Exhibit 10.1


 


EXECUTION COPY


SECURITIES PURCHASE AGREEMENT


 


This
Securities Purchase Agreement (this “Agreement”) is dated as of February 20,
2004 by and between NeoRx Corporation, a Washington 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, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company, certain securities of the
Company as more fully described in this Agreement.


 


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


“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 under the Securities Act.  With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by the same
investment manager as such Purchaser will be deemed to be an Affiliate of such
Purchaser.


 


“Bankruptcy Event”
means any of the following events: (a) the Company or any Subsidiary commences
a case or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
or similar law of any jurisdiction relating to the Company or any Subsidiary
thereof; (b) there is commenced against the Company or any Subsidiary any such
case or proceeding that is not dismissed within 60 days after commencement; (c)
the Company or any Subsidiary is adjudicated insolvent or bankrupt or any order
of relief or other order approving any such case or proceeding is entered; (d)
the Company or any Subsidiary suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not discharged or
stayed within 60 days; (e) the Company or any Subsidiary makes a general
assignment for the benefit of creditors; (f) the Company or any Subsidiary
fails to pay, or states that it is unable to pay or is unable to pay, its debts
generally as they become due; (g) the Company or any Subsidiary calls a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (h) the Company or any Subsidiary, by any act or
failure to act, expressly indicates its


 

















 


consent to, approval of or acquiescence in any of the foregoing or
takes any corporate or other action for the purpose of effecting any of the
foregoing.


 


“Business Day”
means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain
closed.


 


“Change of Control”
means the consummation of a “Rule 13e-3 transaction” as defined in Rule 13e-3
under the Exchange Act with respect to the Company, or the execution by the
Company or its controlling stockholders of an agreement providing for or
reasonably likely to result in any of the foregoing event.  For purposes of clarification only and
without otherwise qualifying, limiting or expanding the definition of “Change
of Control” herein, the parties agree that the consummation of a Fundamental
Transaction (as defined in the Warrant) or other transaction that results in a
merger with a publicly traded company listed on an Eligible Market is not, and
will not be deemed to result in. a Change of Control.


 


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


 


“Closing Date” means
the date of the Closing.


 


“Closing Price” means,
for any date, the price determined by the first of the following clauses that
applies:  (a) if the Common Stock is
then listed or quoted on an Eligible Market or any other national securities
exchange, the closing bid price per share of the Common Stock for such date (or
the nearest preceding date) on the primary Eligible Market or exchange on which
the Common Stock is then listed or quoted; (b) if prices for the Common
Stock are then quoted on the OTC Bulletin Board, the closing bid price per share
of the Common Stock for such date (or the nearest preceding date) so quoted;
(c) if prices for the Common Stock are then reported in the “Pink Sheets”
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent closing bid price per share of the Common Stock so reported; or
(d) in all other cases, the fair market value of a share of Common Stock
as determined by an independent appraiser selected in good faith by a
majority-in-interest of the Purchasers.


 


“Commission” means
the Securities and Exchange Commission.


 


“Common Stock” means
the common stock of the Company, par value $0.02 per share.


 


“Common Stock Equivalents”
means, collectively, Common Stock, Options and Convertible Securities.


 


“Company Counsel”
means Perkins Coie LLP.


 


“Convertible Securities”
means any stock or securities (other than Options) convertible into or
exercisable or exchangeable for Common Stock.


 


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“Effective Date”
means the date that the Registration Statement is first declared effective by
the Commission.


 


“Eligible Market”
means any of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ National Market or the NASDAQ Small Cap Market.


 


“Exchange Act” means
the Securities Exchange Act of 1934, as amended.


 


“Excluded Stock” means
the issuance of Company securities or the right to acquire Company securities
(A) upon exercise or conversion of any Options, Convertible Securities or other
securities described in Schedule 3.1(f) (provided that such exercise or
conversion occurs in accordance with the terms thereof, without amendment or
modification of the terms of such securities after the date of this Agreement),
(B) in connection with any issuance of securities to employees, officers,
directors or consultants of the Company pursuant to any stock option, stock
purchase or restricted stock plans or agreements heretofore or hereafter duly
adopted by the Company’s board of directors (including pursuant to options
granted prior to the date hereof), (C) pursuant to a bona fide firm commitment
underwritten public offering (excluding any equity line) in an aggregate
offering amount greater than $10,000,000, (D) pursuant to acquisition transactions
or other corporate reorganizations in each case, as approved by the Company’s
board of directors (including but not limited to mergers, consolidations, share
exchanges and asset purchases), the primary purpose of which is not to raise
cash, (E) in connection with joint ventures, development agreements, strategic
collaborations or licensing transactions, the primary purpose of which is not
to raise cash, (F) in connection with the Rights Agreement or any successor
rights plan, poison pill or similar arrangement hereafter approved by the
Board, or (G) to commercial financial institutions or lessors whose primary
business is, and in connection with, commercial credit arrangements, equipment
financings or service agreements, in each case as approved by the Company’s
board of directors.


 


“Filing Date” means
March 21, 2004.


 


“Lien” means any
lien, charge, claim, security interest, encumbrance, right of first refusal or
other restriction.


 


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


 


“Options”
means any rights (including under the Rights Plan), warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.


 


“Person” means any
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 any court or other federal,
state, local or other governmental authority or other entity of any kind.


 


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“Proceeding” means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.


 


“Prospectus” means
the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.


 


“Purchase Price”
means $5.25.


 


“Rights Plan”
means the Rights Agreement dated as of April 10, 1996 between Mellon Investor
Services LLC (formerly ChaseMellon Shareholder Services, L.L.C, and successor
to First Interstate Bank of Washington, NA), as rights agent, and the Company,
as amended.


 


“Reference Price”
shall initially be the Purchase Price and, at any time after a cash payment is
received by a Purchaser pursuant to Section 4.9 of this Agreement, shall be
equal to the lowest Issuance Price (as defined in such Section 4.9).


 


“Registrable Securities”
means any Common Stock (including Underlying Shares) issued or issuable
pursuant to the Transaction Documents, together with any securities issued or
issuable upon any stock split, dividend or other distribution, recapitalization
or similar event with respect to the foregoing; provided, however, that
Registrable Securities shall cease to be Registrable Securities when (A) such
shares of Common Stock have been disposed of in accordance with the Registration
Statement or (B) such shares of Common Stock have been transferred pursuant to
Rule 144(k) under the Securities Act.


 


“Registration Statement”
means each registration statement required to be filed under Article VI,
including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.


 


“Required Effectiveness Date”
means the 90th day after the Closing Date.


 


“Rule 144,”  “Rule 415,”
and “Rule
424” means Rule 144, Rule 415 and Rule 424, respectively,
promulgated by the Commission pursuant to the Securities Act, as such Rules 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, the Warrants and the Underlying Shares.


 


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“Securities Act”
means the Securities Act of 1933, as amended.


 


“Series B
Preferred Stock” means the Series B Convertible Preferred Stock of
the Company, $.02 par value.


 


“Shares” means an
aggregate of 1,800,000 shares of Common Stock, which are being issued and sold
to the Purchasers at the Closing.


 


“Special Counsel” means
Proskauer Rose, LLP or one special counsel to the Purchasers otherwise selected
by a majority in interest by the Purchasers with notice of such selection given
to the Company.


 


“Subsidiary” means
any Person in which the Company, directly or indirectly, owns capital stock or
holds an equity or similar interest that is required to be listed in Schedule
3.1(a).


 


“Trading Day” means
(a) any day on which the Common Stock is listed or quoted and traded on its
primary Trading Market, (b) if the Common Stock is not then listed or quoted
and traded on any Eligible Market, then a day on which trading occurs on the
American Stock Exchange (or any successor thereto), or (c) if trading does not
occur on the American Stock Exchange (or any successor thereto), any Business
Day.


 


“Trading Market”
means the NASDAQ SmallCap Market or any other Eligible Market on which the
Common Stock is then listed or quoted.


 


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


 


“Transfer
Agent” means Mellon Investor Services, LLC, or any other transfer
agent selected by the Company.


 


“Transfer
Agent Instructions” means the Irrevocable Transfer Agent
Instructions, in the form of Exhibit D, executed by the Company and
delivered to and acknowledged in writing by the Transfer Agent.


 


“Underlying Shares”
means the shares of Common Stock issuable upon exercise of the Warrants and any
securities issued in exchange for or in respect of such shares.


 


“VWAP”
means, with respect to any particular Trading Day or for any particular period,
the volume weighted average trading price per share of Common Stock on such
Trading Day or for such period on an Eligible Market as reported by Bloomberg,
L.P., or any successor performing similar functions.


 


“Warrants” means,
collectively, the Common Stock purchase warrants issued and sold under this
Agreement, in the form of Exhibit A.


 


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ARTICLE II

PURCHASE AND SALE


 


2.1           Closing.  Subject to the terms and conditions set
forth in this Agreement, at the Closing the Company shall issue and sell to
each Purchaser, and each Purchaser shall, severally and not jointly, purchase
from the Company, such number of Shares and a Warrant to purchase such number
of Underlying Shares, each as indicated below such Purchaser’s name on the
signature page of this Agreement, for an aggregate purchase price for such
Purchaser as indicated below such Purchaser’s name on the applicable signature
page of this Agreement.  The Closing
shall take place at the offices of Proskauer Rose LLP immediately following the
execution hereof, or at such other location or time as the parties may agree.


 


2.2           Closing
Deliveries.


 


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


 


(i)            one or more stock certificates, free and clear of all
restrictive and other legends (except as expressly provided in Section 4.1(b)
hereof or required by the Washington Business Corporation Act), evidencing the
number of Shares indicated below such Purchaser’s name on the signature page of
this Agreement, registered in the name of such Purchaser;


 


(ii)           a Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire the number of
Underlying Shares indicated below such Purchaser’s name on the signature page
of this Agreement, on the terms set forth therein;


 


(iii)          a legal opinion of Company Counsel, in
the form of Exhibit B, executed by such counsel and delivered to the
Purchasers; and


 


(iv)          duly executed Transfer Agent Instructions acknowledged by
the Transfer Agent.


 


(b)           At the Closing,
each Purchaser shall deliver or cause to be delivered to the Company the
aggregate purchase price indicated below such Purchaser’s name on the signature
page of this Agreement, in United States dollars and in immediately available
funds, by wire transfer to an account designated in writing by the Company for
such purpose.


 


ARTICLE III

REPRESENTATIONS AND WARRANTIES


 


3.1           Representations
and Warranties of the Company.  The
Company hereby represents and warrants to each of the Purchasers as follows:


 


(a)           Subsidiaries.  The Company has no direct or indirect
Subsidiaries other than those listed in Schedule 3.1(a).  The Company owns, directly or indirectly,
all of the


 


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capital stock of each Subsidiary free and
clear of any Lien, 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 the Subsidiaries is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation , with the
corporate power 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 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 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 could reasonably be expected to result in a
material adverse effect on the results of operations, assets, current
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 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, except as may be limited by
bankruptcy, reorganization, insolvency, moratorium and similar laws of general
application relating to or affecting the enforcement of rights of creditors,
and except as enforceability of the obligations hereunder are subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or law).


 


(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
articles of incorporation, bylaws or other organizational or charter documents,
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or
other instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, except to the extent that such conflict, default or termination right
could


 


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not reasonably be expected to have a Material
Adverse Effect, 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 and the rules and
regulations of any self-regulatory organization to which the Company or its securities
are subject), or by which any material property or asset of the Company or a
Subsidiary is bound or affected.


 


(e)           Issuance of the
Securities.  The Securities
(including the Underlying Shares) are duly authorized and, when issued and paid
for in accordance with the Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens and shall not
be subject to preemptive rights or similar rights of stockholders.  The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
upon exercise of the Warrants.


 


(f)            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(f).  All outstanding shares
of capital stock are duly authorized, validly issued, fully paid and nonassessable
and have been issued in compliance with all applicable securities laws.  Except as disclosed in Schedule 3.1(f),
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 exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the Company
or any Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of
Common Stock.  Except as disclosed in
Schedule 3.1(f), 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). The issue and sale of the Securities (including
the Underlying Shares) 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, exchange or reset price under such securities.  To the knowledge of the Company, except as
specifically disclosed in Schedule 3.1(f), no Person or group of related
Persons beneficially owns (as determined pursuant to Rule 13d-3 under the
Exchange Act), or has the right to acquire, by agreement with or by obligation
binding upon the Company, beneficial ownership of in excess of 5% of the
outstanding Common Stock, ignoring for such purposes any limitation on the
number of shares of Common Stock that may be owned at any single time.


 


(g)           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 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 this Agreement and 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 made
available to the Purchasers


 


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true, correct and complete copies 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 United States generally accepted accounting principles
applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto, and 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.  All material agreements to which the Company
or any Subsidiary is a party or to which the property or assets of the Company
or any Subsidiary are subject are included as part of or specifically
identified in the SEC Reports.


 


(h)           Material Changes.  Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports or as set forth in Schedule 3.1(h), (i) there has
been no event, occurrence or development that, individually or in the
aggregate, has had or that could reasonably be expected to 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, restricted stock or stock purchase plans or agreements.


 


(i)            Absence of
Litigation.  Except as set forth in
Schedule 3.1(i), there is no action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
that could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Schedule 3.1(i) contains a complete list and summary
description of any pending or, to the knowledge of the Company, threatened
proceeding against or affecting the Company or any of its Subsidiaries that
could individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.


 


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(j)            Compliance.  Except as set forth in the SEC Reports,
neither the Company nor any Subsidiary (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, 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) 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, including
without limitation all foreign, federal, state and local laws relating to
taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case as
could not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect.


 


(k)           Title to Assets.
Except as set forth in the SEC Reports, 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 material compliance.


 


(l)            Certain Fees.  Except for the fees described in Schedule
3.1(l), all of which are payable to registered broker-dealers, 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.


(m)          Private Placement.  Neither the Company nor any Person acting on
the Company’s behalf has sold or offered to sell or solicited any offer to buy
the Securities by means of any form of general solicitation or
advertising.  Neither the Company nor
any of its Affiliates nor any Person acting on the Company’s behalf has,
directly or indirectly, at any time within the past six months, made any offer
or sale of any security or solicitation of any offer to buy any security under
circumstances that would (i) eliminate the availability of the exemption from
registration under Regulation D under the Securities Act in connection with the
offer and sale of the Securities as contemplated hereby or (ii) except as set
forth in Schedule 3.1(m), cause the offering of the Securities pursuant to the
Transaction Documents to be integrated with prior offerings by the Company for
purposes of any applicable law, regulation or stockholder approval provisions,
including, without limitation, under the rules and regulations of any Trading
Market.  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.  The Company
is not a United States real property holding corporation within the meaning of
the Foreign Investment in Real Property Tax Act of 1980.


 


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(n)           Form S-3
Eligibility. The Company is eligible to register its Common Stock for
resale by the Purchasers using Form S-3 promulgated under the Securities Act.


 


(o)           Listing and
Maintenance Requirements.  Except as
set forth in the SEC Reports, the Company has not, in the two years preceding
the date hereof, received notice (written or oral) 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 the listing
and maintenance requirements of the Nasdaq SmallCap Market.


 


(p)           Registration
Rights.  Except as contemplated by
the Transaction Documents or as described in Schedule 3.1(p), 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.


 


(q)           Application of
Takeover Protections.  There is no
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s charter documents or the laws of its state of incorporation
that is or could reasonably be expected to become applicable to any of 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.


 


(r)            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 constitutes or might constitute
material, nonpublic information, other than the signing of this Agreement,
which will be publicly disclosed in the press release issued pursuant to
Section 4.6.  The Company understands
and confirms that each of 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 in all material respects 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.  No event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or
its or their business, properties, current prospects, operations or financial
condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly
announced or disclosed.  The Company
acknowledges and agrees that no Purchaser makes or has made (i) any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2 or (ii) any oral
statement, commitment or promise to the Company or, to its knowledge, any of
its representatives which is or was an inducement to the Company to enter into
this Agreement or otherwise.


 


11

















 


(s)           Acknowledgment
Regarding Purchasers’ Purchase of Securities.  The Company acknowledges and agrees that each of the Purchasers
is acting solely in the capacity of an arm’s length purchaser with respect to
this Agreement and the transactions contemplated hereby.  The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company or any
other Purchaser (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by any Purchaser or
any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Purchaser’s purchase of the Securities. 
The Company further represents to each Purchaser that the Company’s
decision to enter into this Agreement has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company and its
representatives.


 


(t)            Patents and
Trademarks.  Other than as set forth
in the SEC Reports and Schedule 3.1(t), 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”). Neither the
Company nor any Subsidiary has received a written notice 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.


 


(u)           Insurance.  The Company and the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged (currently limited to the clinical
testing phase).  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
present business without a significant increase in cost, except for significant
increases in cost that are generally applicable in the insurance industry.


 


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


 


(w)          Transactions With
Affiliates and Employees.  Except as
set forth in SEC Reports, none of the executive 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,


 


12

















 


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 executive
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.


 


(x)            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 currently 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).


 


(y)           Internal
Accounting Controls.  The Company
maintains 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 consolidated 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.


 


(z)            Going Concern.  The Company and Subsidiaries have no
knowledge (upon receipt of the proceeds of this transaction) that the Company
will receive a “going concern” opinion from the Company’s independent public
accountants in the Company’s annual report on Form 10-K pursuant to Section 13
or 15(d) under the Exchange Act for the fiscal year ended December 31, 2003.


 


3.2           Representations
and Warranties of the Purchasers. 
Each Purchaser hereby, as to itself only 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 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 Shares and the Warrants
hereunder has been duly authorized by all necessary action on the part of such
Purchaser and no further consent or action is required by the Purchaser, its
directors, partners, members or stockholders. 
This Agreement and the Transaction Documents to which such Purchaser is
a party have been duly executed by such Purchaser and is, or when delivered in
accordance with


 


13

















 


the terms hereof, will constitute, the valid
and binding obligation of such Purchaser, enforceable against it in accordance
with its terms, except as may be limited by bankruptcy, reorganization,
insolvency, moratorium and similar laws of general application relating to or
affecting the enforcement of rights of creditors, and except as enforceability
of the obligations hereunder are subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or law).


 


(b)           Investment
Intent.  Such Purchaser is acquiring
the Securities for its own account for investment purposes and not with a view
to or for distributing or reselling such Securities or any part thereof in
violation of applicable securities laws, 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.


 


(c)           Purchaser Status.  At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, an “accredited investor” as
defined in Rule 501(a) under the Securities Act. Such Purchaser is aware that
none of the Securities has been registered under the Securities Act or under
applicable state securities or blue sky laws.


 


(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 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. The Purchaser is not purchasing the securities as a result of
any advertisement, article, notice or other communication regarding the
securities


 


14

















 


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 on
Exemptions.   Such Purchaser
understands that (i) the Securities are “restricted securities” under the
federal securities laws as they are being offered and sold to such Purchaser
without registration in a private placement that is exempt form the
registration provisions of the Securities Act and applicable state securities
laws and (ii) the Company is relying upon the truth and accuracy of, and such
Purchaser’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the availability of such exemptions and the eligibility of such
Purchaser to acquire the Securities.


 


ARTICLE IV

OTHER AGREEMENTS OF THE PARTIES


4.1           Transfer
Restrictions.


 


(a)           Securities may only
be disposed of pursuant to an effective registration statement under the
Securities Act or pursuant to an available exemption from the registration
requirements of the Securities Act, and in compliance with any applicable
federal and state securities laws.  In
connection with any transfer of Securities other than pursuant to an effective
registration statement or to the Company or pursuant to Rule 144(k), except as
otherwise set forth herein, the Company may require the transferor 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 under the
Securities Act.  Notwithstanding the
foregoing, the Company hereby consents to and agrees to register on the books
of the Company and with its Transfer Agent, without any such legal opinion, any
transfer of Securities by a Purchaser to an Affiliate of such Purchaser,
provided that the transferee (i) certifies to the Company that it is an
“accredited investor” as defined in Rule 501(a) under the Securities Act and
that it is acquiring the Securities solely for investment purposes (subject to
the qualifications hereof).  Any such
transferee shall agree in writing to be bound by the terms of this Agreement
and shall have the rights of a Purchaser under this Agreement and, if such
transfer is of all or a portion of the Warrants held by such Purchaser, as a
holder of the Warrants.


 


(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 [NOT] 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


 


15

















 


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


 


THE SALE, TRANSFER OR ASSIGNMENT OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN SECURITIES PURCHASE AGREEMENT DATED AS OF FEBRUARY 18,
2004, AS AMENDED FROM TIME TO TIME AMONG THE COMPANY AND CERTAIN HOLDERS OF
OUTSTANDING SECURITIES.  COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY.


 


Certificates evidencing the Securities shall
not be required to contain such legend or any other legend (other than any
legend required by the Washington Business Corporation Act) (i) following any
sale of the Securities by the Purchaser pursuant to a Registration Statement
that is effective under the Securities Act, or (ii) following any sale of the
such Securities pursuant to Rule 144, or (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 promptly after effectiveness of the Registration Statement
covering the Shares and the Underlying Shares cause a legal opinion to be
delivered to and maintained with its Transfer Agent, together with any other
authorizations, certificates and directions required by the Transfer Agent, which
authorize and direct the Transfer Agent to issue the Shares and Underlying
Shares without a legend upon sale by the Purchaser under an effective
Registration Statement.  At such time as
a legend is no longer required for the Securities, the Company will no later
than three Trading Days following the delivery by a Purchaser to the Company or
the Transfer Agent of a legended certificate representing such Securities,
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 Agreement.


 


4.2           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 sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with paragraph (c) of Rule 144 such information as is required for the
Purchasers to sell the Securities under Rule 144.  The Company further


 


16

















 


covenants that it will take
such further action as any holder of Securities may reasonably request to
satisfy the provisions of Rule 144 applicable to the issuer of securities
relating to transactions for the sale of securities pursuant to Rule 144.


 


4.3           Integration.  The Company shall not, and shall use its
best efforts to ensure that no Affiliate of the Company shall, after the date
hereof, 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.


 


4.4           Reservation
of Securities.  The Company shall
maintain a reserve from its duly authorized shares of Common Stock for issuance
pursuant to the Transaction Documents in such amount as may be required to
fulfill its obligations in full under the Transaction Documents.  In the event that at any time the then
authorized shares of Common Stock are insufficient for the Company to satisfy
its obligations in full under the Transaction Documents, the Company shall
promptly take such actions as may be required to increase the number of
authorized shares.


 


4.5           Subsequent
Placements.


 


(a)           Subject to Section
4.5(b), from the date hereof until the Effective Date (the “Rights Period”), the Company will not,
directly or indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to purchase or
other disposition of) any of its or the Subsidiaries’ equity or equity
equivalent securities, 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 exchangeable or exercisable for Common
Stock or Common Stock Equivalents (any such offer, sale, grant, disposition or
announcement being referred to as a “Subsequent
Placement”). unless the Company shall have first complied with this
Section 4.5(a).


 


(i)            The Company shall deliver to each Purchaser a written
notice (the “Notice”) of any
proposed or intended Subsequent Placement, , which Notice shall (w) identify
and describe the Subsequent Placement and the securities proposed to be
offered, sold or granted therein (the “Offered
Securities”), (x) describe the price and other terms upon which the
Offered Securities are to be issued, sold or exchanged, and the number or
amount of the Offered Securities to be issued, sold or exchanged, (y) identify
the Persons or entities with which the Subsequent Placement is to be effected
and (z) offer (the “Offer”) to
issue and sell to or exchange with each Purchaser, on the same terms set forth
in the Notice, a pro-rata portion of the Offered Securities, based on such
Purchaser’s pro rata portion of the aggregate purchase price paid by the
Purchasers for all of the Shares purchased hereunder (the “Basic Amount”), and with respect to each
Purchaser that elects to purchase its Basic Amount, any additional portion of
the Offered Securities attributable to the Basic Amounts of other Purchasers as
such Purchaser shall indicate it will purchase or acquire should the other
Purchasers subscribe for less than their Basic Amounts (the “Undersubscription Amount”).


 


17

















 


(ii)           To accept the Offer, in whole or in part, a Purchaser must
deliver a written notice to the Company prior to 6:30 PM New York Time on the
second Trading Day following the date on which the Offer is delivered (as
determined in Section 7.5) (the “Acceptance
Period”), setting forth the portion of the Purchaser’s Basic Amount
that such Purchaser elects to purchase and, if such Purchaser shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any, that
such Purchaser elects to purchase (in either case, the “Notice of Acceptance”).  If the Basic Amounts subscribed for by all
Purchasers are less than the total of all of the Basic Amounts, then each
Purchaser who has set forth an Undersubcription Amount in its Notice of
Acceptance shall be entitled to purchase, in addition to the Basic Amounts
subscribed for, the Undersubscription Amount it has subscribed for; provided,
however, that if the Undersubscription Amounts subscribed for exceed the
difference between the total of all the Basic Amounts and the Basic Amounts
subscribed for (the “Available
Undersubscription Amount”), each Purchaser who has subscribed for
any Undersubscription Amount shall be entitled to purchase only that portion of
the Available Undersubscription Amount as the Basic Amount of such Purchaser
bears to the total Basic Amounts of all Purchasers that have subscribed for
Undersubscription Amounts, subject to rounding by the Board of Directors to the
extent its deems reasonably necessary.


 


(iii)          The Company shall have 5 Trading Days from the expiration of
the Acceptance Period to issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by the
Purchasers (the “Refused Securities”),
but only to the offerees described in the Offer (if so described therein) and
only upon terms and conditions (including, without limitation, unit prices and
interest rates) that are not more favorable to the acquiring Person or Persons
or less favorable to the Company than those set forth in the Offer.


 


(iv)          In the event the Company shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the terms
specified in Section 4.5(a)(iii) above), then each Purchaser may, at its sole
option and in its sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount that shall be not
less than the number or amount of the Offered Securities that the Purchaser
elected to purchase pursuant to Section 4.5(a)(ii) above multiplied by a
fraction, (i) the numerator of which shall be the number or amount of Offered
Securities the Company actually proposes to issue, sell or exchange (including
Offered Securities to be issued or sold to Purchasers pursuant to Section
4.5(a)(ii) above prior to such reduction) and (ii) the denominator of which
shall be the original amount of the Offered Securities.  In the event that any Purchaser so elects to
reduce the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities
have again been offered to the Purchasers in accordance with Section 4.5(a)(i)
above.


 


(v)           Upon the closing of the Subsequent Placement, the
Purchasers shall acquire from the Company, and the Company shall issue to the
Purchasers, the number or amount of Offered Securities specified in the Notices
of Acceptance, as


 


18

















 


reduced pursuant to Section 4.5(a)(iv) above
if the Purchasers have so elected, upon the terms and conditions specified in
the Offer.  The sale by the Company and
the purchase by the Purchasers of any Offered Securities are subject in all
cases to the preparation, execution and delivery by the Company and the
Purchasers of mutually acceptable documentation no later than 5 Trading Days after
the expiration of the Acceptance Period. 
If mutually acceptable documentation is not prepared, executed and
delivered within such period, the Offered Securities will be deemed Refused
Securities and the Company shall be entitled to proceed with their sale
pursuant to Section 4.5(a)(iii) above and on the same terms set forth in the
documentation provided to the Purchasers.


 


(vi)          Any Offered Securities not acquired by the Purchasers or
other Persons in accordance with Section 4.5(a)(iii) above may not be issued,
sold or exchanged until they are again offered to the Purchasers under the
procedures specified in this Agreement.


 


(b)           The restrictions
contained in paragraph (a) of this Section shall not apply to Excluded
Stock.  The Rights Period set forth in
the preceding paragraph (a) shall be extended for the number of Trading Days
during such period in which (i) trading in the Common Stock is suspended by any
Trading Market, (ii) the Registration Statement is not effective, or (iii) the
prospectus included in the Registration Statement may not be used by the
Purchasers for the resale of Registrable Securities thereunder.


 


4.6           Securities
Laws Disclosure; Publicity.   The
Company shall, on or before 9:30a.m., New York Time, on February 23, 2004,
issue a press release acceptable to the Purchasers disclosing all material
terms of the transactions contemplated hereby. 
On the Closing Date, the Company shall file a Current Report on Form 8-K
with the Commission (the “8-K Filing”)
describing the terms of the transactions contemplated by the Transaction
Documents and including as exhibits to such Current Report on Form 8-K this
Agreement and the form of Warrants, in the form required by the Exchange
Act.  Thereafter, the Company shall
timely file any filings and notices required by the Commission or applicable
law with respect to the transactions contemplated hereby and provide copies
thereof to the Purchasers promptly after filing.  Except with respect to the 8-K Filing (a copy of which will be
provided to the Purchasers for their review as early as practicable prior to
its filing), the Company shall, at least two Trading Days prior to the filing
or dissemination of any disclosure required by this paragraph, provide a copy
thereof to the Purchasers for their review. 
The Company and the Purchasers shall consult with each other in issuing
any press releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or Trading Market
with respect to the transactions contemplated hereby, and neither party shall
issue any such press release or otherwise make any such public statement,
filing or other communication without the prior consent of the other, except if
(i) such disclosure is required by law or Trading Market regulations, in which
case the disclosing party shall promptly provide the other party with prior
notice of such public statement, filing or other communication or (ii) such
disclosure is in substantial conformity with the 8-K Filing.  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 (but not any disclosure as to the controlling
Persons thereof) is required by law or Trading Market regulations, in which


 


19

















 


case the Company shall provide
the Purchasers with prior notice of such disclosure.  The Company shall not, and shall cause each of its Subsidiaries
and its and each of their respective officers, directors, employees and agents
not to, provide any Purchaser with any information it believes to be material
nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the 8-K Filing without the express written consent of such
Purchaser.  The Company agrees to comply
with Regulation FD promulgated under the Exchange Act.  The Company represents, warrants and
confirms that each press release disseminated during the 36 months preceding
the date of this Agreement did not, at the time of release, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading


 


4.7           Use
of Proceeds.  Except as set forth in
Schedule 4.7, the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital and general corporate purposes, and
not for the repayment 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 or consistent with prior practices), the redemption of any Company
equity or equity-equivalent securities or the settlement of any outstanding
litigation.


 


4.8           Reimbursement.  If any Purchaser or any of its Affiliates or
any officer, director, partner, controlling Person, employee or agent of a
Purchaser or any of its Affiliates (a “Related
Person”) becomes involved in any capacity in any Proceeding brought
by or against any Person in connection with or as a result of any misrepresentation,
breach or inaccuracy of any representation, warranty, covenant or agreement
made by the Company in any Transaction Documents, the Company will indemnify
and hold harmless such Purchaser or Related Person for its reasonable legal and
other expenses (including the costs of any investigation, preparation and
travel) and for any Losses incurred in connection therewith, as such expenses
or Losses are incurred, excluding only Losses that result directly from such
Purchaser’s or Related Person’s gross negligence or willful misconduct.  The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below.  The indemnification
obligations of the Company under this paragraph shall be in addition to any
liability that the Company may otherwise have and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Purchasers and any such Related Persons.  The Company also agrees that neither the
Purchasers nor any Related Persons shall have any liability to the Company or
any Person asserting claims on behalf of or in right of the Company in
connection with or as a result of the transactions contemplated by the
Transaction Documents, except to the extent that any Losses incurred by the
Company result from the gross negligence or willful misconduct of the
applicable Purchaser or Related Person in connection with such transactions.  If the Company breaches its obligations under
any Transaction Document, then, in addition to any other liabilities the
Company may have under any Transaction Document or applicable law, the Company
shall pay or reimburse the Purchasers on demand for all costs of collection and
enforcement (including reasonable attorneys fees and expenses).  Without limiting the generality of the
foregoing, the Company specifically agrees to reimburse the Purchasers on
demand for all costs of enforcing the indemnification obligations in this
paragraph


 


20

















 


4.9           Additional
Issuance of Shares.


 


(a)           In the event that
after the date hereof and prior to the Effective Date the Company, without the
prior written consent of the Purchasers holding at least a majority of the
Registrable Securities, issues or agrees to issue any Common Stock Equivalents,
other than shares of Excluded Stock, for a consideration (before deduction of
any discounts, fees, commissions and other expenses) to the Company per share
less than the Reference Price (the “Issuance
Price”), each Purchaser shall be entitled immediately (and in any
event prior to the end of the first Trading Day after the applicable
issuance)  to receive from the Company
by wire transfer an amount in cash equal to the product of (A) the difference between
the Reference Price minus such Issuance Price, times (B) the number of Shares
purchased by such Purchaser hereunder.


 


(i)            (b)           For
purposes of any cash payments to a Purchaser under Section 4.9(a) above, the
following provisions shall be applicable: In connection with any issuance of
any Common Stock Equivalents, (x) the maximum number of shares of Common Stock
issuable at any time upon conversion, exercise or exchange of such Common Stock
Equivalents (the “Deemed Number”)
shall be deemed to be outstanding upon issuance of such Common Stock
Equivalents, and (y) the price per share applicable to such Common Stock
Equivalents shall be deemed to equal the minimum dollar value of consideration
payable to the Company to purchase such Common Stock Equivalents and to
convert, exercise or exchange them into Common Stock, divided by the Deemed
Number.


 


(ii)           In the case of the issuance of Common Stock Equivalents for
cash, the amount of the consideration received by the Company shall be deemed
to be the aggregate amount of cash received by the Company for such Common
Stock Equivalents.


 


(iii)          In the case of the issuance of Common Stock Equivalents for
a consideration in whole or in part other than cash, including securities
acquired in exchange therefor (other than securities by their terms so
exchangeable), the consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of Directors of
the Company, irrespective of any accounting treatment.


 


4.10         Shareholders’
Rights Plan.   In the event that a
shareholders’ rights plan (or similar plan or arrangement) 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 could be
deemed to trigger the provisions of such plan solely by virtue of receiving
Securities under the Transaction Documents, assuming for this purpose that such
Purchaser does not otherwise acquire control of any other shares of Common Stock
that would trigger the provisions of any such plan.


 


21

















 


ARTICLE V

CONDITIONS


 


5.1           Conditions
Precedent to the Obligations of the Purchasers.  The obligation of each Purchaser to acquire Securities at the
Closing is subject to the satisfaction or waiver by such Purchaser, at or
before the Closing, of each of the following conditions:


 


(a)           Representations
and Warranties.  The representations
and warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date; and


 


(b)           Performance.  The Company and each other Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Transaction Documents to
be performed, satisfied or complied with by it at or prior to the Closing.


 


5.2           Conditions
Precedent to the Obligations of the Company.  The obligation of the Company to sell Securities at the Closing
is subject to the satisfaction or waiver by the Company, at or before the
Closing, of each of the following conditions:


 


(a)           Representations
and Warranties.  The representations
and warranties of the Purchasers contained herein shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made on and as of such date; and


 


(b)           Performance.  The Purchasers shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing.


 


ARTICLE VI

REGISTRATION RIGHTS


 


6.1   
       Shelf Registration


 


(a)           As promptly as
possible, and in any event on or prior to the Filing Date, the Company shall
prepare and file with the Commission a “Shelf” Registration Statement covering
the resale of all Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. 
The Registration Statement shall be on Form S-3 (except if the Company
is not then eligible to register for resale the Registrable Securities on Form
S-3, in which case such registration shall be on another appropriate form in accordance
herewith as the Purchasers may consent) and shall contain (except if otherwise
directed by the Purchasers) the “Plan of Distribution” attached hereto as Exhibit
C.


 


(b)           The Company shall
use its commercially reasonably efforts to cause the Registration Statement to
be declared effective by the Commission as promptly as possible after the
filing thereof, but in any event prior to the Required Effectiveness Date, and
shall use its best efforts to keep the Registration Statement continuously effective
under the Securities Act until the fifth anniversary of the Effective Date or a
date that is five years after the date


 


22

















 


such Registration Statement is declared
effective by the Commission or the earlier of (x) the date when all Registrable
Securities covered by such Registration Statement have been sold or (y) the
date on which the Registered Securities may be sold without restriction
pursuant to Rule 144(k) as determined by counsel to the Company pursuant to a
written opinion letter addressed to the Transfer Agent to such effect (the “Effectiveness Period”).


 


(c)           The Company shall
notify each Purchaser and the Special Counsel in writing promptly (and in any
event within one Trading Day) after receiving notification from the Commission
that the Registration Statement has been declared effective.


 


(d)           Upon the occurrence
of any Event (as defined below) and on every monthly anniversary thereof until
the applicable Event is cured, as partial relief for the damages suffered
therefrom by the Purchasers (which remedy shall not be exclusive of any other
remedies available under this Agreement, at law or in equity), the Company
shall pay to each Purchaser an amount in cash, as liquidated damages and not as
a penalty, equal to 1% of the Purchaser’s pro rata share of the purchase price
paid by all Purchasers for Shares and Warrants purchased pursuant to this
Agreement for the first month and 1.5% for each month thereafter until the
applicable Event has been cured or until there are no longer any Registrable
Securities issued or outstanding (whichever is earlier). The payments to which
a Purchaser shall be entitled pursuant to this Section 6.1(d) are referred to
herein as “Event Payments”.  Any Event Payments payable pursuant to the
terms hereof shall apply on a pro-rata basis for any portion of a month prior
to the cure of an Event.  In the event
the Company fails to make Event Payments in a timely manner, such Event Payments
shall bear interest at the rate of 1.5% per month (prorated for partial months)
until paid in full.


 


For such purposes, each of the following
shall constitute an “Event”:


 


(i)            the Registration Statement is not filed on or prior to the
Filing Date or is not declared effective on or prior to the Required
Effectiveness Date;


 


(ii)           after the Effective Date, the Registration Statement ceases
to be effective as to all Registrable Securities to which it is required to
relate at any time prior to the expiration of the Effectiveness Period, except as
otherwise permitted by this Agreement, including pursuant to Section 6.1(e);


 


(iii)          after the Effective Date, any Registrable Securities covered
by such Registration Statement are not listed on an Eligible Market;


 


(iv)          the Common Stock is not listed or quoted, or is suspended
from trading, on an Eligible Market for a period of three Trading Days (which
need not be consecutive Trading Days), other than pursuant to Section 6.1(e);


 


(v)           the Company fails for any reason to deliver a certificate
evidencing any Securities to a Purchaser within three Trading Days after
delivery of such certificate is required pursuant to any Transaction Document
or the exercise rights of the Purchasers pursuant to the Transaction Documents
are otherwise suspended for any reason; or


 


23

















 


(vi)          the Company fails to have available a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock
available to issue Underlying Shares upon any exercise of the Warrants or, at
any time following the Effective Date, any Shares or Underlying Shares are not
listed on an Eligible Market.


 


(e)           Following the
Effective Date, if (i) there is material non-public information regarding the
Company which the Company’s Board of Directors (the “Board”) determines,
in its good faith judgment in reliance on the advice of counsel, not to be in
the Company’s best interest to disclose and which the Company is not otherwise
required to disclose, or (ii) there is a significant business opportunity
(including, but not limited to, the acquisition or disposition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer or other similar transaction) available to the Company that would require
disclosure under the Exchange Act and with respect to which the Board has
determined in good faith that compliance with this Agreement may reasonably be
expected to either materially interfere with the Company’s ability to
consummate such transaction in a timely fashion or require the Company to
disclose material, non-public information prior to such time as it would be
required to be disclosed, then the Company may by notice in writing to each
holder of Registrable Securities to which a Prospectus relates, require such
holder to suspend, for up to 30 days (the “Suspension Period”), the use
of any Prospectus included in a Registration Statement filed with the
Commission pursuant to this Agreement; provided that the Company may not
postpone, delay or suspend its obligation under this Section 6.5(b) more than 2
times in any 12 month period.


 


(f)            Except as set
forth on Schedule 6.1(f), the Company shall not, prior to the Effective Date of
the Registration Statement, prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities.


 


(g)           Each Purchaser
agrees to furnish the Company with information reasonably requested for the
preparation of the Registration Statement.


 


6.2           Registration
Procedures.  In connection with the
Company’s registration obligations hereunder, the Company shall:


 


(a)           Not less than three
Trading Days prior to the filing of a Registration Statement or any related
Prospectus or any amendment or supplement thereto (including any document that
would be incorporated or deemed to be incorporated therein by reference), the
Company shall (i) furnish to Special Counsel copies of all such documents
proposed to be filed, which documents (other than those incorporated or deemed
to be incorporated by reference) will be subject to the review of Special
Counsel, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be
necessary, in the reasonable opinion of Special Counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.  The Company shall not file a Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which Special Counsel shall reasonably object in writing within three Trading
Days after the receipt thereof.


 


24

















 


(b)           (i) Prepare and
file with the Commission such amendments, including post-effective amendments,
to each Registration Statement and the Prospectus used in connection therewith
as may be necessary to keep the Registration Statement continuously effective
as to the applicable Registrable Securities for the Effectiveness Period and
prepare and file with the Commission such additional Registration Statements in
order to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented by
any required Prospectus supplement, and as so supplemented or amended to be
filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible,
and in any event within ten days, to any comments received from the Commission
with respect to the Registration Statement or any amendment thereto and as
promptly as reasonably possible provide the Purchasers true and complete copies
of all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Purchasers thereof set forth in the Registration Statement as so amended or in
such Prospectus as so supplemented


 


(c)           Notify the
Purchasers of Registrable Securities to be sold and the Special Counsel as
promptly as reasonably possible, and (if requested by any such Person) confirm
such notice in writing no later than one Trading Day thereafter, of any of the
following events: (i) the Commission notifies the Company whether there will be
a “review” of any Registration Statement; (ii) the Commission comments in
writing on any Registration Statement (in which case the Company shall deliver
to each Purchaser a copy of such comments and of all written responses
thereto); (iii) any Registration Statement or any post-effective amendment is
declared effective; (iv) the Commission or any other Federal or state
governmental authority requests any amendment or supplement to any Registration
Statement or Prospectus or requests additional information related thereto; (v)
the Commission issues any stop order suspending the effectiveness of any
Registration Statement or initiates any Proceedings for that purpose; (vi) the
Company receives notice of any suspension of the qualification or exemption
from qualification of any Registrable Securities for sale in any jurisdiction,
or the initiation or threat of any Proceeding for such purpose; or (vii) the
financial statements included in any Registration Statement become ineligible
for inclusion therein or any statement made in any Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference is untrue in any material respect or any revision to a Registration
Statement, Prospectus or other document is required so that it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.


 


(d)           Use its best
efforts to avoid the issuance of or, if issued, use its best efforts to obtain
the withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.


 


25

















 


(e)           Furnish to each
Purchaser and each Purchaser Counsel, without charge, at least one conformed
copy of each Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.


 


(f)            Promptly deliver
to each Purchaser and each Purchaser Counsel, without charge, as many copies of
the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request.  The Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
Purchasers in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto.


 


(g)            (i) In the time and manner required by each
Trading Market, prepare and file with such Trading Market an additional shares
listing application covering all of the Registrable Securities; (ii) take all
steps necessary to cause such Registrable Securities to be approved for listing
on each Trading Market as soon as possible thereafter; (iii) provide to the
Purchasers evidence of such listing; and (iv) maintain the listing of such
Registrable Securities on each such Trading Market or another Eligible Market.


 


(h)           Prior to any public
offering of Registrable Securities, use its best efforts to register or qualify
or cooperate with the selling Purchasers and Special Counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
any Purchaser requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that the
Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities in
any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise subject.


 


(i)            Cooperate with the
Purchasers to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be delivered to a transferee pursuant to
a Registration Statement, which certificates shall be free, to the extent
permitted by this Agreement, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such Purchasers may request at least two Business Days prior to any sale
of the Registrable Securities.  In
connection therewith, the Company shall promptly after effectiveness of the Registration
Statement cause an opinion of counsel to be delivered to an maintained with its
Transfer Agent, together with any other authorizations, certificates and
directions required by the Transfer Agent, which authorize and direct the
Transfer Agent to issue such Registrable Securities without legend upon sale by
the Purchaser under the Registration Statement.


 


26

















 


(j)            Upon the
occurrence of any event described in Section 6.2(c)(vii), as promptly as reasonably
possible, prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.


 


(k)           Cooperate with any
due diligence investigation undertaken by the Purchasers in connection with the
sale of Registrable Securities, including without limitation by making
available any documents and information reasonably requested by the Purchasers;
provided that the Company will not deliver or make available to any Purchaser
material, nonpublic information unless such Purchaser specifically requests in
advance to receive material, nonpublic information in writing.


 


(l)            If the holders of
a majority of the Registrable Securities being offered pursuant to a
Registration Statement select underwriters for the offering, the Company shall
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, including, without limitation, by providing customary
legal opinions, comfort letters and indemnification and contribution
obligations.


 


(m)          Comply in all
material respects with all applicable rules and regulations of the Commission.


 


(n)           Request each
Purchaser to furnish the Company information regarding such Purchaser and the
distribution of such Registrable Securities as is required by law or the
Commission to be disclosed in the Registration Statement.


 


6.3           Registration
Expenses.  The Company shall pay (or
reimburse the Purchasers for) all fees and expenses incident to the performance
of or compliance with this Agreement by the Company, including without
limitation (a) all registration and filing fees and expenses, including without
limitation those related to filings with the Commission, any Trading Market and
in connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing or photocopying prospectuses requested
by the Purchasers), (c) messenger, telephone and delivery expenses, (d) fees
and disbursements of counsel for the Company and up to $5,000 in the aggregate
for Special Counsel, (e) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement, and (f) all listing fees to be paid by the Company to the
Trading Market.   The Purchasers shall
be responsible for their pro rata share of any underwriting discounts or
commissions in connection with the sale of the Registrable Securities and all
fees and expenses of any counsel for a Purchaser or the Purchasers other than
Special Counsel.


 


27

















 


6.4           Indemnification
for Claims under Securities Laws 


 


(a)           Indemnification
by the Company. The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Purchaser, the officers, directors,
partners, members, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Purchaser (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, partners, members, agents and employees of each
such controlling Person, to the fullest extent permitted by applicable law,
from and against any and all Losses, as incurred, arising out of or relating to
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus or form of prospectus or supplement thereto, in the
light of the circumstances under which they were made) not misleading, except
to the extent, but only to the extent, that (i) such untrue statements or
omission is contained in any information so furnished in writing to the Company
by such Purchaser specifically for inclusion in such Registration Statement or
such Prospectus, or to the extent that such information relates solely to (x)
such Purchaser and was reviewed and expressly approved in writing by such
Purchaser expressly for use in the Registration Statement, such Prospectus or
such form of Prospectus or in any amendment or supplement thereto or (y) such
Purchaser’s proposed method of distribution of the Registrable Securities as
set forth in Exhibit C (or as such Purchaser otherwise informs the Company in
writing) or (ii) in the case of an occurrence of an event of the type specified
in Section 6.2(c)(iv)-(vii), the use by such Purchaser of an outdated or
defective Prospectus after the Company has notified such Purchaser in writing
that the Prospectus is outdated or defective and prior to the receipt by such
Purchaser of the Advice contemplated in Section 6.5.  The Company shall notify the Purchasers promptly of the
institution, threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.


 


(b)           Indemnification
by Purchasers.  Each Purchaser
shall, notwithstanding termination of this Agreement, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of any untrue statement of a material fact contained
in the Registration Statement, any Prospectus, or any form of prospectus, or in
any amendment or supplement thereto, or arising solely out of any omission of a
material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement
thereto, in the light of the circumstances under which they were made) not
misleading, to the extent, but only to the extent, that (i) such untrue
statement or omission is contained in any information so furnished in writing
by such Purchaser to the Company specifically for inclusion in such
Registration Statement or such Prospectus or to the extent that such
information relates solely to (x) the Purchaser and was reviewed and expressly approved
in writing by such Purchaser expressly for use in the Registration Statement,
such Prospectus ,or such form of prospectus or in any amendment or supplement
thereto or (y) such


 


28

















 


Purchaser’s proposed method of distribution
of the Registrable Securities as set forth in Exhibit C (or as such Purchaser
otherwise informs the Company in writing) or (ii) in the case of an occurrence
of an event of the type specified in Section 6.2(c)(iv)-(vii), the use
by such Purchaser of an outdated or defective Prospectus after the Company has
notified such Purchaser in writing that the Prospectus is outdated or defective
and prior to the receipt by such Purchaser of the Advice contemplated in Section
6.5.  In no event shall the
liability of any Purchaser hereunder be greater in amount than the dollar
amount of the net proceeds received by such Purchaser as a result of the sale
of the Registrable Securities pursuant to such Registration Statement.


 


(c)           Conduct of Indemnification
Proceedings. If any Proceeding shall be brought or asserted against any
Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.


 


An Indemnified Party shall have
the right to employ separate counsel in any such Proceeding and to participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless:  (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (iii) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel in writing
(with a copy to the Indemnifying Party) that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party).  The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld.  No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding and does not impose any monetary or other obligation or
restriction on the Indemnified Party.


 


All reasonable fees and
expenses of the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be


 


29

















 


 paid
to the Indemnified Party, as incurred, within ten Business Days of written
notice thereof to the Indemnifying Party, which notice shall be delivered no
more frequently than on a monthly basis (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).


 


(d)           Contribution.  If a claim for indemnification under Section
6.4(a) or (b) is unavailable to an Indemnified Party because of a
failure or refusal of a governmental authority to enforce such indemnification
in accordance with its terms (by reasons of public policy or otherwise), then
each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. 
The relative fault of such Indemnifying Party and Indemnified Party
shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission of a material fact, has been taken or made by,
or relates to information supplied by, such Indemnifying Party or Indemnified
Party, and the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such action, statement or omission.  The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 6.4(c), any reasonable attorneys’ or other reasonable
fees or expenses incurred by such party in connection with any Proceeding to
the extent such party would have been indemnified for such fees or expenses if
the indemnification provided for in this Section was available to such party in
accordance with its terms. 
Notwithstanding anything to the contrary herein,  the Purchaser shall not be required to
contribute, in the aggregate, any amount in excess of the net proceeds to such
holder as a result of the sale of Registrable Securities pursuant to such
Registration Statement.


 


The parties hereto agree that
it would not be just and equitable if contribution pursuant to this Section
6.4(d) were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations
referred to in the immediately preceding paragraph.  No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation.


 


The indemnity and contribution
agreements contained in this Section are in addition to any liability that the
Indemnifying Parties may have to the Indemnified Parties.


 


6.5           Dispositions.  Each Purchaser agrees that it will comply
with the prospectus delivery requirements of the Securities Act as applicable
to it in connection with sales of Registrable Securities pursuant to the
Registration Statement.  Each Purchaser
further agrees that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Sections 6.2(c) (iv), (v),
(vi) or (vii), such Purchaser will discontinue disposition of
such Registrable Securities under the Registration Statement until such
Purchaser’s receipt of the


 


30

















 


copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by Section
6.2(j), or until it is advised in writing (the “Advice”) by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.


 


6.6           No
Piggyback on Registrations.  Except
as and to the extent set forth in Schedule 3.1(p), neither the Company nor any
of its security holders (other than the Purchasers in such capacity pursuant
hereto) may include securities of the Company in the Registration Statement
other than the Registrable Securities. 
The Company shall not after the date hereof enter into any agreement
providing any such right to any of its security holders.


 


6.7           Piggy-Back
Registrations.  Except during
Suspension Periods as set forth in Section 6.1(e), if at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare
and file with the Commission a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of
its equity securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans, then the Company shall send to each Purchaser
written notice of such determination and if, within fifteen days after receipt
of such notice, any such Purchaser shall so request in writing, the Company
shall include in such registration statement all or any part of such
Registrable Securities such Purchaser requests to be registered; provided, however,
that the Company shall not be required to register any Registrable Securities
pursuant to this Section 6.7 that are eligible for sale pursuant to Rule 144(k)
of the Securities Act.  In the case of
an underwritten public offering, if the managing underwriter(s) or
underwriter(s) should reasonably object to the inclusion of the Registrable
Securities in such registration statement, then if the Company after
consultation with the managing underwriter should reasonably determine that the
inclusion of such Registrable Securities, would materially adversely affect the
offering contemplated in such registration statement, and based on such
determination recommends inclusion in such registration statement of fewer or
none of the Registrable Securities of the Purchasers, then (x) the number of
Registrable Securities of the Purchasers included in such registration
statement shall be reduced pro-rata among such Purchasers (based upon the
number of Registrable Securities requested to be included in the registration),
if the Company after consultation with the underwriter(s) recommends the
inclusion of fewer Registrable Securities, or (y) none of the Registrable
Securities of the Purchasers shall be included in such registration statement,
if the Company after consultation with the underwriter(s) recommends the
inclusion of none of such Registrable Securities; provided, however, that if
securities are being offered for the account of other Persons or entities as
well as the Company, such reduction of the Registrable Securities of the
Purchasers shall be pro rata with the reduction of the securities of such other
Persons or entities (other than the Company).


 


31

















 


ARTICLE VII

MISCELLANEOUS


 


7.1           Termination.  This Agreement may be terminated by the
Company or any Purchaser, by written notice to the other parties, if the
Closing has not been consummated by the third Trading Day following the date of
this Agreement; provided that no such termination will affect the right of any
party to sue for any breach by the other party (or parties).


 


7.2           Fees
and Expenses.  At the Closing, the
Company shall pay to Heimdall Investments Ltd. an aggregate of $20,000 for
their legal fees and expenses incurred in connection with the preparation and
negotiation of the Transaction Documents. 
In lieu of the foregoing payment, Heimdall Investments Ltd. may retain
such amount at the Closing.  Except as
expressly set forth in the Transaction Documents to the contrary, 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 the Securities.


 


7.3           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.


 


7.4           Further Assurances.  Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement, and further agrees to take promptly, or cause
to be taken, all actions, and to do promptly, or cause to be done, all things
necessary, proper or advisable under applicable law to consummate and make
effective the transactions contemplated hereby, to obtain all necessary
waivers, consents and approvals, to effect all necessary registrations and
filings, and to remove any injunctions or other impediments or delays, legal or
otherwise, in order to consummate and make effective the transactions
contemplated by this Agreement for the purpose of securing to the parties
hereto the benefits contemplated by this Agreement.


 


7.5           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 and facsimile numbers for such notices and communications
are those set forth on the signature pages hereof, or such other address or
facsimile number as may be designated in writing hereafter, in the same manner,
by such Person.


 


32

















 


7.6           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 the holders of at least a majority
of the Registrable Securities 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 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.  Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Purchasers under Article
VI and that does not directly or indirectly affect the rights of other
Purchasers may be given by Purchasers holding at least a majority of the
Registrable Securities to which such waiver or consent relates.


 


7.7           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.


 


7.8           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 to any Person to whom such Purchaser assigns or transfers
any Securities, provided that: (i) the Purchaser agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (c) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section 7.8,
the transferee or assignee agrees in writing with the Company to be bound by
all of the provisions of this Agreement and the Transaction Documents and (d)
such transfer shall have been made in accordance with requirements of Section
4.1 above..


 


7.9           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
Related Person is an intended third party beneficiary of Section 4.8 and each
Indemnified Party is an intended third party beneficiary of Section 6.4 and (in
each case) may enforce the provisions of such Sections directly against the
parties with obligations thereunder.


 


7.10         Governing
Law; Venue; Waiver Of Jury Trail. 
ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY AND
PURCHASERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE STATE AND
FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE
ADJUDICATION OF


 


33

















 


ANY DISPUTE BROUGHT BY THE
COMPANY OR ANY PURCHASER HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO
THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE
COMPANY OR ANY PURCHASER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER.  EACH PARTY HEREBY IRREVOCABLY
WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY
SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF 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.  THE COMPANY AND
PURCHASERS HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.


 


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


 


7.12         Execution.  This Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood that
both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile
transmission, 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.


 


7.13         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.


 


7.14         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.


 


7.15         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


 


34

















 


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.


 


7.16         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.


 


7.17         Payment
Set Aside.  To the extent that the
Company makes a payment or payments to any Purchaser hereunder or pursuant to
the Warrants or any Purchaser enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company by 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.


 


7.18         Adjustments
in Share Numbers and Prices.  In the
event of any stock split, subdivision, dividend or distribution payable in
shares of Common Stock (or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly shares of Common
Stock), combination or other similar recapitalization or event occurring after
the date hereof, each reference in any Transaction Document to a number of
shares or a price per share shall be amended to appropriately account for such
event.


 


7.19         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.  The decision of each Purchaser to purchase
Securities pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other Person) relating to or arising
from any such information, materials, statements or opinions.  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


 


35

















 


respect to such obligations or
the transactions contemplated by the Transaction Document.  Each Purchaser acknowledges that no other
Purchaser has acted as agent for such Purchaser in connection with making its
investment hereunder and that no other Purchaser will be acting as agent of
such Purchaser in connection with monitoring its investment hereunder.  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 represents that it has been represented by its own
separate legal counsel in its review and negotiations of this Agreement and the
Transaction Documents.  For reasons of
administrative convenience only, the Purchasers acknowledge and agree that they
and their respective counsel have chosen to communicate with the Company
through Proskauer Rose, but Proskauer Rose represents only Heimdall Investments
Ltd.


 


[SIGNATURE PAGES TO FOLLOW]


 


36

















 


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.


 


	
   

  	
  NEORX
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   s/ Jack L. Bowman

  	
   

  
	
   

  	
  Name:  Jack L. Bowman

  
	
   

  	
  Title:  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
  300 Elliott Avenue West,
  Suite 500

  
	
   

  	
  Seattle, Washington 98119

  
	
   

  	
  Facsimile No.:  (206) 286-2537

  
	
   

  	
  Telephone No.: (206) 281-7001

  
	
   

  	
  Attn:  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  With a copy
  to:

  	
   

  
	
   

  	
  Perkins Coie LLP

  
	
   

  	
  1201 Third Avenue, Suite 4800

  
	
   

  	
  Seattle, WA 98101-3099

  
	
   

  	
  Attn:  Faith M. Wilson

  
	
   

  	
  Tel (206) 583-8888

  
	
   

  	
  Fax (206) 583-8500

  



 


[REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK

SIGNATURE PAGES FOR PURCHASERS FOLLOW]


 


37

















 


	
   

  	
  Heimdall Investments Ltd.

  
	
   

  	
   

  
	
   

  	
  By: HBK Investments L.P., its
  Investment Advisor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   s/ Jamiel Akhtar

  	
   

  
	
   

  	
  Name:  Jamiel Akhtar

  
	
   

  	
  Title:  Authorized Signatory

  
	
   

  	
   

  
	
   

  	
  Aggregate Purchase Price:

  	
  $9,187,500

  
	
   

  	
   

  	
   

  
	
   

  	
  Number of Shares to be
  acquired: 

  	
  1,750,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Underlying Shares subject to
  Warrant:

  	
  875,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
  c/o HBK Investments L.P.

  
	
   

  	
  300 Crescent Court, Suite 700

  
	
   

  	
  Dallas, TX  75201

  
	
   

  	
  Facsimile No.:  (214) 758-1207

  
	
   

  	
  Telephone No.:  (214) 758-6107

  
	
   

  	
  Attn:  Jon Mosle

  
	
   

  	
   

  
	
  With a copy to:

  	
  Proskauer Rose LLP

  
	
   

  	
  1585 Broadway

  
	
   

  	
  New York, New York  10036-8299

  
	
   

  	
  Facsimile No.:  (212) 969-2900

  
	
   

  	
  Telephone No.:  (212) 969-3000

  
	
   

  	
  Attn:  Adam J. Kansler, Esq.

  
							



 


38

















 


	
   

  	
  Merlin BioMed Long Term
  Appreciation Fund, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   Norman Schleifer

  	
   

  
	
   

  	
  Name:  Norman Schleifer

  
	
   

  	
  Title:  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  Aggregate Purchase Price:

  	
  $141,750

  
	
   

  	
   

  
	
   

  	
  Number of Shares to be
  acquired:

  	
  27,000

  
	
   

  	
   

  
	
   

  	
  Underlying Shares subject to
  Warrant:

  	
  13,500

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
  c/o Merlin BioMed Group

  
	
   

  	
  230 Park Avenue, Suite 928

  
	
   

  	
  New York, NY 10169

  
	
   

  	
  Facsimile No.:  (646) 227-5201

  
	
   

  	
  Telephone No.:  (646) 227-5200

  
	
   

  	
  Attn:  Norman Schleifer

  
	
   

  	
  Tax ID# 54-2089246

  
							



 


39

















 


	
   

  	
  Merlin BioMed Offshore Master Fund, L.P.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   Norman Schleifer

  	
   

  	
   

  
	
   

  	
  Name:  Norman Schleifer

  	
   

  
	
   

  	
  Title:  Chief Financial Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Aggregate Purchase Price:

  	
  $357,000

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Number of Shares to be
  acquired:

  	
  68,000

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Underlying Shares subject to
  Warrant:

  	
  34,000

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for Notice:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  c/o Merlin BioMed Group

  	
   

  
	
   

  	
  230 Park Avenue, Suite 928

  	
   

  
	
   

  	
  New York, NY 10169

  	
   

  
	
   

  	
  Facsimile No.:  (646) 227-5201

  	
   

  
	
   

  	
  Telephone No.:  (646) 227-5200

  	
   

  
	
   

  	
  Attn:  Norman Schleifer

  	
   

  
	
   

  	
  Tax ID# 98-041671

  	
   

  
								



 


40

















 


Exhibits:


 


A             Form of Warrant


B             Opinion of Company Counsel


C             Plan of Distribution


D             Transfer Agent Instructions


 


41