exv10w2





Exhibit 10.2




SECURITIES PURCHASE AGREEMENT




     This
SECURITIES PURCHASE AGREEMENT (the
“Agreement”), dated as of June 30, 2011, is by
and among Emisphere Technologies, Inc., a Delaware corporation with headquarters located at 240
Cedar Knolls Rd, Suite 200, Cedar Knolls, New Jersey 07927 (the “Company”), and each of the
investors listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and
collectively, the “Buyers”).



RECITALS




     A. The Company and each Buyer is executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as
amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.



     B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) the aggregate number of shares of common stock, $0.01 par
value, of the Company (the “Common Stock”), set forth opposite such Buyer’s name in column (3) on
the Schedule of Buyers (which aggregate amount for all Buyers shall
be 4,300,438 shares of Common
Stock and shall collectively be referred to herein as the “Common Shares”) and (ii) a warrant to
initially acquire up to that number of shares of Common Stock set forth opposite such Buyer’s name
in column (4) on the Schedule of Buyers, in the form attached hereto as Exhibit A (the “MHR
Warrants”) (as exercised, collectively, the “MHR Warrant Shares”).



     C. Each Buyer has registration rights pursuant to that certain Registration Rights Agreement,
dated as of September 26, 2005, by and between the Company and MHR Capital Partners (500) LP, MHR
Capital Partners (100) LP, MHR Institutional Partners II LP and MHR Institutional Partners IIA LP
(collectively, and including any of their respective Affiliates, “MHR”) (the “Registration Rights
Agreement”), and all of the Securities purchased hereunder shall constitute “Registrable
Securities” under the terms of such agreement.



     D. Simultaneously herewith, the Company shall enter into that certain Waiver Agreement, by and
between the Company and MHR Capital Partners Master Account LP, MHR Capital Partners (100) LP, MHR
Institutional Partners II LP and MHR Institutional Partners IIA LP (the “Waiver Agreement”),
whereby, in consideration for the waiver by MHR of certain its rights in connection with the
offering contemplated by this Agreement and the Concurrent Offering (as defined below), the Company
shall issue on the date hereof warrants to purchase 795,000 shares of Common Stock on the same
terms and conditions as the Warrants purchased hereunder (the “Waiver Warrants” (as exercised,
collectively, the “Waiver Warrant Shares” and together with the MHR Warrant Shares, the “Warrant
Shares”) and together with the MHR Warrants, the “Warrants”).



     E. The Common Shares, the Warrants, and the Warrant Shares are collectively referred to herein
as the “Securities.”



 









 





AGREEMENT




     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each Buyer hereby agree as follows:



1. PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.




     (a) Common Shares and Warrants. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to each Buyer, and
each Buyer severally, but not jointly, shall purchase from the Company on the Closing Date (as
defined below), the number of Common Shares as is set forth opposite such Buyer’s name in column
(3) on the Schedule of Buyers along with a Warrant to initially acquire up to that number of
Warrant Shares as is set forth opposite such Buyer’s name in column (4) on the Schedule of Buyers.



     (b) Closing. The closing (the “Closing”) of the purchase of the Common Shares and the
Warrants by the Buyers shall occur at Brown Rudnick LLP. The date and time of the Closing (the
"Closing Date”) shall be 10:00 a.m., New York time, on the first (1st) Business Day on
which the conditions to the Closing set forth in Sections 6 and 7 below are satisfied or waived (or
such later date as is mutually agreed to by the Company and each Buyer). As used herein “Business
Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required by law to remain closed.


     (c) Purchase Price. The aggregate purchase price for the Common Shares and the Warrants to
be purchased by each Buyer (the “Purchase Price”) shall be the amount set forth opposite such
Buyer’s name in column (5) on the Schedule of Buyers.




     (d) Form of Payment. On the Closing Date, (i) each Buyer shall pay its respective
Purchase Price to the Company for the Common Shares and the Warrants to be issued and sold to such
Buyer at the Closing, by wire transfer of immediately available funds in accordance with the
Company’s written wire instructions and (ii) the Company shall deliver to each Buyer (A) a copy of
the irrevocable instructions to the Company’s transfer agent instructing the transfer agent to
deliver the Common Shares as is set forth opposite such Buyer’s name in column (3) of the Schedule
of Buyers and (B) a Warrant pursuant to which such Buyer shall have the right to initially acquire
up to the number of Warrant Shares as is set forth opposite such Buyer’s name in column (4) of the
Schedule of Buyers, in all cases, duly executed on behalf of the Company and registered in the name
of such Buyer or its designee (such Warrant certificate shall be delivered within three (3) Trading
Days (as defined in the Warrant) of the Closing Date).



2. BUYER’S REPRESENTATIONS AND WARRANTIES.




     Each Buyer, severally and not jointly, represents and warrants to the Company with respect to
only itself that, as of the date hereof and as of the Closing Date:



     (a) Organization; Authority. Such Buyer is an entity duly organized, validly existing



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and in good standing under the laws of the jurisdiction of its organization with the requisite
power and authority to enter into and to consummate the transactions contemplated by the
Transaction Documents (as defined below) to which it is a party and otherwise to carry out its
obligations hereunder and thereunder.




     (b) No Public Sale or Distribution. Such Buyer (i) is acquiring its Common Shares and
Warrants, and (ii) upon exercise of its Warrants, will acquire the Warrant Shares issuable upon
exercise thereof, in each case, for its own account and not with a view towards, or for resale in
connection with, the public sale or distribution thereof in violation of applicable securities
laws, except pursuant to sales registered or exempted under the 1933 Act; provided, however, by
making the representations herein, such Buyer does not agree, or make any representation or
warranty, to hold any of the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act. Such Buyer is acquiring the Securities hereunder in
the ordinary course of its business. Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person (as defined below) to distribute any of the
Securities in violation of applicable securities laws.



     (c) Accredited Investor Status. Such Buyer is either (i) an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D or (ii) a “qualified institutional investor” as
defined in Rule 144A of the 1933 Act.



     (d) Reliance on Exemptions. Such Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying in part upon the
truth and accuracy of, and such Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.



     (e) Information. Such Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by such Buyer. Such Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer’s right to rely on the
Company’s representations and warranties contained herein or any representations and warranties
contained in any other Transaction Document (as defined below) or any other document or instrument
executed and/or delivered in connection with this Agreement or the consummation of the transaction
contemplated hereby. Such Buyer understands that its investment in the Securities involves a high
degree of risk. Such Buyer has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its acquisition of the
Securities.



     (f) No Governmental Review. Such Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability of the investment



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in the Securities nor have such authorities passed upon or endorsed the merits of the offering
of the Securities.




     (g) Transfer or Resale. Such Buyer understands that except as provided in the
Registration Rights Agreement and Section 4(h) hereof: (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall
have delivered to the Company (if requested by the Company) an opinion of counsel to such Buyer, in
a form reasonably acceptable to the Company, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such
registration, or (C) such Buyer provides the Company with reasonable assurance that such Securities
can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933
Act (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made
in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if
Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller
(or the Person (as defined below) through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the
Company nor any other Person is under any obligation to register the Securities under the 1933 Act
or any state securities laws or to comply with the terms and conditions of any exemption
thereunder.



     (h) Validity; Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of such Buyer and constitutes the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance with its respective terms,
except as such enforceability may be limited by general principles of equity or to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to,
or affecting generally, the enforcement of applicable creditors’ rights and remedies.



     (i) No Conflicts. The execution, delivery and performance by such Buyer of this
Agreement and the consummation by such Buyer of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of such Buyer, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree (including federal
and state securities laws) applicable to such Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the ability of such Buyer to
perform its obligations hereunder.


     (j) Residency. Such Buyer is a resident of that jurisdiction specified below its address on
the Schedule of Buyers.




     (k) [Reserved]



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     (l) No International Sales. Such Buyer acknowledges, represents and agrees that no
action has been or will be taken in any jurisdiction outside the United States by the Company that
would permit an offering of the Securities, or possession or distribution of offering materials in
connection with the issue of the Securities in any jurisdiction outside the United States where
action for that purpose is required. Each Buyer outside the United States will comply with all
applicable laws and regulations in each foreign jurisdiction in which it purchases, offers, sells
or delivers Securities or has in its possession or distributes any offering material, in all cases
at its own expense.



     (m) Experience of Such Buyer. Such Buyer, 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 Buyer 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.



     (n) No Investment Advice. Such Buyer understands that nothing in this Agreement or
any other materials presented to the Buyer in connection with the purchase and sale of the
Securities constitutes legal, tax or investment advice. Such Buyer has consulted such legal, tax
and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Securities.



3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.




     The Company hereby represents and warrants to each of the Buyers that:



     (a) Organization and Qualification; Subsidiaries. The Company is duly incorporated
and validly existing and in good standing under the laws of the State of Delaware, and has the
requisite power and authorization to own its properties and to carry on its business as described
in the Company’s SEC Documents. The Company is duly qualified as a foreign entity to do business
and is in good standing in every jurisdiction in which its ownership of property or the nature of
the business conducted by it makes such qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used
in this Agreement, “Material Adverse Effect” means any material adverse effect on (i) the business,
properties, assets, liabilities, operations (including results thereof), or condition (financial
or otherwise) of the Company, (ii) the transactions contemplated hereby or in any of the other
Transaction Documents or (iii) the authority or ability of the Company to perform any of its
obligations under any of the Transaction Documents; , provided, however, that none of the
following shall constitute, or shall be considered in determining whether there has occurred, and
no event, circumstance, change or effect resulting from or arising out of any of the following
shall constitute, a Material Adverse Effect: (A) the announcement of the execution of this
Agreement; (B) changes in the national or world economy or financial markets as a whole or changes
in general economic conditions that affect the industries in which the Company conducts its
business, so long as such changes or conditions do not adversely affect the Company in a materially
disproportionate manner relative to other similarly situated participants in the industries or
markets in which they operate; (C) any change in applicable law, rule or regulation or GAAP or
interpretation thereof after the date hereof, so long as such changes do not adversely



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affect the Company, in a materially disproportionate manner relative to other similarly
situated participants in the industries or markets in which they operate; (D) the failure, in and
of itself, of the Company to meet any published or internally prepared estimates of revenues,
earnings or other financial projections, performance measures or operating statistics; provided,
however, that the facts and circumstances underlying any such failure may, except as may be
provided in subsections (A), (B), (C), (E), and (F) of this definition, be considered in
determining whether a Material Adverse Effect has occurred; (E) a decline in the price, or a change
in the trading volume, of the Company Common Stock on the Principal Market (as defined below); and
(F) compliance with the terms of, and taking any action required by, this Agreement. The Company
has no significant subsidiaries (as such term is defined in Rule 1-02(w) of Regulation S-X
promulgated by the Commission) and does not own any beneficial interest, directly or indirectly, in
any corporation, partnership, joint venture or other business entity.




     (b) Authorization; Enforcement; Validity. The Company has the requisite corporate
power and authority to enter into and perform its obligations under this Agreement and the other
Transaction Documents and to issue the Securities in accordance with the terms hereof and thereof.
The execution and delivery of this Agreement and the other Transaction Documents by the Company and
the consummation by the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Common Shares, the issuance of the Warrants and the
reservation for issuance and issuance of the Warrant Shares issuable upon exercise of the Warrants)
have been duly authorized by the Company’s board of directors and (other than the filing with the
SEC of a Form D with the SEC and any other filings as may be required by any state securities
agencies) no further filing, consent or authorization or action is required by the Company, its
board of directors or its stockholders or other governing body other than Required Approvals (as
defined below). This Agreement has been, and the other Transaction Documents will be prior to the
Closing, duly executed and delivered by the Company, and each constitutes the legal, valid and
binding obligations of the Company, enforceable against the Company in accordance with its
respective terms, except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of applicable creditors’ rights and remedies as limited
by laws relating to the availability of specific performance, injunctive relief or other equitable
remedies and except as rights to indemnification and to contribution may be limited by federal or
state securities law. “Transaction Documents” means, collectively, this Agreement, the Warrants,
the Waiver Agreement, the Irrevocable Transfer Agent Instructions (as defined below) and each of
the other agreements and instruments entered into or delivered by any of the parties hereto in
connection with the transactions contemplated hereby and thereby, as may be amended from time to
time.



     (c) Issuance of Securities. The issuance of the Common Shares and the Warrants are
duly authorized and, upon issuance in accordance with the terms of the Transaction Documents, will
be validly issued, fully paid and non-assessable and free from all preemptive or similar rights,
taxes, liens, charges and other encumbrances with respect to the issue thereof. As of the Closing,
the Company shall have reserved from its duly authorized capital stock not less than the maximum
number of shares of Common Stock issuable upon exercise of the Warrants (without taking into
account any limitations on the exercise of the Warrants set forth therein). The issuance of the
Warrant Shares is duly authorized, and upon exercise in accordance with the



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Warrants, the Warrant Shares, when issued, will be validly issued, fully paid and
non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. Subject to the accuracy of the representations and warranties
of the Buyers in this Agreement, the offer and issuance by the Company of the Securities is exempt
from registration under the 1933 Act.




     (d) No Conflicts. Except as disclosed in the SEC Documents, the execution, delivery
and performance of the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation, the issuance of
the Common Shares, the Warrants and Warrant Shares and the reservation for issuance of the Warrant
Shares) will not (i) result in a violation of the Certificate of Incorporation (as defined below)
(including, without limitation, any certificates of designation contained therein) or other
organizational documents of the Company, any capital stock of the Company, or Bylaws, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any material agreement, indenture
or instrument to which the Company is a party, or (iii) subject to Required Approvals, result in a
violation of any law, rule, regulation, order, judgment or decree (including, without limitation,
federal and state securities laws and regulations and the rules and regulations of the OTC Bulletin
Board (the “Principal Market”)) applicable to the Company or by which any property or asset of the
Company is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such
violations that could not reasonably be expected to have a Material Adverse Effect.



     (e) Consents. Except as disclosed in the SEC Documents, the Company is not required
to obtain any consent from, authorization or order of, or make any filing or registration with
(other than the filing with the SEC of a Form D with the SEC and any other filings as may be
required by any state securities agencies (collectively, the “Required Approvals”)), any court,
governmental agency or any regulatory or self-regulatory agency or any other Person in order for it
to execute, deliver or perform any of its obligations under, or contemplated, by the Transaction
Documents, in each case, in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company is required to obtain at or
prior to the Closing have been obtained or effected on or prior to the Closing Date, and the
Company is not aware of any facts or circumstances which might prevent the Company from obtaining
or effecting any of the registration, application or filings contemplated by the Transaction
Documents. The Company is not in violation of the requirements of the Principal Market and has no
knowledge of any facts or circumstances which could reasonably lead to delisting or suspension of
the Common Stock in the foreseeable future.



     (f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company acknowledges
and agrees that each Buyer is acting solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions contemplated hereby and thereby. The
Company further acknowledges that no Buyer 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 hereby and thereby, and any advice given by a Buyer or any of its representatives or
agents in connection with the Transaction Documents and the transactions



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




     (g) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of
its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Securities. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for Persons engaged by
any Buyer or its investment advisor) relating to or arising out of the transactions contemplated
hereby. Other than Roth Capital Partners, LLC (the “Placement Agent”), the Company has not engaged
any placement agent or other agent in connection with the offer or sale of the Securities.



     (h) No Integrated Offering. Neither the Company nor any of their affiliates, nor any
Person acting on 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 require registration of
the issuance of any of the Securities under the 1933 Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Securities to require approval of
stockholders of the Company under any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of any exchange or automated quotation system
on which any of the securities of the Company are listed or designated for quotation. None of the
Company, its affiliates nor any Person acting on their behalf will take any action or steps that
would require registration of the issuance of any of the Securities under the 1933 Act or cause the
offering of any of the Securities to be integrated with other offerings of securities of the
Company.



     (i) Dilutive Effect. The Company acknowledges that its obligation to issue the
Warrant Shares upon exercise of the Warrants in accordance with this Agreement and the Warrants is
absolute and unconditional, regardless of the dilutive effect that such issuance may have on the
ownership interests of other stockholders of the Company.



     (j) Application of Takeover Protections; Rights Agreement. The Company and its board
of directors have taken all necessary action, if any, in order to render inapplicable any control
share acquisition, interested stockholder, business combination, poison pill (including, without
limitation, any distribution under a rights agreement) or other similar anti-takeover provision
under the Certificate of Incorporation, Bylaws or other organizational documents or the laws of the
jurisdiction of its incorporation or otherwise which is or could become applicable to any Buyer as
a result of the transactions contemplated by this Agreement, including, without limitation, the
Company’s issuance of the Securities and any Buyer’s ownership of the Securities. The Company and
its board of directors have taken all necessary action, if any, in order to render inapplicable any
stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of
shares of Common Stock or a change in control of the Company.



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     (k) SEC Documents; Financial Statements. During the two (2) years prior to the date
hereof, the Company has timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act (all
of the foregoing filed prior to the date hereof and all exhibits included therein and financial
statements, notes and schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC Documents”). As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, 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. As of their respective dates, except as disclosed in the SEC Documents, the financial
statements of the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and regulations of the SEC
with respect thereto as in effect as of the time of filing. Except as disclosed in the SEC
Documents, such financial statements have been prepared in accordance with generally accepted
accounting principles (“GAAP”), consistently applied, during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments
which will not be material, either individually or in the aggregate). No other information provided
by or on behalf of the Company to any of the Buyers which is not included in the SEC Documents
(including, without limitation, information referred to in Section 2(e) of this Agreement) contains
any untrue statement of a material fact or omits to state any material fact necessary in order to
make the statements therein not misleading, in the light of the circumstance under which they are
or were made.



     (l) Absence of Certain Changes; Solvency. Except as disclosed in the SEC Documents,
since the date of the Company’s most recent audited financial statements contained in a Form 10-K,
there has been no material adverse change and no material adverse development in the business,
assets, liabilities, properties, operations (including results thereof), condition (financial or
otherwise) or prospects of the Company. Except as disclosed in the SEC Documents, since the date
of the Company’s most recent audited financial statements contained in a Form 10-K, the Company has
not (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate,
outside of the ordinary course of business or (iii) made any material capital expenditures,
individually or in the aggregate. Except as disclosed in the SEC Documents, the Company has not
taken any steps to seek protection pursuant to any law or statute relating to bankruptcy,
insolvency, reorganization, receivership, liquidation or winding up, nor does the Company have any
knowledge or reason to believe that any of their respective creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead
a creditor to do so. Except as disclosed in the SEC Documents, the Company does not intend to
incur debts beyond its ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt). Except as disclosed in the SEC
Documents, the Company has no knowledge of any facts or circumstances which lead it to believe that
it will file for reorganization or liquidation



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under the bankruptcy or reorganization laws of any jurisdiction within one year from the
Closing Date.




     (m) No Undisclosed Events, Liabilities, Developments or Circumstances. Except as
disclosed in the SEC Documents, no event, liability, development or circumstance has occurred or
exists, or is, to the Company’s knowledge, reasonably expected to occur or exist, with respect to
the Company or any of their respective businesses, properties, liabilities, prospects, operations
(including results thereof) or condition (financial or otherwise) that (i) would be required to be
disclosed by the Company under applicable securities laws on a registration statement on Form S-1
filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced, (ii) could have a material adverse effect on any Buyer’s
investment hereunder or (iii) could have a Material Adverse Effect.



     (n) Conduct of Business; Regulatory Permits. The Company is not in violation of any
term of or in default under its Certificate of Incorporation, any certificate of designation,
preferences or rights of any other outstanding series of preferred stock of the Company or Bylaws.
Except as disclosed in the SEC Documents, the Company is not in violation of any judgment, decree
or order or any statute, ordinance, rule or regulation applicable to the Company, and the Company
will not conduct its business in violation of any of the foregoing, except in all cases for
possible violations which could not, individually or in the aggregate, have a Material Adverse
Effect. Without limiting the generality of the foregoing, the Company is not in violation of any of
the rules, regulations or requirements of the Principal Market and has no knowledge of any facts or
circumstances that could reasonably lead to delisting or suspension of the Common Stock by the
Principal Market in the foreseeable future. Since June 9, 2009, (i) the Common Stock has been
listed or designated for quotation on the Principal Market, (ii) trading in the Common Stock has
not been suspended by the SEC or the Principal Market and (iii) the Company has received no
communication, written or oral, from the SEC or the Principal Market regarding the suspension or
delisting of the Common Stock from the Principal Market. The Company possess all certificates,
authorizations and permits issued by the appropriate regulatory authorities necessary to conduct
its respective businesses, except where the failure to possess such certificates, authorizations or
permits would not have, individually or in the aggregate, a Material Adverse Effect, and the
Company has not received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.



     (o) Foreign Corrupt Practices. Neither the Company nor, to the knowledge of the
Company, any director, officer, any agent, employee or other Person acting on behalf of the Company
has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political
activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; (iii) violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.



     (p) Sarbanes-Oxley Act. Except as disclosed in the SEC Documents, the Company is in
material compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002 that



10









 




are effective as of the date hereof, and all applicable rules and regulations promulgated by
the SEC thereunder that are effective as of the date hereof.




     (q) Transactions With Affiliates. Except as disclosed in the SEC Documents or as set
forth on Schedule 3(q), none of the officers, directors or to the knowledge of the Company,
employees of the Company is presently a party to any transaction with the Company (other than for
ordinary course services as employees, officers or 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 such officer,
director or employee or, to the knowledge of the Company, any corporation, partnership, trust or
other Person in which any such officer, director, or employee has a substantial interest or is an
employee, officer, director, trustee or partner.



     (r) Capitalization. Except as disclosed in the SEC Documents, the Company has not
issued any capital stock since its most recently filed periodic report under the 1934 Act, other
than 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 as of
the date of the most recently filed periodic report under the 1934 Act. Except as disclosed in the
SEC Documents or as set forth in Schedule 3(r)(i), 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 disclosed in the SEC Documents
or as set forth in Schedule 3(r)(ii), as a result of the purchase and sale of the
Securities, 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 is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents. Except as disclosed in the SEC Documents or as set forth in
Schedule 3(r)(iii), 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 Buyers) and will
not result in a right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the outstanding shares of capital
stock of the Company are validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of such outstanding shares was
issued in violation of any preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any stockholder, the Board of Directors or
others is required for the issuance and sale of the Securities. 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. “Common Stock Equivalents” means any securities of the Company which
would entitle the holder thereof to acquire at any time Common Stock, including, without
limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof
to receive, Common Stock.



11









 





     (s) Indebtedness and Other Contracts. Except as disclosed in the SEC Documents, the
Company (i) has no outstanding Indebtedness (as defined below), (ii) is not a party to any
contract, agreement or instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be expected to result in a
Material Adverse Effect, (iii) is not in violation of any term of or in default under any contract,
agreement or instrument relating to any Indebtedness, except where such violations and defaults
would not result, individually or in the aggregate, in a Material Adverse Effect, or (iv) is not a
party to any contract, agreement or instrument relating to any Indebtedness, the performance of
which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse
Effect. For purposes of this Agreement: (x) “Indebtedness” of any Person means, without duplication
(A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (including, without limitation, “capital leases” in
accordance with generally accepted accounting principles) (other than trade payables entered into
in the ordinary course of business), (C) all reimbursement or payment obligations with respect to
letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all indebtedness created or
arising under any conditional sale or other title retention agreement, or incurred as financing, in
either case with respect to any property or assets acquired with the proceeds of such indebtedness
(even though the rights and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property), (F) all monetary obligations under
any leasing or similar arrangement which, in connection with generally accepted accounting
principles, consistently applied for the periods covered thereby, is classified as a capital lease,
(G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any
mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or
assets (including accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of such indebtedness,
and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means, as to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the primary purpose or
intent of the Person incurring such liability, or the primary effect thereof, is to provide
assurance to the obligee of such liability that such liability will be paid or discharged, or that
any agreements relating thereto will be complied with, or that the holders of such liability will
be protected (in whole or in part) against loss with respect thereto; and (z) “Person” means an
individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity and a government or any department or agency
thereof..



     (t) Absence of Litigation. Except as disclosed in the SEC Documents, there is no
action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court,
public board, government agency, self-regulatory organization or body pending or, to the knowledge
of the Company, threatened against or affecting the Company, the Common Stock or any of the
Company’s officers or directors which is outside of the ordinary course of business or individually
or in the aggregate would have or reasonably expect to result in a Material Adverse Effect. There
has not been, and to the knowledge of the Company, there is not pending or



12









 




contemplated, any investigation by the SEC involving the Company or any current director or
officer of the Company. The SEC has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company under the 1933 Act or the 1934
Act.




     (u) Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the Company are engaged. The
Company has not been refused any insurance coverage sought or applied for, and the Company has no
reason to believe that it will be unable to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.



     (v) Employee Relations. The Company is not a party to any collective bargaining
agreement or employs any member of a union. The Company believes that its relations with its
employees are good. No executive officer (as defined in Rule 501(f) promulgated under the 1933
Act) or other key employee of the Company has notified the Company that such officer intends to
leave the Company or otherwise terminate such officer’s employment with the Company. No executive
officer or other key employee of the Company is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer or other key employee (as the
case may be) does not subject the Company to any liability with respect to any of the foregoing
matters. The Company is in compliance with all federal, state and local laws and regulations
respecting labor, employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.



     (w) Title. Except as disclosed in the SEC Documents or as set forth on Schedule 3(w),
the Company has good and marketable title in fee simple to all real property, and have good and
marketable title to all personal property, owned by it which is material to the business of the
Company free and clear of all liens, charges, security interests, encumbrances, rights of first
refusal, preemptive rights or other restrictions (“Liens”), encumbrances and defects except such as
do not materially affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company. Any real property and facilities held under
lease by the Company are held by it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company.



     (x) Intellectual Property Rights. The Company has or has adequate rights or licenses
to use all trademarks, trade names, service marks, service mark registrations, service names,
patents, patent rights, copyrights, original works, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights and all applications and
registrations therefor (“Intellectual Property Rights”) necessary to conduct its business as
described in the SEC Documents. None of the Company’s Intellectual Property Rights have expired,
terminated or been abandoned, or are expected to expire, terminate or be abandoned,



13









 




within three years from the date of this Agreement, except as set forth in the SEC Documents
or except where such expiration, termination or abandonment would not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company has not
received a notice (written or otherwise) that any of the Intellectual Property Rights used by the
Company violates or infringes upon the rights of any Person. To the knowledge of the Company, all
such Intellectual Property Rights are enforceable. The Company has taken reasonable security
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.




     (y) Environmental Laws. The Company (i) is in material compliance with all
Environmental Laws (as defined below), (ii) has received all permits, licenses or other approvals
required of it under applicable Environmental Laws to conduct its business and (iii) is in
compliance with all terms and conditions of any such permit, license or approval where, in each of
the foregoing clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws”
means all federal, state, local or foreign laws relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or
otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees,
demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved thereunder.



     (z) Tax Status. Except for matters that would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect, the Company 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. The Company is not operated in such a manner as to
qualify as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal
Revenue Code of 1986, as amended.



     (aa) Internal Accounting and Disclosure Controls. Except as disclosed in the SEC
Documents, the Company maintains internal control over financial reporting (as such term is defined
in Rule 13a-15(f) under the 1934 Act) that is effective to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP, including 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 and
liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in
accordance with management’s general or specific authorization and (iv) the recorded accountability
for assets and liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference. Except as disclosed in
the SEC Documents, the Company maintains disclosure controls and procedures (as such term is
defined in Rule 13a-15(e) under the 1934 Act) that are effective in



14









 




ensuring that information required to be disclosed by the Company in the reports that it files
or submits under the 1934 Act is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the SEC, including, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the 1934 Act is accumulated and communicated to the
Company’s management, including its principal executive officer or officers and its principal
financial officer or officers, as appropriate, to allow timely decisions regarding required
disclosure. The Company presented in its most recently filed periodic report under the 1934 Act
the conclusions of the certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the end of the period covered by the Company’s most
recently filed periodic report under the 1934 Act (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 1934 Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.




     (bb) Off Balance Sheet Arrangements. There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that
otherwise could be reasonably likely to have a Material Adverse Effect.



     (cc) Investment Company Status. The Company is not, and upon consummation of the sale
of the Securities will not be, an “investment company,” as such term is defined in the Investment
Company Act of 1940, as amended.



     (dd) Acknowledgement Regarding Buyers’ Trading Activity. It is understood and
acknowledged by the Company that (i) none of the Buyers have been asked by the Company to agree,
nor has any Buyer agreed with the Company, to desist from effecting any transactions in or with
respect to (including, without limitation, purchasing or selling, long and/or short) any securities
of the Company, or “derivative” securities based on securities issued by the Company or to hold any
of the Securities for any specified term; (ii) past or future open market or other transactions by
any Buyer, specifically including, without limitation, Short Sales or “derivative” transactions,
before or after the closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities; (iii) any Buyer, and counterparties
in “derivative” transactions to which any such Buyer is a party, directly or indirectly, presently
may have a “short” position in the Common Stock which was established prior to such Buyer’s
knowledge of the transactions contemplated by the Transaction Documents; and (iv) each Buyer shall
not be deemed to have any affiliation with or control over any arm’s length counterparty in any
“derivative” transaction. The Company further understands and acknowledges that (a) one or more
Buyers may engage in hedging and/or trading activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods that the value and/or
number of the Warrant Shares deliverable with respect to the Securities are being determined and
(b) such hedging and/or trading activities, if any, can reduce the value of the existing
stockholders’ equity interest in the Company both at and after the time the hedging and/or trading
activities are being conducted. The Company acknowledges that such aforementioned hedging and/or
trading activities do not constitute a breach of this Agreement or any other Transaction Document
or any of the documents executed in connection herewith or therewith.



15









 





     (ee) Manipulation of Price. The Company has not, and, to the knowledge of the Company,
no Person acting on its behalf has, directly or indirectly, (i) taken 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 (other than the Placement Agent),
or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase
any other securities of the Company.



     (ff) U.S. Real Property Holding Corporation. The Company is not nor has ever been, a
U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue
Code of 1986, as amended, and the Company shall so certify upon any Buyer’s request.



     (gg) Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other
than income or similar taxes) which are required to be paid in connection with the issuance, sale
and transfer of the Securities to be sold to each Buyer hereunder will be, or will have been, fully
paid or provided for by the Company, and all laws imposing such taxes will be or will have been
complied with.



     (hh) Bank Holding Company Act. The Company is not subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal
Reserve System (the “Federal Reserve”). Neither the Company nor any of its affiliates owns or
controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class
of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any
equity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its affiliates exercises a controlling influence over the management or policies of a
bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.



     (ii) Shell Company Status. The Company is not, and has never been, an issuer
identified in, or subject to, Rule 144(i).



     (jj) Public Utility Holding Act. The Company is not a “holding company,” or an
“affiliate” of a “holding company,” as such terms are defined in the Public Utility Holding Act of
2005.



     (kk) Federal Power Act. The Company is not subject to regulation as a “public
utility” under the Federal Power Act, as amended.



     (ll) FDA. Except as disclosed in the SEC Documents, as to each product subject to the
jurisdiction of the U.S. Food and Drug Administration (“FDA”) under the Federal Food, Drug and
Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged,
labeled, tested, distributed, sold, and/or marketed by the Company (each such product, a
"Pharmaceutical Product”), such Pharmaceutical Product is being manufactured, packaged, labeled,
tested, distributed, sold and/or marketed by the Company in compliance with all applicable
requirements under FDCA and similar laws, rules and regulations relating to registration,
investigational use, premarket clearance, licensure, or application approval, good manufacturing
practices, good laboratory practices, good clinical practices,



16









 




product listing, quotas, labeling, advertising, record keeping and filing of reports, except
where the failure to be in compliance would not have a Material Adverse Effect. Except as
disclosed in the SEC Documents, there is no pending, completed or, to the Company’s knowledge,
threatened, action (including any lawsuit, arbitration, or legal or administrative or regulatory
proceeding, charge, complaint, or investigation) against the Company, and the Company has not
received any notice, warning letter or other communication from the FDA or any other governmental
entity, which (i) contests the premarket clearance, licensure, registration, or approval of, the
uses of, the distribution of, the manufacturing or packaging of, the testing of, the sale of, or
the labeling and promotion of any Pharmaceutical Product, (ii) withdraws its approval of, requests
the recall, suspension, or seizure of, or withdraws or orders the withdrawal of advertising or
sales promotional materials relating to, any Pharmaceutical Product, (iii) imposes a clinical hold
on any clinical investigation by the Company, (iv) enjoins production at any facility of the
Company, (v) enters or proposes to enter into a consent decree of permanent injunction with the
Company, or (vi) otherwise alleges any violation of any laws, rules or regulations by the Company,
and which, either individually or in the aggregate, would have a Material Adverse Effect. Except
as disclosed in the SEC Documents, the properties, business and operations of the Company have been
and are being conducted in all material respects in accordance with all applicable laws, rules and
regulations of the FDA. Except as disclosed in the SEC Documents, the Company has not been
informed by the FDA that the FDA will prohibit the marketing, sale, license or use in the United
States of any product proposed to be developed, produced or marketed by the Company nor has the
FDA, to the Company’s knowledge, expressed any concern as to approving or clearing for marketing
any product being developed or proposed to be developed by the Company.




     (mm) Money Laundering. The Company is in compliance with, and has not previously
violated, the USA Patriot Act of 2001 and any other applicable U.S. and non-U.S. anti-money
laundering laws and regulations, including, but not limited to, the laws, regulations and Executive
Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including,
but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property
and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66
Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.



     (nn) Management. Except as disclosed in the SEC Documents, during the past five year
period, no current officer or director has been the subject of:




     (i) a petition under bankruptcy laws or any other insolvency or moratorium law or the
appointment by a court of a receiver, fiscal agent or similar officer for such Person, or
any partnership in which such person was a general partner at, or any corporation or
business association of which such person was an executive officer at;




     (ii) a conviction in a criminal proceeding or a named subject of a pending criminal
proceeding (excluding traffic violations that do not relate to driving while intoxicated or
driving under the influence);



17









 






     (iii) any order, judgment or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction, permanently or temporarily enjoining any such person
from, or otherwise limiting, the following activities:




          (1) Acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage transaction
merchant, any other person regulated by the United States Commodity Futures Trading
Commission or an associated person of any of the foregoing, or as an investment
adviser, underwriter, broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and loan association
or insurance company, or engaging in or continuing any conduct or practice in
connection with such activity;




          (2) Engaging in any type of business practice; or




          (3) Engaging in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of securities laws or
commodities laws;




     (iv) any order, judgment or decree, not subsequently reversed, suspended or vacated, of
any authority barring, suspending or otherwise limiting for more than 60 days the right of
any such person to engage in any activity described in the preceding sub paragraph, or to be
associated with persons engaged in any such activity;




     (v) a finding by a court of competent jurisdiction in a civil action or by the SEC or
other authority to have violated any securities law, regulation or decree and the judgment
in such civil action or finding by the SEC or any other authority has not been subsequently
reversed, suspended or vacated; or




     (vi) a finding by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal commodities law, and the
judgment in such civil action or finding has not been subsequently reversed, suspended or
vacated.



     (oo) No Additional Agreements. The Company does not have any agreement or
understanding with any Buyer with respect to the transactions contemplated by the Transaction
Documents other than as specified in the Transaction Documents.



     (pp) Disclosure. The Company understands and confirms that each of the Buyers will
rely on the foregoing representations in effecting transactions in securities of the Company. All
disclosure provided to the Buyers regarding the Company, its business and the transactions
contemplated hereby, including the schedules to this Agreement, furnished by or on behalf of the
Company is true and correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Each press release issued by the Company
during the twelve (12) months preceding the date of this Agreement did not at the time of release
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 the light of the



18









 




circumstances under which they are made, not misleading. No event or circumstance has
occurred or information exists with respect to the Company or its business, properties,
liabilities, prospects, operations (including results thereof) or conditions (financial or
otherwise), which, under applicable law, rule or regulation, requires public disclosure at or
before the date hereof or announcement by the Company but which has not been so publicly disclosed.
The Company acknowledges and agrees that no Buyer makes or has made any representations or
warranties with respect to the transactions contemplated hereby other than those specifically set
forth in Section 2.




     (qq) Acknowledgement of Registration Rights and Piggyback Rights. The Company
acknowledges that each of the Buyers has registration rights pursuant to the Registration Rights
Agreement, and agrees that all the Securities purchased hereunder shall constitute “Registrable
Securities” under the terms of such agreement. The Company further acknowledges that (a) pursuant
to Article II of the Registration Rights Agreement, the Buyers may demand that the Company effect
the registration under the 1933 Act of all or a specified number of the Registrable Securities, and
(b) pursuant to Article III of the Registration Rights Agreement, if any time the Company proposes
to file a Registration Statement under the 1933 Act with respect to any offering of securities of
the Company, the Buyers shall have the opportunity to register any of its Registrable Securities of
the same class as those being registered by the Company.


4. COVENANTS.




     (a) Best Efforts. Each Buyer shall use its reasonable best efforts to timely satisfy
each of the conditions to be satisfied by it as provided in Section 6 of this Agreement. The
Company shall use its reasonable best efforts to timely satisfy each of the conditions to be
satisfied by it as provided in Section 7 of this Agreement.



     (b) Form D and Blue Sky. The Company shall file a Form D with respect to the
Securities as required under Regulation D. The Company shall, on or before the Closing Date, take
such action as the Company shall reasonably determine is necessary in order to obtain an exemption
for, or to, qualify the Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an
exemption from such qualification) if so required by such applicable state laws. Without limiting
any other obligation of the Company under this Agreement, the Company shall timely make all filings
and reports relating to the offer and sale of the Securities required under all applicable
securities laws (including, without limitation, all applicable federal securities laws and all
applicable “Blue Sky” laws), and the Company shall comply with all applicable federal, state and
local laws, statutes, rules, regulations and the like relating to the offering and sale of the
Securities to the Buyers.



     (c) Reporting Status. Until the date on which the Buyers shall have sold all of the
Registrable Securities (the “Reporting Period”), the Company shall timely file all reports required
to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status
as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would no longer require or otherwise permit such termination.



19









 





     (d) Use of Proceeds. The Company shall use the proceeds from the sale of the
Securities solely as set forth on Schedule 4(d), and, without limitation of the foregoing, except
as set forth on Schedule 4(d), none of such proceeds shall be used, directly or indirectly, for (i)
the satisfaction of any debt of the Company (other than payment of trade payables incurred after
the date hereof in the ordinary course of business of the Company and consistent with prior
practices), (ii) the redemption of any securities of the Company or (iii) the settlement of any
outstanding litigation.



     (e) Financial Information. The Company agrees to send the following to each Investor
(as defined in the Registration Rights Agreement) during the Reporting Period (i) unless the
following are filed with the SEC through EDGAR and are available to the public through the EDGAR
system, within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q, any interim reports or any consolidated
balance sheets, income statements, stockholders’ equity statements and/or cash flow statements for
any period other than annual, any Current Reports on Form 8-K and any registration statements
(other than on Form S-8) or amendments filed pursuant to the 1933 Act and (ii) copies of any
notices and other information made available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the stockholders. Notwithstanding
the foregoing, nothing in this Section 4(e) shall require the Company to disclose to any Investor
any redacted part of any filing in which the Company has requested confidential treatment by the
SEC.



     (f) Listing. The Company shall promptly secure the listing or designation for
quotation (as the case may be) of all of the Registrable Securities upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock is then listed or
designated for quotation (as the case may be) (subject to official notice of issuance) (but in no
event later than the Closing Date) and shall maintain such listing or designation for quotation (as
the case may be) of all Registrable Securities from time to time issuable under the terms of the
Transaction Documents on such national securities exchange or automated quotation system. The
Company further agrees, if the Company applies to have the Common Stock traded on any other
national securities exchange or automated quotation system, it will then include in such
application all of the Registrable Securities, and will take such other action as is necessary to
cause all of the Registrable Securities to be listed or quoted on such other exchange as promptly
as possible. The Company shall maintain the Common Stock’s designation for quotation (as the case
may be) on the Principal Market, or, if applicable, listing on The NYSE Amex, The New York Stock
Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market
(as the case may be) (each, an “Eligible Market”), and shall take all action reasonably necessary
to continue the listing and trading of its Common Stock on an Eligible Market and will comply in
all respects with the Company’s reporting, filing, and other obligations under the bylaws or rules
of such Eligible Market. The Company shall not take any action which could be reasonably expected
to result in the delisting or suspension of the Common Stock on an Eligible Market. The Company
shall pay all fees and expenses in connection with satisfying its obligations under this Section
4(d).



     (g) Fees. The Company shall be responsible for the payment of any placement agent’s
fees, financial advisory fees, or broker’s commissions (other than for Persons engaged by any
Buyer) relating to or arising out of the transactions contemplated hereby (including, without



20









 




limitation, any fees payable to the Placement Agent, who is the Company’s sole placement agent
in connection with the transactions contemplated by this Agreement). The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including, without limitation,
reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any claim
relating to any such payment. Except as otherwise set forth in the Transaction Documents, each
party to this Agreement shall bear its own expenses in connection with the sale of the Securities
to the Buyers.




     (h) Pledge of Securities. Notwithstanding anything to the contrary contained in this
Agreement, the Company acknowledges and agrees that the Securities may be pledged by a Buyer in
connection with a bona fide margin agreement or other loan or financing arrangement that is secured
by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or
assignment of the Securities hereunder, and no Buyer effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any delivery to the
Company pursuant to this Agreement or any other Transaction Document. The Company hereby agrees to
execute and deliver such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Buyer.



     (i) Disclosure of Transactions and Other Material Information. The Company shall, on
or before 9:30 a.m., New York time, (but in no event prior to 9:15 a.m., New York time) on the date
of this Agreement, issue a press release (the “Press Release”) reasonably acceptable to the Buyers
disclosing all the material terms of the transactions contemplated by the Transaction Documents. On
or before 9:30 a.m., New York time, (but in no event prior to 9:15 a.m., New York time) on the date
of this Agreement, the Company shall file a Current Report on Form 8-K describing all the material
terms of the transactions contemplated by the Transaction Documents in the form required by the
1934 Act and attaching all the material Transaction Documents (including, without limitation, this
Agreement, the form of Warrants and the Waiver Agreement) (including all attachments, the “8-K
Filing”).



     (j) [Reserved]



     (k) Additional Issuance of Securities. The Company agrees that for the period
commencing on the date hereof and ending on the date immediately following the earlier to occur of
(i) the thirtieth (30th) Trading Day after the earlier of (x) the Applicable Date (as defined
below) and (y) the first date on which Rule 144 is available for the sale of any Securities and
(ii) the three (3) month anniversary of the Closing Date (the “Restricted Period”), the Company
shall not directly or indirectly issue, offer, sell, grant any option or right to purchase, or
otherwise dispose of (or announce any issuance, offer, sale, grant of any option or right to
purchase or other disposition of) any equity security or any equity-linked security (including,
without limitation, any “equity security” (as that term is defined under Rule 405 promulgated under
the 1933 Act), any Convertible Securities, or any preferred stock) (any such issuance, offer, sale,
grant, disposition or announcement (whether occurring during the Restricted Period or at any time
thereafter) is referred to as a “Subsequent Placement”), unless each purchaser (each a “Subsequent
Purchaser”) of securities in such Subsequent Placement (including, without limitation, any
securities issuable upon conversion, exercise or exchange thereof) (collectively, the “Subsequent
Placement Securities”) irrevocably agrees that during the Restricted Period it will not, directly
or indirectly, sell, offer to sell, contract or agree to sell, or



21









 




grant any option to purchase any Subsequent Placement Securities pursuant to an effective
registration statement or usable prospectus or in reliance on the Section 4(1) exemption under the
1933 Act (the foregoing restrictions are referred to as the “Subsequent Transfer Restrictions”).
For the avoidance of doubt, Subsequent Transfer Restrictions shall not include (A) any sale, offer
to sell, contract or agreement to sell any of the Subsequent Placement Securities directly or
indirectly to any Person in a private sale transaction in reliance on the 4(11/2) exemption under the
1933 Act, or (B) any sales, transfers, grants or gifts of any Subsequent Placement Securities to
(i) any spouse or lineal descendants, heirs, executors, administrators, testamentary trustees,
legatees or beneficiaries of such Subsequent Purchaser; (ii) any trust, charitable trust, or any
corporation, limited liability company, partnership or other entity, the stockholders, members,
general or limited partners or owners of which include only such Subsequent Purchaser or its
affiliates, or (iii) any affiliate of such Subsequent Purchaser (collectively, a “Permitted
Transferee”), so long as each such Permitted Transferee, prior to acquisition of any Subsequent
Placement Securities, agrees in writing with the Company to be bound by the Subsequent Transfer
Restrictions with respect to all Subsequent Placement Securities such Permitted Transferee
acquires. Notwithstanding the foregoing, this Section 4(k) shall not apply to the issuance of: (A)
shares of Common Stock or standard options to purchase Common Stock to directors, officers,
consultants or employees of the Company in their capacity as such pursuant to an Approved Share
Plan (as defined below), (B) shares of Common Stock issued upon the conversion or exercise of
Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an
Approved Share Plan that are covered by clause (A) above) issued prior to the date hereof,
provided, that, none of the terms or conditions of any such Convertible Securities (other than
standard options to purchase Common Stock issued pursuant to an Approved Share Plan that are
covered by clause (A) above) are otherwise materially changed (except pursuant to the terms
thereof) in any manner that adversely affects any of the Buyers, (C) the Warrant Shares, (D) any
securities issued in the Concurrent Offering or any securities issued upon the exercise or
conversion of any securities issued in connection therewith, including but not limited to any
securities issued in connection with the Waiver Agreement, dated as of the date hereof, between the
Company and the holders of the MHR Securities (as defined in the Warrants), (E) any equity
security, any equity linked security, any Convertible Securities, or any preferred stock issued or
issuable in connection with bona fide, arm’s length bank financings, corporate partnering or
intellectual property licensing transactions, equipment leases or acquisitions of all or any
portion of a business or its assets whether by merger, stock or asset purchase or any other bona
fide strategic transaction (each a “Strategic Transaction”) on terms approved by the Company’s
board of directors, provided that (x) the primary purpose of such issuance is not to raise capital,
(y) the purchasers or acquirers of the securities in such issuance does not include an entity whose
primary business is investing in securities and (z) the number or amount of securities issued to
any Person by the Company shall not be disproportionate to such Person’s actual participation in
such Strategic Transaction or ownership of such assets or securities to be acquired by the Company
in such Strategic Transaction, as applicable, (F) any equity security, equity linked security, any
Convertible Securities or preferred stock issued by the Company to all holders of Common Stock or
any other class of Company capital stock, pro rata (including without limitation, in connection
with a recapitalization, stock split, reverse stock split or rights offering), including any equity
security, equity linked security, Convertible Security or preferred stock issuable upon exercise or
conversion of such Convertible Securities, and (G) any equity security, any equity linked security,
any Convertible Securities, or any preferred stock to MHR or its






22









 







affiliates in connection with the waiver of any of MHR’s anti-dilution rights in connection
with any Subsequent Placement, provided that the consideration being provided to MHR for such
waiver is on terms approved by the Company’s board of directors as advised by independent member(s)
of the Board (each of the foregoing in clauses (A) through (G), collectively the “Excluded
Securities”). “Approved Share Plan” means any employee benefit plan which has been approved by the
board of directors of the Company prior to or subsequent to the date hereof pursuant to which
shares of Common Stock and standard options to purchase Common Stock may be issued to any employee,
officer, consultant or director for services provided to the Company in their capacity as such.
"Convertible Securities” means any capital stock or other security of the Company that is at any
time and under any circumstances directly or indirectly convertible into, exercisable or
exchangeable for, or which otherwise entitles the holder thereof to acquire, any capital stock or
other security of the Company (including, without limitation, Common Stock). “Applicable Date”
means the first date on which the resale by the Buyers of all Registrable Securities is covered by
one or more effective Registration Statements (as defined in the Registration Rights Agreement)
(and each prospectus contained therein is available for use on such date).




     (l) Reservation of Shares. So long as any of the Warrants remain outstanding, the
Company shall take all action necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than the maximum number of shares of Common Stock issuable upon
exercise of all the Warrants (without regard to any limitations on the exercise of the Warrants set
forth therein).



     (m) Conduct of Business. The business of the Company shall not be conducted in
violation of any law, ordinance or regulation of any governmental entity, except where such
violations would not result, either individually or in the aggregate, in a Material Adverse Effect.



     (n) Passive Foreign Investment Company. The Company shall conduct its business in
such a manner as will ensure that the Company will not be deemed to constitute a passive foreign
investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as
amended.



     (o) Closing Documents. Within a reasonable time after the Closing Date, the Company
agrees to deliver, or cause to be delivered, to each Buyer and [INSERT COUNSEL] executed copies of
the Transaction Documents, Securities and other document required to be delivered to any party
pursuant to Section 7 hereof.



     (p) Delivery of Warrants After Closing. The Company shall deliver, or cause to be
delivered, the respective Warrants purchased by each Buyer to such Buyer within three (3) Trading
Days of the Closing Date.



     (q) Shareholder Rights Plan. No claim will be made or enforced by the Company or, with
the consent of the Company, any other Person, that any Buyer 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 Buyer could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Securities under the Transaction Documents.



23









 




5. REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.




     (a) Register. The Company shall maintain at its principal executive offices (or such
other office or agency of the Company as it may designate by notice to each holder of Securities),
a register for the Warrants in which the Company shall record the name and address of the Person in
whose name the Warrants have been issued (including the name and address of each transferee), the
number of Warrant Shares issuable upon exercise of the Warrants held by such Person. The Company
shall keep the register open and available for inspection during business hours, upon reasonable
request of any Buyer or its legal representatives.



     (b) Transfer Agent Instructions. The Company shall issue irrevocable instructions to
its transfer agent and any subsequent transfer agent in a form acceptable to each of the Buyers
(the “Irrevocable Transfer Agent Instructions”) to issue certificates or credit shares to the
applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of each
Buyer or its respective nominee(s), for the Common Shares and the Warrant Shares in such amounts as
specified from time to time by each Buyer to the Company upon delivery of the Common Shares or the
exercise of the Warrants (as the case may be). The Company represents and warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section
5(b), and stop transfer instructions to give effect to Section 2(g) hereof, will be given by the
Company to its transfer agent with respect to the Securities, and that the Securities shall
otherwise be freely transferable on the books and records of the Company, as applicable, to the
extent provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale,
assignment or transfer of the Securities in accordance with Section 2(g), the Company shall permit
the transfer and shall promptly instruct its transfer agent to issue one or more certificates or
credit shares to the applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale,
assignment or transfer involves Common Shares or Warrant Shares sold, assigned or transferred
pursuant to an effective registration statement or in compliance with Rule 144, the transfer agent
shall issue such shares to such Buyer, assignee or transferee (as the case may be) without any
restrictive legend in accordance with Section 5(d) below. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to each Buyer. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 5(b), that each Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and without any bond or other
security being required. The Company shall cause its counsel to issue such legal opinions as may be
requested from time to time in order to enable the sale of the Securities pursuant to the terms
hereof. Any fees (with respect to the transfer agent, counsel to the Company or otherwise)
associated with the issuance of such opinion or the removal of any legends on any of the Securities
shall be borne by the Company.



     (c) Legends. Each Buyer understands that the Securities have been issued (or will be
issued in the case of the Warrant Shares) pursuant to an exemption from registration or
qualification under the 1933 Act and applicable state securities laws, and except as set forth
below, the Securities shall bear any legend as required by the “blue sky” laws of any state and a



24









 




restrictive legend in substantially the following form (and a stop-transfer order may be
placed against transfer of such stock certificates):





[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE SECURITIES INTO WHICH THESE SECURITIES ARE [EXERCISABLE] HAVE BEEN][THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF
REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.



     (d) Removal of Legends. Certificates evidencing Securities shall not be required to
contain the legend set forth in Section 5(c) above or any other legend (i) while a registration
statement (including a Registration Statement) covering the resale of such Securities is effective
under the 1933 Act, (ii) following any sale of such Securities pursuant to Rule 144 (assuming the
transferor is not an affiliate of the Company), (iii) if such Securities are eligible to be sold,
assigned or transferred under Rule 144 (provided that a Buyer provides the Company with reasonable
assurances that such Securities are eligible for sale, assignment or transfer under Rule 144 which
shall not include an opinion of counsel), (iv) in connection with a sale, assignment or other
transfer (other than under Rule 144), provided that such Buyer provides the Company with an opinion
of counsel to such Buyer, in a generally acceptable form, to the effect that such sale, assignment
or transfer of the Securities may be made without registration under the applicable requirements of
the 1933 Act or (v) if such legend is not required under applicable requirements of the 1933 Act
(including, without limitation, controlling judicial interpretations and pronouncements issued by
the SEC). If a legend is not required pursuant to the foregoing, the Company shall no later than
three (3) Trading Days following the delivery by a Buyer to the Company or the transfer agent (with
notice to the Company) of a legended certificate representing such Securities (endorsed or with
stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the
reissuance and/or transfer, if applicable), together with any other deliveries from such Buyer as
may be required above in this Section 5(d), as directed by such Buyer, either: (A) provided that
the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer Program
and such Securities are Common Shares or Warrant Shares, credit the aggregate number of shares of
Common Stock to which such Buyer shall be entitled to such Buyer’s or its designee’s balance
account with DTC through its Deposit/Withdrawal at Custodian system or (B) if the Company’s
transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue
and deliver (via



25









 




reputable overnight courier) to such Buyer, a certificate representing such Securities that is
free from all restrictive and other legends, registered in the name of such Buyer or its designee
(the date by which such credit is so required to be made to the balance account of such Buyer’s or
such Buyer’s nominee with DTC or such certificate is required to be delivered to such Buyer
pursuant to the foregoing is referred to herein as the “Required Delivery Date”).




     (e) Failure to Timely Deliver; Buy-In. If the Company fails to (i) issue and deliver
(or cause to be delivered) to a Buyer by the Required Delivery Date a certificate representing the
Securities so delivered to the Company by such Buyer that is free from all restrictive and other
legends or (ii) credit the balance account of such Buyer’s or such Buyer’s nominee with DTC for
such number of shares of Common Shares or Warrant Shares so delivered to the Company, and if on or
after the Required Delivery Date such Buyer purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by such Buyer of shares of Common Stock
that such Buyer anticipated receiving from the Company without any restrictive legend, then, in
addition to all other remedies available to such Buyer, the Company shall, within three (3) Trading
Days after such Buyer’s request and in such Buyer’s sole discretion, either (i) pay cash to such
Buyer in an amount equal to such Buyer’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such certificate or credit such Buyer’s balance account shall terminate and
such shares shall be cancelled, or (ii) promptly honor its obligation to deliver to such Buyer a
certificate or certificates or credit such Buyer’s DTC account representing such number of shares
of Common Stock that would have been issued if the Company timely complied with its obligations
hereunder and pay cash to such Buyer in an amount equal to the excess (if any) of the Buy-In Price
over the product of (A) such number of shares of Common Shares or Warrant Shares (as the case may
be) that the Company was required to deliver to such Buyer by the Required Delivery Date times (B)
the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the Required
Delivery Date.


6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.




     (a) The obligation of the Company hereunder to issue and sell the Common Shares and the
related Warrants to each Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole discretion by
providing each Buyer with prior written notice thereof:




     (i) Such Buyer shall have executed each of the other Transaction Documents to which it
is a party and delivered the same to the Company.




     (ii) Such Buyer and each other Buyer shall have delivered to the Company the Purchase
Price for the Common Shares and the related Warrants being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire instructions
provided by the Company.




     (iii) The representations and warranties of such Buyer shall be true and correct in all
material respects (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all respects)



26









 







as of the date when made and as of the Closing Date as though originally made at that
time (except for representations and warranties that speak as of a specific date, which
shall be true and correct as of such date), and such Buyer shall have performed, satisfied
and complied in all material respects with the covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by such Buyer at or prior to
the Closing Date.


7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.




     (a) The obligation of each Buyer hereunder to purchase the Common Shares and the related
Warrants at the Closing is subject to the satisfaction, at or before the Closing Date, of each of
the following conditions, provided that these conditions are for each Buyer’s sole benefit and may
be waived by such Buyer at any time in its sole discretion by providing the Company with prior
written notice thereof:




     (i) The Company shall have duly executed and delivered to such Buyer (A) each of the
other Transaction Documents and (B) a copy of the irrevocable instructions to the Company’s
transfer agent instructing the transfer agent to deliver the Common Shares (in the number as
is set forth across from such Buyer’s name in column (3) of the Schedule of Buyers) and the
related Warrants (for the number of Warrant Shares as is set forth across from such Buyer’s
name in column (4) of the Schedule of Buyers) (such Warrant certificate may be delivered
within three (3) Trading Days of the Closing Date) being purchased by such Buyer at the
Closing pursuant to this Agreement.




     (ii) Such Buyer shall have received the opinion of Brown Rudnick LLP, the
Company’s counsel, dated as of the Closing Date, in the form acceptable to such Buyer.




     (iii) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form acceptable to such Buyer, which instructions shall have been
delivered to and acknowledged in writing by the Company’s transfer agent.




     (iv) The Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company issued by the Secretary of State of the State of
Delaware as of a date within ten (10) days of the Closing Date.




     (v) The Company shall have delivered to such Buyer a certificate evidencing the
Company’s qualification as a foreign corporation and good standing issued by the Secretary
of State of the State of New Jersey and the Secretary of State of the State of New York, as
of a date within ten (10) days of the Closing Date.




     (vi) The Company shall have delivered to such Buyer a certificate, in the form
acceptable to such Buyer, executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the
Company’s board of directors in a form reasonably acceptable to such Buyer, (ii) the
Certificate of Incorporation and (iii) the Bylaws, each as in effect at the Closing.



27









 






     (vii) Each and every representation and warranty of the Company shall be true and
correct in all material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and correct in all
respects) as of the date when made and as of the Closing Date as though originally made at
that time (except for representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required to be performed, satisfied or complied with by
the Company at or prior to the Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by such Buyer
in the form acceptable to such Buyer.




     (viii) The Company shall have delivered to such Buyer a letter from the Company’s
transfer agent certifying the number of shares of Common Stock outstanding on the Closing
Date immediately prior to the Closing.




     (ix) The Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the SEC or the
Principal Market from trading on the Principal Market nor shall suspension by the SEC or the
Principal Market have been threatened, as of the Closing Date, either (A) in writing by the
SEC or the Principal Market or (B) by falling below the minimum maintenance requirements of
the Principal Market.




     (x) The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities, including without
limitation, those required by the Principal Market.




     (xi) No statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents.




     (xii) Since the date of execution of this Agreement, no event or series of events shall
have occurred that reasonably would have or result in a Material Adverse Effect.




     (xiii) Such Buyer shall have received a letter on the letterhead of the Company, duly
executed by an appropriate officer of the Company, setting forth the wire instructions of
the Company.




     (xiv) Such Buyer shall have received (A) a duly executed copy of the Securities
Purchase Agreement, by and between the Company and certain investors listed on the Schedule
of Buyers thereto (collectively, the “Investors”), dated as of the date hereof (the
“Investor Agreement”) with respect to an offering of
an aggregate of 4,300,438 shares of Common
Stock and related warrants (in the form of the Warrants) to purchase
3,010,307 shares of Common
Stock for an aggregate purchase price of $0.872 (the “Investor Purchase Price”), pursuant to
the terms hereof, (B) evidence reasonably satisfactory to such Buyer



28









 







of the closing of the transactions contemplated by the Investor Agreement shall have
occurred, (C) evidence reasonably satisfactory to such Buyer that the Company shall have
received the Investor Purchase Price from the Investors by one or more wire transfers of
U.S. dollars and immediately available funds and (D) a duly executed copy of the Waiver
Agreement (as defined in the MHR Agreement) (the foregoing transactions, collectively, the
“Concurrent Offering”).




     (xv) The Company shall have delivered to such Buyer such other documents, instruments
or certificates relating to the transactions contemplated by this Agreement as such Buyer or
its counsel may reasonably request.


8. TERMINATION.




     In
the event that the Closing shall not have occurred with respect to a
Buyer within five (5) Business
days of the date hereof, then such Buyer shall have the right to terminate its obligations under
this Agreement with respect to itself at any time on or after the close of business on such date
without liability of such Buyer to any other party; provided, however, (i) the right to terminate
this Agreement under this Section 8 shall not be available to such Buyer if the failure of the
transactions contemplated by this Agreement to have been consummated by such date is the result of
such Buyer’s breach of this Agreement and (ii) the abandonment of the sale and purchase of the
Common Shares and the Warrants shall be applicable only to such Buyer providing such written
notice. Nothing contained in this Section 8 shall be deemed to release any party from any liability
for any breach by such party of the terms and provisions of this Agreement or the other Transaction
Documents or to impair the right of any party to compel specific performance by any other party of
its obligations under this Agreement or the other Transaction Documents.


9. MISCELLANEOUS.




     (a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State 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, 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 brought in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. 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 to such party
at the address for such 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 manner permitted by law. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL
FOR THE



29









 




ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY.




     (b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which 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. In the
event that any signature is delivered by facsimile transmission or by an e-mail which contains a
portable document format (.pdf) file of an executed signature page, such signature page 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 signature page were an original thereof.



     (c) Headings; Gender. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement. Unless the context
clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine,
feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include”
and words of like import shall be construed broadly as if followed by the words “without
limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this
entire Agreement instead of just the provision in which they are found.



     (d) Severability. If any provision of this Agreement is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that
would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of
such provision shall not affect the validity of the remaining provisions of this Agreement so long
as this Agreement as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical realization of the benefits
that would otherwise be conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).



     (e) Entire Agreement; Amendments. This Agreement, the other Transaction Documents and
the schedules and exhibits attached hereto and thereto and the instruments referenced herein and
therein supersede all other prior oral or written agreements between the Buyers, the Company, their
affiliates and Persons acting on their behalf solely with respect to the matters contained herein
and therein, and this Agreement, the other Transaction Documents, the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein contain the entire
understanding of the parties solely with respect to the matters covered herein and therein;
provided, however, nothing contained in this Agreement or any other Transaction Document shall (or
shall be deemed to) (i) have any effect on any agreements any Buyer has entered into with the
Company prior to the date hereof with respect to any prior investment made by such Buyer in the
Company or (ii) waive, alter, modify or amend in any respect any obligations of the Company, or any
rights of or benefits to any Buyer or any other Person, in any agreement entered into prior to the
date hereof between or among the Company



30









 




and any Buyer and all such agreements shall continue in full force and effect. Except as
specifically set forth herein or therein, neither the Company nor any Buyer makes any
representation, warranty, covenant or undertaking with respect to such matters. For clarification
purposes, the Recitals are part of this Agreement. No provision of this Agreement may be amended or
waived other than by an instrument in writing signed by the Company and the holders of at least 67%
of the Common Shares initially issued hereunder on the Closing Date, and any amendment or to, or
waiver of any provision of, this Agreement made in conformity with the provisions of this Section
9(d) shall be binding on all Buyers and holders of Securities, as applicable, provided that any
party may give a waiver in writing as to itself. No such amendment or waiver (unless given pursuant
to the foregoing proviso in the case of a waiver) shall be effective to the extent that it applies
to less than all of the Buyers and holders of Securities. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in the Transaction
Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Buyer has made any commitment or promise or has any other obligation to provide any
financing to the Company, or otherwise. As a material inducement for each Buyer to enter into this
Agreement, the Company expressly acknowledges and agrees that (i) no due diligence or other
investigation conducted by a Buyer, any of its advisors or any of its representatives shall affect
such Buyer’s right to rely on, or shall modify or qualify in any manner or be an exception to any
of, the Company’s representations and warranties contained in this Agreement or any other
Transaction Document and (ii) unless a provision of this Agreement or any other Transaction
Document is expressly preceded by the phrase “except as disclosed in the SEC Documents,” nothing
contained in any of the SEC Documents shall affect such Buyer’s right to rely on, or shall modify
or qualify in any manner or be an exception to any of, the Company’s representations and warranties
contained in this Agreement or any other Transaction Document. The Company further agrees not to
amend the Investor Agreement or the terms of the warrants issued to the Investors without the prior
written consent of the holders of at least 67% of the shares of Common Stock initially issued
hereunder on the Closing Date.




     (f) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile or electronic mail (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one (1) Business Day
after deposit with an overnight courier service with next day delivery specified, in each case,
properly addressed to the party to receive the same. The addresses and facsimile numbers for such
communications shall be:


If to the Company:




Emisphere Technologies, Inc.

240 Cedar Knolls Rd

Suite 200

Cedar Knolls, New Jersey 07927

Telephone: (973) 532-8000




31









 





Facsimile: (973) 532-8115

Attention: Chief Financial Officer

Email: mgarone@emisphere.com



With a copy (for informational purposes only) to:




Brown Rudnick LLP

One Financial Center

Boston, Massachusetts 02111

Telephone: (617) 856-8200

Facsimile: (617) 856-8201

Attention: Timothy C. Maguire, Esq.

Email: tmaguire@brownrudnick.com



If to the Transfer Agent:




The Bank of New York Mellon — Shareowner Services

111 Founders Plaza, Suite 1100

East Harford, Connecticut 06108

Telephone: (860) 282-3513

Facsimile: (860) 528-6472

Attention: John Boryczki

Email:



If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers, with copies
to such Buyer’s representatives as set forth on the Schedule of Buyers.



or to such other address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party five (5) days prior
to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above, respectively.




     (g) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including, as contemplated
below, any assignee of any of the Securities. The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the holders of at least a
majority of the aggregate number of Registrable Securities issued and issuable under the
Transaction Documents, including, without limitation, by way of a Fundamental Transaction (as
defined in the Warrants) (unless the Company is in compliance with the applicable provisions
governing Fundamental Transactions set forth in the Warrants). A Buyer may assign some or all of
its rights hereunder in connection with any transfer of any of its Securities without the consent
of the Company, in which event such assignee shall be deemed to be a Buyer hereunder with respect
to such assigned rights.



32









 





     (h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person, other than the Indemnitees
referred to in Section 9(k).



     (i) Survival. The representations, warranties, agreements and covenants shall survive
the Closing for the applicable statute of limitations. Each Buyer shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.



     (j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.



     (k) Indemnification. In consideration of each Buyer’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each holder of any Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or indirect investors
and any of the foregoing Persons’ agents or other representatives (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 or is controlled by such Buyer (within the meaning of
Section 15 of the 1933 Act and Section 20 of the 1934 Act), and the directors, officers,
shareholders, 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 or controlled persons (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, contingencies, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective
of whether any such Indemnitee is a party to the action for which indemnification hereunder is
sought), and including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and disbursements and costs of investigation (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the Company in any of the
Transaction Documents, (b) any breach of any covenant, agreement or obligation of the Company
contained in any of the Transaction Documents or (c) any cause of action, suit or claim brought or
made against such Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of any of the Transaction Documents or the transactions contemplated by
the Transaction Documents, (ii) any disclosure properly made by such Buyer pursuant to Section
4(g), or (iii) the status of such Buyer or holder of the Securities as an investor in the Company
pursuant to the transactions contemplated by the Transaction Documents. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make
the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities
which is permissible under applicable law. If any action shall be brought against any Indemnitee
in respect of which



33









 




indemnity may be sought pursuant to this Agreement, such Indemnitee 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 Indemnitee; provided, however that any failure to
give such notice within any particular time period shall not adversely affect any Indemnitee’s
rights to indemnification except to the extent that the Company can show that the failure to give
such notice on a timely basis materially and adversely affected the Company’s ability to defend the
claim. Any Indemnitee 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 Indemnitee 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 Indemnitee, 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 Indemnitee under this Agreement (y) for any settlement by a Indemnitee
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 Indemnitee’s breach of any of the representations, warranties, covenants or
agreements made by such Indemnitee’s in this Agreement or in the other Transaction Documents.




     (l) No Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.



     (m) Remedies. Each Buyer and each holder of any Securities shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes that in the event that it fails to
perform, observe, or discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Buyers. The Company therefore agrees that
the Buyers shall be entitled to seek specific performance and/or temporary, preliminary and
permanent injunctive or other equitable relief from any court of competent jurisdiction in any such
case without the necessity of proving actual damages and without posting a bond or other security.



     (n) Withdrawal Right. Notwithstanding anything to the contrary contained in (and
without limiting any similar provisions of) the Transaction Documents, whenever any Buyer 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 Buyer 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.



34









 





     (o) Payment Set Aside; Currency. To the extent that the Company makes a payment or
payments to any Buyer hereunder or pursuant to any of the other Transaction Documents or any of the
Buyers enforce or exercise their rights hereunder or 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, foreign, 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. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement
and the other Transaction Documents are in United States Dollars (“U.S. Dollars”), and all amounts
owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All
amounts denominated in other currencies (if any) shall be converted in the U.S. Dollar equivalent
amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in
relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement,
the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of
calculation.



     (p) Judgment Currency.




     (i) If for the purpose of obtaining or enforcing judgment against the Company in any
court in any jurisdiction it becomes necessary to convert into any other currency (such
other currency being hereinafter in this Section 9(p) referred to as the “Judgment
Currency”) an amount due in U.S. Dollars under this Agreement or any other Transaction
Document, the conversion shall be made at the Exchange Rate prevailing on the Trading Day
immediately preceding: (1) the date actual payment of the amount due, in the case of any
proceeding in the courts of New York or in the courts of any other jurisdiction that will
give effect to such conversion being made on such date or (2) the date on which the foreign
court determines, in the case of any proceeding in the courts of any other jurisdiction (the
date as of which such conversion is made pursuant to this Section 9(p)(i) being hereinafter
referred to as the “Judgment Conversion Date”).




     (ii) If in the case of any proceeding in the court of any jurisdiction referred to in
Section 9(p)(i) above, there is a change in the Exchange Rate prevailing between the
Judgment Conversion Date and the date of actual payment of the amount due, the applicable
party shall pay such adjusted amount as may be necessary to ensure that the amount paid in
the Judgment Currency, when converted at the Exchange Rate prevailing on the date of
payment, will produce the amount of U.S. Dollars which could have been purchased with the
amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange
Rate prevailing on the Judgment Conversion Date.




     (iii) Any amount due from the Company under this provision shall be due as a separate
debt and shall not be affected by judgment being obtained for any other amounts due under or
in respect of this Agreement or any other Transaction Document.



35









 





     (q) Independent Nature of Buyers’ Obligations and Rights. The obligations of each
Buyer under the Transaction Documents are several and not joint with the obligations of any other
Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any
other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as, and the Company acknowledges that the Buyers do not so constitute, a
partnership, an association, a joint venture or any other kind of group or entity, or create a
presumption that the Buyers are in any way acting in concert or as a group or entity with respect
to such obligations or the transactions contemplated by the Transaction Documents or any matters,
and the Company acknowledges that the Buyers are not acting in concert or as a group, and the
Company shall not assert any such claim, with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Buyer shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out of this Agreement or
out of any other Transaction Documents, and it shall not be necessary for any other Buyer to be
joined as an additional party in any proceeding for such purpose. The use of a single agreement to
effectuate the purchase and sale of the Securities contemplated hereby was solely in the control of
the Company, not the action or decision of any Buyer, and was done solely for the convenience of
the Company and not because it was required or requested to do so by any Buyer. It is expressly
understood and agreed that each provision contained in this Agreement and in each other Transaction
Document is between the Company and a Buyer, solely, and not between the Company and the Buyers
collectively and not between and among the Buyers.



[signature pages follow]




36









 





     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Agreement to be duly executed as of the date first written above.



	 	 	 	 	 
	 	COMPANY:



EMISPHERE TECHNOLOGIES, INC.

 	 
	 	By:  	/s/ Michael R. Garone
 	 
	 	 	Name:  	Michael R. Garone 	 
	 	 	Title:  	Chief Financial Officer 	 
	 




 









 





     IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
this Agreement to be duly executed as of the date first written above.



	 	 	 	 	 
	 	BUYERS:



MHR FUND MANAGEMENT LLC

 	 
	 	By:  	/s/ Hal Goldstein
 	 
	 	 	Name:  	Hal Goldstein 	 
	 	 	Title:  	Authorized Signatory 	 
	 








 









 








SCHEDULE OF BUYERS




	 	 	 	 	 	 	 	 	 	 	 
	(1)	 	(2)	 	(3)	 	(4)	 	(5)	 	(6)
	 	 	 	 	Number of	 	 	 	 	 	Legal Representative’s
	 	 	 	 	Common	 	Number of	 	 	 	Address and Facsimile
	Buyer	 	Address and Facsimile Number	 	Shares	 	Warrant Shares	 	Purchase Price	 	Number
	MHR Fund Management

LLC
	 	40 West 57th Street

24th Floor

New York, NY 10019
	 	4,300,438
	 	3,010,307
	 	$3,749,083
	 	Dechert LLP

1095 Avenue of the
Americas
New York, NY
10036-6797 
Attn: Derek M. Winokur, Esq.
Fax: (212) 698-3599
	 

	 	Attn: Hal Goldstein
	 	 	 	 	 	 	 
	 

	 	Fax: (212) 262-9356
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 






 









 






Exhibit A




Form of Warrant



[See Exhibit 4.3 to Form 8-K]