreement, if such adjustment to the Warrant Price would result in a
lower Warrant Price. Such adjustments shall be made successively whenever
required.
(e) An adjustment shall become effective immediately after the
payment date in the case of each dividend or distribution and immediately after
the effective date of each other event which requires an adjustment.
<PAGE> 5
(f) In the event that, as a result of an adjustment made
pursuant to Section 8(a), the holder of this Warrant shall become entitled to
receive any shares of capital stock of the Company other than shares of Common
Stock, the number of such other shares so receivable upon exercise of this
Warrant shall be subject thereafter to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions with respect
to the Warrant Shares contained in this Warrant.
Section 9. Fractional Interest. The Company shall not be required to
issue fractions of Warrant Shares upon the exercise of the Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable upon the exercise of the Warrant (or specified portions thereof), the
fractional share shall be disregarded and the number of shares to be issued upon
exercise shall be the number of whole shares only.
Section 10. Benefits. Nothing in this Warrant shall be construed to
give any person, firm or corporation (other than the Company and the
Warrantholder) any legal or equitable right, remedy or claim, it being agreed
that this Warrant shall be for the sole and exclusive benefit of the Company and
the Warrantholder.
Section 11. Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall promptly give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. In the event of a dispute with respect to any such
calculation, the certificate of the Company's independent certified public
accountants shall be conclusive evidence of the correctness of any computation
made, absent manifest error. Failure to give such notice to the Warrantholder or
any defect therein shall not affect the legality or validity of the subject
adjustment.
Section 12. Identity of Transfer Agent. The Transfer Agent for the
Common Stock is Continental Stock Transfer & Trust Company, 2 Broadway, New
York, New York 10004. Upon the appointment of any subsequent transfer agent for
the Common Stock or other shares of the Company's capital stock issuable upon
the exercise of the rights of purchase represented by the Warrant, the Company
will mail to the Warrantholder a statement setting forth the name and address of
such transfer agent.
Section 13. Notices. Any notice pursuant hereto to be given or made by
the Warrantholder to or on the Company shall be sufficiently given or made if
sent by certified mail, return receipt requested, postage prepaid, addressed as
follows:
<PAGE> 6
InKine Pharmaceutical Company, Inc.
Sentry Park East
1720 Walton Road
Blue Bell, PA 19432
Attn: Robert F. Apple, Senior Vice President
and Chief Financial Officer
Facsimile: 610/260-9354
or such other address as the Company may specify in writing by notice to the
Warrantholder complying as to delivery with the terms of this Section 13.
Any notice pursuant hereto to be given or made by the Company to or on
the Warrantholder shall be sufficiently given or made if personally delivered or
if sent by an internationally recognized courier services by overnight or
two-day service, to the address set forth on the books of the Company or, as to
each of the Company and the Warrantholder, at such other address as shall be
designated by such party by written notice to the other party complying as to
delivery with the terms of this Section 13. All such notices, requests, demands,
directions and other communications shall, when sent by courier be effective two
(2) days after delivery to such courier as provided and addressed as aforesaid.
Section 14. Registration Rights. The initial holder of this Warrant is
entitled to the benefit of certain registration rights in respect of the Warrant
Shares as provided in the Registration Rights Agreement dated as of as of
September __, 1999.
Section 15. Successors. All the covenants and provisions hereof by or
for the benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.
Section 16. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of New York, without giving effect to
its conflict of law priciples, and for all purposes shall be construed in
accordance with the laws of said State.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be
duly executed, as of the day and year first above written.
INKINE PHARMACEUTICAL
COMPANY, INC.
By:------------------------------
Name:
Title:
<PAGE> 7
INKINE PHARMACEUTICAL COMPANY, INC.
WARRANT EXERCISE FORM
INKINE PHARMACEUTICAL
COMPANY, INC.
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by the payment of the Warrant Price and surrender of the Warrant,
_______________ shares of Common Stock ("Warrant Shares") provided for therein,
and requests that certificates for the Warrant Shares be issued as follows:
-------------------------------
Name
-------------------------------
Address
-------------------------------
-------------------------------
Federal Tax ID or Social Security No.
and delivered by [ ] certified mail to the above address, or
[ ] electronically (provide DWAC Instructions:
__________________), or
[ ] other (specify: ______________________________).
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of this Warrant be registered in
the name of the undersigned Warrantholder or the undersigned's Assignee as below
indicated and delivered to the address stated below.
By exercising the rights represented by this Warrant, the undersigned
hereby certifies that, as of the date of exercise of this Warrant, the
representations and warranties contained in Section 5 of the Purchase Agreement
are true and correct in all material respects with respect to the undersigned.
Dated:___________________, ____
Note: The signature must correspond with Signature:______________________
the name of the registered holder as written
on the first page of the Warrant in every ________________________________
particular, without alteration or enlargement Name (please print)
or any change whatever, unless the Warrant
has been assigned. ________________________________
________________________________
Address
________________________________
________________________________
Federal Identification or
Social Security No.
Assignee:
________________________________
________________________________
________________________________
________________________________
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
InKine Pharmaceutical Company, Inc.
We consent to the use of our report dated August 11, 1999, incorporated herein
by reference, and to the reference to our firm under the heading "Experts" in
the prospectus.
/s/ KMPG LLP
KPMG LLP
Philadelphia, Pennsylvania
October 18, 1999
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to out firm under the caption "Experts" in the
Registration Statement (Form S-3) and related prospectus of InKine
Pharmaceutical Company, Inc. for the registration of 3,069,229 shares of its
common stock and to the incorporation by reference therein of our report dated
July 24, 1997 relating to the statements of operations, cash flows, and changes
in shareholders' equity of InKine Pharmaceutical Company, Inc. for the year
ended June 30, 1997 and for the period from July 1, 1993 (commencement of
operations) through June 30, 1997 (not separately presented therein), included
in its Annual Report on Form 10-K for the year ended June 30, 1999 filed with
the Securities and Exchange Commission.
/s/ Richard A. Eisner & Company, LLP
New York, New York
October 19, 1999
