Exhibit 10.45


 


SECURITIES PURCHASE AGREEMENT


 


This Securities Purchase Agreement (this “Agreement”) is dated as of
May 5, 2003 among AVI BioPharma, Inc., an Oregon corporation (the “Company”),
and each purchaser identified on the signature pages hereto (each a “Purchaser”
and collectively the “Purchasers”).


 


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


 


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


 


ARTICLE
I


DEFINITIONS


 


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


 


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


 


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


 


“Closing
Date” means the date of the Closing.


 


“Commission”
means the Securities and Exchange Commission.


 


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


 


“Company
Counsel” means Hurley, Lynch & Re, P.C.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Securities”
means the Shares, Warrants and the Underlying Shares.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE
II


PURCHASE AND SALE


 


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


 


2.2.                              Purchase
and Sale.  Subject to and upon the
terms and conditions set forth in this Agreement, the Company agrees to issue
and sell to each Purchaser, and each Purchaser, severally but not jointly,
hereby agrees to purchase from the Company, at the Closing, the number of
Shares set forth opposite the name of such Purchaser on the Signature Pages
hereto, at a purchase price of $5.00 per share, and Warrants to purchase the
number of shares of Common Stock set forth opposite the name of such Purchaser
on the Signature Pages hereto.  The
total purchase price payable by each Purchaser for the Warrants and the number
of Shares that such Purchaser is hereby agreeing to purchase is set forth
opposite the name of such Purchaser on the Signature Pages hereto.  The Company shall be obligated to register
the Underlying Shares pursuant to the terms and conditions set forth in the
Registration Rights Agreement.


 


2.3.                              Closing
Deliveries.


 


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


 


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


 


(ii)                                  a
Warrant, registered in the name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire a number of shares of Common Stock
equal to 50% of the number of Shares purchased by such Purchaser at the
Closing;


 


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


 


(iv)                              the
Transfer Agent Instructions; and


 


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


 


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


 


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


 


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


 


ARTICLE III


REPRESENTATIONS
AND WARRANTIES


 


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


 


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


 


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


 


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


 


4

















 


delivered in
accordance with the terms hereof, will constitute, the valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms.


 


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


 


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


 


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


 


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


 


5

















 


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


 


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


 


(i)                                     Material
Changes.  Since the date of the
latest audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports: (i) there has been no event,
occurrence or development that, individually or in the aggregate, has


 


6

















 


had or that
could result in a Material Adverse Effect, (ii) the Company has not incurred
any liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared
or made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock, and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock option plans.


 


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


 


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


 


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


 


(m)                               Regulatory
Permits.  The Company and the
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary
to conduct their respective businesses as described in the SEC Reports, except
where the failure to possess such permits could not, individually or in the


 


7

















 


aggregate,
have or result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received
any notice of proceedings relating to the revocation or modification of any
Material Permit.


 


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


 


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


 


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


 


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


 


8

















 


(r)                                    Internal
Accounting Controls.  The Company
and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The financial records of the Company accurately reflect in all
material respects the information relating to the business of the Company, the
location and collection of its assets, and the nature of all transactions
giving rise to the obligations or accounts receivable of the Company.  The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the Company and designed such disclosures controls and procedures to ensure
that material information relating to the Company is made known to the
certifying officers by others within the Company, particularly during the
period in which the Company’s Form 10-K (or 10-KSB) or 10-Q (or 10-QSB), as the
case may be, is being prepared.  The
Company’s certifying officers have evaluated the effectiveness of the Company’s
controls and procedures as of a date within 90 days prior to the filing date of
the Form 10-K for the year ended December 31, 2002 (such date, the “Evaluation
Date”).  The Company presented in the
Form 10-K for the quarter ended December 31, 2002 the conclusions of the
certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been
no significant changes in the Company’s internal controls (as such term is
defined in Item 307(b) of Regulation S-K under the Exchange Act) or, the Company’s
knowledge, in other factors that could significantly affect the Company’s
internal controls.


 


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


 


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


 


9

















 


respect to any
claims made by or on behalf of any Person for fees of the type contemplated by
this Section in connection with the transactions contemplated by this
Agreement.


 


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


 


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


 


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


 


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


 


(y)                                 Disclosure.  The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any


 


10

















 


information
that the Company believes constitutes, nonpublic information.  The Company understands and confirms that
the Purchasers will rely on the foregoing representations in effecting
transactions in securities of the Company. 
All disclosure provided to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to
this Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. The
Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2.


 


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


 


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


 


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


 


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


 


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


 


11

















 


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


 


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


 


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


 


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


 


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


 


ARTICLE
IV


OTHER AGREEMENTS OF THE PARTIES


 


4.1.                              Transfer
Restrictions.


 


(a)                                  The
Securities may only be disposed of by a Purchaser in compliance with state and
federal securities laws.  In connection
with any transfer of Securities other than pursuant to an effective
registration statement, to the Company, to an Affiliate of a Purchaser or to a
Person managed or advised by the same Person as manager or adviser to such


 


12

















 


Purchaser or
in connection with a pledge as contemplated in Section 4.1(b), the Company may
require the transferor thereof to provide to the Company an opinion of counsel
selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act.  As a condition of transfer, any
such transferee shall restate the representations and warranties of such
Purchaser under Section 3.2 and agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.


 


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


 


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


 


The Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement or grant a security
interest in some or all of the Securities and, if required under the terms of
such arrangement, such Purchaser may transfer pledged or secured Securities to
the pledgees or secured  parties.  Such
a pledge or transfer would not be subject to approval of the Company and no
legal opinion of the pledgee, secured party or pledgor shall be required in
connection therewith; provided, if such transfer occurs prior to the conditions
for removal of the stock legend in Section 4.1(c), then, any such pledge or
transfer would be conditioned on the Securities remaining subject to the
restrictions on further transfer herein and will only be made to a party that
is sophisticated and an “accredited” investor, except as otherwise provided or
allowed under federal and state securities laws without affecting the
exemptions being relied upon herein for the sale of the Securities.  Further, no notice shall be


 


13

















 


required of such pledge.  At the
appropriate Purchaser’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the Securities,
including the preparation and filing of any required prospectus supplement
under Rule 424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of Selling Stockholders
thereunder.


 


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


 


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


 


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


 


4.4.                              Integration.  The Company shall not, and shall use its
best efforts to ensure that no Affiliate of the Company shall, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be


 


14

















 


integrated
with the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the
Purchasers, or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading Market.


 


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


 


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


 


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


 


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


 


15

















 


including as
exhibits to such Current Report on Form 8-K or in a filing or amendment to such
filing within two days after such initial filing, this Agreement, the
Registration Rights Agreement and the form of the Warrants, in the form
required by the Exchange Act.


 


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


 


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


 


4.11.                        Indemnification
of Purchasers.  The Company will
indemnify and hold the Purchasers and their directors, officers, shareholders,
members, partners, employees and agents (each, a “Purchaser Party”) harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation (collectively, “Losses”) that any such Purchaser Party may
suffer or incur as a result of or relating to: (a) any misrepresentation,
breach or inaccuracy, or any allegation by a third party that, if true, would
constitute a breach or inaccuracy, of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents; or (b) any cause of action, suit or claim brought or
made against such Purchaser Party and arising solely out of or solely resulting
from the execution, delivery, performance or enforcement of this Agreement or
any of the other Transaction Documents and without causation by any other
activity, obligation, condition or liability pertaining to such Purchaser and
not to the transactions contemplated by this Agreement. The Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation, preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred.


 


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


 


4.13                           Additional
Closings.  The Purchasers agree that
until 5:00 pm ET on Friday, May 9, 2003, the Company may issue and sell to one
or more of the Purchasers, or to one or more new Purchasers, up to 1,000,000
additional shares of its Common Stock together with up to 500,000 additional
Warrants on the identical terms as set forth in this Agreement.  Any Purchaser desiring to purchase any
additional Shares and Warrants shall direct itself to the Company’s exclusive
agent for such purpose, Rodman & Renshaw, Inc., which shall allocate


 


16

















 


such
additional shares solely on a first-come, first-served basis. No Purchaser
shall be deemed to have any pre-emptive or pro-rata right to purchase any of
such additional Shares and Warrants. 
Such sales shall be on the terms and conditions of and be deemed, except
for the closing date, part of this offering. 
Such additional closings shall be evidenced by the additional investors
signing signature pages to the Transaction Documents.  Such additional investors shall be deemed Purchasers under this
agreement and all other Transaction Documents. 
The Company shall notify all existing Purchasers of any such additional
investments and provide an updated opinion letter covering such additional
investments.


 


ARTICLE
V


MISCELLANEOUS


 


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


 


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


 


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


 


5.4.                              Amendments;
Waivers.  No provision of this
Agreement may be waived or amended except in a written instrument signed, in
the case of an amendment, by the Company and each of the Purchasers or, in the
case of a waiver, by the party against whom enforcement of any such waiver is
sought.  No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement


 


17

















 


hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.


 


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


 


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


 


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


 


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


 


18

















 


costs and
expenses incurred with the investigation, preparation and prosecution of such
Proceeding.


 


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


 


5.10.                        Execution.  This Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood that
the parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof.


 


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


 


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


 


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


 


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


 


19

















 


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


 


5.16.                        Usury.  To the extent it may lawfully do so, the
Company hereby agrees not to insist upon or plead or in any manner whatsoever
claim, and will resist any and all efforts to be compelled to take the benefit
or advantage of, usury laws wherever enacted, now or at any time hereafter in
force, in connection with any claim, action or proceeding that may be brought
by any Purchaser in order to enforce any right or remedy under any Transaction
Document.  Notwithstanding any provision
to the contrary contained in any Transaction Document, it is expressly agreed
and provided that the total liability of the Company under the Transaction
Documents for payments in the nature of interest shall not exceed the maximum lawful
rate authorized under applicable law (the “Maximum
Rate”), and, without limiting the foregoing, in no event shall any
rate of interest or default interest, or both of them, when aggregated with any
other sums in the nature of interest that the Company may be obligated to pay
under the Transaction Documents exceed such Maximum Rate.  It is agreed that if the maximum contract
rate of interest allowed by law and applicable to the Transaction Documents is
increased or decreased by statute or any official governmental action
subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate of interest applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law.  If
under any circumstances whatsoever, interest in excess of the Maximum Rate is
paid by the Company to any Purchaser with respect to indebtedness evidenced by
the Transaction Documents, such excess shall be applied by such Purchaser to the
unpaid principal balance of any such indebtedness or be refunded to the
Company, the manner of handling such excess to be at such Purchaser’s election.


 


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


 


20

















 


Each Purchaser
has been represented by its own separate legal counsel in their review and
negotiation of the Transaction Documents. 
For reasons of administrative convenience only, Purchasers and their
respective counsel have chosen to communicate with the Company through FW.  FW does not represent all of the Purchasers
but only Rodman & Renshaw, Inc.  The
Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.


 


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SIGNATURE PAGES FOLLOWS]


 


21

















 


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


 


	
   

  	
  AVI BIOPHARMA, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Denis
  R. Burger, Ph.D.

  
	
   

  	
  Name:

  	
  Denis R. Burger, Ph.D.

  
	
   

  	
  Title:

  	
  Chairman & Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for Notice:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  One S.W. Columbia, Suite 1105

  
	
   

  	
  Portland, Oregon  97258

  	
   

  
	
   

  	
  Facsimile:  (503) 227-0751

  	
   

  
					



 


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR PURCHASER FOLLOWS]


 


22

















 


	
   

  	
   

  	
   

  	
  SMITHFIELD FIDUCIARY LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Adam J. Chill

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Adam J. Chill

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Shares of Common Stock:

  	
  550,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Warrant Shares:

  	
  275,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Aggregate Purchase Price:

  	
  $2,750,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address for Notice:

  	
   

  
	
   

  	
   

  	
   

  	
  c/o Highbridge Capital Management, LLC

  
	
   

  	
   

  	
   

  	
  9 West 57th Street

  	
   

  
	
   

  	
   

  	
   

  	
  27th Floor

  	
   

  
	
   

  	
   

  	
   

  	
  New York, NY  10019

  	
   

  
	
   

  	
   

  	
   

  	
  Fax:

  	
  212-751-0755

  
	
   

  	
   

  	
   

  	
  Tel:

  	
  212-287-4720

  
	
   

  	
   

  	
   

  	
  Attention:  Ari J. Storch /
  Adam J. Chill

  
										



 


 


	
  OMICRON MASTER
  TRUST

  	
   

  	
   

  	
  Address for Notice:

  
	
  By:  Omicron Capital L.P., as
  subadvisor

  	
   

  	
   

  	
  c/o Omicron Capital L.P.

  
	
  By:  Omicron Capital Inc., its
  general partner

  	
   

  	
   

  	
  810 Seventh Avenue, 39th Floor

  
	
   

  	
   

  	
   

  	
  New York, New York 10019

  
	
  By:

  	
  /s/ Olivier Morali

  	
   

  	
   

  	
   

  	
  Attn: Brian Daly

  
	
   

  	
  Olivier Morali, President

  	
   

  	
   

  	
   

  	
  Fax: (212) 803-5269

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Shares of Common Stock:

  	
  400,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Warrant Shares:

  	
  200,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Aggregate Purchase Price:

  	
  $2,000,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  
								



 


23

















 


	
  RIVERVIEW GROUP, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Terry
  Feeney

  	
   

  	
   

  
	
  Name:

  	
  Terry Feeney

  
	
  Title:

  	
  Chief Operating
  Officer

  
	
  Address for
  Notice:

  	
   

  
	
   

  	
   

  
	
  666
  5th Avenue, 8th Floor

  	
   

  
	
  New
  York, New York 10103

  	
   

  
	
  Attn:  Daniel Cardella

  	
   

  
	
   

  	
   

  
	
   

  	
  Shares of Common Stock:

  	
  650,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Warrant Shares:

  	
  325,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Aggregate Purchase Price:

  	
  $3,250,000

  
							



 


24

















 


	
  THE TAIL WIND FUND
  LIMITED

  	
   

  	
   

  
	
  By: Tail Wind Advisory & Management Ltd.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ David Crook

  	
   

  	
   

  	
   

  
	
  David Crook

  	
   

  	
   

  
	
  Chief Executive Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notice:

  	
   

  	
   

  
	
  David Crook, Esq.

  	
   

  	
   

  
	
  Chief Executive Officer

  	
   

  	
   

  
	
  Tail Wind Advisory & Management Ltd.

  	
   

  	
   

  
	
  1st Floor, No. 1 Regent Street

  	
   

  	
   

  
	
  London, SW1Y 4NS, UK

  	
   

  	
   

  
	
  Fax: +44 20 7468 7657

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Please copy all
  correspondence to:

  
	
   

  	
  Peter J. Weisman, P.C.

  
	
   

  	
  110 East 59th Street

  
	
   

  	
  New York, NY  10005

  
	
   

  	
  Tel:  +212-418-4792  Fax: 
  212-317-8855

  
	
   

  	
   

  	
   

  
	
   

  	
  Please send the
  common shares a.s.a.p. directly to:

  
	
   

  	
  Bishop Rosen & Co.

  
	
   

  	
  Attn:  Mr. D. Freedman

  
	
   

  	
  100 Broadway, 18th Floor

  
	
   

  	
  New York, NY  10006

  
	
   

  	
  Tel:  +212-602-0654  Fax: 
  +212-602-0697

  
	
   

  	
   

  	
   

  
	
   

  	
  Please send the
  warrants to:

  
	
   

  	
  The Tail Wind Fund, Ltd.

  
	
   

  	
  MecaPierson (Bahamas) Ltd.

  
	
   

  	
  Attn:  Ngaire Rolle,

  
	
   

  	
  Windermere House, 404 East Bay St.,

  
	
   

  	
  PO Box SS 5539, Nassau, Bahamas

  
	
   

  	
  Tel:  242-393-8777  Fax: 
  242-393-9021

  
	
   

  	
   

  
	
   

  	
  Shares of Common Stock:

  	
  450,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Warrant Shares:

  	
  225,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Aggregate Purchase Price:

  	
  $2,250,000

  
						



 


25

















 


	
  CRANSHIRE CAPITAL
  L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Mitchell P. Kopin

  	
   

  	
   

  
	
  Name:

  	
  Mitchell P. Kopin

  
	
  Title:

  	
  President – Downsview Capital

  
	
   

  	
  The General Partner

  
	
  Address for Notice:

  	
   

  
	
   

  	
   

  
	
  Attn: Mitchell Kopin

  	
   

  
	
  666 Dundee Road

  	
   

  
	
  Suite 1901

  	
   

  
	
  Northbrook, IL 60062

  	
   

  
	
  Fax: 847-562-9031

  	
   

  
	
   

  	
   

  
	
   

  	
  Shares of Common Stock:

  	
  700,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Warrant Shares:

  	
  350,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Aggregate Purchase Price:

  	
  $3,500,000

  
	
   

  	
   

  
	
  RODMAN &
  RENSHAW, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John J. Borer III

  	
   

  	
   

  
	
   

  	
   

  
	
  Name: John J. Borer III

  	
   

  
	
   

  	
   

  
	
  Title: Senior Managing Director

  	
   

  
	
   

  	
   

  
	
  Address for Notice:

  	
   

  
	
  330 Madison Avenue

  	
   

  
	
  27th Floor

  	
   

  
	
  New York, NY 10019

  	
   

  
	
  Fax: 212-356-0536

  	
   

  
	
   

  	
   

  
	
   

  	
  Shares of Common Stock:

  	
  100,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Warrant Shares:

  	
  50,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Aggregate Purchase Price:

  	
  $500,000

  
							



 


26

















 


	
  SOLOMON STRATEGIC
  HOLDINGS, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Andrew P.
  MacKellar

  	
   

  	
   

  	
   

  
	
  Andrew P. MacKellar

  	
   

  	
   

  
	
  Director

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notice:

  	
   

  	
   

  
	
  c/o Andrew P. MacKellar

  	
   

  	
   

  
	
  Greenlands.

  	
   

  	
   

  
	
  The Red Gap

  	
   

  	
   

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

  	
   

  	
   

  
	
  Fax: +44 1624 824191

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Please send the
  common shares a.s.a.p. directly to:

  
	
   

  	
   

  	
  Bishop Rosen & Co.

  
	
   

  	
   

  	
  Attn:  Mr. D. Freedman

  
	
   

  	
   

  	
  100 Broadway, 18th Floor

  
	
   

  	
   

  	
  New York, NY  10006

  
	
   

  	
   

  	
  Tel: +212-602-0054 Fax: +212-602-0697

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Please send the
  warrants to:

  
	
   

  	
   

  	
  Peter J. Weisman, P.C.

  
	
   

  	
   

  	
  110 East 59th Street

  
	
   

  	
   

  	
  New York, NY  10005

  
	
   

  	
   

  	
  Tel: +212-418-4792  Fax:
  212-317-8855

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Shares of Common Stock:

  	
  50,000

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Warrant Shares:

  	
  25,000

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Aggregate Purchase Price:

  	
  $250,000

  
						



 


27

















 


	
  MRT, LP

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Ian Estepan

  	
   

  	
   

  	
   

  
	
  Name: Ian Estepan

  	
   

  	
   

  
	
  Title: Research Analyst

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Shares of Common Stock: 100,000

  	
   

  	
   

  
	
  Warrant Shares: 50,000

  	
   

  	
   

  
	
  Aggregate Purchase Price: $500,000

  	
   

  	
   

  
					



 


28

















 


 


Exhibits:


 


A                                      Registration
Rights Agreement


B                                        Warrant


C                                        Transfer
Agent Instructions


 


Schedules:


 


3.1(a)                   Subsidiaries


3.1(g)                  Capitalization


3.1(t)                     Commissions


3.1(w)                Registration
Rights


 


1

















 


SCHEDULE
3.1


 


(a) Subsidiaries


 


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


 


(g) Capitalization


 


	
  Type of Capital Stock

  	
   

  	
  Authorized
  Shares

  	
   

  	
  Issued
  Shares

  	
   

  	
  Rights to
  Acquire

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common Stock

  (par value $.0001)

  	
   

  	
  200,000,000

  	
   

  	
  26,581,003 

  	
  (1)

  	
  See table below

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Preferred Stock

  (par value $.0001)

  	
   

  	
  20,000,000

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  



 












Footnotes:


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


 


Rights to Acquire
Common Stock


 


	
  Type of

  Right

  	
   

  	
  Number of
  Shares

  Covered (1)(2)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Stock options

  	
   

  	
  3,670,270

  	
   

  
	
  Stock purchase plan

  	
   

  	
  0

  	
  (3)

  
	
  Warrants

  	
   

  	
  10,903,684

  	
  (4)

  
	
  Other Rights

  	
   

  	
  0

  	
  (5)

  



 












Footnotes:


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


(2)          Numbers, including outstanding shares in
prior table, are as of May 2, 2003 and there may be differences of up to 0
shares reflecting exercise of options and warrants for Common Stock not yet
reflected in such numbers.


(3)          Purchases under the plan by employees are
done semiannually in May and November each year, the number of shares expected
to be purchased based on present participation would be up to 40,000 shares (for
calendar 2003).


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


 


1

















 


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


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


 


Right of First
Refusal:


 


None


 


Anti-dilution
Adjustment Rights


 


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


 


(t)                                    Commissions


 


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


 


(w)                                Registration
Rights


 


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


 


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


1.               the purchase rights of MIL as to $7.5
million in additional securities


2.               warrants covering 3,400,000 shares


3.               shares covered by its employee stock
option and stock purchase plans, including future plans


4.               the SuperGen Warrant


 


2