$5,000,000 Loan Agreement between Government of the State of Sarawak and Sarawak MediChem Pharmaceuticals Inc.
Contract Categories:
Business Finance
›
Loan Agreements
Summary
This agreement is between the Government of the State of Sarawak (the lender) and Sarawak MediChem Pharmaceuticals Inc. (the borrower), a Delaware corporation. The government is lending $5,000,000 to the company to help complete Phase I and partially finance Phase II of Calanolide A clinical trials. The loan carries a 7.75% annual interest rate and must be repaid in a lump sum four years after the first drawdown. The borrower must use the funds only for the specified project, provide regular progress and financial reports, and meet certain conditions to avoid default.
EX-10.7 15 a2155576zex-10_7.txt EXHIBIT 10.7 Exhibit 10.7 $5,000,000 LOAN AGREEMENT BETWEEN THE GOVERNMENT OF THE STATE OF SARAWAK AND SARAWAK MEDICHEM PHARMACEUTICALS INC. (A USD 5,000,000.00 Loan to Sarawak MediChem Pharmaceuticals Inc. to complete Phase 1 and part finance Phase II Calanolide A Clinical Trials). Date: 1 AN AGREEMENT made this 25th day of November 1999 between THE GOVERNMENT OF THE STATE OF SARAWAK (hereinafter called "the Lender" of the one part and SARAWAK MEDICHEM PHARMACEUTICALS INC., a Delaware corporation (hereinafter called the "Borrower") of the other part. WHEREAS at the request of the Borrower, the Lender has agreed to lend to the Borrower a sum of money amounting to US DOLLARS FIVE MILLION ONLY (USD 5,000,000.00) (hereinafter called "the Loan") for the purpose specified in Part I of the Second Schedule (hereinafter called "the Project") upon the terms and conditions hereinafter appearing. NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:- 1. AMOUNT OF LOAN Subject to the terms of this Agreement, the amount of Loan shall be US DOLLARS FIVE MILLION ONLY (USD 5,000,000.00) 2. PURPOSE OF LOAN 2.1 The Loan shall be applied by the Borrower for the purpose stipulated in Part I of the Second Schedule hereto upon the terms and conditions hereinafter contained. 2.2 The proceeds of the Loan shall not be applied for any other purpose without the prior consent in writing of the Lender. [STAMP] 2 3. RELEASE OF LOAN 3.1 The Loan shall be released by the Lender to the Borrower in the manner and at the times stipulated in the First Schedule. 3.2 Every request for any release of the Loan shall be made in the Form prescribed in Part II of the Second Schedule and that Form must be accompanied by an up to date progress report on the Project which shall contain, inter alia, a time schedule for the implementation of the Project and the financial requirement or commitment in respect of each of the stages of implementation thereof. 3.3 Within seven (7) days after the release of any installment of the Loan to the Borrower, the Borrower shall deliver to the Lender a receipt thereof signed by the Borrower or by his duly authorized representative, in the form set out in Part III of the Second Schedule hereto. 3.4 Notwithstanding the provisions of sub-clause 3.1, the Lender shall be entitled to withhold or defer the release of any portion of the Loan or to cancel or withdraw any part of the Loan which has not been released to the Borrower upon the occurrence of any of the events stipulated in clause 5.3 below, or if the Lender is of the opinion that based on the progress report referred to in clause 3.2, the implementation of the Project has not been satisfactory. 3 4. INTEREST 4.1 The Loan is subject to interest of 7.75% per annum compounded annually and calculated on the basis of a 365-day year. 4.2 If the Borrower fails to effect repayment of the Loan punctually on the date when the same becomes due under clause 5.1 hereto, then, without prejudice to the rights of the Lender under clause 5.3, the Borrower shall pay interest at the rate of 7.75% per annum on the sum of loan plus interest overdue from the date such sum is due for payment under the Third Schedule until the date of actual payment thereof and such interest shall be paid by the Borrower to the Lender on demand. 5. REPAYMENT 5.1 The Borrower shall repay the Loan in one lump sum (principal plus interest) on the 4th anniversary date from date of first draw down of the Loan which took place on 19th March, 1999. 5.2. The Borrower shall be entitled, at its option, at the expiration of not less than thirty (30) days' notice given in writing to the Lender to repay either the whole or any part principal amount of the Loan outstanding on the expiration of the said notice. 5.3(1) The Loan shall become due and immediately payable, and the Lender shall be entitled forthwith to take appropriate action to receive the same upon the occurrence of any of the following events, viz:- (a) if the Borrower shall default in the payment of any principal moneys or interest thereon on the date when the same becomes due under the Third Schedule whether formally demanded or not; 4 (b) if the Borrower shall default in the performance or observance of any other covenants, stipulations, conditions or obligations on the part of the Borrower to be performed or observed under this Agreement; (c) if, in the opinion of the Lender, the progress of the Project is unsatisfactory because of gross negligence by Borrower or the same has been abandoned or in danger of being abandoned or has not been satisfactorily completed; (d) if a distress or execution or other process of a Court of competent jurisdiction has been levied upon or issued against the Project or any of the property comprised therein; 5.3(2) When the principal amount of the Loan becomes due and payable and if Borrower defaults as under 5.3(1)(a) as above provided, the Lender may at its option, appoint officers generally to take over the control and management of the Project or the affairs of the Borrower until such time as the Loan shall be repaid in full to the Lender. 6. REPORTS 6.1 Until the full and final settlement of the Loan, the Borrower shall furnish to the State Financial Secretary as from the date of this Agreement and thereafter at quarterly intervals, such reports as may from time to time be required by the State Financial Secretary regarding the financial status or position of the Borrower and the progress of the implementation of the Project, and to notify the Lender of any event, circumstance or occurrence which may have an adverse impact on the financial position of the Borrower. 5 6.2 The Borrower shall promptly inform, the Lender of any condition or circumstance which may interfere or threaten to interfere with the successful implementation of the Project or with the maintenance of the service thereof. 7. UNDERTAKINGS 7.1 The Borrower irrevocably and unconditionally represents that it has taken all the necessary corporate and other actions to authorise the execution, delivery and performance of this agreement. 7.2 The Borrower hereby undertakes to apply the Loan for the purpose as set out in Part I of the Second Schedule hereto and not to apply the same for any other purposes. The breach of this clause shall entitle the Lender to demand for full repayment of the Loan outstanding at the date of such breach. 7.3 The Borrower hereby warrants and undertakes that in addition to the proceeds of the Loan, it has, and will apply, such other funds, facilities, services and other resources that it has available which may be required for the successful implementation of the Project as described in the Second Schedule. 7.4 The Borrower hereby undertakes that the Project Work financed in part or in whole by the Loan shall be completed speedily and successfully with all due diligence, efficiency and in conformity with sound administrative and management practice. 6 7.5 Whenever agents, consultants, and advisers are appointed by the Borrower for the execution of the Project, such appointment shall comply with the provisions of the Statutory Bodies (Accounting and Financial Procedure) Ordinance, 1995. 7.6 The Borrower shall in consultation with the Lender ensure that the tariffs, rentals and revenue for the use, sale or disposal of the products, developed or produced through the successful implementation of the Project are consistent with sound financial and commercial practices and generate sufficient revenue to cover operating expenditure including the costs of maintenance and effects of depreciation. 7.7 The Borrower hereby undertakes to afford or arrange to afford all reasonable opportunities and facilities to authorised representatives of the Lender to inspect such financial records of the Borrower as are required to be kept by the Borrower under the applicable law, and to observe the progress of the Project, and the Borrower shall give such assistance as may be required for such inspection and observation to be carried out. 7.8 This agreement supersedes all previous loan agreement, arrangements, promises, undertaking or understanding between the parties relating to the loan. 8. COSTS AND EXPENSES Each party shall bear and pay its own legal fees incurred in connection with the preparation and execution of this Agreement. Stamp duties, if any, incurred in the stamping of this Agreement shall be borne by the Borrower. 7 12. REMEDIES 12.1 No delay in exercising or omission to exercise any right, power or remedy accruing to the Lender under this Agreement upon any default by the Borrower shall impair any such right, power or remedy or be construed to be a waiver thereof or any acquiescence in such default; nor shall the action of the Lender in respect of any default of the Borrower or any acquiescence in any default affect or impair any right, power or remedy of the Lender in respect of any other or subsequent default. 12.2 The terms and conditions of this Agreement may be amended from time to time subject to the agreement by the Lender by an exchange of letter between the Lender and the Borrower. 9 IN WITNESS WHEREOF THE PARTIES HERETO HAVE SET THEIR HANDS AND SEAL AT THE DAY AND YEAR FIRST ABOVE WRITTEN. Signed by the State Financial ) Secretary for and on behalf of ) the GOVERNMENT OF THE ) /s/ Datuk Wan Ali Tuanku Yubi STATE OF SARAWAK (the Lender) ) ----------------------------- in the presence of: Witness: /s/ Hamim Yusuf - ----------------------------- HAMIM YUSUF PEJABAT SETIAUSAHA KEWANGAN NEGERI PENGARAH PEROLEHAN The Common Seal of ) SARAWAK MEDICHEM ) PHARMACEUTICALS INC. ) (the Borrower) was hereunto ) /s/ Michael T. Flavin affixed in the presence Of ) ---------------------------- MICHAEL T. FLAVIN PRESIDENT Witness: /s/ Jena M. Dwyer - ----------------- 10 FIRST SCHEDULE RELEASE OF LOAN
11 SECOND SCHEDULE PART I THE PROJECT The whole US DOLLARS FIVE MILLION ONLY (USD 5,000,000.00) shall be used to complete Phase 1 Clinical Trials and part finance Calanolide A Clinical Trials Phase II. 12 SECOND SCHEDULE PART III RECEIPT OF LOAN Loan Agreement No. : Date: Amount of Loan : Date of Payment to Borrower : 1 hereby acknowledge receipt of the sum of US Dollars 3,000,000 8/31/99 /s/ Michael T. Flavin - --------------- --------------------------- Date of Receipt Signature of Borrower 14 THIRD SCHEDULE REPAYMENT SCHEDULE 1. Loan Amount : US$5,000,000.00 2. Project : Sarawak MediChem Pharmaceuticals Inc. 3. Loan Period : 48 Months 4. Repayment Date : 19.03.2003 5. Interest Rate : 7.75% per annum (compounded annually and calculated on the basis of a 365-day year) DETAILS OF RELEASE
/s/ Datuk Wan Ali Tuanku Yubi /s/ Michael T. Flavin - ------------------------------ ------------------------- Lender Signature Borrower Signature Datuk Wan Ali Tuanku Yubi MICHAEL T. FLAVIN - ------------------------- ------------------------- Name Name State Financial Secretary PRESIDENT - ------------------------- ------------------------- Designation Designation 25th November 1999 8/31/99 - ------------------------- ------------------------- Date Date 15 LOAN AGREEMENT BETWEEN THE GOVERNMENT OF THE STATE OF SARAWAK AND SARAWAK MEDICHEM PHARMACEUTICALS INC. (A USD2,000,000.00 Loan to Sarawak MediChem Pharmaceuticals Inc. to part finance the costs of Phase I/II Safety & Efficacy Confirmation Study, Phase I/II Drug-Drug Interaction Study and Pilot Phase II Study covering period from October 2000 to March 2001) Date: AN AGREEMENT made this day of 2000 between THE GOVERNMENT OF THE STATE OF SARAWAK (hereinafter called "the Lender") of the one part and SARAWAK MEDICHEM PHARMACEUTICALS INC., a Delaware corporation (hereinafter called the "Borrower") of the other part. WHEREAS the Borrower has requested and the Lender has agreed to lend to the Borrower a sum of money amounting to US DOLLARS TWO MILLION ONLY (USD 2,000,000.00) (hereinafter called "the Loan") for the purpose specified in Part I of the Second Schedule (hereinafter called "the Project") upon the terms and conditions hereinafter appearing. NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:- 1. AMOUNT OF LOAN Subject to the terms of this Agreement, the amount of Loan shall be US DOLLARS TWO MILLION ONLY (USD 2,000,000.00) 2. PURPOSE OF LOAN 2.1 The Loan shall be applied by the Borrower for the purpose stipulated in Part I of the Second Schedule hereto upon the terms and conditions hereinafter contained. 2.2 The proceeds of the Loan shall not be applied for any other purpose without the prior consent in writing of the Lender. 1 3. RELEASE OF LOAN 3.1 The Loan shall be released by the Lender to the Borrower in the manner and at the times stipulated in the First Schedule. 3.2 Every request for any release of the Loan shall be made in the Form prescribed in Part II of the Second Schedule and that Form must be accompanied by an up to date progress report on the Project which shall contain, inter alia, a time schedule for the implementation of the Project and the financial requirement or commitment in respect of each of the stages of implementation thereof. 3.3 Within SEVEN (7) days after the release of any installment of the Loan to the Borrower, the Borrower shall deliver to the Lender a receipt thereof signed by the Borrower or by his duly authorized representative, in the form set out in Part III of the Second Schedule hereto. 3.4 Notwithstanding the provisions of sub-clause 3.1, the Lender shall be entitled to withhold or defer the release of any portion of the Loan or to cancel or withdraw any part of the Loan which has not been released to the Borrower upon the occurrence of any of the events stipulated in clause 5.3 below, or if the Lender is of the opinion that based on the progress report referred to in clause 3.2, the implementation of the Project has not been satisfactory. 2 4. INTEREST 4.1 The Loan is subject to interest of 7.75% per annum compounded annually and calculated on the basis of a 365 - day year. 4.2 If the Borrower fails to effect repayment of the Loan punctually on the date when the same becomes due under clause 5.1 hereto, then, without prejudice to the rights of the Lender under clause 5.3, the Borrower shall pay interest at the rate of 7.75% per annum on the sum of loan plus interest overdue from the date such sum is due for payment under the Third Schedule until the date of actual payment thereof and such interest shall be paid by the Borrower to the Lender on demand. 5. REPAYMENT 5.1 The Borrower shall repay the Loan in one lump sum (principal plus interest) on the 4th anniversary date from date of first draw down of the Loan. 5.2. The Borrower shall be entitled, at its option, at the expiration of not less than THIRTY (30) days' notice given in writing to the Lender to repay either the whole or any part principal amount of the Loan outstanding on the expiration of the said notice. 5.3(1) The Loan shall become due and immediately payable, and the Lender shall be entitled forthwith to take appropriate action 3 to receive the same upon the occurrence of any of the following events, viz:- (a) if the Borrower shall default in the payment of any principal moneys or interest thereon on the date when the same becomes due under the Third Schedule whether formally demanded or not; (b) if the Borrower shall default in the performance or observance of any other covenants, stipulations, conditions or obligations on the part of the Borrower to be performed or observed under this Agreement; (c) if, in the opinion of the Lender, the progress of the Project is unsatisfactory because of gross negligence by the Borrower or the same has been abandoned or in danger of being abandoned or has not been satisfactorily completed; (d) if a distress or execution or other process of a Court of competent jurisdiction has been levied upon or issued against the Project or any of the property comprised therein; 5.3(2) When the principal amount of the Loan becomes due and payable as above provided, the Lender may at its option, appoint officers generally to take over the control and management of the Project or the affairs of the Borrower until such time as the Loan shall be repaid in full to the Lender. 4 6. REPORTS 6.1 Until the full and final settlement of the Loan, the Borrower shall furnish to the State Financial Secretary as from the date of this Agreement and thereafter at quarterly intervals, such reports as may from time to time be required by the State Financial Secretary regarding the financial status or position of the Borrower and the progress of the implementation of the Project, and to notify the Lender of any event, circumstance or occurrence which may have an adverse impact on the financial position of the Borrower. 6.2 The Borrower shall promptly inform, the Lender of any condition or circumstance which may interfere or threaten to interfere with the successful implementation of the Project or with the maintenance of the service thereof. 7. UNDERTAKINGS 7.1 The Borrower irrevocably and unconditionally represents that it has taken all the necessary corporate and other actions to authorise the execution, delivery and performance of this Agreement. 7.2 The Borrower hereby undertakes to apply the Loan for the purpose as set out in Part I of the Second Schedule hereto and not to apply the same for any other purposes. The breach of this clause shall entitle the Lender to demand for full repayment of the Loan outstanding at the date of such breach. 5 7.3 The Borrower hereby warrants and undertakes that in addition to the proceeds of the Loan, it has, and will apply, such other funds, facilities, services and other resources that it has available which may be required for the successful implementation of the Project. 7.4 The Borrower hereby undertakes that the Project financed in part or in whole by the Loan shall be completed speedily and successfully with all due diligence, efficiency and in conformity with sound administrative and management practice. 7.5 Whenever agents, consultants, and advisers are appointed by the Borrower for the execution of the Project, such appointment shall comply with the provisions of the Statutory Bodies (Accounting and Financial Procedure) Ordinance, 1995. 7.6 The Borrower shall in consultation with the Lender ensure that the tariffs, rentals and revenue for the use, sale or disposal of the products, developed or produced through the successful implementation of the Project are consistent with sound financial and commercial practices and generate sufficient revenue to cover operating expenditure including the costs of maintenance and effects of depreciation. 6 7.7 The Borrower hereby undertakes to afford or arrange to afford all reasonable opportunities and facilities to authorised representatives of the Lender to inspect such financial records of the Borrower as are required to be kept by the Borrower under the applicable law, and to observe the progress of the Project, and the Borrower shall give such assistance as may be required for such inspection and observation to be carried out. 7.8 This Agreement supersedes all previous agreements arrangements, promises, undertakings or understandings between the parties relating to the Loan. 8. COSTS AND EXPENSES Each party shall bear and pay its own legal fees incurred in connection with the preparation and execution of this Agreement. Stamp duties, if any, incurred in the stamping of this Agreement shall be borne by the Borrower. 9. ARBITRATION If any dispute shall arise between the Lender and the Borrower as to the meaning or otherwise in connection with any matter arising out of this Agreement, the same shall be referred to a single Arbitrator to be agreed upon between the Lender and Borrower and the provisions of the Arbitration Act, 1952 (Revised - 1972) (Act 93) of Malaysia with such statutory modifications or re-enactments thereof for the time being in force shall apply to such reference. 7 10. NOTICE Any notice to be given to the Lender under this Agreement shall be deemed to be duly given if delivered or addressed by prepaid registered post to the STATE FINANCIAL SECRETARY AT HIS OFFICE IN KUCHING, and any notice to be given to the Borrower shall be deemed to have been duly given if delivered or addressed by prepaid registered post to THE PRESIDENT, SARAWAK MEDICHEM PHARMACEUTICALS INC. 12305 S. NEW AVENUE, SUITE O, LEMONT, IL 60439 USA and a notice so addressed shall be deemed to have been given at the time at which it would have been delivered in the ordinary course of post. 11. TIME Time wherever mentioned herein shall be of the essence of this Agreement. 12. REMEDIES 12.1 No delay in exercising or omission to exercise any right, power or remedy accruing to the Lender under this Agreement upon any default by the Borrower shall impair any such right, power or remedy or be construed to be a waiver thereof or any acquiescence in such default; nor shall the action of the Lender in respect of any default of the Borrower or any acquiescence in any default affect or impair any right, power or remedy of the Lender in respect of any other or subsequent default. 8 12.2 The terms and conditions of this Agreement may be amended from time to time, subject to the agreement of the Lender, by exchange of letters between the Lender and the Borrower. [THE REST OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY] 9 IN WITNESS WHEREOF THE PARTIES HERETO HAVE SET THEIR HANDS AND SEAL THE DAY AND YEAR FIRST ABOVE WRITTEN. Signed by the state Financial ) Secretary for and on behalf of ) THE GOVERNMENT OF THE ) --------------------------- STATE OF SARAWAK (the lender) ) in the presence of: Witness: - ---------------------------- Name - ---------------------------- Address - ---------------------------- Occupation The common seal of ) SARAWAK MEDICHEM ) PHARMACEUTICALS INC. ) /s/ Michael T. Flavin (the Borrower) was hereunto ) --------------------------- affixed in the presence Of ) MICHAEL T. FLAVIN PRESIDENT Witness: /s/ Kristine A. Gryyb - ---------------------------- Name 8112 Middlebury Woodridge, IL 60517 - ---------------------------- Address Admin Assistant - ---------------------------- Occupation 10 FIRST SCHEDULE RELEASE OF LOAN
11 SECOND SCHEDULE PART I THE PROJECT The whole US DOLLARS TWO MILLION ONLY (USD 2,000,000.00) shall be used to part finance the costs of Phase I/II safety & Efficacy confirmation study, Phase I/II Drug-Drug interaction study and Pilot Phase II Study covering period from October 2000 to March 2001. 12 SECOND SCHEDULE PART III RECEIPT OF LOAN Loan Agreement No. : Date: 2/25/2001 Amount of Loan : Date of Payment to Borrower : I hereby acknowledge receipt of the sum of US Dollars 600,000 2/25/2001 /s/ Michael T. Flavin - --------------- ----------------------------- Date of Receipt Signature of Borrower 13 SECOND SCHEDULE PART II REQUEST FOR RELEASE OF LOAN Ref: Date: To: Setiausaha Kewangan Negeri Sarawak Pejabat Setiausaha Kewangan Negeri Tingkat 17-18, Wisma Bapa Malaysia 93502 Petra Jaya, KUCHING Dear Sir, Agreement Number : -------------------------------------------------------- Agreement Date : -------------------------------------------------------- Approved Loan : -------------------------------------------------------- Name of Project : -------------------------------------------------------- With reference to the above agreement, I would be most grateful if you could kindly approve the release of US Dollars 600,000 on MARCH, 2001 2. I hereby certify that:- (i) Total expenditure for the above project as at FEBRUARY 15, 2001 = USD 1,400,000 ----------- (ii) Total loan releases that have been received as at FEBRUARY 25, 2001 = USD 1,400,000 ----------- (iii) Amount of release requested through this notice = USD 600,000 ----------- (iv) Balance of loan after the release in para (iii) above = USD -0- ----------- 3. A progress report on the subject is attached. /s/ Michael T. Flavin ------------------------- Signature of Borrower (CEO/GM of Borrower) 14 SECOND SCHEDULE PART II REQUEST FOR RELEASE OF LOAN Ref: Date: To: Setiausaha Kewangan Negeri Sarawak Pejabat Setiausaha Kewangan Negeri Tingkat 17-18, Wisma Bapa Malaysia 93502 Petra Jaya, KUCHING Dear Sir, Agreement Number : -------------------------------------------------------- Agreement Date : -------------------------------------------------------- Approved Loan : -------------------------------------------------------- Name of Project : -------------------------------------------------------- With reference to the above agreement, I would be most grateful if you could kindly approve the release of us Dollars 600,000 on JANUARY 16, 2001 2. I hereby certify that:- (i) Total expenditure for the above project as at JANUARY 15, 2001 = USD 1,400,000 ----------- (ii) Total loan releases that have been received as at DECEMBER 15, 2000 = USD 800,000 ----------- (iii) Amount of release requested through this notice = USD 600,000 ----------- (iv) Balance of loan after the release in para (iii) above = USD 600,000 ----------- 3. A progress report on the subject is attached. /s/ Michael T. Flavin ------------------------- Signature of Borrower (CEO/GM of Borrower) 15 THIRD SCHEDULE LOAN REPAYMENT 1. Loan Amount : US$2,000,000.00 2. Project : Sarawak MediChem Pharmaceuticals Inc. 3. Loan Period : 48 months 4. Repayment Date : 5. Interest Rate : 7.75% per annum (Compounded annually and calculated on the basis of a 365-day year) 6. Penalty interest : 7.75% per annum DETAILS OF RELEASE
/s/ Michael T. Flavin - ------------------------ ------------------------ Lender Signature Borrower Signature - ------------------------ ------------------------ Name Name - ------------------------ ------------------------ Designation Designation - ------------------------ ------------------------ Date Date 16 LOAN AGREEMENT BETWEEN THE GOVERNMENT OF THE STATE OF SARAWAK AND SARAWAK MEDICHEM PHARMACEUTICALS INC. (A USD2,000,000.00 Loan to Sarawak MediChem Pharmaceuticals Inc. to enable Phase II Clinical Trials to proceed and in particular to ensure the completion of the 21-day Phase I/II safety and efficacy confirmation study, including the pilot Phase II study) Date: COPY AN AGREEMENT made this day of 2000 between THE GOVERNMENT OF THE STATE OF SARAWAK (hereinafter called "the Lender") of the one part and SARAWAK MEDICHEM PHARMACEUTICALS INC., a Delaware corporation (hereinafter called the "Borrower") of the other part. WHEREAS pursuant to an agreement dated the 25th day of November, 1999 executed between the Borrower and the Lender, at the request of the Borrower, the Lender has lent to the Borrower USD 5,000,000 (US Dollars Five Million Only) for the purpose and upon the terms and conditions stated therein. WHEREAS the Borrower has requested and the Lender has agreed to lend to the Borrower an additional sum of money amounting to US DOLLARS TWO MILLION ONLY (USD 2,000,000.00) (hereinafter called "the Loan") for the purpose specified in Part I of the Second Schedule (hereinafter called "the Project") upon the terms and conditions hereinafter appearing. NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:- 1. AMOUNT OF LOAN Subject to the terms of this Agreement, the amount of Loan shall be US DOLLARS TWO MILLION ONLY (USD 2,000,000.00) 2. PURPOSE OF LOAN 2.1 The Loan shall be applied by the Borrower for the purpose stipulated in Part I of the Second Schedule hereto upon the terms and conditions hereinafter contained. 1 2.2 The proceeds of the Loan shall not be applied for any other purpose without the prior consent in writing of the Lender. 3. RELEASE OF LOAN 3.1 The Loan shall be released by the Lender to the Borrower in the manner and at the times stipulated in the First Schedule. 3.2 Every request for any release of the Loan shall be made in the Form prescribed in Part II of the Second Schedule and that Form must be accompanied by an up to date progress report on the Project which shall contain, inter alia, a time schedule for the implementation of the Project and the financial requirement or commitment in respect of each of the stages of implementation thereof. 3.3 Within SEVEN (7) days after the release of any installment of the Loan to the Borrower, the Borrower shall deliver to the Lender a receipt thereof signed by the Borrower or by his duly authorized representative, in the form set out in Part III of the Second Schedule hereto. 3.4 Notwithstanding the provisions of sub-clause 3.1, the Lender shall be entitled to withhold or defer the release of any portion of the Loan or to cancel or withdraw any part of the Loan which has not been released to the Borrower upon the occurrence of any of the events stipulated in clause 5.3 below, or if the Lender is of the opinion that based on the progress report referred to in clause 3.2, the implementation of the Project has not been satisfactory. 2 4. INTEREST 4.1 The Loan is subject to interest of 7.75% per annum compounded annually and calculated on the basis of a 365 - day year. 4.2 If the Borrower fails to effect repayment of the Loan punctually on the date when the same becomes due under clause 5.1 hereto, then, without prejudice to the rights of the Lender under clause 5.3, the Borrower shall pay interest at the rate of 7.75% per annum on the sum of loan plus interest overdue from the date such sum is due for payment under the Third Schedule until the date of actual payment thereof and such interest shall be paid by the Borrower to the Lender on demand. 5. REPAYMENT 5.1 The Borrower shall repay the Loan in one lump sum (principal plus interest) on the 4th anniversary date from date of first draw down of the Loan which took place on 10th February 2000. 5.2. The Borrower shall be entitled, at its option, at the expiration of not less than THIRTY (30) days' notice given in writing to the Lender to repay either the whole or any part principal amount of the Loan outstanding on the expiration of the said notice. 3 5.3(1) The Loan shall become due and immediately payable, and the Lender shall be entitled forthwith to take appropriate action to receive the same upon the occurrence of any of the following events, viz:- (a) if the Borrower shall default in the payment of any principal moneys or interest thereon on the date when the same becomes due under the Third Schedule whether formally demanded or not; (b) if the Borrower shall default in the performance or observance of any other covenants, stipulations, conditions or obligations on the part of the Borrower to be performed or observed under this Agreement; (c) if, in the opinion of the Lender, the progress of the Project is unsatisfactory because of gross negligence by the Borrower or the same has been abandoned or in danger of being abandoned or has not been satisfactorily completed; (d) if a distress or execution or other process of a Court of competent jurisdiction has been levied upon or issued against the Project or any of the property comprised therein; 5.3(2) When the principal amount of the Loan becomes due and payable as above provided, the Lender may at its option, appoint officers generally to take over the control and management of the Project or the affairs of the Borrower 4 until such time as the Loan shall be repaid in full to the Lender. 6. REPORTS 6.1 Until the full and final settlement of the Loan, the Borrower shall furnish to the State Financial Secretary as from the date of this Agreement and thereafter at quarterly intervals, such reports as may from time to time be required by the State Financial Secretary regarding the financial status or position of the Borrower and the progress of the implementation of the Project, and to notify the Lender of any event, circumstance or occurrence which may have an adverse impact on the financial position of the Borrower. 6.2 The Borrower shall promptly inform, the Lender of any condition or circumstance which may interfere or threaten to interfere with the successful implementation of the project or with the maintenance of the service thereof. 7. UNDERTAKINGS 7.1 The Borrower irrevocably and unconditionally represents that it has taken all the necessary corporate and other actions to authorise the execution, delivery and performance of this Agreement. 7.2 The Borrower hereby undertakes to apply the Loan for the purpose as set out in Part I of the Second Schedule hereto and not to apply the same for any other purposes. The breach of 5 this clause shall entitle the Lender to demand for full repayment of the Loan outstanding at the date of such breach. 7.3 The Borrower hereby warrants and undertakes that in addition to the proceeds of the Loan, it has, and will apply, such other funds, facilities, services and other resources that it has available which may be required for the successful implementation of the Project. 7.4 The Borrower hereby undertakes that the Project financed in part or in whole by the Loan shall be completed speedily and successfully with all due diligence, efficiency and in conformity with sound administrative and management practice. 7.5 Whenever agents, consultants, and advisers are appointed by the Borrower for the execution of the Project, such appointment shall comply with the provisions of the Statutory Bodies (Accounting and Financial Procedure) Ordinance, 1995. 7.6 The Borrower shall in consultation with the Lender ensure that the tariffs, rentals and revenue for the use, sale or disposal of the products, developed or produced through the successful implementation of the Project are consistent with sound financial and commercial practices and generate sufficient revenue to cover operating expenditure including the costs of maintenance and effects of depreciation. 6 7.7 The Borrower hereby undertakes to afford or arrange to afford all reasonable opportunities and facilities to authorised representatives of the Lender to inspect such financial records of the Borrower as are required to be kept by the Borrower under the applicable law, and to observe the progress of the Project, and the Borrower shall give such assistance as may be required for such inspection and observation to be carried out. 7.8 This Agreement supersedes all previous agreements arrangements, promises, undertakings or understandings between the parties relating to the Loan. 8. COSTS AND EXPENSES Each party shall bear and pay its own legal fees incurred in connection with the preparation and execution of this Agreement. Stamp duties, if any, incurred in the stamping of this Agreement shall be borne by the Borrower. 9. ARBITRATION If any dispute shall arise between the Lender and the Borrower as to the meaning or otherwise in connection with any matter arising out of this Agreement, the same shall be referred to a single Arbitrator to be agreed upon between the Lender and Borrower and the provisions of the Arbitration Act, 1952 (Revised - 1972) (Act 93) of Malaysia with such statutory modifications or re-enactments thereof for the time being in force shall apply to such reference. 7 10. NOTICE Any notice to be given to the Lender under this Agreement shall be deemed to be duly given if delivered or addressed by prepaid registered post to the STATE FINANCIAL SECRETARY AT HIS OFFICE IN KUCHING, and any notice to be given to the Borrower shall be deemed to have been duly given if delivered or addressed by prepaid registered post to THE PRESIDENT, SARAWAK MEDICHEM PHARMACEUTICALS INC. 12305 S. NEW AVENUE, SUITE O, LEMONT, IL 60439 USA and a notice so addressed shall be deemed to have been given at the time at which it would have been delivered in the ordinary course of post. 11. TIME Time wherever mentioned herein shall be of the essence of this Agreement. 12. REMEDIES 12.1 No delay in exercising or omission to exercise any right, power or remedy accruing to the Lender under this Agreement upon any default by the Borrower shall impair any such right, power or remedy or be construed to be a waiver thereof or any acquiescence in such default; nor shall the action of the Lender in respect of any default of the Borrower or any acquiescence in any default affect or impair any right, power or remedy of the Lender in respect of any other or subsequent default. 8 12.2 The terms and conditions of this Agreement may be amended from time to time, subject to the agreement of the Lender, by exchange of letters between the Lender and the Borrower. [THE REST OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY] 9 IN WITNESS WHEREOF THE PARTIES HERETO HAVE SET THEIR HANDS AND SEAL THE DAY AND YEAR FIRST ABOVE WRITTEN. Signed by the State Financial ) Secretary for and on behalf of ) the GOVERNMENT OF THE ) ----------------------------- STATE OF SARAWAK (the Lender) ) in the presence of: Witness: - ------------------------------ Name - ------------------------------ Address - ------------------------------ Occupation The Common Seal of ) SARAWAK MEDICHEM ) PHARMACEUTICALS INC. ) (the Borrower) was hereunto ) /s/ Michael T. Flavin affixed in the presence Of ) ----------------------------- MICHAEL T. FLAVIN PRESIDENT Witness: /s/ [ILLEGIBLE] - ------------------------------ Name 8112 Middlebury, Woodridge, IL - ------------------------------ Address Admin Assistant - ------------------------------ Occupation 10 FIRST SCHEDULE RELEASE OF LOAN
11 SECOND SCHEDULE PART I THE PROJECT The whole US DOLLARS TWO MILLION ONLY (USD 2,000,000.00) shall be used to enable Phase II Clinical Trials to proceed and in particular to ensure the completion of the 21-day Phase I/II safety and efficacy confirmation study, including the pilot Phase II study. 12 SECOND SCHEDULE PART II REQUEST FOR RELEASE OF LOAN Ref: Date: To: Setiausaha Kewangan Negeri Sarawak Pejabat Setiausaha Kewangan Negeri Tingkat 17-18, Wisma Bapa Malaysia 93502 Petra Jaya, KUCHING Dear Sir, Agreement Number : ------------------------------------------------------ Agreement Date : ------------------------------------------------------ Approved Loan : ------------------------------------------------------ Name of Project : ------------------------------------------------------ With reference to the above agreement, I would be most grateful if you could kindly approve the release of US Dollars _______________on ______________ 2. I hereby certify that:- (i) Total expenditure for the above project as at_______________________ = USD ______________ (ii) Total loan releases that have been received as at______________________ = USD ______________ (iii) Amount of release requested through this notice = USD ______________ (iv) Balance of loan after the release in para (iii) above = USD ______________ 3. A progress report on the subject is attached. /s/ Michael T. Flavin, President -------------------------------- Signature of Borrower (CEO/CM of Borrower) 13 SECOND SCHEDULE PART III RECEIPT OF LOAN Loan Agreement No. : Date: Amount of Loan : Date of Payment to Borrower : I hereby acknowledge receipt of the sum of US Dollars______________ /s/ Michael T. Flavin, President - --------------- --------------------------------- Date of Receipt Signature of Borrower 14 THIRD SCHEDULE LOAN REPAYMENT 1. Loan Amount : US$2,000,000.00 2. project : Sarawak MediChem Pharmaceuticals Inc. 3. Loan Period : 48 months 4. Repayment Date : 10.02.2004 5. Interest Rate : 7.75% per annum (Compounded annually and calculated on the basis of a 365-day year) 6. Penalty Interest : 7.75% per annum DETAILS OF RELEASE
/s/ Michael T. Flavin - --------------------- ------------------------ Lender Signature Borrower Signature /s/ Michael T. Flavin - --------------------- ------------------------ Name Name - --------------------- ------------------------ Designation Designation - --------------------- ------------------------ Date Date 15 LOAN AGREEMENT BETWEEN THE GOVERNMENT OF THE STATE OF SARAWAK AND SARAWAK MEDICHEM PHARMACEUTICALS INC. (A USD500,000.00 Loan to Sarawak MediChem Pharmaceuticals Inc. to fund the Calanolide Work Plan until the end of 2001, including completion of Phase I/II Clinical Studies and gathering expert opinion regarding scientific and commercial prospects for Calanolide A) Date: AN AGREEMENT made this day of 2001 between THE GOVERNMENT OF THE STATE OF SARAWAK (hereinafter called "the Lender") of the one part and SARAWAK MEDICHEM PHARMACEUTICALS INC., a Delaware corporation (hereinafter called the "Borrower") of the other part. WHEREAS pursuant to an agreement dated the 25th day of November, 1999 executed between the Borrower and the Lender, at the request of the Borrower, the Lender has lent to the Borrower USD 5,000,000 (US DOLLARS FIVE MILLION ONLY) for the purpose and upon the terms and conditions stated therein. WHEREAS pursuant to a subsequent agreement dated the 27th day of November, 2000 executed between the Borrower and the Lender, at the request of the Borrower, the Lender has further lent to the Borrower USD 2,000,000.00 (US DOLLARS TWO MILLION ONLY) for the purpose and upon the terms and conditions stated therein. WHEREAS pursuant to a further agreement dated 20th day of January, 2001 executed between the Borrower and the Lender, at the request of the Borrower, the Lender has also lent to the Borrower USD2,000,000.00 (US DOLLARS TWO MILLION ONLY) for the purpose and upon the terms and conditions stated therein. WHEREAS the Borrower has now requested and the Lender has agreed to lend to the Borrower an additional sum of money amounting to US DOLLARS FIVE HUNDRED THOUSAND ONLY (USD500,000.00) (Hereinafter called "the Loan") for the purpose specified in Part I of the Second Schedule (hereinafter called "the Project") upon the terms and conditions hereinafter appearing. 1 1. AMOUNT OF LOAN Subject to the terms of this Agreement, the amount of Loan shall be US DOLLARS FIVE HUNDRED THOUSAND ONLY (USD500,000.00). 2. PURPOSE OF LOAN 2.1 The Loan shall be applied by the Borrower for the purpose stipulated in Part I of the Second Schedule hereto upon the terms and conditions hereinafter contained. 2.2 The proceeds of the Loan shall not be applied for any other purpose without the prior consent in writing of the Lender. 3. RELEASE OF LOAN 3.1 The Loan shall be released by the Lender to the Borrower in the manner and at the times stipulated in the First Schedule. 3.2 Every request for any release of the Loan shall be made in the Form prescribed in Part II of the Second Schedule and that Form must be accompanied by an up to date progress report on the Project which shall contain, inter alia, a time schedule for the implementation of the Project and the financial requirement or commitment in respect of each of the stages of implementation thereof. 3.3 Within SEVEN (7) days after the release of any installment of the Loan to the Borrower, the Borrower shall deliver to the 2 Lender a receipt thereof signed by the Borrower or by his duly authorized representative, in the form set out in Part III of the Second Schedule hereto. 3.4 Notwithstanding the provisions of sub-clause 3.1, the Lender shall be entitled to withhold or defer the release of any portion of the Loan or to cancel or withdraw any part of the Loan which has not been released to the Borrower upon the occurrence of any of the events stipulated in clause 5.3 below, or if the Lender is of the opinion that based on the progress report referred to in clause 3.2, the implementation of the Project has not been satisfactory. 4. INTEREST 4.1 The Loan is subject to interest of 7.75% per annum compounded annually and calculated on the basis of a 365 - day year. 4.2 If the Borrower fails to effect repayment of the Loan punctually on the date when the same becomes due under clause 5.1 hereto, then, without prejudice to the rights of the Lender under clause 5.3, the Borrower shall pay interest at the rate of 7.75% per annum on the sum of loan plus interest overdue from the date such sum is due for payment under the Third Schedule until the date of actual payment thereof and such interest shall be paid by the Borrower to the Lender on demand. 3 5. REPAYMENT 5.1 The Borrower shall repay the Loan in one lump sum (principal plus interest) on the 4th anniversary date from date of first draw down of the Loan. 5.2. The Borrower shall be entitled, at its option, at the expiration of not less than THIRTY (30) days' notice given in writing to the Lender to repay either the whole or any part principal amount of the Loan outstanding on the expiration of the said notice. 5.3(1) The Loan shall become due and immediately payable, and the Lender shall be entitled forthwith to take appropriate action to receive the same upon the occurrence of any of the following events, viz:- (a) if the Borrower shall default in the payment of any principal moneys or interest thereon on the date when the same becomes due under the Third Schedule whether formally demanded or not; (b) if the Borrower shall default in the performance or observance of any other covenants, stipulations, conditions or obligations on the part of the Borrower to be performed or observed under this Agreement; (c) if, in the opinion of the Lender, the progress of the Project is unsatisfactory because of gross negligence by the Borrower or the same has been abandoned or in 4 danger of being abandoned or has not been satisfactorily completed; (d) if a distress or execution or other process of a Court of competent jurisdiction has been levied upon or issued against the Project or any of the property comprised therein; 5.3(2) When the principal amount of the Loan becomes due and payable as above provided, the Lender may at its option, appoint officers generally to take over the control and management of the Project or the affairs of the Borrower until such time as the Loan shall be repaid in full to the Lender. 6. REPORTS 6.1 Until the full and final settlement of the Loan, the Borrower shall furnish to the State Financial Secretary as from the date of this Agreement and thereafter at quarterly intervals, such reports as may from time to time be required by the State Financial Secretary regarding the financial status or position of the Borrower and the progress of the implementation of the Project, and to notify the Lender of any event, circumstance or occurrence which may have an adverse impact on the financial position of the Borrower. 5 6.2 The Borrower shall promptly inform, the Lender of any condition or circumstance which may interfere or threaten to interfere with the successful implementation of the Project or with the maintenance of the service thereof. 7. UNDERTAKINGS 7.1 The Borrower irrevocably and unconditionally represents that it has taken all the necessary corporate and other actions to authorise the execution, delivery and performance of this Agreement. 7.2 The Borrower hereby undertakes to apply the Loan for the purpose as set out in Part I of the Second Schedule hereto and not to apply the same for any other purposes. The breach of this clause shall entitle the Lender to demand for full repayment of the Loan outstanding at the date of such breach. 7.3 The Borrower hereby warrants and undertakes that in addition to the proceeds of the Loan, it has, and will apply, such other funds, facilities, services and other resources that it has available which may be required for the successful implementation of the Project. 7.4 The Borrower hereby undertakes that the Project financed in part or in whole by the Loan shall be completed speedily and successfully with all due diligence, efficiency and in 6 conformity with sound administrative and management practice. 7.5 Whenever agents, consultants, and advisers are appointed by the Borrower for the execution of the Project, such appointment shall comply with the provisions of the Statutory Bodies (Accounting and Financial Procedure) Ordinance, 1995. 7.6 The Borrower shall in consultation with the Lender ensure that the tariffs, rentals and revenue for the use, sale or disposal of the products, developed or produced through the successful implementation of the Project are consistent with sound financial and commercial practices and generate sufficient revenue to cover operating expenditure including the costs of maintenance and effects of depreciation. 7.7 The Borrower hereby undertakes to afford or arrange to afford all reasonable opportunities and facilities to authorised representatives of the Lender to inspect such financial records of the Borrower as are required to be kept by the Borrower under the applicable law, and to observe the progress of the Project, and the Borrower shall give such assistance as may be required for such inspection and observation to be carried out. 7.8 This Agreement supersedes all previous agreements arrangements, promises, undertakings or understandings between the parties relating to the Loan. 7 8. COSTS AND EXPENSES Each party shall bear and pay its own legal fees incurred in connection with the preparation and execution of this Agreement. Stamp duties, if any, incurred in the stamping of this Agreement shall be borne by the Borrower. 9. ARBITRATION If any dispute shall arise between the Lender and the Borrower as to the meaning or otherwise in connection with any matter arising out of this Agreement, the same shall be referred to a single Arbitrator to be agreed upon between the Lender and Borrower and the provisions of the Arbitration Act, 1952 (Revised - 1972) (Act 93) of Malaysia with such statutory modifications or re-enactments thereof for the time being in force shall apply to such reference. 10. NOTICE Any notice to be given to the Lender under this Agreement shall be deemed to be duly given if delivered or addressed by prepaid registered post to the STATE FINANCIAL SECRETARY AT HIS OFFICE IN KUCHING, and any notice to be given to the Borrower shall be deemed to have been duly given if delivered or addressed by prepaid registered post to THE PRESIDENT, SARAWAK MEDICHEM PHARMACEUTICALS INC. 12305 S. NEW AVENUE, SUITE O, LEMONT, IL 60439 USA and a notice so addressed shall be deemed to have been given at the time at which it would have been delivered in the ordinary course of post. 8 11. TIME Time wherever mentioned herein shall be of the essence of this Agreement. 12. REMEDIES 12.1 No delay in exercising or omission to exercise any right, power or remedy accruing to the Lender under this Agreement upon any default by the Borrower shall impair any such right, power or remedy or be construed to be a waiver thereof or any acquiescence in such default; nor shall the action of the Lender in respect of any default of the Borrower or any acquiescence in any default affect or impair any right, power or remedy of the Lender in respect of any other or subsequent default. 12.2 The terms and conditions of this Agreement may be amended from time to time, subject to the agreement of the Lender, by exchange of letters between the Lender and the Borrower. [THE REST OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY] 9 IN WITNESS WHEREOF THE PARTIES HERETO HAVE SET THEIR HANDS AND SEAL THE DAY AND YEAR FIRST ABOVE WRITTEN. Signed by the State Financial ) Secretary for and on behalf of ) the GOVERNMENT OF THE ) __________________________ STATE OF SARAWAK (the Lender) ) in the presence of: Witness: - ----------------------------- Name - ----------------------------- Address - ----------------------------- Occupation The Common Seal of ) SARAWAK MEDICHEM ) PHARMACEUTICALS INC. ) (the Borrower) was hereunto ) affixed in the presence Of ) /s/ Michael T. Flavin -------------------------- MICHAEL T. FLAVIN PRESIDENT Witness: /s/ [ILLEGIBLE] - ----------------------------- Name 8112 Middlebury Woodridge, IL 60517 - ----------------------------- Address Admin Assistant - ----------------------------- Occupation 10 FIRST SCHEDULE RELEASE OF LOAN
11 SECOND SCHEDULE PART I THE PROJECT The whole US DOLLARS FIVE HUNDRED THOUSAND ONLY (USD500,000.00) shall be used to fund the Calanolide Work Plan until the end of 2001, including completion of Phase I/II Clinical Studies and gathering expert opinion regarding scientific and commercial prospects for Calanolide A. 12 SECOND SCHEDULE PART II REQUEST FOR RELEASE OF LOAN Ref: Date: TO: Setiausaha Kewangan Negeri Sarawak Pejabat Setiausaha Kewangan Negeri Tingkat 17-18, Wisma Bapa Malaysia 93502 Petra Jaya, KUCHING Dear Sir, Agreement Number : ---------------------------------------- Agreement Date : ---------------------------------------- Approved Loan : ---------------------------------------- Name of Project : ---------------------------------------- With reference to the above agreement, I would be most grateful if you could kindly approve the release of US Dollars_________________on_________________ 2. I hereby certify that:-
3. A progress report on the project is attached. /s/ Michael T. Flavin ------------------------------ Signature of Borrower (CEO/GM of Borrower) 13 SECOND SCHEDULE PART III RECEIPT OF LOAN Loan Agreement No. : Date: 9/28/01 Amount of Loan : $500,000.00 Date of Payment to Borrower : I hereby acknowledge receipt of the sum of US Dollars $500,000 9/28/01 - --------------- ------------------------------ Date of Receipt Signature of Borrower 14 THIRD SCHEDULE LOAN REPAYMENT 1. Loan Amount : US$500,000.00 2. Project : Sarawak MediChem Pharmaceuticals Inc. 3. Loan Period : 48 months 4. Repayment Date : 5. Interest Rate : 7.75% per annum (Compounded annually and calculated on the basis of a 365-day year) 6. Penalty Interest : 7.75% per annum DETAILS OF RELEASE
/s/ Michael T. Flavin - --------------------- ------------------------ Lender Signature Borrower signature - --------------------- ------------------------ Name Name - --------------------- ------------------------ Designation Designation - --------------------- ------------------------ Date Date 15 LOAN AGREEMENT BETWEEN THE GOVERNMENT OF THE STATE OF SARAWAK AND SARAWAK MEDICHEM PHARMACEUTICALS INC. (A USD2,500,000.00 Loan to Sarawak MediChem Pharmaceuticals Inc. to maintain and complete the 12-month clinical development of Calanolide A and to pursue efforts to negotiate and close a deal with a pharmaceutical company or other third party) Date: STATE FINANCIAL SECRETARY'S OFFICE AGREEMENT NO: SMP/2001/03 DATE: 29.10.01 LOAN AGREEMENT BETWEEN THE GOVERNMENT OF THE STATE OF SARAWAK AND SARAWAK MEDICHEM PHARMACEUTICALS INC. (A USD2,500,000.00 Loan to Sarawak MediChem Pharmaceuticals Inc. to maintain and complete the 12-month clinical development of Calanolide A and to pursue efforts to negotiate and close a deal with a pharmaceutical company or other third party) Date: 29.10.01 AN AGREEMENT made this 29th day of October 2001 between THE GOVERNMENT OF THE STATE OF SARAWAK (hereinafter called "the Lender") of the one part and SARAWAK MEDICHEM PHARMACEUTICALS INC., a Delaware corporation (hereinafter called the "Borrower") of the other part. WHEREAS pursuant to an agreement dated the 25th day of November, 1999 executed between the Borrower and the Lender, at the request of the Borrower, the Lender has lent to the Borrower USD 5,000,000.00 (US DOLLARS FIVE MILLION ONLY) for the purpose and upon the terms and conditions stated therein. WHEREAS pursuant to a subsequent agreement dated the 27th day of November, 2000 executed between the Borrower and the Lender, at the request of the Borrower, the Lender has further lent to the Borrower USD2,000,000.00 (US DOLLARS TWO MILLION ONLY) for the purpose and upon the terms and conditions stated therein. WHEREAS pursuant to a further agreement dated 20th day of January, 2001 executed between the Borrower and the Lender, at the request of the Borrower, the Lender has also lent to the Borrower USD2,000,000.00 (US DOLLARS TWO MILLION ONLY) for the purpose and upon the terms and conditions stated therein. WHEREAS pursuant to another further agreement dated 4th day of September 2001 executed between the Borrower and the Lender at the request of the Borrower, the Lender has further also lent to the Borrower USD500,000.00 (US DOLLARS FIVE HUNDRED THOUSAND ONLY) for the purpose and upon the terms and conditions stated therein. [SEAL] 1 WHEREAS the Borrower has now requested and the Lender has agreed to lend to the Borrower an additional sum of money amounting to US DOLLARS TWO MILLION AND FIVE HUNDRED THOUSAND ONLY (USD2,500,000.00) (hereinafter called "the Loan") for the purpose specified in Part I of the Second Schedule (hereinafter called "the Project") upon the terms and conditions hereinafter appearing. NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:- 1. AMOUNT OF LOAN Subject to the terms of this Agreement, the amount of Loan shall be US DOLLARS TWO MILLION AND FIVE HUNDRED THOUSAND ONLY (USD2,500,000.00). 2. PURPOSE OF LOAN 2.1 The Loan shall be applied by the Borrower for the purpose stipulated in Part I of the Second Schedule hereto upon the terms and conditions hereinafter contained. 2.2 The proceeds of the Loan shall not be applied for any other purpose without the prior consent in writing of the Lender. 3. RELEASE OF LOAN 3.1 The Loan shall be released by the Lender to the Borrower in the manner and at the times stipulated in the First Schedule. 2 4.2 If the Borrower fails to effect repayment of the Loan punctually on the date when the same becomes due under clause 5.1 hereto, then, without prejudice to the rights of the Lender under clause 5.3, the Borrower shall pay interest at the rate of 7.75% per annum on the sum of loan plus interest overdue from the date such sum is due for payment under the Third Schedule until the date of actual payment thereof and such interest shall be paid by the Borrower to the Lender on demand. 5. REPAYMENT 5.1 The Borrower shall repay the Loan in one lump sum (principal plus interest) on the 4th anniversary date from date of first draw down of the Loan. 5.2. The Borrower shall be entitled, at its option, at the expiration of not less than THIRTY (30) days' notice given in writing to the Lender to repay either the whole or any part principal amount of the Loan outstanding on the expiration of the said notice. 5.3(1) The Loan shall become due and immediately payable, and the Lender shall be entitled forthwith to take appropriate action to receive the same upon the occurrence of any of the following events, viz:- (a) if the Borrower shall default in the payment of any principal moneys or interest thereon on the date when the same becomes due under the Third Schedule whether formally demanded or not; 4 (b) if the Borrower shall default in the performance or observance of any other covenants, stipulations, conditions or obligations on the part of the Borrower to be performed or observed under this Agreement; (c) if, in the opinion of the Lender, the progress of the Project is unsatisfactory because of gross negligence by the Borrower or the same has been abandoned or in danger of being abandoned or has not been satisfactorily completed; (d) if a distress or execution or other process of a Court of competent jurisdiction has been levied upon or issued against the Project or any of the property comprised therein; 5.3(2) When the principal amount of the Loan becomes due and payable as above provided, the Lender may at its option, appoint officers generally to take over the control and management of the Project or the affairs of the Borrower until such time as the Loan shall be repaid in full to the Lender. 6. REPORTS 6.1 Until the full and final settlement of the Loan, the Borrower shall furnish to the State Financial Secretary as from the date of this Agreement and thereafter at quarterly intervals, such reports as may from time to time be required by the State 5 Financial Secretary regarding the financial status or position of the Borrower and the progress of the implementation of the Project, and to notify the Lender of any event, circumstance or occurrence which may have an adverse impact on the financial position of the Borrower. 6.2 The Borrower shall promptly inform the Lender of any condition or circumstance which may interfere or threaten to interfere with the successful implementation of the Project or with the maintenance of the service thereof. 7. UNDERTAKINGS 7.1 The Borrower irrevocably and unconditionally represents that it has taken all the necessary corporate and other actions to authorise the execution, delivery and performance of this Agreement. 7.2 The Borrower hereby undertakes to apply the Loan for the purpose as set out in Part I of the Second Schedule hereto and not to apply the same for any other purposes. The breach of this clause shall entitle the Lender to demand for full repayment of the Loan outstanding at the date of such breach. 7.3 The Borrower hereby warrants and undertakes that in addition to the proceeds of the Loan, it has, and will apply, such other funds, facilities, services and other resources that it has available which may be required for the successful implementation of the Project. 6 7.4 The Borrower hereby undertakes that the Project financed in part or in whole by the Loan shall be completed speedily and successfully with all due diligence, efficiency and in conformity with sound administrative and management practice. 7.5 Whenever agents, consultants, and advisers are appointed by the Borrower for the execution of the Project, such appointment shall comply with the provisions of the Statutory Bodies (Accounting and Financial Procedure) Ordinance, 1995. 7.6 The Borrower shall in consultation with the Lender ensure that the tariffs, rentals and revenue for the use, sale or disposal of the products, developed or produced through the successful implementation of the Project are consistent with sound financial and commercial practices and generate sufficient revenue to cover operating expenditure including the costs of maintenance and effects of depreciation. 7.7 The Borrower hereby undertakes to afford or arrange to afford all reasonable opportunities and facilities to authorised representatives of the Lender to inspect such financial records of the Borrower as are required to be kept by the Borrower under the applicable law, and to observe the progress of the Project, and the Borrower shall give such assistance as may be required for such inspection and observation to be carried out. 7 7.8 This Agreement supersedes all previous agreements arrangements, promises, undertakings or understandings between the parties relating to the Loan. 8. COSTS AND EXPENSES Each party shall bear and pay its own legal fees incurred in connection with the preparation and execution of this Agreement. Stamp duties, if any, incurred in the stamping of this Agreement shall be borne by the Borrower. 9. ARBITRATION If any dispute shall arise between the Lender and the Borrower as to the meaning or otherwise in connection with any matter arising out of this Agreement, the same shall be referred to a single Arbitrator to be agreed upon between the Lender and Borrower and the provisions of the Arbitration Act, 1952 (Revised - 1972) (Act 93) of Malaysia with such statutory modifications or re-enactments thereof for the time being in force shall apply to such reference. 10. NOTICE Any notice to be given to the Lender under this Agreement shall be deemed to be duly given if delivered or addressed by prepaid registered post to the STATE FINANCIAL SECRETARY AT HIS OFFICE IN KUCHING, and any notice to be given to the Borrower shall be deemed to have been duly given if delivered or addressed by prepaid registered post to THE PRESIDENT, SARAWAK MEDICHEM PHARMACEUTICALS INC. 12305 S. NEW AVENUE, SUITE O, LEMONT, IL 8 60439 USA and a notice so addressed shall be deemed to have been given at the time at which it would have been delivered in the ordinary course of post. 11. TIME Time wherever mentioned herein shall be of the essence of this Agreement. 12. REMEDIES 12.1 No delay in exercising or omission to exercise any right, power or remedy accruing to the Lender under this Agreement upon any default by the Borrower shall impair any such right, power or remedy or be construed to be a waiver thereof or any acquiescence in such default; nor shall the action of the Lender in respect of any default of the Borrower or any acquiescence in any default affect or impair any right, power or remedy of the Lender in respect of any other or subsequent default. 12.2 The terms and conditions of this Agreement may be amended from time to time, subject to the agreement of the Lender, by exchange of letters between the Lender and the Borrower. [THE REST OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY] 9 IN WITNESS WHEREOF THE PARTIES HERETO HAVE SET THEIR HANDS AND SEAL THE DAY AND YEAR FIRST ABOVE WRITTEN. Signed by the State Financial ) /s/ Chin Jew Bui Secretary for and on behalf of ) -------------------- the GOVERNMENT OF THE ) CHIN JEW BUI STATE OF SARAWAK (the Lender) ) State Financial Secretary in the presence of: Witness: /s/ Than Kui Nyit Than Kui Nyit - --------------------------------------- Name State Financial Secretary's Office - --------------------------------------- Address Principal Assistant Secretary - --------------------------------------- (Finance) Occupation The Common Seal of ) SARAWAK MEDICHEM ) PHARMACEUTICALS INC. ) (the Borrower) was hereunto ) /s/ Michael T. Flavin affixed in the presence Of ) ------------------------ MICHAEL T. FLAVIN PRESIDENT Witness: /s/ Kristine A. Gryyb - --------------------------------------- Name 8112 Middlebury Ave Woodridge, IL 60517 - --------------------------------------- Address Admin Assistant - --------------------------------------- Occupation 10 FIRST SCHEDULE RELEASE OF LOAN
11 SECOND SCHEDULE PART I THE PROJECT The whole of US DOLLARS TWO MILLION AND FIVE HUNDRED THOUSAND ONLY (USD2,500,000.00) shall be used to maintain and complete the 12-month clinical development of Calanolide A and to pursue efforts to negotiate and close a deal with a pharmaceutical company or other third party as per details below :- (a) CRO COSTS US$600,000 Estimated costs for consultants and contract research organizations (CROs) which have been hired for clinical monitoring services; data management; and biostatistics. (b) PROJECT MANAGEMENT US$310,000 Estimated CRO costs for project management related to the on-going clinical development of Calanolide A. (c) PRINCIPAL INVESTIGATOR COSTS US$240,000 Estimated for physicians and their hospitals to screen, recruit, and treat HIV patients enrolled onto the clinical on-going studies. (d) ANALYTICAL COSTS US$400,000 Estimated costs for the blood plasma and other human sample analyses that will be needed during the experimental analysis of Sarawak MediChem's clinical studies. 12 (e) PATIENT MEDICATION US$380,000 Estimated costs to provide the patients who have been enrolled onto the clinical studies with follow-on anti-HIV medication for 6 months after they have participated in the studies. (f) CONSULTANCY FEES US$230,000 Estimated costs for consultants providing HIV/AIDS expertise, and expertise in business, marketing and licensing. (g) ADMINISTRATION US$170,000 (h) PATENT & LEGAL FEES US$170,000 13 SECOND SCHEDULE PART II REQUEST FOR RELEASE OF LOAN Ref: Date: To: Setiausaha Kewangan Negeri Sarawak Pejabat Setiausaha Kewangan Negeri Tingkat 17-18, Wisma Bapa Malaysia 93502 Petra Jaya, KUCHING Dear Sir, Agreement Number : __________________________________________________ Agreement Date : __________________________________________________ Approved Loan : __________________________________________________ Name of Project : __________________________________________________ With reference to the above agreement, I would be most grateful if you could kindly.approve the release of US Dollars 5 on ___________ 2. I hereby certify that:-
3. A progress report on the project is attached. /s/ Michael T. Flavin ------------------------------ Signature of Borrower (CEO/GM of Borrower) 14 SECOND SCHEDULE PART III RECEIPT OF LOAN Loan Agreement No. : Date: Amount of Loan : Date of Payment to Borrower : I hereby acknowledge receipt of the sum of US Dollars________________ /s/ Michael T. Flavin - ------------- --------------------------- Date of Receipt Signature of Borrower 15 THIRD SCHEDULE LOAN REPAYMENT 1. Loan Amount : US$2,500,000.00 2. Project : Sarawak MediChem Pharmaceuticals Inc. 3. Loan Period : 48 months 4. Repayment Date : 5. Interest Rate : 7.75% per annum (Compounded annually and calculated on the basis of a 365-day year) 6. Penalty Interest : 7.75% per annum DETAILS OF RELEASE
/s/ Michael T. Flavin - --------------------- ------------------------ Lender Signature Borrower Signature - --------------------- ------------------------ Name Name - --------------------- ------------------------ Designation Designation - --------------------- ------------------------ Date Date 16
