EXHIBIT 10.1






SECURITIES PURCHASE AGREEMENT




     This Securities Purchase Agreement (this “Agreement”) is dated as of February 4,
2009, 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: (a)
capitalized terms that are not otherwise defined herein have the meanings given to such terms in
the Debentures (as defined herein), and (b) the following terms have the meanings set forth in this
Section 1.1:




     “Acquiring Person” shall have the meaning ascribed to such term in Section 4.5.




     “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 on which 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, in each case, have been
satisfied or waived.




     “Commission” means the United States 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, pursuant to the terms of the Securities
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.




     “Conversion Shares” means the shares of Common Stock issuable upon conversion
or redemption of the Debentures pursuant to the Indenture.




     “Debentures”
means the 7.5556% Convertible Debentures due 2014,
issued under the Indenture.




     “Escrow Agent” means Bank of New York Mellon.




     “Escrow Agreement” means the escrow agreement entered into as of the date
hereof, by and among the Company, the Purchasers and the Escrow Agent, pursuant to which the
Purchasers shall deposit Subscription Amounts with the Escrow Agent to be applied to the
transactions contemplated hereunder.




     “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 price,
exchange price or conversion price of such securities, except to the extent



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provided therein, (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 (or to the equityholders of a Person) which
is, itself or through its subsidiaries, an operating company or an asset in a business
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 and (d) with the prior written consent of
Rodman & Renshaw.




     “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(aa).




     “Indenture” means that certain Trust Indenture, dated February 9, 2009, between the
Company and The Bank of New York Mellon, as Trustee, pursuant to which the Debentures are
issued.




     “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).




     “Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.




     “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.




     “Preliminary 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 any free writing prospectus complying with Rule 433 of the Securities Act
that is filed with the Commission.



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     “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 prospectus filed with the Registration Statement.




     “Prospectus Supplement” means 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.




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




     “Registration Statement” means the effective registration statement with the
Commission file No. 333-153895 which registers the sale of the Debentures, Warrants and
Underlying Shares.




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




     “Rodman & Renshaw” means Rodman & Renshaw, LLC, the placement agent to the
transactions contemplated hereunder.




     “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.




     “Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.




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




     “Securities” means the Debentures, the Warrants and the Underlying Shares.




     “Securities Act” shall have the meaning ascribed to such term in the preamble
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 Debentures 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.



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     “Subsidiary” means any subsidiary of the Company as set forth on Exhibit 21.1
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, and shall,
where applicable, also include any direct or indirect subsidiary of the Company formed or
acquired after the date thereof.




     “tbg” means Technologie-Beteiligungs Gesellschaft mbH der Deutschen
Ausgleichsbank.




     “Trading Day” means a day on which the principal Trading Market is open for
trading.




     “Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE Alternext US,
NYSE Arca, The Nasdaq Capital Market, The Nasdaq Global Market, The Nasdaq Global Select
Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of
the foregoing).




     “Transaction Documents” means this Agreement, the Indenture, the Form of Note,
the Form of Warrant, the Escrow Agreement, all exhibits and schedules thereto and hereto and
any other documents or agreements executed in connection with the transactions contemplated
hereunder.




     “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.




     “Underlying Shares” means the Conversion Shares and the Warrant Shares.




     “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 the six month anniversary of the date hereof and have a term of exercise
equal to 5 years from the date hereof, 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 $25,000,000 in principal amount of the Debentures and Warrants.
Each Purchaser shall deliver to the Escrow Agent via wire transfer or a certified check of
immediately available funds equal to such Purchaser’s Subscription Amount as set forth on the
signature page hereto executed by such Purchaser, and the Company shall deliver to each Purchaser
its respective Debenture and a Warrant, as determined pursuant to Section 2.2(a), and



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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 Company Counsel or such other
location as the parties shall mutually agree.



     2.2 Deliveries.



          (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) the Escrow Agreement duly executed by the Company;




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




     (iv) a Debenture with a principal amount equal to such Purchaser’s Subscription
Amount, registered in the name of such Purchaser;




     (v) a copy of the fully executed Indenture;




     (vi) a Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to the amounts listed on Exhibit C hereto, with an exercise price equal to $1.035, subject to
adjustment therein; and




     (vii) 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;




     (ii) the Escrow Agreement duly executed by such
Purchaser;




     (iii) a completed Form W-9; and




     (iv) such Purchaser’s Subscription Amount by wire transfer to the account
specified by the Escrow Agent.



     2.3 Closing Conditions.




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




     (i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of such Purchaser contained herein



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(unless as of a specific date therein);




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




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




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




     (i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Company contained herein (unless as of a
specific date therein);




     (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 from the
date hereof 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 Preliminary Prospectus Supplement, the Prospectus
Supplement or the SEC Reports, which Registration Statement, Prospectus, Preliminary Prospectus
Supplement, Prospectus Supplement and SEC Reports shall qualify any



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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 Subsidiaries 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 assets and to carry
on its business as currently conducted. Neither the Company nor any Subsidiary is in
violation nor 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 reasonably be
expected to result in: (i) a material adverse effect on the legality, validity or
enforceability against the Company of any Transaction Document with respect to the Company,
(ii) a material adverse effect on the results of operations, assets, business or condition
(financial or otherwise) 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 to which it is a party 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 to which it is a party 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)



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that rights to indemnification and contribution provisions may be limited by federal or
state securities laws or public policy relating thereto.




     (d) No Conflicts. The execution, delivery and performance by the Company of
the Transaction Documents, the issuance and sale of the Securities and the consummation by
the Company of the other transactions contemplated hereby and thereby to which it is a party
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, (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 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 could not have or reasonably be expected to result in 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 or other entity of any kind, in connection with the execution, delivery and
performance by the Company of the Transaction Documents, other than: (i) the filings
required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of
the Prospectus Supplement, (iii) notice and/or application(s) to each applicable Trading
Market for the issuance and sale of the Securities and the listing of the Underlying Shares
for trading thereon in the time and manner required thereby, (iv) such filings as are
required to be made under applicable federal and state securities laws, FINRA and the
Trading Market, and (v) those already obtained (collectively, the “Required
Approvals”). A press release of the Company is the only action required by the OMX
Nordic Exchange for the listing or quotation of the Underlying Shares thereon.




     (f) Issuance of the Securities. 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 for in the Transaction Documents.
The Underlying Shares, when issued in accordance with the terms of the Transaction
Documents, 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 Common Stock the
maximum number of shares of Common Stock issuable pursuant to this Agreement. The Company
has prepared and filed the Registration



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Statement in conformity with the requirements of the Securities Act, which became
effective on October 21, 2008, including the Prospectus, and such amendments and supplements
thereto as may have been required as of the date of this Agreement. The Registration
Statement is effective under the Securities Act, and to the knowledge of the Company, 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, shall file the Prospectus with the Commission pursuant to Rules 424(b) or 433
under the Securities Act. 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 the time the Prospectus or any amendment or supplement
thereto was issued as of their respective dates and the Closing Date, conformed in all
material respects to the requirements of the Securities Act and did not and will not 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, the Prospectus, the Preliminary Prospectus Supplement, the
Prospectus Supplement 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 the Registration Statement, the Prospectus, the Preliminary Prospectus
Supplement, the Prospectus Supplement and the 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 and/or exercise of Common Stock Equivalents outstanding. 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, the Prospectus, the Preliminary Prospectus Supplement, the
Prospectus Supplement and 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, the Preliminary Prospectus Supplement,
the 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



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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. Except as set forth in the
Agreement and those approvals which may have already been received (if any), 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 one year period immediately preceding
and including 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
regulations of the Commission 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 Company is not
an issuer subject to Rule 144(i) under the Securities Act. 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, Prospectus, the Preliminary
Prospectus Supplement and the Prospectus Supplement, (i) there has been no event, occurrence
or development that has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities



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(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 required
to be 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 Preliminary Prospectus
Supplement, the Prospectus Supplement or SEC Reports, no event, liability, fact,
circumstance, occurrence or development has occurred or exists with respect to the Company
or its Subsidiaries or their respective business, properties, operations, assets 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 Preliminary Prospectus
Supplement or the Prospectus Supplement.




     (j) Litigation. Except as disclosed in the Registration Statement, the
Prospectus, the Preliminary Prospectus Supplement, 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) could, if there were an unfavorable decision, reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is 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 of the Company or any current or former
director or officer of the Company in their capacity as an officer or director 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 could
reasonably be expected to result in 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



12









 







with respect to any of the foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and applicable 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 could not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.




     (l) Compliance. Except as disclosed in the Registration Statement, the
Prospectus, the Preliminary Prospectus Supplement, 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, could 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 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 judgment, decree or order of any
court, arbitrator or governmental body or (iii) is or has been in violation of any statute,
rule, ordinance 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 could not reasonably be expected to have a
Material Adverse Effect.




     (m) Regulatory Permits. Except as disclosed in the Registration Statement, the
Prospectus, the Preliminary Prospectus Supplement, 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, the
Prospectus the Preliminary Prospectus Supplement or the Prospectus Supplement, except where
the failure to possess such permits could not reasonably be expected to result in 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.




     (n) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them that is material to the business of
the Company and the Subsidiaries 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



13









 







marks, trade names, trade secrets, inventions, copyrights, licenses and other
intellectual property rights currently employed by them and similar rights as described in
the Prospectus, the Preliminary Prospectus Supplement or the Prospectus Supplement as
necessary or material for use in connection with the business currently operated by them
except where the failure to do so could not reasonably be expected to 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 could not, individually or in the
aggregate, reasonably be expected to 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 disclosed in the the
SEC Reports, the Registration Statement, the Prospectus, the Preliminary Prospectus
Supplement or the Prospectus Supplement, 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, in each case in excess of $120,000, other than for: (i) payment of
compensation or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including equity
compensation 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)



14









 







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 for commissions, fees and expenses payable to Rodman
& Renshaw, and as otherwise described in the SEC Reports, the Registration Statement, the
Prospectus, the Preliminary Prospectus Supplement, or the Prospectus Supplement, 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,
the Prospectus, the Preliminary Prospectus Supplement, the Prospectus Supplement 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 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.



15









 






     (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 Third
Amended and Restated 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
Registration Statement, the Prospectus, the Preliminary Prospectus Supplement, the
Prospectus Supplement or the SEC Reports. The Company understands and confirms that the
Purchasers will rely on the foregoing representation in effecting transactions in securities
of the Company. All of the disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company, its business and the transactions contemplated hereby is
included in, or incorporated by reference in, the Registration Statement and the Prospectus
Supplement. 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, to the knowledge of the Company, any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any security or solicited any
offers to buy any security, under circumstances 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. The Company believes that the issuance
and sale of the Securities hereunder does not contravene in any material respect the rules
and regulations of the Trading Market.




     (z) Indebtedness. The Registration Statement, the Prospectus, the Preliminary
Prospectus Supplement, the Prospectus Supplement and the SEC Reports set 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 (x) any



16









 







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 (y) 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 material default with respect to any Indebtedness.




     (aa) Tax Status. Except for matters that could not, individually or in the
aggregate, reasonably be expected to result in 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. The
Company expects such accounting firm 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 ended
December 31, 2008.




     (dd) Seniority. As of the Closing Date, except for the senior secured loan
held by Hercules, no Indebtedness or other claim against the Company is senior to the
Debentures in right of payment, whether with respect to interest or upon liquidation or
dissolution, or otherwise, other than indebtedness secured by purchase money security
interests (which is senior only as to underlying assets covered thereby) and capital lease
obligations (which is senior only as to the property covered thereby). The loan held by tbg
and the $1,000,000 aggregate principal amount of Subordinated Convertible Notes of the
Company due April 10, 2009 shall be pari passu in right of payment with the Debentures.




     (ee) 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



17









 







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
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.




     (ff) Acknowledgment 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 that: (i) none of the
Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist
from any lawful 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) any lawful 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 and (iii)
any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser
is a party, directly or indirectly, may presently have a lawful “short” position in the
Common Stock. The Company further understands and acknowledges that (y) one or more
Purchasers may engage in lawful hedging activities at various times during the period that
the Securities are outstanding, including, without limitation, during the periods that the
value of the Underlying Shares deliverable with respect to Securities are being determined,
and (z) such lawful 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 lawful
hedging activities do not constitute a breach of any of the Transaction Documents.




     (gg) 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 (unless as of a specific date therein):




     (a) Organization; Authority. Such Purchaser is either an individual or an
entity duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate, limited liability company or



18









 







partnership power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the Transaction Documents
have been duly authorized by all necessary corporate, partnership, limited liability company
or similar action, as applicable, 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) Non-Contravention. The execution, delivery and performance of this
Agreement by such Purchaser, and the consummation by such Purchaser of the transactions
contemplated hereby, do not (i) contravene or conflict with the organizational documents of
such Purchaser; (ii) constitute a violation of any provision of any federal, state, local or
foreign law, rule, regulation, order or decree applicable to such Purchaser; or (iii)
constitute a default or require any consent under, give rise to any right of termination,
cancellation or acceleration of, or to a loss of any material benefit to which such
Purchaser is entitled under, or result in the creation or imposition of any lien, claim or
encumbrance on any asset of the such Purchaser under, any material contract to which such
Purchaser is a party or any material permit, license or similar right relating to such
Purchaser or by which such Purchaser may be bound or affected.




     (c) Litigation. Such Purchaser is not a party to or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government agency or
instrumentality that is reasonably likely to prevent, enjoin, alter, challenge or delay the
consummation of the transactions contemplated by this Agreement.




     (d) 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, the Exchange 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 in violation of the Securities Act, the Exchange Act or any
applicable state securities law (this representation and warranty not limiting such
Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise
in compliance with applicable federal and state securities laws). Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its business.





19











 






     (e) Purchaser Status. At the time such Purchaser was offered the Securities,
it was, and as of the date hereof it is, and on each date on which it exercises any Warrants
or converts any Debentures, it will be either: (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.




     (f) 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.
Such Purchaser understands that nothing in the Agreement or any other materials presented to
the Purchaser in connection with the purchase and sale of the Securities constitutes legal,
tax or investment advice. Such Purchaser acknowledges that it must rely on legal, tax and
investment advisors of its own choosing in connection with its purchase of the Securities.




     (g) Certain Transactions and Confidentiality. Other than consummating the
transactions contemplated hereunder, such Purchaser has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such Purchaser,
executed any purchases or sales, including Short Sales, of the securities of the Company
during the period commencing as of the time that such Purchaser first received a term sheet
(oral), prospectus, prospectus supplement or oral offer from the Company or any other Person
representing the Company setting forth the material terms of the transactions contemplated
hereunder and ending immediately prior to the execution hereof. 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). Notwithstanding the
foregoing, for avoidance of doubt, nothing contained herein shall constitute a
representation or warranty, or preclude any lawful actions, with respect to the
identification of the availability of, or securing of, available shares to borrow in order
to effect Short Sales or similar transactions in the future. The Purchasers acknowledge
that they have read the Prospectus, the Preliminary Prospectus Supplement, 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 Preliminary Prospectus Supplement.



20









 






     (h) Diligence. Such Purchaser has adequate information concerning the business
and financial condition of the Company to make an informed decision regarding the purchase
of the Securities. Such Purchaser made its own analysis and decision to enter into this
Agreement based on such due diligence as such Purchaser has deemed appropriate, but in no
instance is such Purchaser relying on any registration statement of the Company registering
securities of the Company.


The Company acknowledges and agrees that the representations contained in Section 3.2 shall not
modify, amend or affect such Purchaser’s right to rely on the Company’s representations and
warranties contained in this Agreement or any representations and warranties contained in any other
Transaction Document or any other document or instrument executed and/or delivered in connection
with this Agreement or the consummation of the transaction contemplated hereby.




ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES




     4.1 Underlying Shares. The Conversion Shares shall be issued free of legends. 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 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 (it being understood and
agreed that the foregoing shall not limit the ability of the Company to issue, or any Purchaser to
sell, any of the Warrant Shares in compliance with applicable federal and state securities laws).
The Company shall deliver any Conversion Shares or Warrant Shares
(assuming, as to Warrant Shares, that the Registration Statement is
effective or upon cashless exercise) to the holders of the Debentures
and Warrants, as the case may be, electronically through the
Depository Trust Company or another established clearing corporation
performing similar functions.


     4.2 Furnishing of Information; Public Information. Until the earliest of the time
that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the Company covenants to
use reasonable commercial efforts to maintain the registration of the Common Stock under Section
12(b) or 12(g) of the Exchange Act and 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) of the Securities Act such
information as is required for the Purchasers to sell the Securities, including without limitation,
under Rule 144 of the Securities Act. 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,
including without limitation, within the requirements of the exemption provided by Rule 144 of the
Securities Act.



     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



21









 







regulations of any Trading Market such that it would require stockholder approval prior to the
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, 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 and press release
disclosing the material terms of the transactions contemplated hereby, and including the
Transaction Documents as exhibits thereto. From and after the issuance of such press release, the
Company shall have publicly disclosed all material, non-public information delivered to any of the
Purchasers by the Company or any of its subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated by the Transaction
Documents. 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 nor 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: (a) as required by federal securities law in connection with the filing
of final Transaction Documents (including signature pages thereto) with the Commission and (b) 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 (b).



     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 with the
Company 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.



22









 





     4.7 Use of Proceeds. Except as set forth in the Prospectus, the Preliminary
Prospectus Supplement, or the Prospectus Supplement, the Company shall use the net proceeds from
the sale of the Securities hereunder for working capital purposes and for the repayment or
reduction of long-term and short-term debt and shall not use such proceeds for the settlement of
any outstanding material litigation.



     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 such 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 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 (y) for any settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (z) 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 and Listing of Securities. The Company shall maintain a reserve from
its duly authorized Common Stock the maximum number of shares of Common Stock



23









 







issuable pursuant to this Agreement, including the Underlying Shares. The Company hereby
agrees to use commercially reasonably efforts to maintain the listing of the Common Stock on the
primary Trading Market, and as soon as reasonably practicable following the Closing to list all of
the Underlying Shares on such Trading Market subject to the terms of the Transaction Documents.
The Company further agrees that if the Company applies to have the Common Stock traded on any other
Trading Market, it will include in such application all of the Underlying Shares, and will take
such other action as is necessary to cause all of the Underlying Shares to be listed on such other
Trading Market as promptly as possible subject to the terms of the Transaction Documents. The
Company will take all action reasonably necessary to continue the listing and trading of its Common
Stock on a Trading Market and will comply in all material respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the Trading Market.



     4.10 Reserved.



     4.11 Subsequent Equity Sales. From the date hereof until 120 days after the Closing
Date, neither the Company nor any Subsidiary shall issue, enter into any agreement to issue or
announce the issuance or proposed issuance of any shares of Common Stock or Common Stock
Equivalents. Notwithstanding the foregoing, this Section 4.11 shall not apply in respect of an
Exempt Issuance.



     4.12 Equal Treatment of Purchasers. No consideration (including any modification of
any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. Further, the Company shall not
make any payment of principal or interest on the Debentures in amounts which are disproportionate
to the respective principal amounts outstanding on the Debentures at any applicable time. 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.



     4.13 Certain Transactions and Confidentiality. 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 purchases or sales, including
Short Sales, of any of the Company’s securities during the period commencing with the execution of
this Agreement and ending at such time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release 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 pursuant to
the initial press release as described in Section 4.4, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction. Notwithstanding the foregoing, and
notwithstanding anything contained in this Agreement to the contrary, the Company expressly
acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby
that it will not engage in effecting transactions in any securities of the Company after the time
that the transactions contemplated by this Agreement are first publicly announced pursuant



24









 







to the initial press release as described in Section 4.4, (ii) no Purchaser shall be
restricted or prohibited from effecting any transactions in any securities of the Company in
accordance with applicable securities laws from and after the time that the transactions
contemplated by this Agreement are first publicly announced pursuant to the initial press release
as described in Section 4.4 and (iii) no Purchaser shall have any duty of confidentiality to the
Company or its Subsidiaries after the issuance of the initial press release 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 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.



     4.14 Delivery of Certificates After Closing. Notwithstanding the provisions of
Article II, 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.



     4.15 Instructions to Escrow Agent. So long as any funds are held by the Escrow Agent
pursuant to the terms of the Escrow Agreement, upon any payment of interest on the Debentures,
conversion of the Debentures or repurchase of the Debentures, as required under the Indenture, the
Company shall provide prior, as to interest and redemption payments, and prompt, as to conversions,
written instructions to the Escrow Agent authorizing the Escrow Agent to release such payments as
may be required to be made to any holder of a Debenture, to the extent funds are then held by the
Escrow Agent pursuant to the terms of the Escrow Agreement. Any failure of the Company to deliver
such instructions, following 3 Trading Days written notice from a holder of a Debenture, shall be
deemed an Event of Default under the Indenture, which Event of Default shall not be subject to any
cure period thereunder.



     4.16 Reimbursement of Escrow Agent. The Company shall reimburse any expenses incurred
by the Escrow Agent in its capacity as Escrow Agent pursuant to the terms of the Escrow Agreement
and shall use commercially reasonable efforts to prevent the Escrow Agent from withdrawing funds
from the funds held pursuant to the Escrow Agreement. In the event that the Escrow Agent
reimburses itself out of the funds held pursuant to the Escrow Agreement, the Company shall
promptly replace such funds upon notice of such withdrawal.



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 February 13, 2009; provided, however, that such termination will
not 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 own advisers, counsel,



25









 







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, the Preliminary Prospectus Supplement, 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 second (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.



     5.5 Amendments; Waivers. No provision of this Agreement may be waived, modified,
supplemented or amended except in a written instrument signed, in the case of an amendment, by the
Company and the Purchasers holding at least 67% in interest of the Securities then outstanding 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 that
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,



26









 







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, stockholders, 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, in addition to the obligations of the Company under Section 4.8, the
prevailing party in such action or proceeding 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 Securities.



     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,



27









 







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, that in the case of a
rescission of a conversion of a Debenture or exercise of a Warrant, the applicable Purchaser shall
be required to return any shares of Common Stock subject to any such rescinded conversion or
exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid
to the Company for such shares and the restoration of such Purchaser’s right to acquire such shares
pursuant to such Purchaser’s Warrant (including, issuance of a replacement warrant certificate
evidencing such restored right).



     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. Notwithstanding the foregoing, in the case of the Debentures, the terms of the
Indenture shall control and not this Section 5.14.



     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
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 agree 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.



28









 





     5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees not to
insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be
compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any claim, action or proceeding that may be brought by any
Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding
any provision to the contrary contained in any Transaction Document, it is expressly agreed and
provided that the total liability of the Company under the Transaction Documents for payments in
the nature of interest shall not exceed the maximum lawful rate authorized under applicable law
(the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of
interest or default interest, or both of them, when aggregated with any other sums in the nature of
interest that the Company may be obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents from the Closing
Date thereof forward, unless such application is precluded by applicable law. If under any
circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be
applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded
to the Company, the manner of handling such excess to be at such Purchaser’s election.



     5.18 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, each Purchaser and its
respective counsel have chosen to communicate with the Company through FWS. FWS does not represent
any of the Purchasers but only represents Rodman & Renshaw. 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 any of the Purchasers.



     5.19 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



29









 







which such partial liquidated damages or other amounts are due and payable shall have been
canceled.



     5.20 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.



     5.21 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. In addition, each and every reference to share prices and shares of Common Stock
in any Transaction Document shall be 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.



     5.22 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)




30









 








     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]




 









 








[PURCHASER SIGNATURE PAGES TO 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 Authorized Signatory:	 	
 







			
	Facsimile Number of Authorized Signatory:	 	
 







			
	Address for Notice of Purchaser:	 	
 






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




Subscription Amount:                     




Principal Amount (                     x Subscription Amount):                     




Warrant Shares:                     




EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]




[SIGNATURE PAGES CONTINUE]














 








 EXHIBIT A




FORM OF WARRANT




 









 





			
	Initial Issuance Date: February 9, 2009	 	W09-•







COMMON STOCK PURCHASE WARRANT




To Purchase                      Shares of Common Stock of




EPICEPT CORPORATION




     THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received,
[           ] (the “Holder”), is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time on or after the six
month anniversary of the date hereof (the “Initial Exercise Date”) and on or prior to the
close of business on the five-and-one-half year anniversary of the Initial Issuance Date (the “Termination
Date”) but not thereafter, to subscribe for and purchase from EpiCept Corporation, a Delaware
corporation (the “Company”), up to [     ] shares (the “Warrant Shares”)
of Common Stock, par value $0.0001 per share, of the Company (the “Common Stock”). The
purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise
Price, as defined in Section 2(b).



     Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase Agreement (the
“Purchase Agreement”), dated February 4, 2009, among the Company and the purchasers
signatory thereto.



     Section 2. Exercise.




     (a) Exercise of Warrant. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by delivery to the Company of a duly
executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office
or agency of the Company as it may designate by notice in writing to the registered Holder
at the address of the Holder appearing on the books of the Company), and, within three (3)
Trading Days of the date said Notice of Exercise is delivered to the Company, the Company
shall have received the aggregate Exercise Price for the shares thereby purchased under the
cashless exercise provisions set forth in Section 2(c) below. Notwithstanding anything
herein to the contrary, the Holder shall not be required to physically surrender this
Warrant to the Company until the Holder has purchased all of the Warrant Shares available
hereunder and the Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within three (3) Trading Days of the
date the final Notice of Exercise is delivered to the Company. Partial exercises of this
Warrant resulting in purchases of a portion of the total number of Warrant Shares available
hereunder shall have the effect of lowering the outstanding number of Warrant Shares
purchasable hereunder in an amount equal to the applicable number of Warrant Shares
purchased. The Holder and the Company shall maintain records showing the number of Warrant
Shares purchased and the date of such purchases. The Company shall deliver any objection to
any Notice of Exercise Form within one Business Day of receipt of such notice. In the event
of any dispute or discrepancy, the records of the Company shall be controlling and
determinative in the absence of manifest error. The Holder and any assignee, by acceptance
of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be less than the amount stated
on the face hereof.




     (b) Exercise
Price. The exercise price per share of the Common Stock under
this Warrant shall be $1.035, subject to adjustment hereunder (the “Exercise
Price”).



 









 






     (c) Cashless Exercise. If at the time of exercise hereof there is no
effective registration statement registering, or the prospectus contained therein is not
available for the issuance to the Holder of the Warrant Shares remaining hereunder and all
such remaining Warrant Shares are not registered for resale by Holder (it being understood
that the Company is under no obligation to file, have declared effective or maintain the
effectiveness of such registration statement or current prospectus and shall have no
liability to the Holder in the event that there is no effective Registration Statement or
current prospectus), then this Warrant may also be exercised, in whole or in part, at such
time by means of a “cashless exercise” in which the Holder shall be entitled to receive a
certificate for the number of Warrant Shares equal to the quotient obtained by dividing
[(A-B) (X)] by (A), where:




	 	(A) =	 	 the VWAP on the Trading Day immediately preceding the date on
which Holder elects to exercise this Warrant by means of a “cashless exercise,”
as set forth in the applicable Notice of Exercise;
	 
	 	(B) = 	 	the Exercise Price of this Warrant, as adjusted hereunder;
and
	 
	 	(X) =	 	 the number of Warrant Shares that would be issuable upon
exercise of this Warrant in accordance with the terms of this Warrant if such
exercise were by means of a cash exercise rather than a cashless exercise.






     “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 OTC Markets, Inc. (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 Holder
and reasonably acceptable to the Company, the fees and expenses of which shall be paid by
the Company.




     “Trading Day” means a day on which the Common Stock is traded on a Trading
Market.




     “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 New York Stock Exchange,
NYSE Alternext US, NYSE Arca, The Nasdaq Global Market, The Nasdaq Global Select Market, The
Nasdaq Capital Market or the OTC Bulletin Board.




     Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant
shall be automatically exercised via cashless exercise pursuant to this Section 2(c).




     (d) Exercise Limitations. The Company shall not effect any exercise of this
Warrant, and the Holder shall not have the right to exercise any portion of this Warrant,
pursuant to Section 2(c) or otherwise, to the extent that after giving effect to such
issuance after exercise as set forth on the applicable Notice of Exercise, the Holder
(together with the Holder’s Affiliates, and any other person or entity acting as a group
together with the Holder or any of the Holder’s



2









 







Affiliates), as set forth on the applicable Notice of Exercise, would beneficially own
in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder
and its Affiliates shall include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being made, but shall exclude
the number of shares of Common Stock which would be issuable upon (A) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned by Holder or any of its
Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any
other securities of the Company (including, without limitation, any other Warrants) subject
to a limitation on conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its affiliates.  Except as set forth in the
preceding sentence, for purposes of this Section 2(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to the Holder that such
calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance therewith. To the extent
that the limitation contained in this Section 2(d) applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned by the Holder together
with any Affiliates) and of which a portion of this Warrant is exercisable shall be in the
sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to
be the Holder’s determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of which portion of this
Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the
Company shall have no obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 2(d), in determining the
number of outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the Company’s most recent periodic
report on Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement
by the Company or (z) any other notice by the Company or the Company’s Transfer Agent
setting forth the number of shares of Common Stock outstanding. The Company shall have no
obligation to verify or confirm such determination. Upon the written or oral request of the
Holder, the Company shall within two (2) Trading Days confirm orally or in writing to the
Holder the number of shares of Common Stock then outstanding.  In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to the conversion
or exercise of securities of the Company, including this Warrant, by the Holder or its
Affiliates since the date as of which such number of outstanding shares of Common Stock was
reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon exercise of this Warrant. The Beneficial Ownership
Limitation provisions of this Section 2(d) may be waived by the Holder, as to any individual
Holder, at the election of such Holder, upon not less than 61 days’ prior notice to the
Company to change the Beneficial Ownership Limitation to 9.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the issuance of shares of
Common Stock upon exercise of this Warrant, and the provisions of this Section 2(d) shall
continue to apply. Upon such a change by such Holder of the Beneficial Ownership Limitation
from such 4.99% limitation to such 9.99% limitation, the Beneficial Ownership Limitation may
not be further waived by such Holder. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms of this
Section 2 to correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained or to make
changes or supplements



3









 







necessary or desirable to properly give effect to such limitation. The limitations
contained in this paragraph shall apply to a successor holder of this Warrant.




     (e) Mechanics of Exercise.




     (i) Authorization of Warrant Shares. The Warrant Shares are reserved
for issuance, and the Company covenants that all Warrant Shares which may be issued
upon the exercise of the purchase rights represented by this Warrant will, upon
exercise of the purchase rights represented by this Warrant, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges created by the Company in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).




     (ii) Delivery of Certificates Upon Exercise. Certificates for shares
purchased hereunder shall be transmitted by the transfer agent of the Company to the
Holder by crediting the account of the Holder’s prime broker with the Depository
Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”)
system if the Company is a participant in such system, and otherwise by physical
delivery to the address specified by the Holder in the Notice of Exercise within
three (3) Trading Days from the delivery to the Company of the Notice of Exercise
Form, surrender of this Warrant (if required) and payment of the aggregate Exercise
Price as set forth above (including by cashless exercise, if permitted)
(“Warrant Share Delivery Date”). This Warrant shall be deemed to have been
exercised on the date the Exercise Price is received by the Company. The Warrant
Shares shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record of
such shares for all purposes, as of the date the Warrant has been exercised by
payment to the Company of the Exercise Price (or by cashless exercise, if permitted)
and all taxes required to be paid by the Holder, if any, pursuant to Section
2(e)(vii) prior to the issuance of such shares, have been paid. If the Company
fails for any reason to deliver to the Holder certificates evidencing the Warrant
Shares subject to a Notice of Exercise within three (3) Trading Days of the Warrant
Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated
damages and not as a penalty, for each $1,000 of Warrant Shares subject to such
exercise (based on the VWAP of the Common Stock on the date of the applicable Notice
of Exercise), $2 per Trading Day (increasing to $4 per Trading Day on the fifth
Trading Day after such liquidated damages begin to accrue) for each Trading Day
after such Warrant Share Delivery Date until such certificates are delivered.




     (iii) Delivery of New Warrants Upon Exercise. If this Warrant shall
have been exercised in part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, within three (3) Trading Days of the time of
delivery of the certificate or certificates representing Warrant Shares, deliver to
Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.




     (iv) Rescission Rights. If the Company fails to cause its transfer
agent to transmit to the Holder a certificate or certificates representing the
Warrant Shares pursuant to this Section 2(e)(iv) by the Warrant Share Delivery Date,
then the Holder will have the right to rescind such exercise, in which event, no
liquidated damages shall be payable by the Company hereunder after the date of such
recission.



4









 






     (v) Compensation for Buy-In Upon Failure to Timely Deliver Certificates
Upon Exercise. In addition to any other rights available to the Holder, if the
Company fails to cause its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to an exercise on or before
the Warrant Share Delivery Date, and if after such date the Holder is required by
its broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which
the Holder anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue times (B) the price at which the sell order
giving rise to such purchase obligation was executed, and (2) at the option of the
Holder, either reinstate the portion of the Warrant and equivalent number of Warrant
Shares for which such exercise was not honored or deliver to the Holder the number
of shares of Common Stock that would have been issued had the Company timely
complied with its exercise and delivery obligations hereunder. For example, if the
Holder purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of $10,000, under
clause (1) of the immediately preceding sentence the Company shall be required to
pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon
request of the Company, evidence of the amount of such loss. Nothing herein shall
limit a Holder’s right to pursue any other remedies available to it hereunder, at
law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.




     (vi) No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this Warrant.
As to any fraction of a share which Holder would otherwise be entitled to purchase
upon such exercise, the Company shall at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price or round up to the next whole share.




     (vii) Charges, Taxes and Expenses. Issuance of certificates for
Warrant Shares to the Holder shall be made without charge to the Holder for any
issue or transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and such
certificates shall be issued in the name of the Holder or in such name or names as
may be directed by the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder, this
Warrant when surrendered for exercise shall be accompanied by the Assignment Form
attached hereto duly executed by the Holder; and the Company may require, as a
condition thereto, the payment of a sum sufficient to reimburse it for any transfer
tax incidental thereto.




     (viii) Closing of Books. The Company will not close its stockholder
books or records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.



5









 





     Section 3. Certain Adjustments.




     (a) Stock Dividends and Splits. If the Company, at any time while this Warrant
is outstanding: (A) pays a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock (which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant), (B) subdivides
outstanding shares of Common Stock into a larger number of shares, (C) combines (including
by way of reverse stock split) outstanding shares of Common Stock into a smaller number of
shares, or (D) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding immediately after such
event and the number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.




     (b) Other Distributions. If the Company, at any time prior to the Termination
Date, shall distribute to all holders of Common Stock (and not to Holders of the Warrants)
(A) evidences of its indebtedness, (B) any security (other than a distribution of Common
Stock covered by Section 3(a)), (C) rights or warrants to subscribe for or purchase any
security or (D) any other assets (including cash and cash dividends), then in each such case
the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the VWAP determined as of the
record date mentioned above, and of which the numerator shall be such VWAP on such record
date less the then per share fair market value at such record date of the portion of such
securities, assets or evidence of indebtedness so distributed applicable to one outstanding
share of the Common Stock as determined by the Board of Directors in good faith. In either
case the adjustments shall be described in a statement provided to the Holder of the portion
of such securities, assets or evidences of indebtedness so distributed. Such adjustment
shall be made whenever any such distribution is made and shall become effective immediately
after the record date mentioned above.




     (c) Fundamental Transaction. If, at any time while this Warrant is
outstanding, (A) the Company, directly or indirectly, in one or more related transactions
effects any merger or consolidation of the Company with or into another Person, (B) the
Company, directly or indirectly, effects any sale, lease, license, assignment, transfer,
conveyance or other disposition of all or substantially all of its assets in one or a series
of related transactions, (C) any, direct or indirect, purchase offer, tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for other
securities, cash or property and has been accepted by the holders of 50% or more of the
outstanding Common Stock or (D) the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or recapitalization of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (each a “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have
the right to receive, for each Warrant Share that would have been issuable upon such
exercise immediately prior to the occurrence of such Fundamental Transaction, at the option
of the Holder (without regard to any limitation in Section 2(d) on the exercise of this
Warrant), the



6









 







number of shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration (the
“Alternate Consideration”) receivable as a result of such Fundamental Transaction by
a holder of the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such Fundamental Transaction (without regard to any limitation in
Section 2(d) on the exercise of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to such
Alternate Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate Consideration.
If holders of Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction”
as defined in Rule 13e-3 under the Exchange Act, or (3) a Fundamental Transaction involving
a person or entity not traded on a national securities exchange, including, but not limited
to, the New York Stock Exchange, NYSE Alternext US, NYSE Arca, The Nasdaq Global Select
Market, The Nasdaq Global Market, or The Nasdaq Capital Market, the Company or any Successor
Entity (as defined below) shall, at the Holder’s option, exercisable at any time
concurrently with, or within 30 days after, the consummation of the Fundamental Transaction,
purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the
Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the
consummation of such Fundamental Transaction. “Black Scholes Value” means the value
of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV”
function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation
of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a
risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the
time between the date of the public announcement of the applicable Fundamental Transaction
and the Termination Date, (B) an expected volatility equal to the greater of 100% and the
100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day
immediately following the public announcement of the applicable Fundamental Transaction, (C)
the underlying price per share used in such calculation shall be the sum of the price per
share being offered in cash, if any, plus the value of any non-cash consideration, if any,
being offered in such Fundamental Transaction and (D) a remaining option time equal to the
time between the date of the public announcement of the applicable Fundamental Transaction
and the Termination Date. The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section 3(c) pursuant to
written agreements prior to such Fundamental Transaction and shall, at the option of the
holder of this Warrant, deliver to the Holder in exchange for this Warrant a security of the
Successor Entity evidenced by a written instrument substantially similar in form and
substance to this Warrant which is exercisable for a corresponding number of shares of
capital stock of such Successor Entity (or its parent entity) equivalent to the shares of
Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with
an exercise price which applies the exercise price hereunder to such shares of capital stock
(but taking into account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such number of shares
of capital stock and such exercise price being for the purpose of protecting the economic
value of this Warrant immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and substance to



7









 







the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents
referring to the “Company” shall refer instead to the Successor Entity), and may exercise
every right and power of the Company and shall assume all of the obligations of the Company
under this Warrant and the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein.




     (d) Calculations. All calculations under this Section 3 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this
Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding treasury
shares, if any) issued and outstanding.




	 	(e)	 	[RESERVED]
	 
	 	(f)	 	 Notice to Holders.






     (i) Adjustment to Exercise Price. Whenever the Exercise Price is
adjusted pursuant to any provision of this Section 3, the Company shall promptly
deliver to each Holder a notice setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. If the Company issues a variable rate security, despite the prohibition
thereon in the Purchase Agreement, the Company shall be deemed to have issued Common
Stock or Common Stock Equivalents at the lowest possible conversion or exercise
price at which such securities may be converted or exercised in the case of a
Variable Rate Transaction (as defined in the Purchase Agreement).




     (ii) Notice to Allow Exercise by Holder. After the Initial Exercise
Date, if (A) the Company shall declare a dividend (or any other distribution in
whatever form) on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company
shall authorize the granting to all holders of the Common Stock rights or warrants
to subscribe for or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any consolidation or
merger to which the Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property; (E) the Company
shall authorize the voluntary or involuntary dissolution, liquidation or winding up
of the affairs of the Company; then, in each case, the Company shall cause to be
mailed to the Holder at its last address as it shall appear upon the Warrant
Register of the Company, at least 20 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the date as of which the
holders of the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale, transfer or share
exchange is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share exchange;
provided that the



8









 







failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified in
such notice. To the extent that any notice provided hereunder constitutes, or
contains, material, non-public information regarding the Company or any of the
Subsidiaries, the Company shall simultaneously file such notice with the Commission
pursuant to a Current Report on Form 8-K. The Holder is entitled to exercise this
Warrant during the 20-day period commencing on the date of such notice to the
effective date of the event triggering such notice except as may otherwise be
expressly set forth herein.



     Section 4. Transfer of Warrant.




     (a) Transferability. Subject to compliance with any applicable securities laws
and the conditions set forth in Section 4(d) hereof and to the provisions of the Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon surrender of this Warrant
at the principal office of the Company or its designated agent, together with a written
assignment of this Warrant substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned (if any) and this Warrant shall promptly be cancelled. A Warrant,
if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares
without having a new Warrant issued.




     (b) New Warrants. This Warrant may be divided or combined with other common
stock purchase warrants of the Company having the same terms as the Warrant, upon
presentation at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any
transfer which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or exchanges
shall be dated as of the Initial Issuance Date set forth on the first page of this Warrant
and shall be identical with this Warrant except as to the number of Warrant Shares issuable
pursuant thereto and the name of the holder, as applicable.




     (c) Warrant Register. The Company shall register this Warrant, upon records to
be maintained by the Company for that purpose (the “Warrant Register”), in the name
of the record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes, absent actual
notice to the contrary.



     Section 5. [RESERVED]



     Section 6. Miscellaneous.




     (a) No Rights as Shareholder Until Exercise. This Warrant does not entitle the
Holder to any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof as set forth in Section 2(e)(ii).



9









 






     (b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it (which, in the case of the Warrant, shall not include the
posting of any bond), and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.




     (c) 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.




     (e) Authorized Shares.




     (i) The Company covenants that during the period the Warrant is outstanding, it
will reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of any
purchase rights under this Warrant. The Company further covenants that its issuance
of this Warrant shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights under
this Warrant. The Company will take all such reasonable action as may be necessary
to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed.




     (ii) Except and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation, amending its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the Company will (A)
not increase the par value of any Warrant Shares above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (B) take all
such action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares upon the exercise of
this Warrant, and (C) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.




     (iii) Before taking any action which would result in an adjustment in the
number of Warrant Shares for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.



10









 






     (f) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance with the
provisions of the Purchase Agreement.




     (h) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of such right
or otherwise prejudice Holder’s rights, powers or remedies. Without limiting any other
provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results in any material damages to
the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees, including
those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.




     (i) Notices. Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.




     (j) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of Holder, shall give rise to any liability
of Holder for the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the Company.




     (k) Remedies. Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific performance of
its rights under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the defense in any action for
specific performance that a remedy at law would be adequate.




     (l) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors of the Company and the successors and permitted assigns of
Holder. The provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and shall be enforceable by any such Holder or holder of
Warrant Shares.




     (m) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.




     (n) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of this Warrant.




     (o) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.



********************




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          IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer
thereunto duly authorized.




Dated: February 9, 2009




	 	 	 	 	 
	 	EPICEPT CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




 









 





NOTICE OF EXERCISE





			
	TO:	 	EPICEPT CORPORATION





          (1) The undersigned hereby elects to purchase                      Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith
payment of the exercise price in full, together with all applicable transfer taxes, if any.





(2) Payment shall take the form of (check applicable box):




[ ] in lawful money of the United States; or




[ ] [if permitted] the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in Section 2(c), to exercise
this Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in Section 2(c).



          (3) Please issue a certificate or certificates representing said Warrant Shares in the name of
the undersigned or in such other name as is specified below:




 





The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery
of a certificate to:




 






 






 






          (4) Accredited Investor. The undersigned is an “accredited investor” as defined in
Regulation D promulgated under the Securities Act of 1933, as amended.




          (5) Beneficial Ownership. The undersigned (together with the undersigned’s Affiliates,
and any other person or entity acting as a group together with the undersigned or any of the
undersigned’s Affiliates), after exercise of the Warrant will not beneficially own in excess of the Beneficial Ownership
Limitation (as calculated pursuant to Section 2(d) of the Warrant). 




[SIGNATURE OF HOLDER]




	 	 	 	 	 
	Name of Investing Entity:
	 	 	 	 
	

Signature of Authorized

	 	 

	 	 
	

Signatory of Investing Entity:
	 	 	 	 
	

Name of Authorized Signatory:

	 	 

	 	 
	

Title of Authorized Signatory:

	 	 

	 	 
	

Date:

	 	 

	 	 
	 

	 	 

	 	 
















 






ASSIGNMENT FORM




(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)




     FOR VALUE RECEIVED, [                    ] all of or [                         ] shares of the foregoing Warrant and all rights
evidenced thereby are hereby assigned to



	 	 	 	 	 	 	 
	 


	 	whose address is 
	 	  
	 
	 	 	 	 	 	 
	 


	 	.	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 


	 	 	 	 	 	 






Dated:                                         ,                     




	 	 	 	 	 	 	 
	 

	 	Holder’s Signature:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Holder’s Address:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	 

	 	 






Signature Guaranteed:                                         



NOTE: The signature to this Assignment Form must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign the foregoing
Warrant.





 











 





EXHIBIT B




FORM OF LEGAL OPINION














 





Exhibit B




          1. The Company is a corporation validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as described in the Prospectus Supplement.




          2. The Securities Purchase Agreement (the “Agreement”) has been duly authorized, executed and
delivered by the Company and (assuming the due authorization, execution and delivery thereof by the
other parties thereto) constitutes the legal, valid and binding obligation of the Company,
enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except that rights to
indemnification and contribution thereunder may be limited by federal or state securities laws or
public policy relating thereto.




          3. The Convertible Debt Securities have been duly authorized, executed and delivered by the
Company and, when issued as contemplated by the Agreement, will be validly issued.




          4. The Warrants have been duly authorized, executed and delivered by the Company and, when
issued as contemplated by the Agreement, will be validly issued.




          5. The Conversion Shares have been duly authorized and, when issued as contemplated by the
Agreement, will be validly issued, fully paid and nonassessable.




          6. The Warrant Shares have been duly authorized and, when issued as contemplated by the
Agreement, will be validly issued, fully paid and nonassessable.




          7. No consent, approval, waiver, license or authorization or other action by or filing with
any federal or New York State governmental authority is required in connection with the execution
and delivery by the Company of the Agreement, the consummation by the Company of the transactions
contemplated thereby or the performance by the Company of its obligations thereunder, other than
(i) filings and other actions required pursuant to the Securities Act of 1933, as amended and/or
the Securities Exchange Act of 1934, as amended and the rules and regulations thereunder or
pursuant to federal and state securities or blue sky laws, as to which we express no opinion, (ii)
pursuant to any rules, regulations or requirements promulgated by The Financial Industry Regulatory
Authority, as to which we express no opinion, (iii) pursuant to any rules, regulations or
requirements promulgated by The Nasdaq Capital Market, as to which we express no opinion and (iv)
those already obtained.




          8. The Registration Statement and any amendments thereto have become effective under the
Securities Act, and we are not aware of any stop order suspending the effectiveness of the
Registration Statement.





 












 





EXHIBIT C


WARRANTS TO BE ISSUED



	 	 	 
	Investor	 	Warrants to be issued
	BAM Opportunity Fund LP	 	10,888,889
	Private Equity Direct Finance	 	222,222








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