Document:

exv10w1

 

Exhibit 10.1

December 8, 2006

VIA OVERNIGHT COURIER AND

FACSIMILE – 301-944-6700

Advancis Pharmaceutical Corporation

20425 Seneca Meadows Parkway

Germantwon, MD 20876

Attn: Mr. Robert Low

	 	Re:   Merrill Lynch Capital – Advancis

Gentlemen:

     Reference is made to that certain Credit and Security Agreement dated June
30, 2006 (as amended, modified, restated or supplemented from time to time, the
“Credit Agreement”) between ADVANCIS PHARMACEUTICAL CORPORATION (“Borrower”),
and MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial
Services Inc., individually as a lender and as agent (“Merrill Lynch”). All
capitalized terms used herein and not defined herein shall have the meaning
ascribed to such terms in the Credit Agreement.

     Borrower has requested that Merrill Lynch agree that, in respect of the
fiscal quarters ending December 31, 2006 and March 31, 2007, the covenants in
Section 6.1 of the Credit Agreement (Revenue/Invoiced Products) shall not be
applicable to the Borrowers (it being understood that any failure to comply
with such covenants for such quarters shall not cause or result in any Default
or Event of Default) (the “Consent Item”).

     Borrower represents and warrants to Merrill Lynch that: (a) after giving
effect to this Letter Agreement, no Default or Event of Default has occurred
and is continuing, and (b) all of the terms and conditions of the Credit
Agreement and other Financing Documents are hereby ratified and confirmed and
continue unchanged and in full force and effect. Borrower hereby confirms and
agrees that all security interests and liens granted to Merrill Lynch on behalf
of Lenders continue to be perfected, first priority liens and remain in full
force and effect and shall continue to secure the Obligations. All Collateral
remains free and clear of any liens other than liens in favor of Merrill Lynch
or otherwise permitted under the Credit Agreement.

     In reliance upon Borrower’s confirmation of the above representations and
warranties and upon Borrower’s delivery of a fully executed original of this
letter agreement, Merrill Lynch hereby consents to the Consent Item. Such
consent shall in no way constitute a waiver or consent of any Default or Event
of Default which may occur or have occurred but which is not specifically
referenced as a “Consent Item” nor shall it obligate Merrill Lynch to provide
any further waiver or consent of any Default or Event of Default (whether
similar or dissimilar, including any subsequent Events of Default resulting
from a failure to comply with Section 6.1 of the Credit Agreement).

 

 

     Please acknowledge your receipt of this letter and your agreement with the
terms set forth herein by signing below where indicated, and forward an
execution copy to me via facsimile and overnight courier.

     This letter may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when taken together, shall
constitute but one the same agreement. Delivery of an executed counterpart of
this letter by facsimile shall be equally as effective as delivery of an
original executed counterpart by this letter.

	 	Very truly yours,

	 	MERRILL LYNCH CAPITAL, a division of Merrill

Lynch Business Financial Services Inc., as

Administrative Agent and a Lender

	 	 	 	 
	 	 	By:
	/s/ Maurice Amsellem     
	 	 	Name:
	Maurice Amsellem           
	 	 	
Title:
	Vice President                   

Acknowledged and Agreed:

ADVANCIS PHARMACEUTICAL CORPORATION

	 	 	 	 	 
	By:

Name:

Title:	 	
/s/ Robert C. Low

Robert C. Low

Vice President, Finance and

Chief Financial Officer
	 	 

2exv10w2

 

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.

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