Exhibit 10.2
SECURITIES PURCHASE AGREEMENT
     This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of the
11th day of December, 2006 (the “Effective Date”) by and between Advancis
Pharmaceutical Corporation, a Delaware corporation, with its principal office at
20425 Seneca Meadows Parkway, Germantown, Maryland 20876 (the “Company”), and
the several purchasers identified in the attached Exhibit A (individually, a
“Purchaser” and collectively, the “Purchasers”).
     WHEREAS, the Company desires to issue and sell to the Purchasers an
aggregate of 6,000,000 shares (the “Shares”) of the authorized but unissued
shares of common stock, $0.01 par value per share, of the Company (the “Common
Stock”); and
     WHEREAS, the Purchasers, severally, wish to purchase the Shares on the
terms and subject to the conditions set forth in this Agreement.
     NOW, THEREFORE, in consideration of the mutual agreements, representations,
warranties and covenants herein contained, the parties hereto agree as follows:
     1. Definitions. As used in this Agreement, the following terms shall have
the following respective meanings:
          (a) “Affiliate” of a party means any corporation or other business
entity controlled by, controlling or under common control with such party. For
this purpose “control” shall mean direct or indirect beneficial ownership of
fifty percent (50%) or more of the voting or income interest in such corporation
or other business entity.
          (b) “Agreement” means this Securities Purchase Agreement.
          (c) “Business Day” means any day except Saturday, Sunday and any day
which shall be a federal legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other governmental
action to close.
          (d) “Closing Date” means the date of the Closing.
          (e) “Exchange Act” means the Securities Exchange Act of 1934, as
amended, and all of the rules and regulations promulgated thereunder.
          (f) “Registration Rights Agreement” shall mean that certain
Registration Rights Agreement, dated as of the date hereof, among the Company
and the Purchasers.
          (g) “Operative Agreements” shall mean the Registration Rights
Agreement together with this Agreement.
          (h) “Majority Purchasers” shall mean Purchasers which, at any given
time, hold greater than fifty percent (50%) of the voting power of the
outstanding Shares, that have not been resold pursuant to an effective
registration statement under the Securities Act or Rule 144 under the Securities
Act.

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          (i) “Rules and Regulations” shall mean the rules and regulations of
the SEC.
          (j) “SEC” shall mean the Securities and Exchange Commission.
          (k) “SEC Documents” shall have the meaning set forth in Section 3.26
below.
          (l) “Securities” shall mean the Shares.
          (m) “Securities Act” shall mean the Securities Act of 1933, as
amended, and all of the rules and regulations promulgated thereunder.
          (n) “Trading Day” means(a) any day on which the Common Stock is listed
or quoted and traded on the NASDAQ Global Market, or (b) if the Common Stock is
not then listed or quoted and traded on the NASDAQ Global Market, then any
Business Day.
     2. Purchase and Sale of Securities.
          2.1 Purchase and Sale. Subject to and upon the terms and conditions
set forth in this Agreement, the Company agrees to issue and sell to each
Purchaser, and each Purchaser, severally, hereby agrees to purchase from the
Company, at the Closing (as defined below), the number of shares of Common Stock
set forth opposite the name of such Purchaser under the heading “Number of
Shares to be Purchased” on Exhibit A hereto, at a purchase price of $3.00 per
share. The total purchase price payable by each Purchaser for the Securities
that such Purchaser is hereby agreeing to purchase is set forth opposite the
name of such Purchaser under the heading “Aggregate Purchase Price” on Exhibit A
hereto. The aggregate purchase price payable by the Purchasers to the Company
for all of the Securities shall be $18,000,000.
          2.2 Closing. The closing of the transactions contemplated under this
Agreement (the “Closing”) shall take place at the offices of Dewey Ballantine
LLP, 1301 Avenue of the Americas, New York, New York 10019, counsel to the
Company, on December 14, 2006 or at such other location, date and time as may be
agreed upon between the Majority Purchasers and the Company. At the Closing, the
Company shall deliver to each Purchaser a single stock certificate representing
the number of Securities purchased by such Purchaser, each to be registered in
the name of such Purchaser, or in such nominee’s or nominees’ name(s) as
designated by such Purchaser in writing in the form of the Investor
Questionnaire attached hereto as Appendix I, against payment of the purchase
price therefor by wire transfer of immediately available funds to such account
or accounts as the Company shall designate in writing.

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     3. Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows:
          3.1 Incorporation. The Company has been duly incorporated and is a
validly existing corporation in good standing under the laws of Delaware with
full power and authority (corporate and other) to own, lease and operate, as the
case may be, its properties and conduct its business as now conducted; and the
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the nature of the business conducted by it, or its
ownership or leasing of property, or its employment of employees or consultants
therein, makes such qualification necessary, except where the failure to be so
qualified or be in good standing would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the financial
condition, business, properties, or results of operations of the Company
(“Material Adverse Effect”). The Company has not received a written notification
that any proceeding has been instituted in any such jurisdiction, revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification, and to the Company’s knowledge, no proceeding has
been instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or qualification.
The Company is in possession of and operating in material compliance with all
authorizations, licenses, certificates, consents, orders and permits from state,
federal and other regulatory authorities that are material to the conduct of its
business, all of which are valid and in full force and effect. The Company is
not in violation of its charter or bylaws. Except as disclosed in the SEC
Documents the Company does not own or control, directly or indirectly, any
corporation, association or other entity. Complete and correct copies of the
certificate of incorporation (the “Certificate of Incorporation”) and bylaws
(the “Bylaws”) of the Company as in effect on the Effective Date have been filed
by the Company with the SEC.

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          3.2 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and the other Operative Agreements and to
perform the transactions contemplated hereby and thereby. The Operative
Agreements have been duly authorized, executed and delivered by the Company and
are valid and binding agreements on the part of the Company, enforceable in
accordance with their terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors’ rights generally or by general equitable principles. The
performance of this Agreement and the other Operative Agreements and the
consummation of the transactions herein and therein contemplated will not result
in (A) any violation of the Certificate of Incorporation or Bylaws of the
Company or (B) a breach or violation of any of the terms and provisions of, or
constitute a default under any contract, agreement, license, understanding,
indenture, mortgage, deed of trust, loan agreement, joint venture, lease
(including without limitation any sale and leaseback arrangement) or bond,
debenture, note or other evidence of indebtedness, to which the Company is a
party or by or to which it or its properties (including without limitation all
Company Intellectual Property (as defined in Section 3.9(b)) are or may be bound
or subject (each, a “Contract”) or any law, order, ruling, rule, regulation,
writ, assessment, injunction, judgment or decree of any government or
governmental court, agency or body, domestic or foreign, having jurisdiction
over the Company or over any of its respective properties (including without
limitation all Company Intellectual Property) or Contracts (“Government Entity”)
or by or to which they or such of its properties or Contracts are or may be
bound or subject (each, a “Law”), except in the case of this clause (B), such
defaults or violations which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. No consent,
approval, authorization or order of or qualification with any Government Entity
is required for the execution and delivery of this Agreement or the other
Operative Agreements and the consummation by the Company of the transactions
herein and therein contemplated, except such consents (i) that will be obtained
prior to the Closing Date and (ii) as may be required under the Securities Act,
the Exchange Act (if applicable), the Rules and Regulations, or under state or
other securities or blue sky laws or the National Association of Securities
Dealers, Inc. (the “NASD”), all of which requirements will be satisfied in all
material respects at or prior to the Closing Date.
          3.3 Litigation; Contracts. Except as disclosed in the SEC Documents,
there are no actions, suits, claims, investigations or proceedings pending or,
to the Company’s knowledge, threatened to which the Company or, to the Company’s
knowledge, to which any of its respective directors or officers is a party, or
of which any of its respective properties (including without limitation all
Company Intellectual Property) or any Contract is the subject, at law or in
equity, before or by any federal, state, local or foreign governmental or
regulatory commission, board, body, authority or agency which, if adversely
decided, would be reasonably likely to result in a decision, ruling, finding,
judgment, decree, order or settlement having a Material Adverse Effect or to
prevent consummation of the transactions contemplated hereby. There are no
Contracts of a character required to be described or referred to in the SEC
Documents, and/or filed as an exhibit to, by the Securities Act, the Exchange
Act or the Rules and Regulations which have not been accurately described in all
material respects in the SEC Documents, and/or filed as an exhibit to such SEC
Documents. Except to the extent disclosed in the SEC Documents, the Contracts
described in the SEC Documents are in full force and effect and are valid
agreements, enforceable by the Company, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors’ rights generally or by
general equitable principles, and except where the enforceability and validity
thereof would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. No event has occurred, and no
circumstances or condition exists, that (with or without notice or lapse of
time) (A) has resulted or is reasonably likely to result in a breach, default,
violation or waiver of any Contract or any provision thereof; (B) gives or is
reasonably likely to give any party to any Contract the right to declare a
breach, default or violation of or exercise any remedy under such Contract;
(C) gives or is reasonably likely to give any party to any Contract the right to
cancel, terminate, modify or be excused from performance of any obligations
under such Contract; or (D) has resulted or is reasonably likely to result in a
violation of any Law or in imposition of any fines, penalties, damages,
injunctions, prohibitions or other sanctions, except in the cases of clauses
(A), (B) and (C) where such breaches, defaults, violations, waivers, remedies,
cancellations, terminations, modifications excuses or impositions would not
reasonably by expected to have, individually or in the aggregate, a Material
Adverse Effect.

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          3.4 Capitalization. All outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and have not been issued in violation of any preemptive rights
or other rights to subscribe for or purchase securities. The authorized capital
stock of the Company consists of (i) 225,000,000 shares of Common Stock, of
which approximately 30,380,882 shares are outstanding on the date hereof and
(ii) 25,000,000 shares of preferred stock, of which no shares are outstanding on
the date hereof. Except for options to purchase Common Stock, other equity
awards issued to employees and consultants of the Company pursuant to employee
benefits plans and the warrants disclosed in the SEC Documents, there are no
existing options, warrants, calls, preemptive (or similar) rights, subscriptions
or other rights, agreements, arrangements or commitments of any character
obligating the Company to issue, transfer or sell, or cause to be issued,
transferred or sold, any shares of the capital stock of the Company or other
equity interests in the Company or any securities convertible into or
exchangeable for such shares of capital stock or other equity interests, and
there are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of its capital stock or other equity
interests. There are no voting agreements or other similar arrangements with
respect to the Common Stock to which the Company is a party. The description of
the Company’s stock option plans, employee stock purchase plans or similar
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the SEC Documents accurately and fairly presents, in all material
respects, the information required to be shown with respect to such plans,
arrangements, options and rights.
          3.5 Authorization. The Securities have been duly authorized for
issuance and sale to the Purchasers pursuant to this Agreement and, when issued
and delivered by the Company against payment therefor in accordance with the
terms of this Agreement, will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest. No preemptive right, co-sale
right, registration right, right of first refusal or other similar right of
stockholders exists with respect to any of the Securities or the issuance and
sale thereof, other than those that have been expressly waived prior to the date
hereof, those that will have been expressly waived prior to the Closing Date,
and those that will automatically expire upon or will not apply to the
consummation of the transactions contemplated on the Closing Date. No further
approval or authorization of any stockholder, the Board of Directors of the
Company or others is required for the issuance and sale or transfer of the
Securities, except as may be required (i) under state or other securities or
blue sky laws or (ii) pursuant to the Registration Rights Agreement.

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          3.6 Accountants. PricewaterhouseCoopers LLP, whose report on the
financial statements of the Company is filed with the SEC in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2005, are independent
registered public accountants as required by the Securities Act and the Rules
and Regulations. Except as described in the SEC Documents and as preapproved in
accordance with the requirements set forth in Section 10A of the Exchange Act,
to the Company’s knowledge, PricewaterhouseCoopers LLP has not engaged in any
“prohibited activities” (as defined in Section 10A of the Exchange Act) on
behalf of the Company.
          3.7 Financial Statements. The financial statements of the Company
contained in the SEC Documents, together with the related schedules and notes:
(i) present fairly, in all material respects, the financial position of the
Company as of the dates indicated and the results of operations and cash flows
of the Company for the periods specified; (ii) have been prepared in compliance
with requirements of the Securities Act and the Rules and Regulations and in
conformity with generally accepted accounting principles in the United States
applied on a consistent basis during the periods presented and the schedules
included in the Registration Statement present fairly, in all material respects,
the information required to be stated therein (provided, however, that the
statements that are unaudited are subject to normal year-end adjustments and do
not contain certain footnotes required by generally accepted accounting
principles); (iii) comply with the antifraud provisions of the federal
securities laws; and (iv) describe accurately, in all material respects, the
controlling principles used to form the basis for their presentation. There are
no financial statements (historical or pro forma) and/or related schedules and
notes that are required to be included in the SEC Documents that are not
included as required by the Securities Act, the Exchange Act and/or the Rules
and Regulations.
          3.8 No Changes. Subsequent to September 30, 2006, except as otherwise
described in the SEC Documents, there has not been (i) any change, development
or event that would reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect, (ii) any transaction that is material
to the Company, (iii) any obligation, direct or contingent, that is material to
the Company, incurred by the Company, (iv) any change in the capital stock or
outstanding indebtedness of the Company that is material to the Company, (v) any
dividend or distribution of any kind declared, paid or made on the capital stock
of the Company or (vi) any loss or damage (whether or not insured) to the
property of the Company that has been sustained or will have been sustained that
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
          3.9 Property.
               (a) Except as set forth in the SEC Documents: (i) the Company has
good and marketable title to all properties and assets described in the SEC
Documents as owned by it free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, whether imposed by agreement,
contract, understanding, law, equity or otherwise, except for Permitted Liens
(as defined below) or where any failure to have good and marketable title to
such properties and assets, individually or in the aggregate, would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect; and (ii) the Company has valid and enforceable leases, including
without limitation any leases that are the subject of any sale and leaseback
arrangement, for all properties described in the SEC Documents as leased by it,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors’ rights generally or by general equitable principles. Except
as set forth in the SEC Documents, the Company owns or leases all such
properties as are necessary to its operations as now conducted or as proposed to
be conducted.

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A “Permitted Lien” shall mean (i) liens for taxes not yet due, (ii) mechanics
liens and similar liens for labor, materials or supplies incurred in the
ordinary course of business for amounts that are not delinquent and (iii) any
liens that individually or in the aggregate are not material.
               (b) Except as described in the SEC Documents, to the Company’s
knowledge the Company owns or has valid, binding and enforceable licenses or
other rights to use the patents and patent applications, inventions, copyrights,
trademarks, service marks, trade names, service names, technology or know-how
(including trade secrets and other unpatented and/or unpatentable proprietary
rights and excluding generally commercially available “off the shelf” software
programs licensed pursuant to shrink wrap or “click and accept” licenses)
necessary to conduct its business in the manner described in the SEC Documents
(collectively, the “Company Intellectual Property”), except for any Company
Intellectual Property the absence of which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect. The Company
Intellectual Property is free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, whether imposed by agreement,
contract, understanding, law, equity or otherwise, except for Permitted Liens or
where any failure to have such adequate licenses or other rights of use to such
Intellectual Property, individually or in the aggregate, would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or
except as described in the SEC Documents. The Company is not obligated to pay a
royalty, grant a license or provide other consideration to any third party in
connection with the Company Intellectual Property other than as disclosed in the
SEC Documents or except as could not reasonably be expected to have a Material
Adverse Effect. Except as disclosed in the SEC Documents or as could not
reasonably be expected to have a Material Adverse Effect, (i) the Company has
not received any notice of infringement or conflict with asserted rights of
others with respect to any Company Intellectual Property, (ii) the conduct of
the business of the Company in the manner described in the SEC Documents does
not and will not, to the knowledge of the Company, infringe, interfere or
conflict with any valid issued patent claim or other intellectual property right
of any third party known to the Company and (iii) no third party, including any
academic or governmental organization, possesses rights to the Company
Intellectual Property which, if exercised, would enable such party to develop
products competitive to those of the Company. Except as disclosed in the SEC
Documents, the Company has not received any notice or has any knowledge of
(i) any potential infringement or misappropriation by others of the Company
Intellectual Property or (ii) any intellectual property of others that
potentially conflicts or interferes with the Company Intellectual Property, that
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. To the Company’s knowledge, no claim of any patent or
patent application (assuming the claims of patent applications issue as
currently pending) included in the Company Intellectual Property is
unenforceable or invalid, except for such unenforceability or invalidity that
would not reasonably be expected to result, individually or in the aggregate, in
a Material Adverse Effect or except as described in the SEC Documents. Each
former and current employee and independent contractor of the Company has signed
and delivered one or more written contracts with the Company pursuant to which
such employee or independent contractor assigns to the Company all of his, her
or its rights in and to any inventions, discoveries, improvements, works of
authorship, know-how or information made, conceived, reduced to practice,
authored or discovered in the course of employment by or performance of services
for the Company and any and all patent rights, copyrights, trademark and other
intellectual property rights therein or thereto.

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          3.10 Tax Returns. The Company has timely filed all federal, state and
foreign income and franchise tax returns required to be filed by the Company on
or prior to the date hereof, and has paid all taxes shown thereon as due, and
there is no tax deficiency that has been or, to the Company’s knowledge, might
be asserted against the Company that could reasonably be expected to have a
Material Adverse Effect. All tax liabilities are adequately provided for on the
books of the Company.
          3.11 Internal Controls. The Company has established and maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with management’s
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles in the United States and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
          3.12 Audit Committee. The Company’s Board of Directors has validly
appointed an Audit Committee whose composition satisfies the requirements of
Rule 4350(d)(2) of the Rules of the NASD (the “NASD Rules”) and the Board of
Directors and/or the Audit Committee has adopted a charter that satisfies the
requirements of Rule 4350(d)(1) of the NASD Rules. The Audit Committee has
reviewed the adequacy of its charter within the past 12 months.
          3.13 Disclosure Controls. The Company has established and maintains
disclosure controls and procedures (as such term is defined in Rules 13a-15 and
15d-15 under the Exchange Act). Since the date of the most recent evaluation of
such disclosure controls and procedures, there have been no significant changes
in internal controls or in other factors that could significantly affect
internal controls, including any corrective actions with regard to significant
deficiencies and material weaknesses. The Company is in compliance in all
material respects with all provisions currently in effect and applicable to the
Company of the Sarbanes-Oxley Act of 2002, and all rules and regulations
promulgated thereunder or implementing the provisions thereof.

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          3.14 Insurance. The Company maintains insurance with insurers of
recognized financial responsibility of the types and in the amounts it
reasonably believes to be adequate for its business and consistent with
insurance coverage maintained by similar companies in similar businesses,
including, but not limited to, insurance covering the acts and omissions of
directors and officers, real and personal property owned or leased by the
Company against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, all of which insurance is in full force and
effect; and the Company has no reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not reasonably be expected to have a Material
Adverse Effect.
          3.15 Losses. The Company has not sustained since September 30, 2006
any losses or interferences with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, other than any losses or
interferences which could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.
          3.16 Labor Disputes. No labor dispute with employees of the Company
exists or, to the Company’s knowledge, is imminent which could reasonably be
expected to have a Material Adverse Effect. No collective bargaining agreement
exists with any of the Company’s employees and, to the Company’s knowledge, no
such agreement is imminent.
          3.17 NASDAQ Global Market. The Common Stock is registered pursuant to
Section 12(g) of the Exchange Act and is listed on the NASDAQ Global Market, and
the Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from the NASDAQ Global Market. Except as disclosed in
the Company’s Form 8-K filed on May 10, 2005, the Company has not received any
notification that the SEC or the NASDAQ Stock Market LLC is contemplating
terminating such registration or listing. The Company has taken all actions
necessary to list the Securities for quotation on the NASDAQ Global Market. The
Company is in compliance with all corporate governance requirements of the
NASDAQ Global Market except for such non-compliance as would not, individually
or in the aggregate, have a Material Adverse Effect. The Company shall comply
with all requirements of the NASD with respect to the issuance of the Shares and
the listing of the Shares on the NASDAQ Global Market and such other securities
exchange or automated quotation system, as applicable. The sale and issuance of
the Securities does not require stockholder approval, including, without
limitation, pursuant to the NASD Rules.
          3.18 Investment Company. The Company is not and, after giving effect
to the offering and sale of the Securities, will not be an “investment company,”
as such term is defined in the Investment Company Act of 1940, as amended.

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          3.19 Offering Materials. Other than the SEC Documents and the
Operative Agreements (collectively, the “Offering Materials”), the Company has
not distributed and, prior to the Closing Date, will not distribute, any
offering materials in connection with the offering and sale of the Securities.
The Company has not in the past nor will it hereafter take any action to sell,
offer for sale or solicit offers to buy any securities of the Company which
would require the offer, issuance or sale of the Shares, as contemplated by this
Agreement, to be registered under Section 5 of the Securities Act (other than
pursuant to the Registration Rights Agreement).
          3.20 No Manipulation of Stock. Neither the Company nor, to its
knowledge, any of its affiliates has taken, directly or indirectly, any action
designed to or which has constituted or which would reasonably be expected to
cause or result, under the Exchange Act or otherwise, in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities.
          3.21 ERISA. The Company is in compliance in all material respects with
all currently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published interpretations
thereunder (“ERISA”), except where a failure to so comply could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect; to the Company’s knowledge, no unwaivable “reportable event” (as defined
in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA)
for which the Company would have any liability; the Company has not incurred and
does not expect to incur any material liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any “pension plan” or
(ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the “Code”);
and each “pension plan” for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification.
          3.22 Environmental. Except as set forth in the SEC Documents: (i) the
Company is in material compliance with all rules, laws and regulations relating
to the use, treatment, storage and disposal of toxic substances and protection
of health or the environment (“Environmental Laws”) which are applicable to its
business; (ii) the Company has not received any notice from any governmental
authority or third party of an asserted claim under Environmental Laws, which
claim is required to be disclosed in the SEC Documents; (iii), to the Company’s
knowledge, the Company is not currently required to make future material capital
expenditures to comply with Environmental Laws; and (iv) to the Company’s
knowledge, no property that is owned, leased or occupied by the Company has been
designated a Superfund site pursuant to the Comprehensive Response, Compensation
and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), or
otherwise designated as a contaminated site under applicable state or local law.

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          3.23 Outstanding Loans to Officers or Directors. There are no
outstanding loans, advances (except normal advances for business expenses in the
ordinary course of business) or guarantees of indebtedness by the Company to or
for the benefit of any of the officers or directors of the Company or any of the
members of the families of any of them.
          3.24 Regulatory Compliance.
               (a) The Company possess all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct its business as currently conducted, including
without limitation all such certificates, authorizations and permits required by
the United States Food and Drug Administration (the “FDA”) or any other federal,
state or foreign agencies or bodies engaged in the regulation of pharmaceuticals
or biohazardous materials, except where the failure to so possess such
certificates, authorizations and permits, individually or in the aggregate,
would not result in a Material Adverse Effect or except as disclosed in the SEC
Documents. The Company has not received any notice of proceedings relating to
the revocation or modification of any such certificate, authorization or permit
which, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a Material Adverse Effect.
               (b) Except to the extent disclosed in the SEC Documents, the
Company has not received any written notices or statements from the FDA, the
European Medicines Agency (the “EMEA”) or any other governmental agency, and
otherwise has no knowledge or reason to believe, that (i) any new drug
application or marketing authorization application for any product or potential
product of the Company is or has been rejected or determined to be
non-approvable or conditionally approvable; and (ii) any license, approval,
permit or authorization to conduct any clinical trial of or market any product
or potential product of the Company has been, will be or may be suspended or
revoked, except in the cases of clauses (i) and (ii) where such rejections,
determinations, delays, requests, suspensions, revocations, modifications or
limitations could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
               (c) To the Company’s knowledge, the preclinical and clinical
testing, application for marketing approval of, manufacture, distribution,
promotion and sale of the products and potential products of the Company is in
compliance, in all material respects, with all laws, rules and regulations
applicable to such activities, including without limitation applicable good
laboratory practices, good clinical practices and good manufacturing practices,
except for such non-compliance as would not, individually or in the aggregate,
have a Material Adverse Effect. The descriptions of the results of such tests
and trials contained in the SEC Documents are accurate in all material respects.
Except to the extent disclosed in the SEC Documents, the Company has not
received notice of adverse finding, warning letter or clinical hold notice from
the FDA or any non-U.S. counterpart of any of the foregoing, or any untitled
letter or other correspondence or notice from the FDA or any other governmental
authority or agency or any institutional or ethical review board alleging or
asserting noncompliance with any law, rule or regulation applicable in any
jurisdiction, except notices, letters and correspondence and non-U.S.
counterparts thereof alleging or asserting such noncompliance as would not,
individually or in the aggregate, have a Material Adverse Effect.

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The Company has not, either voluntarily or involuntarily, initiated, conducted
or issued, or caused to be initiated, conducted or issued, any recall, field
correction, market withdrawal or replacement, safety alert, warning, “dear
doctor” letter, investigator notice, or other notice or action relating to an
alleged or potential lack of safety or efficacy of any product or potential
product of the Company, or any violation of any material applicable law, rule,
regulation or any clinical trial or marketing license, approval, permit or
authorization for any product or potential product of the Company, except such
notices or actions as would not, individually or in the aggregate, have a
Material Adverse Effect.
          3.25 Lock-Up Agreements. The Company has caused each person listed on
Schedule I hereto to furnish to the Placement Agents (as herein after defined),
on or prior to the date of this Agreement, a letter or letters, in form and
substance reasonably satisfactory to the Placement Agents (the “Lock-up
Agreements”), pursuant to which such person shall agree not to, directly or
indirectly, for a period (the “Lock-up Period”) commencing on the date of this
Agreement and ending on the close of business on the thirtieth (30th) day after
the date of the effectiveness of a resale registration statement filed pursuant
to the terms of the Registration Rights Agreement (the “Effective Date of the
Registration Statement”), offer, sell, pledge, contract to sell, grant any
option to purchase, grant a security interest in, hypothecate or otherwise sell
or dispose of (collectively, a “Transfer”) any shares of Common Stock (including
without limitation, shares of Common Stock that may be deemed to be beneficially
owned by such person in accordance with the Rules and Regulations and shares of
Common Stock that may be issued upon the exercise of a stock option or warrant)
or any securities convertible into, derivative of or exchangeable or exercisable
for Common Stock (collectively, “Covered Securities”), owned directly by such
person or as to which such person has the power of disposition, in any such case
whether owned as of the date of such letter or acquired thereafter, except for
such Transfers that are expressly permitted by the Lock-up Agreements. The
foregoing restrictions have been expressly agreed to preclude the holder of the
Covered Securities from engaging in any hedging or other transaction, as more
fully described in the Lock-up Agreements. Furthermore, such person has also
agreed and consented to the entry of stop transfer instructions with the
Company’s transfer agent against the transfer of the Covered Securities held by
such person except in compliance with this restriction. The Company hereby
represents and warrants that it will not release, prior to the expiration of the
Lock-up Period, any of its officers from any Lock-up Agreements currently
existing or hereafter effected without the prior written consent of the Majority
Purchasers.
          3.26 SEC Documents. The Company has made available to each Purchaser,
a true and complete copy of the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2005, the Company’s Quarterly Reports on Form
10-Q for the periods ended March 31, 2006, June 30, 2006 and September 30, 2006,
and each current report on Form 8-K (except for the information deemed to be
furnished and not filed therewith), and definitive proxy statement, filed by the
Company with the SEC during the period commencing on January 1, 2006 and ending
on the date hereof. The Company will, promptly upon the filing thereof, also
make available to each Purchaser all Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K and definitive proxy statements filed by the Company with
the SEC during the period commencing on the date hereof and ending on the
Closing Date (all such materials required to be furnished to each Purchaser
pursuant to this sentence or pursuant to the next preceding sentence of this
Section 3.26 being called, collectively, the “SEC Documents”).

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The Company has filed in a timely manner all documents that the Company was
required to file under the Exchange Act during the 12 months preceding the date
of this Agreement. As of their respective filing dates, the SEC Documents
complied or, when filed will comply in all material respects with the
requirements of the Exchange Act or the Securities Act, as applicable, and none
of the SEC Documents contained or, when filed, will contain any untrue statement
of a material fact or omitted or, when filed, will omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading, as of their respective filing dates, except to the extent corrected
by a subsequently filed SEC Document.
          3.27 Brokers or Finders. Except for Pacific Growth Equities, LLC and
Susquehanna Financial Group, LLLP, the Company has not dealt with any broker or
finder in connection with the transactions contemplated by this Agreement, and,
except for certain fees and expenses payable by the Company to Pacific Growth
Equities, LLC and Susquehanna Financial Group, LLLP, the Company has not
incurred, and shall not incur, directly or indirectly, any liability for any
brokerage or finders’ fees or agents commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
          3.28 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances within the prior six months that would
require registration under the Securities Act of the issuance of the Securities
to the Purchasers.
          3.29 No General Solicitation. Neither the Company nor, to the
knowledge of the Company, any person acting for the Company, has conducted any
“general solicitation” (as such term is defined in Regulation D) with respect to
any of the Securities being offered hereby. The Company will not distribute any
offering material in connection with the sale of the Securities prior to the
Closing Date, other than this Agreement, the Registration Rights Agreement and
the SEC Documents.
     4. Representations and Warranties of the Purchasers. Each Purchaser
severally for itself, and not jointly with the other Purchasers, represents and
warrants to the Company as follows:

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          4.1 Authorization. All action on the part of such Purchaser and, if
applicable, its officers, directors and shareholders necessary for the
authorization, execution, delivery and performance of the Operative Agreements
and the consummation of the transactions contemplated herein and therein has
been taken. When executed and delivered, each of the Operative Agreements will
constitute the legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms, except as such
may be limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors’ rights generally and by general equitable principles. Such Purchaser
has all requisite corporate power to enter into each of the Operative Agreements
and to carry out and perform its obligations under the terms of the Operative
Agreements. Such Purchaser has the knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Securities and has the ability to bear the economic risks of
an investment in the Securities for an indefinite period of time.
          4.2 Purchase Entirely for Own Account. Such Purchaser is acquiring the
Securities being purchased by it hereunder for investment, for its own account,
and not for resale or with a view to distribution thereof in violation of the
Securities Act. Such Purchaser has not entered into an agreement or
understanding with any other party to resell or distribute such Securities.
          4.3 Investor Status; Etc. Such Purchaser certifies and represents to
the Company that it is now, and at the time such Purchaser acquires any of the
Securities, such Purchaser will be, an “Accredited Investor” as defined in
Rule 501 of Regulation D promulgated under the Securities Act and was not
organized for the purpose of acquiring the Securities. Such Purchaser’s
financial condition is such that it is able to bear the risk of holding the
Securities for an indefinite period of time and the risk of loss of its entire
investment. Such Purchaser has received, reviewed and considered all information
it deems necessary in making an informed decision to make an investment in the
Securities and has been afforded the opportunity to ask questions of and receive
answers from the management of the Company concerning this investment and has
sufficient knowledge and experience in investing in companies similar to the
Company in terms of the Company’s stage of development so as to be able to
evaluate the risks and merits of its investment in the Company.
          4.4 Confidential Information. Each Purchaser understands that any
information, other than the SEC Documents, provided to such Purchaser by the
Company, including, without limitation, the existence and nature of all
discussions and presentations, if any, regarding this offering and the Operative
Agreements, is strictly confidential and proprietary to the Company and is being
submitted to the Purchaser solely for such Purchaser’s confidential use in
connection with its investment decision regarding the Securities. Such Purchaser
agrees to use such information for the sole purpose of evaluating a possible
investment in the Securities and such Purchaser hereby acknowledges that it is
prohibited from reproducing or distributing such information, the Operative
Agreements, or any other offering materials, in whole or in part, or divulging
or discussing any of their contents except for use internally and by its legal
counsel and except as required by law or legal process. Such Purchaser
understands that the federal securities laws prohibit any person who possesses
material nonpublic information about a company from trading in securities of
such company.
          4.5 Shares Not Registered. Such Purchaser understands that the
Securities have not been registered under the Securities Act, by reason of their
issuance by the Company in a transaction exempt from the registration
requirements of the Securities Act, and that the Securities must continue to be
held by such Purchaser unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration.

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The Purchaser understands that the exemptions from registration afforded by
Rule 144 (the provisions of which are known to it) promulgated under the
Securities Act depend on the satisfaction of various conditions, and that, if
applicable, Rule 144 may afford the basis for sales only in limited amounts.
          4.6 No Conflict. The execution and delivery of the Operative
Agreements by such Purchaser and the consummation of the transactions
contemplated hereby and thereby will not conflict with or result in any
violation of or default by such Purchaser (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit under (i) any
provision of the organizational documents of such Purchaser, (ii) any material
agreement or instrument, permit, franchise, or license or (iii) any judgment,
order, statute, law, ordinance, rule or regulations, applicable to such
Purchaser or its respective properties or assets.
          4.7 Brokers. Such Purchaser has not retained, utilized or been
represented by any broker or finder in connection with the transactions
contemplated by this Agreement.
          4.8 Consents. All consents, approvals, orders and authorizations
required on the part of such Purchaser in connection with the execution,
delivery or performance of this Agreement and the consummation of the
transactions contemplated herein have been obtained and are effective as of the
Closing.
          4.9 Acknowledgments Regarding Placement Agent. Each Purchaser
acknowledges that Pacific Growth Equities, LLC and Susquehanna Financial Group,
LLLP are acting as placement agent (the “Placement Agents”) for the Securities
being offered hereby and will be compensated by the Company for acting in such
capacity. Each Purchaser further acknowledges that the Placement Agents have
acted solely as placement agent for the Company in connection with the offering
of the Securities by the Company, that if the Placement Agents provided any
information and data to such Purchaser in connection with the transactions
contemplated hereby, that such information and data have not been subjected to
independent verification by the Placement Agents, and that the Placement Agents
make no representation or warranty with respect to the accuracy or completeness
of such information, data or other related disclosure material. Each Purchaser
further acknowledges that in making its decision to enter into this Agreement
and purchase the Securities it has relied on its own examination of the Company
and the terms of, and consequences, of holding the Securities. The Purchaser
agrees that neither the Placement Agents nor any of their controlling persons,
Affiliates, directors, officers, employees or consultants shall have any
liability to the Purchaser or any person asserting claims on behalf of or in
right of the Purchaser for any losses, claims, damages, liabilities or expenses
arising out of or relating to this Agreement or the Purchaser’s purchase of
Securities. Each Purchaser further acknowledges that the provisions of this
Section 4.9 are also for the benefit of, and may also be enforced by, the
Placement Agents.

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          4.10 Information. Each Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company, and materials relating to the offer and sale of the Securities,
if any, that have been requested by the Purchaser or its advisors, if any. The
Purchaser and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. The Purchaser acknowledges and understands that its
investment in the Securities involves a significant degree of risk, including
the risks reflected in the SEC Documents.
          4.11 No Public Offering. Such Purchaser has not received any
information relating to the Securities or the Company, and is not purchasing the
Securities as a result of, any form of general solicitation or general
advertising, including but not limited to, any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio or pursuant to any seminar or meeting whose
attendees were invited by any general solicitation or general advertising.
          4.12 Short Positions; Certain Trading Limitations. Such Purchaser will
not, at any time, use any of the Securities acquired pursuant to this Agreement
to cover any short position in the Common Stock if doing so would be in
violation of applicable securities laws. The Purchaser represents that on and
from the date the Purchaser first became aware of the offering of the Shares
until the date hereof neither it nor anyone acting on its behalf has engaged in
any sale, hedging or other transaction which is designed to or could reasonably
be expected to lead to or result in, or be characterized as, a sale, an offer to
sell, a solicitation of offers to buy, disposition of, loan, pledge or grant of
any right with respect to (collectively, a “Disposition”) the Common Stock of
the Company by the Purchaser or any person or entity in violation of applicable
securities laws. The Purchaser covenants that for the period commencing on the
date hereof and ending on the earlier to occur of (A) the Company’s issuance of
a press release disclosing the transactions contemplated hereby and (B) the
Company’s filing of a Current Report on Form 8-K disclosing the transactions
contemplated hereby, neither it nor anyone acting on its behalf will engage in
or cause to occur any Disposition. Such prohibited hedging or other transactions
would include without limitation effecting any short sale or having in effect
any short position (whether or not such sale or position is “against the box”
and regardless of when such position was entered into) or any purchase, sale or
grant of any right (including without limitation any put or call option) with
respect to the Common Stock of the Company or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from the Common Stock of the Company.
          4.13 Broker-dealer. The Purchaser is not a broker-dealer. If the
Purchaser is an affiliate of a broker-dealer, the Purchaser is acquiring the
Shares in the ordinary course of its business.

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          4.14 Affiliates. To the knowledge of the Purchaser, the Purchaser is
not an affiliate of the Company.
     5. Conditions Precedent.
          5.1 Conditions to the Obligation of the Purchasers to Consummate the
Closing. The obligation of each Purchaser to consummate the Closing and to
purchase and pay for the Securities being purchased by it pursuant to this
Agreement is subject to the satisfaction of the following conditions precedent:
               (a) The representations and warranties of the Company contained
herein shall be true and correct on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date (it being
understood and agreed by each Purchaser that, in the case of any representation
and warranty of the Company contained herein which is not hereinabove qualified
by application thereto of a materiality standard, such representation and
warranty need be true and correct only in all material respects in order to
satisfy as to such representation or warranty the condition precedent set forth
in the foregoing provisions of this Section 5.1(a)).
               (b) The Registration Rights Agreement shall have been executed
and delivered by the Company.
               (c) The Company shall not have been adversely affected in any
material way prior to the Closing Date; and the Company shall have performed all
obligations and conditions herein required to be performed or observed by the
Company on or prior to the Closing Date.
               (d) No proceeding challenging this Agreement or the transactions
contemplated hereby, or seeking to prohibit, alter, prevent or materially delay
the Closing, shall have been instituted before any court, arbitrator or
governmental body, agency or official and shall be pending.
               (e) The purchase of and payment for the Securities by the
Purchasers shall not be prohibited by any law or governmental order or
regulation. All necessary consents, approvals, licenses, permits, orders and
authorizations of, or registrations, declarations and filings with, any
governmental or administrative agency or of any other person with respect to any
of the transactions contemplated hereby shall have been duly obtained or made
and shall be in full force and effect.
               (f) The Company shall have obtained and delivered to the
Purchasers the Lock-up Agreements referred to in Section 3.25 hereof.
               (g) All instruments and corporate proceedings in connection with
the transactions contemplated by this Agreement to be consummated at the Closing
shall be reasonably satisfactory in form and substance to such Purchaser, the
Purchasers shall have received an opinion of legal counsel to the Company
substantially in the form of Exhibit B attached hereto, and such Purchaser shall
have received such certificates of the Company’s officers as such Purchaser may
have reasonably requested in connection with such transactions.

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          5.2 Conditions to the Obligation of the Company to Consummate the
Closing. The obligation of the Company to consummate the Closing and to issue
and sell to each of the Purchasers the Securities to be purchased by it at the
Closing is subject to the satisfaction of the following conditions precedent:
               (a) The representations and warranties contained herein of such
Purchaser shall be true and correct on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date (it being
understood and agreed by the Company that, in the case of any representation and
warranty of each Purchaser contained herein which is not hereinabove qualified
by application thereto of a materiality standard, such representation and
warranty need be true and correct only in all material respects in order to
satisfy as to such representation or warranty the condition precedent set forth
in the foregoing provisions of this Section 5.2(a)).
               (b) The Registration Rights Agreement shall have been executed
and delivered by each Purchaser.
               (c) The Purchasers shall have performed all obligations and
conditions herein required to be performed or observed by the Purchasers on or
prior to the Closing Date.
               (d) No proceeding challenging this Agreement or the transactions
contemplated hereby, or seeking to prohibit, alter, prevent or materially delay
the Closing, shall have been instituted before any court, arbitrator or
governmental body, agency or official and shall be pending.
               (e) The sale of the Securities by the Company shall not be
prohibited by any law or governmental order or regulation. All necessary
consents, approvals, licenses, permits, orders and authorizations of, or
registrations, declarations and filings with, any governmental or administrative
agency or of any other person with respect to any of the transactions
contemplated hereby shall have been duly obtained or made and shall be in full
force and effect.
               (f) Each of the Purchasers shall have executed and delivered to
the Company an Investor Questionnaire, in the form attached hereto as
Appendix I, pursuant to which each such Purchaser shall provide information
necessary to confirm each such Purchaser’s status as an “accredited investor”
(as such term is defined in Rule 501 promulgated under the Securities Act) and
to enable the Company to comply with the Registration Rights Agreement.
               (g) Each of the other Purchasers shall have purchased, in
accordance with this Agreement, the number of shares of Common Stock set forth
opposite its name under the heading “Number of Shares to be Purchased” on
Exhibit A.

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               (h) All instruments and corporate proceedings in connection with
the transactions contemplated by this Agreement to be consummated at the Closing
shall be satisfactory in form and substance to the Company, and the Company
shall have received counterpart originals, or certified or other copies of all
documents, including without limitation records of corporate or other
proceedings, which it may have reasonably requested in connection therewith.
     6. Transfer, Legends.
          6.1 Securities Law Transfer Restrictions.
               (a) Each Purchaser understands that the Securities have not been
registered under the Securities Act or any state securities laws, and each
Purchaser agrees that it will not sell, offer to sell, solicit offers to buy,
dispose of, loan, pledge or grant any right with respect to (collectively, a
“Disposition”), the Securities nor will such Purchaser engage in any hedging or
other transaction which is designed to or could be reasonably expected to lead
to or result in a Disposition of Securities by such Purchaser or any other
person or entity unless (a) the Securities are registered under the Securities
Act, or (b) such Purchaser shall have delivered to the Company an opinion of
counsel in form, substance and scope reasonably acceptable to the Company, to
the effect that registration is not required under the Securities Act or any
applicable state securities law due to the applicability of an exemption
therefrom. In that connection, such Purchaser is aware of Rule 144 under the
Securities Act and the restrictions imposed thereby. Such Purchaser acknowledges
and agrees that no sales of the Securities may be made under the registration
statement filed by the Company pursuant to the Registration Rights Agreement
(the “Registration Statement”) and that the Securities are not transferable on
the books of the Company unless the certificate submitted to the transfer agent
evidencing the Securities is accompanied by a separate Purchaser’s Certificate
of Subsequent Sale: (i) in the form of Exhibit C hereto; (ii) executed by an
officer of, or other authorized person designated by, the Purchaser; and
(iii) to the effect that (A) the shares have been sold in accordance with the
Registration Statement, the Securities Act and any applicable state securities
or blue sky laws, and (B) the requirement of delivering, or deemed delivery of,
a current prospectus has been satisfied. Such prohibited hedging or other
transactions would include, without limitation, effecting any short sale or
having in effect any short position (whether or not such sale or position is
against the box and regardless of when such position was entered into) or any
purchase, sale or grant of any right (including, without limitation, any put or
call option) with respect to the Securities or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from the Common Stock of the Company.
               (b) Each Purchaser acknowledges that no action has been or will
be taken in any jurisdiction outside the United States by the Company or the
Placement Agent that would permit an offering of the Securities, or possession
or distribution of offering materials in connection with the issue of
Securities, in any jurisdiction outside of the United States where action for
that purpose is required. Each Purchaser outside the United States will comply
with all applicable laws and regulations in each foreign jurisdiction in which
it purchases, offers, sells or delivers Securities or has in its possession or
distributes any offering material, in all cases at its own expense. The
Placement Agent is not authorized to make any representation or use any
information in connection with the issue, placement, purchase and sale of the
Securities.

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               (c) Each Purchaser hereby covenants with the Company not to make
any sale of the Securities without complying with the provisions of the
Operative Agreements and such Purchaser acknowledges that the certificates
evidencing the Shares will be imprinted with a legend that prohibits their
transference except in accordance therewith. Each Purchaser acknowledges that
there may occasionally be times when the Company, based on the advice of its
counsel, determines that it must suspend the Registration Statement, until such
time as an amendment to the Registration Statement has been filed by the Company
and declared effective by the SEC or until the Company has amended or
supplemented such Prospectus.
          6.2 Legends.
               (a) Each certificate requesting any of the Shares shall be
endorsed with the legends set forth below, and each Purchaser covenants that,
except to the extent such restrictions are waived by the Company, it shall not
transfer the shares represented by any such certificate without complying with
the restrictions on transfer described in this Agreement and the legends
endorsed on such certificate:
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
UNDER SAID ACT AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS
EXEMPT FROM SAID ACT.”
               (b) After the earlier of (i) a sale pursuant to the Registration
Statement and receipt by the Company of a Purchaser’s written confirmation that
such Securities have been disposed of in compliance with the prospectus delivery
requirements of the Securities Act or (ii) Rule 144(k) under the Securities Act
becoming available to a Purchaser, the Company shall, upon such Purchaser’s
written request, promptly cause certificates evidencing the Purchaser’s Shares
to be replaced with certificates that do not bear such restrictive legends. When
the Company is required to cause unlegended certificates to replace previously
issued legended certificates, such unlegended certificates shall be delivered to
a Purchaser or the Purchaser’s transferee within three (3) business days
following submission by that Purchaser of legended certificate(s) to the
Company’s transfer agent together with a representation letter in customary
form.

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The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Investor by vitiating the intent and purpose of
the transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 6.2(b) will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Investor will be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate transfer, without the necessity of showing
economic loss and without any bond or other security being required. The
Company’s obligation to issue unlegended certificates pursuant to this
Section 6.2(b) shall be excused if (i) the SEC promulgates any rule or
interpretation expressly prohibiting removal of legends in such circumstances,
(ii) the SEC or other regulatory authority instructs the Company or its transfer
agent not to remove such legends or (iii) the SEC makes it a condition to the
effectiveness of the Registration Statement to that the Company continue to keep
such legends in place.
               (c) Notwithstanding the removal of legends as provided in
Section 6.2(b), until a Purchaser’s Shares are sold pursuant to the Registration
Statement or Rule 144(k) becomes available to the Purchaser, the Purchaser shall
continue to hold such shares in the form of a definitive stock certificate and
shall not hold the shares in street name or in book-entry form with a securities
depository.
     7. Termination; Liabilities Consequent Thereon. This Agreement may be
terminated and the transactions contemplated hereunder abandoned at any time
prior to the Closing only as follows:
               (a) by the Purchasers, upon notice to the Company if the
conditions set forth in Section 5.1 shall not have been satisfied on or prior to
the fourth Trading Day following the date of this Agreement; or
               (b) by the Company, upon notice to the Purchasers if the
conditions set forth in Section 5.2 shall not have been satisfied on or prior to
the fourth Trading Day following the date of this Agreement; or
               (c) at any time by mutual agreement of the Company and the
Purchasers; or
               (d) by the Purchasers, if there has been any breach of any
representation or warranty or any material breach of any covenant of the Company
contained herein and the same has not been cured within 15 days after notice
thereof (it being understood and agreed by each Purchaser that, in the case of
any representation or warranty of the Company contained herein which is not
hereinabove qualified by application thereto of a materiality standard, such
representation or warranty will be deemed to have been breached for purposes of
this Section 7(d) only if such representation or warranty was not true and
correct in all material respects at the time such representation or warranty was
made by the Company); or

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               (e) by the Company, if there has been any breach of any
representation, warranty or any material breach of any covenant of any Purchaser
contained herein and the same has not been cured within 15 days after notice
thereof (it being understood and agreed by the Company that, in the case of any
representation and warranty of the Purchaser contained herein which is not
hereinabove qualified by application thereto of a materiality standard, such
representation or warranty will be deemed to have been breached for purposes of
this Section 7(e) only if such representation or warranty was not true and
correct in all material respects at the time such representation or warranty was
made by such Purchaser).
     Any termination pursuant to this Section 7 shall be without liability on
the part of any party, unless such termination is the result of a material
breach of this Agreement by a party to this Agreement in which case such
breaching party shall remain liable for such breach notwithstanding any
termination of this Agreement.
     8. Agreements of the Company. The Company agrees that it will not, until
90 days after the Closing Date, offer to sell, solicit offers to purchase or
sell any of its capital stock or securities convertible into or exchangeable or
exercisable for its capital stock, including without limitation any debt,
preferred stock or other instrument or security that is, at any time during its
life and under any circumstances, convertible into or exchangeable or
exercisable for its capital stock, without the prior written consent of the
Majority Purchasers; provided, however, that the foregoing shall not preclude
the Company from issuing a pure debt instrument or from issuing stock options or
Common Stock issuable upon exercise of outstanding options and warrants, or
pursuant to employee benefit or stock purchase plans. The Company has not
offered to sell, solicited offers to purchase or sold any securities during the
six months preceding the date of this Agreement, and the Company will not offer
to sell, solicit offers to purchase or sell, any securities during the six
months following the date of this Agreement, that would be required to be
integrated with the offer and sale of the Securities so as to require
registration of the offer and sale of the Securities under the Securities Act of
1933, as amended.
     9. Miscellaneous Provisions.
          9.1 Public Statements or Releases. The Company shall, by 8:30 a.m.
Eastern time on the business day following the Closing Date, issue a press
release and file a Current Report on Form 8-K, copies of each of which shall be
provided to the Purchasers for review, disclosing the transactions contemplated
hereby and make such other filings and notices in the manner and time required
by the SEC. The Company and each Purchaser shall consult with each other in
issuing any press releases with respect to the transactions contemplated hereby,
and none of the parties to this Agreement shall make, issue, or release any
announcement, whether to the public generally, or to any of its suppliers or
customers, with respect to this Agreement or the transactions provided for
herein, or make any statement or acknowledgment of the existence of, or reveal
the status of, this Agreement or the transactions provided for herein, without
the prior consent of the other parties, which shall not be unreasonably withheld
or delayed, provided, that nothing in this Section 9.1 shall prevent any of the
parties hereto from making such public announcements as it may consider
necessary in order for it to satisfy its legal obligations, but to the extent
not inconsistent with such obligations, it shall provide the other parties with
an opportunity to review and comment on any proposed public announcement before
it is made.

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          9.2 Further Assurances. Each party agrees to cooperate fully with the
other party and to execute such further instruments, documents and agreements
and to give such further written assurances, as may be reasonably requested by
the other party to better evidence and reflect the transactions described herein
and contemplated hereby, and to carry into effect the intents and purposes of
this Agreement.
          9.3 Rights Cumulative. Each and all of the various rights, powers and
remedies of the parties shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have at
law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or remedy shall
neither constitute the exclusive election thereof nor the waiver of any other
right, power or remedy available to such party.
          9.4 Pronouns. All pronouns or any variation thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person, persons, entity or entities may require.
          9.5 Notices. Any notices, reports or other correspondence (hereinafter
collectively referred to as “correspondence”) required or permitted to be given
hereunder shall be in writing and shall be sent by postage prepaid first class
mail, courier or telecopy or delivered by hand to the party to whom such
correspondence is required or permitted to be given hereunder, and shall be
deemed sufficient upon receipt when delivered personally or by courier,
overnight delivery service or confirmed facsimile, or three (3) business days
after being deposited in the regular mail as certified or registered mail
(airmail if sent internationally) with postage prepaid, if such notice is
addressed to the party to be notified at such party’s address or facsimile
number as set forth below:
               (a) All correspondence to the Company shall be addressed as
follows:
20425 Seneca Meadows Parkway
Germantown, Maryland 20876
Attention:    Edward M. Rudnic, Ph.D.
                    President and Chief Executive Officer
Facsimile:   (301) 944-6700
               with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York
Attention:   Frederick W. Kanner, Esq.
Facsimile:   (212) 259-6333
               (b) All correspondence to any Purchaser shall be sent to such
Purchaser at the address set forth in Exhibit A.

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               (c) Any entity may change the address to which correspondence to
it is to be addressed by written notification as provided for herein.
          9.6 Captions. The captions and paragraph headings of this Agreement
are solely for the convenience of reference and shall not affect its
interpretation.
          9.7 Severability. Should any part or provision of this Agreement be
held unenforceable or in conflict with the applicable laws or regulations of any
jurisdiction, the invalid or unenforceable part or provisions shall be replaced
with a provision which accomplishes, to the extent possible, the original
business purpose of such part or provision in a valid and enforceable manner,
and the remainder of this Agreement shall remain binding upon the parties
hereto.
          9.8 Governing Law; Injunctive Relief.
               (a) This Agreement shall be governed by and construed in
accordance with the internal and substantive laws of the State of New York and
without regard to any conflicts of laws concepts which would apply the
substantive law of some other jurisdiction.
               (b) Each of the parties hereto acknowledges and agrees that
damages will not be an adequate remedy for any material breach or violation of
this Agreement if such material breach or violation would cause immediate and
irreparable harm (an “Irreparable Breach”). Accordingly, in the event of a
threatened or ongoing Irreparable Breach, each party hereto shall be entitled to
seek, equitable relief of a kind appropriate in light of the nature of the
ongoing or threatened Irreparable Breach, which relief may include, without
limitation, specific performance or injunctive relief; provided, however, that
if the party bringing such action is unsuccessful in obtaining the relief
sought, the moving party shall pay the non-moving party’s reasonable costs,
including attorney’s fees, incurred in connection with defending such action.
Such remedies shall not be the parties’ exclusive remedies, but shall be in
addition to all other remedies provided in this Agreement.
          9.9 Amendments. This Agreement may not be amended or modified except
pursuant to an instrument in writing signed by the Company and the Majority
Purchasers.
          9.10 Waiver. No waiver of any term, provision or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or be construed as, a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
          9.11 Expenses. Each party will bear its own costs and expenses in
connection with this Agreement.

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          9.12 Assignment. The rights and obligations of the parties hereto
shall inure to the benefit of and shall be binding upon the authorized
successors and permitted assigns of each party. No party may assign its rights
or obligations under this Agreement or designate another person (i) to perform
all or part of its obligations under this Agreement or (ii) to have all or part
of its rights and benefits under this Agreement, in each case without the prior
written consent of the other party, provided, however, that a Purchaser may
assign its rights hereunder with respect to any Securities transferred to a
“Qualified Holder” pursuant to and in compliance with Section 12 of the
Registration Rights Agreement, and may designate such Qualified Holder to
perform the duties of the Purchaser hereunder with respect to such transferred
Securities; provided further that irrespective of such transfer and designation
the Purchaser shall remain obligated hereunder with respect to all of such
Purchaser’s purchased Securities. In the event of any assignment in accordance
with the terms of this Agreement, the assignee shall specifically assume and be
bound by the provisions of the Agreement by executing and agreeing to an
assumption agreement reasonably acceptable to the other party.
          9.13 Survival. The respective representations and warranties given by
the parties hereto, and the other covenants and agreements contained herein,
shall survive the Closing Date and the consummation of the transactions
contemplated herein for a period of two years, without regard to any
investigation made by any party.
          9.14 Counterpart. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
          9.15 Entire Agreement. This Agreement and the Registration Rights
Agreement constitute the entire agreement between the parties hereto respecting
the subject matter hereof and supersede all prior agreements, negotiations,
understandings, representations and statements respecting the subject matter
hereof, whether written or oral. No modification, alteration, waiver or change
in any of the terms of this Agreement shall be valid or binding upon the parties
hereto unless made in writing and duly executed by the Company and the Majority
Purchasers.
          9.16 Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Operative Agreement are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Operative Agreement. Nothing contained herein or in any
other Operative Agreement, and no action taken by any Purchaser pursuant hereto
or thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Operative Agreements and the Company acknowledges that the Purchasers are not
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Operative Agreements. Each Purchaser confirms
that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors.

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Each Purchaser shall be entitled to independently protect and enforce its
rights, including, without limitation, the rights arising out of this Agreement
or out of any other Operative Agreement, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose.
[Signature Page to Follow]

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     IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the day and year first above written.

                  ADVANCIS PHARMACEUTICAL CORPORATION    
 
           
 
  By:   /s/: Robert C. Low
 
   
 
  Name:   Robert C. Low    
 
  Title:   Vice President, Finance and Chief Financial Officer    

THE PURCHASER’S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED OF EVEN DATE
HEREWITH SHALL CONSTITUTE THE PURCHASER’S SIGNATURE TO THIS SECURITIES PURCHASE
AGREEMENT.