EXHIBIT 10.11
ADVANCIS PHARMACEUTICAL CORPORATION
NOTE ISSUANCE AGREEMENT
THIS NOTE ISSUANCE AGREEMENT, dated March _28, 2003, (this
"AGREEMENT") is entered into by and among Advancis Pharmaceutical Corporation, a
Delaware corporation (the "CORPORATION"), Healthcare Ventures VI, L.P., as
Collateral Agent and the persons listed on Schedule 1 attached hereto (the
"LENDERS").
BACKGROUND
The Corporation desires to borrow from the Lenders the amount
of Five Million Dollars ($5,000,000) (the "LOAN"), which will be evidenced by
convertible secured promissory notes in substantially the form of Exhibit A
attached hereto (the "NOTES"). The Lenders are willing to provide the Loan to
the Corporation pursuant to the terms and conditions specifically set forth
hereinafter.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. The Loan.
1.1 Closing. The closing of the Loan (the "CLOSING")
shall take place at the offices of Xxxxxx Xxxxxxxx LLP, 400 Berwyn Park, 000
Xxxxxxx Xxxx, Xxxxxx, Xxxxxxxxxxxx 00000-0000 at 10:00 am., at such place and at
such time and date as is agreed to by the Corporation and the Lenders.
1.2 Notes. At the Closing, the Corporation shall deliver
to each Lender a Note in such Lender's name in the principal amount set forth
opposite such Lender's name on Schedule 1.
1.3 Pari Passu Notes. Lenders and the Corporation
acknowledge and agree that the right of payment of all or any portion of the
outstanding principal amount of each of the Notes and all interest thereon shall
be pari passu in right of payment and in all other respects to all of the other
Notes. In the event a Lender receives payments in excess of its pro rata share
of the Corporation's payments to all of the Lenders, then such Lender shall hold
in trust all such excess payments for the benefit of the other Lenders and shall
pay such amounts held in trust to such other Lenders upon demand by such
Lenders.
SECTION 2. Representations and Warranties of the Corporation to the
Lenders. The Corporation hereby represents and warrants to the Lenders that,
except as set forth in the Schedule of Exceptions attached hereto as Exhibit B
(the "SCHEDULE"):
2.1 Bringdown of Series D Representations and Warranties.
The representations and warranties made by the Corporation in the Series D
Convertible Preferred Stock Purchase Agreement dated as of October 25, 2001
among the Corporation and the investors thereunder (as amended, the "SERIES D
PURCHASE AGREEMENT"), as such representations and warranties are updated and/or
excepted in Section 2.1 of the Schedule, are true and complete as though made on
the date of this Agreement; provided, however, that the Corporation makes no
representation and warranty in this Agreement in regards to Sections 5.3, 5.4,
5.5 and 5.7 of the Series D Purchase Agreement.
2.2 Authorization of this Agreement, the Notes and IP
Security Agreement. The execution, delivery and performance by the Corporation
of this Agreement, the Notes, the IP Security Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all requisite action on the part of the Corporation. Each of this Agreement, the
Notes and the IP Security Agreement has been duly executed and delivered by the
Corporation and constitutes a valid and binding obligation of the Corporation,
enforceable in accordance with its respective terms. The execution, delivery and
performance of this Agreement, the Notes, and the IP Security Agreement and the
compliance with the provisions hereof and thereof by the Corporation, will not:
(a) materially violate any provision of law, statute,
ordinance, rule or regulation or any ruling, writ, injunction, order, judgment
or decree of any court, administrative agency or other governmental body;
(b) conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute (with due notice or lapse
of time, or both) a default (or give rise to any right of termination,
cancellation or acceleration) under (i) any agreement, document, instrument,
contract, understanding, arrangement, note, indenture, mortgage or lease to
which the Corporation is a party or under which the Corporation or any of its
assets is bound or affected, (ii) the Corporation's Certificate of Incorporation
as currently in effect, or (iii) the Corporation's Bylaws as currently in
effect; or
(c) result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Corporation, except as contemplated by this Agreement, the Notes, and the IP
Security Agreement.
2.3 Consents and Approvals. No authorization, consent,
approval or other order of, or declaration to or filing with, any governmental
agency or body (other than filings required to be made under applicable federal
and state securities laws) or any other person, entity or association is
required for: (a) the valid authorization, execution, delivery and performance
by the Corporation of this Agreement, the Notes and the IP Security Agreement;
or (b) the valid authorization, issuance, sale and delivery of the Notes. The
Corporation has obtained all other consents that are necessary to permit the
consummation of the transactions contemplated hereby and thereby.
2.4 Securities Laws. Based in part on the representations
and warranties of the Lenders set forth in Section 3, neither the Corporation
nor anyone acting on its behalf has offered securities of the Corporation for
sale to, or solicited any offers to buy the same from, or sold
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securities of the Corporation to, any person or organization, in any case so as
to subject the Corporation, its promoters, directors and/or officers to any
liability under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
the Securities and Exchange Act of 1934, as amended, or any state securities or
"blue sky" law (collectively, the "SECURITIES LAWS"). The offer, grant, sale
and/or issuance of the Notes and the securities into which the Notes may be
converted were not, are not, or, as the case may be, will not be, in violation
of the Securities Laws when offered, sold and issued in accordance with the
operative documents relating to their issuance.
SECTION 3. Representations and Warranties of the Lenders to the
Corporation. Each of the Lenders, severally, but not jointly, as to and on
behalf of itself only, represents and warrants to the Corporation as follows:
(a) It is acquiring the Note and, in the event it
should acquire other securities of the Corporation upon conversion of the Note,
it will be acquiring such securities, for its own account, for investment and
not with a view to the distribution thereof within the meaning of the Securities
Act.
(b) It is an "accredited investor" as such term is
defined in Rule 501(a) promulgated under the Securities Act.
(c) It agrees that the Corporation may place a legend
on the Notes that the Notes have not been registered under the Securities Act,
and, therefore, cannot be offered, sold or transferred unless they are
registered under the Securities Act or an exemption from such registration is
available.
(d) The execution, delivery and performance by it of
this Agreement have been duly authorized by all requisite action of it.
(e) It further understands that the exemptions from
registration afforded by Rule 144 and Rule 144A (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.
(f) It has such knowledge and experience in business
and financial matters and with respect to investments in securities of
privately-held companies so as to enable it to understand and evaluate the risks
of the Lender's investment in the Notes and form an investment decision with
respect thereto. It has been afforded the opportunity during the course of
negotiating the transactions contemplated by this Agreement to ask questions of,
and to secure such information from, the Corporation and its officers and
directors as it deems necessary to evaluate the merits of entering into such
transactions.
(g) If it is a natural person, it has full power and
authority to enter into this Agreement. If it is not a natural person, it is
duly organized and validly existing and has the power and authority to enter
into this Agreement. Any Lender which is a corporation, partnership or trust
represents that it has not been organized, reorganized or recapitalized
specifically for the purpose of acquiring the securities of the Corporation.
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(h) It has adequate net worth and means of providing
for its current needs and personal contingencies to sustain a complete loss of
its investment in the Corporation.
3.2 Voting Rights. As long as any of the Notes remain
outstanding, the Corporation shall not, without the affirmative approval of the
Lenders that have lent a majority of the then outstanding principal under the
Notes (the "MAJORITY LENDERS"), given by written consent in lieu of a meeting or
by vote at a meeting called for such purpose:
(a) sell, abandon, transfer, lease or otherwise
dispose of all or substantially all of its properties or assets other than in
the ordinary course of its business;
(b) purchase, lease or otherwise acquire all or
substantially all of the assets of another entity;
(c) except as otherwise required by the
Corporation's Fourth Restated Certificate of Incorporation, declare or pay any
dividend or make any distribution with respect to shares of its capital stock
(whether in cash, shares of capital stock or other securities or property);
(d) except as otherwise required by the
Corporation's Fourth Restated Certificate of Incorporation or in any agreement
approved by the Corporation's Board of Directors, with a director, officer,
employee, consultant or independent contractor of or to the Corporation
providing for the repurchase of any of its capital stock owned by such director,
officer, employee, consultant or independent contractor at the option of the
Corporation, provided that such agreements are either: (A) set forth on Schedule
3.2 to the Series D Purchase Agreement, or (B) entered into pursuant to any
stock option plan which has been adopted by the Corporation and approved by the
Board of Directors and by the holders of at least a majority of the combined
voting power of the Corporation's Preferred Stock, par value $.01 per share
("PREFERRED STOCK") then outstanding (including any outstanding shares of the
Corporation's Common Stock, par value $.01 per share ("COMMON STOCK") issued
upon conversion thereof), and the form of option agreement under such stock
option satisfactory in form and in substance, except for immaterial changes
thereto made from time to time by officers of the Corporation, to the Board of
Directors and by the holders of at least a majority of the combined voting power
of the Preferred Stock then outstanding (including any outstanding shares of
Common Stock issued upon conversion thereof), make any payment on account of the
purchase, redemption or other retirement of any share of capital stock of the
Corporation, or distribute to the holders of the Common Stock shares of the
Corporation's capital stock (other than Common Stock) or other securities of
other entities, evidences of indebtedness issued by the Corporation or other
entities, or other assets or options or rights (excluding options to purchase
and rights to subscribe for shares of Common Stock or the securities of the
Corporation convertible into or exchangeable for shares of Common Stock), as
then in effect;
(e) merge or consolidate with or into, or permit
any subsidiary to merge or consolidate with or into, any other corporation,
corporations or other entity or entities;
(f) voluntarily dissolve, liquidate or wind-up
or carry out any partial liquidation or distribution or transaction in the
nature of a partial liquidation or distribution;
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(g) in any manner alter or change the
designations, powers, preferences, rights, qualifications, limitations or
restrictions of the Corporation's outstanding Preferred Stock;
(h) take any action to cause any amendment,
alteration or repeal of any of the provisions of the Corporation's Fourth
Restated Certificate of Incorporation or the Bylaws of the Corporation as then
in effect ("BYLAWS");
(i) except for the issuance of capital stock or
other securities constituting shares of Excluded Stock (as defined in Section
A.7(d)(ii) of the Corporation's Fourth Restated Certificate of Incorporation),
authorize, designate, create, issue or agree to issue any equity or debt
security of the Corporation or any security, right, option or warrant
convertible into, or exercisable or exchangeable for, shares of the capital
stock of the Corporation or any capitalized lease with an equity feature with
respect to the capital stock of the Corporation;
(j) amend, modify or terminate any stock option
plan of the Corporation or any stock option agreement or restricted stock
purchase agreement entered into between the Corporation and its employees,
directors or consultants, except for immaterial changes made thereto from time
to time by officers of the Corporation;
(k) accelerate the vesting schedule or exercise
date or dates of any such options or in any stock option agreement entered into
between the Corporation and its directors, officers, employees, consultants or
independent contractors, or waive or modify the Corporation's repurchase rights
with respect to any shares of the Corporation's stock issuable pursuant to any
restricted stock purchase agreement entered into between the Corporation and its
directors, officers, employees, consultants or independent contractors.
(l) grant any stock options with an exercise
price per share of less than the fair market value of such share on the date of
such grant (as determined by the Board of Directors) or issue or sell capital
stock of the Corporation pursuant to restricted stock awards or restricted stock
purchase agreements at a price per share less than the fair market value of such
share on the date of such issuance or sale (as determined by the Board of
Directors);
(m) increase the number of directors of which
the Board of Directors consists;
(n) enter into any financing arrangement in
excess of $500,000 including, without limitation, loan agreements, credit lines,
letters of credit or capitalized leases;
(o) enter into any contract, agreement or
license or series of related contracts, agreements or licenses in excess of
$750,000 whether in a single disbursement or a series of related disbursements;
(p) enter into any transaction or agreement with
any officer or director of the Corporation or with any corporation, partnership
or other organization (an "OUTSIDE ENTITY") in which one or more of the officers
or directors of the Corporation is an officer or director of, or has a financial
interest in, such Outside Entity;
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(q) enter into or become subject to any
agreement which restricts or purports to restrict the Corporation from engaging
or otherwise competing in any material aspect of its business other than
pursuant to a duly authorized license agreement of the Corporation's
intellectual property;
(r) take any action or enter into any other
transaction outside the ordinary course of business or effect any material
change in the conduct or operation of the Corporation's business;
(s) establish or approve of any Corporation
policies delegating or delineating the authority of any officer or employee to
act on behalf of the Corporation outside of the ordinary course of business;
(t) appoint, terminate or remove the Chief
Executive Officer or President or the Chief Financial Officer, Treasurer or Vice
President-Finance without the approval of the Board of Directors;
(u) adopt and amend the budgets of the
Corporation and authorize budget variances for expenditures in excess of ten
percent (10%) without the approval of the Board of Directors;
(v) adopt and materially amend the strategic or
business plan of the Corporation without the approval of the Board of Directors;
or
(w) take any action to cause any amendment,
alteration or repeal of any of the provisions of the Bylaws, or the bylaws of
any of its subsidiaries with the exception of ministerial amendments which would
not have any adverse affect on the outstanding Preferred Stock or the Notes.
SECTION 4. Registration Rights. The Corporation shall take, and shall
seek to have its stockholders take, all action necessary to cause the securities
issued upon the conversion of the Notes to be Restricted Shares, as that term is
defined in the Third Amended and Restated Stockholders' Agreement dated as of
October 25, 2001, as it may from time to time be amended, among the Corporation
and the Investors thereunder (the "STOCKHOLDERS' AGREEMENT"), such that a Lender
holding such securities shall be able to avail itself of the registration rights
of Section 3 of the Stockholders' Agreement with respect to such securities.
SECTION 5. Publicity. The Corporation shall not make any public
statement relating to this Agreement, the Notes, the IP Security Agreement or
the transactions contemplated hereby and thereby, whether in any advertisement,
news release or professional or trade publication, or in any other manner,
unless (a) otherwise required by law, (b) such statement is made to potential
equity investors in connection with discussions among the Corporation and such
potential equity investors about an equity investment in the Corporation, or (c)
such statement is made with HealthCare Ventures VI, L.P.'s prior written
consent.
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SECTION 6. Collateral Agent.
6.1 Definitions. As used in this Section 6, the following
terms shall have the meanings assigned to them in this Section 6.1 or in the
provisions of this Agreement referred to below:
(a) AGGREGATE PRINCIPAL INDEBTEDNESS: As of any
date of determination, the aggregate principal amount of the Notes outstanding.
(b) COLLATERAL: This term shall have the meaning
given it in the Notes.
(c) COLLATERAL AGENT: HealthCare Ventures VI,
L.P. in its capacity as collateral agent hereunder and under the Notes and the
IP Security Agreement or any Successor Collateral Agent appointed pursuant to
Section 6.3(g) hereof.
(d) EVENT OF DEFAULT: This term shall have the
meaning given it in the Notes.
(e) LIABILITIES: This term shall have the
meaning given to it in the Notes.
(f) NOTICE DATE: The date on which the
Collateral Agent first receives instructions from the Majority Lenders to
enforce rights under the Notes or the IP Security Agreement.
(g) PERSON: Any individual, partnership,
corporation, trust, joint venture or unincorporated organization, including any
government or agency or political subdivision thereof.
(h) SECURITY DOCUMENT: Any or all of (i) the IP
Security Agreement, (ii) the Notes, (iii) the ancillary documents relating to
any of the foregoing including but not limited to financing statements and stock
powers and (iv) all extensions, renewals, amendments, substitutions or
replacements to any of the foregoing.
(i) STATEMENT OF EVENT OF DEFAULT: A written
statement delivered by any Lender to the Collateral Agent referring to the Note
and/or the IP Security Agreement, stating that an Event of Default has occurred
thereunder.
(j) SUCCESSOR COLLATERAL AGENT: This term shall
have the meaning given it in Section 6.3(g) hereof.
6.2 Appointment and Authorization of Collateral Agent.
(a) Appointment of Authority. Each Lender hereby
designates and appoints the Collateral Agent to act as collateral agent for such
Lender under this Agreement and the Security Documents, and each Lender hereby
authorizes the Collateral Agent, as Collateral Agent acting on behalf of and for
the benefit of such Lender, to execute and enter into any of the Security
Documents as appropriate on such Lender's behalf and to take such action under
the
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provisions of the Security Documents and all other instruments relating thereto
and to exercise such powers and perform such duties as are expressly delegated
to the Collateral Agent by the terms hereof and thereof, together with such
other powers as are reasonably incidental thereto.
(b) Limited Agency. Notwithstanding any
provision to the contrary set forth elsewhere in this Agreement or the Security
Documents, the Collateral Agent shall not have any duties or responsibilities in
its capacity as Collateral Agent except those expressly set forth herein or
therein or any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties or liabilities shall be read into this
Agreement or any Security Document or otherwise exist against the Collateral
Agent.
6.3 Agency Provisions.
(a) Delegation of Duties. The Collateral Agent
may exercise its powers and execute any of its duties under this Agreement and
the Security Documents by or through employees, agents or attorneys-in-fact and
shall be entitled to take and to rely on advice of counsel concerning all
matters pertaining to such powers and duties. The Collateral Agent shall not be
responsible for the negligence or misconduct of any employees, agents or
attorneys-in-fact selected by it with reasonable care. The Collateral Agent may
utilize the services of such Persons as the Collateral Agent in its sole
discretion may determine, and all reasonable fees and expenses of such Persons
shall be borne by the Corporation pursuant to the terms of the Security
Documents and this Agreement.
(b) Exculpatory Provisions. The Collateral Agent
and each of its employees, agents, attorneys-in-fact and affiliates shall not be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any Security Document
(except for its personal liability for its own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Corporation or
any officer thereof contained in any Security Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by, the Collateral Agent under or in connection with this Agreement or any
Security Document, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of the Security Documents or for any failure of
the Corporation to perform its Liabilities thereunder. The Collateral Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, the Security Documents.
(c) Reliance by Collateral Agent. The Collateral
Agent shall be entitled to rely, and shall be fully protected in relying, upon
(i) any writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and (ii) advice
and statements of legal counsel (including, without limitation, counsel to the
Corporation), independent accountants and other experts selected by the
Collateral Agent with reasonable care. The Collateral Agent shall be fully
justified in failing or refusing to take action under this Section 6 or the
Security Documents unless it shall first receive such advice or concurrence of
the Majority Lenders as is contemplated by Section 6.4 hereof and it shall first
be indemnified to its
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reasonable satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking, continuing to take or
refraining from taking any such action. The Collateral Agent, in all cases,
shall be fully protected in acting, or in refraining from acting, under this
Section 6 and the Security Documents in accordance with the provisions of
Section 6.4 hereof and any action taken or failure to act pursuant thereto shall
be binding upon all the Lenders.
(d) Notice of Default. The Collateral Agent
shall not be deemed to have knowledge or notice of the occurrence of any Event
of Default unless it has received from a Lender a Statement of Event of Default.
The Collateral Agent may rely on a Statement of Event of Default without further
inquiry. When the Collateral Agent receives a Statement of Event of Default, the
Collateral Agent promptly (but in any event within three (3) business days of
receipt of such notice) shall give notice thereof to the Lenders and shall
schedule a meeting (which may be telephonic) of all Lenders to be held within
five (5) business days of the sending of such notice at a mutually convenient
time and place. At such meeting the Lenders shall consult with one another in an
attempt to determine a mutually acceptable course of conduct regarding the
Corporation and the collection of the outstanding Liabilities. The Collateral
Agent shall take such action with respect to such Event of Default as shall be
directed by the Majority Lenders in accordance with Section 6.4 hereof, provided
that unless and until the Collateral Agent shall have received such directions,
the Collateral Agent may (but shall not be obligated to) take such action under
Section 6.4(c) hereof with respect to such Event of Default as it shall deem
advisable in the furtherance of the interests of the Lenders.
(e) Non-Reliance on Collateral Agent and Other
Lenders. Each Lender expressly acknowledges that neither the Collateral Agent
nor any of its employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to such Lender and that no act by the Collateral
Agent hereinafter taken, including any review of the affairs of the Corporation,
shall be deemed to constitute any representation or warranty by the Collateral
Agent to any Lender. Each Lender represents to the Collateral Agent that it has,
independently and without reliance upon the Collateral Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and credit-worthiness of the
Corporation and made its own decision to lend monies to the Corporation and
acquire its Note and enter into such agreements. Each Lender also represents
that it will, independently and without reliance upon the Collateral Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking (or directing the Collateral Agent to take
or not take) action under the Security Documents and this Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Corporation. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Collateral Agent hereunder, the Collateral
Agent shall not have any duty or responsibility to provide the Lenders with any
credit or other information concerning the business, operations, property,
financial and other condition or creditworthiness of the Corporation which may
come into the possession of the Collateral Agent or any of its employees,
agents, attorneys-in-fact or affiliates.
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(f) Indemnification. The Lenders agree to
indemnify (promptly upon request) the Collateral Agent in its capacity as such
(to the extent not reimbursed by the Corporation and without limiting the
obligation of the Corporation to do so), ratably according to their respective
share of the Aggregate Principal Indebtedness from and against any and all
liabilities, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the
Liabilities) be imposed on, incurred by or asserted against the Collateral Agent
in any way relating to or arising out of actions or omissions of the Collateral
Agent specifically required or permitted by this Section 6 or by written
instructions of the Majority Lenders or all of the Lenders delivered pursuant
thereto, provided that no Lender shall be liable for the payment of any portion
of such liabilities, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Collateral Agent's gross
negligence or willful misconduct. The agreements in this subsection shall
survive the payment of the Liabilities.
(g) Successor Collateral Agent. The Collateral
Agent may resign as Collateral Agent hereunder upon ninety (90) days' notice to
the Lenders and the Corporation and may be removed at any time, with or without
cause, by the Majority Lenders upon ninety (90) days' notice to the Lenders, the
Corporation, and the Collateral Agent. If at any time the Collateral Agent shall
resign or be removed as Collateral Agent under this Section 6, then the Majority
Lenders shall appoint a successor agent for the Lenders, whereupon such
successor agent shall, following written notice to the Corporation, succeed to
the rights, powers and duties of the Collateral Agent; provided, however, that
any successor agent so appointed shall be authorized under the laws of the
jurisdiction of its incorporation or organization to assume the functions of an
agent (any successor agent meeting each of the foregoing requirements, a
"SUCCESSOR COLLATERAL AGENT"). If the appointment of such successor shall not
have become effective (as hereafter provided) within such ninety-day period
after the Collateral Agent's resignation or upon removal of the Collateral
Agent, then (i) the Collateral Agent may assign the security interests granted
pursuant to the Security Documents and its duties hereunder and under the
Security Documents to the Lenders, as their interests may appear, and in such
case all references herein to "Collateral Agent" shall be deemed to refer to
"Majority Lenders" and (ii) the Lenders may petition a court of competent
jurisdiction for the appointment of a successor Collateral Agent and such court
shall, after such notice as it may deem proper, appoint a successor Collateral
Agent meeting the qualifications specified in this Section 6.3(g). The Lenders
hereby consent to such petition and appointment so long as such criteria are
met. The term "Collateral Agent" shall mean the successor agent effective upon
its appointment and upon its acceptance of such appointment, and the former
Collateral Agent's rights, powers and duties as Collateral Agent shall be
terminated, without any other or further act or deed on the part of such former
Collateral Agent or any of the parties to this Section 6 or the Security
Documents, and the Successor Collateral Agent shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Collateral
Agent. The resigning or removed Collateral Agent agrees that it shall take all
actions and execute all documents which may be reasonably required by the
Lenders and the Successor Collateral Agent to give effect to its replacement as
the Collateral Agent hereunder and shall be fully indemnified under the terms of
this Section 6 in so doing. After the Collateral Agent's resignation or removal
hereunder as Collateral Agent, the provisions of this Section 6.3 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Collateral Agent under this Section 6.
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6.4 Actions by Collateral Agent.
(a) Duties; Liabilities. The only duties and
liabilities which the Collateral Agent shall have are those set forth in this
Agreement and in the Security Documents.
(b) Requesting Instructions. The Collateral
Agent may at any time request directions from the Lenders as to any course of
action or other matter relating to the performance of its duties under this
Agreement and the Security Documents, and the Lenders shall promptly comply with
such request. Directions given to the Collateral Agent by the Majority Lenders
shall be binding on each of the Lenders. The Collateral Agent, in taking action
pursuant to this Section 6.4, shall be entitled to rely on instructions given by
the Majority Lenders.
(c) Emergency Actions. If the Collateral Agent
requests instructions from the Lenders as to any action to be taken with regard
to an Event of Default and if the Lenders do not respond to such request within
two (2) days after transmittal of such request by the Collateral Agent, the
Collateral Agent shall be authorized to take such actions with regard to such
Event of Default which the Collateral Agent, in good faith, believes to be
reasonably required to promote and protect the interests of the Lenders and to
maximize both the value of the Collateral and the present value of the recovery
by each of the Lenders on the Liabilities; provided, however, that once
instructions have been received from the Majority Lenders which comply with
Section 6.4(h) hereof, the actions of the Collateral Agent shall be governed
thereby and the Collateral Agent shall not take any further action which would
be contrary thereto regardless of whether compliance with such instructions by
the Collateral Agent would cause any loss to the Lenders or to the value of the
Collateral because of any actions in progress which were undertaken by the
Collateral Agent prior to receiving such instructions.
(d) Changes to Security Documents. Any term of
the Security Documents may be amended, and the performance or observance by the
parties to a Security Document of any term of such Security Document may be
waived (either generally or in a particular instance and either retroactively or
prospectively) by the Collateral Agent only upon the written consent of the
Majority Lenders. In any case, no amendment, waiver, or consent shall, unless in
writing and signed by the Collateral Agent, affect the rights or duties of the
Collateral Agent under such Security Documents. This provision shall not
restrict the right of the Lenders to amend documents other than the Security
Documents as long as such amendments do not change the terms of the Security
Documents.
(e) Release of Collateral. The Collateral Agent
shall not release any Collateral without the written consent of all the Lenders,
except releases of Collateral as may be expressly permitted by the Notes or the
IP Security Agreement.
(f) Expenses of Release and Reinstatement. The
Corporation shall pay all costs and expenses of the Collateral Agent and the
Lenders incurred in connection with any release of Collateral, including, but
not limited to, all costs and fees of all lien searches deemed necessary by the
Collateral Agent and all costs and expenses relating to financing statement
filings and terminations and document review and preparation, including but not
-11-
limited to reasonable fees and expenses of counsel for the Collateral Agent
relating to any of the foregoing.
(g) Administrative Actions. The Collateral Agent
shall have the right to take such actions, or omit to take such actions,
hereunder and under the Security Documents not inconsistent with the
instructions of the Majority Lenders, or the terms of this Agreement, including
without limitation actions the Collateral Agent deems necessary or appropriate
to perfect or continue the perfection of the liens on the Collateral for the
benefit of the Lenders or to protect or insure the Collateral. Except as
provided above and as otherwise provided pursuant to applicable law, the
Collateral Agent shall have no duty as to the collection or protection of the
Collateral or any income thereon, nor as to the preservation of rights against
prior parties, nor as to the preservation of rights pertaining to the Collateral
beyond the safe custody of any Collateral in the Collateral Agent's possession.
(h) Exercise of Remedies. Except as otherwise
provided in Section 6.4(c), the Collateral Agent shall only be authorized to
take such actions under the Security Documents and to enforce or prepare to
enforce the remedies available under such Security Documents as are approved in
a written notice by the Majority Lenders. In furtherance of the foregoing, the
Collateral Agent agrees to make such demands and give such notices under the
Security Documents as may be requested by the Majority Lenders, and to take such
action to enforce the Security Documents and to foreclose upon, collect and
dispose of the Collateral or any portion thereof as may be directed by the
Majority Lenders; provided, however, that (i) the Collateral Agent shall not be
required to take any action that is in its opinion contrary to law or the terms
of any Note, the Security Documents or this Section 6 and (ii) the Collateral
Agent shall not be required to take any action unless, upon its request, it is
indemnified in accordance with the provisions of Section 6.3(f) hereof.
(i) Application of Proceeds. All amounts owing
with respect to the Liabilities shall be secured pro rata by the Collateral
without distinction as to whether some Liabilities are then due and payable and
other Liabilities are not then due and payable. Upon any realization upon the
Collateral by the Collateral Agent, the Lenders agree that the proceeds thereof
shall be applied (i) first, to the payment of expenses incurred by the
Collateral Agent with respect to maintenance and protection of the Collateral
and of expenses incurred with respect to the sale of or realization upon any of
the Collateral or the perfection, enforcement or protection of the rights of the
Lenders (including reasonable attorneys' fees and expenses of every kind,
including, without limitation, reasonable allocated costs of staff counsel);
(ii) second, equally and ratably to all amounts of interest, expenses and fees
constituting a part of the Liabilities, according to the aggregate amounts
thereof owing to each Lender on the Notice Date; (iii) third, equally and
ratably to all amounts of principal constituting a part of the Liabilities,
according to the aggregate amounts thereof owing to each Lender on the Notice
Date; (iv) fourth, equally and ratably to other amounts then due to the Lenders
under the Notes (including but not limited to all fees, expenses and premiums)
with amounts prorated, if necessary, based on the aggregate amounts thereof then
owing to each Lender; and (v) fifth, the balance, if any, shall be returned to
the Corporation or such other Persons as are entitled thereto.
(j) Retention and Investment of Proceeds.
Proceeds which, due to their nature, due to a restraining order or otherwise are
not permitted to be applied as set forth
-12-
above, or due to the Collateral Agent determining it to be impractical to divide
and apply such proceeds to the payment of the Liabilities, shall be held by the
Collateral Agent or, as the case may be, the Lender receiving such proceeds as
agent for the Lenders until such proceeds (i) are converted into cash, (ii) are
permitted to be applied or (iii) become practical to divide at which time such
proceeds shall be applied in accordance with the terms of this Agreement.
6.5 Other Collateral, Duty to Notify, Cooperation,
Marshalling.
(a) Additional Collateral. The Lenders agree
that all of the provisions of this Section 6 shall apply to any and all
properties, assets and rights of the Corporation in which the Collateral Agent,
at any time, acquires a security interest or lien pursuant to the Security
Documents.
(b) Notification of Default or Event of Default.
Upon the occurrence of any Event of Default, the Corporation or any Lender with
knowledge thereof shall promptly notify the Collateral Agent thereof, such
notice to be given in accordance with Section 6.3(d) and Section 12.2 hereof.
(c) Cooperation; Accountings. To the extent that
the exercise of the rights, powers and remedies of the Collateral Agent in
accordance with this Agreement requires that any Lender take (or omit to take)
any action, such Lender shall take (or omit to take) such action and cooperate
with the Collateral Agent to ensure that the rights, powers and remedies of all
Lenders are exercised in full. Each of the Lenders will, upon the reasonable
request of another Lender, from time to time execute and deliver or cause to be
executed and delivered such further instruments and do and cause to be done (or
refrain from doing) such further acts as may be necessary or proper to carry out
more effectively the provisions of this Section 6.
(d) Marshalling. The Collateral Agent shall not
be required to marshal any present or future security for (including, without
limitation, the Collateral), or guarantees of, the Liabilities or any of them,
or to resort to such security or guaranties in any particular order; and all of
each of such Person's rights in respect of such security and guaranties shall be
cumulative and in addition to all other rights, however existing or arising. To
the extent that they lawfully may, the Lenders hereby agree that they will not
invoke any law relating to the marshalling of collateral which might cause delay
in or impede the enforcement of the Lenders' rights under the Security Documents
or under any other instrument evidencing any of the Liabilities or under which
any of the Liabilities is outstanding or by which any of the Liabilities is
secured or guaranteed, and to the extent that they lawfully may, the Lenders
hereby irrevocably waive the benefits of all such laws.
(e) No Other Collateral. No Lender shall take
any security interest in the personal property or liens upon the real property
of the Corporation other than security interests and liens which are governed by
the terms of this Section 6 and held in the name of the Collateral Agent for the
benefit of all Lenders.
(f) Purchase of Collateral. Any Lender may
purchase all or any part of the Collateral at any public or private sale of such
Collateral and may make payment on account thereof by using any claim then due
and payable to such Lender from the Persons which
-13-
granted a security interest in such Collateral as a credit against the purchase
price only to the extent approved by the Majority Lenders. Such Lender shall
comply with Article 9 of the UCC of the relevant jurisdiction as an Lender,
notwithstanding that the Collateral Agent holds the security interest pursuant
to this Agreement. Each of the Lenders shall cooperate with each other Lender
and with the Collateral Agent in order to obtain the maximum sale price
reasonably possible upon any foreclosure or other sale of all or any part of the
Collateral. In addition to the foregoing, all sales, transfers and other
dispositions of any Collateral shall be accomplished in a commercially
reasonable manner.
6.6 Corporation's Dealings with Collateral Agent. In all of
its dealings with the Collateral Agent, the Corporation shall be entitled to
rely on the acts of the Collateral Agent as being the authorized acts of the
Lenders and the Collateral Agent as being authorized and empowered to take all
such action or failure to take such action, as the case may be, provided that
the Corporation has no knowledge to the contrary.
SECTION 7. Expenses and Fees. The Corporation shall pay, and hold
HealthCare Ventures VI, L.P. harmless against all liability for the payment of,
all reasonable costs and other reasonable expenses incurred by HealthCare
Ventures VI, L.P. in connection with the Corporation's performance of and
compliance with all agreements, instruments and conditions contained herein or
contemplated hereby on its part to be performed or complied with. The
Corporation agrees to pay all reasonable costs, expenses and transfer taxes
incurred by HealthCare Ventures VI, L.P., in connection with, arising out of, or
incidental to the discussion, evaluation, negotiation, preparation,
documentation, execution, delivery, filing, administration, modification,
amendment and enforcement of this Agreement, the IP Security Agreement, the
Notes and any other documents to be delivered under this Agreement, including
the fees and out-of-pocket expenses of counsel for HealthCare Ventures VI, L.P.
with respect thereto and with respect to advising the Lenders as to their rights
and responsibilities under this Agreement, the IP Security Agreement, the Notes
and the other Security Documents. The Corporation further agrees that it will
pay, and hold each of the Lenders harmless from, any and all liability with
respect to any stamp or similar taxes which may be determined to be payable in
connection with the execution and delivery of this Agreement or any
modification, amendment or alteration of the terms or provisions of this
Agreement and that it will similarly pay, and hold each of the Lenders harmless
from, all issue taxes in respect of the issuance of the Notes and/or the
securities into which the Notes may be converted to each of the Lenders;
provided that the Corporation shall have no obligation to pay for any income or
similar taxes incurred by the Lenders in connection with the issuance of the
Notes and/or the securities into which the Notes may be converted.
SECTION 8. Brokers or Finders. The Corporation represents and warrants
to each of the Lenders, and each of the Lenders, as to itself, represents and
warrants to the Corporation, that no person or entity has or will have, as a
result of the Loan, the issuance of the Notes or the securities into which the
Note may be converted, any right, interest or valid claim against or upon the
Corporation or the Lenders for any commission, fee or other compensation as a
finder or broker because of any act or omission by the Corporation or the
Lenders or by any agent of the Corporation or the Lenders.
-14-
SECTION 9. Indemnification.
9.1 The Corporation, on the one hand, and the Lenders, on the
other hand (for the purposes of this Section 9, each of the Corporation and the
group of Lenders is a "PARTY") (each, an "INDEMNIFYING PARTY"), shall indemnify,
defend and hold the other party and their respective officers, directors,
agents, employees, subsidiaries, partners, members and controlling persons
(each, an "INDEMNIFIED PARTY") harmless against any and all liabilities, loss,
cost or damage, together with all reasonable costs and expenses related thereto
including legal and accounting fees and expenses (collectively, "LOSSES"),
arising from, relating to, or connected with the untruth, inaccuracy or breach
of any material statements, representations, warranties or covenants by such
party contained herein, including, but not limited to, all statements,
representations, warranties or covenants concerning environmental matters of
such party.
9.2 The Corporation shall indemnify, defend and hold each
Indemnified Party harmless against any and all Losses arising from, relating to
or connected with any material claims, actions, suits or arbitrations relating
to any Indemnified Party's role in connection with the Corporation as a Lender,
stockholder, director or otherwise.
SECTION 10. Remedies. In case any one or more of the representations,
warranties, covenants and/or agreements set forth in this Agreement shall have
been breached by any party hereto, the party or parties entitled to the benefit
of such representations, warranties, covenants or agreements may proceed to
protect and enforce their rights either by suit in equity and/or action at law,
including, but not limited to, an action for damages as a result of any such
breach and/or an action for specific performance of any such covenant or
agreement contained in this Agreement, in addition to, and not to the exclusion
of, any other remedy. The rights, powers and remedies of the parties under this
Agreement are cumulative and not exclusive of any other right, power or remedy
which such parties may have under any other agreement or law. No single or
partial assertion or exercise of any right, power or remedy of a party hereunder
shall preclude any other or further assertion or exercise thereof.
SECTION 11. Pre-Conditions to Loan.
11.1 Conditions Precedent of Lenders. The several
obligations of the Lenders to make the Loan to the Corporation are subject to
the satisfaction of the following conditions precedent:
(a) All waivers and consents to be obtained in
connection with the transactions contemplated by or incident to the Loan, this
Agreement, the IP Security Agreement, the issuance of the Notes shall be
satisfactory to each Lender and its counsel, and each Lender and its counsel
shall have received copies (executed or certified, as may be appropriate) of all
documents which such Lender or its counsel may reasonably have requested in
connection with such transactions.
(b) All legal matters incident to the Loan and
the transactions contemplated by the Loan, this Agreement, the IP Security
Agreement, the issuance of the Notes and the securities into which the Notes may
be converted shall be satisfactory to each Lender's counsel, and the Lenders
shall have received from Xxxxx Xxxxxxx LLP, counsel for the
-15-
Corporation, such firm's opinion addressed to the Lenders and dated the date of
the Closing in form and substance satisfactory to Lender's counsel.
(c) All consents, permits, approvals,
qualifications and/or registrations required to be obtained or effected prior to
or upon the Loan and the issuance of the Notes under any applicable securities
or "Blue Sky" laws of any jurisdiction shall have been obtained or effected.
(d) The Corporation shall have delivered to the
Lenders a certificate or certificates, dated the Closing Date, of the Secretary
of the Corporation certifying as to (i) the resolutions of the Corporation's
Board of Directors and stockholders authorizing the execution and delivery of
this Agreement and the IP Security Agreement, the issuance to the Lenders of the
Notes, the execution and delivery of such other documents and instruments as may
be required by this Agreement, the IP Security Agreement or the Notes, and the
consummation of the transactions contemplated hereby, and certifying that such
resolutions were duly adopted and have not been rescinded or amended as of said
date, and (ii) the name and the signature of the officers of the Corporation
authorized to sign, as appropriate, this Agreement and the other documents and
certificates to be delivered pursuant to this Agreement by either the
Corporation or any of its officers.
(e) The Corporation shall have duly executed the
IP Security Agreement in substantially the form attached hereto as Exhibit C.
(f) The Corporation shall have delivered to the
Lenders a certificate or certificates, dated the date of Closing, of the
President of the Corporation certifying that the representations and warranties
made by the Corporation in this Agreement are true, correct and complete as of
the date of such Certificate and that all actions required to be taken by the
Corporation under this Agreement have been taken.
(g) Certain members of the Corporation's Board
of Directors have delivered to Lenders a letter, in form and substance
satisfactory to the Lenders, regarding their roles on the Corporation's Board of
Directors.
11.2 Conditions to Obligations of the Corporation. It
shall be a condition precedent to the obligations of the Corporation hereunder
to be performed at the Closing, as to each Lender severally, but not jointly,
that the representations and warranties contained in Section 3 of this Agreement
of each of the Lenders hereunder shall be true and correct as of the date
hereof.
SECTION 12. Miscellaneous.
12.1 Successors and Assigns. Except as otherwise expressly
provided herein, this Agreement shall bind and inure to the benefit of the
Corporation and each of the Lenders and the respective permitted successors and
assigns of each of the Lenders and the permitted successors and assigns of the
Corporation. Neither this Agreement nor any of the rights or duties of the
Corporation set forth herein shall be assigned by the Corporation, in whole or
in part, without having first received the written consent of the Majority
Lenders. Neither this Agreement nor any of the rights or duties of the Lenders
set forth herein shall be assigned by the
-16-
Lenders, in whole or in part, without having first received the written consent
of the Corporation (other than a transfer to an Affiliate of such Lender or a
Person that is a member of such Lender's Group, as such term is defined in the
Stockholders' Agreement). For purposes of this Section 12.1 only, "AFFILIATE"
means (a) with respect to any Lender who is a natural person, each member of
such Lender's immediate family; and (b) with respect to any Lender that is a
corporation, partnership, trust or limited liability company (collectively, an
"ENTITY"), (i) each Entity that such Lender controls and (ii) each Entity that
is under common control with such Lender.
12.2 Entire Agreement. This Agreement, together with the
other writings referred to herein or delivered pursuant hereto which form a part
hereof, contains the entire agreement among the parties with respect to the
subject matter hereof and amends, restates and supersedes all prior and
contemporaneous arrangements or understandings, whether written or oral, with
respect thereto.
12.3 Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class registered, certified or overnight mail, postage prepaid, or telecopied
with a confirmation copy by regular mail, addressed or telecopied, as the case
may be, to such party at the address or telecopier number, as the case may be,
set forth below or such other address or telecopier number, as the case may be,
as may hereafter be designated in writing by the addressee to the addressor
listing all parties:
(a) if to the Corporation, to:
Advancis Pharmaceutical Corporation
000 Xxxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Ph.D.,
President and CEO
Telecopier: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxx LLP
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esquire
Telecopier: (000) 000-0000
(b) if to Lenders, as set forth on Schedule 1
with a copy to:
Xxxxxx Xxxxxxxx LLP
000 Xxxxxx Xxxx
000 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
-17-
Attention: Xxxxxxx X. Xxxxxx, Esquire
Telecopier: (000) 000-0000
All such notices, requests, consents and other communications shall be deemed to
have been received: (a) in the case of personal delivery, on the date of such
delivery; (b) in the case of mailing, on the third business day following the
date of such mailing; (c) in the case of overnight mail, on the first business
day following the date of such mailing; and (d) in the case of facsimile
transmission, when confirmed by the sender's facsimile machine report.
12.4 Changes. The terms and provisions of this Agreement
may not be modified or amended, or any of the provisions hereof waived,
temporarily or permanently, except pursuant to a writing executed by a duly
authorized representative of the Corporation and the Majority Lenders.
12.5 Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
12.6 Headings. The headings of the various sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be a part of this Agreement.
12.7 Nouns and Pronouns. Whenever the context may require,
any pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
12.8 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
regard for the conflicts or choice of laws rules of any jurisdiction.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have executed this Note
Holders Agreement as of the date first above written.
ADVANCIS PHARMACEUTICAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
Xxxxxx X. Xxxxxx, Ph.D.
President and Chief Executive Officer
COLLATERAL AGENT:
HEALTHCARE VENTURES VI, L.P.
By: HealthCare Partners VI, L.P.,
as General Partner
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------
General Partner
LENDERS:
HEALTHCARE VENTURES VI, L.P.
By: HealthCare Partners VI, L.P.,
as General Partner
By: /s/ Xxxxxxx Xxxxxxxxx
-------------------------------
General Partner
/s/
-----------------------------------
By: _______________________________
Its: ______________________________
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SCHEDULE 1
LENDER ADDRESS PRINCIPAL
LOAN
AMOUNT
--------------------------------------------------------------------------------------------------------------
HealthCare Ventures VI, L.P. 00 Xxxxxx Xxxxxx $4,375,000
Xxxxxxxxx, Xxx Xxxxxx 00000-0000
Attn: Xxxx Xxxxxxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
--------------------------------------------------------------------------------------------------------------
Targeted Entrepreneurial Services 000 Xxxxx 0 $ 25,000
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxx Xxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Targeted Entrepreneurial Services
c/o Xxxxxxx Xxxxx Barney
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx X. Xxxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
--------------------------------------------------------------------------------------------------------------
Rho Management Trust, I c/o Rho Capital Partners, Inc. $ 473,500
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxx
--------------------------------------------------------------------------------------------------------------
Private Equity Holding, L.L.C. c/o Howard Xxxxxx Medical Institute $ 76,000
0000 Xxxxx Xxxxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
--------------------------------------------------------------------------------------------------------------
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--------------------------------------------------------------------------------------------------------------
DC 1998 NFA Trust FBO Xxx Xxxxx c/o IFX Corporation $ 45,500
000 Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxx X. Xxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
--------------------------------------------------------------------------------------------------------------
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EXHIBIT A
FORM OF CONVERTIBLE SECURED PROMISSORY NOTE
-22-
EXHIBIT B
SCHEDULE OF EXCEPTIONS
-23-
EXHIBIT C
IP SECURITY AGREEMENT
-24-
