EX-10.1






Exhibit 10.1




SECURITIES PURCHASE AGREEMENT




     This Securities Purchase Agreement (this “Agreement”) is dated as of August 1, 2008,
between EpiCept Corporation, a Delaware corporation (the “Company”), and each purchaser
identified on the signature pages hereto (each, including its successors and assigns, a
“Purchaser” and collectively the “Purchasers”).



     WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an
effective registration statement under the Securities Act of 1933, as amended (the “Securities
Act”), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally
and not jointly, desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.



     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and each Purchaser agree as follows:



ARTICLE I.

DEFINITIONS




     1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for
all purposes of this Agreement, the following terms have the meanings set forth in this Section
1.1:




     “Action” shall have the meaning ascribed to such term in Section 3.1(j).




     “Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person as
such terms are used in and construed under Rule 405 under the Securities Act. With respect
to a Purchaser, any investment fund or managed account that is managed on a discretionary
basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of
such Purchaser.




     “Board of Directors” means the board of directors of the Company.




     “Business Day” means any day except any Saturday, any Sunday, any day which is
a federal legal holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action to close.




     “Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.




     “Closing Date” means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all conditions precedent
to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Securities have been satisfied or waived.



 









 






     “Closing Price” means on any particular date (a) the last reported closing bid
price per share of Common Stock on such date on the Trading Market (as reported by Bloomberg
L.P. at 4:15 p.m. (New York City time)), or (b) if there is no such price on such date, then
the closing bid price on the Trading Market on the date nearest preceding such date (as
reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (c) if the Common Stock
is not then listed or quoted on a Trading Market and if prices for the Common Stock are then
reported in the “pink sheets” published by Pink Sheets LLC (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid price per share
of the Common Stock so reported, or (d) if the shares of Common Stock are not then publicly
traded the fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Purchasers of a majority in interest of the Shares
then outstanding and reasonably acceptable to the Company, the fees and expenses of which
shall be paid by the Company.




     “Commission” means the Securities and Exchange Commission.




     “Common Stock” means the common stock of the Company, par value $0.0001 per
share, and any other class of securities into which such securities may hereafter be
reclassified or changed into.




     “Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.




     “Company Counsel” means Weil Gotshal & Manges LLP, with offices located at 767
Fifth Avenue, New York, NY 10153.




     “Evaluation Date” shall have the meaning ascribed to such term in Section
3.1(r).




     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.




     “Exempt Issuance” means the issuance of (a) shares of Common Stock or options
to employees, officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors established
for such purpose, (b) securities upon the exercise or exchange of or conversion of any
Securities issued hereunder and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of this
Agreement to increase the number of such securities or to decrease the exercise, exchange or
conversion price of such securities and (c) securities issued pursuant to acquisitions or
strategic transactions approved by a majority of the disinterested directors of the Company,
provided that any such issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company in a business



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synergistic with the business of the Company and in which the Company receives benefits
in addition to the investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities.




     “FWS” means Feldman Weinstein & Smith LLP with offices located at 420 Lexington
Avenue, Suite 2620, New York, New York 10170-0002.




     “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).




     “Hercules” means Hercules Technology Growth Capital, Inc. and its affiliates.




     “Indebtedness” shall have the meaning ascribed to such term in Section 3.1(z).




     “Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).




     “Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.




     “Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).




     “Material Permits” shall have the meaning ascribed to such term in Section
3.1(m).




     “Per Share Purchase Price” equals $0.5425, subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of this Agreement.




     “Person” means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint stock
company, government (or an agency or subdivision thereof) or other entity of any kind.




     “Pre-Notice” shall have the meaning ascribed to such term in Section 4.12.




     “Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding, such as a
deposition), whether commenced or threatened.




     “Prospectus” means the final prospectus filed for the Registration Statement.




     “Prospectus Supplement” means the preliminary prospectus supplement to the
Prospectus complying with Rule 424(b) of the Securities Act that is filed with the
Commission and the final prospectus supplement to the Prospectus complying with Rule 424(b)
of the Securities Act that is filed with the Commission and delivered by the Company to each
Purchaser at the Closing.



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     “Purchaser Party” shall have the meaning ascribed to such term in Section 4.8.




     “Registration Statement” means the effective registration statement with
Commission file No. 333-145561 which registers the sale of the Shares, the Warrants and the
Warrant Shares by the Purchasers.




     “Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).




     “Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same effect as such
Rule.




     “SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).




     “Securities” means the Shares, the Warrants and the Warrant Shares.




     “Securities Act” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.




     “Shares” means the shares of Common Stock issued or issuable to each Purchaser
pursuant to this Agreement.




     “Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or reservation
of borrowable shares of Common Stock).




     “Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for Shares and Warrants purchased hereunder as specified below such Purchaser’s name on
the signature page of this Agreement and next to the heading “Subscription Amount,” in
United States dollars and in immediately available funds.




     “Time of Sale Prospectus” means the Prospectus, together with the Prospectus
Supplement, if any, and the free writing prospectuses, if any, used in connection with the
offering of the Securities, including any documents incorporated by reference therein.




     “Trading Day” means a day on which the Common Stock is traded on the Trading
Market or an over-the-counter market, if applicable.




     “Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American Stock Exchange,
The Nasdaq Capital Market, The Nasdaq Global Market, The Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board.




     “Transaction Documents” means this Agreement, the Warrants and any other
documents or agreements executed in connection with the transactions contemplated hereunder.



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     “Transfer Agent” means American Stock Transfer & Trust Company, the current
transfer agent of the Company, with a mailing address of 6201 15th Avenue, 3rd
Floor, Brooklyn, NY 11219 and a facsimile number of 718-921-8327, and any successor transfer
agent of the Company.




     “VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted for
trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:02 p.m. (New York City time); (b) if the OTC Bulletin Board is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in
the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (d) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good faith by the
Purchasers of a majority in interest of the Shares then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the Company.




     “Warrants” means, collectively, the Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall
be exercisable on or after the date hereof and have a term of exercise equal to 5 years from
the Initial Exercise Date, in the form of Exhibit A attached hereto.




     “Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.



ARTICLE II.

PURCHASE AND SALE




     2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set
forth herein, substantially concurrent with the execution and delivery of this Agreement by the
parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree
to purchase, up to an aggregate of $3,000,000 of Shares and Warrants. Each Purchaser shall deliver
to the Company, via wire transfer or a certified check, immediately available funds equal to its
Subscription Amount and the Company shall deliver to each Purchaser its respective Shares and a
Warrant as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver
the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices
of FWS or such other location as the parties shall mutually agree.



     2.2 Deliveries.



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     (a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered
to each Purchaser the following:




     (i) this Agreement duly executed by the Company;




     (ii) a legal opinion of Company Counsel, substantially in the form of
Exhibit B attached hereto;




     (iii) a copy of the irrevocable instructions to the Company’s transfer agent
instructing the transfer agent to deliver via the Depository Trust Company Deposit
Withdrawal Agent Commission System (“DWAC”) Shares equal to such Purchaser’s
Subscription Amount divided by the Per Share Purchase Price, registered in the name
of such Purchaser;




     (iv) a Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 50% of the number of Shares purchased by
each Purchaser, with an exercise price equal to $0.48, subject to adjustment therein
(such Warrant certificate may be delivered within three Trading Days of the Closing
Date); and




     (v) the Prospectus and Prospectus Supplement (unless the conditions set forth
under Rule 172 under the Securities Act have been satisfied).




     (b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:




     (i) this Agreement duly executed by such Purchaser; and




     (ii) such Purchaser’s Subscription Amount by wire transfer to the account as
specified in writing by the Company.



     2.3 Closing Conditions.




     (a) The obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:




     (i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Purchasers contained herein;




     (ii) all obligations, covenants and agreements of each Purchaser required to be
performed at or prior to the Closing Date shall have been performed; and




     (iii) the delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement.




     (b) The respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:



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     (i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein;




     (ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;




     (iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;




     (iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and




     (v) from the date hereof to the Closing Date, trading in the Common Stock shall
not have been suspended by the Commission or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the Closing), and, at any time prior
to the Closing Date, trading in securities generally as reported by Bloomberg L.P.
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of each Purchaser,
makes it impracticable or inadvisable to purchase the Securities at the Closing.



ARTICLE III.

REPRESENTATIONS AND WARRANTIES




     3.1 Representations and Warranties of the Company. Except as set forth in the
Registration Statement, the Prospectus, the Prospectus Supplement or the SEC Reports, which the
Registration Statement, Prospectus, Prospectus Supplement and SEC Reports shall qualify any
representation or warranty otherwise made herein to the extent of such disclosure, the Company
hereby makes the following representations and warranties set forth below to each Purchaser:




     (a) Subsidiaries. The Company owns, directly or indirectly, all of the capital
stock or other equity interests of each of its direct and indirect subsidiaries
(individually, a “Subsidiary”) free and clear of any Liens, (except for Liens held
by Hercules), and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities.




     (b) Organization and Qualification. The Company and each of the Subsidiaries
is an entity duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as applicable),
with the requisite power and authority to own and use its properties and



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assets and to carry on its business as currently conducted. Neither the Company nor
any Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or charter
documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as the case may
be, could not have or reasonably be expected to result in (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document with respect to the
Company, (ii) a material adverse effect on the results of operations, assets, business or
financial condition of the Company and the Subsidiaries, taken as a whole, or (iii) a
material adverse effect on the Company’s ability to perform in any material respect on a
timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.




     (c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by each of the
Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and no further action is
required by the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals. Each Transaction Document
has been (or upon delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its terms,
except (i) as limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting enforcement of
creditors’ rights generally (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) that rights to
indemnification and contribution thereunder may be limited by federal or state securities
laws or public policy relating thereto.




     (d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company, the issuance and sale of the Securities and the consummation by
the Company of the other transactions contemplated hereby and thereby do not and will not
(i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, result in the creation of any Lien upon any of the
properties or assets of the Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other



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understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected (except as may have
been waived) or (iii) subject to the Required Approvals, conflict with or result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected; except in the case of
each of clauses (ii) and (iii), such as would not have a Material Adverse Effect.




     (e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by the Company of
the Transaction Documents, other than (i) filings required pursuant to Section 4.4 of this
Agreement, (ii) the filing with the Commission of the Prospectus Supplement, (iii)
application(s) to each applicable Trading Market for the listing of the Securities for
trading thereon in the time and manner required thereby and (iv) such filings as are
required to be made under applicable state securities laws, FINRA and the Trading Market
(collectively, the “Required Approvals”).




     (f) Issuance of the Securities; Registration. The Securities are duly
authorized and, when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than any restrictions on transfer provided herein.
The Warrant Shares, when issued in accordance with the terms of the Warrants, will be
validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company. The Company has reserved from its duly authorized capital stock the maximum number
of shares of Common Stock issuable pursuant to this Agreement. The Company has prepared and
filed the Registration Statement in conformity with the requirements of the Securities Act,
which became effective on September 18, 2007 (the “Effective Date”), including the
Prospectus, and such amendments and supplements thereto as may have been required to the
date of this Agreement. The Registration Statement is effective under the Securities Act
and no stop order preventing or suspending the effectiveness of the Registration Statement
or suspending or preventing the use of the Prospectus has been issued by the Commission and
no proceedings for that purpose have been instituted or, to the knowledge of the Company,
are threatened by the Commission. The Company, if required by the rules and regulations of
the Commission, proposes to file the Prospectus, with the Commission pursuant to Rule
424(b). At the time the Registration Statement and any amendments thereto became effective,
at the date of this Agreement and at the Closing Date, the Registration Statement and any
amendments thereto conformed and will conform in all material respects to the requirements
of the Securities Act and did not and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary to make
the statements therein not misleading; and the Prospectus and any amendments or supplements
thereto, at time the Prospectus or any amendment or supplement thereto was issued and at the
Closing Date, conformed and will conform in all material respects to the requirements of the
Securities Act and did not and will not



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contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances under which
they were made, not misleading.




     (g) Capitalization. The capitalization of the Company is as described in the
Registration Statement and the SEC Reports. The Company has not issued any capital stock
since its most recently filed periodic report under the Exchange Act, other than as
described in SEC Reports, or pursuant to the exercise of employee stock options under the
Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant
to the Company’s employee stock purchase plans and pursuant to the conversion or exercise of
Common Stock Equivalents. No Person has any right of first refusal, preemptive right, right
of participation, or any similar right to participate in the transactions contemplated by
the Transaction Documents. Except as a result of the purchase and sale of the Securities
and as described in the Registration Statement, Prospectus, Prospectus Supplement or the SEC
Reports, there are no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may become bound
to issue additional shares of Common Stock or Common Stock Equivalents. Except as disclosed
in the Prospectus, Prospectus Supplement and the Registration Statement or the SEC Reports,
the issuance and sale of the Securities will not obligate the Company to issue shares of
Common Stock or other securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. No further approval or authorization of any
stockholder, the Board of Directors or others is required for the issuance and sale of the
Securities. Except as described in the Registration Statement and the SEC Reports, there
are no stockholders agreements, voting agreements or other similar agreements with respect
to the Company’s capital stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.




     (h) SEC Reports; Financial Statements. The Company has complied in all
material respects with requirements to file all reports, schedules, forms, statements and
other documents required to be filed by the Company under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the year preceding the date hereof (or such
shorter period as the Company was required by law or regulation to file such material) (the
foregoing materials, including the exhibits thereto and documents incorporated by reference
therein, being collectively referred to herein as the “SEC Reports”) on a timely
basis or has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective dates, the
SEC Reports complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and the rules and regulation of the Commission



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promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The financial statements of the
Company included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with respect thereto
as in effect at the time of filing. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied on a
consistent basis during the periods involved (“GAAP”), except as may be otherwise
specified in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and cash flows
for the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.




     (i) Material Changes; Undisclosed Events, Liabilities or Developments. Since
the date of the latest audited financial statements included within the SEC Reports or the
Registration Statement, except as disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that has had or that would result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A)
trade payables and accrued expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made with the Commission,
(iii) the Company has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares of its
capital stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company equity compensation plans. The
Company does not have pending before the Commission any request for confidential treatment
of information. Except for the issuance of the Securities contemplated by this Agreement or
as set forth in the Prospectus Supplement or the SEC Reports, no event, liability or
development has occurred or exists with respect to the Company or its Subsidiaries or their
respective business, properties, operations or financial condition, that would be required
to be disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed prior to the date
of this Agreement or in the Time of Sale Prospectus.




     (j) Litigation. Except as disclosed in the Registration Statement, the
Prospectus, the Prospectus Supplement or the SEC Reports, there is no action, suit, inquiry,
notice of violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign) (collectively, an
“Action”) which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii) would, if



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there were an unfavorable decision, have a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject
of any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of the
Company. To the knowledge of the Company, the Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.




     (k) Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company which would
have a Material Adverse Effect. No executive officer, to the knowledge of the Company, is
in violation of any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any other contract or
agreement or any restrictive covenant, and, to the Company’s knowledge, the continued
employment of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters. The Company and
its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in compliance would not,
individually or in the aggregate, have a Material Adverse Effect.




     (l) Compliance. Except as disclosed in the Registration Statement, the
Prospectus, the Prospectus Supplement or the SEC Reports, neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred that has
not been waived that, with notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a
claim that it is in default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or
(iii) is or has been in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws
applicable to its business and all such laws that affect the environment, except in each
case as would not have a Material Adverse Effect.




     (m) Regulatory Permits. Except as disclosed in the Registration Statement, the
Prospectus, the Prospectus Supplement or the SEC Reports, the Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the failure to possess such permits
would not have a Material Adverse Effect (“Material Permits”), and neither the
Company nor any Subsidiary has received any notice of proceedings relating to the revocation
or modification of any Material Permit.



12









 






     (n) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable title in all
personal property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens in favor of
Hercules and for Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property by the
Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in
compliance.




     (o) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual
property rights and similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to so have would
have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
Neither the Company nor any Subsidiary has received a notice (written or otherwise) that any
of the Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any Person. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing infringement by
another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries
have taken reasonable measures to protect the secrecy, confidentiality and value of all of
their intellectual properties, except where failure to do so would not, individually or in
the aggregate, have a Material Adverse Effect.




     (p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance coverage. To the
knowledge of the Company, such insurance contracts are accurate and complete. Neither the
Company nor any Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business without a significant
increase in cost.




     (q) Transactions With Affiliates and Employees. Except as set forth in the
Registration Statement or the SEC Reports, none of the officers or directors of the Company
and, to the knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer, director,
trustee or partner, other than for (i) payment of salary or consulting fees for services



13









 







rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii)
other employee benefits, including stock option agreements or any other similar arrangements
under any equity plan of the Company.




     (r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date. The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management’s general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The Company has
established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and designed such disclosure controls and procedures to
ensure that information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms. The Company’s certifying
officers have evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the Company’s most recently filed periodic
report under the Exchange Act (such date, the “Evaluation Date”). The Company
presented in its most recently filed periodic report under the Exchange Act the conclusions
of the certifying officers about the effectiveness of the disclosure controls and procedures
based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no changes in the Company’s internal control over financial reporting (as such term is
defined in the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.




     (s) Certain Fees. Except as otherwise provided in the Transaction Documents,
no brokerage or finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the Transaction Documents.
The Purchasers shall have no obligation with respect to any fees or with respect to any
claims made by or on behalf of other Persons for fees of a type contemplated in this Section
that may be due in connection with the transactions contemplated by the Transaction
Documents.




     (t) Investment Company. The Company is not, and immediately after receipt of
payment for the Securities, will not be an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.




     (u) Registration Rights. Except as disclosed in the Registration Statement or
the SEC Reports, no Person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company, which rights are currently not



14









 







satisfied except for the registration of additional shares that may be issued pursuant
to a warrant issued to Hercules.




     (v) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such registration. The
Company has not, in the 12 months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or quoted to the effect that
the Company is not in compliance with the listing or maintenance requirements of such
Trading Market.




     (w) Application of Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result of the
Purchasers and the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company’s issuance of
the Securities and the Purchasers’ ownership of the Securities.




     (x) Disclosure. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company confirms that
neither it nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or might
constitute material, non-public information which is not otherwise disclosed in the
Prospectus Supplement. The Company understands and confirms that the Purchasers will rely
on the foregoing representation in effecting transactions in securities of the Company. All
disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company,
its business and the transactions contemplated hereby is true and correct and does not
contain any untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances under which they
were made, not misleading. The press releases disseminated by the Company during the twelve
months preceding the date of this Agreement taken as a whole do not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the circumstances under
which they were made and when made, not misleading. The Company acknowledges and agrees
that no Purchaser makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in Section 3.2
hereof.




     (y) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under



15









 







circumstances that would cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of any applicable stockholder approval
provisions of any Trading Market on which any of the securities of the Company are listed or
designated.




     (z) “Indebtedness” The Prospectus, Prospectus Supplement and the SEC Reports
sets forth as of the dates specified therein all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary
has commitments. For the purposes of this Agreement, “Indebtedness” means (a) any
liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade
accounts payable incurred in the ordinary course of business) and (b) all guaranties,
endorsements and other contingent obligations in respect of indebtedness of others, whether
or not the same are or should be reflected in the Company’s balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business. Neither the Company
nor any Subsidiary is in default with respect to any Indebtedness.




     (aa) Tax Status. Except for matters that would not, individually or in the
aggregate, have a Material Adverse Effect, the Company and each Subsidiary has filed all
necessary federal, state and foreign income and franchise tax returns and has paid or
accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency
which has been asserted or threatened against the Company or any Subsidiary.




     (bb) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has (i) directly or
indirectly, used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully
any contribution made by the Company (or made by any person acting on its behalf of which
the Company is aware) which is in violation of law, or (iv) violated in any material respect
any provision of the Foreign Corrupt Practices Act of 1977, as amended.




     (cc) Accountants. The Company’s accounting firm is Deloitte & Touche LLP. To
the knowledge of the Company, such accounting firm who the Company expects will express its
opinion with respect to the financial statements to be included in the Company’s Annual
Report on Form 10-K for the year ending December 31, 2008 is a registered public accounting
firm as required by the Exchange Act.




     (dd) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated thereby and any advice given by
any Purchaser or any of their respective representatives or agents in connection with the
Transaction Documents and the transactions



16









 







contemplated thereby is merely incidental to the Purchasers’ purchase of the
Securities. The Company further represents to each Purchaser that the Company’s decision to
enter into this Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company and its
representatives.




     (ee) Acknowledgement Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(e)
and 4.13 hereof), it is understood and acknowledged by the Company (i) that none of the
Purchasers have been asked by the Company to agree, nor has any Purchaser agreed, to desist
from purchasing or selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities for any
specified term; (ii) that past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or “derivative” transactions, before
or after the closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities; (iii) that any Purchaser, and
counter-parties in “derivative” transactions to which any such Purchaser is a party,
directly or indirectly, presently may have a “short” position in the Common Stock, and (iv)
that each Purchaser shall not be deemed to have any affiliation with or control over any
arm’s length counter-party in any “derivative” transaction. The Company further understands
and acknowledges that (a) one or more Purchasers may engage in hedging activities at various
times during the period that the Securities are outstanding, including, without limitation,
during the periods that the value of the Warrant Shares deliverable with respect to
Securities are being determined and (b) such hedging activities (if any) could reduce the
value of the existing stockholders’ equity interests in the Company at and after the time
that the hedging activities are being conducted. The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the Transaction
Documents.




     (ff) Regulation M Compliance. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or
to result in the stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased,
or, paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid
or agreed to pay to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii), compensation
paid to the Company’s placement agent in connection with the placement of the Securities.



     3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and
for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows:




     (a) Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its organization
with full right, corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by this Agreement and otherwise to carry out



17









 







its obligations hereunder and thereunder. The execution and delivery of this Agreement
and performance by such Purchaser of the transactions contemplated by this Agreement have
been duly authorized by all necessary corporate or similar action on the part of such
Purchaser. Each Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser, enforceable against
it in accordance with its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law.




     (b) Own Account. Such Purchaser is acquiring the Securities as principal for
its own account and not with a view to or for distributing or reselling such Securities or
any part thereof in violation of the Securities Act or any applicable state securities law,
has no present intention of distributing any of such Securities in violation of the
Securities Act or any applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding the
distribution of such Securities (this representation and warranty not limiting such
Purchaser’s right to sell the Securities immediately pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state securities laws) in violation
of the Securities Act or any applicable state securities law. Such Purchaser is acquiring
the Securities hereunder in the ordinary course of its business.




     (c) Purchaser Status. At the time such Purchaser was offered the Securities,
it was, and at the date hereof it is, and on each date on which it exercises any Warrants,
it will be: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as
defined in Rule 144A(a) under the Securities Act. Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act.




     (d) Experience of Such Purchaser. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser acknowledges that an investment in the Securities involves a high degree of
risk and that such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such investment.




     (e) Short Sales and Confidentiality Prior To The Date Hereof. Other than
consummating the transactions contemplated hereunder, such Purchaser has not, nor has any
Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or
indirectly executed any purchases or sales, including Short Sales, of the securities of the
Company during the period commencing from the time that such Purchaser first received a term
sheet (written or oral) from the Company or any other



18









 







Person representing the Company setting forth the material terms of the transactions
contemplated hereunder (“Discussion Time”). Notwithstanding the foregoing, in the
case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio managers have
no direct knowledge of the investment decisions made by the portfolio managers managing
other portions of such Purchaser’s assets, the representation set forth above shall only
apply with respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement. Other than to
other Persons party to this Agreement, such Purchaser has maintained the confidentiality of
all disclosures made to it in connection with this transaction (including the existence and
terms of this transaction). The Purchasers acknowledge that they have read the Prospectus,
the Prospectus Supplement, the Registration Statement and the SEC Reports. The Purchasers
have not received any written documents that would constitute an offer to sell, or the
solicitation of an offer to buy the Securities or that would constitute a prospectus under
the Securities Act, other than the Prospectus and the Prospectus Supplement.



ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES




     4.1 Warrant Shares. If all or any portion of a Warrant is exercised at a time when
there is an effective registration statement to cover the issuance or resale of the Warrant Shares
or if the Warrant is exercised via cashless exercise, the Warrant Shares issued pursuant to any
such exercise shall be issued free of all legends. If at any time following the date hereof the
Registration Statement (or any subsequent registration statement registering the Warrant Shares) is
not effective or is not otherwise available for the sale or resale of the Warrant Shares, the
Company shall immediately notify the holders of the Warrants in writing that such registration
statement is not then effective and thereafter shall promptly notify such holders when the
registration statement is effective again and available for the sale or resale of the Warrant
Shares.



     4.2 Furnishing of Information. Until the earliest of the time that (i) no Purchaser
owns Securities or (ii) the Warrants have expired, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all reports required to
be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is
not then subject to the reporting requirements of the Exchange Act. As long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c)
such information as is required for the Purchasers to sell the Securities under Rule 144. The
Company further covenants that it will take such further action as any holder of Securities may
reasonably request, to the extent required from time to time to enable such Person to sell such
Securities without registration under the Securities Act within the requirements of the exemption
provided by Rule 144.



     4.3 Integration. The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act)
that would be integrated with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market such that it would require stockholder approval prior to the



19









 







closing of such other transaction unless stockholder approval is obtained before the closing
of such subsequent transaction.



     4.4 Securities Laws Disclosure; Publicity. The Company shall (a) by 9:30 a.m. (New
York City time) on the Business Day immediately following the date hereof, issue a press release
disclosing the material terms of the transactions contemplated hereby, and (b) within the time
period prescribed by the Exchange Act, file a Current Report on Form 8-K disclosing the material
terms of the transactions contemplated hereby and including the Transaction Documents as exhibits
thereto. The Company and each Purchaser shall consult with each other in issuing any other press
releases with respect to the transactions contemplated hereby, and neither the Company nor any
Purchaser shall issue any such press release or otherwise make any such public statement without
the prior consent of the Company, with respect to any press release of any Purchaser, or without
the prior consent of each Purchaser, with respect to any press release of the Company, which
consent shall not unreasonably be withheld or delayed, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing
with the Commission or any regulatory agency or Trading Market, without the prior written consent
of such Purchaser, except (i) as required by federal securities law in connection with the filing
of final Transaction Documents (including signature pages thereto) with the Commission and (ii) to
the extent such disclosure is required by law or Trading Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure permitted under this
clause (ii).



     4.5 Stockholder Rights Plan. No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person”
under any control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such
plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers.



     4.6 Non-Public Information. Except with respect to the material terms and conditions
of the transactions contemplated by the Transaction Documents, the Company covenants and agrees
that neither it nor any other Person acting on its behalf will provide any Purchaser or its agents
or counsel with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the
Company.



     4.7 Use of Proceeds. Except as set forth in the Prospectus Supplement, the Company
shall use the net proceeds from the sale of the Securities hereunder for working capital purposes
and shall not use such proceeds for (a) the redemption of any Common Stock or Common Stock
Equivalents or (b) the settlement of any outstanding material litigation.



20








 





     4.8 Indemnification of Purchasers. Subject to the provisions of this Section 4.8,
the Company will indemnify and hold each Purchaser and its directors, officers, stockholders,
members, partners, employees and agents (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any other title), each
Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, stockholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title) of such controlling
persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any
such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser in any capacity,
or any of them or their respective Affiliates, by any stockholder of the Company who is not an
Affiliate of such Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such Purchaser’s
representations, warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any violations by the Purchaser
of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance). If any action shall be brought against any
Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right
to assume the defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such counsel shall be
at the expense of such Purchaser Party except to the extent that (i) the employment thereof has
been specifically authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Purchaser Party, in which case
the Company shall be responsible for the reasonable fees and expenses of no more than one such
separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (i)
for any settlement by a Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent that a
loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement
or in the other Transaction Documents.



     4.9 Reservation of Common Stock. As of the date hereof, the Company has reserved and
the Company shall continue to reserve and keep available at all times, free of preemptive rights, a
sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Shares
pursuant to this Agreement.



     4.10 Equal Treatment of Purchasers. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any of the



21









 




Transaction Documents unless the same consideration is also offered to all of the parties to
the Transaction Documents. For clarification purposes, this provision constitutes a separate right
granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is
intended for the Company to treat the Purchasers as a class and shall not in any way be construed
as the Purchasers acting in concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.




     4.11 Subsequent Equity Sales.




     (a) From the date hereof until 7 days from the date hereof, the Company shall not issue
any Common Stock or Common Stock Equivalents.




     (b) From the date hereof until such time as no Purchaser holds any of the Securities,
the Company shall be prohibited from effecting or entering into an agreement to effect any
Subsequent Financing involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company issues or sells (i) any debt or
equity securities that are convertible into, exchangeable or exercisable for, or include the
right to receive additional shares of Common Stock either (A) at a conversion, exercise or
exchange rate or other price that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the initial issuance of such
debt or equity securities, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such debt or equity
security or upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock or (ii) enters
into any agreement, including, but not limited to, an equity line of credit, whereby the
Company may sell securities at a future determined price. Any Purchaser shall be entitled
to obtain injunctive relief against the Company to preclude any such issuance, which remedy
shall be in addition to any right to collect damages.




     (c) Notwithstanding the foregoing, this Section 4.12 shall not apply in respect of an
Exempt Issuance.



     4.12 Short Sales and Confidentiality After The Date Hereof. Each Purchaser, severally
and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on
its behalf or pursuant to any understanding with it will execute any Short Sales during the period
commencing at the Discussion Time and ending at the time that the transactions contemplated by this
Agreement are first publicly announced as described in Section 4.4. Each Purchaser, severally and
not jointly with the other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as described in Section 4.4,
such Purchaser will maintain the confidentiality of the existence and terms of this transaction.
Notwithstanding the foregoing, no Purchaser makes any representation, warranty or covenant hereby
that it will not engage in Short Sales in the securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced as described in Section
4.4. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and
the portfolio managers have no direct knowledge of the investment decisions made by the portfolio
managers managing other portions



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of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the
portion of assets managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement.




     4.13  Delivery of Securities After Closing. The Company shall deliver, or cause to be
delivered, the respective Securities purchased by each Purchaser to such Purchaser within 3 Trading
Days of the Closing Date.



     4.14 Capital Changes. Until the one year anniversary of the Closing Date, the Company
shall not undertake a reverse or forward stock split or reclassification of the Common Stock
without the prior written consent of the Purchasers holding a majority in interest of the Shares.



ARTICLE V.

MISCELLANEOUS




     5.1 Termination. This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between
the Company and the other Purchasers, by written notice to the other parties, if the Closing has
not been consummated on or before August 6, 2008; provided, however, that no such
termination will affect the right of any party to sue for any breach by the other party (or
parties).



     5.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the delivery
of any Securities to the Purchasers.



     5.3 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, the Prospectus and the Prospectus Supplement, contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties acknowledge have
been merged into such documents, exhibits and schedules.



     5.4 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the 2nd Trading Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon
actual receipt by the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached hereto.



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     5.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company and the
Purchasers of at least 85% of the Shares still held by the Purchasers or, in the case of a waiver,
by the party against whom enforcement of any such waived provision is sought. No waiver of any
default with respect to any provision, condition or requirement of this Agreement shall be deemed
to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right.



     5.6 Headings. The headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.



     5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of each
Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this
Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided such
transferee agrees in writing to be bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the “Purchasers.”



     5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in
Section 4.8.



     5.9 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of
Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to the enforcement of
any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by
law. If either party shall commence an action or proceeding to enforce any provisions of the
Transaction Documents, then the prevailing party in such action or proceeding



24









 




shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such action or proceeding.




     5.10 Survival. The representations and warranties contained herein shall survive the
Closing and the delivery of the Shares and Warrant Shares.



     5.11 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature
page were an original thereof.



     5.12 Severability. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.



     5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein
provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights; provided, however, in the case
of a rescission of an exercise of a Warrant, the Purchaser shall be required to return any shares
of Common Stock delivered in connection with any such rescinded exercise notice.



     5.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant
for a new certificate or instrument under such circumstances shall also pay any reasonable
third-party costs (including customary indemnity) associated with the issuance of such replacement
Securities.



     5.15 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Purchasers and the Company will be



25









 




entitled to specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive and not to assert in
any action for specific performance of any such obligation the defense that a remedy at law would
be adequate.




     5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent
of any such restoration the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.



     5.17 Independent Nature of Purchasers’ Obligations and Rights. The obligations of
each Purchaser under any Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the performance or
non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in their review and negotiation of the
Transaction Documents. For reasons of administrative convenience only, Purchasers and their
respective counsel have chosen to communicate with the Company through FWS. FWS does not represent
the Purchasers but only Rodman & Renshaw LLC. The Company has elected to provide all Purchasers
with the same terms and Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.



     5.18 Liquidated Damages. The Company’s obligations to pay any partial liquidated
damages or other amounts owing under the Transaction Documents is a continuing obligation of the
Company and shall not terminate until all unpaid partial liquidated damages and other amounts have
been paid notwithstanding the fact that the instrument or security pursuant to which such partial
liquidated damages or other amounts are due and payable shall have been canceled.



     5.19 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not be a Business Day,
then such action may be taken or such right may be exercised on the next succeeding Business Day.



26









 





     5.20 Construction. The parties agree that each of them and/or their respective counsel
has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal
rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments
hereto.



     5.21 Waiver of Jury Trial. In any action, suit or proceeding in any jurisdiction
brought by any party against any other party, the parties each knowingly and intentionally, to the
greatest extent permitted by applicable law, hereby absolutely, unconditionally, irrevocably and
expressly waives forever trial by jury.



(Signature Pages Follow)




27









 








          IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.



	 	 	 	 	 	 	 	 	 
	EPICEPT CORPORATION	 	Address for Notice:	 	 
	 

	 	 	 	 	 	777 Old Saw Mill River Road	 	 
	 

	 	 	 	 	 	Tarrytown, NY 10591	 	 
	 

	 	 	 	 	 	Attn: John V. Talley,	 	 
	 

	 	 	 	 	 	President & CEO	 	 
	By:

	 	 	 	 	 	Fax: 914-606-3501	 	 
	 

	 	 

Name:
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 






With a copy to (which shall not constitute notice):




Alexander D. Lynch, Esq.

Weil Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10153

Fax: 212-310-8007




[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]




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[PURCHASER SIGNATURE PAGES TO EPCT SECURITIES PURCHASE AGREEMENT]




     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.



Name of Purchaser:
_________________________________________________________





Signature of Authorized Signatory of Purchaser:
__________________________________




Name of Authorized Signatory:
________________________________________________




Title of Authorized Signatory:
_________________________________________________




Email Address of Purchaser:
__________________________________________________




Fax Number of Purchaser:
____________________________________________________





Address for Notice of Purchaser:



Address for Delivery of Securities for Purchaser (if not same as address for notice):



Subscription Amount: $                                        



Shares:                                         



Warrant Shares:                                         



EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]




[SIGNATURE PAGES CONTINUE]





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