Document:

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                                                                    EXHIBIT 10.7

                          PLEDGE AND SECURITY AGREEMENT

                         DATED AS OF SEPTEMBER 26, 2005

                                      AMONG

                    EMISPHERE TECHNOLOGIES, INC., AS GRANTOR

                             AND EACH OTHER GRANTOR

                         FROM TIME TO TIME PARTY HERETO

                                       AND

                       MHR INSTITUTIONAL PARTNERS IIA LP,

                   AS SECURED PARTY, ON BEHALF OF THE LENDERS
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                                TABLE OF CONTENTS

1. DEFINITIONS..............................................................   1
         1.1. Defined Terms.................................................   1
         1.2. Other Terms...................................................   9
         1.3. The Exchange..................................................   9

2. CREATION OF SECURITY INTEREST............................................   9
         2.1. Pledge and Grant of Security Interest.........................   9
         2.2. Security for the Obligations..................................  11
         2.3. Excluded Collateral...........................................  11

3. REPRESENTATIONS AND WARRANTIES...........................................  11
         3.1. Ownership of Collateral.......................................  12
         3.2. Security Interests; Filings...................................  12
         3.3. Locations, Jurisdiction of Organization.......................  13
         3.4. Authorization; Consent........................................  13
         3.5. Equity Interests..............................................  13
         3.6. Intellectual Property.........................................  14
         3.7. Disclosure....................................................  14

4. COVENANTS................................................................  14
         4.1. Security Interest.............................................  14
         4.2. Change of Name, etc...........................................  14
         4.3. Records; Inspection...........................................  15
         4.4. Intellectual Property.........................................  15
         4.5. Delivery of Collateral........................................  17
         4.6. Control of Investment Property and Other Collateral...........  17
         4.7. Vehicles......................................................  18
         4.8. Controlled Accounts; Controlled Deposit Accounts..............  18
         4.9. Payment of Obligations........................................  18
         4.10. Special Property.............................................  19
         4.11. Additional Information.......................................  19
         4.12. Additional Grantors..........................................  19

5. CERTAIN PROVISIONS RELATING TO EQUITY INTERESTS..........................  19
         5.1. Ownership; After-Acquired Equity Interests....................  19
         5.2. Voting Rights.................................................  20
         5.3. Dividends and Other Distributions.............................  20

6. REMEDIES.................................................................  21
         6.1. Events of Default.............................................  21
         6.2. Remedies......................................................  21
         6.3. Application of Proceeds.......................................  23
         6.4. Collateral Accounts...........................................  24
         6.5. Grant of License..............................................  24
         6.6. The Grantors Remain Liable....................................  24
         6.7. Registration Rights...........................................  25
         6.8. Right of Set-Off..............................................  26

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         6.9. Waivers by the Grantors.......................................  26

7. THE SECURED PARTY........................................................  27
         7.1. Limitation on Duty of Secured Party in Respect of Collateral..  27
         7.2. Further Assurances............................................  27
         7.3. Appointment as Attorney-in-Fact...............................  28

8. MISCELLANEOUS............................................................  29
         8.1. Indemnity and Expenses........................................  29
         8.2. No Waiver by Course of Conduct; Cumulative Remedies...........  29
         8.3. Grantors' Obligations Absolute................................  30
         8.4. Amendments, Waivers, etc......................................  31
         8.5. Subrogation; Termination and Release; Survival................  31
         8.6. Notices.......................................................  32
         8.7. Severability..................................................  32
         8.8. Headings......................................................  32
         8.9. Bankruptcy; Reinstatement.....................................  32
         8.10. Injunctive Relief............................................  32
         8.11. Successors and Assigns.......................................  33
         8.12. Counterparts.................................................  33
         8.13. Governing Law; Submission to Jurisdiction....................  33
         8.14. WAIVER OF JURY TRIAL.........................................  34
         8.15. Entire Agreement.............................................  34

EXHIBIT A:   Pledged Equity Interests
EXHIBIT B:   Filing Locations
EXHIBIT C:   Locations of Chief Executive Offices, Records Relating to
             Collateral and Equipment and Inventory
EXHIBIT D:   Copyrights and Copyright Applications
EXHIBIT E:   Patents and Patent Applications
EXHIBIT F:   Trademarks and Trademark Applications
EXHIBIT G:   Domain Name Registrations
EXHIBIT H:   Special Power of Attorney
EXHIBIT I:   Vehicles
EXHIBIT J:   Pledge Amendment
EXHIBIT K:   Security Agreement (Copyrights)
EXHIBIT L:   Security Agreement (Patents)
EXHIBIT M:   Security Agreement (Trademarks)
EXHIBIT N:   Security Agreement (Domain Name Registrations)
EXHIBIT O:   Form of Grantor Addendum
EXHIBIT P:   Deposit Account Control Agreement
EXHIBIT Q:   Certain Agreements, Property and Assets Constituting "Special
             Property"
EXHIBIT R:   Domain Name Assignment

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                          PLEDGE AND SECURITY AGREEMENT

            This PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of
September 26, 2005, by Emisphere Technologies, Inc. (the "Grantor"), each
subsidiary of the Grantor that, on or after the date hereof, executes an
addendum hereto substantially in the form of Exhibit O (the undersigned Grantor
together with such subsidiaries, the "Grantors"), and MHR Institutional Partners
IIA LP, a Delaware limited partnership (together with its successors and
permitted assigns, the "Secured Party"), on behalf of and for the benefit of the
Lenders (as defined herein).

                              W I T N E S S E T H:

            WHEREAS, contemporaneously with entering into this Agreement, the
Grantor is entering into that certain Investment and Exchange Agreement (the
"Investment and Exchange Agreement") and that certain Senior Secured Term Loan
Agreement (the "Loan Agreement"), each dated as of the date hereof, between the
Grantor and the Secured Party;

            WHEREAS, the Lenders (as defined herein) have agreed to lend on the
terms and conditions set forth in the Loan Agreement (the "Secured Loan")
$15,000,000 to the Grantor on the date hereof;

            WHEREAS, the Lenders (as defined herein) shall have the right, upon
the terms and conditions contained in the Investment and Exchange Agreement and
the Loan Agreement, to exchange (the "Exchange") the Secured Loan into the
11.00% Senior Secured Convertible Note of the Grantor (the "Convertible Note");

            WHEREAS, a condition precedent to the obligation of the Lenders (as
defined herein) to make the Secured Loan is that the Grantor shall have executed
and delivered this Agreement to the Secured Party.

            NOW THEREFORE, in consideration of the premises and to induce the
Investor to enter into the Loan Agreement and the Investment and Exchange
Agreement, each Grantor hereby agrees with the Secured Party as follows:

1. DEFINITIONS

            1.1. Defined Terms. For purposes of this Agreement, in addition to
the terms defined elsewhere herein, the following terms shall have the meanings
set forth below:

            "Accounts" shall have the meaning ascribed thereto in the Uniform
Commercial Code and whether now owned or existing or hereafter acquired or
arising, including, without limitation, the Segregated Account.

            "Account Control Agreement" means, with respect to any Deposit
Account or Securities Account, an account control agreement in a form acceptable
to the Secured Party and the Grantor, as each such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms hereof.

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            "Affiliate" means, as to any Person, any other Person (i) that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person; (ii) who is a
director or officer (A) of such Person; (B) of any Subsidiary of such Person; or
(C) of any Person described in clause (i) above with respect to such Person; or
(iii) which, directly or indirectly through one or more intermediaries, is the
beneficial or record owner (as defined in Rule 13d-3 of the Exchange Act, as is
in effect on the date hereof) of 10% or more of any class of the outstanding
voting stock, securities or other equity or ownership interests of such Person;
provided, however, that notwithstanding anything else herein to the contrary,
any Permitted Holder shall be deemed not to be an Affiliate of the Grantor or
any Subsidiary. For purposes of this definition, the term "control" (and the
correlative terms, "controlled by" and "under common control with") shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies, whether through ownership of securities
or other interests, by contract or otherwise.

            "Bankruptcy Code" shall mean 11 U.S.C. Sections 101 et seq., as
amended from time to time, and any successor statute.

            "Chattel Paper" shall have the meaning ascribed thereto in the
Uniform Commercial Code and whether now owned or existing or hereafter acquired
or arising.

            "Closing Date" shall have the meaning ascribed to such term in the
Loan Agreement.

            "Collateral" shall have the meaning given to such term in Section
2.1.

            "Collateral Accounts" shall have the meaning given to such term in
Section 6.4.

            "Commercial Tort Claims" shall have the meaning ascribed thereto in
the Uniform Commercial Code.

            "Contracts" shall mean, collectively, all rights of each Grantor
under all leases, contracts and agreements to which such Grantor is now or
hereafter a party, including, without limitation, all rights, privileges and
powers under Investment Agreements and Licenses, together with any and all
extensions, modifications, amendments and renewals of such leases, contracts and
agreements and all rights of such Grantor to receive moneys due or to become due
thereunder or pursuant thereto and to amend, modify, terminate or exercise
rights under such leases, contracts and agreements, but excluding rights under
(but not excluding Proceeds of) any lease, contract or agreement (including,
without limitation, any License) that by the terms thereof, or under applicable
law, cannot be assigned or a security interest granted therein in the manner
contemplated by this Agreement unless consent from the relevant party or parties
has been obtained and under the terms of which lease, contract or agreement any
such assignment or grant of a security interest therein in the absence of such
consent would, or could, result in the termination thereof, but only to the
extent that (y) such rights are subject to such contractual or legal restriction
and (z) such restriction is not, or could not be, rendered ineffective pursuant
to the Uniform Commercial Code of any relevant jurisdiction or any other
applicable law (including the Bankruptcy Code) or principles of equity.

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            "Controlled Account" means each Account that is subject to an
Account Control Agreement, and each Controlled Deposit Account.

            "Controlled Deposit Account" means each Deposit Account that is
subject to a Deposit Account Control Agreement.

            "Copyrights" means all copyrights arising under the laws of the
United States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office, and the right to obtain all renewals of any of
the foregoing.

            "Copyright Collateral" shall mean, collectively, all Copyrights and
Copyright Licenses to which any Grantor is or hereafter becomes a party and all
other General Intangibles embodying, incorporating, evidencing or otherwise
relating or pertaining to any Copyright or Copyright License, in each case
whether now owned or existing or hereafter acquired or arising.

            "Copyright License" means all written agreements granting any right
under any Copyright, including the grant of rights to manufacture, distribute,
exploit and sell materials derived from any Copyright.

            "Deposit Account" shall have the meaning ascribed thereto in the
Uniform Commercial Code, including, without limitation, all bank and other
deposit accounts (including, without limitation, any demand, time, savings,
passbook or like account maintained with any depositary institution) of any
Grantor and all such bank and other deposit accounts of any other Person, held
on behalf of or for the benefit of any Grantor in any jurisdiction.

            "Deposit Account Bank" means a financial institution approved by the
Secured Party (which approval shall not be unreasonably withheld) and with
respect to which a Grantor has delivered to the Secured Party an executed
Deposit Account Control Agreement.

            "Deposit Account Control Agreement" means a letter agreement,
substantially in the form of Exhibit P attached hereto, or in another form
reasonably acceptable to the Grantor and the Secured Party, executed by the
Grantor, the Secured Party and the relevant Deposit Account Bank.

            "Document" shall have the meaning ascribed thereto in the Uniform
Commercial Code.

            "Domain Name" shall mean the combination of words and abbreviations
that represents a uniquely identifiable internet protocol address of a World
Wide Web internet location.

            "Equipment" shall have the meaning ascribed thereto in the Uniform
Commercial Code including, without limitation, with respect to any Grantor, all
of such Grantor's now owned and hereafter acquired machinery, equipment,
furniture, furnishings, fixtures and other tangible personal property, including
without limitation, data processing hardware and software, computers, motor
vehicles, trailers, aircraft, tools, office equipment, store fixtures, and
leasehold

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improvements, as well as all of such Grantor's rights and interests with respect
thereto under such leases of such types of personal property (including, without
limitation, options to purchase); together with all component and auxiliary
parts and supplies owned by such Grantor's and used or to be used in connection
therewith, and all substitutes for any of the foregoing, all manuals, drawings,
instructions, warranties and rights with respect thereto owned by such
Grantor's, and all proceeds and general intangibles relating to all of the
foregoing, including, without limitation, any claims against third parties for
loss or damage.

            "Equity Interest" means, (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of common stock and preferred stock of such Person and all options,
warrants or other rights to purchase or acquire any of the foregoing; and (ii)
with respect to any Person that is not a corporation or a natural person, any
and all partnership, membership or other equity interests of such Person, and
all options, warrants or other rights to purchase or acquire any of the
foregoing.

            "Excluded Collateral" means (i) Special Property other than the
following: (A) the right to receive any payment of money (including, without
limitation, general intangibles for money due or to become due); and (B) any
Proceeds, products, offspring, accessions, rents, profits, income, benefits,
substitutions or replacements of any Special Property (unless such proceeds,
products, offspring, accessions, rents, profits, income, benefits, substitutions
or replacements themselves would constitute Special Property); and (ii)
Grantor's leasehold interest as described in Schedule 8.1(n) of the Loan
Agreement.

            "Event of Default" shall have the meaning ascribed thereto in
Section 6.1.

            "Final Withdrawal Date" shall have the meaning ascribed to such term
in the Loan Agreement.

            "Fixtures" shall have the meaning ascribed thereto in the Uniform
Commercial Code.

            "GECC" shall mean General Electric Capital Corporation.

            "General Intangibles" shall have the meaning ascribed thereto in the
Uniform Commercial Code, including, without limitation, all Contracts, all
Copyright Collateral, all Patent Collateral, all Trademark Collateral, all
Domain Name registrations, all Intercompany Obligations, all rights under or
evidenced by choses in action or causes of action, all judgments, tax refund
claims, claims against carriers and shippers, claims under liens and insurance
policies, all rights under security agreements, guarantees, indemnities and
other instruments and contracts securing or otherwise relating to any of the
foregoing, and all other intangible personal property of every kind and nature,
and all accessions, additions, improvements, modifications and upgrades to,
replacements of and substitutions for the foregoing, in each case whether now
owned or existing or hereafter acquired or arising, but excluding Accounts and
excluding leases, contracts and agreements (including, without limitation,
Licenses) to the extent excluded from Contracts under the definition of such
term herein. For the purposes of this Agreement, General Intangibles shall
include Commercial Tort Claims.

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            "Instruments" shall have the meaning ascribed thereto in the Uniform
Commercial Code, whether now owned or existing or hereafter acquired, including
those evidencing, representing, securing, arising from or otherwise relating to
any Accounts, Intercompany Obligations or other Collateral.

            "Intercompany Obligations" shall mean, collectively, all
indebtedness, obligations and other amounts at any time owing to any Grantor
from any of the Grantor's subsidiaries or Affiliates and all interest, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
indebtedness, obligations or other amounts.

            "Inventory" shall have the meaning ascribed thereto in the Uniform
Commercial Code, including, without limitation, all goods manufactured, acquired
or held for sale or lease, all raw materials, component materials,
work-in-progress and finished goods, all supplies, goods and other items and
materials used or consumed in the manufacture, production, packaging, shipping,
selling, leasing or furnishing of such inventory or otherwise in the operation
of the business of such Grantor, all goods in which such Grantor now or at any
time hereafter has any interest or right of any kind, and all goods that have
been returned to or repossessed by or on behalf of such Grantor, in each case
whether or not the same is in transit or in the constructive, actual or
exclusive occupancy or possession of such Grantor or is held by such Grantor or
by others for the account of such Grantor, and in each case whether now owned or
existing or hereafter acquired or arising.

            "Investment Agreement" shall mean any articles or certificate of
incorporation, partnership agreement, joint venture agreement, limited liability
company operating agreement, stockholders agreement or other agreement creating,
governing or evidencing any Equity Interests and to which any Grantor is now or
hereafter becomes a party, as any such agreement may be amended, modified,
supplemented, restated or replaced from time to time.

            "Investment Property" shall have the meaning ascribed thereto in the
Uniform Commercial Code.

            "Know-How" means any and all proprietary unpatented technical
information, data, ideas, test results, inventions, instructions, processes,
knowledge, techniques, discoveries, formulae, specifications, designs,
regulatory filings, and biological or other materials (including, without
limitation, biological, chemical, toxicological, physical and analytical,
safety, manufacturing and quality control data and information).

            "Know-How Collateral" shall mean, collectively, all Know-How,
Know-How Licenses and all other General Intangibles embodying, incorporating,
evidencing or otherwise relating or pertaining to any Know-How whether now owned
or existing or hereafter acquired or arising.

            "Know-How License" means all written agreements granting any right
under any Know-How, including the grant of rights to manufacture, distribute,
exploit and sell materials derived from any Know-How.

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            "Lenders" means the Lender, as defined in the Loan Agreement, and
all successors and assignees thereof.

            "Letter of Credit Rights" shall have the meaning ascribed thereto in
the Uniform Commercial Code.

            "License" shall mean any Copyright License, Patent License,
Trademark License or Know-How License.

            "Lien" shall have the meaning ascribed to such term in the Loan
Agreement.

            "Loan Documents" shall have the meaning ascribed to such term in the
Loan Agreement.

            "MHR" means MHR Fund Management LLC and any successor thereto.

            "Obligations" shall mean all present and future obligations and
liabilities of each of the Grantors to the Secured Party and each of the Lenders
under this Agreement and the Loan Documents, including, without limitation,
principal of, interest on the Secured Loan, the Convertible Note (as applicable)
and any and all fees, expenses, indemnities, premiums and any other sum
chargeable to the Grantors under this Agreement or any of the other Loan
Documents, including, without limitation, interest accruing at the specified
rate (including any default rate of interest) after the filing of a petition or
commencement of a case by or with respect to the Grantor seeking relief under
any applicable federal and state laws pertaining to bankruptcy, reorganization,
arrangement, moratorium, readjustment of debts, dissolution, liquidation or
other debtor relief, specifically including, without limitation, the Bankruptcy
Code and any fraudulent transfer and fraudulent conveyance laws, whether or not
the claim for such interest is allowed or allowable in such proceeding, whether
due or to become due, secured or unsecured, direct or indirect, absolute or
contingent, joint or several, and howsoever or whensoever incurred by each of
the Grantors or acquired by the Secured Party or each of the Lenders; and in
each case with respect to the foregoing, all such liabilities and obligations
that, but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due, and all fees, costs and expenses payable by
such Grantor under this Agreement.

            "Partner Obligations" shall have the meaning given to such term in
Section 6.6.

            "Patents" shall mean (i) all letters patent of the United States,
any other country or any political subdivision thereof, all reissues and
extensions thereof and all goodwill associated therewith; (ii) all applications
for letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof; and (iii) all rights to obtain
any reissues or extensions of the foregoing.

            "Patent Collateral" shall mean, collectively, all Patents and all
Patent Licenses to which any Grantor is or hereafter becomes a party and all
other General Intangibles embodying, incorporating, evidencing or otherwise
relating or pertaining to any Patent or Patent License, in each case whether now
owned or existing or hereafter acquired or arising.

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            "Patent License" shall mean all agreements, whether written or oral,
providing for the grant of any right to manufacture, use or sell any invention
covered in whole or in part by a Patent.

            "Payroll Accounts" means accounts #670-1771905, #670-1771913 and
#670-1771816 maintained by the Company at The Bank of New York, which accounts
are used solely to fund the Company's payroll and payroll-related expenses and
Cafeteria Benefit Plan.

            "Permitted Holders" shall have the meaning ascribed to such term in
the Loan Agreement.

            "Person" means any corporation, limited liability company, natural
person, firm, joint venture, partnership, trust, unincorporated organization or
government, or any political subdivision, department or agency of any
government.

            "Pledge Amendment" shall have the meaning given to such term in
Section 5.1.

            "Proceeds" shall mean all "proceeds" as such term is defined in the
Uniform Commercial Code and all proceeds and products of any Collateral, and all
proceeds of such proceeds and products, including, without limitation, all cash
and credit balances, all payments under any indemnity, warranty, or guaranty
payable with respect to any Collateral, all awards for taking by eminent domain,
all proceeds of fire or other insurance, and all money and other Property
obtained as a result of any claims against third parties or any legal action or
proceeding with respect to Collateral and all dividends or other income from any
Equity Interests pledged to the Secured Party on its own behalf and on behalf of
the Lenders, collections thereon or distributions or payments with respect
thereto.

            "Property" means any right or interest in or to property of any kind
whatsoever of the Grantors, whether real, personal or mixed and whether tangible
or intangible, including, without limitation, Equity Interests held by any
Grantor.

            "Related Party" shall have the meaning ascribed to such term in the
Loan Agreement.

            "Securities Account" shall have the meaning ascribed thereto in the
Uniform Commercial Code and whether now owned or existing or hereafter acquired
or arising.

            "Securities Act" means the Securities Act of 1933, as amended.

            "Security Documents" shall have the meaning ascribed to such term in
the Loan Agreement.

            "Special Property" shall mean any permit, lease or license held by
any Grantor that prohibits, and any law applicable thereto prohibits, the
creation of a lien or security interest therein, in each case only to the
extent, and for so long as, such permit, lease, license, contract or other
agreement, or law applicable thereto, validly prohibits the creation of a lien
or security interest in such property in favor of the Secured Party on its own
behalf and on behalf of the Lenders (and upon the termination of such
prohibition (howsoever occurring)) such permit,

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lease, license, contract or agreement shall cease to be "Special Property").
Notwithstanding the foregoing, the term "Special Property" shall include (i) the
property and assets pledged to GECC pursuant to that certain Master Lease
Agreement dated as of March 14, 2004 between the Grantor and GECC and the
schedules relating thereto delivered prior to the date of this Agreement, and
(ii) those agreements, properties and assets listed on Exhibit Q hereof.

            "Stockholder Approval Default" shall have the meaning ascribed to
such term in the Loan Agreement.

            "Subsidiary" means (i) as to the Grantor, any Person in which more
than 25% of all equity, membership, partnership or other ownership interests is
owned directly or indirectly by the Grantor or one or more of its Subsidiaries;
and (ii) as to any other Person, any Person in which more than 25% of all
equity, membership, partnership or other ownership interests is owned directly
or indirectly by such Person or by one or more of such Person's Subsidiaries.
Unless otherwise specified in this Agreement or any Loan Document, references to
a Subsidiary refer to a Subsidiary of the Grantor.

            "Voting Stock" of a Person means all classes of capital stock or
other interests of such Person then outstanding and normally entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof.

            "Trademarks" shall mean (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and all goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, and all common-law
rights related thereto; and (ii) the right to obtain all renewals thereof.

            "Trademark Collateral" shall mean, collectively, all Trademarks and
Trademark Licenses to which any Grantor is or hereafter becomes a party and all
other General Intangibles embodying, incorporating, evidencing or otherwise
relating or pertaining to any Trademark or Trademark License, in each case
whether now owned or existing or hereafter acquired or arising.

            "Trademark License" means, collectively, each agreement, whether
written or oral, providing for the grant of any right to use any Trademark
herein now or hereafter owned by any third party, and all rights of any Grantor
under any such agreement.

            "Uniform Commercial Code" shall mean the Uniform Commercial Code as
the same may be in effect from time to time in the State of New York; provided
that if, by reason of applicable law, the validity or perfection or the effect
of perfection or non-perfection or the priority of any security interest in any
Collateral granted under this Agreement is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, then as to the validity
or perfection or the effect of perfection or non-perfection or the priority, as
the case may be, of such security interest, "Uniform Commercial Code" shall mean
the Uniform Commercial Code as in effect in such other jurisdiction.

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            "Vehicles" shall mean all cars, trucks, trailers, construction and
earth moving equipment and other vehicles whether or not covered by a
certificate of title law of any state and, in any event, shall include, without
limitation, the vehicles listed on Exhibit I hereto and all appurtenances to any
of the foregoing.

            1.2. Other Terms.

            (a) All terms in this Agreement that are not capitalized shall have
the meanings provided by the Uniform Commercial Code to the extent the same are
used or defined therein.

            (b) The words "herein," "hereof" and "hereunder" are used in this
Agreement to refer to this Agreement as a whole including all Exhibits and
Schedules, as the same may from time to time be amended, restated, modified, or
supplemented and not to any particular section, subsection, or clause contained
in this Agreement or any such Exhibit or Schedule. The meaning given to terms
defined herein shall be equally applicable to both the singular and plural forms
of such terms. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include,"
"includes," and "including" shall be deemed to be followed by the phrase
"without limitation." The word "will" shall be construed to have the same
meaning and effect as the word "shall". Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein); (b) any reference to statute shall be construed to refer to
such statute as amended from time to time, and any rules and regulations
promulgated thereunder; and (c) any reference herein to any Person shall be
construed to include such Person's successors and assigns. The table of contents
and the headings of the articles and sections of this Agreement are included for
convenience of reference. They shall not affect the construction of any
provision of this Agreement. Where the context requires, provisions relating to
the Collateral or any part thereof, when used in relation to a Grantor, shall
refer to such Grantor's Collateral or the relevant part thereof. References to
sections and exhibits without further identification of the document to which
reference is made are references to provisions or parts of this Agreement.

            1.3. The Exchange. The obligations under the Convertible Note and
the other "Loan Documents" referred to therein, if executed and delivered, shall
be in substitution for, but not in satisfaction of, the Obligations under the
Loan Agreement and the Loan Documents referred to therein and the obligations
under the Convertible Note shall not constitute a refinancing or novation of the
Obligations. Accordingly, from and after the consummation of the Exchange, (i)
references herein to the term "Loan Agreement" shall be deemed to be references
to the Convertible Note, (ii) references herein to the "Loan Documents" shall be
deemed to refer to the Loan Documents referred to in the Convertible Note and
(iii) references herein to the term "Lenders" shall be deemed to refer to the
holders of the Convertible Note.

2. CREATION OF SECURITY INTEREST

            2.1. Pledge and Grant of Security Interest. For value received and
to induce the Lenders to make the Secured Loan, each Grantor hereby collaterally
assigns, mortgages, pledges

                                      9
<PAGE>
and hypothecates to the Secured Party and grants to the Secured Party, on its
own behalf and on behalf of the Lenders, and their successors and assigns, a
lien upon and security interest in, all of such Grantor's right, title and
interest in and to all of the Grantor's assets, including, without limitation,
the following, in each case whether now owned or existing or hereafter acquired
or arising or in which such Grantor now has or at any time in the future may
acquire any right, title or interest (collectively, the "Collateral"):

            (i)         all Accounts;

            (ii)        all Chattel Paper;

            (iii)       all Contracts;

            (iv)        all Copyright Collateral;

            (v)         all Deposit Accounts;

            (vi)        all Documents;

            (vii)       all Equipment;

            (viii)      all Equity Interests;

            (ix)        all Fixtures;

            (x)         all General Intangibles;

            (xi)        all Instruments and Intercompany Obligations;

            (xii)       all Inventory;

            (xiii)      all Investment Property;

            (xiv)       all Know-How Collateral;

            (xv)        all Patent Collateral;

            (xvi)       all Trademark Collateral;

            (xvii)      all Vehicles;

            (xviii)     all Commercial Tort Claims;

            (xix)       all Letter of Credit Rights;

            (xx)        to the extent not covered or not specifically excluded
                        by clauses (i) through (xviii) above, or the definitions
                        of the terms included therein, all of such Grantor's
                        other personal property, whether now owned or existing
                        or hereafter arising or acquired; and

                                      10
<PAGE>
            (xxi)       any and all Proceeds, products, rents and profits of or
                        from any and all of the foregoing and, to the extent not
                        otherwise included in the foregoing, (a) all Proceeds of
                        any sale by the Grantor of any shares of Common Stock or
                        other securities of the Grantor in the event of a
                        Stockholder Approval Default, including, without
                        limitation, pursuant to a Registered Repayment Offering
                        (as such term is defined in the Loan Agreement) (b) all
                        payments under any insurance (whether or not the Secured
                        Party is the loss payee thereunder), indemnity, warranty
                        or guaranty with respect to any of the foregoing
                        Collateral, (c) all payments in connection with any
                        requisition, condemnation, seizure or forfeiture with
                        respect to any of the foregoing Collateral, (d) all
                        claims and rights to recover for any past, present or
                        future infringement or dilution of or injury to any
                        Copyright Collateral, Patent Collateral or Trademark
                        Collateral, and (e) all other amounts from time to time
                        paid or payable under or with respect to any of the
                        foregoing Collateral.

            2.2. Security for the Obligations. This Agreement and the Collateral
of each Grantor secure the full and prompt payment, at any time and from time to
time as and when due (whether at the stated maturity, by acceleration or
otherwise), of all of the Obligations. Each Grantor authorizes the Secured Party
to file any such financing statements, financing change statement or amendment
to financing statement or continuation statement relating thereto under the
Uniform Commercial Code describing the Collateral using such other language
which the Secured Party reasonably deems necessary or appropriate (including the
filing of "all assets" financing statements), in each case without the signature
or further authorization of the Grantors to the fullest extent permitted under
applicable law, and to file appropriate statements with the appropriate
jurisdictions set forth with respect to such Grantor on Exhibit B hereto or as
otherwise required to perfect or continue to perfect the security interest
granted under this Agreement.

            2.3. Excluded Collateral. Notwithstanding anything to the contrary
contained in this Article 2, no Lien is or shall be created in favor of the
Secured Party for the benefit of the Lenders in any Grantor's right, title and
interest in any Excluded Collateral, and for purposes of the definitions of
"Collateral," "Copyright Collateral," "Know-How Collateral," "Patent
Collateral," and "Trademark Collateral" hereunder, such terms shall not include
"Excluded Collateral"; provided, however, that if and when the prohibition which
prevents the granting by such Grantor to the Secured Party on its own behalf and
on behalf of the Lenders of a security interest in such Excluded Collateral
(other than the Grantor's leasehold interest as described in Schedule 8.1(n) to
the Loan Agreement) is removed or otherwise terminated, such Excluded Collateral
shall be considered Collateral for all purposes herein, including that the
Secured Party will be deemed to have, and at all times from and after the date
hereof to have had, a security interest in such Excluded Collateral, as the case
may be, and all representations and warranties hereunder shall be deemed to have
been made with regard to all such Excluded Collateral.

3. REPRESENTATIONS AND WARRANTIES

            Each Grantor represents and warrants as follows:

                                       11
<PAGE>
            3.1. Ownership of Collateral. Except for the Liens granted to the
Secured Party on its own behalf and on behalf of the Lenders pursuant to this
Agreement and except for other Liens permitted or disclosed pursuant to the Loan
Documents, each Grantor is, and as to Collateral acquired after the date hereof,
the Grantor shall and will be at the time of acquisition, the owner and holder,
or has valid rights as a lessee or licensee of, or the power to transfer or
pledge with respect to, all Collateral free and clear of any claim, security
interest, encumbrance, lien, charge, or other right, title or interest of any
person, has rights in or the power to transfer each other item of Collateral in
which a Lien is granted by it hereunder, free and clear of any and all Liens. No
security agreement, financing statement or other public notice with respect to
all or any part of the Collateral that is effective to perfect a lien or
security interest on the Collateral and is on file or of record in any
government or public office against any Grantor, and no Grantor has filed or
consented to the filing of any such statement or notice, except (i) financing
statements naming the Secured Party, on its own behalf and on behalf of the
Lenders, as secured party and financing statements which have been terminated or
the underlying debt therefor has been extinguished, (ii) security instruments
filed in the U.S. Copyright Office or the U.S. Patent and Trademark Office
naming the Secured Party on its own behalf and on behalf of the Lenders as
secured party, and (iii) as may be otherwise permitted by or disclosed in the
Loan Documents.

            3.2. Security Interests; Filings. This Agreement, together with (i)
the filing in the jurisdictions set forth with respect to such Grantor on
Exhibit B hereto, of duly completed financing statements (A) naming each Grantor
as debtor, (B) naming the Secured Party on its own behalf and on behalf of the
Lenders as secured party, and (C) describing the Collateral, (ii) the filing of
duly completed and executed assignments in the forms set forth as Exhibits K, L
and M with the U.S. Copyright Office or the U.S. Patent and Trademark Office or
other appropriate form with the foreign jurisdictions listed on Exhibit B, and
Exhibit N with Network Solutions, Inc. or its successor entity administering any
domain name registrations affected by this Agreement, as appropriate, with
regard to federally registered Copyright Collateral, Patent Collateral,
Trademark Collateral and Domain Names of each Grantor, as the case may be, (iii)
the registration of pledge thereof to the Secured Party (or its bailee or agent)
on the issuer's books or the execution by the issuer of a control agreement
satisfying the requirements of Section 8-106 (or its successor provision) of the
Uniform Commercial Code with regard to uncertificated securities and Investment
Property (other than certificated securities) included in the Collateral, and
(iv) the delivery to the Secured Party (or its bailee or agent) of all
certificated securities and Instruments included in the Collateral together with
undated stock powers or instruments of transfer duly executed in blank, creates,
and at all times shall constitute, a legal, valid and perfected security
interest in and Lien upon the Collateral in favor of the Secured Party on its
own behalf and on behalf of the Lenders to the extent that Articles 8 and 9 of
the Uniform Commercial Code are applicable thereto, superior and prior to the
rights of all other persons therein (except for Permitted Liens as defined in
the Loan Documents), and no other or additional filings, registrations,
recordings or actions are or shall be necessary or appropriate in order to
perfect or maintain the perfection and priority of such lien and security
interest, other than actions required with respect to Collateral of the types
excluded from Articles 8 or 9 of the Uniform Commercial Code or from the filing
requirements under Article 9 of the Uniform Commercial Code in accordance with
the terms thereof and other than continuation statements required under the
Uniform Commercial Code, and that any filing or recording of this Agreement or
any financing statement with respect to the Collateral securing the Obligations
under the Secured Loan shall continue in effect on and after the Exchange Date
(as such term is

                                       12
<PAGE>
defined in the Investment and Exchange Agreement) for purposes of the Collateral
securing the Convertible Note, and no additional filing or recording statement
with respect to the Collateral need be filed on or after the Exchange Date as a
result of the exchange of the Secured Loan into the Convertible Note in
accordance with the terms of the Investment and Exchange Agreement.

            3.3. Locations, Jurisdiction of Organization. Exhibit B lists, as to
each Grantor, each of the jurisdictions in which filings under Section 3.2 are
necessary. Exhibit C lists, as to each Grantor, (a) the addresses of its chief
executive office and chief place of business for any Grantor and for any Grantor
which is organized under the laws of any state, its state of registration and
registration I.D. number, (b) the address of each location where all original
invoices, ledgers, chattel paper, Instruments and other records or information
evidencing or relating to the Collateral of such Grantor are maintained, (c) the
address of each location at which any Fixtures, Equipment or Inventory owned by
such Grantor is kept or maintained, in each instance except for any new
locations established in accordance with the provisions of Section 4.2 hereof,
(d) all Deposit Accounts or Securities Accounts, including the institution at
which each such Deposit Account or Securities Account is established, the
purpose thereof, the name thereon, and the account number thereafter. Each
Account listed on Exhibit C is a Controlled Account. Except as may be otherwise
noted therein, all locations identified in Exhibit C are owned or leased by the
applicable Grantor. No Grantor presently conducts business under any prior or
other corporate or company name or under any trade or fictitious names, except
as indicated beneath its name on Exhibit C, and no Grantor has entered into any
contract or granted any Lien within the past five years under any name other
than its legal name or a trade or fictitious name indicated on Exhibit C. All
such Accounts are owned solely by the applicable Grantors and are subject to the
Liens and other terms of this Agreement; and any Accounts which may arise with
customers of Grantor with respect to the products invoiced under the name of any
trade or fictitious name are subject to the terms of this Agreement as though
such trade or fictitious name did not exist.

            3.4. Authorization; Consent. Subject to Section 3.3 hereof, no
authorization, consent or approval of, or declaration or filing with, any
governmental authority (including, without limitation, any notice filing with
state tax or revenue authorities required to be made by account creditors in
order to enforce any Accounts in such state) is required for the valid
execution, delivery and performance by any Grantor of this Agreement, the grant
by it of the lien and security interest in favor of the Secured Party on its own
behalf and on behalf of the Lenders provided for herein, or the exercise by the
Secured Party of its rights and remedies hereunder.

            3.5. Equity Interests. As of the date hereof, each of the Equity
Interests held by each Grantor is listed in Exhibit A, is pledged hereunder, and
consists of the number and type of shares of capital stock (in the case of
issuers that are corporations) or the percentage and type of other Equity
Interests (in the case of issuers other than corporation) as described for such
Grantor in Exhibit A. The Grantor shall supplement Exhibit A promptly upon the
execution of any Pledge Amendments. All of the Equity Interests pledged or to be
pledged hereunder have been or shall be duly and validly issued and are or will
be fully paid and non-assessable (or, in the case of partnership, limited
liability company or similar Equity Interests, not subject to any capital call
or other additional capital requirement) and not subject to any preemptive
rights, warrants, options or similar rights or restrictions in favor of third
parties, other than any Grantor,

                                       13
<PAGE>
or any contractual or other restrictions upon transfer other than as may be
permitted under the Loan Documents.

            3.6. Intellectual Property. Exhibits D, E, F and G correctly set
forth all pending and registered Copyrights, Patents, Trademarks and Domain
Names owned by any Grantor as of the date hereof.

            3.7. Disclosure. All information with respect to Collateral set
forth in any annex, exhibit, schedule, certificate or other writing at any time
heretofore or hereafter furnished by any Grantor to the Secured Party or the
Lenders is and will be true and correct in all respects as of the date
furnished.

4. COVENANTS

            4.1. Security Interest. Each Grantor shall not (a) create or suffer
to exist any Lien upon or with respect to any of the Collateral, except for the
lien and security interest created by this Agreement and the Liens disclosed in
or permitted under the Loan Documents, (b) use or permit any Collateral to be
used unlawfully or in violation of any provision of this Agreement, any Loan
Document, any applicable law or any policy of insurance covering the Collateral,
(c) sell, lease, transfer or assign (by operation of law or otherwise) any
Collateral except as permitted under the Loan Documents, (d) enter into any
agreement or undertaking restricting the right or ability of such Grantor or the
Secured Party on its own behalf and on behalf of the Lenders to sell, assign or
transfer any of the Collateral without the prior written consent of the Secured
Party, except as permitted under the Loan Documents. Each Grantor shall use its
best efforts, at its own cost and expense, to take any and all actions necessary
to maintain the security interest and priority of such security interest created
by this Agreement and to take any and all actions necessary to warrant and
defend the right, title and interest of the Secured Party on its own behalf and
on behalf of the Lenders in and to the Collateral against the claims and demands
of all Persons, and shall promptly and duly execute and deliver to the Secured
Party any and all such further instruments and documents and take such further
action as the Secured Party may reasonably request for the purpose of obtaining
or preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, obtaining the substantial
equivalent thereof under the law of any jurisdiction outside of the United
States where the Collateral may be located, together with the filing of any
financing statements, financing change statements or amendments to financing
statements, or continuation statements under the Uniform Commercial Code or any
similar personal property security legislation in effect in any jurisdiction
with respect to the security interest and lien granted hereby.

            4.2. Change of Name, etc. No Grantor shall (a) change its name,
identity or structure, or, if applicable, the state in which it is registered,
(b) reorganize under the laws of another jurisdiction or as a different type of
entity, (c) change its chief executive office from the location thereof listed
on Exhibit C, or remove any Collateral or any books, records, or other
information relating to Collateral, from locations listed on Exhibit C or any
other location in the United States, unless in each case such Grantor has (i)
given at least thirty (30) days' prior written notice to the Secured Party of
its intention to do so, together with information regarding any such new
location and such other information in connection with such proposed action as
the Secured Party may reasonably request, (ii) executed and delivered to the
Secured Party thirty

                                       14
<PAGE>
(30) days prior to any such change, such additional or supplemental security
agreements, pledges, instruments, financing statements or amendments thereto
(including, without limitation, initial financing statements in lieu of
continuation statements under Article 9 of the Uniform Commercial Code or any
similar personal property security legislation) or other documents as shall be
deemed necessary or appropriate by the Secured Party in its discretion, all in
form and substance satisfactory to the Secured Party, (iii) paid all necessary
filing and recording fees and taxes, and (iv) taken all other actions reasonably
requested by the Secured Party, in order to perfect and maintain the lien upon
and security interest in the Collateral provided for herein in accordance with
the provisions of Section 3.2 hereof.

            4.3. Records; Inspection.

            (a) Each Grantor will keep and maintain at its own cost and expense
satisfactory and complete records of the Accounts and all other Collateral,
including, without limitation, records of all payments received, all credits
granted thereon, all merchandise returned and all other documentation relating
thereto.

            (b) Each Grantor shall, from time to time at such times as may be
reasonably requested and upon reasonable notice, make available to the Secured
Party or any agent thereof for inspection and review at such Grantor's offices
copies of all invoices and other documents and information relating to the
Collateral. At the reasonable request of the Secured Party, each Grantor will
legend, in form and manner reasonably satisfactory to the Secured Party, the
books, records and materials evidencing or relating to the Collateral with an
appropriate reference to the fact that the Collateral has been assigned to the
Secured Party on its own behalf and on behalf of the Lenders and that the
Secured Party on its own behalf and on behalf of the Lenders has a security
interest therein.

            4.4. Intellectual Property.

            (a) Each Grantor will, at its own expense, execute and deliver on
the Closing Date, a fully completed Copyright Security Agreement, Patent
Security Agreement or Trademark Security Agreement in the respective forms of
Exhibits K, L and M, as applicable, with regard to any Copyright registrations,
Patent or Trademark, as the case may be, of such Grantor, described in Exhibits
D, E and F hereto. In the event that after the date hereof any Grantor shall
acquire any pending or registered Copyright, Patent or Trademark or effect any
registration of any such Copyright, Patent or Trademark or file any application
for registration thereof, whether within the United States or any other country
or jurisdiction, such Grantor shall promptly furnish written notice thereof to
the Secured Party on its own behalf and on behalf of the Lenders together with
information sufficient to permit the Secured Party, upon its receipt of such
notice, to (and each Grantor hereby authorizes the Secured Party to) modify this
Agreement, as appropriate, by amending Exhibits D, E or F hereto or to add
additional exhibits hereto to include any Copyright, Patent or Trademark that
becomes part of the Collateral under this Agreement, and such Grantor shall
additionally, at its own expense, execute and deliver, as promptly as possible
(but in any event within 30 days) after the date of such notice, with regard to
United States Copyrights, Patents and Trademarks, fully completed Copyright
Security Agreements, Patent Security Agreements or Trademark Security Agreements
in the forms of Exhibits K, L and M, as applicable, together in all instances
with any other agreements, instruments

                                       15
<PAGE>
and documents that the Secured Party may reasonably request from time to time to
further effect and confirm the security interest created by this Agreement in
such Copyrights, Patents and Trademarks, and each Grantor hereby appoints the
Secured Party its attorney-in-fact, upon the occurrence and during the
continuance of an Event of Default, to execute, deliver and record any and all
such agreements, instruments and documents for the foregoing purposes, all acts
of such attorney being hereby ratified and confirmed and such power, being
coupled with an interest, being irrevocable for so long as this Agreement shall
be in effect with respect to such Grantor. In that connection, each Grantor
shall also execute and deliver on the Closing Date such number of Special Powers
of Attorney in the form of Exhibit H hereto as may be reasonably requested by
the Secured Party. Upon the occurrence and during the continuance of an Event of
Default, the Secured Party on its own behalf and on behalf of the Lenders may
request, and each Grantor shall cause, at its own expense, the execution and
delivery of fully completed assignments in the form of Exhibit R with respect to
any Domain Name described in Exhibit G hereto. If after the date hereof, any
Grantor shall register any Domain Name, such Grantor shall promptly notify the
Secured Party of such registration and the Secured Party is hereby authorized to
amend Exhibit G hereto to reflect such additional registration.

            (b) Each Grantor (either itself or through its licensees or
sublicensees) will, for each Trademark owned by it (i) maintain such Trademark
in full force and effect, free from any claim of abandonment or invalidity for
non-use, (ii) maintain the quality of products and services offered under such
Trademark, (iii) display such Trademark with notice of federal registration to
the extent required by applicable law, (iv) take appropriate and reasonable
steps to police and defend such Trademark and prevent or arrest infringement,
dilution or other harm to such Trademark and (v) not knowingly use or knowingly
permit the use of such Trademark in violation of any third-party rights.

            (c) Each Grantor (either itself or through its licensees or
sublicensees) will refrain from committing any act, or omitting any act, whereby
any Patent may become invalidated or dedicated to the public, and shall continue
to mark any products covered by a Patent with the relevant patent number as
required by applicable patent laws.

            (d) Each Grantor (either itself or through its licensees or
sublicensees) will, for each work covered by a Copyright owned by such Grantor,
continue to publish, reproduce, display, adopt and distribute the work with
appropriate copyright notice as required under applicable copyright laws.

            (e) Each Grantor (either itself or through its licensee or
sublicensees) will maintain the confidential nature of the Know-How owned by it
and shall refrain from committing any act or omitting any act whereby any such
Know-How may become invalidated or dedicated to the public.

            (f) Each Grantor shall notify the Secured Party immediately if it
knows or has reason to know that any Patent, Trademark, Copyright or Know-How
owned by such Grantor may become abandoned or dedicated to the public, or of any
adverse determination or development (including the institution of, or any such
determination or development in, any proceeding in the U.S. Patent and Trademark
Office, U.S. Copyright Office or any court)

                                       16
<PAGE>
regarding, such Grantor's ownership of any Patent, Trademark, Copyright or
Know-How, its right to register the same, or to keep and maintain the same.

            (g) Each Grantor will take all necessary steps that are consistent
with the practice in any proceeding before the U.S. Patent and Trademark Office,
U.S. Copyright Office or any office or agency in any political subdivision of
the United States or, subject to the provisions of Section 10.36 of the Loan
Agreement, in any other country or any political subdivision thereof, to
maintain and pursue each application relating to any material Patents,
Trademarks or Copyrights (and to obtain the relevant grant or registration) and
to maintain each application and registration of any Patents, Trademarks and
Copyrights owned by Grantor, including the filing of applications for renewal,
affidavits of use, affidavits of incontestability and maintenance fees, and, if
consistent with sound business judgment, to initiate opposition, interference
and cancellation proceedings against third parties.

            (h) In the event that any Collateral consisting of a Patent,
Trademark, Copyright or Know-How owned by any Grantor is believed to have been
or be infringed, misappropriated or diluted by a third party, such Grantor shall
notify the Secured Party promptly after it learns thereof and shall, if
consistent with sound business judgment, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution, and take such other actions as are
appropriate under the circumstances to protect such Collateral.

            (i) Upon the occurrence and during the continuance of any Event of
Default, each Grantor shall use its best efforts to obtain all requisite
consents or approvals from the licensor of each License included within the
Copyright Collateral, Patent Collateral, Trademarks Collateral and Know-How
Collateral to effect the assignment of all of such Grantor's right, title and
interest thereunder to the Secured Party or its designee.

            4.5. Delivery of Collateral. All certificates or instruments
representing or evidencing any Account, Intercompany Obligation, Investment
Property, Instruments or Equity Interest pledged hereunder or other Collateral
required to be delivered to the Secured Party (or its bailee or agent) pursuant
hereto, shall be in form suitable for transfer by delivery and shall promptly
be, as applicable, endorsed to the order of the Secured Party (or its bailee or
agent) and delivered to the Secured Party together with undated stock powers
duly executed in blank, appropriate endorsements or other necessary instruments
of registration, transfer or assignment, duly executed and in form and substance
satisfactory to the Secured Party to be held as Collateral hereunder.

            4.6. Control of Investment Property and Other Collateral. If any
Investment Property (whether now owned or hereafter acquired) is included in the
Collateral, each applicable Grantor will promptly take and cause to be taken all
actions required under Articles 8 and 9 of the Uniform Commercial Code and any
other applicable law to enable the Secured Party to acquire "control" (within
the meaning of such term under Section 8-106 (or its successor provision) of the
Uniform Commercial Code) of such Investment Property to perfect the security
interest of the Secured Party therein. If any letter-of-credit right or
electronic chattel paper (each as defined in the Uniform Commercial Code) is
included in the Collateral, each applicable Grantor will notify the Secured
Party thereof and will promptly take all actions to enable the

                                       17
<PAGE>
Secured Party to acquire "control" (as contemplated by Section 9-314 (or its
successor provision) of the Uniform Commercial Code) of such letter-of-credit
rights or electronic chattel paper.

            4.7. Vehicles. Within 30 days after the date of acquisition thereof,
each Grantor shall file all applications for certificates of title/ownership
indicating the Secured Party's first priority security interest in the Vehicle
covered by such certificate, and any other necessary documentation, in each
office in each jurisdiction which the Secured Party shall deem advisable to
perfect its security interests in the Vehicles.

            4.8. Controlled Accounts; Controlled Deposit Accounts.

            (a) As of and after the date hereof, no Proceeds of Accounts will be
deposited in or at any time transferred to an Account other than to a Controlled
Account. Upon receiving any Proceeds of Accounts that were not paid into a
Controlled Account, the Grantors shall cause such Proceeds to be promptly
deposited into a Controlled Account and promptly segregated from other funds of
the Grantors that are not held in a Controlled Account until such Proceeds are
deposited in a Controlled Account. Each Grantor agrees that, upon the creation
of a new Deposit Account, it will immediately, enter into a Deposit Account
Control Agreement for such Deposit Account. Grantor will (i) deposit in a
Controlled Deposit Account all cash received by such Grantor, and (ii) not
establish or maintain any Deposit Account other than with a Deposit Account
Bank, the Secured Party or an Affiliate of the Secured Party. Such Grantor shall
instruct each Account Debtor or other Person obligated to make a payment to such
Grantor under a General Intangible to make payment, or to continue to make
payment, as the case may be, to a Controlled Deposit Account and will deposit in
a Controlled Deposit Account all Proceeds of such Accounts and General
Intangibles received by such Grantor from any other Person immediately upon
receipt. Any and all such Proceeds held in a Controlled Account (or by any
Grantor, other than in a Controlled Account) shall continue to be held as
collateral security for the Obligations and shall not constitute payment thereof
until applied as provided hereunder. Notwithstanding anything to the contrary
contained herein or in any other Loan Document, Grantor shall not be required to
deliver any Account Control Agreement or Deposit Account Control Agreement with
respect to the Payroll Accounts.

            (b) In the event (i) such Grantor or Deposit Account Bank shall,
after the date hereof, terminate an agreement with respect to the maintenance of
a Control Account or Controlled Deposit Account for any reason, (ii) the Secured
Party shall demand such termination as a result of the failure of a Deposit
Account Bank to comply with the terms of the applicable Control Account
Agreement or Deposit Account Control Agreement, or (iii) the Secured Party
determines in its sole discretion that the financial condition of a Deposit
Account Bank, as the case may be, has materially deteriorated, such Grantor
agrees to notify all of its obligors that were making payments to such
terminated Control Account or Controlled Deposit Account, as the case may be, to
make all future payments to another Control Account or Controlled Deposit
Account, as the case may be.

            4.9. Payment of Obligations. Each Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including claims for labor,

                                       18
<PAGE>
materials and supplies) against or with respect to the Collateral, except that
no such charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.

            4.10. Special Property. All of the Special Property of the Grantor
as of the date hereof is listed in Exhibit Q (other than any Special Property of
the type described in clause (i) of the second sentence of the definition of
"Special Property"), and each Grantor shall from time to time at the request of
the Secured Party give written notice to the Secured Party identifying in
reasonable detail the Special Property (and stating in such notice that such
Special Property constitutes "Excluded Property") and shall provide to the
Secured Party such other information regarding the Special Property as the
Secured Party may reasonably request and, from and after the Closing Date (as
defined in the Investment and Exchange Agreement) with respect to such Special
Property, no Grantor shall permit to become effective in any document creating,
governing or providing for any permit, lease or license, a provision that would
prohibit the creation of a Lien on such permit, lease, license or equipment in
favor of the Secured Party unless such Grantor believes, in its reasonable
judgment, that such prohibition is usual and customary in transactions of such
type.

            4.11. Additional Information. Grantor agrees to furnish the Secured
Party from time to time with such additional information and copies of such
documents relating to this Agreement, the Collateral, the Obligations and
Grantor's financial condition as the Secured Party may reasonably request.

            4.12. Additional Grantors. Each Grantor recognizes that the
provisions of the Loan Agreement require Persons that become Subsidiaries of the
Grantor and that are not already parties hereto, to execute and deliver a
Grantor Addendum attached hereto as Exhibit O, whereupon each such Person shall
become a Grantor hereunder with the same force and effect as if originally a
Grantor hereunder on the date hereof, and agrees that its obligations hereunder
shall not be discharged, limited or otherwise affected by reason of the same, or
by reason of the Secured Party's actions in effecting the same or in releasing
any Grantor hereunder, in each case without the necessity of giving notice to or
obtaining the consent of such Grantor or any other Grantor.

5. CERTAIN PROVISIONS RELATING TO EQUITY INTERESTS

            5.1. Ownership; After-Acquired Equity Interests.

            (a) Each Grantor will cause the Equity Interests pledged by it or
required to be pledged hereunder to constitute at all times 100% of the capital
stock or other Equity Interests in each issuer held by Grantor thereof, and
unless the Secured Party shall have given its prior written consent, no Grantor
will cause or permit any such issuer to issue or sell any new capital stock, any
warrants, options or rights to acquire the same, or other Equity Interests of
any nature to any person other than any Grantor, or cause, permit or consent to
the admission of any other person other than another Grantor as a stockholder,
partner or member of any such issuer.

                                       19
<PAGE>
            (b) If any Grantor shall, at any time and from time to time after
the date hereof, acquire any additional capital stock or other Equity Interests
in any Person of the types described in the definition of the term "Equity
Interests," the same shall be automatically deemed to be Equity Interests, and
to be pledged to the Secured Party on its own behalf and on behalf of the
Lenders pursuant to Section 2.1, and such Grantor will forthwith pledge and
deposit the same with the Secured Party (or its agent or bailee) and deliver to
the Secured Party (or its agent or bailee) any certificates or instruments
therefor, together with the endorsement of such Grantor (in the case of any
promissory notes or other Instruments), undated stock powers (in the case of
Equity Interests evidenced by certificates) or other necessary instruments of
transfer or assignment, duly executed in blank and in form and substance
satisfactory to the Secured Party, together with such other certificates and
instruments as the Secured Party (or its agent or bailee) may reasonably request
(including financing statements or appropriate amendments thereto), and will
promptly thereafter deliver to the Secured Party (or its agent or bailee) a
fully completed and duly executed amendment to this Agreement in the form of
Exhibit J (each, a "Pledge Amendment") in respect thereof. Each Grantor hereby
authorizes the Secured Party to attach each such Pledge Amendment to this
Agreement, and agrees that all such Collateral listed on any Pledge Amendment
shall for all purposes be deemed Collateral hereunder and shall be subject to
the provisions hereof; provided that the failure of any Grantor to execute and
deliver any Pledge amendment with respect to any such additional Collateral as
required hereinabove shall not impair the security interest of the Secured Party
or the Lenders in such Collateral or otherwise adversely, affect the rights and
remedies of the Secured Party or other Lenders hereunder with respect thereto.

            (c) If any Equity Interests (whether now owned or hereafter
acquired) included in the Collateral are "uncertificated securities" within the
meaning of the Uniform Commercial Code or are otherwise not evidenced by any
certificate or instrument, each applicable Grantor will promptly notify the
Secured Party thereof and will promptly take and cause to be taken, and will (if
the issuer of such uncertificated securities is a person other than a subsidiary
of the Grantor) use its best efforts to cause the issuer to take, all actions
required under Articles 8 and 9 of the Uniform Commercial Code and any other
applicable law, to enable the Secured Party to acquire "control" (within the
meaning of such term under Section 8-106 (or its successor provision) of the
Uniform Commercial Code) of such uncertificated securities to perfect the
security interest of the Secured Party therein.

            5.2. Voting Rights. So long as no Event of Default shall have
occurred and be continuing (or would occur as a result thereof), each Grantor
shall be entitled to exercise all voting and other consensual rights pertaining
to its Equity Interests pledged hereunder (subject to each Grantor's obligations
under Section 6.2), and for that purpose the Secured Party will execute and
deliver or cause to be executed and delivered to each applicable Grantor all
such proxies and other instruments as such Grantor may reasonably request in
writing to enable the Grantor to exercise such voting and other consensual
rights; provided, however, that such Grantor shall not cast a vote, give consent
or exercise any right or take any action which would impair the Collateral or
which would be inconsistent with or result in any violation of any provision of
the Investment Agreement, this Agreement or any other Loan Document.

            5.3. Dividends and Other Distributions. So long as no Event of
Default shall have occurred and be continuing (or would occur as a result
thereof), all interest, income,

                                       20
<PAGE>
dividends, distributions and other amounts payable in cash in respect of the
Equity Interests pledged hereunder may be paid to, retained by or used by the
Grantors; provided, however, that all such interest, income, dividends,
distributions and other amounts shall, at all times after the occurrence and
during the continuance of an Event of Default be paid to the Secured Party (or
its bailee or agent) and retained by it (or its bailee or agent) as part of the
Collateral (except to the extent applied upon receipt to the repayment of the
Obligations). The Secured Party (or its bailee or agent) shall also be entitled
at all times (whether or not during the continuance of an Event of Default) to
receive directly, and to retain as part of the Collateral, (i) all interest,
income, dividends, distributions or other amounts paid or payable in cash or
other property in respect of any Equity Interests pledged hereunder in
connection with the dissolution, liquidation, recapitalization or
reclassification of the capital of the applicable issuer to the extent
representing an extraordinary, liquidating or other distribution in return of
capital, (ii) all additional Equity Interests or other securities or property
(other than cash) paid or payable or distributed or distributable in respect of
any Equity Interests pledged hereunder in connection with any non-cash dividend,
distribution, return of capital, spin-off, stock split, split-up,
reclassification, combination of shares or interests or similar rearrangement,
and (iii) without affecting any restrictions against such actions contained in
the Loan Documents, all additional Equity Interests or other securities or
property (including cash) paid or payable or distributed or distributable in
respect of any Equity Interests pledged hereunder in connection with any
consolidation, merger, exchange of securities, liquidation or other
reorganization. All interest, income, dividends, distributions or other amounts
that are received by any Grantor in violation of the provisions of this Section
shall be received in trust for the benefit of the Secured Party, shall be
segregated from other property or funds of such Grantor and shall be forthwith
delivered to the Secured Party (or its bailee or agent) as Collateral in the
same form as so received (with any necessary endorsements).

6. REMEDIES

            6.1. Events of Default. As used herein, the term "Default" and
"Event of Default" shall refer to such terms as defined in the Loan Agreement;
provided, however, that for purposes of this Agreement and all other Security
Documents, a Stockholder Approval Default shall not constitute an Event of
Default unless Grantor shall be in breach of its obligations under Section
12.2(b) of the Loan Agreement. In addition, the Grantor hereby acknowledges and
agrees that the failure by any Grantor to perform or fulfill any covenant,
obligation or agreement contained in this Agreement or the Investment and
Exchange Agreement shall also constitute an "Event of Default" for purposes
hereunder.

            6.2. Remedies.

            (a) If an Event of Default shall have occurred and be continuing,
the Secured Party on its own behalf and on behalf of the Lenders shall be
entitled to exercise in respect of the Collateral all of the rights, powers and
remedies provided for herein or otherwise available to it under the Loan
Agreement or any other Loan Document, by law, in equity or otherwise, including,
without limitation, all rights and remedies of a secured party under the Uniform
Commercial Code. Without limiting the generality of the foregoing, the Secured
Party, on its own behalf and on behalf of the Lenders, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law) to

                                       21
<PAGE>
or upon any Grantor or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Secured Party or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The Secured
Party on its own behalf and on behalf of the Lenders shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in any Grantor, which right
or equity is hereby waived and released. Each Grantor further agrees that, upon
the occurrence and continuance of an Event of Default, at the Secured Party's
request, to assemble the Collateral and make it available to the Secured Party
at places which the Secured Party shall reasonably select, whether at such
Grantor's premises or elsewhere.

            (b) Subject to Article 7 hereof, the Secured Party shall never be
under any obligation to collect, attempt to collect, protect or enforce the
Collateral or any security therefor, which the Grantor agrees and undertake to
do at their expense, but the Secured Party may do so, but without any obligation
to do so, in its discretion at any time after the occurrence and during the
continuance of an Event of Default, and at such time the Secured Party shall
have the right to take any steps by judicial process or otherwise it may deem
proper to effect the collection of all or any portion of the Collateral or to
protect or to enforce the Collateral or any security therefor. During the
continuance of an Event of Default, upon notice by the Secured Party to the
relevant Grantor or Grantors, the Secured Party or its nominee may exercise (A)
all voting, consent, corporate and other rights pertaining to the Collateral at
any meeting of shareholders, partners or members, as the case may be, of the
relevant issuer or issuers of Equity Interests or Collateral or otherwise and
(B) any and all rights of conversion, exchange and subscription and any other
rights, privileges or options pertaining to the Collateral as if it were the
absolute owner thereof (including the right to exchange at its discretion any
and all of the Collateral upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of any
issuer of Equity Interests, the right to deposit and deliver any and all of the
Collateral with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Secured Party may
determine), all without liability except to account for property actually
received by it, but the Secured Party shall have no duty to any Grantor to
exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.

            (c) In order to permit the Secured Party to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant hereto and
to receive all dividends and other distributions which it may be entitled to
receive hereunder in the event of and during the continuance of an Event of
Default, (i) each Grantor shall promptly execute and deliver (or cause to be
executed and delivered) to the Secured Party all such proxies, dividend payment
orders and other instruments as the Secured Party may reasonably request, and
(ii) without limiting the effect of clause (i) above, such Grantor hereby grants
to the Secured Party an irrevocable proxy to vote all or any part of the
Collateral and to exercise all other rights, powers, privileges and remedies to
which a holder of the Collateral would be entitled (including

                                       22
<PAGE>
giving or withholding written consents of shareholders, partners or members, as
the case may be, calling special meetings of shareholders, partners or members,
as the case may be, and voting at such meetings), which proxy shall be
effective, automatically and without the necessity of any action (including any
transfer of any Collateral on the record books of the issuer thereof) by any
other person (including the issuer of such Collateral or any officer or agent
thereof) during the continuance of an Event of Default and which proxy shall
only terminate upon the payment in full of the Obligations.

            (d) The Secured Party agrees that, notwithstanding anything to the
contrary set forth in any Deposit Account Control Agreement or any Account
Control Agreement, it shall not issue a Blockage Notice under any Deposit
Account Control Agreement or any Account Control Agreement or issue any other
orders, notices, requests or other instructions asserting exclusive control over
or otherwise directing disposition of funds in any Controlled Deposit Account or
any other Controlled Account, unless and until an Event of Default shall have
occurred and be continuing.

            6.3. Application of Proceeds.

            (a) Following the occurrence of an Event of Default, and in
connection with the liquidation and sale of any of the Collateral in the
exercise of remedies pursuant to the terms of this Agreement and the Loan
Documents, the Secured Party shall apply the net proceeds of any action taken by
it pursuant to this Section 6.3, after deducting all reasonable costs and
expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Secured Party and any Secured Party, including
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Obligations, in such order as the Loan Documents shall prescribe, and
only after such application and after the payment by the Secured Party of any
other amount required by any provision of law to any Grantor.

            (b) In the event the Secured Party shall pay any taxes, assessments,
interests, costs, penalties or expenses incident to or in connection with the
collection of the Collateral or protection or enforcement of the Collateral or
any security therefore or in connection with any of its rights or duties
hereunder, Grantor, upon demand of the Secured Party, shall pay to the Secured
Party the full amount thereof with interest at a rate per annum equal to the
rate per annum at which interest would then be payable on amounts due under the
Secured Loan or the Convertible Note, as applicable, or as otherwise provided in
the Loan Documents, and so long as the Secured Party shall be entitled to any
such payment, this Agreement shall operate as security therefor as fully and to
the same extent as it operates as security for payment of the other Obligations
secured hereunder, and for the enforcement of such repayment the Secured Party
shall have every right and remedy provided for enforcement of payment of the
Obligations.

            (c) The expression "payment in full" or "paid in full" or any
similar term or phrase when used in this Agreement shall mean the indefeasible
payment in full in cash of all Obligations owing to the Secured Party.

                                       23
<PAGE>
            (d) Each Grantor shall remain liable to the extent of any deficiency
between the amount of all Proceeds realized upon sale, other disposition or
collection of the Collateral, and monies held as Collateral pursuant to this
Agreement and the aggregate amount of Obligations.

            6.4. Collateral Accounts.

            (a) Upon the occurrence and during the continuance of an Event of
Default, the Secured Party shall have the right to cause to be established and
maintained, at its principal office or such other location or locations as it
may establish from time to time in its discretion, one or more accounts
(collectively, "Collateral Accounts") for the collection of cash Proceeds of the
Collateral. Such Proceeds, when deposited into such Collateral Accounts, shall
continue to constitute Collateral for the Obligations and shall not constitute
payment thereof until applied as herein provided. The Secured Party shall have
sole dominion and control over all funds deposited in any Collateral Account,
and such funds may be withdrawn therefrom only by the Secured Party. Upon the
occurrence and during the continuance of an Event of Default, the Secured Party
shall apply amounts held in the Collateral Accounts in payment of the
Obligations in the manner provided for in Section 6.3 hereof.

            (b) Upon the request of the Secured Party at any time during the
continuance of an Event of Default, each Grantor shall notify Account Debtors
that the Accounts or General Intangibles have been collaterally assigned to the
Secured Party for its own behalf and on behalf of the Lenders and that payments
in respect thereof shall be made directly to the Secured Party for its own
behalf and on behalf of the Lenders. In addition, without notice to the
Grantors, the Secured Party, for its own behalf and on behalf of the Lenders,
may at any time during the continuance of an Event of Default enforce such
Grantor's rights against such Account Debtors and obligors of General
Intangibles.

            6.5. Grant of License. Each Grantor hereby grants to the Secured
Party for its own behalf and on behalf of the Lenders an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to any Grantor) to use, license or sublicense any Patent
Collateral, Trademark Collateral, Copyright Collateral or Know-How Collateral
now owned or licensed or hereafter acquired or licensed by such Grantor (to the
extent and only to the extent any of the foregoing does not constitute Excluded
Collateral), wherever the same may be located throughout the world, for such
term or terms, on such conditions and in such manner as the Secured Party shall
determine, whether general, special or otherwise, and whether on an exclusive or
nonexclusive basis, and including in such license reasonable access to all media
in which any of the licensed items may be recorded or stored and to all computer
software and programs used for the compilation or printout thereof. The use of
such license or sublicense by the Secured Party shall be exercised, at the
option of the Secured Party, and only upon the occurrence and during the
continuation of an Event of Default; provided that any license, sublicense or
other transaction entered into by the Secured Party in accordance herewith shall
be binding upon each applicable Grantor notwithstanding any subsequent cure of
an Event of Default.

            6.6. The Grantors Remain Liable. Notwithstanding anything herein to
the contrary, (i) each Grantor shall remain liable under all Contracts to which
it is a party included within the Collateral (including, without limitation, all
Investment Agreements) to perform all of

                                       24
<PAGE>
its obligations thereunder to the same extent as if this Agreement had not been
executed, (ii) the exercise by the Secured Party on its own behalf and on behalf
of the Lenders of any of its rights or remedies hereunder shall not release any
Grantor from any of its obligations under any of such Contracts, and (iii)
except as specifically provided for herein below, the Secured Party shall not
have any obligation or liability by reason of this Agreement under any of such
Contracts, nor shall the Secured Party be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder. This Agreement shall not in
any way be deemed to obligate the Secured Party or any purchaser at a
foreclosure sale under this Agreement to assume any of a Grantor's obligations,
duties or liabilities under any Investment Agreement, including, without
limitation, any Grantor's obligations, if any, to manage the business and
affairs of the applicable partnership, joint venture, limited liability company,
limited liability partnership or other issuer (collectively, the "Partner
Obligations"), unless the Secured Party or purchaser otherwise agrees in writing
to assume any or all of such Partner Obligations. In the event of foreclosure by
the Secured Party in accordance with the terms of this Agreement, then except as
provided in the preceding sentence, each applicable Grantor shall remain bound
and obligated to perform its Partner Obligations and the Secured Party shall not
be deemed to have assumed any Partner Obligations. In the event the Secured
Party or any purchaser at such a foreclosure sale elects to become a substitute
partner or member in place of a Grantor, the party making such election shall
adopt in writing such Investment Agreement and agree to be bound by the terms
and provisions thereof; and subject to the execution of such written agreement,
each Grantor hereby irrevocably consents in advance to the admission of the
Secured Party or any such purchaser as a substitute partner or member to the
extent of the Equity Interests acquired pursuant to such foreclosure sale, and
agrees to execute any documents or instruments and take any other action as may
be necessary or as may be reasonably requested in connection therewith. The
powers, rights and remedies conferred on the Secured Party hereunder are solely
to protect their interest and privilege in such Contracts, as Collateral, and
shall not impose any duty upon them to exercise any such powers, rights or
remedies.

            6.7. Registration Rights.

            (a) If the Secured Party on its own behalf and on behalf of the
Lenders shall determine to exercise its right to sell any or all securities that
constitute Collateral pursuant to Section 6.2, and if in the opinion of the
Secured Party it is necessary or advisable to have such Collateral, or any
portion thereof to be registered under the provisions of the Securities Act, the
relevant Grantor shall use its best efforts to cause the issuer thereof to (i)
execute and deliver, and cause the directors and officers of such issuer to
execute and deliver, all such instruments and documents, and do or cause to be
done all such other acts as may be, in the opinion of the Secured Party,
necessary or advisable to register such securities, or that portion thereof to
be sold, under the provisions of the Securities Act, (ii) use its best efforts
to cause the registration statement relating thereto to become effective and to
remain effective for a period of one year from the date of the first public
offering of such securities, or that portion thereof to be sold and (iii) make
all amendments thereto and/or to the related prospectus which, in the opinion of
the Secured Party, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Secured Party shall designate

                                       25
<PAGE>
and to make available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy the provisions
of Section 11(a) of the Securities Act.

            (b) Each Grantor recognizes that the Secured Party may be unable to
effect a public sale of any or all such pledged securities by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise or may determine that a public sale is impracticable or not
commercially reasonable and, accordingly, may resort to one or more private
sales thereof to a restricted group of purchasers which will be obliged to
agree, among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Secured Party
shall be under no obligation to delay a sale of any of such pledged securities
for the period of time necessary to permit the issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such issuer would agree to do so.

            (c) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the pledged securities pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable requirements of law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Secured Party, that the
Secured Party have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 6.7 shall be
specifically enforceable against such Grantor, and such Grantor hereby waives
and agrees not to assert any defenses against an action for specific performance
of such covenants except for a defense that no Event of Default has occurred
under the Investment and Exchange Agreement.

            6.8. Right of Set-Off. Each Grantor recognizes and agrees that with
respect to any time or other deposit, certificate of deposit or any other
balance of account standing to the credit of each of the Grantor on the books of
the Secured Party wherever located, the Secured Party has a right of set-off to
the full extent permitted by law. Each Grantor further agrees that the Secured
Party may exercise such right of set-off at any time when an Event of Default
shall occur and be continuing, regardless of the stated maturity of any time
deposit or other such credit balance.

            6.9. Waivers by the Grantors. Each Grantor, to the greatest extent
not prohibited by applicable law, hereby (i) agrees that it will not invoke,
claim or assert the benefit of any rule of law or statute now or hereafter in
effect (including, without limitation, any right to prior notice or judicial
hearing in connection with the Secured Party's possession, custody or
disposition of any Collateral or any appraisal, valuation, stay, extension,
moratorium or redemption law), or take or omit to take any other action, that
would or could reasonably be expected to have the effect of delaying, impeding
or preventing the exercise of any rights and remedies in respect of the
Collateral, the absolute sale of any of the Collateral or the possession thereof
by any purchaser at any sale thereof, and waives the benefit of all such laws
and further agrees that it will not hinder, delay or impede the execution of any
power granted hereunder to the Secured Party on its own behalf and on behalf of
the Lenders, but that it will permit the execution of every such power as though
no such laws were in effect, (ii) waives all rights that it has or may

                                       26
<PAGE>
have under any rule of law or statute now existing or hereafter adopted to
require the Secured Party to marshal any Collateral or other assets in favor of
such Grantor or any other party or against or in payment of any or all of the
Obligations, and (iii) waives all rights that it has or may have under any rule
of law or statute now existing or hereafter adopted to demand, presentment,
protest, advertisement or notice of any kind (except notices expressly provided
for herein or in the Loan Documents) or to require the Secured Party to pursue
any third party for any of the Obligations.

7. THE SECURED PARTY

            7.1. Limitation on Duty of Secured Party in Respect of Collateral.
The Secured Party will hold all items of the Collateral at any time that may be
received under this Agreement in accordance with the provisions hereof and the
Loan Documents. The obligations of the Secured Party as holder of the Collateral
and interests therein and with respect to the disposition thereof, and otherwise
under this Agreement and the Loan Documents, are only those expressly set forth
in this Agreement and the Loan Documents. The powers conferred on the Secured
Party hereunder are solely to protect its interest, on its own behalf and on
behalf of the Lenders, in the Collateral, and shall not impose any duty upon it
to exercise any such powers. Except for treatment of the Collateral in its
possession in the same manner as that which the Secured Party, in its individual
capacity, accord their own property of a similar nature for their own accounts,
and the accounting for moneys actually received by them hereunder, the Secured
Party shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to the Collateral. The Secured Party shall not be liable to any
Grantor (i) for any loss or damage sustained by such Grantor, or (ii) for any
loss, damage, depreciation or other diminution in the value of any of the
Collateral that may occur as a result of or in connection with or that is in any
way related to any exercise by Secured Party of any right or remedy under this
Agreement, any failure to demand, collect or realize upon any of the Collateral
or any delay in doing so, or any other act or failure to act on the part of
Secured Party, except to the extent that the same is caused by its own gross
negligence or willful misconduct. In connection with its appointment and acting
hereunder, the Secured Party is entitled to all rights, privileges, protections,
immunities and indemnities provided to it under the Loan Documents. Without
limiting the foregoing, the Secured Party shall not be liable or responsible for
any loss or diminution in the value of any of the Collateral by reason of the
act or omission of any carrier, forwarding agency or other agent or bailee
selected by the Secured Party in good faith.

            7.2. Further Assurances. Each Grantor agrees that it will join with
the Secured Party to execute and, at its own expense, file and refile under the
Uniform Commercial Code such financing statements, continuation statements and
other documents and instruments in such offices as necessary or as the Secured
Party may reasonably deem necessary or appropriate, and wherever required or
permitted by law, in order to perfect and preserve the Secured Party's security
interest in the Collateral, and hereby authorizes the Secured Party to sign and
file financing statements and amendments thereto relating to all or any part of
the Collateral without the signature of such Grantor, and agrees to do such
further acts and things (including, without limitation, making any notice
filings with state tax or revenue authorities required to be made by account
creditors in order to enforce any Accounts in such state) and to execute and
deliver to the Secured Party such additional collateral conveyances, collateral
assignments, agreements and

                                       27
<PAGE>
instruments as the Secured Party may reasonably require or reasonably deem
advisable to perfect, establish, confirm and maintain the security interest and
Lien provided for herein, to carry out the purposes of this Agreement or to
further assure and confirm unto the Secured Party its rights, powers and
remedies hereunder.

            7.3. Appointment as Attorney-in-Fact.

            (a) Each Grantor hereby irrevocably appoints the Secured Party its
lawful attorney-in-fact, with full authority in the place and stead of such
Grantor and in the name of such Grantor, and with full power of substitution in
the premises (which power of attorney, being coupled with an interest, is
irrevocable for so long as this Agreement shall be in effect), from time to time
in the Secured Party's discretion after the occurrence and during the
continuance of an Event of Default (except for the actions described in clause
(vii) below which may be taken by the Secured Party without regard to whether an
Event of Default has occurred) to take any action and to execute any instruments
that the Secured Party may deem reasonably necessary or advisable to accomplish
the purpose of this Agreement, including, without limitation:

            (i)         to ask, demand, collect, sue for, recover, compound,
                        receive and give receipts for moneys due and to become
                        due under or in respect of any of the Collateral;

            (ii)        to receive, endorse and collect any checks, drafts,
                        instruments, chattel paper and other orders for the
                        payment of money made payable to such Grantor
                        representing any interest, income, dividend,
                        distribution or other amount payable in respect of any
                        of the Collateral and to give full discharge for the
                        same;

            (iii)       to obtain, maintain and adjust any property or casualty
                        insurance required to be maintained by such Grantor and
                        direct the payment of proceeds thereof to the Secured
                        Party;

            (iv)        to pay or discharge taxes, Liens or other encumbrances
                        levied or placed on or threatened against the
                        Collateral, the legality or validity thereof and the
                        amounts necessary to discharge the same to be determined
                        by the Secured Party in its reasonably exercised
                        discretion, any such payments made by the Secured Party
                        to become Obligations of the Grantors to the Secured
                        Party and the Lenders, due and payable immediately and
                        without demand;

            (v)         to file any claims or take any action or institute any
                        proceedings in a court of law or equity that the Secured
                        Party may deem necessary or advisable for the collection
                        of any of the Collateral or otherwise to enforce the
                        rights of the Secured Party with respect to any of the
                        Collateral;

            (vi)        to use, sell, assign, transfer, pledge, make any
                        agreement with respect to or otherwise deal with any and
                        all of the Collateral as fully and completely as though
                        the Secured Party was the absolute owner of the
                        Collateral for all purposes, and to do from time to
                        time, at the Secured Party's option and the Grantors'
                        expense, all other acts and things deemed necessary by
                        the

                                       28
<PAGE>
                        Secured Party to protect, preserve or realize upon the
                        Collateral for its own behalf and on behalf of the
                        Lenders and to more completely carry out the purposes of
                        this Agreement;

            (vii)       effect any repairs or any insurance called for by the
                        terms of this Agreement and pay all or any part of the
                        premiums therefor and the costs thereof, or obtain,
                        maintain and adjust any property or casualty insurance
                        required to be maintained by such Grantor and direct the
                        payment of proceeds thereof to the Secured Party; and

            (viii)      to sign the name of such Grantor on any financing
                        statement, continuation statement, notice or other
                        similar document that, in the Secured Party's opinion,
                        should be made or filed in order to perfect or continue
                        to perfect the security interest granted under this
                        Agreement.

            (b) Except as otherwise provided herein, if any Grantor fails to
perform or fulfill any covenant, obligation or agreement contained in this
Agreement after written request to do so by the Secured Party (provided,
however, that no such request shall be necessary at any time after the
occurrence and during the continuance of an Event of Default), the Secured Party
may itself perform, or cause the performance of, such covenant or agreement and
may take any other action provided hereunder, and the reasonable expenses so
incurred in connection therewith shall be payable by the Grantors under Section
8.1.

8. MISCELLANEOUS

            8.1. Indemnity and Expenses. The Secured Party and the Secured
Party's Affiliates and each of their respective officers, directors, managers,
partners, shareholders, employees, lenders, advisors, agents and other
representatives and any Affiliate of the foregoing, and each of their respective
successors and permitted assigns and each Person who controls any of the
foregoing, within the meaning of the Securities Act and the Exchange Act, shall
be entitled to all indemnities and reimbursement of all fees, costs and expenses
and other protections provided in Article 13 of the Loan Agreement, and such
Article 13 is incorporated by reference herein.

            8.2. No Waiver by Course of Conduct; Cumulative Remedies. The rights
and remedies of the Secured Party expressly set forth in this Agreement and the
Loan Documents are cumulative and in addition to, and not exclusive of, all
other rights and remedies available at law, in equity or otherwise. No failure
or delay on the part of the Secured Party in exercising any of its rights,
powers or privileges shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
or be construed to be a waiver of any Default or Event of Default. No course of
dealing between the Grantors and the Secured Party or employees shall be
effective to amend, modify or discharge any provision of this Agreement or any
other Loan Document or to constitute a waiver of any Default or Event of
Default. No notice to or demand upon any Grantor in any case shall entitle such
Grantor or any other Grantor to any other or further notice or demand in similar
or other circumstances or constitute a waiver

                                       29
<PAGE>
of the right of the Secured Party to exercise any right or remedy or take any
other or further action in any circumstances without notice or demand.

            8.3. Grantors' Obligations Absolute. Each Grantor agrees that its
obligations hereunder, and the security interest granted to and all rights,
remedies and powers of the Secured Party hereunder, are irrevocable, absolute
and unconditional and shall not be discharged, limited or otherwise affected by
reason of any of the following, whether or not such Grantor has knowledge
thereof:

            (i)         any change in the time, manner or place of payment of,
                        or in any other term of, any Obligations, or any
                        amendment, modification or supplement to, restatement
                        of, or consent to any rescission or waiver of or
                        departure from, or any other Loan Document or any
                        agreement or instrument delivered pursuant to any of the
                        foregoing;

            (ii)        the invalidity or unenforceability of any Obligations or
                        any provisions of the Loan Documents or any agreement or
                        instrument delivered pursuant to any of the foregoing;

            (iii)       the addition or release of Grantors hereunder or the
                        taking, acceptance or release of any Obligations or
                        additional Collateral or other security therefor;

            (iv)        any sale, exchange, release, substitution, compromise,
                        non-perfection or other action or inaction in respect of
                        any Collateral or other direct or indirect security for
                        any Obligations, or any discharge, modification,
                        settlement, compromise or other action or inaction in
                        respect of any Obligations;

            (v)         any agreement not to pursue or enforce or any failure to
                        pursue or enforce (whether voluntarily or involuntarily
                        as a result of operation of law, court order or
                        otherwise) any right or remedy in respect of any
                        Obligations or any Collateral or other security
                        therefor, or any failure to create, protect, perfect,
                        secure, insure, continue or maintain any liens in any
                        such Collateral or other security;

            (vi)        the exercise of any right or remedy available under any
                        of the Loan Documents, at law, in equity or otherwise in
                        respect of any Collateral or other security for any
                        Obligations, in any order and by any manner thereby
                        permitted, including, without limitation, foreclosure on
                        any such Collateral or other security by any manner of
                        sale thereby permitted, whether or not every aspect of
                        such sale is commercially reasonable;

            (vii)       any bankruptcy, reorganization, arrangement,
                        liquidation, insolvency, dissolution, termination,
                        reorganization or like change in the corporate structure
                        or existence of the Grantors or any other person
                        directly or indirectly liable for any Obligations;

                                       30
<PAGE>
            (viii)      any manner of application of any payments by or amounts
                        received or collected from any person, by whomsoever
                        paid and howsoever realized, whether in reduction of any
                        Obligations or any other obligations of the Grantors or
                        any other person directly or indirectly liable for any
                        Obligations regardless of what Obligations may remain
                        unpaid after any such application; or

            (ix)        any other circumstance that might otherwise constitute a
                        legal or equitable discharge of, or a defense, set-off
                        or counterclaim available to, the Grantors, or a surety
                        or guarantor generally, other than the occurrence of the
                        payment in full of the Obligations.

            8.4. Amendments, Waivers, etc. No amendment, modification, waiver,
discharge or termination of, or consent to any departure by any Grantor from,
any provision of this Agreement, shall be effective unless in a writing executed
by the parties hereto and delivered to the Secured Party, and then the same
shall be effective only in the specific instance and for the specific purpose
for which given.

            8.5. Subrogation; Termination and Release; Survival. This Agreement
shall create a continuing security interest in the Collateral and shall secure
the payment and performance of all of the Obligations as the same may arise and
be outstanding at any time and from time to time from and after the date hereof,
and shall terminate when all the Obligations have been paid in full (or, in the
case of the Convertible Note, converted in full into shares of Grantor's common
stock in accordance with the terms of the Convertible Note), and the Secured
Party on its own behalf and on behalf of the Lenders is hereby subrogated to all
of the Grantors' interests, rights and remedies in respect to the Collateral and
all security now or hereafter existing with respect thereto and all guaranties
and endorsements thereof and with respect thereto until such time as all of the
Obligations have been paid in full, at which time the Secured Party shall
execute and deliver to the Grantor all documents reasonably necessary to
evidence termination of such security interest and shall return physical
possession of any Collateral then held by the Secured Party to the Grantor. Upon
any sale or other disposition by any Grantor of any Collateral in a transaction
expressly permitted hereunder or under or pursuant to the Loan Documents, or any
amendment or waiver hereunder or thereunder, the lien and security interest
created by this Agreement in and upon such Collateral shall be automatically
released; and in connection with any such release or termination, the Secured
Party, at the request and expense of the applicable Grantor, will execute and
deliver to such Grantor such documents and instruments evidencing such release
or termination as such Grantor may reasonably request and will assign, transfer
and deliver to such Grantor, without recourse and without representation or
warranty, such of the Collateral as may then be in the possession of the Secured
Party (or, in the case of any partial release of Collateral, such of the
Collateral so being released as may be in its possession). All representations,
warranties, covenants and agreements herein shall survive the execution and
delivery of this Agreement and any Pledge Amendment or Grantor Addendum;
provided, however, that Sections 6.3, 6.5, 6.6, 8.1, 8.5 and 8.13 and all
indemnities of the Grantors in favor of the Secured Party contained in this
Agreement shall survive, and remain in full force and effect regardless of the
termination of the security interest or this Agreement.

                                       31
<PAGE>
            8.6. Notices. All notices and other communications provided for
hereunder shall be given to the parties in the manner and subject to the other
notice provisions set forth in the Loan Documents.

            8.7. Severability. To the extent any provision of this Agreement is
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.

            8.8. Headings. The headings of the various sections and subsections
of this Agreement have been inserted for convenience only and shall not in any
way affect the meaning or construction of any of the provisions hereof.

            8.9. Bankruptcy; Reinstatement. This Agreement is a legal, valid and
binding obligation of the Grantor. This Agreement will remain in full force and
effect and enforceable to the maximum extent provided in Section 510(a) of the
Bankruptcy Code, and all references herein to the Grantor will be deemed to
apply to such entity as debtor-in-possession and to any trustee in bankruptcy
for the estate of such entity. Each Grantor further agrees that, if any payment
made by any Grantor or other Person and applied to the Obligations is at any
time annulled, avoided, set aside, rescinded, invalidated, declared to be
fraudulent or preferential or otherwise required to be refunded or repaid, or
the proceeds of Collateral are required to be returned by any the Secured Party
or any Secured Party to such Grantor, its estate, trustee, receiver or any other
party, under any bankruptcy law, state or federal law, common law or equitable
cause, then, to the extent of such payment or repayment, any lien or security
interest or other Collateral securing such liability shall be and remain in full
force and effect, as fully as if such payment had never been made or, if prior
thereto the lien or security interest granted hereby or other Collateral
securing such liability hereunder shall have been released or terminated by
virtue of such cancellation or surrender), such Lien or other Collateral shall
be reinstated in full force and effect, and such prior cancellation or surrender
shall not diminish, release, discharge, impair or otherwise affect any Lien or
other Collateral securing the obligations of any Grantor in respect of the
amount of such payment. Notwithstanding any other provision of this Section, the
Secured Party will be entitled to file any necessary pleadings, motions,
objections or agreement which assert rights or interests available to unsecured
creditors of the Grantor arising under either the Bankruptcy Code or applicable
non-bankruptcy law.

            8.10. Injunctive Relief. It is hereby agreed and acknowledged that
it will be impossible to measure in money the damages that would be suffered if
the parties fail to comply with any of the obligations herein imposed on them
and that in the event of any such failure, an aggrieved Person will be
irreparably damaged and will not have an adequate remedy at law. Any such Person
shall, therefore, be entitled (in addition to any other remedy to which it may
be entitled in law or in equity) to injunctive relief, including, without
limitation, specific performance, to enforce such obligations, and if any action
should be brought in equity to enforce any of the provisions of this Agreement,
none of the parties hereto shall raise the defense that there is an adequate
remedy at law.

                                       32
<PAGE>
            8.11. Successors and Assigns. This Agreement shall be binding upon
the successors and assigns of each Grantor and shall inure to the benefit of the
Secured Party and its successors and permitted assigns; provided, however, that
no Grantor may assign, transfer or delegate any of its rights or obligations
under this Agreement without the prior written consent of the Secured Party;
and; provided, further, however, that Secured Party may not assign, transfer or
delegate any of its rights or obligations as Secured Party under this Agreement
without the prior written consent of the Grantor unless, on and after the Final
Withdrawal Date, MHR and its Affiliates and Related Parties shall not hold any
of the Secured Loan or the Convertible Note. If, on and after the Final
Withdrawal Date, MHR and its Affiliates shall not hold any of the Secured Loan
or the Convertible Note, a new Secured Party satisfactory to Grantor and not
less than a majority in principal amount of the Secured Loan or the Convertible
Note, as applicable, shall be appointed by such parties and upon the acceptance
of its appointment as Secured Party hereunder, the resigning Secured Party shall
be released from all further obligations under this Agreement. Prior to the
Final Withdrawal Date, the Secured Party may not assign, transfer or delegate
any of its rights or obligations as Secured Party under this Agreement without
the prior written consent of the Grantor.

            8.12. Counterparts. This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute an original but all of which when taken together shall constitute but
one contract, and shall become effective when copies hereof which, when taken
together, bear the signatures of each of the parties hereto shall be delivered
to the Secured Party. Delivery of an executed counterpart of a signature page to
this Agreement by telecopier shall be effective as delivery of a manually
executed signature page hereto.

            8.13. Governing Law; Submission to Jurisdiction.

            (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK. TO INDUCE THE SECURED PARTY TO ENTER INTO THIS AGREEMENT,
THE GRANTOR HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO THE SECURED PARTY' SOLE
AND ABSOLUTE ELECTION AND INSTRUCTION TO THE SECURED PARTY, ALL ACTIONS OR
PROCEEDINGS WHICH IN ANY MANNER ARISE OUT OF OR IN CONNECTION WITH OR ARE IN ANY
WAY RELATED TO THIS AGREEMENT SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN
THE COUNTY OF NEW YORK, STATE OF NEW YORK. THE GRANTOR HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITH THE COUNTY OF NEW YORK,
STATE OF NEW YORK. THE GRANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER
OR CHANGE THE VENUE OF ANY LITIGATION BETWEEN THE GRANTOR AND THE SECURED PARTY
IN ACCORDANCE WITH THIS PARAGRAPH.

            (b) EACH OF THE GRANTOR AND THE SECURED PARTY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WHICH IN ANY MANNER ARISES OUT OF OR IN CONNECTION WITH OR IS IN ANY
WAY RELATED TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.

                                       33
<PAGE>
            (c) THE PROVISIONS OF THIS SECTION 8.13 ARE A MATERIAL INDUCEMENT
FOR THE SECURED PARTY ENTERING INTO THE AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREIN. GRANTOR HEREBY ACKNOWLEDGES THAT IT HAS REVIEWED THE
PROVISIONS OF THIS SECTION 8.13 WITH ITS INDEPENDENT COUNSEL.

            (d) Any legal action or proceeding with respect to this Agreement
may be brought in the courts of the State of New York or of the United States of
America for the Southern District of New York, and, by execution and delivery of
this Agreement, each Grantor hereby submits for itself and in respect of its
property, generally and unconditionally, to the jurisdiction of the aforesaid
courts, waives any objection, including, without limitation, any objection to
the laying of venue or based on the grounds of forum non conveniens, which such
Grantor now or hereafter has to the bringing of any such action or proceeding in
such respective jurisdictions and consents to the service of process of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to each such
person, as the case may be, as provided for in Section 9(e) of the Investment
and Exchange Agreement. The Secured Party may also serve process in any other
manner permitted by law or commence legal proceedings or otherwise proceed
against any Grantor in any other jurisdiction.

            8.14. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

            8.15. Entire Agreement. This Agreement embodies the entire agreement
and understanding between the Grantor and the Secured Party in respect of the
subject matter contained herein. In the event of a conflict between this
Agreement and any of the Loan Documents, the terms of the Loan Agreement shall
govern.

                  [Remainder of page intentionally left blank]

                                       34
<PAGE>
            IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.

                                      EMISPHERE TECHNOLOGIES, INC., AS GRANTOR

                                      By: /s/ Elliot M. Maza
                                          --------------------------------------
                                      Name: Elliot M. Maza
                                      Title: Chief Financial Officer

                                      MHR INSTITUTIONAL PARTNERS IIA LP,
                                        AS SECURED PARTY

                                      By:  MHR Institutional Advisors II LLC,
                                             its general partner

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

                                       35exv10w8

 

EXHIBIT 10.8

 REGISTRATION RIGHTS AGREEMENT

BY AND AMONG

EMISPHERE TECHNOLOGIES, INC.

AND

THE PERSONS LISTED ON THE

SIGNATURE PAGES HEREOF

Dated as of September 26, 2005

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 
	 	 	 	 	Page	
	 	 	 	 	 	
	
    ARTICLE I  DEFINITIONS	 	 	1	 
	 	
    
    1.1

    	 	
    Defined Terms	 	 	1	 
	 	
    
    1.2

    	 	
    General Interpretive Principles	 	 	4	 
	 
	
    ARTICLE II  DEMAND REGISTRATION	 	 	4	 
	 	
    
    2.1

    	 	
    Request for Registration	 	 	4	 
	 	
    
    2.2

    	 	
    Joining Holders	 	 	5	 
	 	
    
    2.3

    	 	
    Effective Registration	 	 	5	 
	 	
    
    2.4

    	 	
    Underwritten Offering	 	 	5	 
	 	
    
    2.5

    	 	
    Priority on Demand Registrations	 	 	6	 
	 	
    
    2.6

    	 	
    Withdrawal and Cancellation of Registration	 	 	6	 
	 	
    
    2.7

    	 	
    Registration Statement Form	 	 	7	 
	 	
    
    2.8

    	 	
    Registration on Form S-3	 	 	7	 
	 	
    
    2.9

    	 	
    Registered Repayment Offering	 	 	7	 
	 
	
    ARTICLE III  PIGGYBACK REGISTRATIONS	 	 	7	 
	 	
    
    3.1

    	 	
    Holder Piggyback Registration	 	 	7	 
	 	
    
    3.2

    	 	
    Priority on Piggyback Registrations	 	 	8	 
	 	
    
    3.3

    	 	
    Withdrawals	 	 	9	 
	 
	
    ARTICLE IV  SHELF REGISTRATION	 	 	10	 
	 	
    
    4.1

    	 	
    Shelf Registration Filing	 	 	10	 
	 	
    
    4.2

    	 	
    Required Period and Shelf Registration Procedures	 	 	10	 
	 	
    
    4.3

    	 	
    Effective Registration	 	 	10	 
	 	
    
    4.4

    	 	
    Underwritten Offering	 	 	11	 
	 
	
    ARTICLE V  STANDSTILL AND SUSPENSION PERIODS	 	 	11	 
	 	
    
    5.1

    	 	
    Company Standstill Period	 	 	11	 
	 	
    
    5.2

    	 	
    Suspension Period	 	 	11	 
	 	
    
    5.3

    	 	
    Holder Standstill Period	 	 	12	 
	 	
    
    5.4

    	 	
    Restrictions on Sale by the Company and Others	 	 	12	 
	 
	
    ARTICLE VI  REGISTRATION PROCEDURES	 	 	13	 
	 	
    
    6.1

    	 	
    Company Obligations	 	 	13	 
	 
	
    ARTICLE VII  INDEMNIFICATION	 	 	16	 
	 	
    
    7.1

    	 	
    Indemnification by the Company	 	 	16	 
	 	
    
    7.2

    	 	
    Indemnification by the Holders	 	 	17	 
	 	
    
    7.3

    	 	
    Notice of Claims, Etc. 	 	 	17	 
	 	
    
    7.4

    	 	
    Contribution	 	 	18	 
	 	
    
    7.5

    	 	
    Indemnification Payments; Other Remedies	 	 	18	 
	 
	
    ARTICLE VIII  REGISTRATION EXPENSES	 	 	19	 
	 
	
    ARTICLE IX  RULE 144	 	 	19	 

i

 

	 	 	 	 	 	 	 	 
	 	 	 	 	Page	
	 	 	 	 	 	
	 
	
    ARTICLE X  MISCELLANEOUS	 	 	19	 
	 	
    
    10.1

    	 	
    Other Registration Rights	 	 	19	 
	 	
    
    10.2

    	 	
    Notice Generally	 	 	20	 
	 	
    
    10.3

    	 	
    Successors and Assigns; No Third Party Beneficiaries	 	 	21	 
	 	
    
    10.4

    	 	
    Amendments; Waivers	 	 	21	 
	 	
    
    10.5

    	 	
    Severability	 	 	21	 
	 	
    
    10.6

    	 	
    Headings	 	 	21	 
	 	
    
    10.7

    	 	
    Injunctive Relief	 	 	21	 
	 	
    
    10.8

    	 	
    Remedies Cumulative	 	 	22	 
	 	
    
    10.9

    	 	
    Governing Law; Jurisdiction	 	 	22	 
	 	
    
    10.10

    	 	
    Counterparts and Facsimile Execution	 	 	22	 
	 	
    
    10.11

    	 	
    Attorneys’ Fees	 	 	22	 
	 	
    
    10.12

    	 	
    Termination of Registration Rights; Survival	 	 	22	 
	 	
    
    10.13

    	 	
    Entire Agreement	 	 	22	 
	 	
    
    10.14

    	 	
    Further Assurances	 	 	22	 

ii

 

REGISTRATION RIGHTS AGREEMENT

     
THIS REGISTRATION RIGHTS AGREEMENT (this
“Agreement”), dated as of September 26,
2005, by and among Emisphere Technologies, Inc., a Delaware
corporation (together with any Subsidiaries (as hereinafter
defined) hereafter formed or acquired, the
“Company”), and the Holders (as hereinafter
defined) of Registrable Securities (as hereinafter defined).

     
WHEREAS, contemporaneously with entering into this Agreement,
the Company is entering into that certain Investment and
Exchange Agreement (the “Investment Agreement”)
and that certain Senior Secured Term Loan Agreement (the
“Loan Agreement”), each dated as of
September 26, 2005, between the Company, on the one hand,
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 (as defined below), the
“Investor”), on the other hand;

     
WHEREAS, the Investor currently owns certain Warrants (as
hereinafter defined) and Common Stock (as hereinafter defined);

     
WHEREAS, in connection with the consummation of the transactions
contemplated by the Investment Agreement, the Holders and the
Company desire to enter into this Agreement to provide the
Holders with certain rights relating to the registration of
Registrable Securities owned as of the date hereof or that may
be owned from time to time after the date hereof by Holders or
their Affiliates (as hereinafter defined).

     
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS.

     
1.1     Defined Terms. As
used in this Agreement, the following capitalized terms (in
their singular and plural forms, as applicable) have the
following meanings:

		
	 	     
    “Action” has the meaning assigned to such term
    in Section 7.3 hereof.
	 
	 	     
    “Additional Holder(s)” means the Permitted
    Assignee(s) who, from time to time, acquire Registrable
    Securities and own Registrable Securities at the relevant time
    and agree to be bound by the terms hereof and become Holders for
    purposes of this Agreement.
	 
	 	     
    “Adverse Effect” has the meaning assigned to
    such term in Section 2.5 hereof.
	 
	 	     
    “Affiliate” of a Person means any Person that,
    directly or indirectly, through one or more intermediaries,
    controls or is controlled by, or is under common control with,
    such other Person. For purposes of this definition, the term
    “control” (including the terms
    “controlling,” “controlled by” and
    “under common control with”) means the possession,
    direct or indirect, of the power to cause the direction of the
    management and policies of a Person, whether through the
    ownership of voting securities, by contract or otherwise.
	 
	 	     
    “Agreement” has the meaning assigned to such
    term in the introductory paragraph to this Agreement, as the
    same may be amended, supplemented or restated from time to time.
	 
	 	     
    “Business Day” means any day that is not a
    Saturday, a Sunday or a day on which banks are required or
    permitted to be closed in State of New York.
	 
	 	     
    “Closing Shelf Registration Statement” has the
    meaning assigned to such term in Section 4.1 hereof.
	 
	 	     
    “Commission” means the United States Securities
    and Exchange Commission and any successor United States federal
    agency or governmental authority having similar powers.

1

 

		
	 	     
    “Common Stock” means the common stock, par
    value $0.01 per share, of the Company.
	 
	 	     
    “Company Indemnified Person” has the meaning
    assigned to such term in Section 7.2 hereof.
	 
	 	     
    “Company Standstill Period” has the meaning
    assigned to such term in Section 5.1 hereof.
	 
	 	     
    “Convertible Note” has the meaning assigned to
    such term in the Investment Agreement.
	 
	 	     
    “Convertible Note Shelf Registration
    Statement” has the meaning assigned to such term in
    Section 4.1 hereof.
	 
	 	     
    “Demand Registration” has the meaning assigned
    to such term in Section 2.1 hereof.
	 
	 	     
    “Demand Request” has the meaning assigned to
    such term in Section 2.1 hereof.
	 
	 	     
    “Exchange” has the meaning assigned to such
    term in the Loan Agreement, whether or not such agreement is in
    full force and effect as of the date of the Exchange.
	 
	 	     
    “Exchange Act” means the Securities Exchange
    Act of 1934, as amended, or any successor statute, and the rules
    and regulations of the Commission thereunder.
	 
	 	     
    “Form S-3” has the meaning assigned to
    such term in Section 2.8 hereof.
	 
	 	     
    “Form S-3 Registration” has the meaning
    assigned to such term in Section 2.8 hereof.
	 
	 	     
    “Holder” means any (i) Person (other than
    the Company) who owns Registrable Securities at the relevant
    time and is a party to this Agreement, (ii) Additional
    Holder, or (iii) the Investor. The Investor shall be
    deemed, for purposes hereunder, a single Holder.
	 
	 	     
    “Holder Indemnified Person” has the meaning
    assigned to such term in Section 7.1 hereof.
	 
	 	     
    “Indemnitee” has the meaning assigned to such
    term in Section 7.3 hereof.
	 
	 	     
    “Inspectors” has the meaning assigned to such
    term in Section 6.1(k) hereof.
	 
	 	     
    “Investor” has the meaning assigned to such
    term in the introductory paragraph to this Agreement.
	 
	 	     
    “Joining Holder” has the meaning assigned to
    such term in Section 2.2 hereof.
	 
	 	     
    “Loss” and “Losses” have the
    meanings assigned to such terms in Section 7.1 hereof.
	 
	 	     
    “Major Holder” means, with respect to a class
    of Registrable Securities, any Person or group or Affiliate of a
    Person that holds a minimum of 10% of the Registrable Securities
    as of the date of determination.
	 
	 	     
    “Majority Participating Holders” means, with
    respect to any registration of Registrable Securities under this
    Agreement, the Holder or Holders at the relevant time of at
    least a majority of amount and/or type of the Registrable
    Securities to be included in the Registration Statement in
    question.
	 
	 	     
    “Material Disclosure Event” means, as of any
    date of determination, any pending or imminent event relating to
    the Company or any of its Subsidiaries, which, in the good faith
    determination of the Board of Directors of the Company after
    consultation with counsel to the Company (i) requires
    disclosure of material, non-public information relating to such
    event in any Registration Statement or related Prospectus
    (including documents incorporated by reference therein) so that
    such Registration Statement would not be materially misleading,
    (ii) is otherwise not required to be publicly disclosed at
    that time (e.g., on Forms 10-K, 8-K, or 10-Q)
    under applicable federal or state securities laws but for the
    filing of such Registration Statement, and (iii) if
    publicly disclosed at the time of such event, could reasonably
    be expected to have a material adverse effect on the business,
    financial condition or prospects of the Company and its
    Subsidiaries or would materially adversely affect a pending or
    proposed acquisition, merger, recapitalization, consolidation,
    reorganization, financing or similar transaction, or
    negotiations with respect thereto.
	 
	 	     
    “NASD” has the meaning assigned to such term in
    Section 6.1(n) hereof.

2

 

		
	 	     
    “Participating Holder” means any Holder on
    whose behalf Registrable Securities are registered pursuant to
    Articles II, III or IV hereof.
	 
	 	     
    “Permitted Assignee” means any
    (i) Affiliate of any Holder who acquires Registrable
    Securities from such Holder or (ii) any other Person who
    acquires any Holder’s Registrable Securities and who shall
    have been designated as a Permitted Assignee by such Holder in a
    written notice to the Company; provided, however,
    that the rights of any Person designated as a Permitted Assignee
    referred to in the foregoing clause (ii) shall be limited
    if, and to the extent, provided in such notice.
	 
	 	     
    “Person” means any individual, corporation,
    partnership, limited liability company, joint venture,
    association, joint-stock company, trust, unincorporated
    organization, government or any agency or political subdivision
    thereof or any other entity.
	 
	 	     
    “Prospectus” means the prospectus included in
    any Registration Statement, all amendments and supplements to
    such prospectus and all material incorporated by reference in
    such prospectus.
	 
	 	     
    “Purchase Option” has the meaning assigned to
    such term in the Investment Agreement.
	 
	 	     
    “Records” has the meaning assigned to such term
    in Section 6.1(k) hereof.
	 
	 	     
    “Registered Repayment Offering” has the meaning
    assigned to such term in the Loan Agreement.
	 
	 	     
    The terms “register,”
    “registered” and
    “registration” mean a registration effected by
    preparing and filing with the Commission a Registration
    Statement on an appropriate form in compliance with the
    Securities Act, and the declaration or order of the Commission
    of the effectiveness of such Registration Statement under the
    Securities Act.
	 
	 	     
    “Registrable Securities” means the following
    securities of the Company held by any of the Holders (or their
    respective Affiliates and successors and assigns or Permitted
    Assignees) at any time or from time to time: (i) the
    Convertible Note, (ii) the Warrants, (iii) the shares
    of Common Stock (x) issued upon conversion of the
    Convertible Note, (y) issued upon the exercise of the
    Warrants, or (z) otherwise held by the Holders,
    (iv) any Convertible Note, Warrants, shares of additional
    Common Stock or securities that may be acquired or received by
    the Holders or issued or distributed or be issuable with respect
    to Registrable Securities by way of a stock dividend, stock
    split or reverse stock split or in connection with a combination
    of shares, recapitalization, merger, consolidation or otherwise,
    and any securities issued in exchange for or in replacement of
    such Registrable Securities, (v) any securities of the
    Company that the Company is required to register in order to
    satisfy the Company’s payment obligations to the Investor
    in the event of a Stockholder Approval Default in the manner
    prescribed in Section 12.2(b) of the Loan Agreement as of
    the appropriate date of determination, and (vi) any
    securities of the Company that the Investor may acquire upon the
    Investor’s exercise of the Purchase Option;
    provided, however, that as to any Registrable
    Securities, such securities shall cease to constitute
    “Registrable Securities” for purposes of this
    Agreement if and when (i) a Registration Statement with
    respect to the sale of such securities shall have been declared
    effective by the Commission and such securities shall have been
    sold pursuant thereto, or (ii) such securities are sold or
    transferred in accordance with the provisions of Rule 144,
    or (iii) such securities are sold or transferred (other
    than in a transaction under clause (i) or (ii) above)
    by a person in a transaction in which such person’s rights
    under this Agreement are not assigned, or (iv) such
    securities are no longer outstanding, or (v) such
    securities may, in the reasonable determination of the
    beneficial owner thereof, be sold or transferred by such
    beneficial owner pursuant to Rule 144 at the time such
    beneficial owner desires to sell or transfer such securities and
    new certificates for such securities not bearing a legend
    restricting transfer under the Securities Act shall have been
    delivered to the Holder thereof by the Company. For purposes of
    this Agreement, a “class” of Registrable Securities
    shall mean all securities with the same terms and a
    “percentage” (or a “majority”) of the
    Registrable Securities (or, where applicable, of any other
    securities) shall be determined (x) based on the number of
    shares of such securities, in the case of Registrable Securities
    which are equity securities, and (y) based on the principal
    amount of such securities, in the case of Registrable Securities
    which are debt securities.

3

 

		
	 	     
    “Registration Statement” means any Registration
    Statement of the Company filed with, or to be filed with, the
    Commission under the rules and regulations promulgated under the
    Securities Act, including the Prospectus, amendments and
    supplements to such Registration Statement, including
    post-effective amendments, and all exhibits and all material
    incorporated by reference in such Registration Statement.
	 
	 	     
    “Requesting Holder” has the meaning assigned to
    such term in Section 2.1 hereof.
	 
	 	     
    “Required Filing Date” has the meaning assigned
    to such term in Section 2.1 hereof.
	 
	 	     
    “Required Period” has the meaning assigned to
    such term in Section 4.2 hereof.
	 
	 	     
    “Rule 144” means Rule 144 (or any
    similar provision then in force) promulgated under the
    Securities Act.
	 
	 	     
    “Securities Act” means the Securities Act of
    1933, as amended, or any successor statute, and the rules and
    regulations of the Commission thereunder.
	 
	 	     
    “Shelf Registration Statement” has the meaning
    assigned to such term in Section 4.1 hereof.
	 
	 	     
    “Stockholder Approval” has the meaning assigned
    to such term in the Loan Agreement.
	 
	 	     
    “Stockholder Approval Default” has the meaning
    assigned to such term in the Loan Agreement.
	 
	 	     
    “Subsidiary” means (i) as to the Company,
    any Person in which more than 25% of all equity, membership,
    partnership or other ownership interests is owned directly or
    indirectly by the Company or one or more of its Subsidiaries;
    and (ii) as to any other Person, any Person in which more
    than 25% of all equity, membership, partnership or other
    ownership interests is owned directly or indirectly by such
    Person or by one or more of such Person’s Subsidiaries.
    Unless otherwise specified in this Agreement or any Loan
    Document (as defined in the Loan Agreement), references to a
    Subsidiary refer to a Subsidiary of the Company.
	 
	 	     
    “Suspension Notice” has the meaning assigned to
    such term in Section 5.2 hereof.
	 
	 	     
    “Suspension Period” has the meaning assigned to
    such term in Section 5.2 hereof.
	 
	 	     
    “Underwriter” means a securities dealer(s) who
    purchases any Registrable Securities as principal in an
    underwritten offering and not as part of such dealer’s
    market-making activities.
	 
	 	     
    “Underwritten Offering” means a registration in
    which securities of the Company are sold to an underwriter or
    underwriters on a firm commitment basis for reoffering to the
    public.
	 
	 	     
    “Warrants” means all warrants issued by the
    Company at any time prior to or after the date hereof, including
    Warrant No. A3, dated March 31, 2005, and Warrant
    No. A4, dated March 31, 2005.

     
1.2     General Interpretive
Principles. Whenever used in this Agreement, except as
otherwise expressly provided or unless the context otherwise
requires, any noun or pronoun shall be deemed to include the
plural as well as the singular and to cover all genders. The
name assigned to this Agreement and the section captions used
herein are for convenience of reference only and shall not be
construed to affect the meaning, construction or effect hereof.
Unless otherwise specified, the terms “hereof,”
“herein,” “hereunder” and
similar terms refer to this Agreement as a whole (including the
exhibits and schedules hereto), and references herein to
Sections refer to Sections of this Agreement. The words
“include,” “includes” and
“including,” when used in this Agreement, shall
be deemed to be followed by the words “without
limitation.”

ARTICLE II

DEMAND REGISTRATION

     
2.1     Request for
Registration. Any Major Holder may, from time to time
(each, a “Requesting Holder”) make a request in
writing (a “Demand Request”) that the Company
effect the registration under the Securities Act of all or a
specified number of shares (or amount) and type of Registrable
Securities held

4

 

by the Requesting Holders proposed to be sold and the intended
method(s) of distribution thereof (a “Demand
Registration”); provided, however, that
the Company will in no event be required to effect (a) more
than three (3) Demand Registrations under this
Section 2.1 subject to the Company’s compliance with
its obligations under Article III hereof, or (b) any
Demand Registration within three (3) months after the
effective date of a Registration Statement relating to any
Underwritten Offering (including any such offering effected
pursuant to a Demand Registration hereunder). Upon receipt of a
Demand Request, the Company will cause to be included in a
Registration Statement on an appropriate form under the
Securities Act, filed with the Commission as promptly as
practicable but in any event not later than sixty
(60) calendar days after receiving a Demand Request (the
“Required Filing Date”), such Registrable
Securities as may be requested by such Requesting Holders in
their Demand Request together with any other Registrable
Securities of the same class as requested by Joining Holders
joining in such request pursuant to Section 2.2 hereof. The
Company shall use its best efforts to cause any such
Registration Statement to be declared effective by the
Commission as promptly as possible after such filing. A
registration of any securities by the Company pursuant to
Section 2.9 hereof shall not constitute a Demand
Registration or a Demand Request and shall not in any way affect
or limit the rights of the Requesting Holders pursuant to this
Section 2.1.

     
2.2     Joining Holders.
If at any time the Company proposes to register Registrable
Securities for the account of the Requesting Holders pursuant to
Section 2.1 hereof, then (i) the Company shall give,
or cause to be given, written notice of such proposed filing to
all of the Holders of such class of Registrable Securities as
soon as practicable (but in no event less than thirty
(30) calendar days before the anticipated filing date),
upon which any Holder (each such Holder, a “Joining
Holder”) may, upon written request to the Company, so
as to be received by the Company no later than the fifth (5th)
Business Day after receipt by such Holder of such notice,
request that the Company register, on the same terms and
conditions as the securities otherwise being sold pursuant to
such Demand Registration, any of its Registrable Securities of
the same class as the securities otherwise being sold pursuant
to such Demand Registration, and the Company will use its best
efforts to cause such Registrable Securities to be included in
the Registration Statement proposed to be filed by the Company
on the same terms and conditions as any securities of the same
class included therein. All such requests by Joining Holders
shall specify the aggregate amount and/or class of Registrable
Securities to be registered and the intended method of
distribution of the same.

     
2.3     Effective
Registration. A registration will not count as a Demand
Registration for purposes of Section 2.1 hereof
(i) unless the related Registration Statement has been
declared effective and has remained effective until such time as
all of such Registrable Securities covered thereby have been
disposed of in accordance with the intended methods of
disposition by the Participating Holders (but in no event for a
period of more than one hundred eighty (180) calendar days
after such Registration Statement becomes effective not
including any Suspension Period) or cease to be Registrable
Securities, (ii) if pursuant to Section 2.5 hereof,
the Requesting Holders and Joining Holders are cut back to fewer
than 75% of the Registrable Securities requested to be
registered and at the time of the request there was not in
effect a Shelf Registration Statement, as applicable, or the
Holders cannot otherwise utilize the Shelf Registration
Statement, as applicable, and (iii) unless the Company has
complied with all of its obligations under this Agreement; it
being understood that if, after such Registration Statement has
become effective, an offering of Registrable Securities pursuant
to a Demand Registration is interfered with by any stop order,
injunction, or other order of the Commission or other
governmental agency or court, such Registration Statement with
respect to such Demand Registration will be deemed not to have
been effected (and will not count as a Demand Registration for
purposes of Section 2.1 hereof), unless and until
(1) such stop order or injunction is removed, rescinded or
otherwise terminated, and (2) the Requesting Holders
thereafter elect to continue the offering.

     
2.4     Underwritten
Offering. If the Requesting Holder so elects and so
advises the Company as part of its Demand Request for a Demand
Registration, the offering of such Registrable Securities
pursuant to such Demand Registration shall be in the form of an
Underwritten Offering, and the Requesting Holder shall be
entitled to select the managing Underwriter or Underwriters for
such offering, which managing Underwriter or Underwriters shall
be reasonably acceptable to the Company.

5

 

     
2.5     Priority on Demand
Registrations.

     
(a) Underwritten Offering. With respect to any
offering of Registrable Securities pursuant to a Demand
Registration in the form of an Underwritten Offering, no
securities to be sold for the account of any Person (including
the Company) other than the Requesting Holder shall be included
in such Demand Registration unless the Underwriter or managing
Underwriter selected in accordance with Section 2.4 hereof,
advises the Requesting Holder in writing that the inclusion of
such securities will not adversely affect the price or success
of the offering (an “Adverse Effect”).
Furthermore, in the event that the Underwriter or managing
Underwriter, advises the Requesting Holder in writing that the
amount of Registrable Securities proposed to be included in such
Demand Registration by Requesting Holders and Joining Holders is
sufficiently large (even after exclusion of all securities of
any other Person pursuant to the immediately preceding sentence)
to cause an Adverse Effect, the number of Registrable Securities
to be included in such Demand Registration shall be allocated
among all such Requesting Holders and Joining Holders pro rata
based on the ratio of the number of Registrable Securities that
each such Holder requested to be included in such Demand
Registration to the total number of Registrable Securities that
all Requesting Holders and Joining Holders requested to be
included in such Demand Registration; provided,
however, that if, as a result of such pro-ration, any
Requesting Holder or Joining Holder shall not be entitled to
include in a registration all Registrable Securities of the
class that such Holder had requested to be included, such Holder
may elect to withdraw its request to include such Registrable
Securities in such registration (in which case such registration
shall not count as a Demand Registration in accordance with
Section 2.3) or may reduce the number requested to be
included.

     
(b) Non-Underwritten Offering. With respect to any
offering of Registrable Securities pursuant to a Demand
Registration that is not in the form of an Underwritten
Offering, no securities to be sold for the account of any Person
(including the Company) other than the Requesting Holder shall
be included in such Demand Registration unless the Majority
Participating Holders in good faith, or in the event the
Requesting Holder is also the Majority Participating Holders,
the Majority Participating Holders after consultation with the
Company, advises the Requesting Holder in writing that the
inclusion of such securities will not result in an Adverse
Effect. Furthermore, in the event that the Majority
Participating Holders in good faith, or in the event the
Requesting Holder is also the Majority Participating Holders,
the Majority Participating Holders after consultation with the
Company, advises the Requesting Holder in writing that the
amount of Registrable Securities proposed to be included in such
Demand Registration by Requesting Holders and Joining Holders is
sufficiently large (even after exclusion of all securities of
any other Person pursuant to the immediately preceding sentence)
to cause an Adverse Effect, the number of Registrable Securities
to be included in such Demand Registration shall be allocated
among all such Requesting Holders and Joining Holders pro rata
based on the ratio of the number of Registrable Securities that
each such Holder requested to be included in such Demand
Registration to the total number of Registrable Securities that
all Requesting Holders and Joining Holders requested to be
included in such Demand Registration; provided,
however, that if, as a result of such pro-ration, any
Requesting Holder or Joining Holder shall not be entitled to
include in a registration all Registrable Securities of the
class that such Holder had requested to be included, such Holder
may elect to withdraw its request to include such Registrable
Securities in such registration (in which case such registration
shall not count as a Demand Registration in accordance with
Section 2.3) or may reduce the number requested to be
included.

     
2.6     Withdrawal and
Cancellation of Registration. If (i) the Requesting
Holder disapproves of the terms of any Demand Registration,
whether in the form of an Underwritten Offering or a
non-Underwritten Offering, under Article II hereof,
(ii) the Requesting Holder is not entitled to include all
of its Registrable Securities specified in the Demand Request in
any offering, (iii) a Suspension Period occurs after a
request for a Demand Registration but before the Registrable
Securities covered by such Demand Request are sold, transferred,
exchanged or disposed in accordance with such Demand Request, or
(iv) if the Company has breached its obligations hereunder,
then in any of such cases the Requesting Holder may elect to
withdraw from such offering by giving written notice to the
Company and the Underwriter, to the extent applicable, of its
request to withdraw prior to the effectiveness of the
Registration Statement filed with the Commission with respect to
such Demand Registration. If the Requesting Holder withdraws
from the proposed offering relating

6

 

to a Demand Registration in accordance with the previous
sentence, then (i) the Participating Holders shall have no
further rights to include their Registrable Securities in such
Demand Registration, (ii) the Company shall, and cause
Affiliates to, cease all efforts to secure registration, and
(iii) the Company shall be responsible for the expenses of
the Requesting Holders incurred in connection with such
cancelled registration through the date of the written notice of
withdrawal.

     
2.7     Registration Statement
Form. Registrations under this Article II shall be
on such appropriate registration form of the Commission
(i) as shall be selected by the Company and as shall be
reasonably acceptable to the Major Holders requesting
participation in the Demand Registration, and (ii) as shall
permit the disposition of the Registrable Securities in
accordance with the intended method or methods of disposition
specified in the applicable Holders’ requests for such
registration. Notwithstanding the foregoing, if, pursuant to a
Demand Registration, (x) the Company proposes to effect
registration by filing a registration statement on Form S-3
(or any successor or similar short-form registration statement),
(y) such registration is in connection with an Underwritten
Offering and (z) the managing Underwriter or Underwriters
shall advise the Company in writing that, in its or their
opinion, the use of another form of Registration Statement (or
the inclusion, rather than the incorporation by reference, of
information in the Prospectus related to a Registration
Statement on Form S-3 (or other
short-form Registration Statement)) is of material
importance to the success of such proposed offering, then such
registration shall be effected on such other form (or such
information shall be so included in such Prospectus).

     
2.8     Registration on
Form S-3. Each Holder may at any time and from time
to time, without limitation as to the aggregate number of such
requests, request (each, a “Form S-3
Registration”) in writing that the Company register the
resale of any or all of such Registrable Securities on
Form S-3 or any similar short-form registration which may
be available at such time (“Form S-3”).
Upon receipt of such Form S-3 Registration, the Company
will promptly give written notice of the proposed registration
to all other Holders of Registrable Securities, and, as soon as
practicable thereafter, effect the registration of all or such
portion of such Holder’s or Holders’ Registrable
Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a
written request given within fifteen (15) calendar days
after receipt of such written notice from the Company;
provided, however, that the Company shall not be
obligated to effect any such registration pursuant to this
Section 2.8 if Form S-3 is not available for such
offering. No securities other than the Registrable Securities
shall be included in the Form S-3 without the consent of
the Holders. Registrations effected pursuant to this
Section 2.8 shall not be counted as Demand Registrations
effected pursuant to Section 2.1.

     
2.9     Registered Repayment
Offering. In the event the Company shall be required to
engage in one or more Registered Repayment Offerings, on each
such occasion the Company shall, as soon as practicable (and in
no event later than fifteen (15) calendar days after the
occurrence of a Stockholder Approval Default if pursuant to a
Shelf Registration Statement, and in no event later than thirty
(30) calendar days after the occurrence of a Stockholder
Approval Default if otherwise), file with the Commission a
Registration Statement relating to the offer and sale of any or
all securities of the Company as necessary in order to satisfy
the Company’s payment obligations to the Investor in the
event of a Stockholder Approval Default in the manner prescribed
in Section 12.2(b) of the Loan Agreement as of the
appropriate date of determination. Such registration shall be in
the form of an Underwritten Offering and the Underwriter shall
be selected by the Investor. The Company shall use its best
efforts to cause all such securities to be registered and sold,
in accordance with Section 12.2(b) of the Loan Agreement,
and to cause the proceeds thereof to be delivered to the
Investor as required by Section 12.2(b) of the Loan
Agreement. Registrations effected pursuant to this
Section 2.9 shall not be counted as a Demand Registration
pursuant to Section 2.1 hereof.

ARTICLE III

PIGGYBACK REGISTRATIONS

     
3.1     Holder Piggyback
Registration. If at any time after the date hereof the
Company proposes to file a Registration Statement under the
Securities Act with respect to an offering of any Registrable
Securities or other securities of the Company, including
pursuant to Section 2.9 hereof (except pursuant to
registrations on

7

 

Form S-4 or any successor form or on Form S-8 or any
successor form relating solely to securities issued pursuant to
any benefit plan) on a form that would permit registration of
Registrable Securities or other securities of the Company for
sale to the public under the Securities Act, or in the event of
any “take-down” by the Company from a Shelf
Registration Statement, then the Company shall give written
notice (“Piggyback Notice”) of such proposed
filing or “take-down” to each Holder as soon as
practicable, but in any event not less than twenty-one
(21) calendar days before the anticipated filing date. Such
Piggyback Notice shall (a) describe the proposed
registration (including the number and class of such securities
proposed to be registered, the proposed date of filing of such
Registration Statement, any proposed means of distribution of
such securities, any proposed managing underwriter of such
securities and a good faith estimate by the Company of the
proposed maximum offering price of such securities as such price
is proposed to appear on the facing page of such Registration
Statement), and (b) offer each Holder the opportunity to
register any of such Holder’s Registrable Securities of the
same class as those being registered by the Company, as each
such Holder may request in writing (the “Piggyback
Shares”), on the same terms and conditions as the
securities otherwise being sold pursuant to such registration or
“take-down” (each a “Piggyback
Registration”). Such written request must be received
by the Company no later than ten (10) Business Days after
receipt by such Holder of a Piggyback Notice and shall state the
intended method of disposition thereof if the securities
otherwise being sold are being sold by more than one method of
disposition. Upon receipt of this request, the Company will use
its best efforts (and shall use its best efforts to cause the
Underwriter of a proposed Underwritten Offering) to cause such
Registrable Securities as to which registration shall have been
so requested to be included in the Registration Statement
proposed to be filed by the Company or the “take-down”
on the same terms and conditions as the securities otherwise
being sold pursuant to such registration.

     
3.2     Priority on Piggyback
Registrations.

     
(a) Subject to Section 3.2(b) below, if the
Underwriter or managing Underwriter for a Piggyback Registration
that is an Underwritten Offering advises the Company and the
Holders in writing (or, in the event of a Piggyback Registration
that is not being underwritten, if the Majority Participating
Holders in good faith (or in the event the Requesting Holder is
also the Majority Participating Holders, the Majority
Participating Holders after consultation with the Company)
advises the Company and the Holders in writing) that the
inclusion of such Piggyback Shares would cause an Adverse
Effect, then the Company will be obligated to include in such
Registration Statement only that number of Registrable
Securities which, in the reasonable judgment of the Underwriter
or managing Underwriter (or, in the event of a Piggyback
Registration that is not being underwritten, the Majority
Participating Holders in good faith (or in the event the
Requesting Holder is also the Majority Participating Holders,
the Majority Participating Holders after consultation with the
Company)), would not have an Adverse Effect; provided,
however, that no such reduction shall reduce the
aggregate amount of Registrable Securities included in such
Registration Statement for the benefit of the Requesting Holders
to less than (i) any time that the Shelf Registration
Statements are not effective or the Holders may not otherwise
utilize the Registration Statements, as applicable, for the
offer and sale of all Registrable Securities, all of the
Registrable Securities requested by the Holders to be included
in such Registration Statement (subject to the maximum amount of
the securities to be sold in the related Underwritten Offering),
and (ii) any time after the Shelf Registration Statements
are declared effective and the Holders may utilize the
Registration Statement for the offer and sale of all Registrable
Securities, fifty percent (50%) of the total number of
securities that are included in each such Registration Statement
thereafter. Any partial reduction in the number of Registrable
Securities to be included in a Registration Statement pursuant
to the immediately preceding sentence shall be affected pro rata
based on the ratio of the number of Registrable Securities that
each such Holder requested to be included in such Registration
Statement to the total number of Registrable Securities that all
Holders requested to be included in such Registration Statement;
provided, however, that if, as a result of such
pro-ration, any Holder requesting to be included in such
Registration Statement pursuant to Section 3.1 hereof shall
not be entitled to include in a registration all Registrable
Securities of the class that such Holder had requested to be
included, such Holder may elect to withdraw its request to
include such Registrable Securities in such registration or may
reduce the number requested to be included in accordance with
Section 3.3 hereof.

8

 

     
(b) Priority in Registered Repayment Offering.
Subject to Section 2.9 hereof, following the occurrence of
a Stockholder Approval Default and until such time as the
Investor is paid in full in cash in accordance with the terms of
Section 12.2(b) of the Loan Agreement, the aggregate amount
of the securities of the Company to be included in a
Registration Statement under any Registered Repayment Offering
shall not be reduced to less than all of the securities to be
included in such Registration Statement for the benefit of the
Investor pursuant to this Agreement and Section 12.2(b) of
the Loan Agreement as of the appropriate date of determination;
provided, however, that in the event the
Underwriter or the managing Underwriter of a Registered
Repayment Offering reasonably determines in good faith, after
consultation with the Investor, that the inclusion of Piggyback
Shares will adversely affect the Company’s ability to make
payment in full to the Investor pursuant to and in accordance
with Section 12.2(b) of the Loan Agreement, and advises the
Investor of such determination in writing in advance, then the
Company will be obligated to include in such Registration
Statement only that number or amount of Registrable Securities
which, in the reasonable judgment in good faith of the
Underwriter or the Managing Underwriter after consultation with
the Investor, will not adversely affect the Company’s
ability to make payment in full to the Investor pursuant to
Section 12.2(b) of the Loan Agreement as of the appropriate
date of determination.

     
(c) Subject to the Company’s compliance with its
obligations under this Article III, if after a Demand
Request by the Holders pursuant to Section 2.1 hereof the
Company initiates a proposal to register an Underwritten
Offering of securities for its own account pursuant to this
Article III and the Holders will be afforded the right
(whether or not exercised by the Holders) to include Registrable
Securities in such Underwritten Offering in accordance with and
subject to the provisions of this Article III, then the
proposed registration for the account of the Company pursuant to
this Article III shall be given priority in all respects.

     
(d) Subject to the Company’s compliance with its
obligations under this Article III, and subject to the last
sentence of Section 3.2(b) hereof, if prior to the filing
or effectiveness of the Shelf Registration Statements the
Company initiates a proposal to register an Underwritten
Offering of equity securities for its own account pursuant to
this Article III and the Holders will be afforded the right
(whether or not exercised by the Holders) to include Registrable
Securities in such Underwritten Offering in accordance with and
subject to the provisions of this Article III, then the
proposed registration for the account of the Company pursuant to
this Article III shall be given priority in all respects.

     
(e) Notwithstanding anything contained herein to the
contrary (except for the registration and sale of Company
securities pursuant to Section 2.9 hereof) until the date
that is the earlier to occur of (i) one hundred twenty
(120) calendar days from the date that the Closing Shelf
Registration Statement is declared effective, or (ii) the
date that Stockholder Approval is obtained, the Company will not
initiate a proposal to register or otherwise conduct an
Underwritten Offering of equity securities of the Company for
its own account.

     
(f) If the Company issues a notice of a proposed
Underwritten Offering of equity securities of the Company for
its own account pursuant to Section 3.2(d) hereof and
subsequently abandons, ceases or withdraws such offering, the
Company shall not issue a notice of a subsequent proposed
registration of an Underwritten Offering of equity securities of
the Company for its own account pursuant to Section 3.2(d)
hereof until the Shelf Registration Statements are declared
effective, as applicable.

     
3.3     Withdrawals. Each
Holder shall have the right to withdraw its request for
inclusion of its Registrable Securities in any Registration
Statement pursuant to this Article III by giving written
notice to the Company of its request to withdraw prior to the
effectiveness of the Registration Statement. Notwithstanding any
such withdrawal, the Company shall pay all expenses incurred by
a Holder in connection with such cancelled registration through
the date of such notice of cancellation; provided,
however, that the Company shall not be responsible to pay
the expenses incurred by a withdrawing Holder in connection with
more than two (2) such cancelled registrations.

9

 

ARTICLE IV

SHELF REGISTRATION

     
4.1     Shelf Registration
Filing. Within thirty (30) calendar days following
the date hereof, the Company shall file with the Commission a
Registration Statement (the “Closing Shelf Registration
Statement”) relating to the offer and sale of all of
the Registrable Securities (other than (a) the Convertible
Note, (b) the shares of Common Stock issued upon conversion
of the Convertible Note, and (c) any and all shares of
additional Common Stock or securities that may be acquired or
received by the Holders or issued or distributed or be issuable
with respect thereto by way of a stock dividend, stock split or
reverse stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or otherwise,
and any securities issued in exchange for or in replacement of
the foregoing securities) to the public, from time to time, on a
delayed or continuous basis. In addition, within thirty
(30) calendar days following the date of the Exchange, the
Company shall file with the Commission a Registration Statement
(the “Convertible Note Registration
Statement”, together with the Closing Shelf
Registration Statement, the “Shelf Registration
Statements”) relating to the offer and sale of
(a) the Convertible Note, (b) all of the shares of
Common Stock issued upon conversion of the Convertible Note, and
(c) any and all shares of additional Common Stock or
securities that may be acquired or received by the Holders or
issued or distributed or be issuable with respect thereto by way
of a stock dividend, stock split or reverse stock split or in
connection with a combination of shares, recapitalization,
merger, consolidation or otherwise, and any securities issued in
exchange for or in replacement of the foregoing securities, to
the public, from time to time, on a delayed or continuous basis.
The Company shall use its best efforts to cause the Shelf
Registration Statements to be declared effective under the
Securities Act as soon as practicable after the filing thereof
with the Commission and to maintain and cause the Shelf
Registration Statements to remain effective thereafter. The
Shelf Registration Statements shall specify the intended method
of distribution of the Registrable Securities substantially in
the form of Exhibit A attached hereto. The Company
shall file the Shelf Registration Statements on Form S-3
or, if the Company or the offering of the Registrable Securities
does not satisfy the requirements for use of such form, such
other form as may be appropriate; provided,
however, that if the Shelf Registration Statements are
not filed on Form S-3, the Company shall, promptly upon
meeting the requirements for use of such form, file an
appropriate amendment to the Shelf Registration Statements to
convert it to Form S-3. Registrations effected pursuant to
this Section shall not be counted as Demand Registrations
effected pursuant to Section 2.1. Notwithstanding anything
contained herein to the contrary, no securities other than the
Registrable Securities shall be included in the Shelf
Registration Statements without the prior written consent of the
Holders.

     
4.2     Required Period and Shelf
Registration Procedures. The Company shall
(i) cause the Shelf Registration Statements to include a
resale Prospectus intended to permit each Holder to sell, at
such Holder’s election, all or part of the Registrable
Securities held by such Holder without restriction,
(ii) use its best efforts to prepare and file with the
Commission such supplements, amendments and post-effective
amendments to the Shelf Registration Statements as may be
necessary to keep the Shelf Registration Statements continuously
effective (subject to Sections 3.2(c) and 3.2(d) and to any
Suspension Period(s) referred to below) for so long as the
securities registered thereunder constitute Registrable
Securities (the “Required Period”), and
(iii) use its best efforts to cause the resale Prospectus
to be supplemented by any required Prospectus supplement
(subject to Section 5.2(c) and to any Suspension Period(s)
referred to below).

     
4.3     Effective
Registration. A registration will not count as a Shelf
Registration Statement until the Registration Statement filed
with the Commission with respect to such Shelf Registration has
been declared effective and the Company has complied with all of
its obligations under this Agreement with respect thereto;
provided, however, that if, after such
Registration Statement has been declared effective, the offering
of Registrable Securities pursuant to a Shelf Registration
Statement is interfered with by any stop order or injunction of
the Commission or any other governmental agency or court, the
Registration Statement with respect to such Shelf Registration
Statement will be deemed not to have been declared effective,
unless and until, (i) such stop order or injunction is
removed, rescinded or otherwise terminated, and (ii) the
Investor (and the Majority Participating Holders, as the case
may be) thereafter elects to continue the offering.

10

 

     
4.4     Underwritten
Offering. If the Majority Participating Holders so elect
and so advise the Company, the offering of Registrable
Securities pursuant to the Shelf Registration Statements or any
“takedown” thereof shall be in the form of an
Underwritten Offering and the Company, if necessary, shall amend
or supplement the Shelf Registration Statements for such
purpose, and the Majority Participating Holders shall be
entitled to select the managing Underwriter or Underwriters and
any other Underwriters for such offering; provided,
however, that any such Underwriter shall be reasonably
acceptable to the Company.

ARTICLE V

STANDSTILL AND SUSPENSION PERIODS

     
5.1     Company Standstill
Period. (a) In the event of an Underwritten
Offering of Registrable Securities on a firm commitment basis
pursuant to Section 2.1 hereof, the Company agrees not to,
without the prior written consent of the managing Underwriter
and the Majority Participating Holders, in the case of an
Underwritten Offering, or the Majority Participating Holders in
the case of a non-Underwritten Offering, offer, pledge, sell,
contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or
indirectly, any securities that are the same as, or similar to,
the Registrable Securities, or any securities convertible into,
or exchangeable or exercisable for, any securities of the
Company that are the same as, or similar to, the Registrable
Securities (except pursuant to registrations on Form S-4 or
any successor form, or otherwise in connection with the
acquisition of a business or assets of a business, a merger, or
an exchange offer for the securities of the issuer or another
entity, or pursuant to a Company dividend reinvestment plan, or
for issuances of securities pursuant to the conversion, exchange
or exercise of then-outstanding convertible or exchangeable
securities, options, rights or warrants, or pursuant to
registrations on Form S-8 or any successor form or
otherwise relating solely to securities offered pursuant to any
benefit plan), during the period commencing fifteen
(15) calendar days prior to the effective date of the
Registration Statement relating to such Registrable Securities
(to the extent timely notified in writing by the Majority
Participating Holders or the managing Underwriter of such
distribution) and ending on the ninetieth (90th) calendar day
after such effective date (the “Company Standstill
Period”).

     
(b) The Company agrees to use best efforts to obtain from
each holder of securities of the Company which are subject to
selling restrictions and are the same as or similar to those
being registered by the Company, or which are convertible into
or exchangeable or exercisable for any of its securities, an
agreement not to effect any public sale or distribution of such
securities (other than securities purchased in a public
offering) during any Company Standstill Period. Without limiting
the foregoing, if after the date hereof the Company grants,
pursuant to and in compliance with Section 10.1 hereof, any
Person (other than a holder of Registrable Securities) any
rights to demand or participate in a registration, the Company
agrees that the agreement with respect thereto shall include
such Person’s agreement as contemplated by the previous
sentence.

     
5.2     Suspension
Period. Except with respect to a registration under
Section 2.9 hereof, the Company may, by notice in writing
to each Holder, postpone the filing or effectiveness of the
Shelf Registration Statement or any other registration requested
pursuant to this Agreement, or otherwise suspend the Demand
Registration rights of the Holders and/or require the Holders to
suspend use of any resale Prospectus included in the Shelf
Registration Statement for any period of time reasonably
determined by the Company if there shall occur a Material
Disclosure Event (such period, a “Suspension
Period”). Notwithstanding anything herein to the
contrary, the Company shall not be entitled to more than three
(3) Suspension Periods, which Suspension Periods shall have
durations of not more than thirty (30) calendar days each
(but may at the Company’s reasonable determination run
consecutively for a given Material Disclosure Event) during any
consecutive 12 month period, and which Suspension Periods
shall not exceed more than seventy-five (75) calendar days
in the aggregate in any consecutive 12 month period;
provided, however, that if the Company deems in
good faith that it is necessary to file a post-effective
amendment to the Shelf Registration Statement in order to comply
with Article IV hereof, then such period of time from the
date of filing such post-effective amendment until the date on
which the Shelf Registration Statement is declared effective by
the Commission shall not be treated as a Suspension Period and
the Company shall use its best efforts to

11

 

cause such post-effective amendment to be declared effective as
promptly as possible, but in no event more than two
(2) Business Days following the filing of such
post-effective amendment (subject only to such delay as may be
caused solely as a result of review by the Commission, whereupon
the Company shall use its best efforts to facilitate such review
and approval by the Commission and cause such post-effective
amendment to be declared effective as promptly as possible).
Each Holder agrees that, upon receipt of notice from the Company
of the occurrence of a Material Disclosure Event (a
“Suspension Notice”), such Holder will
forthwith discontinue any disposition of Registrable Securities
pursuant to the Shelf Registration Statement or any public sale
or distribution, including pursuant to Rule 144, until the
earlier of (i) the expiration of the Suspension Period and
(ii) such Holder’s receipt of a notice from the
Company to the effect that such suspension has terminated. Any
Suspension Notice shall be accompanied by a certificate of the
Chief Executive Officer, Chief Financial Officer, President or
any Vice President of the Company confirming the existence of
the Material Disclosure Event. If so directed by the Company,
such Holder will deliver to the Company (at the Company’s
expense) all copies, other than permanent file copies, then in
such Holder’s possession, of the most recent Prospectus
covering such Registrable Securities at the time of receipt of
such Suspension Notice. The Company covenants and agrees that it
will not deliver a Suspension Notice with respect to a
Suspension Period unless Company employees, officers and
directors are also prohibited by the Company for the duration of
such Suspension Period from effecting any public sales of shares
of Common Stock beneficially owned by them. In the event of a
Suspension Notice, the Company shall, promptly after such time
as the related Material Disclosure Event no longer exists,
provide notice to all Holders that the Suspension Period has
ended, and take any and all actions necessary or desirable to
give effect to any Holders’ rights under this Agreement
that may have been affected by such notice, including the
Holders’ Demand Registration rights and rights with respect
to any Shelf Registration Statement.

     
5.3     Holder Standstill
Period. Except with respect to a registration under
Section 2.9 hereof, each Holder of Registrable Securities
(whether or not such Registrable Securities are covered by the
Shelf Registration Statement or by a Registration Statement
filed pursuant to Section 2.1 or 3.1 hereof) agrees to
enter into a customary lock-up agreement with the managing
Underwriter for any Underwritten Offering of the Company’s
equity securities for its own account, containing terms
reasonably acceptable to such managing Underwriter, covering the
period commencing fifteen (15) calendar days prior to the
effective date of any Registration Statement relating to such
securities of the Company and ending on the ninetieth (90th)
calendar day after such effective date (or such shorter period
as shall have been agreed to by the Company’s executive
officers and directors in their respective lock-up agreements);
provided, however, that the obligations of each
Holder under this Section 5.3 shall apply only if:
(i) such Holder will be afforded the right (whether or not
exercised by the Holder) to include Registrable Securities in
such Underwritten Offering in accordance with and subject to the
provisions of Article III hereof, (ii) each of the
Company’s executive officers and directors enter into
lock-up agreements with such managing Underwriter, which
agreements shall not contain terms more favorable to such
executive officers or directors than those contained in the
lock-up agreement entered into by such Holder, and
(iii) the aggregate restriction periods in such
Holder’s lock-up agreements entered into pursuant to this
Section 5.3 shall not exceed an aggregate of ninety
(90) calendar days during any 365-day period.

     
5.4     Restrictions on Sale by
the Company and Others. The Company agrees: (i) not
to effect any public sale or distribution of any securities
similar to those being registered in accordance with
Section 2.1 hereof, or any securities convertible into or
exchangeable or exercisable for such securities, from the date
the Company receives the written demand for any Demand
Registration until permitted under any “lock-up”
agreement with the Underwriter, but not more than ninety
(90) calendar days from the effective date of any
Registration Statement filed pursuant to Section 2.1
hereof, and (ii) that any agreement entered into after the
date hereof pursuant to which the Company issues or agrees to
issue any privately placed securities shall contain a provision
under which holders of such securities agree not to effect any
sale or distribution of any such securities during the periods
described in clause (i) above, in each case including a
sale pursuant to Rule 144 under the Securities Act (except
as part of any such registration, if permitted);
provided, however, that the provisions of this
Section 5.4 shall not prevent the conversion or exchange of
any securities pursuant to their terms into or for other
securities and shall not prevent the issuance of securities by
the Company under any employee benefit, stock option or stock
subscription plans.

12

 

ARTICLE VI

REGISTRATION PROCEDURES

     
6.1     Company
Obligations. Whenever the Company is required pursuant
to this Agreement to register Registrable Securities, the
Company shall (it being understood and agreed that except as
otherwise expressly set forth in this Article VI, if any
other provision of this Agreement is more favorable to the
Holders than the provisions of this Article VI, such other
provision shall apply) use its best efforts to effect the
registration and, if applicable, sale by the Company (including
a sale pursuant to Section 2.9 hereof) and to enable the
Holders to consummate disposition of all such Registrable
Securities in accordance with the intended method(s) of
distribution thereof as expeditiously as practicable, and in
connection therewith, shall do as follows:

		
	 	     
    (a) The Company shall provide the Participating Holders and
    their counsel with a reasonable opportunity to review, and
    comment on, any Registration Statement to be prepared and filed
    pursuant to this Agreement prior to the filing thereof with the
    Commission, and make all changes thereto as any Participating
    Holder may request in writing to the extent such changes are
    required, in the reasonable judgment of the Company’s
    counsel, by the Securities Act or for the Company to comply with
    its obligations hereunder;
	 
	 	     
    (b) The Company shall cause any such Registration Statement
    and the related Prospectus and any amendment or supplement
    thereto, as of the effective date of such Registration
    Statement, amendment or supplement, (i) to comply in all
    material respects with the applicable requirements of the
    Securities Act and the rules and regulations of the Commission
    promulgated thereunder and (ii) not to contain any untrue
    statement of a material fact or omit to state a material fact
    required to be stated therein or necessary to make the
    statements therein, (in the case of the Prospectus and any
    preliminary Prospectus in light of the circumstances under which
    they were made) not misleading (except that this clause
    (ii) shall not apply to statements made or statements
    omitted by the Company solely in reliance upon and in full
    conformity with written information furnished but not otherwise
    available to the Company by any Holder solely with respect to
    such Holder and expressly for use in the Registration Statement
    or any amendment or supplement thereto), or, if for any other
    reason it shall be necessary to amend or supplement such
    Registration Statement or Prospectus in order to comply with the
    Securities Act and, in either case as promptly as reasonably
    practicable thereafter, prepare and file with the Commission an
    amendment or supplement to such Registration Statement or
    Prospectus which will correct such statement or omission or
    effect such compliance;
	 
	 	     
    (c) The Company shall furnish, at its expense, to the
    Participating Holders such number of conformed copies of such
    Registration Statement and of each such amendment thereto (in
    each case including all exhibits thereto, except that the
    Company shall not be obligated to furnish to any such
    Participating Holder more than two (2) copies of such
    exhibits), such number of copies of the Prospectus included in
    such Registration Statement (including each preliminary
    Prospectus and each supplement thereto), and such number of the
    documents, if any, incorporated by reference in such
    Registration Statement or Prospectus, as the Participating
    Holders reasonably may request;
	 
	 	     
    (d) The Company shall use its best efforts to register or
    qualify the Registrable Securities covered by such Registration
    Statement under such securities or “blue sky” laws of
    the states of the United States as the Participating Holders
    reasonably shall request, to keep such registration or
    qualification in effect for so long as such Registration
    Statement remains in effect, and to do any and all other acts
    and things that may be necessary or advisable to enable the
    Participating Holders to consummate the disposition in such
    jurisdictions of the Registrable Securities covered by such
    Registration Statement, except that the Company shall not, for
    any such purpose, be required to qualify generally to do
    business as a foreign corporation in any jurisdiction in which
    it is not obligated to be so qualified, or to subject itself to
    material taxation in any such jurisdiction, or to consent to
    general service of process in any such jurisdiction; and use its
    best efforts to obtain all other approvals, consents, exemptions
    or authorizations from such securities regulatory authorities or
    governmental agencies as may be necessary to enable such
    Participating Holders to consummate the disposition of such
    Registrable Securities;

13

 

		
	 	     
    (e) The Company shall promptly notify the Participating
    Holders, at any time when a Prospectus or Prospectus supplement
    relating thereto is required to be delivered under the
    Securities Act, upon discovery that, or upon the occurrence of
    any event as a result of which, the Prospectus included in such
    Registration Statement, as then in effect, includes an untrue
    statement of a material fact or omits to state any material fact
    required to be stated therein or necessary to make the
    statements therein, in the light of the circumstances under
    which they were made, not misleading, which untrue statement or
    omission requires amendment of the Registration Statement or
    supplementing of the Prospectus, and, as promptly as practicable
    (subject to Section 5.2 hereof), prepare and furnish, at
    its expense, to the Participating Holders a reasonable number of
    copies of a supplement to such Prospectus as may be necessary so
    that, as thereafter delivered to the purchasers of such
    Registrable Securities, such Prospectus shall not include an
    untrue statement of a material fact or omit to state a material
    fact required to be stated therein or necessary to make the
    statements therein, in the light of the circumstances under
    which they were made, not misleading; provided,
    however, that with respect to Registrable Securities
    registered pursuant to such Registration Statement, each Holder
    agrees that it will not enter into any transaction for the sale
    of any Registrable Securities pursuant to such Registration
    Statement during the time after the furnishing of the
    Company’s notice that the Company is preparing a supplement
    to or an amendment of such Prospectus or Registration Statement
    and until the filing and effectiveness thereof. When a
    Prospectus or Prospectus supplement relating thereto is required
    to be delivered under the Securities Act, each Participating
    Holder shall notify the Company, as soon as practicable, after
    it has actual knowledge of the occurrence of any event as a
    result of which the Prospectus included in such Registration
    Statement, as then in effect, contains an untrue statement of a
    material fact with respect to such Participating Holder or omits
    to state any material fact with respect to such Participating
    Holder required to be stated therein or necessary to make the
    statements therein, in the light of the circumstances under
    which they were made, not misleading with respect to such
    Participating Holder, which untrue statement or omission
    requires material amendment of the Registration Statement or
    supplementing of the Prospectus;
	 
	 	     
    (f) The Company shall use its best efforts to comply with
    all applicable rules and regulations of the Commission, and make
    available to holders of its securities, as soon as practicable,
    an earnings statement covering the period of at least
    12 months, beginning within three (3) months after the
    effective date of such Registration Statement, which earnings
    statement shall satisfy the provisions of Section 11(a) of
    the Securities Act and Rule 158 thereunder;
	 
	 	     
    (g) The Company shall provide, and cause to be maintained,
    a transfer agent and registrar for the Registrable Securities
    covered by such Registration Statement (which transfer agent and
    registrar shall, at the Company’s option, be the
    Company’s existing transfer agent and registrar) from and
    after a date not later than the effective date of such
    Registration Statement;
	 
	 	     
    (h) The Company shall notify the Participating Holders and
    the managing Underwriter, if any, promptly, and (if requested by
    any such Person) confirm such notice in writing, (i) when a
    Registration Statement, Prospectus, Prospectus supplement or
    post-effective amendment related to such Registration Statement
    has been filed, and, with respect to such Registration Statement
    or any post-effective amendment thereto, when the same has
    become effective, (ii) of any request by the Commission or
    any other federal or state governmental authority for amendments
    or supplements to such Registration Statement or related
    Prospectus, (iii) of the issuance by the Commission or any
    other federal or state governmental authority of any stop order
    suspending the effectiveness of such Registration Statement or
    the initiation of any proceedings for that purpose and
    (iv) of the receipt by the Company of any notification with
    respect to the suspension of the qualification or exemption from
    qualification of any of the Registrable Securities for sale in
    any jurisdiction or the initiation or threatening of any
    proceeding for such purpose;
	 
	 	     
    (i) The Company shall use its best efforts to obtain the
    withdrawal of any order suspending the effectiveness of such
    Registration Statement, or the lifting of any suspension of the
    qualification (or exemption from qualification) of any of the
    Registrable Securities for sale in any jurisdiction, as soon as
    practicable;

14

 

		
	 	     
    (j) The Company shall in the event of an Underwritten
    Offering of Registrable Securities pursuant to Section 2.1
    hereof, enter into customary agreements (including underwriting
    agreements in customary form, which may include, in the case of
    an underwritten offering on a firm commitment basis,
    “lock-up” obligations substantially similar to
    Sections 5.1 and 5.4 hereof) and take such other actions
    (including using its best efforts to make such road show
    presentations and otherwise engaging in such reasonable
    marketing support in connection with any such underwritten
    offering, including the obligation to make its executive
    officers available for such purpose if so requested by the
    managing underwriter for such offering) as are reasonably
    requested by the managing underwriter in order to expedite or
    facilitate the sale of such Registrable Securities. The
    representations, warranties and covenants of the Company in any
    underwriting agreement which are made to or for the benefit of
    any Underwriters, to the extent applicable, shall also be made
    to and for the benefit of the Holders holding Registrable
    Securities included in such Registration Statement. No Holder
    holding Registrable Securities included in such Registration
    Statement shall be required to make any representations or
    warranties in the underwriting agreement except, if applicable,
    with respect to such Holder’s organization, good standing,
    authority, title to Registrable Securities, lack of conflict of
    such sale with such Holder’s material agreements and
    organizational documents, and with respect to written
    information relating to such Holder that such Holder has
    furnished in writing expressly for inclusion in such
    Registration Statement.
	 
	 	     
    (k) The Company shall make available for inspection by each
    Participating Holder, any underwriter participating in any
    disposition pursuant to such registration, and any attorney,
    accountant or other agent retained by such Participating Holder
    or any such underwriter (collectively, the
    ”Inspectors”), all financial and other records,
    pertinent corporate documents and properties of the Company and
    any of its Subsidiaries (collectively, the
    “Records”) as shall be reasonably necessary to
    enable them to exercise their due diligence responsibility, and
    cause the officers, directors and employees of the Company to
    supply all information reasonably requested by any such
    Inspector in connection with such registration, provided,
    however, that (i) in connection with any such
    inspection, any such Inspectors shall cooperate to the extent
    reasonably practicable to minimize any disruption to the
    operation by the Company of its business and shall comply with
    all Company site safety rules, (ii) Records and information
    obtained hereunder shall be used by such Inspectors only to
    exercise their due diligence responsibility and
    (iii) Records or information furnished or made available
    hereunder shall be kept confidential and shall not be disclosed
    by such Participating Holder, underwriter or Inspectors unless
    (A) the disclosing party advises the other party that the
    disclosure of such Records or information is necessary to avoid
    or correct a misstatement or omission in a Registration
    Statement or is otherwise required by law, (B) the release
    of such Records or information is ordered pursuant to a subpoena
    or other order from a court or governmental authority of
    competent jurisdiction (provided, however, that
    such person shall use its reasonable efforts to provide the
    Company with prior written notice of such requirement to afford
    the Company with an opportunity to seek a protective order or
    other appropriate remedy in response) or (C) such Records
    or information otherwise become generally available to the
    public other than through disclosure by such Participating
    Holder, underwriter or Inspector in breach hereof or by any
    Person in breach of any other confidentiality arrangement;
	 
	 	     
    (l) The Company shall, in connection with any registration
    of an Underwritten Offering of Registrable Securities hereunder,
    use best efforts to furnish to each Participating Holder and to
    the managing Underwriter, if any, a signed counterpart,
    addressed to such Participating Holder and the managing
    Underwriter, if any, of (i) an opinion or opinions of
    counsel to the Company and (ii) a comfort letter or comfort
    letters from the Company’s independent public accountants
    pursuant to Statement on Auditing Standards No. 72 (or any
    successor thereto), each in customary form and covering such
    matters of the type customarily covered by opinions or comfort
    letters, as the case may be, as each such Participating Holder
    and the managing underwriter, if any, reasonably requests;
	 
	 	     
    (m) The Company shall in connection with any registration
    of an Underwritten Offering of Registrable Securities hereunder,
    provide officers’ certificates and other customary closing
    documents;
	 
	 	     
    (n) The Company shall reasonably cooperate with each seller
    of Registrable Securities and any underwriter in the disposition
    of such Registrable Securities and with underwriters’
    counsel, if any, in

15

 

		
	 	
    connection with any filings required to be made with the
    National Association of Securities Dealers, Inc. (the
    “NASD”);
	 
	 	     
    (o) The Company shall use its best efforts to cause all
    such Registrable Securities to be listed on each securities
    exchange on which securities of the same class issued by the
    Company are then listed.
	 
	 	     
    (p) The Company shall cooperate with the Participating
    Holders and the managing Underwriter, Underwriters or agent, if
    any, to facilitate the timely preparation and delivery of
    certificates representing Registrable Securities to be sold and
    not bearing any restrictive legends;
	 
	 	     
    (q) The Company shall use its best efforts to cause the
    Registrable Securities covered by the applicable Registration
    Statement to be registered with or approved by such other
    governmental agencies or authorities as may be necessary to
    enable the seller or sellers thereof or the Underwriter or
    Underwriters, if any, to consummate the disposition of such
    Registrable Securities; and
	 
	 	     
    (r) The Company shall, no later than the effective date of
    the applicable Registration Statement, provide a CUSIP number
    for all Registrable Securities and provide the applicable
    transfer agent with printed certificates for the Registrable
    Securities which certificates shall be in a form eligible for
    deposit with The Depository Trust Company.

ARTICLE VII

INDEMNIFICATION

     
7.1     Indemnification by the
Company. In the event of any registration of any
Registrable Securities under the Securities Act pursuant to this
Agreement, the Company shall indemnify and hold harmless to the
full extent permitted by law (i) each Holder, each such
Holder’s Affiliates and their respective officers,
directors, managers, partners, stockholders, employees,
advisors, agents and other representatives of the foregoing, and
each of their respective successors and assigns, and each Person
who controls any of the foregoing, within the meaning of the
Securities Act and the Exchange Act, and (ii) any selling
agent selected by the Holders or their Affiliates with respect
to such Registrable Securities (each such Person being sometimes
referred to as a “Holder Indemnified Person”),
against any and all losses, claims, damages, liabilities (or
actions or proceedings in respect thereof, whether or not such
Holder Indemnified Person is a party thereto) and expenses
(including reasonable costs of investigations and legal
expenses), joint or several (each a “Loss” and
collectively “Losses”), to which such Holder
Indemnified Person may become subject, to the extent that such
Losses (or related actions or proceedings) arise out of or are
based upon (A) any untrue statement or alleged untrue
statement of any material fact contained in any Registration
Statement in which such Registrable Securities were included for
registration under the Securities Act, including any preliminary
or summary Prospectus or any final Prospectus included in such
Registration Statement (or any amendment or supplement to such
Registration Statement or Prospectus) or any document
incorporated by reference therein or (B) any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, (in
the case of the Prospectus and any preliminary Prospectus in
light of the circumstances under which they were made) not
misleading; and the Company agrees to reimburse such Holder
Indemnified Person for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any
such action or claim as such expenses are incurred;
provided, however, that the Company shall have no
obligation to provide any indemnification or reimbursement
hereunder (i) to the extent that any such Losses (or
actions or proceedings in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such Registration
Statement, preliminary Prospectus, final Prospectus, amendment
or supplement, in reliance upon and in conformity with written
information furnished to the Company by the Holder, or on the
Holder’s behalf, specifically for inclusion, respectively,
in such Registration Statement, preliminary Prospectus, final
Prospectus, amendment or supplement, or (ii) in the case of
a sale directly by a Holder of Registrable Securities (including
a sale of such Registrable Securities through any underwriter
retained by such Holder engaging in a distribution solely on
behalf of such Holder), to the extent that such untrue statement
or alleged untrue statement or omission or alleged omission was
contained in a preliminary Prospectus and corrected in a

16

 

final, amended or supplemented Prospectus provided to such
Holder prior to the confirmation of the sale of the Registrable
Securities to the Person asserting any such Loss, and such
Holder failed to deliver a copy of the final, amended or
supplemented Prospectus at or prior to such confirmation of sale
in any case in which such delivery is required by the Securities
Act, or (iii) in the case of a sale directly by a Holder of
Registrable Securities (including a sale of such Registrable
Securities through any underwriter retained by such Holder
engaging in a distribution solely on behalf of such Holder), to
the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was contained in a
final Prospectus but was corrected in an amended or supplemented
final Prospectus provided to such Holder prior to the
confirmation of the sale of the Registrable Securities to the
Person asserting any such Loss, and such Holder failed to
deliver a copy of the amended or supplemented final Prospectus
at or prior to such confirmation of sale in any case in which
such delivery is required by the Securities Act. The indemnity
provided in this Section 7.1 shall remain in full force and
effect regardless of any investigation made by or on behalf of
such Holder or any Holder Indemnified Person and shall survive
the transfer or disposal of the Registrable Securities by the
Holder or any such other Persons. The Company will also
indemnify, if applicable and if requested, underwriters, selling
brokers, dealer managers and similar securities industry
professionals participating in any distribution pursuant hereto,
their officers and directors and each Person who controls such
Persons (within the meaning of the Securities Act and the
Exchange Act) to the same extent as provided above with respect
to the indemnification of the Holder Indemnified Persons. This
indemnity shall be in addition to any liability the Company may
otherwise have.

     
7.2     Indemnification by the
Holders. In the event of any registration of any
Registrable Securities under the Securities Act pursuant to this
Agreement, each Holder shall, severally and not jointly,
indemnify and hold harmless (in the same manner and to the same
extent as set forth in Section 7.1 hereof) the Company,
each director and officer of the Company and each other Person,
if any, who controls the Company within the meaning of the
Securities Act and the Exchange Act (each such Person being
sometimes referred to as a “Company Indemnified
Person”), against Losses to which the Company or any
such Persons may become subject under the Securities Act or
otherwise, to the extent that such losses (or related actions or
proceedings) arise out of or are based upon (A) any untrue
statement or alleged untrue statement of any material fact
contained in any Registration Statement in which Registrable
Securities were included for registration under the Securities
Act, or any preliminary Prospectus or any final Prospectus
included in such Registration Statement (or any amendment or
supplement to such Registration Statement or Prospectus), or
(B) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein, (in the case of the Prospectus and any
preliminary Prospectus in light of the circumstances under which
they were made) not misleading, in each case, only to the extent
that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such Registration
Statement, preliminary Prospectus, final Prospectus, amendment
or supplement in reliance upon and in conformity with written
information furnished to the Company by such Holder, or on such
Holder’s behalf, specifically for inclusion, respectively,
in such Registration Statement, preliminary Prospectus, final
Prospectus, amendment or supplement; and each Holder agrees
severally but not jointly to reimburse such Company Indemnified
Person for any legal or other expenses reasonably incurred by it
in connection with investigating or defending any such action or
claim as such expenses are incurred; provided,
however, that a Holder’s aggregate liability under
this Agreement shall be limited to an amount equal to the net
proceeds (after deducting the underwriter’s discount and
expenses) received by such Holder from the sale of such
Holder’s Registrable Securities pursuant to such
registration.

     
7.3     Notice of Claims,
Etc. Promptly after receipt by any Person entitled to
indemnity under Section 7.1 or 7.2 hereof (an
“Indemnitee”) of notice of the commencement of
any action or proceeding (an “Action”)
involving a claim referred to in such Sections, such Indemnitee
shall, if indemnification is sought against an indemnifying
party, give written notice to such indemnifying party of the
commencement of such Action; provided, however,
that the failure of any Indemnitee to give said notice shall not
relieve the indemnifying party of its obligations under
Sections 7.1 or 7.2 hereof, except to the extent that the
indemnifying party is actually prejudiced by such failure. In
case an Action is brought against any Indemnitee, and such
Indemnitee notifies the indemnifying party of the commencement
thereof, each indemnifying party shall be entitled to
participate therein and, to the extent it elects to do so by
written notice delivered to the Indemnitee promptly after
receiving the aforesaid notice, to assume the defense thereof
with counsel selected

17

 

by such Indemnitee and reasonably satisfactory to such
indemnifying party. Notwithstanding the foregoing, the
Indemnitee shall have the right to employ its own counsel in any
such case, but the fees and expenses of such counsel shall be at
the expense of such Indemnitee, unless (i) the employment
of such counsel shall have been authorized in writing by the
indemnifying party, (ii) the indemnifying party shall not
have employed counsel to take charge of the defense of such
Action, reasonably promptly after notice of the commencement
thereof or (iii) such Indemnitee reasonably shall have
concluded that there may be defenses available to it which are
different from or additional to those available to the
indemnifying party which, if the indemnifying party and the
Indemnitee were to be represented by the same counsel, could
result in a conflict of interest for such counsel or materially
prejudice the prosecution of the defenses available to such
Indemnitee. If any of the events specified in clauses (i),
(ii) or (iii) of the preceding sentence shall have
occurred or otherwise shall be applicable, then the fees and
expenses of counsel for the Indemnitee shall be borne by the
indemnifying party; it being understood, however, that the
indemnifying party shall not, in connection with any one such
claim or proceeding, or separate but substantially similar or
related claims or proceedings arising out of the same general
allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together
with appropriate local counsel) at any time for all Indemnitees
hereunder, or for fees and expenses that are not reasonable.
Anything in this Section 7.3 to the contrary
notwithstanding, an indemnifying party shall not be liable for
the settlement of any action effected without its prior written
consent (which consent shall not unreasonably be withheld or
delayed), but if settled with the prior written consent of the
indemnifying party, or if there shall be a final judgment
adverse to the Indemnitee, the indemnifying party agrees to
indemnify the Indemnitee from and against any loss or liability
by reason of such settlement or judgment. No indemnifying party
shall, without the prior consent of the Indemnitee (which
consent shall not be unreasonably withheld or delayed), consent
to entry of any judgment or enter into any settlement or
compromise, with respect to any pending or threatened action or
claim in respect of which the Indemnitee would be entitled to
indemnification or contribution hereunder (whether or not the
Indemnitee is an actual party to such action or claim), which
(i) does not include as a term thereof the unconditional
release of the Indemnitee from all liability in respect of such
action or claim or (ii) includes an admission of fault,
culpability or a failure to act by or on behalf of the
Indemnitee.

     
7.4     Contribution. If
the indemnification provided for in this Article VII is
unavailable or insufficient to hold harmless an Indemnitee in
respect of any Losses, then each indemnifying party shall, in
lieu of indemnifying such Indemnitee, contribute to the amount
paid or payable by such Indemnitee as a result of such Losses in
such proportion as appropriate to reflect the relative fault of
the indemnifying party, on the one hand, and the Indemnitee, on
the other hand, which relative fault shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information
supplied by such Indemnitee or indemnifying party, and such
parties’ relative intent, knowledge, access to information
and opportunity to correct or mitigate the damage in respect of
or prevent the untrue statement or omission giving rise to such
indemnification obligation; provided, however,
that a Holder’s aggregate liability under this
Section 7.4 shall be limited to an amount equal to the net
proceeds (after deducting the underwriter’s discount but
before deducting expenses) received by such Holder from the sale
of such Holder’s Registrable Securities pursuant to such
registration. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 7.4
were determined solely by pro rata allocation or by any other
method of allocation which did not take account of the equitable
considerations referred to above. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any
Person who is not guilty of such fraudulent misrepresentation.

     
7.5     Indemnification Payments;
Other Remedies.

     
(a) Periodic payments of amounts required to be paid
pursuant to this Article VII shall be made during the
course of the investigation or defense, as and when reasonably
itemized bills therefor are delivered to the indemnifying party
in respect of any particular Loss as incurred.

     
(b) The remedies provided in this Article VII are not
exclusive and shall not limit any rights or remedies that may
otherwise be available to an Indemnitee at law or in equity.

18

 

ARTICLE VIII

REGISTRATION EXPENSES

     
The Company shall bear all costs and expenses incurred in
connection with any offerings pursuant to a Registration
Statement or any “take-down” hereunder, and all
expenses incurred in performing or complying with its other
obligations under this Agreement, whether or not the
Registration Statement becomes effective, including, without
limitation, the following fees and expenses: (i) all
registration and filing fees, (ii) all fees and expenses of
compliance with state securities or “blue sky” laws
(including reasonable fees and disbursements of counsel in
connection with “blue sky” laws qualifications of the
Registrable Securities), (iii) printing and duplicating
expenses, (iv) internal expenses of the Company (including
all salaries and expenses of its officers and employees
performing legal or accounting duties), (v) fees and
disbursements of counsel for the Company and fees and expenses
of independent certified public accountants retained by the
Company (including the expenses of any comfort letters or costs
associated with the delivery by independent certified public
accountants of a comfort letter or comfort letters or with any
required special audits), (vi) the reasonable fees and
expenses of any special experts retained by the Company,
(vii) fees and expenses in connection with any review of
underwriting arrangements by the NASD, including fees and
expenses of any “qualified independent underwriter” in
connection with an underwritten offering, (viii) reasonable
fees and expenses of not more than one counsel for the
Participating Holders (as a group), (ix) fees and expenses
in connection with listing, if applicable, the Registrable
Securities on a securities exchange or the Nasdaq National
Market, and (x) all duplicating, distribution and delivery
expenses. In connection with any offerings pursuant to a
Registration Statement, each Participating Holder will pay
(i) any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities by such
Participating Holder in connection with an underwritten
offering; (ii) any out-of-pocket expenses of such
Participating Holder including any fees and expenses of counsel
to such Participating Holder (other than as set forth in
clause (viii) of the immediately preceding sentence);
and (iii) any applicable transfer taxes.

ARTICLE IX

RULE 144

     
With a view to making available to the Holder the benefits of
Rule 144 and any other similar rule or regulation of the
Commission that may at any time permit the Holder to sell
securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company
covenants that, for so long as it is subject to Section 13
or 15(d) of the Exchange Act thereafter, it shall use its best
efforts to file in a timely manner all reports required to be
filed by it under the Exchange Act, and that it shall comply
with the requirements of Rule 144(c), as such Rule may be
amended from time to time (or any similar rule or regulation
hereafter adopted by the Commission), regarding the availability
of current public information to the extent required to enable
any Holder to sell Registrable Securities without registration
under the Securities Act pursuant to the resale provisions of
Rule 144 (or any similar rule or regulation). Upon the
request of any Holder, the Company will promptly deliver to such
Holder a written statement as to whether it has complied with
such requirements and, upon such Holder’s compliance with
the applicable provisions of Rule 144 and its delivery of
such documents and certificates as the Company’s transfer
agent may reasonably request in connection therewith, will take
such action as may be required (including using its best efforts
to cause legal counsel to issue an appropriate opinion) to cause
its transfer agent to effectuate any transfer of Registrable
Securities properly requested by such Holder, in accordance with
the terms and conditions of Rule 144.

ARTICLE X

MISCELLANEOUS

     
10.1     Other Registration
Rights. The Company represents and warrants that no
Person has any right to require the Company to register any
shares of the Company’s capital stock (or securities
convertible or exercisable into shares of the Company’s
capital stock) for sale or to include shares of the
Company’s capital

19

 

stock (or securities convertible or exercisable into shares of
the Company’s capital stock) in any registration filed by
the Company for the sale of shares of capital stock for its own
account or for the account of any other person, other than
pursuant to this Agreement. The Company shall not grant any
Person any registration rights or enter into any agreement
providing for registration rights that are more favorable than
those being granted hereunder or that shall be in conflict with
or inconsistent with or otherwise adversely affect the rights of
a Holder in the Registrable Securities or such Holder’s
rights under this Agreement in any respect, including, without
limitation, the priority of registration or the ability to
transfer or otherwise dispose of the Registrable Securities.

     
10.2     Notice
Generally. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder
to be made pursuant to the provisions of this Agreement shall be
deemed sufficiently given or made if in writing and signed by
the party making the same, and either delivered in person with
receipt acknowledged or sent by registered or certified mail,
return receipt requested, postage prepaid, or by telecopy and
confirmed by telecopy answerback, addressed, if to any Holder,
at the address of such Holder as set forth on the signature
pages hereto, with copies to

		
	 	
    If to the Company, at
	 
	 	
    Emisphere Technologies, Inc.
	 	
    765 Old Saw Mill River Road
	 	
    Tarrytown, NY 10591
	 	
    Attention: Michael M. Goldberg,
	 	
                     Chief
    Executive Officer
	 	
    Phone: (914) 347-2220
	 	
    Fax: (914) 347-2498
	 	
    Email: mgoldberg@emisphere.com
	 
	 	
    with a copy to:
	 
	 	
    Brown Rudnick Berlack Israels LLP
	 	
    One Financial Center
	 	
    Boston, MA 02111
	 	
    Attention: Timothy C. Maguire, Esq.
	 	
    Phone: (617) 856-8377
	 	
    Fax: (617) 289-0413
	 	
    Email: tmaguire@brownrudnick.com
	 
	 	
    If to the Investor, to:
	 
	 	
    MHR Fund Management LLC
	 	
    40 West 57th Street, 24th Floor
	 	
    New York, NY 10019
	 	
    Fax number: (212) 262-9356
	 	
    Attention: Hal Goldstein
	 	
    Phone: (212) 262-0005
	 	
    Fax: (212) 262-9356
	 	
    Email: hgoldstein@mhrfund.com

20

 

		
	 	
    with a copy to:
	 
	 	
    Stroock & Stroock & Lavan LLP
	 	
    180 Maiden Lane
	 	
    New York, New York 10038-4982
	 	
    Attention: Doron Lipshitz, Esq.
	 	
                     Brett
    Lawrence, Esq.
	 	
    Phone: (212) 806-5400
	 	
    Fax: (212) 806-6006
	 	
    Email: dlipshitz @stroock.com
	 	
                blawrence@stroock.com

or at such other address as may be substituted by notice given
as herein provided. The giving of any notice required hereunder
may be waived in writing by the party entitled to receive such
notice. Every notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder shall be
deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, telecopied and
confirmed by telecopy answerback or three (3) Business Days
after the same shall have been deposited in the United States
mail (by registered or certified mail, return receipt requested,
postage prepaid), whichever is earlier.

     
10.3     Successors and Assigns;
No Third Party Beneficiaries. This Agreement and the
rights, duties and obligations of the Company hereunder may not
be assigned or delegated by the Company in whole or in part.
This Agreement and the rights, duties and obligations of the
Holders hereunder may be assigned by any Holder to a Permitted
Assignee in whole or in part, without the consent of the Company
provided such Permitted Assignee agrees to be bound by the terms
of this Agreement, whereupon such Permitted Assignee shall be
deemed to be a Holder for all purposes of this Agreement;
provided, however, that this Agreement, and the rights, duties
and obligations of the Investor hereunder may be freely assigned
by the Investor to any Affiliate of the Investor without notice
and without the consent of the Company. Subject to the preceding
sentence, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and all successors to the Company
and the Holders. This Agreement is not intended to confer any
rights or benefits on any Persons that are not party hereto
other than as expressly set forth in Article VII and this
Section 10.3; provided, however, that each of the parties
hereto acknowledges and agrees that MHR Fund Management LLC, an
Affiliate of the Investor, shall have the right to act on behalf
of the Investor for the purposes of this Agreement and in
connection with any of the transactions contemplated hereby at
any time and from time to time.

     
10.4     Amendments;
Waivers. This Agreement may be amended or modified only
by a written agreement signed by the Company, the Investor and,
if different from the Investor, the Holders of a majority of the
Registrable Securities then outstanding. No provision of this
Agreement may be waived except pursuant to a writing signed by
the Company, the Investor and, if different from the Investor,
the Holders of a majority of the Registrable Securities then
outstanding (including the Registrable Securities held by the
Major Holders).

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

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

     
10.7     Injunctive
Relief. It is hereby agreed and acknowledged that it
will be impossible to measure in money the damages that would be
suffered if the parties fail to comply with any of the
obligations herein imposed on them and that in the event of any
such failure, an aggrieved Person will be irreparably damaged
and will not have an adequate remedy at law. Any such Person
shall, therefore, be entitled (in addition to any

21

 

other remedy to which it may be entitled in law or in equity) to
injunctive relief, including, without limitation, specific
performance, to enforce such obligations, and if any action
should be brought in equity to enforce any of the provisions of
this Agreement, none of the parties hereto shall raise the
defense that there is an adequate remedy at law.

     
10.8     Remedies
Cumulative. In the event that the Company fails to
observe or perform any covenant or agreement to be observed or
performed under this Agreement, each Holder may proceed to
protect and enforce its rights by suit in equity or action at
law, whether for specific performance of any term contained in
this Agreement or for an injunction against the breach of any
such term or in aid of the exercise of any power granted in this
Agreement or to enforce any other legal or equitable right, or
to take any one or more of such actions, without being required
to post a bond. None of the rights, powers or remedies conferred
under this Agreement shall be mutually exclusive, and each such
right, power or remedy shall be cumulative and in addition to
any other right, power or remedy, whether conferred by this
Agreement or now or hereafter available at law, in equity, by
statute or otherwise.

     
10.9     Governing Law;
Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED EXCLUSIVELY
BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising
out of or relating to this Agreement or any agreements or
transactions contemplated hereby may be brought in the courts of
the State of New York or of the United States of America for the
Southern District of New York and hereby expressly submits to
the personal jurisdiction and venue of such courts for the
purposes thereof and expressly waives any claim of improper
venue and any claim that such courts are an inconvenient forum.
Each party hereby irrevocably consents to the service of process
of any of the aforementioned courts in any such suit, action or
proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the address set forth in
Section 10.2 hereof, such service to become effective ten
(10) calendar days after such mailing.

     
10.10     Counterparts and
Facsimile Execution. This Agreement may be executed in
any number of counterparts and each of such counterparts shall
for all purposes be deemed to be an original, and all such
counterparts shall together constitute one and the same
instrument. This Agreement may be executed by facsimile
signatures.

     
10.11     Attorneys’
Fees. In any action of proceeding brought to enforce any
provision of this Agreement or where any provision hereof is
validly asserted as a defense, the successful party shall, to
the extent permitted by applicable law, be entitled to recover
reasonable attorneys’ fees in addition to any other
available remedy.

     
10.12     Termination of
Registration Rights; Survival. All rights granted under
this Agreement shall terminate with respect to any Holder at
such time as such Holder ceases to own any Registrable
Securities and this entire Agreement shall terminate when all
Holders cease to own or beneficially own any Registrable
Securities. The provisions of Articles VII, VIII and X
shall survive any termination of this Agreement

     
10.13     Entire
Agreement. This Agreement embodies the entire agreement
and understanding between the Company and the Holders in respect
of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the
parties with respect to the subject matter of this Agreement.

     
10.14     Further
Assurances. Each of the parties hereto shall execute
such documents and perform such further acts as may be
reasonably required or desirable to carry out or to perform the
provisions of this Agreement.

[Remainder of page intentionally left blank.]

22

 

     
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first
above written.

		
	 	
    EMISPHERE TECHNOLOGIES, INC.

			
	 	By: 	
    /s/ Elliot M. Maza

		
	 	
     

	 	
    Name: Elliot M. Maza
	 	
    Title: Chief Financial Officer
	 
	 	
    MHR CAPITAL PARTNERS (500) LP

			
	 	By:	
    MHR ADVISORS LLC,

		
	 	
    its General Partner

			
	 	By: 	
    /s/ Hal Goldstein

		
	 	
     

	 	
    Name: Hal Goldstein
	 	
    Title: Authorized Signatory
	 
	 	
    MHR CAPITAL PARTNERS (100) LP

			
	 	By:	
    MHR ADVISORS LLC,

		
	 	
    its General Partner

			
	 	By: 	
    /s/ Hal Goldstein

		
	 	
     

	 	
    Name: Hal Goldstein
	 	
    Title: Authorized Signatory

23

 

		
	 	
    MHR INSTITUTIONAL PARTNERS II LP

			
	 	By:	
    MHR INSTITUTIONAL ADVISORS II LLC,

		
	 	
    its General Partner

			
	 	By: 	
    /s/ Hal Goldstein

		
	 	
     

	 	
    Name: Hal Goldstein
	 	
    Title: Authorized Signatory
	 
	 	
    MHR INSTITUTIONAL PARTNERS IIA LP

			
	 	By:	
    MHR INSTITUTIONAL ADVISORS II LLC,

		
	 	
    its General Partner

			
	 	By: 	
    /s/ Hal Goldstein

		
	 	
     

	 	
    Name: Hal Goldstein
	 	
    Title: Authorized Signatory

24

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00091-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00091-of-00352.parquet"}]]