QuickLinks -- Click here to rapidly navigate through this document

SECURITIES PURCHASE AGREEMENT

        This Securities Purchase Agreement (this "Agreement") is dated as of
March 25, 2002 among AVI BioPharma, Inc., an Oregon corporation (the "Company"),
and the purchasers identified on the signature pages hereto (each a "Purchaser"
and collectively the "Purchasers").

        WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended, and
Rule 506 promulgated thereunder, the Company desires to issue and sell to the
Purchasers, and the Purchasers, severally and not jointly, desire to purchase
from the Company, securities of the Company as more fully described in this
Agreement.

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

ARTICLE I
DEFINITIONS

        1.1.    Definitions.    In addition to the terms defined elsewhere in
this Agreement, the following terms have the meanings indicated in this
Section 1.1:

        "Affiliate" means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144.

        "Closing" means the closing of the purchase and sale of the Shares and
Warrants pursuant to Section 2.1.

        "Closing Date" means the date of the Closing.

        "Commission" means the Securities and Exchange Commission.

        "Common Stock" means the common stock of the Company, par value $.0001
per share, and any securities into which such common stock may hereafter be
reclassified into.

        "Company Counsel" means Hurley, Lynch & Re, P.C.

        "Effective Date" means the date that an Underlying Shares Registration
Statement is first declared effective by the Commission.

        "Effectiveness Date" means the date on which an Underlying Shares
Registration Statement is required to become effective pursuant to the
Registration Rights Agreement.

        "Eligible Market" means any of the New York Stock Exchange, the American
Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.

        "Exchange Act" means the Securities Exchange Act of 1934, as amended.

        "Losses" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including without limitation costs of preparation
and reasonable attorneys' fees.

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

        "Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition).

1

--------------------------------------------------------------------------------

        "Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date of this Agreement, among the Company and the Purchasers, in
the form of Exhibit A.

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

        "Securities" means the Shares, Warrants and the Underlying Shares.

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

        "Shares" means the shares of the Common Stock issued and sold to the
Purchasers at the Closing.

        "Subsidiary" means any subsidiary of the Company that is required to be
listed in Schedule 3.1(a).

        Trading Market" shall mean the Eligible Market on which the Company's
Common Stock is then listed or qualified for trading or quotation.

        "Transaction Documents" means this Agreement, the Warrants, the Transfer
Agent Instructions, the Registration Rights Agreement and any other documents or
agreements executed in connection with the transactions contemplated hereunder.

        "Transfer Agent Instructions" means the Transfer Agent Instructions, in
the form of Exhibit C, executed by the Company and delivered to and acknowledged
in writing by the Company's transfer agent.

        "Underlying Shares" means the Shares and the shares of common stock
issuable upon exercise of the Warrants.

        "Underlying Shares Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Underlying Shares by the Purchasers.

        "Warrants" means collectively the Common Stock purchase warrants, in the
form of Exhibit B delivered to the Purchasers at the Closing in accordance with
Section 2.2.

ARTICLE II
PURCHASE AND SALE

        2.1.    Closing.    The Closing shall take place at the offices of
Company Counsel or via facsimile immediately following the execution hereof, or
by such other method or at such location or time as the parties may agree.

        2.2.    Purchase and Sale.    Subject to and upon the terms and
conditions set forth in this Agreement, the Company agrees to issue and sell to
each Purchaser, and each Purchaser, severally but not jointly, hereby agrees to
purchase from the Company, at the Closing, the number of Shares set forth
opposite the name of such Purchaser on the Signature Pages hereto, at a purchase
price of $7.50 per share, and Warrants to purchase the number of shares of
Common Stock set forth opposite the name of such Purchaser on the Signature
Pages hereto. The total purchase price payable by each Purchaser for the
Warrants and the number of Shares that such Purchaser is hereby agreeing to
purchase is set forth opposite the name of such Purchaser on the Signature Pages
hereto. The Company shall be obligated to register the Underlying Shares
pursuant to the terms and conditions set forth in the Registration Rights
Agreement.

2

--------------------------------------------------------------------------------

        2.3.    Closing Deliveries.    

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

          (i)  a stock certificate, free and clear of all restrictive and other
legends (except as expressly provided in Section 4.1(b) hereof), registered in
the name of such Purchaser and representing the number of Shares purchased by
such Purchaser at the Closing;

        (ii)  a Warrant, registered in the name of such Purchaser, pursuant to
which such Purchaser shall have the right to acquire a number of shares of
Common Stock equal to 20% of the number of Shares purchased by such Purchaser at
the Closing;

        (iii)  the legal opinion of Company Counsel, in agreed form;

        (iv)  the Transfer Agent Instructions; and

        (v)  the Registration Rights Agreement duly executed by the Company.

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

          (i)  the amount in United States dollars indicated below such
Purchaser's signature to this Agreement, in immediately available funds, by wire
transfer to an account designated in writing by the Company for such purpose;
and

        (ii)  the Registration Rights Agreement duly executed by such Purchaser.

ARTICLE III
REPRESENTATIONS AND WARRANTIES

        3.1.    Representations and Warranties of the Company.    The Company
hereby makes the following representations and warranties to each Purchaser:

        (a)    Subsidiaries.    The Company has no direct or indirect
subsidiaries other than those listed in Schedule 3.1(a). Except as disclosed in
Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital
stock of each Subsidiary free and clear of any lien, charge, security interest,
encumbrance, right of first refusal or other restriction (collectively,
"Liens"), and all the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights.

        (b)    Organization and Qualification.    Each of the Company and each
Subsidiary is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate:
(i) adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in a material adverse effect on the results of
operations, assets, prospects, business or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) adversely impair
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (i), (ii) or (iii), a "Material Adverse
Effect").

3

--------------------------------------------------------------------------------

        (c)    Authorization; Enforcement.    The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company, its Board of Directors or its stockholders. Each of the
Transaction Documents has been (or upon delivery will be) duly executed by the
Company and is, or when delivered in accordance with the terms hereof, will
constitute, the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.

        (d)    No Conflicts.    The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not: (i) conflict
with or violate any provision of the Company's or any Subsidiary's certificate
or articles of incorporation, bylaws or other organizational or charter
documents, or (ii) subject to obtaining the Required Approvals (as defined
below), conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or result in a Material Adverse Effect.

        (e)    Filings, Consents and Approvals.    Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required under Section 4.8,
(ii) the filing with the Commission of the Underlying Shares Registration
Statement, (iii) the application(s) to each applicable Trading Market for the
listing of the Underlying Shares for trading thereon in the time and manner
required thereby, and (iv) applicable Blue Sky filings (collectively, the
"Required Approvals").

        (f)    Issuance of the Securities.    The Securities are duly authorized
and, when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all Liens. The Company has reserved from its duly authorized
capital stock a sufficient number of Underlying Shares to enable it to comply
with its exercise obligations under the Warrants.

        (g)    Capitalization.    The number of shares and type of all
authorized, issued and outstanding capital stock, options and other securities
of the Company (whether or not presently convertible into, or exercisable or
exchangeable for, shares of capital stock of the Company) is set forth in
Schedule 3.1(g). All outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable and have been issued in
compliance with all applicable securities laws. No securities of the Company are
entitled to preemptive or similar rights, and no Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents,
except as set forth in Schedule 3.1(g). Except as a result of the purchase and
sale of the Securities and except as

4

--------------------------------------------------------------------------------

disclosed in Schedule 3.1(g), there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible
into or exercisable or exchangeable for shares of Common Stock. Except as
disclosed in Schedule 3.1(g), there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in any agreement
providing rights to security holders) and the issuance and sale of the
Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Purchasers) and will not result
in a right of any holder of Company securities to adjust the exercise,
conversion, number of issuable shares, exchange or reset price under such
securities. The Company will not authorize the issuance of any additional
securities unless there are sufficient authorized shares of Common Stock (or any
successor security thereto) available, taking into account all potential
adjustments or anti-dilution provisions in such securities, to satisfy the
rights of the Purchasers to acquire the Securities and underlying securities in
the event of exercise of the Warrant. Further, if at any time the number of
shares of Common Stock available for issuance were insufficient for any reason
to satisfy such rights of the Purchasers, the Company would take immediate
action to cause sufficient authorized shares to be authorized or effect a
reverse stock split to provide sufficient shares to be available.

        (h)    SEC Reports; Financial Statements.    The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two (2) years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively referred
to herein as the "SEC Reports" and, together with the Schedules to this
Agreement, the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has delivered to the Purchasers a
copy of all SEC Reports filed within the ten (10) days preceding the date
hereof. As of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and none of
the SEC Reports, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved ("GAAP"), except as
may be otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.

        (i)    Material Changes.    Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports: (i) there has been no event, occurrence or
development that, individually or in the aggregate, has had or that could result
in a Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its

5

--------------------------------------------------------------------------------

auditors, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock option plans.

        (j)    Litigation.    There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "Action") which: (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or result in a Material Adverse Effect.
Neither the Company nor any Subsidiary, nor any director or officer thereof, is
or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. The Company does not have pending before the Commission any
request for confidential treatment of information. There has not been, and to
the knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company. The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any Subsidiary under the Exchange Act or the Securities Act.

        (k)    Compliance.    Neither the Company nor any Subsidiary: (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) to the
knowledge of the Company, is in violation of any order of any court, arbitrator
or governmental body, or (iii) is or has been in violation of any statute, rule
or regulation of any governmental authority, except in each case as could not,
individually or in the aggregate, have or result in a Material Adverse Effect.

        (l)    Labor Relations.    No strike, work stoppage, slow down or other
material labor problem exists or, to the knowledge of the Company, is threatened
or imminent with respect to any of the employees of the Company or any
Subsidiary.

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

        (n)    Title to Assets.    The Company and the Subsidiaries have good
and marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries

6

--------------------------------------------------------------------------------

are held by them under valid, subsisting and enforceable leases of which the
Company and the Subsidiaries are in compliance.

        (o)    Patents and Trademarks.    The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). None of the Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate within two years from the
date of this Agreement. Neither the Company nor any Subsidiary has received a
written notice or otherwise has reason to believe that the Intellectual Property
Rights used by the Company or any Subsidiary violates or infringes upon the
rights of any Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights.

        (p)    Insurance.    To the knowledge of the Company, the Company and
the Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent and customary
in the businesses in which the Company and the Subsidiaries are engaged. Neither
the Company nor any Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost, except for cost
increases being experienced by public companies in similar businesses and risk
categories.

        (q)    Transactions With Affiliates and Employees.    Except as set
forth in SEC Reports filed at least ten (10) days prior to the date hereof, none
of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.

        (r)    Internal Accounting Controls.    The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

        (s)    Solvency.    Based on the financial condition of the Company as
of the Closing Date: (i) the Company's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and
(iii) the current cash flow of the Company, together with the proceeds the
Company would receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay all amounts
on or in respect of its debt

7

--------------------------------------------------------------------------------

when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).

        (t)    Certain Fees.    Except for the fees described in
Schedule 3.1(t), all of which are payable by the Company to the registered
broker-dealers named therein, no brokerage or finder's fees or commissions are
or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement, and the Company
has not taken any action that would cause any Purchaser to be liable for any
such fees or commissions. The Company agrees that the Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on
behalf of any Person for fees of the type contemplated by this Section in
connection with the transactions contemplated by this Agreement.

        (u)    Form S-3 Eligibility; Private Placement.    The Company is
eligible to register its Common Stock for resale by the Purchasers under
Form S-3 promulgated under the Securities Act. Neither the Company, nor any of
its Affiliates, nor any Person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Securities. Neither the Company, nor any of its Affiliates, nor any Person
acting on its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under
circumstances that would require registration of any of the Securities under the
Securities Act or cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act or any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated, nor will the
Company or any of its Subsidiaries take any action or steps that would require
registration of any of the Securities under the Securities Act or cause the
offering of the Securities to be integrated with other offerings.

        (v)    Listing and Maintenance Requirements.    The Company has not, in
the 12 months preceding the date hereof, received notice from any Trading Market
on which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Trading Market. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the Trading Market
and no shareholder approval is required for the Company to fulfill its
obligations under the Transaction Documents. The Company's Common Stock is
currently listed on the NASDAQ National Market System.

        (w)    Registration Rights.    Except as described in Schedule 3.1(w),
the Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.

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

8

--------------------------------------------------------------------------------

        (y)    Disclosure.    The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that the Company believes constitutes, nonpublic
information. The Company understands and confirms that the Purchasers will rely
on the foregoing representations in effecting transactions in securities of the
Company. All disclosure provided to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to
this Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. The
Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2.

        (z)    Investment Company.    The Company is not, and is not an
Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.

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

        (a)    Organization; Authority.    Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase by such Purchaser of the
Securities to be acquired by it has been duly authorized by all necessary action
on the part of such Purchaser. Each of this Agreement and the Registration
Rights Agreement has been duly executed by such Purchaser and is, or with
respect to the Registration Rights Agreement, when delivered by such Purchaser
in accordance with the terms hereof, will constitute, the valid and binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.

        (b)    Investment Intent.    Such Purchaser is acquiring the Securities
as principal for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part thereof,
without prejudice, however, to such Purchaser's right, subject to the provisions
of this Agreement, at all times to sell or otherwise dispose of all or any part
of such Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws. Nothing contained herein
shall be deemed a representation or warranty by such Purchaser to hold
Securities for any period of time. Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business. Such Purchaser does not have
any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.

        (c)    Purchaser Status.    At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on which it
exercises any Warrants, it will be an "accredited investor" as defined in
Rule 501(a) under the Securities Act. Such Purchaser has not been formed solely
for the purpose of acquiring the Securities.

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

9

--------------------------------------------------------------------------------

        (e)    Access to Information.    Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded: (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to public information about the Company and the
Subsidiaries and their respective financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment; and (iii) the opportunity to obtain such additional
information that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision with
respect to the investment. Neither such inquiries nor any other investigation
conducted by or on behalf of such Purchaser or its representatives or counsel
shall modify, amend or affect such Purchaser's right to rely on the truth,
accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.

        (f)    General Solicitation.    Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.

        (g)    Reliance.    Such Purchaser understands and acknowledges that:
(i) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.

        (h)    Rights of First Refusal.    Each Purchaser acknowledges that one
investor ("1999 Holders") in the Company's December 1999 private financing
("1999 Financing") had certain rights of first refusal that apply to this
financing that may not have terminated or been waived as of the Closing Date.
Each Purchaser further agrees that additional Securities may be issued by the
Company to that investor, New Technology Fund, within fifteen (15) days of the
Closing Date to satisfy those rights under the terms and conditions herein and,
by amendment to the Transaction Documents, such 1999 Holder, if it exercises
such right after the Closing Date may be made a party to the Transaction
Documents and this financing, such amendment to be signed by the Company and
such 1999 Holder and promptly distributed to all Purchasers. In such event, the
Purchasers agree that all Transaction Documents and rights therein shall be
interpreted to include such 1999 Holder in the definition of Purchaser. Company
Counsel will issue an opinion letter in the form issued hereunder as to each
such transaction addressed to the Purchasers and the Company will promptly
notify the Purchasers of any such transactions. Each 1999 Holder who is a
Purchaser as of the Closing Date, acknowledges and agrees that its participation
herein fully satisfies its rights of first refusal under the agreements related
to the 1999 Financing, including any additional sales hereafter that are part of
this financing. Each Purchaser acknowledges that information regarding such
rights of first refusal is set forth in Schedule 3.1.

        The Company acknowledges and agrees that no Purchaser makes or has made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.

10

--------------------------------------------------------------------------------

ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES

        4.1.    Transfer Restrictions.    

        (a)  The Securities may only be disposed of by a Purchaser in compliance
with state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement, to the
Company, to an Affiliate of a Purchaser or to a Person managed or advised by the
same Person as manager or adviser to such Purchaser or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall restate the representations and
warranties of such Purchaser under Section 3.2 and agree in writing to be bound
by the terms of this Agreement and shall have the rights of a Purchaser under
this Agreement and the Registration Rights Agreement.

        (b)  The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of the following legend on any certificate evidencing
Securities:

[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[EXERCISABLE] HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

        The Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement or grant a security
interest in some or all of the Securities and, if required under the terms of
such arrangement, such Purchaser may transfer pledged or secured Securities to
the pledgees or secured parties. Such a pledge or transfer would not be subject
to approval of the Company and no legal opinion of the pledgee, secured party or
pledgor shall be required in connection therewith; provided, if such transfer
occurs prior to the conditions for removal of the stock legend in
Section 4.1(c), then, any such pledge or transfer would be conditioned on the
Securities remaining subject to the restrictions on further transfer herein and
will only be made to a party that is sophisticated and an "accredited" investor,
except as otherwise provided or allowed under federal and state securities laws
without affecting the exemptions being relied upon herein for the sale of the
Securities. Further, no notice shall be required of such pledge. At the
appropriate Purchaser's expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities,
including the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder.

11

--------------------------------------------------------------------------------

        (c)  Certificates evidencing Securities shall not contain any legend
(including the legend set forth in Section 4.1(b)): (i) while a registration
statement (including the Underlying Shares Registration Statement) covering the
resale of such security is effective under the Securities Act; (ii) following
any sale of such Securities pursuant to Rule 144; (iii) if such Securities are
eligible for sale under Rule 144(k); or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission). The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Company's transfer agent on the Effective
Date. If all or any portion of the Warrants are exercised at a time when the
Underlying Shares are eligible for resale under Rule 144(k) or if such legend is
no longer required under the applicable requirements of the Securities Act, such
Underlying Shares shall be issued free of all legends. The Company agrees that,
at such time as such legend is no longer required under this Section 4.1(c), it
will, no later than three (3) Trading Days following the delivery by a Purchaser
to the Company or the Company's transfer agent of a certificate representing
Securities issued with a restrictive legend, deliver or cause to be delivered to
such Purchaser a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section.

        4.2.    Acknowledgment of Dilution.    The Company acknowledges that the
issuance of the Securities will result in dilution of the outstanding shares of
Common Stock. The Company further acknowledges that its obligations under the
Transaction Documents, including without limitation, its obligation to issue the
Underlying Shares pursuant to the Transaction Documents, are unconditional and
absolute and not subject to any right of set off, counterclaim, delay or
reduction, regardless of the effect of any such dilution or any claim that the
Company may have against any Purchaser.

        4.3.    Furnishing of Information.    As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any Purchaser, the Company shall deliver to
such Purchaser a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144.

        4.4.    Integration.    The Company shall not, and shall use its best
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market.

        4.5.    Reservation and Listing of Securities.    The Company shall
maintain a reserve from its duly authorized shares of Common Stock to comply
with its exercise obligations under the Warrants pursuant to the Transaction
Documents. The Company shall promptly secure the listing of all of the
Registrable Securities (as defined in the Registration Rights Agreement) upon
each national securities exchange and automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. The Company shall
maintain the Common Stock's authorization for quotation on the NASDAQ National
Market ("NASDAQ") or listing on The New York Stock Exchange, Inc.("NYSE") (as
applicable, the "Principal Market"). Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or

12

--------------------------------------------------------------------------------

suspension of the Common Stock from the Principal Market. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 4.5.

        4.6.    Exercise Procedures.    The form of Election to Purchase
included in the Warrants set forth the totality of the procedures required in
order to exercise the Warrants. No additional legal opinion or other information
or instructions shall be necessary to enable the Purchasers to exercise their
Warrants. The Company shall honor exercises of the Warrants and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.

        4.7.    Subsequent Placements.    Until the Effective Date, the Company
shall not, directly or indirectly, offer, sell or grant any option to purchase,
or otherwise dispose of, or announce any offer, sale, grant or any option to
purchase or other disposition (collectively, a "Subsequent Placement") of any of
its Common Stock or other securities which entitle the holder thereof to receive
Common Stock, including, without limitation, any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exercisable or exchangeable for Common Stock.

        4.8.    Securities Laws Disclosure; Publicity.    The Company shall, not
later than the Closing Date, issue a press release reasonably acceptable to the
Purchasers disclosing all material terms of the transactions contemplated
hereby. The Company and the Purchasers shall consult with each other in issuing
any press releases with respect to the transactions contemplated hereby.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except to the extent such disclosure is required by
law or Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure. On or before 8:30 a.m., Eastern
Standard time, the first (1st) Business Day following the Closing Date the
Company shall file a Current Report on Form 8-K with the Commission describing
the terms of the transactions contemplated by the Transaction Documents and
including as exhibits to such Current Report on Form 8-K or in a filing or
amendment to such filing within two days after such initial filing, this
Agreement, the Registration Rights Agreement and the form of the Warrants, in
the form required by the Exchange Act.

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

        4.10.    Use of Proceeds.    The Company shall use the net proceeds from
the sale of the Securities hereunder for working capital purposes and not for
the satisfaction of any portion of the Company's debt (other than payment of
trade payables and accrued expenses in the ordinary course of the Company's
business and prior practices), to redeem any Company equity or equity-equivalent
securities or to settle any outstanding litigation.

        4.11.    Indemnification of Purchasers.    The Company will indemnify
and hold the Purchasers and their directors, officers, shareholders, members,
partners, employees and agents (each, a "Purchaser Party") harmless from any and
all losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation (collectively, "Losses")
that any such Purchaser Party may suffer or incur as a result of or relating to:
(a) any misrepresentation, breach or inaccuracy, or any allegation by a third
party that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents; or (b) any cause of action,
suit or claim brought or made against

13

--------------------------------------------------------------------------------

such Purchaser Party and arising solely out of or solely resulting from the
execution, delivery, performance or enforcement of this Agreement or any of the
other Transaction Documents and without causation by any other activity,
obligation, condition or liability pertaining to such Purchaser and not to the
transactions contemplated by this Agreement. The Company will reimburse such
Purchaser for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred.

        4.12.    Shareholders Rights Plan.    In the event that a shareholders
rights plan is adopted by the Company, no claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any such plan or in any way could be deemed to trigger the provisions of such
plan by virtue of receiving Securities under the Transaction Documents.

        4.13    Additional Closings.    The Purchasers agree that through
Monday, April 1, 2002, the Company, with the consent of each purchaser whose
purchase price is $5.0 million or more, may sell additional Securities as part
of this offering. Such sales shall be on the terms and conditions of and be
deemed, except for the closing date, part of this offering. Such additional
closings shall be evidenced by the additional investors signing signature pages
to the Transaction Documents. Such additional investors shall be deemed
Purchasers under this agreement and all other Transaction Documents. The Company
shall notify all existing Purchasers of any such additional investments and
provide an updated opinion letter covering such additional investments.

ARTICLE V
MISCELLANEOUS

        5.1.    Fees and Expenses.    Unless otherwise agreed, each party shall
pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer agent fees, stamp taxes and other taxes and
duties levied in connection with the issuance of any Securities.

        5.2.    Entire Agreement.    The Transaction Documents, together with
the Exhibits and Schedules thereto, contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further consideration, the
Company will execute and deliver to the Purchasers such further documents as may
be reasonably requested in order to give practical effect to the intention of
the parties under the Transaction Documents.

        5.3.    Notices.    Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such notices and communications are
those set forth on the signature pages hereof, or such other address as may be
designated in writing hereafter, in the same manner, by such Person.

        5.4.    Amendments; Waivers.    No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No

14

--------------------------------------------------------------------------------

waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right.

        5.5.    Construction.    The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

        5.6.    Successors and Assigns.    This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchasers. Any Purchaser may
assign its rights under this Agreement and the Registration Rights Agreement to
any Person to whom such Purchaser assigns or transfers any Securities.

        5.7.    No Third-Party Beneficiaries.    This Agreement is intended for
the benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Purchaser Party is an intended third
party beneficiary of Section 4.11 and may enforce the provisions of such section
directly against the Company.

        5.8.    Governing Law; Venue; Waiver of Jury Trial.    All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York, Borough of Manhattan. Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such Proceeding
is improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such Proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby. If either party shall commence a Proceeding to enforce any
provisions of a Transaction Document, then the prevailing party in such
Proceeding shall be reimbursed by the other party for its reasonable attorneys
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such Proceeding.

        5.9.    Survival.    The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and
exercise of the Securities, as applicable.

        5.10.    Execution.    This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that

15

--------------------------------------------------------------------------------

the parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

        5.11.    Severability.    If any provision of this Agreement is held to
be invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

        5.12.    Rescission and Withdrawal Right.    Notwithstanding anything to
the contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.

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

        5.14.    Remedies.    In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific performance under
the Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

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

        5.16.    Usury.    To the extent it may lawfully do so, the Company
hereby agrees not to insist upon or plead or in any manner whatsoever claim, and
will resist any and all efforts to be compelled to take the benefit or advantage
of, usury laws wherever enacted, now or at any time hereafter in force, in
connection with any claim, action or proceeding that may be brought by any
Purchaser in order to enforce any right or remedy under any Transaction
Document. Notwithstanding any provision to the contrary contained in any
Transaction Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for payments in the
nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the "Maximum Rate"), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of

16

--------------------------------------------------------------------------------

them, when aggregated with any other sums in the nature of interest that the
Company may be obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of interest allowed
by law and applicable to the Transaction Documents is increased or decreased by
statute or any official governmental action subsequent to the date hereof, the
new maximum contract rate of interest allowed by law will be the Maximum Rate of
interest applicable to the Transaction Documents from the effective date
forward, unless such application is precluded by applicable law. If under any
circumstances whatsoever, interest in excess of the Maximum Rate is paid by the
Company to any Purchaser with respect to indebtedness evidenced by the
Transaction Documents, such excess shall be applied by such Purchaser to the
unpaid principal balance of any such indebtedness or be refunded to the Company,
the manner of handling such excess to be at such Purchaser's election.

        5.17.    Independent Nature of Purchasers' Obligations and
Rights.    The rights and obligations of each Purchaser under any Transaction
Document are several and not joint with the rights and obligations of the other
Purchaser and a Purchaser shall not be responsible in any way for the
performance of the obligations of the other Purchaser under any Transaction
Document. Nothing contained herein or in any Transaction Document, and no action
taken by any Purchaser pursuant thereto shall constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for the other Purchaser to be joined as an additional party in any
proceeding for such purpose.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOWS]

17

--------------------------------------------------------------------------------

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

    AVI BIOPHARMA, INC.
 
 
By:
 
/s/  DENIS R. BURGER, PH.D.      

--------------------------------------------------------------------------------

    Name: Denis R. Burger, Ph.D.
Title: Chairman & Chief Financial Officer
 
 
Address for Notice:
 
 
One S.W. Columbia, Suite 1105
Portland, Oregon 97258
Facsimile: (503) 227-0751

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]

18

--------------------------------------------------------------------------------

    SMITHFIELD FIDUCIARY LLC
 
 
By:
 
/s/  ADAM J. CHILL      

--------------------------------------------------------------------------------

    Name: Adam J. Chill
Title: Authorized Signatory

    Shares of Common Stock:     866,667
 
 
Warrant Shares:
 
 
173,334
 
 
Aggregate Purchase Price:
 
$
6,500,000
 
 
Address for Notice:
 
 
 
 
 
c/o Highbridge Capital Management, LLC
9 West 57th Street, 27th Floor
New York, NY 10019
Fax: 212-751-0755
Tel: 212-287-4720
Attention: Ari J. Storch / Adam J. Chill

19

--------------------------------------------------------------------------------

    SF CAPITAL PARTNERS LTD
 
 
By:
 
/s/  BRIAN H. DAVIDSON      

--------------------------------------------------------------------------------

    Name: Brian H. Davidson
Title: Authorized Signatory

 
 
Shares of Common Stock:
 
 
666,667
 
 
Warrant Shares:
 
 
133,334
 
 
Purchase Price:
 
$
5,000,000
 
 
Address for Notice:
 
 
 
 
 
SF Capital Partners Ltd.
Attention: Brian H. Davidson
1500 West Market Street, Suite 200
Mequon, Wisconsin 53092
 
 
Phone: (262) 241-1810
Facsimile: (262) 241-1888

20

--------------------------------------------------------------------------------

    CASTLE CREEK HEALTHCARE
PARTNERS LLC
 
 
By:
 
CASTLE CREEK PARTNERS,
LLC, its Investment Manager
 
 
By:
 
/s/  THOMAS A. FREI      

--------------------------------------------------------------------------------

    Name: Thomas A. Frei
Title: Managing Member

 
 
Shares of Common Stock:
 
 
216,667
 
 
Warrant Shares:
 
 
43,334
 
 
Purchase Price:
 
$
1,625,000
 
 
Address for Notice:
 
 
Castle Creek Healthcare Partners, LLC
c/o Castle Creek Partners, LLC
111 West Jackson Blvd, Suite 2020
Chicago, IL 60604

21

--------------------------------------------------------------------------------

    CC LIFE SCIENCE, LTD.
 
 
By:
 
/s/  THOMAS A. FREI      

--------------------------------------------------------------------------------

    Name: Thomas A. Frei
Title: Member

 
 
Shares of Common Stock:
 
 
216,667
 
 
Warrant Shares:
 
 
43,334
 
 
Purchase Price:
 
$
1,625,000
 
 
Address for Notice:
 
 
CC Life Science, Ltd.
c/o Castle Creek Life Science Partners, LLC
111 West Jackson Blvd, Suite 2020
Chicago, IL 60604

22

--------------------------------------------------------------------------------

    SDS MERCHANT FUND, LP
 
 
By:
 
/s/  STEVE DERBY      

--------------------------------------------------------------------------------

    Name: Steve Derby
Title: Managing Member

 
 
Shares of Common Stock:
 
 
133,334
 
 
Warrant Shares:
 
 
26,667
 
 
Purchase Price:
 
$
1,000,000
 
 
Address for Notice:
 
 
SDS Merchant Fund, LP
c/o SDS Capital Partners, LLC
1 Sound Shore Drive, Suite 202
Greenwich, CT 06830

23

--------------------------------------------------------------------------------

    DMG LEGACY FUND LLC
 
 
By:
 
/s/  ANDREW WILDER      

--------------------------------------------------------------------------------

    Name: Andrew Wilder
Title: Chief Financial Officer

 
 
Shares of Common Stock:
 
 
20,000
 
 
Warrant Shares:
 
 
4,000
 
 
Purchase Price:
 
$
7.50
 
 
Address for Notice:
 
 
DMG Legacy Fund LLC
c/o DMG Advisors LLC
One Sound Shore Drive, Ste 202
Greenwich, CT 06830

24

--------------------------------------------------------------------------------

    DMG LEGACY INSTITUTIONAL FUND LLC
 
 
By:
 
/s/  ANDREW WILDER      

--------------------------------------------------------------------------------

    Name: Andrew Wilder
Title: Chief Financial Officer

 
 
Shares of Common Stock:
 
 
60,000
 
 
Warrant Shares:
 
 
12,000
 
 
Purchase Price:
 
$
7.50
 
 
Address for Notice:
 
 
DMG Legacy Institutional Fund LLC
c/o DMG Advisors LLC
One Sound Shore Drive, Ste 202
Greenwich, CT 06830

25

--------------------------------------------------------------------------------

    DMG LEGACY INTERNATIONAL LTD.
 
 
By:
 
/s/  ANDREW WILDER      

--------------------------------------------------------------------------------

    Name: Andrew Wilder
Title: Chief Financial Officer

 
 
Shares of Common Stock:
 
 
53,334
 
 
Warrant Shares:
 
 
10,667
 
 
Purchase Price:
 
$
7.50
 
 
Address for Notice:
 
 
DMG Legacy International Ltd.
c/o DMG Advisors LLC
One Sound Shore Drive, Ste 202
Greenwich, CT 06830

26

--------------------------------------------------------------------------------

    GRYPHON MASTER FUND, L.P.
 
 
By:
 
/s/  E.B. LYON, IV      

--------------------------------------------------------------------------------

    Name: E.B. Lyon, IV
Title: Authorized Agent

 
 
Shares of Common Stock:
 
 
224,000
 
 
Warrant Shares:
 
 
44,800
 
 
Purchase Price:
 
$
7.50
 
 
Address for Notice:
 
 
500 Crescent Court, Suite 270
Dallas, TX 75201

27

--------------------------------------------------------------------------------

    QUANTICO PARTNERS, L.P.
 
 
By:
 
/s/  JEFFREY THORP      

--------------------------------------------------------------------------------

    Name: Jeffrey Thorp
Title: Managing Partner of
Langley Capital, LLC,
its General Partner

 
 
Shares of Common Stock:
 
 
213,334
 
 
Warrant Shares:
 
 
42,668
 
 
Purchase Price:
 
$
1,600,000.00
 
 
Address for Notice:
 
 
Quantico Partners, L.P.
c/o Langley Capital, LLC
535 Madison Avenue, 7th Floor
New York, NY 10022
(212) 850-7528 Telephone
(212) 850-7589 Facsimile
JT@LangleyCapital.com

28

--------------------------------------------------------------------------------

    BNY CAPITAL MARKETS, INC.
 
 
By:
 
/s/  WESLEY V. PRITCHETT      

--------------------------------------------------------------------------------

    Name: Wesley V. Pritchett
Title: M.D.

 
 
Shares of Common Stock:
 
 
133,334
 
 
Warrant Shares:
 
 
26,227
 
 
Purchase Price:
 
$
7.50
 
 
Address for Notice:
 
 
Attn: Raymond Lang, Managing Director
BNY Capital Markets, Inc.
32 Old Slip, 15th Floor
New York, NY 10286
 
 
 

29

--------------------------------------------------------------------------------

    UNITED CAPITAL MANAGEMENT, INC.
 
 
By:
 
/s/  JAMES A. LUSTIG      

--------------------------------------------------------------------------------

    Name: James A. Lustig
Title: Proprietor

 
 
Shares of Common Stock:
 
 
66,667
 
 
Warrant Shares:
 
 
13,334
 
 
Purchase Price:
 
$
7.50
 
 
(Total: $500,000)
 
 
Address for Notice:
 
 
410 17th Street, Suite 1705
Denver, CO 80202

30

--------------------------------------------------------------------------------

    On behalf of
THE TAIL WIND FUND LIMITED
Tail Wind Advisory & Management Ltd.
 
 
By:
 
/s/  DAVID CROOK      

--------------------------------------------------------------------------------

    Name: David Crook
Title: Chief Executive Officer

 
 
Shares of Common Stock:
 
 
66,666
 
 
Warrant Shares:
 
 
13,333
 
 
Purchase Price:
 
$
[7.50]
 
 
Total: $500,000
 
 
Address for Notice:
 
 
David Crook, Esq.
Chief Executive Officer
Tail Wind Advisory & Management Ltd.
1st Floor, No. 1 Regent Street
London, SW1Y 4NS, UK
Tel: +44 20 7468 7691 Fax: 7657
 
 
Please copy all correspondence to:
Peter J. Weisman, P.C.
110 East 59th Street
New York, NY 10005
Tel: +212-418-4792 Fax: 212-317-8855
 
 
Please send the common shares a.s.a.p. directly to:
Bishop Rosen & Co.
Attn: Mr. D. Freedman
100 Broadway, 18th Floor
New York, NY 10006
Tel: +212-602-0054 Fax: +212-602-0697
 
 
Please send the warrants to:
The Tail Wind Fund, Ltd.
MecaPierson (Bahamas) Ltd.
Attn: Ngaire Rolle,
Windermere House, 404 East Bay St.,
PO Box SS 5539, Nassau, Bahamas
Tel: 242-393-8777 Fax: 242-393-9021

31

--------------------------------------------------------------------------------

    JULES NORDLICHT
 
 
By:
 
/s/  JULES NORDLICHT      

--------------------------------------------------------------------------------

    Name: Jules Nordlicht
Title:

 
 
Shares of Common Stock:
 
 
133,333
 
 
Warrant Shares:
 
 
26,667
 
 
Purchase Price:
 
$
7.50
 
 
Address for Notice:
 
 
255 W. Beech St
Long Beach, NY 11561

32

--------------------------------------------------------------------------------

Exhibits:

ARegistration Rights Agreement BWarrant CTransfer Agent Instructions

Schedules:

3.1(a)    Subsidiaries
3.1(g)    Capitalization
3.1(t)    Commissions
3.1(w)    Registration Rights

33

--------------------------------------------------------------------------------

SCHEDULE 3.1

(a) Subsidiaries

Anti-Viral Acquisition Corporation, a California corporation. Note: this
corporation may have been dissolved and, if that is the case, any reference to
this subsidiary will be deleted from the final version of this document.

(g) Capitalization

Type of
Capital Stock

--------------------------------------------------------------------------------

  Authorized
Shares

--------------------------------------------------------------------------------

  Issued
Shares

--------------------------------------------------------------------------------

  Rights to Acquire

--------------------------------------------------------------------------------

Common Stock
(par value $.0001)   50,000,000   23,245,539(1)(2)   See table below
Preferred Stock
(par value $.0001)
 
2,000,000
 
-0-
 
-0-

Footnotes:

(1)The investors in the 1999 Financing are entitled to additional shares of
Common Stock if certain financing transactions occur on or before December 16,
2002 at prices below the purchase price for their Common Stock in the 1999
Financing.

(2)Numbers, including outstanding shares in the following table, are as of
March 12, 2002 and there may be differences of up to 20,000 shares reflecting
exercise of options and warrants for Common Stock not yet reflected in such
numbers.

Rights to Acquire Common Stock

Type of
Right

--------------------------------------------------------------------------------

 
Number of Shares
Covered (1)(2)

--------------------------------------------------------------------------------

 
 

  Stock options   2,849,187       Stock purchase plan   0(3 )     Warrants  
10,292,626(4 )     Other Rights   0(5 )    

Footnotes:

(1)Most rights carry typical anti-dilution provisions for stock splits, stock
dividends and similar matters and adjustments/substitutions for mergers,
reorganizations and similar transactions.

(2)Numbers, including outstanding shares in prior table, are as of March 12,
2002 and there may be differences of up to 20,000 shares reflecting exercise of
options and warrants for Common Stock not yet reflected in such numbers.

(3)Purchases under the plan by employees are done semiannually in May and
November each year, the number of shares expected to be purchased based on
present participation would be 32,000 shares (for calendar 2002).

(4)The Warrant for SuperGen, Inc. ("SuperGen Warrant") covering 1,665,878 shares
has an anti-dilution provision that adjusts the number of shares that may be
acquired to approximately 11.11% of the then outstanding shares upon the first
exercise of the warrant. The adjustment is to the number of shares, but the
exercise per share is not adjusted. The warrant is not currently

34

--------------------------------------------------------------------------------

exercisable. If the first exercise were to occur immediately after Closing and
the financing was for $28 million at $8.00 per share, the approximate number of
shares that SuperGen, Inc. could acquire would be 2,972,000 shares.

(5)Medtronic International, Ltd. (formerly Medtronic Asset Management, Inc.)
("MIL") has the right under an Investment Agreement with the Company to purchase
(i) an additional 352,113 shares of the Common Stock at a price of $7.10 per
share and (ii) the right to purchase up to $7,500,000 of our Common Stock based
on the average closing sales price for the five days preceding the commitment to
purchase. These contractual purchase rights are subject to certain technology
milestones being met or waived by MIL and any required regulatory or shareholder
approvals. MIL may require us to register these shares upon the exercise of such
purchase rights. MIL also holds a warrant covering 3,000,000 shares of the
Company's Common Stock at an exercise price of $10.00 per share which is
reflected in the numbers for warrants in this table.

Right of First Refusal:

        The investors in the 1999 Financing acquired certain rights of first
refusal as to 50% of certain future financings, which rights expire around
December 16, 2002. Those rights have been satisfied as to three of the five 1999
Holders by their participation in this financing under Section 3.2(h) of the
Purchase Agreement and as to one 1999 Holder by its written waiver as to
participation in this financing and will be satisfied by notice to the last 1999
Holder of its right to participate on or before the Closing Date and the right
to sell to such holder under Section 3.2(h) of the Purchase Agreement.

Anti-dilution Adjustment Rights

        The investors in the 1999 Financing are entitled to additional shares of
Common Stock if certain financing transactions occur on or before December 16,
2002 at prices below the purchase price for their Common Stock in the 1999
Financing.

(t) Commissions

        The Company has agreed to pay UBS Warburg certain percentage placement
fees, certain fixed fees and certain reimbursable expenses in connection with
this of its services hereunder. The Company has also given certain exclusive
rights to UBS Warburg to raise any additional financings for a fixed period of
time and a "tail" commission on certain funds raised after the termination of
the agreement.

(w) Registration Rights

        The Company currently is registering approximately 4,812,327 shares of
its Common Stock relating to 51,763 and 1,408,451 shares of Common Stock owned
respectively by Boston Healthcare and MIL and 3,352,113 shares under a warrant
and purchase right held by MIL..

        The Company has other contractual obligations to register shares
issueable upon the exercise of

1.the purchase rights of MIL as to $7.5 million in additional securities
2.warrants covering 3,400,000 shares 3.shares covered by its employee stock
option and stock purchase plans, including future plans 4.the SuperGen Warrant

35

--------------------------------------------------------------------------------

QuickLinks

SECURITIES PURCHASE AGREEMENT
ARTICLE I DEFINITIONS
ARTICLE II PURCHASE AND SALE
ARTICLE III REPRESENTATIONS AND WARRANTIES
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES
ARTICLE V MISCELLANEOUS
SCHEDULE 3.1