Exhibit 10.45

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of May 5, 2003
among AVI BioPharma, Inc., an Oregon corporation (the “Company”), and each
purchaser 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 each Purchaser, severally and not jointly, desires to purchase from the
Company, securities of the Company as more fully described in this Agreement.

 

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

 

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“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).

 

“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.

 

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“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 $5.00 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.

 

2.3.                              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 50% 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:

 

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(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”).

 

(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

 

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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 DISCLOSED IN
SCHEDULE 3.1(G), THERE ARE NO OUTSTANDING OPTIONS, WARRANTS, SCRIPT RIGHTS TO
SUBSCRIBE TO, CALLS OR COMMITMENTS OF ANY CHARACTER

 

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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

 

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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 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

 

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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 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.

 

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(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. THE FINANCIAL RECORDS OF THE COMPANY ACCURATELY REFLECT IN ALL
MATERIAL RESPECTS THE INFORMATION RELATING TO THE BUSINESS OF THE COMPANY, THE
LOCATION AND COLLECTION OF ITS ASSETS, AND THE NATURE OF ALL TRANSACTIONS GIVING
RISE TO THE OBLIGATIONS OR ACCOUNTS RECEIVABLE OF THE COMPANY.  THE COMPANY HAS
ESTABLISHED DISCLOSURE CONTROLS AND PROCEDURES (AS DEFINED IN EXCHANGE ACT RULES
13A-14 AND 15D-14) FOR THE COMPANY AND DESIGNED SUCH DISCLOSURES CONTROLS AND
PROCEDURES TO ENSURE THAT MATERIAL INFORMATION RELATING TO THE COMPANY IS MADE
KNOWN TO THE CERTIFYING OFFICERS BY OTHERS WITHIN THE COMPANY, PARTICULARLY
DURING THE PERIOD IN WHICH THE COMPANY’S FORM 10-K (OR 10-KSB) OR 10-Q (OR
10-QSB), AS THE CASE MAY BE, IS BEING PREPARED.  THE COMPANY’S CERTIFYING
OFFICERS HAVE EVALUATED THE EFFECTIVENESS OF THE COMPANY’S CONTROLS AND
PROCEDURES AS OF A DATE WITHIN 90 DAYS PRIOR TO THE FILING DATE OF THE FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2002 (SUCH DATE, THE “EVALUATION DATE”).  THE
COMPANY PRESENTED IN THE FORM 10-K FOR THE QUARTER ENDED DECEMBER 31, 2002 THE
CONCLUSIONS OF THE CERTIFYING OFFICERS ABOUT THE EFFECTIVENESS OF THE DISCLOSURE
CONTROLS AND PROCEDURES BASED ON THEIR EVALUATIONS AS OF THE EVALUATION DATE. 
SINCE THE EVALUATION DATE, THERE HAVE BEEN NO SIGNIFICANT CHANGES IN THE
COMPANY’S INTERNAL CONTROLS (AS SUCH TERM IS DEFINED IN ITEM 307(B) OF
REGULATION S-K UNDER THE EXCHANGE ACT) OR, THE COMPANY’S KNOWLEDGE, IN OTHER
FACTORS THAT COULD SIGNIFICANTLY AFFECT THE COMPANY’S INTERNAL CONTROLS.

 

(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 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

 

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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.

 

(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

 

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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.

 

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(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.

 

(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.

 

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.

 

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

 

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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

 

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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.

 

(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

 

14

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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 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

 

15

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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
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
UNTIL 5:00 PM ET ON FRIDAY, MAY 9, 2003, THE COMPANY MAY ISSUE AND SELL TO ONE
OR MORE OF THE PURCHASERS, OR TO ONE OR MORE NEW PURCHASERS, UP TO 1,000,000
ADDITIONAL SHARES OF ITS COMMON STOCK TOGETHER WITH UP TO 500,000 ADDITIONAL
WARRANTS ON THE IDENTICAL TERMS AS SET FORTH IN THIS AGREEMENT.  ANY PURCHASER
DESIRING TO PURCHASE ANY ADDITIONAL SHARES AND WARRANTS SHALL DIRECT ITSELF TO
THE COMPANY’S EXCLUSIVE AGENT FOR SUCH PURPOSE, RODMAN & RENSHAW, INC., WHICH
SHALL ALLOCATE

 

16

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SUCH ADDITIONAL SHARES SOLELY ON A FIRST-COME, FIRST-SERVED BASIS. NO PURCHASER
SHALL BE DEEMED TO HAVE ANY PRE-EMPTIVE OR PRO-RATA RIGHT TO PURCHASE ANY OF
SUCH ADDITIONAL SHARES AND WARRANTS.  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 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

 

17

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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

 

18

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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
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.

 

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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 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.  INDEPENDENT NATURE OF PURCHASERS’ OBLIGATIONS AND RIGHTS.  THE
OBLIGATIONS OF EACH PURCHASER UNDER ANY TRANSACTION DOCUMENT ARE SEVERAL AND NOT
JOINT WITH THE OBLIGATIONS OF ANY OTHER PURCHASER, AND NO PURCHASER SHALL BE
RESPONSIBLE IN ANY WAY FOR THE PERFORMANCE OF THE OBLIGATIONS OF ANY OTHER
PURCHASER UNDER ANY TRANSACTION DOCUMENT.  NOTHING CONTAINED HEREIN OR IN ANY
TRANSACTION DOCUMENT, AND NO ACTION TAKEN BY ANY PURCHASER PURSUANT THERETO,
SHALL BE DEEMED TO CONSTITUTE THE PURCHASERS AS A PARTNERSHIP, AN ASSOCIATION, A
JOINT VENTURE OR ANY OTHER KIND OF ENTITY, OR CREATE A PRESUMPTION THAT THE
PURCHASERS ARE IN ANY WAY ACTING IN CONCERT OR AS A GROUP WITH RESPECT TO SUCH
OBLIGATIONS OR THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENT.  EACH
PURCHASER SHALL BE ENTITLED TO INDEPENDENTLY PROTECT AND ENFORCE ITS RIGHTS,
INCLUDING WITHOUT LIMITATION THE RIGHTS ARISING OUT OF THIS AGREEMENT OR OUT OF
THE OTHER TRANSACTION DOCUMENTS, AND IT SHALL NOT BE NECESSARY FOR ANY OTHER
PURCHASER TO BE JOINED AS AN ADDITIONAL PARTY IN ANY PROCEEDING FOR SUCH
PURPOSE.  EACH PURCHASER WAS INTRODUCED TO THE COMPANY BY RODMAN & RENSHAW,
INC., WHICH HAS ACTED SOLELY AS AGENT FOR THE COMPANY AND NOT FOR ANY PURCHASER.

 

20

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EACH PURCHASER HAS BEEN REPRESENTED BY ITS OWN SEPARATE LEGAL COUNSEL IN THEIR
REVIEW AND NEGOTIATION OF THE TRANSACTION DOCUMENTS.  FOR REASONS OF
ADMINISTRATIVE CONVENIENCE ONLY, PURCHASERS AND THEIR RESPECTIVE COUNSEL HAVE
CHOSEN TO COMMUNICATE WITH THE COMPANY THROUGH FW.  FW DOES NOT REPRESENT ALL OF
THE PURCHASERS BUT ONLY RODMAN & RENSHAW, INC.  THE COMPANY HAS ELECTED TO
PROVIDE ALL PURCHASERS WITH THE SAME TERMS AND TRANSACTION DOCUMENTS FOR THE
CONVENIENCE OF THE COMPANY AND NOT BECAUSE IT WAS REQUIRED OR REQUESTED TO DO SO
BY THE PURCHASERS.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOLLOWS]

 

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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 Executive 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]

 

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SMITHFIELD FIDUCIARY LLC

 

 

 

 

 

 

 

 

 

By:

/s/ Adam J. Chill

 

 

 

 

Name:

Adam J. Chill

 

 

 

Title:

Authorized Signatory

 

 

 

 

 

 

 

 

Shares of Common Stock:

550,000

 

 

 

 

 

 

 

 

Warrant Shares:

275,000

 

 

 

 

 

 

 

 

Aggregate Purchase Price:

$2,750,000

 

 

 

 

 

 

 

 

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

 

 

OMICRON MASTER TRUST

 

 

Address for Notice:

By:  Omicron Capital L.P., as subadvisor

 

 

c/o Omicron Capital L.P.

By:  Omicron Capital Inc., its general partner

 

 

810 Seventh Avenue, 39th Floor

 

 

 

New York, New York 10019

By:

/s/ Olivier Morali

 

 

 

Attn: Brian Daly

 

Olivier Morali, President

 

 

 

Fax: (212) 803-5269

 

 

 

 

 

 

 

 

 

 

 

Shares of Common Stock:

400,000

 

 

 

 

 

 

 

 

Warrant Shares:

200,000

 

 

 

 

 

 

 

 

Aggregate Purchase Price:

$2,000,000

 

 

 

 

 

 

23

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RIVERVIEW GROUP, LLC

 

 

 

 

 

BY:

/S/ TERRY FEENEY

 

 

NAME:

TERRY FEENEY

TITLE:

CHIEF OPERATING OFFICER

ADDRESS FOR NOTICE:

 

 

 

666 5th Avenue, 8th Floor

 

New York, New York 10103

 

Attn:  Daniel Cardella

 

 

 

 

Shares of Common Stock:

650,000

 

 

 

 

Warrant Shares:

325,000

 

 

 

 

Aggregate Purchase Price:

$3,250,000

 

24

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THE TAIL WIND FUND LIMITED

 

 

By: Tail Wind Advisory & Management Ltd.

 

 

 

 

 

 

 

 

By:

/s/ David Crook

 

 

 

David Crook

 

 

Chief Executive Officer

 

 

 

 

 

Address for Notice:

 

 

David Crook, Esq.

 

 

Chief Executive Officer

 

 

Tail Wind Advisory & Management Ltd.

 

 

1st Floor, No. 1 Regent Street

 

 

London, SW1Y 4NS, UK

 

 

Fax: +44 20 7468 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:  +212-602-0654  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

 

 

 

Shares of Common Stock:

450,000

 

 

 

 

Warrant Shares:

225,000

 

 

 

 

Aggregate Purchase Price:

$2,500,000

 

25

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CRANSHIRE CAPITAL L.P.

 

 

 

 

 

By:

/s/ Mitchell P. Kopin

 

 

Name:

Mitchell P. Kopin

Title:

President – Downsview Capital

 

The General Partner

Address for Notice:

 

 

 

Attn: Mitchell Kopin

 

666 Dundee Road

 

Suite 1901

 

Northbrook, IL 60062

 

Fax: 847-562-9031

 

 

 

 

Shares of Common Stock:

700,000

 

 

 

 

Warrant Shares:

350,000

 

 

 

 

Aggregate Purchase Price:

$3,500,000

 

 

RODMAN & RENSHAW, INC.

 

 

 

 

 

By:

/s/ John J. Borer III

 

 

 

 

Name: John J. Borer III

 

 

 

Title: Senior Managing Director

 

 

 

Address for Notice:

 

330 Madison Avenue

 

27th Floor

 

New York, NY 10019

 

Fax: 212-356-0536

 

 

 

 

Shares of Common Stock:

200,000

 

 

 

 

Warrant Shares:

100,000

 

 

 

 

Aggregate Purchase Price:

$1,000,000

 

26

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SOLOMON STRATEGIC HOLDINGS, INC.

 

 

 

 

 

 

 

 

By:

/s/ Andrew P. MacKellar

 

 

 

Andrew P. MacKellar

 

 

Director

 

 

 

 

 

Address for Notice:

 

 

c/o Andrew P. MacKellar

 

 

Greenlands.

 

 

The Red Gap

 

 

Castletown, Isle of Man, IM9 1 HB, British Isles

 

 

Fax: +44 1624 824191

 

 

 

 

 

 

 

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:

 

 

Peter J. Weisman, P.C.

 

 

110 East 59th Street

 

 

New York, NY  10005

 

 

Tel: +212-418-4792  Fax: 212-317-8855

 

 

 

 

 

Shares of Common Stock:

50,000

 

 

 

 

 

 

Warrant Shares:

25,000

 

 

 

 

 

 

Aggregate Purchase Price:

$250,000

 

27

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Exhibits:

 

A                                      Registration Rights Agreement

B                                        Warrant

C                                        Transfer Agent Instructions

 

Schedules:

 

3.1(a)                   Subsidiaries

3.1(g)                  Capitalization

3.1(t)                     Commissions

3.1(w)                Registration Rights

 

1

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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)

 

200,000,000

 

26,581,003

(1)

See table below

 

 

 

 

 

 

 

 

 

Preferred Stock
(par value $.0001)

 

20,000,000

 

-0-

 

-0-

 

 

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

Footnotes:

(1)           Numbers, including outstanding shares in the following table, are
as of May 2, 2003.

 

Rights to Acquire Common Stock

 

Type of
Right

 

Number of Shares
Covered (1)(2)

 

 

 

 

 

Stock options

 

3,670,270

 

Stock purchase plan

 

0

(3)

Warrants

 

10,903,684

(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 May
2, 2003 and there may be differences of up to 0 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 up to 40,000 shares (for calendar 2003).

(4)          The Warrant for SuperGen, Inc. (“SuperGen Warrant”) covering
1,665,878 shares has an anti-dilution provision (percentage ownership, not
economic, dilution) that adjusts the number of shares that may be acquired to
approximately 11.11% of the then outstanding

 

1

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shares upon the first exercise of the warrant.  The adjustment is to the number
of shares, but the exercise per share is not adjusted.  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:

 

None

 

Anti-dilution Adjustment Rights

 

The investors in the 2002 Pipe Financing are entitled to certain price
adjustments under Section 9 of their warrants to reflect certain subsequent
financings at lower prices than the option exercise price which price
adjustments will be triggered by this financing.

 

(t)                                    Commissions

 

The Company has agreed to pay Rodman & Renshaw, Inc. certain percentage
placement fees, certain reimbursable expenses and give the placement agent a
warrant (7% warrant coverage) in connection with this of its services hereunder.

 

(w)                                Registration Rights

 

The Company, as part of the registration covering the shares in this offering
will be registering up to 50,000 shares of its Common Stock for Thomas Jefferson
University.

 

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

 

2

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