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As filed with the Securities and Exchange Commission on May 17, 2000
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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, BLUE BELL, PENNSYLVANIA 19422, (610) 260-9350
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
-----------------------
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.| |
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES 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 3,352,758(1)(2) (3) $19,275,024(3) $5,089(4)
</TABLE>
(1) Includes 513,887 shares of common stock that may be acquired by three
of the selling stockholders named herein upon the exercise of
outstanding options and an outstanding warrant.
(2) Pursuant to Rule 416, this Registration Statement shall be deemed to
cover an indeterminate number of additional shares of common stock
issueable pursuant to the anti-dilution provisions of the warrant 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) 283,887 shares offered pursuant to an outstanding
warrant exercisable at $5.13 per share, (ii) 130,000 shares offered
pursuant to an outstanding option exercisable at $0.875 per share,
(iii) 100,000 shares offered pursuant to an outstanding option
exercisable at $1.38 per share, and (iv) 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 May 11, 2000, which was $6.188.
(4) Represents the Proposed Maximum Aggregate Offering Price multiplied by
$.000264.
<PAGE> 2
PROSPECTUS
3,352,758 SHARES
INKINE PHARMACEUTICAL COMPANY, INC.
COMMON STOCK, PAR VALUE $.0001 PER SHARE
The shareholders named on page 11 are selling up to 3,352,758 shares of
InKine's stock.
InKine's common stock is traded on the Nasdaq SmallCap Market under the
symbol "INKP". On May 11, 2000, the reported closing price of the common stock
was $6.188 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 1 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 ___________, 2000
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TABLE OF CONTENTS
<TABLE>
<S> <C>
RISK FACTORS..................................................... 1
RECENT EVENTS................................................... 10
USE OF PROCEEDS................................................. 10
SELLING SHAREHOLDERS............................................ 11
PLAN OF DISTRIBUTION............................................ 13
AVAILABLE INFORMATION........................................... 14
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................ 15
LEGAL MATTERS................................................... 16
EXPERTS......................................................... 17
</TABLE>
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RISK FACTORS
Investing in our common stock is very risky. You should be able to bear
a complete loss of your investment. This prospectus and the documents included
in this prospectus contain forward-looking statements that involve risks or
uncertainties. Actual events or results may differ from those discussed in this
prospectus and the documents included in this prospectus. 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 included in this prospectus.
IF WE DO NOT OBTAIN REQUIRED APPROVALS FROM THE GOVERNMENT, THEN WE MAY NOT
SUCCESSFULLY MARKET OR SELL OUR PRODUCTS.
The U.S. Food and Drug Administration, or FDA, requires multiple stages
of tests, known as phase I, II and III clinical trials, on all pharmaceutical
products. In addition, the FDA must confirm that our drug manufacturers are
complying with applicable federal regulations. The process to obtain government
approvals of a pharmaceutical product takes many years and requires substantial
resources.
The FDA may delay or deny the approval of our proposed products. If the
FDA delays or denies approval of a proposed product, then we may delay or stop
developing this product. We do not believe we are subject to risks which are
materially different than other pharmaceutical companies seeking FDA approval,
but the process of obtaining FDA approval is expensive, time-consuming and often
filled with unexpected problems. Even if we receive approval of a product
candidate, the FDA may limit and restrict the drug's use and may subject our
products to continuous review. If we fail to comply with any applicable
regulatory requirements, the FDA could impose penalties on us, including:
- warning letters;
- fines;
- withdrawal of regulatory approval;
- product recalls;
- operating restrictions;
- injunctions; and
- criminal prosecution.
1. FDA marketing approval:
We submit the results of our scientific studies, commonly
referred to as preclinical studies, to the FDA as part of an investigational new
drug application, commonly referred to as an IND. An IND is a summary document
describing the drug product, the safety of the drug product and the filer's
proposed use of the drug product. After the FDA approves the IND, we conduct
human clinical trials (phase I, II and III). We then submit the results of these
trials to the FDA as part of a new drug application, or NDA. The FDA requires
the filing of the NDA, which summarizes all human clinical and manufacturing
experiences of the drug. The FDA approves a drug on the basis of the NDA. After
we file the NDA, the FDA may approve the product for marketing, require
additional testing or deny the application.
2. FDA manufacturing approval:
The FDA requires pharmaceutical companies to include detailed
manufacturing information in an NDA. The FDA has mandated that all manufacturing
facilities and processes comply with good
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manufacturing practices, or GMP. GMP is a body of federal regulations and
guidelines that govern the manufacture of drugs for human use. For example, all
manufacturers must pass manufacturing plant inspections and provide records of
detailed manufacturing processes. Among other things, drug manufacturers must
demonstrate that:
- the drug product can be consistently manufactured at the same
quality standard;
- the drug product is stable over time; and
- the level of chemical impurities in the drug product are under
a designated level.
For example, the FDA has not approved our manufacturing
process for DIACOL(TM). DIACOL(TM) is one of our proposed products that is taken
in tablet form and used to clean the colon for medical purposes. The FDA may
delay or prevent us from marketing DIACOL(TM) if we do not consistently
manufacture appropriate amounts of DIACOL(TM) or cannot repeat the manufacturing
process used to manufacture the phase III clinical trial batches of DIACOL(TM).
3. FDA oversight after product approval:
The FDA will regulate us after a product has been approved. The FDA may
require post-marketing testing and surveillance to monitor the effects of an
approved drug product. The FDA may also place conditions on any approvals that
could restrict the sale or use of a product.
4. Status of our products in the FDA approval process:
Our proposed products are in various stages of development and in
various stages of the FDA approval process, as set forth below:
- DIACOL(TM). We have completed a phase I, IIb, and two phase
III clinical trials for DIACOL(TM). We submitted a NDA for
DIACOL(TM) to the FDA on November 23, 1999. We are awaiting
FDA approval to begin marketing DIACOL(TM). Pending the FDA's
approval of DIACOL(TM), we are developing plans for the
manufacture and marketing of DIACOL(TM). Although we do not
know what the FDA's response to our NDA will be, we hope to
implement these plans shortly after the FDA responds.
- CBP-1011. We developed CBP-1011 as a compound for the
treatment of idiopathic thrombocytopenic purpura, or ITP, an
autoimmune disease which causes spontaneous bleeding. CBP-1011
is currently in phase III clinical trials for ITP. In December
1999, we enrolled patients in a phase II trial for the
treatment of patients with inflammatory bowel disease using
CBP-1011. Inflamatory bowel disease consists of both Chrohns
disease and ulcerative colitis, both of which are inflammation
disorders of the bowel. We refer to CBP-1011 and certain
related products as the Fc receptor technology.
- Thrombospondin technology products. We have acquired an
exclusive worldwide license to a cancer treatment technology
known as the thrombospondin technology. We are evaluating a
number of product opportunities utilizing the thrombospondin
technology in the area of cancer treatment, which are in the
early stages of
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development (before phases I, II and III). We have not begun
human clinical trials for these products.
We may never receive FDA approval for any of these products, and
without FDA approval, we may not manufacture, market or sell these products.
WE HAVE NOT GENERATED ANY REVENUE TO DATE. IF WE CONTINUE TO INCUR SUBSTANTIAL
LOSSES, THEN THE VALUE OF OUR COMMON STOCK IS LIKELY TO BE REDUCED. ALSO, WE MAY
NEVER ACHIEVE A PROFITABLE LEVEL OF OPERATION.
To date, we have engaged solely in the research and development of
proposed drug products. We have not generated any revenue from product sales or
royalties and will not do so until the FDA has approved our products and we
manufacture and market them successfully. We have incurred losses in each year
since our inception on July 1, 1993. As of March 31, 2000, we had an accumulated
deficit of approximately $30.9 million.
Our proposed products are in various stages of development and require
significant research, development and testing. We must obtain all of the
necessary government approvals for our products before we can sell any proposed
product. As a result, we believe our losses will increase further in the
foreseeable future as we develop our products.
If our research spending in the foreseeable future is greater than
potential sales revenue, then we may never conduct our operations at a profit.
Our common stock is likely to decrease in value if we fail to generate profits
or if the market believes that we are unable to do so.
We have granted or committed to grant shares and options to founding
scientists and consultants when we achieve agreed upon product development
goals. These goals relate to our filing applications with the FDA, and achieving
agreed upon sales targets. As a result, our potential earnings per share will
decrease because of the necessary accounting treatment of these shares and
options.
IF WE DO NOT DEVELOP AND MAINTAIN RELATIONSHIPS WITH MANUFACTURERS, THEN WE MAY
NOT SUCCESSFULLY MANUFACTURE AND SELL OUR PRODUCTS.
We do not possess the capabilities, resources or facilities to
manufacture any of our proposed products. We must contract with manufacturers to
produce our proposed products according to government regulations. Our future
development and delivery of our products on a timely, profitable and competitive
basis depends on the performance of these manufacturers. A limited number of
manufacturers exist which are capable of manufacturing our proposed products. We
may fail to contract with the necessary manufacturers or we may contract with
manufacturers on terms which may not be entirely acceptable to us.
Manufacturers may utilize their own technology, our technology or
technology obtained from others in developing a manufacturing process for our
products. We may pay a fee to the manufacturer if we utilize the manufacturing
process that the manufacturer has developed or if we seek a third party to
participate in the development process.
We have contracted with Pharmaceutical Manufacturing Research Services,
a manufacturing development company, to supply commercial quantities of
DIACOL(TM) in a manner which meets FDA requirements. To date, however, the FDA
has not approved the manufacturing processes of
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Pharmaceutical Manufacturing Research Services. We are currently seeking an
appropriate manufacturer to produce CBP-1011 and other proposed products. We may
be unable to develop a cost-effective manufacturing process for these products.
IF WE DO NOT DEVELOP AND MAINTAIN EITHER INTERNAL OR EXTERNAL MARKETING
CAPABILITIES, THEN WE MAY NOT SUCCESSFULLY SELL OUR PRODUCTS.
We have no experience in marketing, distributing and selling
pharmaceutical products. We may contract with third parties which specialize in
marketing, selling and distributing pharmaceutical products or try to build an
internal sales and marketing operation. If we choose to utilize third parties
for sales and marketing, then we may exert limited control over these third
parties and the amount and timing of resources which they devote to our
products. We may not achieve our desired amount of revenue from product sales if
these third parties fail to market and sell our products effectively.
We may establish an internal sales and marketing force or convert from
an external sales force after a few years of selling DIACOL(TM). If we choose to
follow this strategy, then we will have to spend significant additional funds
and devote significant resources and time to establish this internal sales and
marketing force. Because of our inexperience in these areas, however, we may not
successfully implement an internal sales and marketing force which is
competitive or cost effective.
We may choose to license our products to others to market, or
circumstances may force us to license our products if we do not develop adequate
manufacturing and marketing capabilities. If we license our products, we will
receive less revenue and may realize less profit.
IF WE CANNOT DEVELOP AND MARKET OUR PRODUCTS AS RAPIDLY OR COST-EFFECTIVELY AS
OUR COMPETITORS, THEN WE WILL NOT BE ABLE TO CONDUCT OUR OPERATIONS AT A PROFIT.
We are developing products that will compete in three very competitive
segments of the pharmaceutical industry. The three segments are those which
include (i) DIACOL(TM), (ii) CBP-1011, and (iii) the thrombospondin technology.
Based on total assets and revenues, we are significantly smaller than the
majority of our competitors in these segments. Therefore, we may encounter
significant competition with respect to each of our potential products,
primarily from the following competitors:
PRODUCT CANDIDATES
<TABLE>
<CAPTION>
Thrombospondin
DIACOL(TM) CBP-1011 Technology
---------- -------- ----------
<S> <C> <C> <C>
COMPETITORS Braintree Laboratories, La Jolla Pharmaceutical Boston Life Sciences,
Inc. Company Inc.
C.B. Fleet Company, Inc. GeneLabs Technologies, Inc. Entremed, Inc.
Schwarz Pharma Inc. IDEC Pharmaceuticals Human Genome Sciences
Corporation
Immune Response
Corporation
Autoimmune, Inc.
Centocor, Inc.
</TABLE>
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The financial strength of our competitors is particularly important in
the pharmaceutical industry, where technological innovations occur rapidly.
These technological innovations can dramatically affect the price and
effectiveness of a product line, and they can render a competing product line
obsolete. Our competitors that have strong financial resources may develop
competitive products that are cheaper and more effective than our products.
These competitive products may render our products unmarketable or
non-competitive. Even if our competitors do not develop better and more cost
effective products, they may manufacture and market their products more
successfully than us. Therefore, our competitors may capture all or a large
segment of our market, severely restricting our ability to achieve a profitable
level of product sales.
In addition to our competitors in the pharmaceutical 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 our products. Any of these
organizations could develop products which could render our products obsolete or
non-competitive.
IF THE OWNERS OF TECHNOLOGY LICENSED TO US TERMINATE OUR LICENSE AGREEMENTS,
THEN THESE OWNERS COULD PREVENT US FROM DEVELOPING, MANUFACTURING OR SELLING
THAT PRODUCT COVERED BY THAT LICENSE.
We have acquired the worldwide exclusive right to market DIACOL(TM),
the Fc receptor technology and the thrombospondin technology under various
license agreements. Each of the owners of the technology licensed to us may
terminate the license prior to its expiration date under certain circumstances,
including our failure to comply with commitments related to the development of
the products specified in the licenses. For example, some of our licensing
agreements require us to spend specific amounts for research and development of
our products. If we do not comply with the terms of these agreements, the owners
of the licensed technology could demand the return of all rights to the licensed
technology, and force us to cease developing, manufacturing or selling the
products covered by that license.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, THEN OUR COMPETITORS MAY
DEVELOP SIMILAR PRODUCTS WHICH COULD RENDER OUR PRODUCTS OBSOLETE.
Our success depends, in part, on our ability to develop and maintain a
strong patent position for our products and technologies both in the United
States and other countries. As with most biotechnology and pharmaceutical
companies, our patent position is highly uncertain and involves complex legal
and factual questions. Without patent and other protections, other companies
could offer substantially identical products for sale without incurring the
sizeable development and testing costs that we have incurred. Our ability to
recoup these expenditures and realize profits upon sale of product could be
diminished.
The process of obtaining patents can be time consuming and expensive.
Even if we spend the necessary time and money, a patent may not issue or it may
insufficiently protect the technology it was intended to protect. We can never
be certain that we were the first to develop the technology or that we were the
first to file a patent application for the particular technology because U.S.
patent applications are maintained in secrecy until a patent issues and
publications in the scientific or patent literature lag behind actual
discoveries.
Even after the U.S. Patent and Trademark Office issues patent rights to
us, our competitors may develop similar or duplicate technologies or design
around the patented aspects of our technology, which may decrease sales of our
prospective products, therefore causing a negative impact on our
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profit. Competitors may also challenge our patent rights in court by alleging
patent infringement. If we lose a patent infringement suit, third parties may
claim significant damages, require us to license the disputed technology or
require us to cease using the disputed technology.
In 1997, the U.S. Patent and Trademark Office issued a patent covering
the use of DIACOL(TM) as a colonic cleansing agent or as a laxative. In January
1999 we received notice of allowance from the U.S. Patent and Trademark Office
for an application that we filed for numerous solid-dose colonic cleansing
agents. We have also filed applications for DIACOL(TM) under the Patent
Cooperation Treaty which designate Europe and Canada.
One of our products, CBP-1011 (within the Fc receptor technology), is
not patentable. Instead of a patent, we expect that CBP-1011 will receive
protection based on FDA designation of Orphan Drug Status for ITP, which means
the FDA has determined that the number of people affected by the disease to be
treated by the drug is less than 200,000, and that having numerous companies
compete for the market is unrealistic and likely to harm, rather than help,
prospective users of the product. If we receive this designation, we will have
an exclusive right to sell CBP-1011 for ITP for seven years. In October of 1999
we filed a U.S. patent application to treat inflammatory bowel disease with
CBP-1011 and other similar compounds. The U. S. Patent and Trademark Office has
not yet issued this patent.
Patents or patent applications are pending for our TSP-1 peptide and
angiocidin, two of the thrombospondin technology compounds. The area of cancer
technology is complex and the patents covering our TSP-1 peptide may not be
adequate.
We have also obtained the rights to foreign patents, and intend to
apply for additional foreign patents, for other products and technologies.
Competitors could challenge or develop around the patents, or the scope of the
patents may not be adequate to protect the patented product from competitors.
The commercial success of our products will also depend upon our ability to make
sure the products do not infringe on patents issued to competitors. We have not
conducted a search to determine if there are any patents similar to those
covering DIACOL(TM) or the TSP-1 peptide and angiocidin.
Our employees or scientific consultants may develop inventions or
processes independently that may be related to our products. These employees or
consultants could claim ownership of these inventions or processes, and these
claims could succeed. We may need to enter into protracted and costly litigation
to enforce or determine the scope of our proprietary rights.
Government agencies and academic institutions have funded the
development of some of our patented technologies, in particular the
thrombospondin technology and the Fc receptor technology. Although we have
acquired the rights to use such technology, these agencies or institutions may
have rights to the technology or inventions, including rights to the
royalty-free use, but not sale, of the invention or technology for our own
purposes.
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IF WE DO NOT RECEIVE ADEQUATE REIMBURSEMENT FROM THE GOVERNMENT, MANAGED CARE
ORGANIZATIONS AND PRIVATE INSURANCE PLANS, THEN SOME PATIENTS MAY BE UNABLE OR
UNWILLING TO PURCHASE OUR PRODUCTS AND WE WILL ACHIEVE LESS REVENUE FROM PRODUCT
SALES.
Successful sales of our products in the United States and other
countries depend on the availability of adequate reimbursement from the
government, managed care organizations and private insurance plans.
Pharmaceutical companies often use reimbursement as the basis for determining
their sales. In the pharmaceutical industry, unlike other consumer product
industries, insurance companies, including managed care organizations, often pay
drug manufacturers and distributors directly for their products. In fact,
pharmaceutical companies make a majority of their sales to insurance companies
and not to consumers. These organizations provide for reimbursement only after
considering a number of factors, including product features such as safety,
medical necessity, cost and the experimental nature of the product. We will
spend significant amounts of time and other resources to obtain reimbursement
for our products. The organizations which provide reimbursement routinely limit
reimbursement and attempt to exert significant pressure on medical suppliers to
lower their prices.
We cannot predict the amounts or reliability of reimbursement because
reimbursement for pharmaceutical products incorporating new technology is
historically unpredictable in the pharmaceutical industry. Additionally,
reimbursement varies from country to country. We do not know whether our
products will qualify for reimbursement from domestic or foreign reimbursement
sources.
IF WE DO NOT OBTAIN DEBT FINANCING OR ADDITIONAL CAPITAL IN THE FUTURE, THEN WE
MAY NOT BE ABLE TO CONTINUE OUR OPERATIONS BEYOND DECEMBER 31, 2001.
We need additional capital to develop, manufacture and market our
proposed products. Specifically, we will spend funds for the following:
- Researching and developing its proposed products, including
participating in human clinical trials and animal studies
conducted before clinical trials;
- Seeking necessary approvals from the government;
- Developing manufacturing and distribution capabilities; and
- Funding our growth as a company.
We believe that our current capital resources will fund our operations
through December 31, 2001. Our future capital requirements will depend on a
variety of factors. For example, if we experience continued progress in our
research and development activities, or if we determine that it is necessary to
prosecute and enforce our patents, we will require additional capital. In
addition, our future marketing activities will affect our future capital
requirements. Because we have no experience in marketing our products, we have
no experience in predicting how much capital will be necessary to successfully
complete our marketing plans. If we fail to accurately predict our future
capital requirements, we may be unable to continue our operations.
We regularly seek funding for our operations from a variety of sources,
including public and private securities offerings, loans and joint arrangements
with partners. We currently do not possess a commitment to obtain additional
funding, and we may never receive additional funding in the future. If we fail
to obtain additional funding, we will delay, scale back or eliminate our
research and
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development activities or enter into arrangements with others to develop and
market certain proposed products that we may otherwise have developed ourselves.
IF THE HOLDERS OF OUR OUTSTANDING OPTIONS AND WARRANTS EXERCISE SUCH OPTIONS AND
WARRANTS, THEN THE MARKET PRICE OF THE COMMON STOCK MAY DROP.
We have a total of approximately 7 million options and warrants
outstanding. Options and warrants give the holder the right to purchase shares
of a company's stock in the future for a predetermined price which may or may
not be below the current market value of the company's stock at the time the
option or warrant is exercised. In addition, we can issue an additional 1.3
million options pursuant to our option plans. To date, option and warrant
holders have exercised approximately 4,900,000 options and warrants in the
aggregate at prices ranging from $0.50 to $2.16. We believe that option holders
and warrant holders may exercise options and warrants when we are able to obtain
additional financing on more favorable terms. The exercise of these outstanding
warrants and options and the sale of the related shares may cause our common
stock price to drop.
IF OUR COMMON STOCK CONTINUES TO BE VOLATILE AND THINLY TRADED, THEN OUR
SHAREHOLDERS MAY NOT BE ABLE TO SELL THEIR SHARES WHEN DESIRED.
The market price of our common stock, similar to other
development-stage public pharmaceutical or biotechnology companies, has been
volatile and may remain volatile for the foreseeable future. Our shareholders
may not sell their shares when they desire because the stock price is highly
volatile and the stock is not widely traded. For example, the number of our
shares theoretically available for sale in any one day is approximately
29,000,000 shares and its average daily trading volume has historically been
approximately 479,000 shares. If our stock continues to trade thinly, our
shareholders may not be able to sell their shares when desired.
IF WE DO NOT HAVE ADEQUATE INSURANCE FOR PRODUCT LIABILITY CLAIMS, WE MAY BE
SUBJECT TO SIGNIFICANT EXPENSES RELATING TO THESE CLAIMS.
We are subject to significant product liability risks relating to the
testing, manufacturing and sale of the products we are developing. These risks
include:
- Our proposed products could cause undesirable side effects or
injury during clinical trials;
- Our products could cause undesirable side effects or injury
when sold; or
- We may agree to reimburse others that incur liability relating
to our product.
We currently maintain insurance for product liability claims in the
amount of $10,000,000 per occurrence and $10,000,000 in the aggregate. We have
no way of knowing if these amounts will be adequate to cover any product
liability claims filed against us. If we do not or cannot maintain adequate
insurance coverage, we may incur a significant liability if a product liability
claim arises.
IF OUR CERTIFICATE OF INCORPORATION AND NEW YORK LAW CONTINUE TO CONTAIN
PROVISIONS THAT DISCOURAGE POTENTIAL TAKEOVERS, THEN OUR SHAREHOLDERS MAY NOT
RECEIVE A PREMIUM FOR THEIR SHARES IN A TAKEOVER SITUATION AND WILL BE SUBJECT
TO CERTAIN RESTRICTIONS ON VOTING AND OTHER RIGHTS.
Our board of directors has the right, granted under our certificate of
incorporation, to authorize certain preferred stock which may have a variety of
terms, commonly known as blank check preferred
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stock. The board of directors may designate the rights and preferences of this
stock without shareholder approval. If the directors authorize and issue this
stock, potential purchasers of the company may be unable to purchase the common
stock at a premium over its market price. In addition, the board of directors
issuing this stock could have a negative impact on the market price of the
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 owners of 20% or more of the outstanding voting shares of a
corporation. These restrictions could reduce the potential that a third party
will attempt a takeover of us and therefore reduce the chances of shareholders
receiving a premium for their shares over the market price.
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RECENT EVENTS
On May 5, 2000, we sold a total of 2,838,871 shares of common stock to
the investors listed on the selling shareholders table on page 11 and a warrant
to purchase 283,887 shares of common stock to our placement agent. After
expenses, we will realize approximately $9.9 million of the approximately $10.8
million in proceeds from the offering. The warrant holder may exercise the
warrant at $5.13 per share at any time before May 4, 2005. We 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 obtained on the
exercise of the warrant. We also agreed to reimburse the selling shareholders
for liability we caused by making any untrue statements of material fact or
failing to state a material fact in this registration statement.
USE OF PROCEEDS
The selling shareholders will receive all of the proceeds from the sale
of the shares of common stock.
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SELLING SHAREHOLDERS
The table below describes the amount of common stock owned by the
selling shareholders on May 11, 2000 and the number of shares of common stock
the selling shareholders may sell under this prospectus. The selling
shareholders, which includes their transferees, pledgees, distributees or donees
or their successors, may offer all, some or none of their shares. The following
table assumes that the selling shareholders sell all of their shares offered
hereby.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
SHARES OWNED SHARES OWNED
SHARES SHARES OFFERED PRIOR TO AFTER
SELLING SHAREHOLDERS OWNED(1) HEREBY(2) OFFERING(3) CLOSING(3)
-------------------- -------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Cahill Warnock Strategic Partners 862,225 862,225 2.56% 0.0%
Fund, L.P.(4)
The Tail Wind Fund Ltd 573,481(5) 65,789 1.73% 1.53%
The J Fund, L.P. 496,000 496,000 1.47% 0.0
Leerink Swann & Company 323,887(6) 323,887(6) * 0.0
Baker Street Technology Partners, LP 131,579 131,579 * 0.0
Baker Street Capital Partners, LP 131,579 131,579 * 0.0
Worthington Growth LP 131,578 131,578 * 0.0
Donald Weinberger 130,000(7) 130,000(7) * 0.0
Little Wing, LP 110,000 110,000 * 0.0
Peter Grabler 105,263 105,263 * 0.0
Strategic Growth International, Inc. 100,000(8) 100,000(8) * 0.0
Nob Hill Capital Partners, L.P. 80,000 80,000 * 0.0
Middenbank Curacao N.V. 66,000 66,000 * 0.0
Charles P. Hammersmith, Jr. 65,700 65,700 * 0.0
Tradewinds Fund Ltd 56,000 56,000 * 0.0
Gerry D. Koumatos & 53,000 53,000 * 0.0
Flora D. Koumatos, JTWROS
Wayne Saker 52,631 52,631 * 0.0
Strategic Associates, L.P.(9) 47,775 47,775 * 0.0
Lighthouse Management, L.P. 40,000 40,000 * 0.0
Toledano Capital LLC 35,000 35,000 * 0.0
Little Wing LP Too 34,000 34,000 * 0.0
James A. Ruffalo & 26,500 26,500 * 0.0
Margaret M. Ruffalo, JTWROS
Harry T. Poteat 26,500 26,500 * 0.0
Willoughby I. Stuart 26,315 26,315 * 0.0
Ira Daniel Sherman & 26,315 26,315 * 0.0
Darlene Bryant, JTWROS
Donald D. Graham 26,315 26,315 * 0.0
Dunn Family Charitable Foundation 25,000 25,000 * 0.0
Nob Hill Capital Associates, L.P. 20,000 20,000 * 0.0
Jeffrey T. Barnes 18,500 18,500 * 0.0
Peter M. Greco & 13,157 13,157 * 0.0
Pamela A. Greco, JTWROS
John J. Connor 13,150 13,150 * 0.0
Edmond E. Charrette, M.D. Profit 10,000 10,000 * 0.0
Sharing Trust
Michael T. Foley, M.D. 3,000 3,000 * 0.0
-------- --------
Totals: 3,860,450 3,352,758
</TABLE>
-11-
<PAGE> 15
- -------------------------------------
* Represents ownership of less than 1% of the outstanding shares of our
common stock.
(1) Assumes the exercise of all outstanding warrants and options owned by
four of the selling shareholders.
(2) Assumes the exercise of all outstanding warrants and options, except
for The Tail Wind Fund Ltd. warrant. We have previously registered the
resale of the shares underlying that warrant.
(3) Based on shares of common stock outstanding as of May 11, 2000 plus,
for each selling shareholder that owns shares of common stock which
are issuable upon the exercise of outstanding warrants and options, the
shares underlying such shareholders options or warrants.
(4) Cahill Warnock Strategic Partners Fund, L.P. may distribute shares of
common stock to its limited partners and such distributees shall be
deemed "selling shareholders" for purposes of this prospectus. See the
Plan of Distribution on page 13.
(5) Includes 507,692 shares of common stock which are issuable upon the
exercise of an outstanding warrant owned by the selling shareholder. We
have previously registered the resale of the shares underlying that
warrant.
(6) Includes 283,887 shares of common stock which are issuable upon the
exercise of an outstanding warrant owned by the selling shareholder.
(7) Consists of options, dated December 1, 1997, to purchase 100,000 shares
of common stock with an exercise price of $1.38 per share and 30,000
shares of common stock with an exercise price of $0.875 per share,
respectively.
(8) Consists of an option, dated December 1, 1997, to purchase 100,000
shares of common stock with an exercise price of $0.875 per share.
(9) Strategic Associates, L.P. may distribute shares of common stock to its
limited partners and such distributees shall be deemed "selling
shareholders" for purposes of this prospectus. See the Plan of
Distribution on page 13.
-12-
<PAGE> 16
PLAN OF DISTRIBUTION
We are registering all of the shares on behalf of the selling
shareholders. We will receive no proceeds from this offering. "Selling
shareholders," as used in this prospectus, includes anyone who receives the
shares 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 us in making decisions about the timing,
manner and size of each sale. The selling shareholders may sell shares 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 use one or more, or a
combination, of the following methods to sell their shares:
- 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 of 1933, or the Securities Act, under that rule
rather than this prospectus.
From time to time, the selling shareholders may transfer, pledge,
distribute, donate or assign shares of our common stock to lenders or others. At
such time, each of the persons receiving these shares may become a selling
shareholder. The selling shareholder who transfers, pledges, distributes donates
or assigns its shares of our common stock will own fewer shares after they take
such actions. The plan of distribution for selling shareholders' shares sold
according to this prospectus will otherwise remain unchanged, except that the
transferees, pledgees, distributees, donees or other successors will become
selling shareholders.
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
-13-
<PAGE> 17
by this prospectus, 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 us that they have not entered into any agreements, understandings
or arrangements with any underwriters or broker-dealers regarding the sale of
the shares. No underwriter or coordinating broker is acting in connection with
the selling shareholders proposed sale of shares.
The selling shareholders will sell their shares only through registered
or licensed brokers or dealers if required under applicable state securities
laws. In addition, in some states the selling shareholders may not sell their
shares unless the shares have been registered or qualified for sale in the
applicable state or the selling shareholders comply with an available exemption
from the registration or qualification requirements.
Under applicable rules and regulations of the Securities Exchange Act
of 1934, or the Exchange Act, any person engaged in the distribution of the
shares may not simultaneously engage in market making activities with respect to
our 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 the selling shareholders' purchases and sales of shares of
our common stock. We 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.
We will file a supplement to this prospectus, if required, under Rule
424(b) under the Securities Act.
We have agreed to reimburse in certain circumstances the selling
shareholders against certain liabilities, including liabilities under the
Securities Act. The selling shareholders have agreed to reimburse, in certain
circumstances, us and certain related persons against certain liabilities,
including liabilities under the Securities Act.
AVAILABLE INFORMATION
We have filed a registration statement, of which this prospectus is a
part, and related exhibits with the SEC pursuant to the Securities Act. The
registration statement contains additional information about the company and our
common stock. We also file annual and quarterly reports, proxy statements and
other information with the SEC. You may read and copy the registration statement
or any other document we file 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 that we have filed electronically.
The SEC's website is located at http://www.sec.gov.
-14-
<PAGE> 18
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we
provide in documents filed with the SEC, which means that we 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 we later file with the SEC, modifies and
replaces this information. We incorporate by reference the following documents
we have filed with the SEC:
1. annual report on Form 10-K for the year ended June 30, 1999;
2. proxy statement, dated October 8, 1999 for InKine's 1999
annual meeting of shareholders;
3. current report on Form 8-K filed on October 1, 1999;
4. quarterly report on Form 10-Q for the quarter ended September
30, 1999;
5 quarterly report on Form 10-Q for the quarter ended December
31, 1999;
6. current report on Form 8-K filed on May 10, 2000;
7. quarterly report on Form 10-Q for the quarter ended March 31,
2000; and
8. The description of our common stock, which is registered under
Section 12 of the Exchange Act, contained in our registration
statement on Form 8-A, including any amendments or reports
filed for the purpose of updating such description.
All documents we have filed with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this prospectus will become a
part of this prospectus.
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. We will
not send exhibits to the documents unless those exhibits have been specifically
incorporated by reference in this prospectus.
You should rely only on the information incorporated by reference or
included in this prospectus or the applicable prospectus supplement. We have not
authorized anyone else to provide you with different information. The selling
shareholders may only use this prospectus to sell securities if a prospectus
supplement is delivered with the prospectus, 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.
-15-
<PAGE> 19
LEGAL MATTERS
Saul, Ewing, Remick & Saul LLP, Philadelphia, Pennsylvania, will pass
upon the validity of the shares of common stock offered in this prospectus for
us.
-16-
<PAGE> 20
EXPERTS
The financial statements of InKine 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 InKine's 1999 annual report on
Form 10-K, have been incorporated by reference in this prospectus and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, also incorporated by reference in this prospectus,
and upon the authority of KPMG LLP 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 and in the
registration statement, have been audited by Richard A. Eisner & Company, LLP,
independent auditors, and are incorporated by reference in this prospectus in
reliance upon such report given upon the authority of Richard A. Eisner &
Company, LLP as experts in accounting and auditing.
-17-
<PAGE> 21
You should rely only on the information contained in this prospectus or
incorporated by reference. We have not authorized anyone to provide you with
additional or different information. We are 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.
-------------
INKINE PHARMACEUTICAL COMPANY, INC.
Common Stock
------------------
Prospectus
------------------
__________, 2000
-18-
<PAGE> 22
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
We will pay the following expenses incurred in connection with the sale
of the securities registered under this registration statement. Other than the
SEC registration fee and the Nasdaq filing fee, the amounts stated are
estimates.
<TABLE>
<S> <C>
SEC registration fee................................................................ $ 5,089
Accounting fees and expenses........................................................ 10,000
Legal fees and expenses............................................................. 25,000
Nasdaq filing fee................................................................... 17,500
Printing............................................................................ 3,000
Miscellaneous expenses.............................................................. 5,000
----------
Total...................................................................... $ 65,589
==========
</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.
Our certificate of incorporation provides that the directors of our
company 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.
Our bylaws provide that we shall indemnify and hold harmless our
directors and officers 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 that we advance expenses to persons eligible for
indemnification. In addition, the bylaws authorize our company to maintain
insurance to protect our company and any of our directors or officers against
any expense, liability, or loss, whether or not we would have the power to
indemnify these 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 Form of Subscription Agreement between InKine and the Investors listed
on the Selling Shareholders table.
4.2 Common Stock Purchase Warrant, dated May 5, 2000, granted to the
placement agent, Leerink, Swann, Garrity, Sollami, Yaffe & Wynn, Inc.
5 Opinion of Saul, Ewing, Remick & Saul LLP as to the legality of the
securities registered hereunder.
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).
24 Power of Attorney (contained on signature page).
</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;
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
II-2
<PAGE> 24
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 May 17,
2000.
INKINE PHARMACEUTICAL
COMPANY, INC.
By: /s/Leonard S. Jacob
-----------------------------------------
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.
NOTICE TO SIGNATORIES
The purpose of this Power of Attorney is to give Leonard S. Jacob,
M.D., Ph.D. and Robert F. Apple (each an "Agent" and together, the "Agents") the
power to execute certain documents related to this Registration Statement on
your behalf.
This Power of Attorney does not impose a duty on the Agents to exercise
granted powers, but when powers are exercised, they must use due care to act for
your benefit and in accordance with this Power of Attorney.
Agents may exercise the powers given here for the period during which
this registration statement is effective, even after you become incapacitated,
unless you expressly limit the duration of these powers or you revoke these
powers or a court acting on your behalf terminates the Agents' authority. A
court can take away the powers of the Agents if it finds the Agents are not
acting properly.
The powers and duties of an agent under a Power of Attorney are
explained more fully in 20 Pa. C.S. Ch. 56.
If there is anything about this form that you do not understand, you
should ask a lawyer of your own choosing to explain it to you.
II-4
<PAGE> 26
By signing below you are attesting that you have read or had explained
to you the above Notice and you understand its contents.
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 Chairman and Chief May 17, 2000
- ----------------------------- Executive Officer and
Leonard S. Jacob, M.D., Ph.D. Director
/s/Robert F. Apple Sr. Vice President and May 17, 2000
- ---------------------------- Chief Financial Officer
Robert F. Apple (principal financial and
accounting officer)
/s/J.R. LeShufy Director May 17, 2000
- ----------------------------
J.R. LeShufy
/s/Steven B. Ratoff Director May 17, 2000
- ----------------------------
Steven B. Ratoff
/s/Thomas P. Stagnaro Director May 17, 2000
- ----------------------------
Thomas P. Stagnaro
/s/ Robert A. Vukovich Director May 17, 2000
- ----------------------------
Robert A. Vukovich, Ph.D.
/s/ Jerry A. Weisbach Director May 17, 2000
- ----------------------------
Jerry A. Weisbach, Ph.D.
</TABLE>
The undersigned have read the above Power of Attorney and
acknowledge that each of them, respectively, is the person identified as the
agent for the principals listed above. The undersigned hereby acknowledge that
in the absence of a specific provision to the contrary in the Power of Attorney
or in 20 Pa. C.S. when they, respectively, act as agent, each of them:
(i) shall exercise the powers for the benefit of the
principal;
(ii) shall exercise reasonable caution and prudence; and
(iii) shall keep a full and accurate record of all actions
on behalf of the principal.
/s/Leonard S. Jacob May 17, 2000
- ----------------------------
Leonard S. Jacob, M.D., Ph.D
/s/Robert F. Apple May 17, 2000
- ----------------------------
Robert F. Apple
II-5
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Title
- --- -----
<S> <C>
4.1 Form of Subscription Agreement between InKine and the Investors listed
on the Selling Shareholders table.
4.2 Common Stock Purchase Warrant, dated May 5, 2000, granted to the
placement agent, Leerink, Swann, Garrity, Sollami, Yaffe & Wynn, Inc.
5 Opinion of Saul, Ewing, Remick & Saul LLP as to the legality of the
securities registered hereunder.
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).
24 Power of Attorney (contained on signature page).
</TABLE>
<PAGE> 1
Exhibit 4.1
FORM OF SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement") made as of the date
set forth on the signature page hereof between InKine Pharmaceutical Company,
Inc., a New York corporation, (the "Company") and the undersigned (the
"Subscriber").
WITNESSETH:
WHEREAS, the Company is offering in a private placement to
accredited investors (the "Offering") a minimum of 1.5 million shares of its
Common Stock, par value $.0001 per share, (the "Common Stock") (the "Minimum
Offering") and a maximum of 2.5 million shares of Common Stock (the "Maximum
Offering"), with an option in favor of the Placement Agent to offer up to an
additional 500,000 shares to cover overallotments, all at a purchase price of
$3.80 per share. The shares of Common Stock offered hereby are sometimes
referred to as the "Shares;"
WHEREAS, the Subscriber desires to purchase that number of
Shares set forth on the signature page hereof on the terms and conditions
hereinafter set forth; and
WHEREAS, the Company has engaged Leerink Swann & Company (the
"Placement Agent") as placement agent for the Offering on a "best-efforts"
basis.
NOW, THEREFORE, in consideration of the premises and the
mutual representations and covenants hereinafter set forth, the parties hereto
agree as follows:
I. SUBSCRIPTION FOR SHARES AND REPRESENTATIONS BY SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth,
the Subscriber hereby irrevocably subscribes for and agrees to purchase from the
Company such number of Shares as is set forth upon the signature page hereof at
a price equal to the calculation of the above mentioned formula per Share and
the Company agrees to sell such Shares to the Subscriber for said purchase
price. The purchase price is payable by personal or business check, wire
transfer of immediately available funds or money order made payable to U.S. Bank
National, Escrow Agent, F/B/O InKine Pharmaceutical Company, Inc."
contemporaneously with the execution and delivery of this Agreement by the
Subscriber.
All wires should be sent to:
BBK: U.S. Bank N.A.
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ABA #091000022
BNF: U.S. Bank Trust N.A./AC #180121167365
OBI: TFM Wire Clearing A/C #47300017
Ref: InKine/Leerink Escrow Attn: Chad Myers 651-244-8542
Certificates for the Shares will be delivered by the Company
to the Subscriber within 2 business days of the Closing of the Offering
applicable to the Subscriber as set forth in Section III hereof.
1.2 The Subscriber recognizes that the purchase of Shares
involves a high degree of risk in that (i) the Company remains a development
stage business with a limited operating history and requires substantial funds
in addition to the proceeds of the Offering; (ii) an investment in the Company
is highly speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company; (iii) the Subscriber may
not be able to liquidate its investment; (iv) transferability of the Shares is
extremely limited; and (v) in the event of a disposition, the Subscriber could
sustain the loss of its entire investment.
1.3 The Subscriber represents that the Subscriber is an
"accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended, (the "Act") as
indicated by the responses to the questions contained in Section VII hereof, and
that the Subscriber is able to bear the economic risk and illiquidity of an
investment in the Shares.
1.4 The Subscriber hereby acknowledges and represents that
(i) the Subscriber has prior investment experience, including investment in
non-listed and unregistered securities, or that the Subscriber has employed the
services of an investment advisor, attorney and/or accountant to read all of the
documents furnished or made available by the Company both to the Subscriber and
to all other prospective investors to evaluate the merits and risks of such an
investment on the Subscriber's behalf; (ii) the Subscriber recognizes the highly
speculative nature of an investment in the Shares; and (iii) the Subscriber is
able to bear the economic risk and illiquidity which the Subscriber assumes by
investing in the Shares.
1.5 The Subscriber hereby acknowledges receipt and careful
review of the Confidential Offering Package dated March 22, 2000; hereby
represents that the Subscriber has
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been furnished by the Company during the course of this transaction with all
information regarding the Company which the Subscriber has requested or desired
to know; has been afforded the opportunity to ask questions of and receive
answers from duly authorized officers or other representatives of the Company
concerning the terms and conditions of the Offering; and has received any
additional information which the Subscriber has requested.
1.6 (a) In making the decision to invest in the Shares, the
Subscriber has relied solely upon the information provided by the Company in the
Offering Package. To the extent necessary, the Subscriber has retained, at its
own expense, and relied upon the advice of appropriate professionals regarding
the investment, tax and legal merits and consequences of this Agreement and its
purchase of the Shares hereunder. The Subscriber acknowledges and agrees that
the Placement Agent has not supplied any information for inclusion in the
Offering Package other than information furnished in writing to the Company by
the Placement Agent specifically for inclusion in the Offering Package relating
to the Placement Agent, that the Placement Agent has no responsibility for the
accuracy or completeness of the Offering Package and that the Subscriber has not
relied upon the independent investigation or verification, if any, which may
have been undertaken by the Placement Agent.
(b) The Subscriber covenants that (i) the Subscriber was contacted
regarding the sale of the Shares by the Placement Agent (or an authorized agent
or representative thereof) with whom the Subscriber had a prior substantial
pre-existing relationship and (ii) no Shares were offered or sold to it by means
of any form of general solicitation or general advertising, and in connection
therewith the Subscriber did not (A) receive or review any advertisement,
article, notice or other communication published in a newspaper or magazine or
similar media or broadcast over television or radio, whether closed circuit or
generally available; or (B) attend any seminar, meeting or industry investor
conference whose attendees were invited by any general solicitation or general
advertising.
1.7 The Subscriber hereby acknowledges that the Offering has
not been reviewed by the United States Securities and Exchange Commission (the
"SEC") because of the Company's representations that this Offering is intended
to be exempt from the registration requirements of Section 5 of the Act pursuant
to Sections 3(b), 4(2), and 4(6) thereof and Regulation D promulgated under the
Act. The Subscriber agrees that the Subscriber will not sell or otherwise
transfer the Shares unless they are registered under the Act or unless an
exemption from such registration is available.
1.8 The Subscriber understands that none of the Shares have
been registered under the Act by reason of a claimed exemption under the
provisions of the Act which depends, in part, upon the Subscriber's investment
intention. In this connection, the Subscriber hereby represents that the
Subscriber is purchasing the Shares for the Subscriber's own account for
investment and not with a view toward the resale or distribution thereof to
others. The Subscriber, if an entity, was not formed for the purpose of
purchasing the Shares. The Subscriber understands that Rule 144 promulgated
under the Act requires, among other conditions, a one-year holding period prior
to the resale (in limited amounts) of securities acquired in a non-public
offering without having to satisfy the registration requirements under
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<PAGE> 4
the Act.
1.9 The Subscriber understands and hereby acknowledges that
the Company is under no obligation to register the Shares under the Act or any
state securities or "blue sky" laws other than as set forth in Section V. The
Subscriber consents that the Company may, if it desires, permit the transfer of
the Shares out of the Subscriber's name only when the Subscriber's request for
transfer is accompanied by an opinion of counsel reasonably satisfactory to the
Company that neither the sale nor the proposed transfer results in a violation
of the Act or any applicable state "blue sky" laws (collectively, "Securities
Laws"). The Subscriber agrees to hold the Company and the Placement Agent and
their respective directors, officers, employees, agents and controlling persons
and their respective heirs, representatives, successors and assigns harmless and
to indemnify them against all losses, damages, liabilities, costs and expenses
incurred by them as a result of any breach of any representation, warranty or
acknowledgement, or any misrepresentation made by the Subscriber contained in
this Agreement (including the Confidential Investor Questionnaire contained in
Section VII herein) or any sale or distribution by the Subscriber in violation
of the Securities Laws.
1.10 The Subscriber consents to the placement of a legend on
any certificate or other document evidencing the Shares indicating that such
Shares have not been registered under the Act or any state securities or "blue
sky" laws and setting forth or referring to the restrictions on transferability
and sale thereof contained in this Agreement. The Subscriber is aware that the
Company will make a notation in its appropriate records and issue "stop
transfer" instructions to its transfer agent with respect to the restrictions on
the transferability of such Shares.
1.11 The Subscriber understands that the Company will review
this Agreement and hereby gives authority to the Company to call Subscriber's
bank or place of employment (in a call in which the Placement Agent
participates) or otherwise review the financial standing of the Subscriber; and
it is further agreed that upon their mutual agreement the Placement Agent and
the Company reserve the unrestricted right, without further documentation or
agreement on the part of the Subscriber, to reject or limit any subscription, to
accept subscriptions for Shares and to close the Offering to the Subscriber at
any time.
1.12 The Subscriber hereby represents that the address of the
Subscriber furnished by the Subscriber on the signature page hereof is the
Subscriber's principal residence if the Subscriber is an individual or its
principal business address if it is a corporation or other entity.
1.13 The Subscriber represents that the Subscriber has full
power and authority (corporate, statutory and otherwise) to execute and deliver
this Agreement and to purchase the Shares subscribed for hereby. This Agreement
constitutes the legal, valid and binding obligation of the Subscriber,
enforceable against the Subscriber in accordance with its terms.
1.14 If the Subscriber is a corporation, partnership, limited
liability company, trust, employee benefit plan, individual retirement account,
Keogh Plan, or other entity, then (a) it is authorized and qualified to become
an investor in the Company and the person signing this
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<PAGE> 5
Agreement on behalf of such entity has been duly authorized by such entity to do
so, and (b) it is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization.
1.15 The Subscriber acknowledges that if he or she is a
registered representative of a National Association of Securities Dealers, Inc.
("NASD") member firm, he or she must give such firm the notice required by the
NASD's Rules of Fair Practice, receipt of which must be acknowledged by such
firm in Section 7.4 below.
1.16 The Subscriber represents and warrants that it has not
engaged, consented to nor authorized any broker, finder or intermediary to act
on its behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement. The Subscriber
shall indemnify and hold harmless the Company from and against all fees,
commissions or other payments owing to any such person or firm acting on behalf
of such Subscriber hereunder.
1.17 The Subscriber acknowledges that (a) the Company has
engaged, consented to and authorized the Placement Agent in connection with the
transactions contemplated by this Agreement, (b) the Company shall pay the
Placement Agent a commission and reimburse the Placement Agent's expenses in
accordance with the Placement Agency Agreement (as defined in Section 5.1(c)
below), and the Company shall indemnify and hold harmless the Subscriber from
and against all fees, commissions or other payments owing by the Company to the
Placement Agent or any other person or firm acting on behalf of the Company
hereunder and (c) registered representatives of the Placement Agent and/or its
designees (including, without limitation, registered representatives of the
Placement Agent and/or its designees who participate in the Offering and sale of
the securities sold in the Offering) will be paid a portion of the commissions
paid to the Placement Agent including a portion of the Placement Warrants (as
defined in Section 5.1(c) below).
1.18 The Subscriber, whose name appears on the signature line
below, shall be the beneficial owner of the Shares for which such Subscriber
subscribes.
1.19 The Subscriber agrees that from the time the Subscriber
first received the Offering Package until a point in time equal to the earlier
of (i) the date that the Registration Statement (as defined in Section 5.2(a))
is declared effective by the SEC or (ii) one year from the date of the Offering
Package, the Subscriber has not and shall not, directly or indirectly, through
related parties, affiliates or otherwise, (A) sell "short" or "short against the
box" (as those terms are generally understood) any equity security of the
Company or (B) otherwise engage in any transaction that involves hedging of the
Subscriber's position in any equity security of the Company.
II. REPRESENTATIONS BY THE COMPANY
The Company hereby represents and warrants to the Subscriber that:
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<PAGE> 6
2.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of New York and has full corporate power and lawful authority
to conduct its business as described in the Offering Package. The Company is
duly qualified to do business as a foreign corporation and is in good standing
in the Commonwealth of Pennsylvania and in each jurisdiction in which the nature
of the business conducted, or as proposed to be conducted in the Offering
Package, by it or the properties owned, leased or operated by it, makes such
qualification or licensing necessary and where the failure to be so qualified or
licensed would have a material adverse effect upon the business, prospects or
financial condition of the Company other than Pennsylvania, where the Company
will be so qualified prior to the Closing (as defined in Section 3.2).
2.2 Capitalization and Voting Rights. The authorized, issued
and outstanding capital stock of the Company is as set forth in the Offering
Package; all issued and outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable. Except as set forth in the
Offering Package, there are no outstanding options, warrants, agreements,
commitments, convertible securities, preemptive rights or other rights to
subscribe for or to purchase any shares of capital stock of the Company nor are
there any agreements, promises or commitments to issue any of the foregoing, or
discussions concerning same, which have not been disclosed in writing. Except as
set forth in the Offering Package, in this Agreement and as otherwise required
by law, there are no restrictions upon the voting or transfer of the Shares
pursuant to the Company's Certificate of Incorporation, as amended, (the
"Certificate of Incorporation"), By-laws or other governing documents or any
agreement or other instruments to which the Company is a party or by which the
Company is bound.
2.3 Authorization; Enforceability. The Company has all
corporate right, power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of the Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Company, the authorization, sale, issuance and delivery of the Shares and the
performance of the Company's obligations hereunder has been taken. This
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy. The Shares have been duly and validly
authorized and, upon the issuance and delivery thereof and payment therefor as
contemplated by this Agreement, will be free and clear of liens, duly and
validly authorized and issued, fully paid and nonassessable. The issuance and
sale of the Shares contemplated hereby will not give rise to any preemptive
rights or rights of first refusal on behalf of any person.
2.4 No Conflict; Governmental Consents.
(a) The execution and delivery by the Company of this
Agreement and the consummation of the transactions contemplated hereby will not
result in the violation of any law,
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<PAGE> 7
statute, rule, regulation, order, writ, injunction, judgment or decree of any
court or governmental authority to or by which the Company is bound, or of any
provision of the Certificate of Incorporation or By-laws of the Company, and
will not conflict with, or result in a breach or violation of, any of the terms
or provisions of, or constitute (with due notice or lapse of time or both) a
default under, any lease, loan agreement, mortgage, security agreement, trust
indenture or other agreement or instrument to which the Company is a party or by
which it is bound or to which any of its properties or assets is subject, nor
result in the creation or imposition of any lien upon any of the properties or
assets of the Company.
(b) No consent, approval, authorization or other order of any
governmental authority or other third-party is required to be obtained by the
Company in connection with the authorization, execution and delivery of this
Agreement or with the authorization, issuance and sale of the Shares, except
such filings as may be required to be made, and which shall have been made at or
prior to the required time, with the SEC, the NASD and the National Association
of Securities Dealers Automated Quotation System ("Nasdaq"), and with any state
or foreign blue sky or securities regulatory authority.
2.5 Licenses. Except as may be set forth in the Offering
Package, the Company has all licenses, permits and other governmental
authorizations currently required for the conduct of its business or ownership
of properties and is in all material respects complying therewith, except for
any licenses, permits or other governmental authorizations which would not
materially adversely affect the business, property, financial condition, results
of operations or prospects of the Company.
2.6 Litigation. The Company knows of no pending or threatened
legal or governmental proceedings against the Company which could materially
adversely affect the business, property, financial condition, results of
operations or prospects of the Company.
2.7 Accuracy of Reports. All material reports required to be
filed by the Company within the three years prior to the date of this Agreement
under the Securities Exchange Act of 1934, as amended, (the "Exchange Act") have
been duly filed with the SEC, complied at the time of filing in all material
respects with the requirements of their respective forms and, except to the
extent updated or superseded by the Offering Package or any subsequently filed
report, to the best of the Company's knowledge, were complete and correct in all
material respects as of the dates at which the information was furnished, and
contained (as of such dates) no untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
2.8 Accuracy of Offering Package. No information set forth in
the Offering Package contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
2.9 Investment Company. The Company is not an "investment
company"
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within the meaning of such term under the Investment Company Act of 1940, as
amended, and the rules and regulations of the SEC thereunder.
2.10 Listing. The Company shall promptly file an Application
for Listing of Additional Shares with the Nasdaq SmallCap Market and hereby
represents and warrants to the Placement Agent and the Subscriber that it will
take any other necessary action in accordance with the rules of the Nasdaq
SmallCap Market to enable the Shares (and the Common Stock issuable upon
exercise of the Placement Warrants as defined in Section 5.1 (c)) to trade on
the Nasdaq SmallCap Market.
III. TERMS OF SUBSCRIPTION
3.1 The Offering is for a minimum of 1.5 million Shares and a
maximum of 2.5 million Shares. The Shares are offered on a "best efforts" basis.
The Placement Agent, at its option, may offer for sale by the Company up to an
additional 500,000 Shares to cover over-allotments. Subscribers must each
purchase a minimum of 75,000 Shares unless the Company and the Placement Agent
agree to a lesser number.
3.2 After the Minimum Offering amount has been subscribed for,
the Company and the Placement Agent shall mutually agree as to the number of
closings and the timing thereof (each, a "Closing") and they will not be
obligated to conduct the first Closing within any specific time following
receipt of subscriptions for the Minimum Offering. The foregoing
notwithstanding, the first Closing is expected to occur no later than April 27,
2000, subject to extension of this Offering for up to an additional 60 days at
the option of the Placement Agent and the Company (such date, as the same may be
extended, the "Closing Date"). The purchase price is payable by personal or
business check, wire transfer of immediately available funds or money order made
payable to "U.S. Bank National, Escrow Agent, F/B/O InKine Pharmaceutical
Company, Inc." as provided in Section 1.1.
3.3 Pending the sale of the Shares, all subscription funds
paid hereunder shall be deposited by the Escrow Agent in escrow with U.S. Bank
National. If the Company shall not have obtained subscriptions (including this
subscription) for the Minimum Offering on or before May 19, 2000, then this
subscription shall be void and all funds paid hereunder by the Subscriber shall
be promptly returned to the Subscriber, without deduction therefrom and with
interest thereon, in accordance with Section 3.5 hereof.
3.4 The Subscriber hereby authorizes and directs the Company
to deliver the Shares to be issued to the Subscriber pursuant to this Agreement
directly to the Subscriber's account maintained by the Placement Agent or, if no
such account exists, to the residential or business address indicated on the
signature page hereto.
3.5 The Subscriber hereby authorizes and directs the Company
to return any funds related to unaccepted subscriptions to the same account from
which the funds were drawn, including any customer account maintained with the
Placement Agent.
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IV. CONDITIONS TO OBLIGATIONS OF THE SUBSCRIBERS AND THE COMPANY
4.1 The Subscribers' obligation to purchase the Shares at the
Closing is subject to the fulfillment on or prior to the date of such Closing of
the following conditions, which conditions may be waived at the option of each
Subscriber to the extent permitted by law:
(a) Representations and Warranties. The representations and
warranties made by the Company in Section II hereof shall be true and correct in
all material respects when made, and shall be true and correct in all material
respects on the date of such Closing with the same force and effect as if they
had been made on and as of said date. If any such representations or warranties
shall not be true and accurate in any respect prior to the Closing, the Company
shall give immediate written notice of such fact to the Placement Agent,
specifying which representations or warranties are not true and accurate and the
reason therefor.
(b) Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to such
purchase shall have been performed or complied with in all material respects.
(c) No Legal Order Pending. There shall not then be in effect
any legal or other order enjoining or restraining the transactions contemplated
by this Agreement.
(d) No Law Prohibiting or Restricting Such Sale. There shall
not be in effect any law, rule or regulation prohibiting or restricting such
sale or requiring any consent or approval of any person to issue the Shares
which consent or approval shall not have been obtained (except as may otherwise
be provided in this Agreement).
(e) Minimum Subscriptions. The Company shall have received
binding subscriptions for at least the Minimum Offering.
(f) Legal Opinion. Upon the Closing, counsel to the Company
shall have delivered to the Placement Agent for the benefit of the Subscribers a
legal opinion with respect to such legal matters relating to this Agreement and
the Offering Package as the Placement Agent may reasonably require.
4.2 The Company's obligation to sell the Shares at the Closing
is subject to the fulfillment on or prior to the date of such Closing of the
following conditions, which conditions may be waived at the option of the
Company to the extent permitted by law:
(a) Acknowledgements, Representations and Warranties. The
acknowledgements, representations and warranties made by the Subscriber in
Section I hereof shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the date of such
Closing with the same force and effect as if they had been made on and as of
said date. If any such representations, warranties or acknowledgements shall not
be true and accurate in any respect prior to the Closing, the undersigned shall
give immediate
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written notice of such fact to the Company, to the Placement Agent, and to his
representatives, if any, specifying which representations, warranties or
acknowledgements are not true and accurate and the reason therefor.
(b) Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Subscriber on or prior to
such purchase shall have been performed or complied with in all material
respects.
(c) No Legal Order Pending. There shall not then be in effect
any legal or other order enjoining or restraining the transactions contemplated
by this Agreement.
(d) No Law Prohibiting or Restricting Such Sale. There shall
not be in effect any law, rule or regulation prohibiting or restricting such
sale or requiring any consent or approval of any person to issue the Shares
which consent or approval shall not have been obtained (except as may otherwise
be provided in this Agreement).
(e) Minimum Subscriptions. The Company shall have received
binding subscriptions for a least the Minimum Offering.
V. REGISTRATION RIGHTS
5.1 As used in this Agreement, the following terms shall have
the following meanings:
(a) "Affiliate" shall mean, with respect to any
Person (as defined below), any other Person controlling, controlled by, or under
direct or indirect common control with, such Person (for the purposes of this
definition "control," when used with respect to any specified Person, shall mean
the power to direct the management and policies of such person, directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing).
(b) "Business Day" shall mean a day, Monday through
Friday, on which banks are generally open for business in each of New York, New
York; Boston, Massachusetts; and Philadelphia, Pennsylvania;
(c) "Holders" shall mean the Subscriber and any
person holding Registrable Securities as defined below (including the
Registrable Securities underlying the Placement Warrants (the "Placement
Warrants") to be granted to the Placement Agent and/or their designees pursuant
to the engagement letter between the Company and the Placement Agent dated March
1, 2000, (the "Placement Agency Agreement")), a holder of the Placement
Warrants, or any person to whom the rights under Section V have been transferred
in accordance with Section 5.9 hereof.
(d) "Person" shall mean any person, individual,
corporation, limited liability company, partnership, trust or other
nongovernmental entity or any governmental
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agency, court, authority or other body (whether foreign, federal, state, local
or otherwise).
(e) The terms "register," "registered" and
"registration" refer to the registration effected by preparing and filing with
the SEC a registration statement in compliance with the Act, and the declaration
or ordering by the SEC of the effectiveness of such registration statement.
(f) "Registrable Securities" shall mean (i) the
Shares and (ii) the shares of Common Stock issuable upon the exercise of the
Placement Warrants; provided, however, that securities shall only be treated as
Registrable Securities if and only for so long as they (A) have not been
disposed of pursuant to a registration statement declared effective by the SEC,
(B) have not been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Act so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the consummation
of such sale, and (C) are held by a Holder or a permitted transferee pursuant to
Section 5.9.
(g) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Section 5.2 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and expenses of counsel for the Company, blue sky fees and
expenses and the expense of any special audits incident to, or required by, any
such registration (but excluding the aggregate fees of legal counsel for all
Holders).
(h) "Registration Statement" shall have the meaning
ascribed to such term in Section 5.2 (a).
(i) "Registration Period" shall have the meaning
ascribed to such term in Section 5.4 (a).
(j) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities and the aggregate fees and expenses of legal counsel for all Holders.
5.2 (a) The Company shall, as soon as practicable, but not
later than ten (10) business days after the first Closing Date (such tenth
business day herein referred to as the "Filing Date"), (i) use its best efforts
to file with the SEC a registration statement (the "Registration Statement")
with respect to the resale of the Registerable Securities and use its best
efforts to have such Registration Statement declared effective by the SEC as
soon thereafter as is practical and (ii) cause such Registration Statement to
remain effective until the earlier of such date as the Holders have completed
the distribution described in the Registration Statement and such time as such
Shares are no longer, by reason of Rule 144 (k) under the Act, required to be
registered for the sale thereof by such Holders. If requested by the Placement
Agent, and in accordance with applicable securities laws, the Registration
Statement shall cover the direct sale of such Registrable Securities to the
Holders of such securities.
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(b) If the Registration Statement is not filed on or
prior to the Filing Date, then for each successive thirty (30) day period beyond
such Date, the Company shall pay to each Subscriber, in cash, as liquidated
damages and not as a penalty, one percent (1%) of the aggregate purchase price
previously paid by such Subscriber for Shares (or a pro rata amount for any
periods less than thirty (30) days) until such time as the filing is made;
provided, however, such Subscriber shall not be entitled to such cash payment if
and to the extent that such delays are the result of the failure of such
Subscriber to provide the Company with written information necessary to complete
the Registration Statement by the Filing Date.
5.3 All Registration Expenses incurred in connection with any
registration, qualification, exemption or compliance pursuant to Section 5.2
shall be borne by the Company. All Selling Expenses relating to the sale of
securities registered by or on behalf of Holders shall be borne by such Holders
pro rata on the basis of the number of securities so registered.
5.4 In the case of the registration, qualification, exemption
or compliance effected by the Company pursuant to this Agreement, the Company
shall, upon reasonable request, inform each Holder as to the status of such
registration, qualification, exemption and compliance. At its expense the
Company shall:
(a) use its best efforts to keep such registration,
and any qualification, exemption or compliance under state securities laws which
the Holders reasonably request the Company to obtain, continuously effective
until the Holders have completed the distribution described in the registration
statement relating thereto. The period of time during which the Company is
required hereunder to keep the Registration Statement effective is referred to
herein as "the Registration Period." Notwithstanding the foregoing, at the
Company's election, the Company may cease to keep such registration,
qualification, exemption or compliance effective with respect to any Registrable
Securities, and the registration rights of a Holder with respect to such
Registrable Securities shall expire, at such time as the Holder may sell all
Registrable Securities then held by such Holder under Rule 144 under the Act in
a three-month period, but this sentence shall not relieve the Company of any
obligation to comply with this Section V as to any shares of Common Stock
issuable upon exercise of the Placement Warrants;
(b) advise the Holders:
(i) when the Registration Statement or any
amendment thereto has been filed with the SEC and when the Registration
Statement or any post-effective amendment thereto has become effective;
(ii) of any request by the SEC for
amendments or supplements to the Registration Statement or the prospectus
included therein or for additional information;
(iii) of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for such purpose;
(iv) of the receipt by the Company of any
notification with
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respect to the suspension of the qualification of the Registrable Securities
included therein for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(v) of the happening of any event that
requires the making of any changes in the Registration Statement or the
prospectus so that, as of such date, the statements therein are not misleading
and do not omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the prospectus, in the
light of the circumstances under which they were made) not misleading;
(c) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time;
(d) furnish to each Holder, without charge, at least
one copy of such Registration Statement and any post-effective amendment or
supplement thereto, including financial statements and schedules, and, if the
Holder so requests in writing, all exhibits (excluding those incorporated by
reference) in the form filed with the SEC;
(e) during the Registration Period, deliver to each
Holder, without charge, a reasonable number of copies of the prospectus included
in such Registration Statement and any amendment or supplement thereto as such
Holder may reasonably request; and the Company consents to the use, consistent
with the provisions hereof, of the prospectus and any amendment or supplement
thereto by each of the selling Holders of Registrable Securities in connection
with the offering and sale of the Registrable Securities covered by the
prospectus and any amendment or supplement thereto;
(f) during the Registration Period, deliver to each
Holder, without charge, (i) as soon as practicable (but in the case of the
annual report of the Company to its stockholders, within 120 days after the end
of each fiscal year of the Company) one copy of: (A) its annual report to its
stockholders, if any (which annual report shall contain financial statements
audited in accordance with generally accepted accounting principles in the
United States of America by a firm of certified public accountants of recognized
standing); (B) if not included in substance in its annual report to
stockholders, its annual report on Form 10-K (or similar form); (C) a copy of
the full Registration Statement (excluding exhibits); and (ii) upon reasonable
request, all exhibits excluded by the parenthetical to the immediately preceding
clause (C);
(g) prior to any public offering of Registrable
Securities pursuant to any Registration Statement, register or qualify or obtain
an exemption for the offer and sale under the securities or blue sky laws of
such jurisdictions as any such Holders reasonably request in writing, provided
that the Company shall not for any such purpose be required to qualify generally
to transact business as a foreign corporation in any jurisdiction where it is
not so qualified or to consent to general service of process in any such
jurisdiction, and do any and all other acts or things reasonably necessary or
advisable to enable the offer and sale in such jurisdictions of the Registrable
Securities covered by such Registration Statement;
(h) cooperate with the Holders to facilitate the
timely preparation and
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<PAGE> 14
delivery of certificates representing Registrable Securities to be sold pursuant
to any Registration Statement free of any restrictive legends to the extent not
required at such time and in such denominations and registered in such names as
Holders may request at least five (5) business days prior to sales of
Registrable Securities pursuant to such Registration Statement;
(i) upon the occurrence of any event contemplated by
Section 5.4(b)(v) above, the Company shall promptly prepare a post-effective
amendment to the Registration Statement or a supplement to the related
prospectus, or file any other required document so that, as thereafter delivered
to purchasers of the Registrable Securities included therein, the prospectus
will not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
(j) use its best efforts to comply with all
applicable rules and regulations of the SEC, and make generally available to the
Holders not later than 45 days (or 90 days if the fiscal quarter is the fourth
fiscal quarter) after the end of its fiscal quarter in which the first
anniversary date of the effective date of the Registration Statement occurs, an
earnings statement satisfying the provisions of Section 11(a) of the Act.
5.5 The Holders shall have no right to take any action to
restrain, enjoin or otherwise delay any registration pursuant to Section 5.2
hereof as a result of any controversy that may arise with respect to the
interpretation or implementation of this Agreement.
5.6 (a) To the extent permitted by law, the Company shall
indemnify each Holder, each underwriter of the Registrable Securities and each
person controlling such Holder and each such underwriter within the meaning of
Section 15 of the Act, with respect to which any registration, qualification or
compliance has been sought pursuant to this Agreement, against all claims,
losses, expenses, costs, damages and liabilities (or action in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened (subject to Section 5.6(c) below), arising out of or
based on (i) any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus or offering circular,
or any amendment or supplement thereof, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances in which
they were made, or (ii) any violation or alleged violation by the Company of the
Act, the Exchange Act, or any rule or regulation promulgated under the Act or
the Exchange Act, and shall reimburse each Holder, each underwriter of the
Registrable Securities and each person controlling such Holder and each such
underwriter, for legal and other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action as
incurred; provided that the Company shall not be liable in any such case to the
extent that any untrue statement or omission or allegation thereof is made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Holder or underwriter and stated to be
specifically for use in preparation of such registration statement, prospectus
or offering circular; provided that the Company shall not be liable in any such
case where the claim, loss, damage or liability arises out of or is related to
the failure of the
14
<PAGE> 15
Holder to comply with the covenants and agreements contained in this Agreement
respecting sales of Registrable Securities, and except that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates to
any such untrue statement or alleged untrue statement or omission or alleged
omission made in the preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the SEC at the time the registration statement
becomes effective or in the amended prospectus filed with the SEC pursuant to
Rule 424(b) of the Act or in the prospectus subject to completion under Rule 434
of the Act, which together meet the requirements of Section 10(a) of the Act
(the "Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any such Holder, any such underwriter or any such controlling person,
if a copy of the Final Prospectus furnished by the Company to the Holder for
delivery was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Act and the Final Prospectus would have cured the defect giving rise to
such loss, liability, claim or damage.
(b) Each Holder will severally, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers, each underwriter of the Registrable
Securities and each person who controls the Company and each underwriter of the
Registrable Securities within the meaning of Section 15 of the Act, against all
claims, losses, expenses, costs, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened (subject to Section 5.6(c) below), arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made, and will reimburse the Company, such
directors and officers, each underwriter of the Registrable Securities and each
person controlling the Company and each underwriter of the Registrable
Securities for reasonable legal and any other expenses or costs reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action as incurred, in each case to the extent, but only to
the extent, that such untrue statement or omission or allegation thereof is made
in reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of the Holder and stated to be specifically for use in
preparation of such registration statement, prospectus or offering circular;
provided that the indemnity shall not apply to the extent that such claim, loss,
damage or liability results from the fact that a current copy of the prospectus
or offering circular was not made available to the Holder and such current copy
of the prospectus or offering circular would have cured the defect giving rise
to such loss, claim, expense, costs, damage or liability. Notwithstanding the
foregoing, in no event shall a Holder be liable for any such claims, losses,
expenses, costs, damages or liabilities in excess of the proceeds received by
such Holder in that offering, except in the event of fraud by such Holder.
(c) Each party entitled to indemnification under this
Section 5.6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim
15
<PAGE> 16
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense with its own counsel at such Indemnified Party's
expense unless the named parties to any proceeding covered hereby (including any
impleaded parties) include both the Company or any others the Company may
designate and one or more Indemnified Persons, and representation of the
Indemnified Persons and such other parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, 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
under this Agreement, unless such failure is materially prejudicial to the
Indemnifying Party in defending such claim or litigation. An Indemnifying Party
shall not be liable for any settlement of an action or claim effected without
its written consent (which consent will not be unreasonably withheld).
(d) If the indemnification provided for in this
Section 5.6 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage, cost or
expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such loss, liability,
claim, damage, cost or expense in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or omissions
which resulted in such loss, liability, claim, damage, cost or expense as well
as any other relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied or which should have been supplied by the Indemnifying Party or by the
Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
5.7 (a) Upon receipt of any notice from the Company of the
happening of any event requiring the preparation of a supplement or amendment to
a prospectus relating to Registrable Securities so that, as thereafter delivered
to the Holders, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, each Holder shall
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement contemplated by Section 5.2 until its receipt of copies
of the supplemented or amended prospectus from the Company and, if so directed
by the Company, each Holder shall deliver to the Company all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
(b) Any Holder which owns five percent (5%) or more
(and with respect to 5.7(b)(ii), "any Holder") of the Company's outstanding
Common Stock shall suspend, upon request of the Company, any disposition of
Registrable Securities pursuant to the
16
<PAGE> 17
Registration Statement and prospectus contemplated by Section 5.2 during (i) any
period not to exceed one 120-day period within any one 12-month period the
Company requires in connection with a primary underwritten offering of equity
securities and (ii) any period, not to exceed two 45-day periods within any
twelve month period, when the Company determines in good faith that offers and
sales pursuant thereto should not be made by reason of the presence of material
undisclosed circumstances or developments with respect to which the disclosure
that would be required in such a prospectus is premature, would have an adverse
effect on the Company or is otherwise inadvisable.
(c) As a condition to the inclusion of its
Registrable Securities, each Holder shall furnish to the Company such
information regarding such Holder, the securities of the Company owned
beneficially or of record by such Holder and the distribution proposed by such
Holder as the Company may request in writing or as shall be required in
connection with any registration, qualification or compliance referred to in
this Section V.
(d) With respect to any sale of Registrable
Securities pursuant to a Registration Statement filed pursuant to this Section
V, each Holder hereby covenants with the Company (i) not to make any sale of the
Registrable Securities without effectively causing the prospectus delivery
requirements under the Act to be satisfied, and (ii) if such Registrable
Securities are to be sold by any method or in any transaction other than on a
national securities exchange, the Nasdaq National Market, the Nasdaq SmallCap
Market or in the over-the-counter market, in privately negotiated transactions,
or in a combination of such methods, or as otherwise described in the prospectus
contemplated by Section 5.2, to notify the Company at least five (5) business
days prior to the date on which the Holder first offers to sell any such
Registrable Securities.
(e) Each Holder acknowledges and agrees that the
Registrable Securities sold pursuant to the Registration Statement described in
this Section are not transferable on the books of the Company unless the stock
certificate submitted to the transfer agent evidencing such Registrable
Securities is accompanied by a certificate reasonably satisfactory to the
Company to the effect that (i) the Registrable Securities have been sold in
accordance with such Registration Statement and (ii) the requirement of
delivering a current prospectus has been satisfied.
(f) Each Holder shall not take any action with
respect to any distribution deemed to be made pursuant to such registration
statement, which would constitute a violation of Regulation M under the Exchange
Act or any other applicable rule, regulation or law.
(g) At the end of the period during which the Company
is obligated to keep the Registration Statement current and effective as
described above, the Holders of Registrable Securities included in the
Registration Statement and the shares underlying the Placement Warrants shall
discontinue sales of shares pursuant to such Registration Statement upon receipt
of notice from the Company of its intention to remove from registration the
shares covered by such Registration Statement which remain unsold, and such
Holders shall notify the
17
<PAGE> 18
Company of the number of shares registered which remain unsold immediately upon
receipt of such notice from the Company.
5.8 With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which at any time permit
the sale of the Registrable Securities to the public without registration, the
Company shall use its reasonable best efforts:
(a) to make and keep public information available, as
those terms are understood and defined in Rule 144 under the Act, at all times;
(b) to file with the SEC in a timely manner all
reports and other documents required of the Company under the Exchange Act; and
(c) so long as a Holder owns any Registrable
Securities, to furnish to such Holder upon any reasonable request a written
statement by the Company as to its compliance with Rule 144 under the Act, and
of the Exchange Act, and a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents of the Company as such Holder
may reasonably request in availing itself of any rule or regulation of the SEC
allowing a Holder to sell any such securities without registration.
5.9 With the written consent of the Company and the Holders
holding at least a majority of the Registrable Securities that are then
outstanding, any provision of this Section V may be waived (either generally or
in a particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely) or amended. Upon the effectuation of
each such waiver or amendment, the Company shall promptly give written notice
thereof to the Holders, if any, who have not previously received notice thereof
or consented thereto in writing.
VI. MISCELLANEOUS
6.1 Any notice or other communication given hereunder shall be
deemed sufficient in writing and sent by (a) telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received); or (b) registered or
certified mail, return receipt requested, or delivered by hand against written
receipt therefor, addressed to InKine Pharmaceutical Company, Inc., Sentry Park
East, 1720 Walton Road, Blue Bell, PA 19422, Facsimile: (610) 260-9354,
Attention: Robert F. Apple, with a copy to Leerink Swann & Company, 60 State
Street, Boston, MA 02019, Facsimile (617) 918-4955, Attention: Thomas A.
Fitzgerald. Notices shall be deemed to have been given or delivered on the date
of mailing, except notices of change of address, which shall be deemed to have
been given or delivered when received.
6.2 Except as set forth in Section 5.9, this Agreement shall
not be changed, modified or amended except by a writing signed by the parties to
be charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
18
<PAGE> 19
6.3 Upon the execution and delivery of this Agreement by the
Subscriber, this Agreement shall become a binding obligation of the Subscriber
with respect to the purchase of Shares as herein provided, subject to acceptance
by the Company and the Placement Agent; subject, however, to the right hereby
reserved to the Company to enter into the same agreements with other subscribers
and to add and/or delete other persons as subscribers.
6.4 (a) Notwithstanding the place where this Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed in accordance with and governed
by the laws of the State of New York without regard to principles of conflicts
of law. In the event that a judicial proceeding is necessary, the sole forum for
resolving disputes arising out of or relating to this Agreement is the Supreme
Court of the State of New York in and for the County of New York or the Federal
Courts for such state and county, and all related appellate courts
(collectively, the "New York Courts"). The parties hereby irrevocably and
unconditionally consent to the jurisdiction of such courts.
(b) Each of the parties hereby irrevocably and
unconditionally consents to venue in the New York Courts, and hereby irrevocably
and unconditionally waives any objection to the laying of venue of any judicial
proceeding in the New York Courts, and agrees not to plead or claim in any such
New York Court that any such judicial proceeding brought in any such court has
been brought in an inconvenient forum.
6.5 The holding of any provision of this Agreement to be
invalid or unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Agreement, which shall remain in full force and
effect. If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, such provision shall be interpreted so as to remain
enforceable to the maximum extent permissible consistent with applicable law and
the remaining conditions and provisions or portions thereof shall nevertheless
remain in full force and effect and enforceable to the extent they are valid,
legal and enforceable, and no provisions shall be deemed dependent upon any
other covenant or provision unless so expressed herein.
6.6 It is agreed that a waiver by either party of a breach of
any provision of this Agreement shall not operate, or be construed, as a waiver
of any subsequent breach by that same party.
6.7 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.
6.8 This Agreement may be executed in two or more
counterparts each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
6.9 The Subscriber agrees not to issue any public statement
with respect to the
19
<PAGE> 20
Subscriber's investment or proposed investment in the Company or the terms of
any agreement or covenant between them and the Company without the Company's
prior written consent, except such disclosures as may be required under
applicable law or under any applicable order, rule or regulation.
6.10 Nothing in this Agreement shall create or be deemed to
create any rights in any person or entity not a party to this Agreement, except
for the holders of Registrable Securities.
6.11 Any pronoun herein shall include all genders and/or the
plural or singular as appropriate from the context.
[The remainder of this page intentionally left blank.]
20
<PAGE> 21
VII. CONFIDENTIAL INVESTOR QUESTIONNAIRE
7.1 The Subscriber represents and warrants that he, she or it
comes within one category marked below, and that for any category marked, he,
she or it has truthfully set forth, where applicable, the factual basis or
reason the Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO
THIS SECTION VII WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to
furnish any additional information which the Company deems necessary in order to
verify the answers set forth below.
Category A _____ The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or joint
net worth with his or her spouse, presently exceeds
$1,000,000.
Explanation. In calculating net worth
you may include equity in personal
property and real estate, including
your principal residence, cash,
short-term investments, stock and
securities. Equity in personal
property and real estate should be
based on the fair market value of
such property less debt secured by
such property.
Category B _____ The undersigned is an individual (not a partnership,
corporation, etc.) who had an individual income in
excess of $200,000 in each of the two most recent
years, or joint income with his or her spouse in excess
of $300,000 in each of those years (in each case
including foreign income, tax exempt income and full
amount of capital gains and losses but excluding any
income of other family members and any unrealized
capital appreciation) and has a reasonable expectation
of reaching the same income level in the current year.
Category C _____ The undersigned is a director or executive officer of
the Company.
Category D _____ The undersigned is a bank; a savings and loan
association; insurance company; registered investment
company; registered business development company;
licensed small business investment company or "SBIC";
or employee benefit plan within the meaning of Title
1 of Employee Retirement Income Security Act or
"ERISA" and (a) the investment decision is made by a
plan fiduciary which is either a bank, savings and
loan association, insurance company or registered
investment advisor, or (b) the plan has total assets
in excess of $5,000,000 or is a self-directed plan
with investment decisions made solely by persons that
are accredited investors.
-------------------------------------------------------
-------------------------------------------------------
(describe entity)
21
<PAGE> 22
Category E _____ The undersigned is a private business development
company as defined in section 202(a)(22) of the
Investment Advisors Act of 1940.
-----------------------------------------------------
-----------------------------------------------------
(describe entity)
Category F _____ The undersigned is either a corporation, partnership,
Massachusetts business trust, or nonprofit
organization within the meaning of Section 501(c)(3)
of the Internal Revenue Code, in each case not formed
for the specific purpose of acquiring the Shares and
with total assets in excess of $5,000,000.
-----------------------------------------------------
-----------------------------------------------------
(describe entity)
Category G _____ The undersigned is a trust with total assets in
excess of $5,000,000, not formed for the specific
purpose of acquiring the Shares where the purchase is
directed by a "sophisticated person" as defined in
Regulation 506(b)(2)(ii) under the Act.
Category H _____ The undersigned hereby certifies that it is an
accredited investor because all of its equity owners
are accredited investors. The Company, in its sole
discretion, may request information regarding the
basis on which such equity owners are accredited.
Category I _____ The undersigned hereby certifies that it is an
accredited investor because it has total assets in
excess of $5,000,000 and was not formed for the
specific purpose of acquiring the Shares.
Category J _____ The undersigned is not within any of the categories
above and is therefore not an accredited investor.
The Company will notify a prospective Subscriber whether such Subscriber is
eligible to purchase Shares pursuant to this Agreement (and the Company, in its
sole discretion, retains the right to accept or reject all such purchases). The
undersigned agrees that it will notify the Company at any time on or prior to
the Closing Date in the event that the representations and warranties in this
Investor Questionnaire shall cease to be true, accurate and complete.
22
<PAGE> 23
7.2 SUITABILITY (please answer each question)
(a) For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(b) For an individual Subscriber, please describe any college or graduate
degrees held by you:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(c) For all Subscribers, please list types of prior investments:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(d) For all Subscribers, please state whether you have you participated in other
private placements before:
YES NO
------- -------
(e) If your answer to question (d) above was "YES", please indicate frequency of
such prior participation in private placements of:
<TABLE>
<CAPTION>
Biotechnology,
Pharmaceutical and
Public Private Other Life Science
Companies Companies Companies *
--------- --------- ------------------
<S> <C> <C>
Frequently --------- --------- ---------
Occasionally --------- --------- ---------
Never --------- --------- ---------
</TABLE>
*indicate how many companies, whether public or private, are in the
biotechnology, pharmaceutical or other life sciences sectors.
23
<PAGE> 24
(f) For an individual Subscriber, do you expect your current level of income to
significantly decrease in the foreseeable future?
YES_______ NO_______
(g) For trust, corporate, partnership and other institutional Subscribers, do
you expect your total assets to significantly decrease in the foreseeable
future?
YES_______ NO_______
(h) For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you?
YES_______ NO_______
(i) For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?
YES_______ NO_______
(j) For all Subscribers, do you understand that there is no guarantee of
financial return on this investment and that you run the risk of losing your
entire investment?
YES_______ NO_______
7.3 MANNER IN WHICH TITLE IS TO BE HELD. (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of
Survivorship (both parties
must sign)
(d) Partnership*
(e) Tenants in Common
(f) Company*
(g) Trust*
(h) Other
*If Shares are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.
24
<PAGE> 25
7.4 NASD AFFILIATION.
Are you affiliated or associated with an NASD member firm (please check one)?
YES NO
--------- ----------
If Yes, please describe:**
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
**If Subscriber is a Registered Representative with an NASD member
firm, have the following acknowledgment signed by the appropriate
party:
The undersigned NASD member firm acknowledges receipt of the
notice required by Article 3, Sections 28(a) and (b) of the Rules
of Fair Practice.
---------------------------------------------
Name of NASD Member Firm
By:
------------------------------------------
Authorized Officer - Signature
--------------------------------------------
Authorized Officer - Printed Name
Date: , 2000
-----------------------------
7.5 COMPANY RELIANCE ON THIS QUESTIONNAIRE
The undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in this Section VII and such answers have
been provided under the assumption that the Company and its counsel will rely on
them.
25
<PAGE> 26
SIGNATURE PAGE DATE SIGNED: APRIL _____ , 2000
NUMBER OF SHARES: _______________________
MULTIPLIED BY OFFERING PRICE PER SHARE: x $3.80
-----
EQUALS SUBSCRIPTION AMOUNT: = $
=====
Signature Second Signature (if purchasing jointly)
Printed Name Printed Second Name
Entity Name Entity Name
Address Address
City, State and Zip Code City, State and Zip Code
Telephone-Business Telephone--Business
Facsimile-Business Facsimile--Business
Tax ID # or Social Security # Tax ID # or Social Security #
Name in which securities should be issued: ____________________________________
CHECK "YES" IF YOU WOULD LIKE THE SECURITIES TO BE DELIVERED TO YOUR ACCOUNT
WITH LEERINK SWANN & COMPANY OR "NO" IF YOU WOULD LIKE THE SECURITIES TO BE
DELIVERED TO YOUR ADDRESS AS SET FORTH ABOVE.
YES _____ NO _____
26
<PAGE> 27
This Subscription Agreement is agreed to and accepted as of April ________,
2000.
INKINE PHARMACEUTICAL COMPANY, INC.
By:
____________________________________
Name: Robert F. Apple
Title: Chief Financial Officer
27
<PAGE> 28
CERTIFICATE OF SIGNATORY
(To be completed if Shares are being subscribed for by an entity)
I,________________________, am the____________________________
of _____________________________________________ (the "Entity").
I certify that I am empowered and duly authorized by the Entity to
execute and carry out the terms of the Subscription Agreement and to purchase
and hold the Shares, and certify further that the Subscription Agreement has
been duly and validly executed on behalf of the Entity and constitutes a legal
and binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this___ day of April, 2000.
_______________________________________
(Signature)
28
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND
SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THIS CORPORATION, IS AVAILABLE.
VOID AFTER 5:00 P.M. NEW YORK TIME, ON MAY 4, 2005. WARRANT TO PURCHASE
283,887 SHARES OF COMMON STOCK.
PA-40 May 5, 2000
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF INKINE PHARMACEUTICAL COMPANY, INC.
This certifies that Leerink, Swann, Garrity, Sollami, Yaffe & Wynn,
Inc., 60 State St., 15th Floor, Boston, MA 02109, or any subsequent holder of
this Warrant (the "HOLDER"), for value received, is entitled, subject to the
adjustment and to the other terms set forth below, to purchase from InKine
Pharmaceutical Company, Inc., a New York corporation (the "COMPANY"), 283,887
fully paid and nonassessable shares of the Company's common stock, par value
$0.0001 per share (the "COMMON STOCK") at a price of $5.13 per share (the
"EXERCISE PRICE"). This Warrant shall be exercisable at any time on or after the
date first noted above, (the "COMMENCEMENT DATE") but not later than 5:00 p.m.
(New York Time) on the Expiration Date (as defined below). The Exercise Price
and, in some cases, the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant. This Warrant and all rights
hereunder, to the extent not exercised in the manner set forth herein shall
terminate and become null and void on the Expiration Date. "EXPIRATION DATE"
means 5:00 p.m. (New York time) on May 4, 2005. In the event that the Holder
does not exercise this Warrant pursuant to the terms of this Warrant, then this
Warrant shall expire, be cancelled, and be null and void. Pursuant to the letter
agreement, dated February 28, 2000, between the Company and the Holder, the
Holder has agreed to act as placement agent in connection with a certain private
placement of the Company's securities which closed on the date hereof (the
"OFFERING").
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares; Conversion
Right.
1.1 Duration of Exercise of Warrant. This Warrant is exercisable at the
option of the Holder at any time or from time to time but not earlier than on
the Commencement Date or later than 5:00 p.m. (New York Time) on the Expiration
Date for all or a portion of the shares of Common Stock which may be purchased
hereunder (the "WARRANT SHARES"). This Warrant may be exercised by presentation
and surrender hereof to the Company at its principal office, or at the office of
its stock transfer agent, with the Subscription Agreement attached hereto duly
<PAGE> 2
completed and executed and, unless the Conversion Right in Section 1.2 is
exercised, upon payment of the Exercise Price for the number of Warrant Shares
for which this Warrant is being exercised determined in accordance with the
provisions hereof. The Company agrees that the Warrant Shares shall be and are
deemed to be issued to the Holder as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered
and payment made for such shares. Subject to the provisions of Section 2,
certificates for the shares of Common Stock so purchased, together with any
other securities or property to which the Holder is entitled upon such exercise,
shall be delivered to the Holder by the Company or its transfer agent at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been exercised, but not later than ten (10) days from the date of
such exercise. Each stock certificate so delivered shall be in such
denominations of Common Stock as may be requested by the Holder and shall be
registered in the name of the Holder or such other name as shall be designated
by the Holder. If, upon exercise of this Warrant, fewer than all of the Warrant
Shares evidenced by this Warrant are purchased prior to the Expiration Date of
this Warrant, one or more new warrants substantially in the form of, and on the
terms in, this Warrant will be issued for the remaining number of shares of
Common Stock not purchased upon exercise of this Warrant. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.
1.2 Conversion Right. At any time during the term of this Warrant, the
Holder may, at its option, convert this Warrant, in whole or in part (a
"CONVERSION RIGHT"), into the number of shares of Common Stock determined in
accordance with this Section 1.2, by surrendering this Warrant at the principal
office of the Company or at the office of its stock transfer agent, accompanied
by a notice, in the form attached, stating such Holder's intent to effect such
Conversion Right, the number of Warrant Shares to be exchanged and the date on
which the Holder requests that such Conversion Right occur (the "NOTICE OF
CONVERSION"). The Conversion Right shall take place on the date specified in the
Notice of Conversion or, if later, the date the Notice of Conversion is received
by the Company (the "CONVERSION DATE"). Certificates for the shares issuable
upon such Conversion Right and, if applicable, a new warrant of like tenor
evidencing the balance of the shares remaining subject to this Warrant, shall be
issued as of the Conversion Date and delivered to the Holder within seven (7)
days following the Conversion Date. In connection with any Conversion Right,
this Warrant shall represent the right to subscribe for and acquire the number
of Warrant Shares equal to (i) the number of Warrant Shares specified by the
Holder in its Notice of Conversion (the "CONVERSION AMOUNT") less (ii) the
number of Warrant Shares equal to the quotient obtained by dividing (a) the
product of the Conversion Amount and the then current Exercise Price by (b) the
then current Market Price (as defined in Section 3.2 hereafter) of a share of
Common Stock.
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2. Shares to Be Fully Paid; Reservation of Shares.
The Company covenants and agrees that all Warrant Shares shall, upon
issuance and payment therefor, if any, be duly authorized, validly issued, fully
paid and nonassessable and free from all preemptive rights of any stockholder
and free of all taxes, liens and charges with respect to the issue thereof. The
Company covenants that it will reserve and keep available a sufficient number of
shares of its authorized but unissued Common Stock for such exercise. The
Company will take all such reasonable action as may be necessary to assure that
such Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Nasdaq SmallCap
Market or any other domestic securities exchange or automated quotation system
upon which the Common Stock may be listed.
3. Adjustment of Exercise Price and Number of Shares.
The Exercise Price and, in some cases, the number of shares purchasable
upon the exercise of this Warrant shall be subject to adjustment from time to
time upon the occurrence of certain events described in this Section 3.
3.1 Split or Combination of Common Stock and Stock Dividend. In case
the Company shall at any time subdivide, redivide, recapitalize, split or change
its outstanding shares of Common Stock into a greater number of shares or
declare a dividend upon its Common Stock payable solely in shares of Common
Stock, the Exercise Price in effect immediately prior to such subdivision or
declaration shall be proportionately reduced, and the number of Warrant Shares
issuable upon exercise of this Warrant shall be proportionately increased.
Conversely, in case the outstanding shares of Common Stock of the Company shall
be combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased, and
the number of Warrant Shares issuable upon exercise of this Warrant shall be
proportionately reduced.
3.2 Definitions. For purposes of this Agreement, the following
definitions shall apply:
(a) "Market Price" shall mean: (i) if there is a ready public
market of registered stock, the Market Price shall be the "Stock Price"
(as defined in this Section 3.2) obtained by taking the average over a
period of five (5) consecutive trading days ending on the second
trading day prior to the date of determination; and (ii) if there is no
ready public market, Market Price shall be the higher of the last bona
fide sale made by the Company and the fair market value of the Common
Stock as determined by the Board of Directors in its good faith
judgment.
(b) "Stock Price" shall mean (i) the last sales price, on each
such trading day, of a share of Common Stock, or if no such sale takes
place on any such trading day, the mean of the highest bid and lowest
asked prices therefor on any such trading day, in each case as
officially reported on all national securities
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exchanges on which the Common Stock is then listed or admitted to
trading or as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), or (ii) if the
Common Stock is not then listed or admitted to trading on any
national securities exchange or in the over-the-counter market, as
reported by NASDAQ, the closing price of the Common Stock on such
date, or (iii) if the Common Stock is not then quoted by NASDAQ,
the mean between the highest and lowest bid prices reported by
market makers and dealers for the Common Stock listed as such by
the National Quotation Bureau, Incorporated, or any similar
successor organization, or (iv) if there is no ready public market,
then the Stock Price shall be the Market Price, as determined
pursuant to 3.2(a)(ii) above.
3.3 Notice of Adjustment. Promptly after adjustment of the Exercise
Price or any increase or decrease in the number of shares purchasable upon the
exercise of this Warrant, the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered Holder of this
Warrant at the address of such Holder as shown on the books of the Company. The
notice shall be signed by the Company's Chairman or President and shall state
the effective date of the adjustment and the Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
3.4 Notices. If at any time:
(a) the Company shall declare any cash dividend upon its
Common Stock;
(b) the Company shall declare any dividend upon its Common
Stock payable in securities (other than a dividend payable solely in
shares of Common Stock) or make any special dividend or other
distribution to the holders of its Common Stock;
(c) there shall be any consolidation or merger of the Company
with another corporation, or a sale of all or substantially all of the
Company's assets to another corporation; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give, by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
registered Holder of this Warrant at the address of such Holder as shown on the
books of the Company, (i) at least thirty (30) days' prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of any such dissolution, liquidation or winding-up; (ii) at
least ten (10) days' prior written
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<PAGE> 5
notice of the date on which the books of the Company shall close or a record
shall be taken for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger or sale, and (iii) in
the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, at least thirty (30) days' written
notice of the date when the same shall take place. Any notice given in
accordance with clause (i) above shall also specify, in the case of any such
dividend, distribution or option rights, the date on which the holders of Common
Stock shall be entitled thereto. Any notice given in accordance with clause
(iii) above shall also specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding- up, as the case may be. If
the registered Holder of this Warrant does not exercise this Warrant prior to
the occurrence of an event described above, except as provided in Sections 3.1
and 3.5, the Holder shall not be entitled to receive the benefits accruing to
existing holders of the Common Stock in such event. Notwithstanding anything
herein to the contrary, if and to the extent the Holder chooses to exercise this
Warrant within the ten (10) day period following receipt of the notice specified
in clause (ii) above, the Holder may elect to pay the aggregate Exercise Price
by delivering to the Company cash or a cashier's check in the amount of the
aggregate par value of the shares of Common Stock to be purchased and the
Holder's full recourse promissory note in the amount of the balance of the
aggregate Exercise Price, which promissory note shall be payable to the order of
the Company in a single sum on the 30th day following the date of receipt of
such notice and shall bear interest at the lowest applicable federal short term
rate (using monthly compounding) as established pursuant to Section 1274(d) of
the Internal Revenue Code of 1986, as amended, or any successor provision;
provided, however, that if the Holder elects to deliver such a promissory note
to the Company, the Holder will pledge to the Company all Common Stock issued in
connection with the exercise of this Warrant, and the Company shall retain
possession of the certificates evidencing such Common Stock, until such time as
the Note is paid in full.
3.5 Changes in Common Stock. In case at any time following the
Commencement Date hereof, the Company shall be a party to any transaction
(including, without limitation, a merger, consolidation, sale of all or
substantially all of the Company's assets or recapitalization of the Common
Stock) in which the previously outstanding Common Stock shall be changed into or
exchanged for different securities of the Company or common stock or other
securities of another corporation or interests in a noncorporate entity or other
property (including cash) or any combination of any of the foregoing (each such
transaction being herein called the "TRANSACTION" and the date of consummation
of the Transaction being herein called the "CONSUMMATION DATE"), then, as a
condition of the consummation of the Transaction, lawful and adequate provisions
shall be made so that the Holder, upon the exercise hereof at any time on or
after the Consummation Date, shall be entitled to receive, and this Warrant
shall thereafter represent the right to receive, in lieu of the Common Stock
issuable upon such exercise prior to the Consummation Date, the highest amount
of securities or other property to which such Holder would actually have been
entitled as a stockholder upon the consummation of the Transaction if such
Holder had exercised such Warrant immediately prior thereto. The provisions of
this Section 3.5 shall similarly apply to successive Transactions.
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4. Issue Tax.
The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder of this
Warrant for any issue tax in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the then Holder of this Warrant.
5. No Voting or Dividend Rights; Limitation of Liability.
Nothing contained in this Warrant shall be construed as conferring upon
the Holder hereof the right to vote or to consent or to receive notice as a
stockholder in respect of meetings of stockholders for the election of directors
of the Company or any other matters or any rights whatsoever as a stockholder of
the Company. Except for the adjustment to the Exercise Price pursuant to Section
3.1 in the event of a dividend on the Common Stock payable in shares of Common
Stock, no dividends or interest shall be payable or accrued in respect of this
Warrant or the interest represented hereby or the shares purchasable hereunder
until, and only to the extent that, this Warrant shall have been exercised. No
provisions hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder hereof, shall give rise to any liability of such Holder
for the Exercise Price or as a stockholder of the Company whether such liability
is asserted by the Company or by its creditors.
6. Restrictions on Transferability of Securities; Compliance With
Securities Act.
6.1 Restrictions on Transferability. This Warrant and the Warrant
Shares shall not be transferable in the absence of registration under the
Securities Act of 1933, as amended (the "SECURITIES ACT") or an applicable
exemption from registration thereunder.
6.2 Restrictive Legend. Each certificate representing the Warrant
Shares or any other securities issued in respect of the Warrant Shares upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall be stamped or otherwise imprinted with a legend substantially in
the following form (in addition to any legend required under applicable state
securities laws):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR
THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR
THIS CORPORATION, IS AVAILABLE."
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7. Registration Rights.
7.1 As used in this Warrant, the following terms shall have the
following meanings:
(a) "Affiliate" shall mean, with respect to any
Person (as defined below), any other Person controlling,
controlled by, or under direct or indirect common control
with, such Person (for the purposes of this definition
"control," when used with respect to any specified Person,
shall mean the power to direct the management and policies of
such person, directly or indirectly, whether through ownership
of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative
to the foregoing).
(b) "Business Day" shall mean a day, Monday through
Friday, on which banks are generally open for business in each
of New York, New York; Boston, Massachusetts; and
Philadelphia, Pennsylvania;
(c) "Person" shall mean any person, individual,
corporation, limited liability company, partnership, trust or
other nongovernmental entity or any governmental agency,
court, authority or other body (whether foreign, federal,
state, local or otherwise).
(d) The terms "register," "registered" and
"registration" refer to the registration effected by preparing
and filing with the SEC a registration statement in compliance
with the Act, and the declaration or ordering by the SEC of
the effectiveness of such registration statement.
(e) "Registrable Securities" shall mean the shares of
Common Stock issuable upon the exercise of this Warrant;
provided, however, that securities shall only be treated as
Registrable Securities if and only for so long as they (A)
have not been disposed of pursuant to a registration statement
declared effective by the SEC, (B) have not been sold in a
transaction exempt from the registration and prospectus
delivery requirements of the Act so that all transfer
restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale, and (C) are held
by the Holder.
(f) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with this Section 7
including, without limitation, all registration, qualification
and filing fees, printing expenses, escrow fees, fees and
expenses of counsel for the Company, blue sky fees and
expenses and the expense of any special audits incident to, or
required by, any such registration (but excluding the fees of
legal counsel for the Holder).
(g) "Registration Statement" shall have the meaning
ascribed to such term in Section 7.2 (a).
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(h) "Registration Period" shall have the meaning
ascribed to such term in Section 7.4(a).
(i) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of
Registrable Securities and the aggregate fees and expenses of
legal counsel for the Holder.
7.2 The Company shall, as soon as practicable, but not later than ten
(10) business days after the date hereof (such tenth business day herein
referred to as the "Filing Date"), (i) use its best efforts to file with the SEC
a registration statement (the "Registration Statement") with respect to the
resale of the Registerable Securities and use its best efforts to have such
Registration Statement declared effective by the SEC as soon thereafter as is
practical and (ii) cause such Registration Statement to remain effective until
the earlier of such date as the Holder has completed the distribution described
in the Registration Statement and such time as such Shares are no longer, by
reason of Rule 144 (k) under the Act, required to be registered for the sale
thereof by the Holder. If requested by the Holder, and in accordance with
applicable securities laws, the Registration Statement shall cover the direct
sale of such Registrable Securities to the Holder of such securities.
7.3 All Registration Expenses incurred in connection with any
registration, qualification, exemption or compliance pursuant to Section 7.2
shall be borne by the Company. All Selling Expenses relating to the sale of
securities registered by or on behalf of the Holder shall be borne by the
Holder.
7.4 In the case of the registration, qualification, exemption or
compliance effected by the Company pursuant to this Agreement, the Company
shall, upon reasonable request, inform the Holder as to the status of such
registration, qualification, exemption and compliance. At its expense the
Company shall:
(a) use its best efforts to keep such registration,
and any qualification, exemption or compliance under state
securities laws which the Holder reasonably requests the
Company to obtain, continuously effective until the Holder has
completed the distribution described in the registration
statement relating thereto. The period of time during which
the Company is required hereunder to keep the Registration
Statement effective is referred to herein as "the Registration
Period."
(b) advise the Holder:
(i) when the Registration Statement or any
amendment thereto has been filed with the SEC and
when the Registration Statement or any post-effective
amendment thereto has become effective;
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(ii) of any request by the SEC for
amendments or supplements to the Registration
Statement or the prospectus included therein or for
additional information;
(iii) of the issuance by the SEC of any stop
order suspending the effectiveness of the
Registration Statement or the initiation of any
proceedings for such purpose;
(iv) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Registrable Securities included
therein for sale in any jurisdiction or the
initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that
requires the making of any changes in the
Registration Statement or the prospectus so that, as
of such date, the statements therein are not
misleading and do not omit to state a material fact
required to be stated therein or necessary to make
the statements therein (in the case of the
prospectus, in the light of the circumstances under
which they were made) not misleading;
(c) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time;
(d) furnish to the Holder, without charge, at least
one copy of such Registration Statement and any post-effective
amendment or supplement thereto, including financial
statements and schedules, and, if the Holder so requests in
writing, all exhibits (excluding those incorporated by
reference) in the form filed with the SEC;
(e) during the Registration Period, deliver to the
Holder, without charge, a reasonable number of copies of the
prospectus included in such Registration Statement and any
amendment or supplement thereto as the Holder may reasonably
request; and the Company consents to the use, consistent with
the provisions hereof, of the prospectus and any amendment or
supplement thereto by the Holder of Registrable Securities in
connection with the offering and sale of the Registrable
Securities covered by the prospectus and any amendment or
supplement thereto;
(f) cooperate with the Holder to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to any Registration
Statement free of any restrictive legends to the extent not
required at such time and in such denominations and registered
in such names as the Holder may request at least five (5)
business days prior to sales of Registrable Securities
pursuant to such Registration Statement;
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(g) upon the occurrence of any event contemplated by
Section 7.4(b)(v) above, the Company shall promptly prepare a
post-effective amendment to the Registration Statement or a
supplement to the related prospectus, or file any other
required document so that, as thereafter delivered to
purchasers of the Registrable Securities included therein, the
prospectus will not include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
7.5 The Holder shall have no right to take any action to restrain,
enjoin or otherwise delay any registration pursuant to Section 7.2 hereof as a
result of any controversy that may arise with respect to the interpretation or
implementation of this Agreement.
7.6 (a) Upon receipt of any notice from the Company
of the happening of any event requiring the preparation of a
supplement or amendment to a prospectus relating to
Registrable Securities so that, as thereafter delivered to THE
Holder, such prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements
therein not misleading, each Holder shall forthwith
discontinue disposition of Registrable Securities pursuant to
the registration statement contemplated by Section 7.2 until
its receipt of copies of the supplemented or amended
prospectus from the Company and, if so directed by the
Company, each Holder shall deliver to the Company all copies,
other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
(b) As a condition to the inclusion of its
Registrable Securities, the Holder shall furnish to the
Company such information regarding the Holder, the securities
of the Company owned beneficially or of record by the Holder
and the distribution proposed by the Holder as the Company may
request in writing or as shall be required in connection with
any registration, qualification or compliance referred to in
this Section 7.
(c) With respect to any sale of Registrable
Securities pursuant to a Registration Statement filed pursuant
to this Section 7, the Holder hereby covenants with the
Company (i) not to make any sale of the Registrable Securities
without effectively causing the prospectus delivery
requirements under the Act to be satisfied, and (ii) if such
Registrable Securities are to be sold by any method or in any
transaction other than on a national securities exchange, the
Nasdaq National Market, the Nasdaq SmallCap Market or in the
over-the-counter market, in privately negotiated transactions,
or in a combination of such methods, or as otherwise described
in the prospectus contemplated by Section 7.2, to notify the
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Company at least five (5) business days prior to the date on
which the Holder first offers to sell any such Registrable
Securities.
(d) The Holder acknowledges and agrees that the
Registrable Securities sold pursuant to the Registration
Statement described in this Section are not transferable on
the books of the Company unless the stock certificate
submitted to the transfer agent evidencing such Registrable
Securities is accompanied by a certificate reasonably
satisfactory to the Company to the effect that (i) the
Registrable Securities have been sold in accordance with such
Registration Statement and (ii) the requirement of delivering
a current prospectus has been satisfied.
(e) The Holder shall not take any action with respect
to any distribution deemed to be made pursuant to such
registration statement, which would constitute a violation of
Regulation M under the Exchange Act or any other applicable
rule, regulation or law.
(f) At the end of the period during which the Company
is obligated to keep the Registration Statement current and
effective as described above, the Holder of Registrable
Securities included in the Registration Statement and the
shares underlying the Warrants shall discontinue sales of
shares pursuant to such Registration Statement upon receipt of
notice from the Company of its intention to remove from
registration the shares covered by such Registration Statement
which remain unsold, and such Holder shall notify the Company
of the number of shares registered which remain unsold
immediately upon receipt of such notice from the Company.
7.7 With the written consent of the Company and the Holder, any
provision of this Section 7 may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) or amended.
8. Modification and Waiver.
This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of the same is sought.
9. Notices.
Except as otherwise provided herein, any notice, request or other
document required or permitted to be given or delivered to the Holder hereof or
the Company shall be delivered personally or by nationally recognized overnight
courier service or sent by registered or certified mail, return receipt
requested, to such Holder at its address as shown on the books of the Company or
to the Company at its principal office. Notices delivered personally shall be
effective upon receipt, notices sent by overnight courier service shall be
deemed to have been
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received one (1) day after deposit with such courier and notices sent by United
States mail shall be deemed to have been received three (3) days after deposit
with the U.S. Postal Service.
10. Descriptive Headings and Governing Law.
The descriptive headings of the several sections and paragraphs of this
Warrant are inserted for convenience only and do not constitute a part of this
Warrant. This Warrant shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of New
York without giving effect to conflict of laws. The parties hereby submit to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the federal courts located in the Southern District of New York,
with respect to any action or legal proceeding commenced by either party with
respect to this Agreement. Each party irrevocably waives any objection it now
has or hereafter may have respecting the venue of any such action or proceeding
or the inconvenience of such forum, and each party consents to the service of
process in any such action or proceeding in the manner set forth for the
delivery of notices herein.
11. Lost Warrants or Stock Certificate.
The Company represents and warrants to the Holder that upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Warrant or stock certificate and, in the case of any such
loss, theft or destruction, and if requested, upon receipt of an indemnity bond
reasonably satisfactory to the Company, or in the case of any such mutilation,
upon surrender and cancellation of such Warrant or stock certificate, the
Company at its expense will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or
stock certificate.
12. Fractional Shares.
No fractional shares shall be issued upon exercise of this Warrant. The
Company shall, in lieu of issuing any fractional share pay the Holder entitled
to such fraction a sum in cash equal to the fair market value of any such
fractional interest as it shall appear on the public market, or if there is no
public market for such shares, then as shall be reasonably determined by the
Company.
12
<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer, thereunto duly authorized as of this 5th day of May, 2000.
INKINE PHARMACEUTICAL COMPANY, INC.
By: /s/Robert F. Apple
--------------------------------------
Robert F. Apple
Senior Vice President and
Chief Financial Officer
<PAGE> 14
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
[DATE]
InKine Pharmaceutical Company, Inc.
Sentry Park East
1720 Walton Road
Blue Bell, Pennsylvania 19422
Attention:
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, ____________ shares of Common Stock, par value
$.0001 per share (the "Common Stock") of InKine Pharmaceutical Company, Inc.
and, subject to the following paragraph, herewith makes payment of
_________________ Dollars ($__________) therefor and requests that the
certificates for such shares be issued in the name of, and delivered to
_______________________________________, whose address is
_______________________________________, ______________________________________
and if such number of shares of Common Stock shall not represent all of the
shares of Common Stock which may be exercised pursuant to the Warrant, a new
Warrant for the balance of such shares of Common Stock shall be registered in
the name of, and delivered to, the Registered Holder at the address set forth
below.
If the exercise of this Warrant is not covered by a registration
statement effective under the Securities Act of 1933, as amended (the
"Securities Act"), the undersigned represents that it is acquiring such Common
Stock for investment for its own account, not as nominee or agent, and not with
a view to the distribution thereof and the undersigned has not signed or
otherwise arranged for the selling, granting any participation in, or otherwise
distributing the same.
Leerink, Swann, Garrity, Sollami, Yaffe & Wynn, Inc.
DATED:_______________ By:_______________________________________
Authorized Signature
Name:_____________________________________
Title:______________________________________
<PAGE> 15
CONVERSION RIGHT EXERCISE FORM
To Be Executed by the Registered Holder
in Order to Exercise the Conversion Right
The undersigned hereby irrevocably elects to surrender its Warrant for
such shares of Common Stock pursuant to the Conversion Right of the within
Warrant, as provided for in Section 1.2 of such Warrant.
Please issue a certificate or certificates for such Common Stock in the
name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
[please print or type name and address]
and deliver to
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by the
attached Warrant a new Warrant for the balance of such Warrants shall be
registered in the name of, and delivered to, the Registered Holder at the
address stated below.
Dated:
---------------------------- X
------------------------------------
------------------------------------
------------------------------------
Address
------------------------------------
Taxpayer Identification Number
<PAGE> 16
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, hereby sells, assigns and transfers
unto
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
[please print or type name and address]
----------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
of the Warrants represented by the attached Warrant, and
hereby irrevocably constitutes and appoints attorney to transfer
the attached Warrant and the Warrants represented thereby on the books of the
Company, with full power of substitution in the premises.
Dated: Leerink, Swann, Garrity, Sollami, Yaffe & Wynn, Inc.
By:
-------------------------------------------------
Authorized Signature
Name:
----------------------------------------------
Title:
---------------------------------------------
<PAGE> 1
Exhibit 5
<TABLE>
<S> <C> <C>
LAW OFFICES OF
SAUL, EWING, REMICK & SAUL LLP
BALTIMORE, MARYLAND CENTRE SQUARE WEST NEW YORK, NEW YORK
BERWYN, PENNSYLVANIA 1500 MARKET STREET, 38th FLOOR PRINCETON, NEW JERSEY
HARRISBURG, PENNSYLVANIA PHILADELPHIA, PA 19102-2186 WILMINGTON, DELAWARE
(215) 972-7777
Fax: (215) 972-7725
Internet Email: [email protected]
World Wide Web: http://www.saul.com
</TABLE>
May 17, 2000
InKine Pharmaceutical Company, Inc.
1720 Walton Road
Suite 200
Blue Bell, PA 19422
Gentlemen:
We refer to the Registration Statement on Form S-3
(collectively with any amendments thereto, the "Registration Statement") of
InKine Pharmaceutical Company, Inc., a New York corporation (the "Company"),
filed with the Securities and Exchange Commission, which covers the registration
under the Securities Act of 1933, as amended, of 3,352,758 shares of common
stock, par value $.0001 per share, of the Company, including (i) 2,838,871
shares (the "Original Shares") currently issued and outstanding, (ii) 283,887
shares (the "Warrant Shares") issuable upon exercise of a certain warrant (the
"Warrant") and (iii) 230,000 shares (the "Option Shares") issuable upon exercise
of certain purchase options (the "Options"), all as described in the Prospectus
included in the Registration Statement.
We have examined the Registration Statement, the Warrant, the
Options, the Certificate of Incorporation and Bylaws of the Company and such
records, certificates and other documents as we have considered necessary or
appropriate for the purposes of this opinion. Without limiting the generality of
the foregoing, in our examination we have assumed without independent
verification that (i) each natural person executing a document we examined is
legally competent to do so, (ii) all documents submitted to us as originals are
"authentic", the signatures on all documents that we examined are genuine, and
all documents submitted to us as certified, conformed, photostatic or facsimile
copies conformed to the original document, and (iii) all corporate records made
available to us by the Company and or public records reviewed are accurate and
complete.
Based on the foregoing, it is our opinion that:
1. the Original Shares were, when issued, duly authorized,
validly issued, fully paid and non-assessable; and
<PAGE> 2
InKine Pharmaceutical Company, Inc.
May 17, 2000
Page 2
2. the Warrant Shares and the Option Shares have been duly
authorized and, when issued in accordance with the terms of the Warrant and the
Options, respectively, and upon receipt by the Company of payment therefor as
provided in the Warrant or the Options, respectively, will be validly issued,
fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to this form under the
caption "Legal Matters" in the Prospectus contained therein. In giving this
consent, we do not admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ SAUL, EWING, REMICK & SAUL LLP
<PAGE> 1
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
InKine Pharmaceutical Company, Inc.:
We consent to incorporation by reference in the registration statement on Form
S-3 of InKine Pharmaceutical Company, Inc. of our report dated August 11, 1999,
with respect to the balance sheets of InKine Pharmaceutical Company, Inc. as of
June 30, 1999 and 1998, and the related statements of operations, changes in
shareholders' equity, and cash flows for the years then ended, and for the
period from July 1, 1993 (commencement of operations) through June 30, 1999,
which report appears in the June 30, 1999, annual report on Form 10-K of InKine
Pharmaceutical Company, Inc. We also consent to the reference to our firm under
the captain "Experts" in the prospectus.
/s/ KPMG LLP
Philadelphia, Pennsylvania
May 16, 2000
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related prospectus of InKine
Pharmaceutical Company, Inc. for the registration of 3,352,758 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
May 12, 2000
