Exhibit 4.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 15,
2001, by and among InKine Pharmaceutical Company, Inc., a corporation organized
under the laws of the State of New York (the "Company"), and the undersigned
(together with their affiliates, the "Initial Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and among the Company and the Initial Investors (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors (i)
Convertible Notes (the "Notes") that are convertible into shares of the
Company's common stock, par value $.0001 per share (the "Common Stock"), and
(ii) warrants (the "Warrants") to acquire shares of Common Stock. The shares of
Common Stock issuable upon conversion of or otherwise pursuant to the Notes are
referred to herein as the "Conversion Shares" and the shares of Common Stock
issuable upon exercise of or otherwise pursuant to the Warrants are referred to
herein as the "Warrant Shares".
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investors" means the Initial Investors and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) "Registrable Securities" means (a) the Conversion Shares,
(b) the Warrant Shares, (c) any shares of Common Stock issued as interest
payments or otherwise under the Notes and (d) any shares of capital stock issued
or issuable, from time to time (with any adjustments), as a distribution on or
in exchange for or otherwise with respect to any of the foregoing, whether as
default payments or otherwise.
(iv) "Registration Statement" means a registration statement of
the Company under the Securities Act.
(b) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
(a) Mandatory Registration. The Company shall prepare promptly and
file with the SEC as soon as practicable, but in no event later than the
thirtieth (30th) day following the Closing Date (the "Filing Date"), a
Registration Statement on Form S-3 (or, if Form S-3 is not then available, on
such form of Registration Statement as is then available to effect a
registration of all of the Registrable Securities, subject to the consent of the
Initial Investors) covering the resale of at least 2,700,000 Registrable
Securities. The Registration Statement filed hereunder, to the extent allowable
under the Securities Act and the Rules promulgated thereunder (including Rule
416), shall state that such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Notes and exercise of the Warrants to prevent dilution
resulting from stock splits, stock dividends or similar transactions. The
Registrable Securities included in the Registration Statement shall be allocated
to the Investors as set forth in Section 11(k) hereof. The Registration
Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided to (and subject to the
approval of) the Initial Investors and their counsel prior to its filing or
other submission. The Initial Investors shall provide their approval of (or
comments to) such Registration Statement within the earlier of five (5) days and
three (3) business days after their receipt of such Registration Statement.
(b) Payments by the Company. The Company shall use its best efforts
to cause the Registration Statement required to be filed pursuant to Section
2(a) hereof to become effective as soon as practicable, but in no event later
than the one hundred twentieth (120th) day following the Closing Date. At the
time of effectiveness, the Company shall ensure such Registration Statement
covers at least 111% of the Registrable Securities issuable pursuant to the
Notes and Warrants (including, if necessary, by filing an amendment prior to the
effective date of the Registration Statement to increase the number of shares
covered thereby). If (i) (A) the Registration Statement required to be filed by
the Company pursuant to Section 2(a) hereof is not filed with the SEC prior to
the Filing Date or (B) such Registration Statement covering all of the
Registrable Securities is not declared effective by the SEC on or before the one
hundred and twentieth (120th) day following the Closing Date (the "Registration
Deadline") or (ii) if, after such Registration Statement has been declared
effective by the SEC, sales of any of the Registrable Securities required to be
covered by such Registration Statement cannot be made pursuant to such
Registration Statement (by reason of a stop order or otherwise the Registration
Statement contains misstatements or omissions by reason of the Company's failure
to update the Registration Statement or for any other reason outside the control
of the Investors) or (iii) the Common Stock is not listed or included for
quotation on the Nasdaq National Market ("NNM"), the Nasdaq SmallCap Market
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("SmallCap"), the New York Stock Exchange (the "NYSE") or the American Stock
Exchange (the "AMEX") at any time after the Registration Deadline hereunder,
then the Company will make payments to the Investors in such amounts and at such
times as shall be determined pursuant to this Section 2(c) as partial relief for
the damages to the Investors by reason of any such delay in or reduction of
their ability to sell the Registrable Securities (which remedy shall not be
exclusive of any other remedies available at law or in equity). Notwithstanding
the foregoing, the Registration Deadline shall be extended by one (1) day for
each day after the earlier of five (5) days and three (3) business days that the
Initial Investors fail to provide their approval of (or comments to) the
Registration Statement pursuant to Section 2(a). The Company shall pay to each
Investor an amount equal to the product of (i) the aggregate Purchase Price of
the Notes and Warrants held by such Investor (including, without limitation,
Notes that have been converted into Conversion Shares and Warrants that have
been exercised for Warrant Shares then held by such Investor) (the "Aggregate
Share Price"), multiplied by (ii) fifteen thousandths (.015), for each thirty
(30) day period (or portion thereof) (A) after the Filing Date and prior to the
date the Registration Statement is filed with the SEC pursuant to Section 2(a),
(B) after the Registration Deadline and prior to the date the Registration
Statement covering all of the Registrable Securities is declared effective by
the SEC, and (C) during which sales of any Registrable Securities cannot be made
pursuant to any such Registration Statement after the Registration Statement has
been declared effective or the Common Stock is not listed or included for
quotation on the NNM, SmallCap, NYSE or AMEX; provided, however, that there
shall be excluded from each such period any delays which are solely attributable
to changes (other than corrections of Company mistakes with respect to
information previously provided by the Investors) required by the Investors in
the Registration Statement with respect to information relating to the
Investors, including, without limitation, changes to the plan of distribution.
(For example, if the Registration Statement covering all of the Registrable
Securities is not effective by the Registration Deadline, the Company would pay
$15,000 for each thirty (30) day period thereafter with respect to each
$1,000,000 of Aggregate Share Price until the Registration Statement becomes
effective.) Such amounts shall be paid in cash or, at each Investor's option,
may be convertible into Common Stock at the "Conversion Price" (as defined in
the Notes) then in effect. Any shares of Common Stock issued upon conversion of
such amounts shall be Registrable Securities. If the Investor desires to convert
the amounts due hereunder into Registrable Securities it shall so notify the
Company in writing within two (2) business days after the date on which such
amounts are first payable in cash and such amounts shall be so convertible
(pursuant to the mechanics set forth under Article III of the Notes), beginning
on the last day upon which the cash amount would otherwise be due in accordance
with the following sentence. Payments of cash pursuant hereto shall be made
within five (5) days after the end of each period that gives rise to such
obligation, provided that, if any such period extends for more than thirty (30)
days, interim payments shall be made for each such thirty (30) day period.
(c) Piggy-Back Registrations. If at any time prior to the expiration
of the Registration Period (as hereinafter defined) and during a period in which
the Registration Statement required to be filed pursuant to Section 2(a) is not
effective, the Company shall file with the SEC a Registration Statement relating
to an offering for its own account or the account of others under the Securities
Act of any of its equity securities (other than on Form S-4 or Form S-8 or their
then equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
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connection with stock option or other employee benefit plans), the Company shall
send to each Investor written notice of such filing and, if within fifteen (15)
days after the date of such notice, such Investor shall so request in writing,
the Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering, the managing underwriter(s)
thereof shall impose a limitation on the number of shares of Common Stock which
may be included in the Registration Statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion hereunder
as the underwriter shall permit. Any exclusion of Registrable Securities shall
be made pro rata among the Investors seeking to include Registrable Securities,
in proportion to the number of Registrable Securities sought to be included by
such Investors; provided, however, that the Company shall not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities, the holders of which are not contractually entitled to inclusion of
such securities in such Registration Statement or are not contractually entitled
to pro rata inclusion with the Registrable Securities; and provided, further,
however, that, after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with holders of other
securities having the contractual right to include such securities in the
Registration Statement other than holders of securities contractually entitled
to inclusion of their securities in such Registration Statement by reason of
demand registration rights. Notwithstanding the foregoing, no such reduction
shall reduce the amount of Registrable Securities included in the registration
below twenty-five (25%) of the total amount of securities included in such
registration. No right to registration of Registrable Securities under this
Section 2(d) shall be construed to limit any registration required under Section
2(a) hereof. If an offering in connection with which an Investor is entitled to
registration under this Section 2(d) is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering.
(d) Eligibility for Form S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Initial Investors and any other Investors of the Registrable
Securities and the Company shall file all reports and statements required to be
filed by the Company with the SEC in a timely manner so as to thereafter
maintain such eligibility for the use of Form S-3.
(e) Rule 416; Notice of Registration Trigger Date. The Company and
the Investors each acknowledge that an indeterminate number of Registrable
Securities shall be registered pursuant to Rule 416 under the Securities Act so
as to include in such Registration Statement any and all Registrable Securities
which may become issuable to prevent dilution resulting from stock splits, stock
dividends or similar transactions (collectively, the "Rule 416 Securities"). In
this regard, the Company agrees to take all steps necessary to ensure that all
Rule 416 Securities are registered pursuant to Rule 416 under the Securities Act
in the Registration Statement and, absent guidance from the SEC or other
definitive authority to the contrary, the Company shall affirmatively support
and not take any action adverse to the position that the Registration Statements
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filed hereunder cover all of the Rule 416 Securities. If the Company determines
that the Registration Statement(s) filed hereunder do not cover all of the Rule
416 Securities, the Company shall immediately provide to each Investor written
notice (a "Rule 416 Notice") setting forth the basis for the Company's position
and the authority therefor. In the event that a Registration Trigger Date (as
defined below) occurs, the Company shall provide each Investor written notice of
such Registration Trigger Date within three (3) business days thereafter.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
(a) The Company shall respond promptly to any and all comments made
by the staff of the SEC to the Registration Statement required by Section 2(a),
and shall submit to the SEC, before the close of business on the business day
immediately following the business day on which the Company learns (either by
telephone or in writing) that no review of such Registration Statement will be
made by the SEC or that the staff of the SEC has no further comments on such
Registration Statement, as the case may be, a request for acceleration of the
effectiveness of such Registration Statement to a time and date as soon as
practicable. The Company shall keep such Registration Statement effective
pursuant to Rule 415 at all times until such date as is the earlier of (i) the
date on which all of the Registrable Securities have been sold and (ii) the date
on which all of the Registrable Securities (in the reasonable opinion of counsel
to the Initial Investors) may be immediately sold to the public without
registration or restriction pursuant to Rule 144(k) under the Securities Act or
any successor provision (the "Registration Period"), which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein and all documents incorporated by reference therein) (i) shall
comply in all material respects with the requirements of the Securities Act and
the rules and regulations of the SEC promulgated thereunder and (ii) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading. The financial statements of the Company included in the Registration
Statement or incorporated by reference therein will comply as to form in all
material respects with the applicable accounting requirements and the published
rules and regulations of the SEC applicable with respect thereto. Such financial
statements will be prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may not include footnotes or may be condensed on summary statements and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to immaterial year-end
adjustments).
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
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Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement.
(c) The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC (including, without limitation, any request to
accelerate the effectiveness of the Registration Statement or amendment
thereto), and each item of correspondence from the SEC or the staff of the SEC,
in each case relating to the Registration Statement (other than any portion, if
any, thereof which contains information for which the Company has sought
confidential treatment), (ii) on the date of effectiveness of the Registration
Statement or any amendment thereto, a notice stating that the Registration
Statement or amendment has been declared effective, and (iii) such reasonable
number of copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
(d) The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as each Initial Investor who holds Registrable Securities being offered
reasonably requests prior to Closing, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws, which in each case the Board of Directors of the Company determines
to be contrary to the best interests of the Company and its stockholders.
(e) As promptly as practical after becoming aware of an event that
results in the prospectus included in the Registration Statement, as then in
effect, to include an untrue statement of a material fact or omission of a
material fact required to be stated therein or necessary to make statements
therein not misleading, the Company shall notify each Investor by telephone and
facsimile to as to the ineffectiveness of the prospectus, and, use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
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(f) The Company shall use its best efforts (i) to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest practicable moment (including in each
case by amending or supplementing such Registration Statement) and (ii) to
notify each Investor who holds Registrable Securities being sold of the issuance
of such order and the resolution thereof (and if such Registration Statement is
supplemented or amended, deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request).
(g) The Company shall permit a single firm of counsel designated by
the Initial Investors to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time (not to exceed the earlier
of five (5) days and three (3) business days) prior to its filing with the SEC,
and not file any document in a form to which such counsel reasonably objects.
(h) The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the Securities Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration Statement.
(i) The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement, or (v) such Investor
consents to the form and content of any such disclosure. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
(j) The Company shall use its best efforts to promptly cause all of
the Registrable Securities covered by the registration Statement to be listed on
the NNM or another national securities exchange and on each additional national
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange.
(k) The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
(l) The Company shall cooperate with the Investors who hold
Registrable Securities being offered to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
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Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, or the Investors may reasonably request and registered in such names as the
managing underwriter or underwriters, if any, or the Investors may request, and,
within five (5) business days after the Registration Statement which includes
Registrable Securities is ordered effective by the SEC, the Company shall
deliver, and shall cause legal counsel selected by the Company to deliver, to
the transfer agent for the Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement), an
opinion of such counsel in the form attached hereto as Exhibit 1.
(m) At the request of Investors holding a majority in interest of
the Registerable Securities, the Company shall prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.
(n) The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including, without limitation, the Securities Act and the Securities Exchange
Act of 1934, as amended, (the "Exchange Act")and the rules and regulations
promulgated by the SEC.)
(o) From and after the date of this Agreement, the Company shall
not, and shall not agree to, allow the holders of any securities of the Company
to include any of their securities which are not Registrable Securities in the
Registration Statement under Section 2(a) hereof or any amendment or supplement
thereto under Section 3(b) hereof without the consent of the holders of a
majority in interest of the Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
trading days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
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(c) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Sections 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Sections 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
Notwithstanding anything to the contrary, subject to compliance with applicable
laws, the Company shall cause the transfer agent for the Registrable Securities
to deliver unlegended shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Notes and Warrants in connection with any sale
of Registrable Securities with respect to which such Investor has entered into a
contract for sale prior to receipt of such notice and for which such Investor
has not yet settled.
5. EXPENSES OF REGISTRATION. All reasonable expenses incurred by the
Company or the Investors in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3 above, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees, the fees and disbursements of counsel for the Company and the
fees and disbursements of one counsel selected by the Investors shall be borne
by the Company (not to exceed $7,500). In addition, the Company shall pay all of
the Investors' costs and expenses (including legal fees) incurred in connection
with the enforcement of the rights of the Investors hereunder.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities, and
(ii) the directors, officers, partners, members, employees and agents of such
Investor and each person who controls any Investor within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, if any, (each, an
"Indemnified Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any other law, including, without limitation, any state
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securities law, or any rule or regulation thereunder relating to the offer or
sale of the Registrable Securities (the matters in the foregoing clauses (i)
through (iii) being, collectively, "Violations"). Subject to the restrictions
set forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the Investors and each other Indemnified Person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by such Indemnified Person
expressly for use in the Registration Statement or any such amendment thereof or
supplement thereto; (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; and (iii) with
respect to any preliminary prospectus, shall not inure to the benefit of any
Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, if such corrected prospectus was
timely made available by the Company pursuant to Section 3(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9 hereof.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder within the
meaning of the Securities Act or the Exchange Act (collectively and together
with an Indemnified Person, an "Indemnified Party"), against any Claim to which
any of them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and subject to Section 6(c) such Investor will reimburse any legal or
other expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Agreement (including this Section 6(b) and
Section 7) for only that amount as does not exceed the net proceeds actually
received by such Investor as a result of the sale of Registrable Securities
10
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9 hereof. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that such indemnifying party shall not be entitled to assume such
defense and an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential conflicts of interest between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding or the actual or potential defendants in, or targets of, any such
action include both the Indemnified Person or the Indemnified Party and the
indemnifying party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are in conflict with those
available to such indemnifying party. The indemnifying party shall pay for only
one separate legal counsel for the Indemnified Persons or the Indemnified
Parties, as applicable, and such legal counsel shall be selected by Investors
holding a majority-in-interest of the Registrable Securities included in the
Registration Statement to which the Claim relates (with the approval of the
Initial Investor if it holds Registrable Securities included in such
Registration Statement), if the Investors are entitled to indemnification
hereunder, or by the Company, if the Company is entitled to indemnification
hereunder, as applicable. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law as is appropriate
to reflect the relative fault of the indemnifying party, on the one hand, and
the Indemnified Person or Indemnified Party, as the case may be, on the other
hand, with respect to the Violation giving rise to the applicable Claim;
provided, however, that (i) no contribution shall be made under circumstances
where the maker would not have been liable for indemnification under the fault
standards set forth in Section 6, (ii) no person guilty of fraudulent
11
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation, and (iii) contribution
(together with any indemnification or other obligations under this Agreement) by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) file with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the Company remains subject to such requirements
(it being understood that nothing herein shall limit the Company's obligations
under Section 4(c) of the Securities Purchase Agreement) and the filing and
availability of such reports and other documents is required for the applicable
provisions of Rule 144; and
(b) furnish to each Investor so long as such Investor holds any
Notes or Warrants, promptly upon request, (i) a written statement by the Company
that it has complied with the reporting requirements of Rule 144, the Securities
Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit such Investor to sell such securities under Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights of the Investors
hereunder, including the right to have the Company register Registrable
Securities pursuant to this Agreement, shall be automatically assignable by each
Investor to any transferee of all or any portion of the Notes, the Warrants or
the Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company after such assignment, (ii) the Company is furnished
with written notice of (a) the name and address of such transferee or assignee,
and (b) the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (iv)
the transferee or assignee agrees in writing for the benefit of the Company to
be bound by all of the provisions contained herein, and (v) such transfer shall
have been made in accordance with the applicable requirements of the Securities
Purchase Agreement, the Notes and the Warrants, as applicable. In addition, and
notwithstanding anything to the contrary contained in this Agreement, the
Securities Purchase Agreement, the Notes or the Warrants, the Securities (as
defined in the Securities Purchase Agreement) may be pledged, and all rights of
the Investors under this Agreement or any other agreement or document related to
the transactions contemplated hereby may be assigned, without further consent of
the Company, to a bona fide pledgee in connection with an Investor's margin or
brokerage account.
12
10. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
written consent of the Company, the Initial Investors (to the extent the Initial
Investors still owns Notes, Warrants or Registrable Securities) and Investors
who hold a majority in interest of the Registrable Securities or, in the case of
a waiver, with the written consent of the party charged with the enforcement of
any such provision; provided, however, that no amendment hereto which restricts
the ability of an Investor to elect not to participate in an underwritten
offering shall be effective against any Investor which does not consent in
writing to such amendment; provided, further, however, that no consideration
shall be paid to an Investor by the Company in connection with an amendment
hereto unless each Investor similarly affected by such amendment receives a
pro-rata amount of consideration from the Company. Unless an Investor otherwise
agrees, each amendment hereto must similarly affect each Investor. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five (5) days after being placed in the mail, if mailed, or
upon receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
InKine Pharmaceutical Company, Inc.
0000 Xxxxxx Xxxxxxx Xxxx
Xxxxxxxx 00, Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxxxx 00000
Telephone: 000-000-0000
Fax: 000-000-0000
Telephone: (000) 000-0000
Attn: Chief Executive Officer and Chief Financial Officer
13
with a copy simultaneously transmitted by like means to::
Xxxx Xxxxx XXX
Xxxxxx Xxxxxx Xxxx, 00xx Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Telephone: (000) 000-0000
Attn: Xxxxxxx X. Xxxx, Esq.
and if to any Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be
performed in the State of New York. The Company irrevocably consents to the
jurisdiction of the United States federal courts and the state courts located in
the County of New York, State of New York in any suit or proceeding based on or
arising under this Agreement and irrevocably agrees that all claims in respect
of such suit or proceeding may be determined in such courts. The Company
irrevocably waives the defense of an inconvenient forum to the maintenance of
such suit or proceeding. The Company further agrees that service of process upon
the Company, mailed by first class mail shall be deemed in every respect
effective service of process upon the Company in any such suit or proceeding.
Nothing herein shall affect the Investors' right to serve process in any other
manner permitted by law. The Company agrees that a final non-appealable judgment
in any such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
(e) This Agreement, the Securities Purchase Agreement (including all
schedules and exhibits thereto), the Notes and the Warrants constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement, the Securities Purchase Agreement, the Notes and the Warrants
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
14
(h) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
(i) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(j) All consents, approvals and other determinations to be made by
the Investors pursuant to this Agreement shall be made by the Investors holding
a majority in interest of the Registrable Securities (determined as if all Notes
and Warrants then outstanding had been converted into or exercised for
Registrable Securities) held by all Investors.
(k) The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be allocated pro rata among the Investors based on the
number of Registrable Securities held by each Investor at the time of such
establishment or increase, as the case may be. In the event an Investor shall
sell or otherwise transfer any of such holder's Registrable Securities, each
transferee shall be allocated a pro rata portion of the number of Registrable
Securities included on a Registration Statement for such transferor. Any shares
of Common Stock included on a Registration Statement and which remain allocated
to any person or entity which does not hold any Registrable Securities shall be
allocated to the remaining Investors, pro rata based on the number of shares of
Registrable Securities then held by such Investors. For the avoidance of doubt,
the number of Registrable Securities held by any Investor shall be determined as
if all Notes and Warrants then outstanding were converted into or exercised for
Registrable Securities.
(l) Each party to this Agreement has participated in the negotiation
and drafting of this Agreement. As such, the language used herein shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party to
this Agreement.
(m) For purposes of this Agreement, the term "business day" means
any day other than a Saturday or Sunday or a day on which banking institutions
in the State of New York are authorized or obligated by law, regulation or
executive order to close, and the term "trading day" means any day on which NNM
or, if the Common Stock is not then traded on NNM, the principal securities
exchange or trading market where the Common Stock is then listed or traded, is
open for trading.
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
INKINE PHARMACEUTICAL COMPANY, INC.
By: /S/_____________________________
Name:________________________
Its:_________________________
INITIAL INVESTORS:
S.A.C. CAPITAL ASSOCIATES, LLC
By:/S/______________________________
Name:_________________________
Its:__________________________
ROYAL BANK OF CANADA
by its agent RBC Dominion Securities
Corporation
By: /S/_____________________________
Name:________________________
Its:_________________________
By: /S/_____________________________
Name:________________________
Its:_________________________
16
[Date]
[Name and address
of transfer agent]
RE: Sale of Stock by Certain Holders of Common Stock of
INKINE PHARMACEUTICAL COMPANY, INC.
Ladies and Gentlemen:
We are counsel to InKine Pharmaceutical Company, Inc., a corporation
organized under the laws of the State of New York (the "Company"). The Schedule
of Holders, attached hereto and incorporated herein, identifies certain persons
(the "Holder") who have purchased from the Company: (i) Convertible Notes that
are convertible into shares of the Company's common stock, par value $.0001 per
share (the "Shares"), and (ii) warrants to acquire additional Shares.
On __________, 2001, the Company filed a Registration Statement on Form
S-3 (File No. 333- _____________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Shares. The
Registration Statement names the Holder as a selling stockholder thereunder. The
SEC declared the Registration Statement effective on ___________, 2001.
We hereby confirm that, unless and until you are instructed by us or
the Company to the contrary, you may, upon receipt of a letter from a Holder
requesting a transfer of Shares, effect a transfer of any number of such Shares
without restriction; provided that each such request letter must confirm that
(i) the Shares were sold pursuant to the Company's Prospectus dated ___________,
2001 and (ii) the selling Holder delivered a copy of the Prospectus to the
purchaser. We are of the opinion that the foregoing is permissible under the
Securities Act of 1933, as amended.
Very truly yours,
cc: The Holder listed on the Schedule of Holders
Xxxxxxx X. Xxxxx, M.D., Ph.D.
Xx. Xxxxxx X. Apple
