Exhibit 10.1


 


SECURITIES PURCHASE AGREEMENT


 


SECURITIES PURCHASE
AGREEMENT (the “Agreement”), dated as of February 26, 2003
by and among SuperGen, Inc., a Delaware corporation, with headquarters located
at 4140 Dublin Boulevard, Suite 200, Dublin, California 94568 (the “Company”),
and the investors listed on the Schedule of Buyers attached hereto
(individually, a “Buyer” and collectively, the “Buyers”).


 


WHEREAS:


 


A.  The Company and each Buyer is executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Section 4(2) of the Securities Act of 1933, as amended
(the “1933
Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated
by the United States Securities and Exchange Commission (the “SEC”)
under the 1933 Act;


 


B.  The Company has authorized senior
exchangeable convertible notes of the Company in the form attached hereto as Exhibit
A (together with any senior exchangeable convertible notes issued in
replacement or exchange thereof in accordance with the terms thereof, the “Notes”),
which Notes shall be, in accordance with the terms of the Notes, in whole or in
part, (i) convertible into shares of the Company’s common stock, par value
$.001 per share (“Company Common Stock”) (as converted, the “Conversion
Shares”) and (ii) exchangeable for up to an aggregate of 2,634,211
shares (the “AVII Shares”) of the common stock, par value $.0001 per share
(“AVII
Common Stock”), of AVI BioPharma, Inc. (“AVII”);


 


C.  The Notes bear interest, which at the option
of the Company, subject to certain conditions, may be paid in shares of Company
Common Stock (“Interest Shares”);


 


D.  The Company is agreeing to pledge the AVII
Shares to secure its obligations (i) to pay interest on and principal of the
Notes and (ii) to deliver AVII Shares to the Buyers upon exchange or otherwise
pursuant to the terms of the Notes.  The
pledge will be evidenced by the Pledge Agreement, dated as of the date hereof,
by and among the Company and the Buyers, substantially in the form attached
hereto as Exhibit B (the “Pledge Agreement”), and the Securities
Account Control Agreement, dated as of the date hereof, by and among the
Company, the Buyers and Mellon Investor Services, LLC, as Custodian (the “Custodian”),
substantially in the form attached hereto as Exhibit C (the “Securities
Account Control Agreement”);


 


E.  Each Buyer wishes to purchase, severally but
not jointly, and the Company wishes to sell, upon the terms and conditions
stated in this Agreement, (i) that aggregate principal amount of Notes set
forth opposite such Buyer’s name in column (3) on the Schedule of Buyers (which
aggregate principal amount for all Buyers shall be $21,250,000) and (ii)
warrants, in substantially the form attached hereto as Exhibit D (the “Warrants”),
to acquire that number of shares of Company Common Stock (as exercised,
collectively, the “Warrant Shares”) set forth opposite such
Buyer’s name in column (4) on the Schedule of Buyers;


 


F.  Contemporaneously with the execution and
delivery of this Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement, substantially in the form


 

















 


attached
hereto as Exhibit E (the “Registration Rights Agreement”), pursuant
to which the Company has agreed to provide certain registration rights with
respect to the Conversion Shares, the Warrant Shares and the Interest Shares
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws; and


 


G.  The Notes, the Conversion Shares, the
Interest Shares, the Warrants and the Warrant Shares collectively are referred
to herein as the “Securities”.


 


NOW, THEREFORE,
the Company and each Buyer hereby agree as follows:


 


1.  PURCHASE AND SALE OF NOTES AND
WARRANTS.


 


(a)  Purchase of Notes and Warrants.


 


(i)            Notes and Warrants.  Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6(a) and 7(a) below, the
Company shall issue and sell to each Buyer, and each Buyer severally, but not
jointly, agrees to purchase from the Company on the Closing Date (as defined
below), a principal amount of Notes, as is set forth opposite such Buyer’s name
in column (3) on the Schedule of Buyers,  along with Warrants to acquire that number
of Warrant Shares as is set forth opposite such Buyer’s name in column (4) on
the Schedule of Buyers.


 


(ii)           Closing.  The closing (the “Closing”) of the purchase of
the Notes and the Warrants by the Buyers shall occur at the offices of Schulte
Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022.  The date and time of the Closing (the “Closing Date”)
shall be 10:00 a.m., New York City Time, on the date hereof, subject to
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 6(a) and 7(a) below (or such later date as is mutually agreed
to by the Company and each Buyer).


 


(iii)          Purchase Price.  The purchase price for each Buyer (the “Purchase
Price”) of the Notes and related Warrants to be purchased by each
such Buyer at the Closing shall be equal to $1.00 for each $1.00 of principal
amount of Notes being purchased by such Buyer at the Closing.


 


(b)  Form of Payment.  On the Closing Date, (i) each Buyer shall
pay its aggregate Purchase Price to the Company for the Notes and the Warrants
to be issued and sold to such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the Company’s written wire
instructions, and (ii) the Company shall deliver to each Buyer the Notes
(in the principal amounts as such Buyer shall have requested prior to the Closing)
which such Buyer is then purchasing along with the Warrants (in the amounts as
such Buyer shall have requested prior to the Closing) such Buyer is purchasing,
duly executed on behalf of the Company and registered in the name of such Buyer
or its designee.


 


2.  BUYER’S REPRESENTATIONS AND WARRANTIES.


 


Each Buyer represents and warrants with respect to only itself that:


 


(a)  No Public Sale or Distribution.  Such Buyer is (i) acquiring the Notes and
the Warrants, and (ii) upon conversion of the Notes and exercise of the
Warrants will acquire the


 


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Conversion Shares issuable upon conversion of
the Notes and the Warrant Shares issuable upon exercise of the Warrants, for
its own account and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; provided, however, that by making
the representations herein, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.  Such Buyer is acquiring the Securities hereunder
in the ordinary course of its business.


 


(b)  Accredited Investor Status.  Such Buyer is an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D.


 


(c)  Reliance on Exemptions.  Such Buyer understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws
and that the Company is relying in part upon the truth and accuracy of, and
such Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.


 


(d)  Information.  Such Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Buyer.  Such Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. 
Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer’s right to rely on the Company’s
representations and warranties contained herein.


 


(e)  Experience of such Buyer.  Such Buyer understands that its investment
in the Securities involves a high degree of risk.  Such Buyer, 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 Buyer 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.


 


(f)  Tax Liability.  Such Buyer has sought such accounting, legal
and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.  With respect to such matters, such Buyer
relies solely on such advisors and not on any statements or representations of
the Company or any of its agents other than the representations and warranties
set forth in the Transaction Documents (as defined in Section 3(b)).  Such Buyer understands that it (and not the
Company) shall be responsible for its own tax liability that may arise as a
result of this investment or the transactions contemplated by the Agreements.


 


(g)  General Solicitation.  Such Buyer 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


 


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any seminar or any other general solicitation
or general advertisement (as defined in Regulation D).


 


(h)  No Governmental Review.  Such Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.


 


(i)  Transfer or Resale.  Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a form reasonably acceptable to the Company,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A promulgated under the 1933 Act, as amended (or a successor rule thereto)
(collectively, “Rule 144”); (ii) any sale of the Securities made in reliance
on Rule 144 may be made only in accordance with the terms of Rule 144 and
further, if Rule 144 is not applicable, any resale of the Securities under
circumstances in which the seller (or the Person (as defined in Section 3(r))
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder, and may
be made only in accordance with such exemption or rules and regulations; and
(iii) neither the Company nor any other Person is under any obligation to
register the Securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.  The Securities may be pledged in connection
with a bona fide margin account or other loan or financing arrangement secured
by the Securities and such pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and no Buyer
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document (as defined in Section 3(b)),
including, without limitation, this Section 2(i); provided, that in
order to make any sale, transfer or assignment of Securities, such Buyer and
its pledgee makes such disposition in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.


 


(j)  Legends.  Such Buyer understands that the certificates or other instruments
representing the Notes and the Warrants and, until such time as the resale of
the Conversion Shares and the Warrant Shares have been registered under the
1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Conversion Shares and the Warrant Shares, except
as set forth below, shall bear any legend as required by the “blue sky” laws of
any state and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):


 


[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[CONVERTIBLE][EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY THIS
CERTIFICATE


 


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HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. 
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE
TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT.  NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.


 


The legend set
forth above shall be removed and the Company shall issue a certificate without
such legend to the holder of the Securities upon which it is stamped, if,
unless otherwise required by state securities laws, (i) such Securities are
registered for resale under the 1933 Act, provided, however, that
each Buyer has complied with or covenants and agrees that it will comply with
the prospectus delivery requirements of the 1933 Act as applicable to it in
connection with sales of such Securities pursuant to a registration statement,
(ii) in connection with a sale, assignment or other transfer, such holder
provides the Company with an opinion of counsel, in a form reasonably
acceptable to the Company, to the effect that such legend is not required under
applicable requirements of the 1933 Act, or (iii) such holder provides the
Company with reasonable assurance that the Securities can be sold, assigned or
transferred pursuant to Rule 144.


 


(k)  Organization; Validity; Enforcement.  Such Buyer is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate, limited liability company or
partnership, as applicable, power and authority to enter into and to consummate
the transactions contemplated by the Transaction Documents to which it is a
party and otherwise to carry out its obligations hereunder and thereunder.  This Agreement, the Pledge Agreement, the
Registration Rights Agreement and the Securities Account Control Agreement have
been duly and validly authorized, executed and delivered on behalf of such
Buyer and shall constitute the legal, valid and binding obligations of such
Buyer, enforceable against such Buyer in accordance with their respective
terms, except as such enforceability may be limited by general principles of
equity or to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies and except that the
indemnification provisions under the Registration Rights Agreement may further
be limited by principles of public policy.


 


(l)  Residency.  Such Buyer is a resident of that jurisdiction specified below its
address on the Schedule of Buyers.


 


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3.  REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.


 


Except as set forth under the corresponding section of the disclosure
schedule supplied by the Company to each Buyer as of the date of this Agreement
(the “Disclosure Schedules”), the Company represents and warrants to each of
the Buyers that:


 


(a)  Organization and Qualification.  The Company and its “Subsidiaries” (which for
purposes of this Agreement means any entity, other than AVII, in which the
Company, directly or indirectly, owns 10% or more of the capital stock or holds
10% or more of an equity or similar interest) are corporations duly organized
and validly existing in good standing under the laws of the jurisdiction in
which they are incorporated, and have the requisite corporate power and
authorization to own their properties and to carry on their business as now
being conducted.  Each of the Company
and its Subsidiaries is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect.  As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on the business,
properties, assets, operations, results of operations or condition (financial
or otherwise) of the Company and its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby and the other Transaction Documents or by the
agreements and instruments to be entered into in connection herewith or
therewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents. 
The Company has no Subsidiaries except as set forth on Schedule 3(a).  None of such Subsidiaries is material to the
Company.


 


(b)  Authorization; Enforcement; Validity.  The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement, the Notes, the Registration Rights Agreement, the Irrevocable
Transfer Agent Instructions (as defined in Section 5(b)), the Warrants, the
Pledge Agreement, the Securities Account Control Agreement and each of the
other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the “Transaction
Documents”), to issue the Securities and to pledge and transfer the
AVII Shares in accordance with the terms hereof and thereof.  The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby, including, without limitation,
the issuance of the Notes and the Warrants, the reservation for issuance and
the issuance of the Conversion Shares  and the Warrant Shares issuable upon
conversion or exercise thereof and the pledging and transfer of the AVII
Shares, as the case may be, have been duly authorized by the Company’s Board of
Directors and (other than the Stockholder Approval pursuant to Section 4(n) for
certain issuances that may require such approval pursuant to the rules of the
NASDAQ National Market (the “Principal Market”)) no further consent or
authorization is required by the Company, its Board of Directors or its stockholders.  This Agreement and the other Transaction
Documents of even date herewith have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies


 


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and except that the indemnification
provisions under the Registration Rights Agreement may further be limited by
principles of public policy.


 


(c)  Issuance of Securities.  The Notes and the Warrants are duly
authorized and, upon issuance in accordance with the terms hereof, shall be
free from all taxes, liens and charges with respect to the issue thereof.  As of the Closing, a number of shares of
Company Common Stock shall have been duly authorized and reserved for issuance
which equals the sum of 130% of the maximum number of shares of Company Common
Stock issuable upon conversion of, or as payment for interest on, the Notes to
be issued at the Closing and 100% of the number of shares of Company Common
Stock issuable upon exercise of the Warrants to be issued at the Closing.  Upon conversion or exercise in accordance
with the Notes or the Warrants, as the case may be, and upon issuance of
Interest Shares as interest on the Notes, the Conversion Shares, the Warrant
Shares and the Interest Shares, respectively, will be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof, with the holders being entitled to all rights accorded to
a holder of Company Common Stock. 
Assuming the accuracy of the Buyers representations and warrants set
forth in Section 2 hereof, the issuance by the Company of the Securities is
exempt from registration under the 1933 Act.


 


(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 (including, without
limitation, the issuance of the Notes and Warrants, the pledge and any transfer
of the AVII Shares and reservation for issuance and issuance of the Conversion
Shares, the Interest Shares and the Warrant Shares) will not (i) result in a
violation of the certificate of incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock or bylaws
of the Company or any Subsidiary or (ii) except as disclosed in Schedule
3(d), conflict with, or constitute a default (or an event which 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 of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Principal Market)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected, except in
the case of each of clauses (ii) and (iii), such as would not, individually or
in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect.


 


(e)  Consents.  Other than (i) the filing with the SEC of the Registration
Statement (as defined in the Registration Rights Agreement), (ii) any filings
required pursuant to Section 4(b) hereof and (iii) the application(s) to the
Principal Market for the listing of the Conversion Shares, Interest Shares and
Warrant Shares for trading thereon, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with,
any court, governmental agency or any regulatory or self-regulatory agency or
any other Person in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents, in each case in
accordance with the terms hereof or thereof. 
Other than the filing with the SEC of the Registration Statement, all
consents, authorizations, orders, filings and registrations which the Company
is required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the Closing Date. 
The Company and its Subsidiaries are 


 


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unaware of any facts or circumstances which
might reasonably be expected to prevent the Company from obtaining or effecting
any of the registration, application or filings pursuant to the preceding
sentence.  The Company is not in
violation of the listing requirements of the Principal Market.  The Company has no knowledge, without having
undertaken any affirmative independent inquiry of AVII, of any violation by
AVII of the listing requirements of the Principal Market with respect to the
AVII Common Stock.  The Company has no
knowledge, without having undertaken any affirmative independent inquiry of
AVII, of any facts which would reasonably lead to delisting or suspension of
the Company Common Stock or the AVII Common Stock in the foreseeable future.


 


(f)  Acknowledgment Regarding Buyer’s Purchase
of Securities.  The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and that no Buyer is (i) an
officer or director of the Company, (ii) an “affiliate” of the Company (as
defined in Rule 144) or (iii) to the Company’s knowledge, a “beneficial owner”
of more than 10% of the Company Common Stock (as defined for purposes of Rule
13d-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”)).  The Company further acknowledges that no
Buyer is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby, and any advice given by a Buyer
or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to such Buyer’s purchase of the Securities.  The Company further represents to each Buyer
that the Company’s decision to enter into the Transaction Documents has been
based solely on the independent evaluation by the Company and its
representatives.


 


(g)  No General Solicitation; Placement
Agent’s Fees.  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) in connection with the offer or sale of the
Securities.  The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, or brokers’ commissions (other than for persons engaged by any Buyer or
its investment advisor) relating to or arising out of the transactions
contemplated hereby.  The Company shall
pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorney’s fees and out-of-pocket expenses)
arising in connection with any such claim. 
Other than engaging Rodman & Renshaw, Inc. as placement agent (the “Agent”),
the Company has not engaged any placement agent or other agent in connection with
the sale of the Notes and the Warrants.


 


(h)  No Integrated Offering.  None of the Company, its Subsidiaries, any
of their affiliates, and any Person acting on 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 1933 Act or cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the 1933 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.  None of the Company, its Subsidiaries, their
affiliates and any Person acting on their behalf will take any action or steps
referred to in the preceding


 


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sentence that would require registration of
any of the Securities under the 1933 Act or cause the offering of the
Securities to be integrated with other offerings.


 


(i)  Dilutive Effect.  The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Notes will
increase in certain circumstances. 
Subject to the Stockholder Approval requirement, the Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Notes in accordance with this Agreement and the Notes  is, in each case, absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the Company.


 


(j)  Application of Takeover Protections;
Rights Agreement.  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 Certificate of Incorporation (as defined in
Section 3(q)) or the laws of the state of its incorporation which is or could
become applicable to any Buyer as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company’s issuance of the
Securities and any Buyer’s ownership of the Securities.  The Company has not adopted a stockholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Company Common Stock or a change in control of the Company.


 


(k)  SEC Documents; Financial Statements.  Since December 31, 2000, the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the 1934
Act (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the “SEC
Documents”).  The Company has
delivered to the Buyers or their respective representatives true, correct and
complete copies of the SEC Documents not available on the EDGAR system.  As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were
filed with the SEC, 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. 
As of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto.  Such
financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). 
No other information provided by or on behalf of the Company to the
Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this


 


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Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made and, taken together with the information set forth
in the SEC Documents, not misleading.


 


(l)  Absence of Certain Changes.  Since the date of the most recent quarterly
report on Form 10-Q, except as specifically disclosed in the SEC Documents
filed not later than 10 days prior to the date hereof, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise) or results of
operations of the Company or its Subsidiaries. 
Since the date of the most recent quarterly report on Form 10-Q and
except as specifically disclosed in the SEC Documents filed not later than 10
days prior to the date hereof, the Company has not (i) declared or paid any
dividends, (ii) sold any assets, individually or in the aggregate, in excess of
$1,000,000 outside of the ordinary course of business or (iii) had capital
expenditures, individually or in the aggregate, in excess of $1,000,000.  The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so. 
The Company is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent
(as defined below).  For purposes of
this Section 3(l), “Insolvent” means (i) the present fair
saleable value of the Company’s assets is less than the amount required to pay
the Company’s total indebtedness, contingent or otherwise, (ii) the Company is
unable to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured or (iii) the Company
intends to incur or believes that it will incur debts that would be beyond its
ability to pay as such debts mature.


 


(m)  No Undisclosed Events, Liabilities,
Developments or Circumstances. 
Except as disclosed in Schedule 3(m), no event, liability,
development or circumstance has occurred or exists, or is contemplated to
occur, with respect to the Company or its Subsidiaries or their respective
business, properties, operations or financial condition, that would be required
to be disclosed by the Company under applicable securities laws on a
registration statement on Form S-1 filed with the SEC relating to an issuance
and sale by the Company of the Company Common Stock and which has not been so
disclosed or otherwise publicly announced.


 


(n)  Conduct of Business; Regulatory Permits.  Neither the Company nor its Subsidiaries is
in violation of any term of or in default under its Certificate of
Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or Bylaws or their
organizational charter or bylaws, respectively.  Neither the Company nor any of its Subsidiaries is in violation
of any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or its Subsidiaries, and neither the Company nor any
of its Subsidiaries will conduct its business in violation of any of the
foregoing, except for possible violations which would not, individually or in
the aggregate, have a Material Adverse Effect. 
Without limiting the generality of the foregoing, the Company is not in
violation of any of the rules, regulations or requirements of the Principal
Market, and has no knowledge of any facts or circumstances which would
reasonably lead to delisting or suspension of the Company Common Stock by the
Principal Market in the foreseeable future. 
Since December 31, 2001, (i) the Company Common Stock has been
designated for quotation or listed


 


10

















 


on the Principal Market, (ii) trading in the
Company Common Stock has not been suspended by the SEC or the Principal Market,
(iii) the Company has received no communication, written or oral, from the SEC
or the Principal Market regarding the suspension or delisting of the Company
Common Stock from the Principal Market, (iv) to the knowledge of the Company,
without having undertaken any affirmative independent inquiry of AVII, AVII
Common Stock has been designated for quotation or listed on the Principal
Market, (v) to the knowledge of the Company, without having undertaken any
affirmative independent inquiry of AVII, trading in AVII Common Stock has not
been suspended by the SEC or the Principal Market and (vi) to the knowledge of
the Company, without having undertaken any affirmative independent inquiry of
AVII, AVII has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting of the AVII Common Stock
from the Principal Market.  The Company
and its Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate federal, state or foreign regulatory authorities
necessary to conduct their respective businesses, except where the failure to
possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.


 


(o)  Foreign Corrupt Practices.  Neither the Company, nor any of its
Subsidiaries, nor, to the knowledge of the Company, any director, officer,
agent, employee or other Person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the
Company (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; (ii)
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; (iii) violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.


 


(p)  Transactions With Affiliates.  Except as set forth on Schedule 3(p)
and in the SEC Documents filed at least ten days prior to the date hereof and
other than the grant of stock options disclosed on Schedule 3(q), none
of the officers or directors 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 of its Subsidiaries (other than for ordinary course services as
employees, officers or 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 such officer, director or employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in which any such
officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner.


 


(q)  Equity Capitalization.  As of the date hereof, the authorized
capital stock of the Company consists of (x) 150,000,000 shares of Company
Common Stock, of which as of the date hereof, 32,892,674 shares are issued and
outstanding, options for the purchase of 5,112,151 shares outstanding pursuant
to the Company’s stock option plan, stock purchase plan and non plan options,
and 4,185,889 shares are issuable pursuant to securities (other than the
aforementioned options, the Notes and the Warrants) exercisable or exchangeable
for, or


 


11

















 


convertible into, shares of Company Common
Stock, and (y) 2,000,000 shares of preferred stock, of which as of the date
hereof, none are issued and outstanding. 
All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable.  Except as disclosed herein and in Schedule 3(q): (i) no
shares of the Company’s capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its Subsidiaries, or
contracts, commitments, understandings or arrangements by which the Company or
any of its Subsidiaries is bound to issue additional shares of capital stock of
the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its Subsidiaries; (iii) there
are no outstanding debt securities, notes, credit agreements, credit facilities
or other agreements, documents or instruments evidencing Indebtedness (as
defined in Section 3(r)) of the Company or any of its Subsidiaries or by which
the Company or any of its Subsidiaries is bound; (iv) there are no financing
statements securing obligations in any material amounts, either singly or in
the aggregate, filed in connection with the Company; (v) there are no
agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement); (vi) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is bound to redeem a security of the Company or any of its
Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or “phantom stock” plans or agreements or any similar plan or agreement; and
(ix) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents (as defined herein) but not so
disclosed in the SEC Documents, other than those incurred in the ordinary
course of the Company’s or its Subsidiaries’ respective businesses and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.  The Company has furnished to
the Buyer, to the extent not available on the EDGAR system in the SEC Documents
filed at least 10 days prior to the date hereof, true, correct and complete
copies of the Company’s Certificate of Incorporation, as amended and as in
effect on the date hereof (the “Certificate of Incorporation”), and the
Company’s Bylaws, as amended and as in effect on the date hereof (the “Bylaws”),
and the terms of all securities convertible into, or exercisable or
exchangeable for, Company Common Stock and the material rights of the holders
thereof in respect thereto.


 


(r)  Indebtedness and Other Contracts.  Except as disclosed in Schedule 3(r),
neither the Company nor any of its Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument would result in a Material
Adverse Effect, (iii) is in violation of any term of or in default under any
contract, agreement or instrument relating to any Indebtedness, except where
such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness, the performance of which,


 


12

















 


in the judgment of the Company’s officers,
has or is expected to have a Material Adverse Effect.  Schedule 3(r) provides a detailed description of the
material terms of any such outstanding Indebtedness.  For purposes of this Agreement: 
(x) “Indebtedness” of any Person means, without duplication (A) all
indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed
as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business), (C) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,
(E) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with
respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under
such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a
capital lease, (G) all indebtedness referred to in clauses (A) through (F)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any mortgage, lien, pledge,
charge, security interest or other encumbrance (each, a “Lien”) upon or in any
property or assets (including accounts and contract rights) owned by any
Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (G) above; (y) “Contingent
Obligation” means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the
primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect
thereto; and (z) “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.


 


(s)  Absence of Litigation.  There is no action, suit, proceeding,
inquiry or investigation before or by the Principal Market, 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, the
Company Common Stock or any of the Company’s Subsidiaries or any of the
Company’s or the Company’s Subsidiaries’ officers or directors in their
capacities as such, except as set forth in Schedule 3(s).


 


(t)  Insurance.  The Company and each of its Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as management of the Company believes to be prudent and customary
in the businesses in which the Company and its Subsidiaries are engaged.  Neither the Company nor any such Subsidiary
has been refused any insurance coverage sought or applied for and neither the
Company nor any such 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


 


13

















 


as may be necessary to continue its business
at a cost that would not have a Material Adverse Effect.


 


(u)  Employee Relations. (i) Neither the
Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union. 
The Company and its Subsidiaries believe that their relations with their
employees are good.  No executive
officer of the Company (as defined in Rule 501(f) of the 1933 Act) has notified
the Company that such officer intends to leave the Company or otherwise
terminate such officer’s employment with the Company.  No executive officer of the Company, to the knowledge of the
Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters.


 


(ii)           The Company and its Subsidiaries are
in compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.


 


(v)  Title.  The Company and its Subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(v)
or such as do not materially affect the value of such property and do not
interfere in any material respect with the use made and proposed to be made of
such property by the Company and any of its Subsidiaries.  Any real property and facilities held under
lease by the Company and any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.


 


(w)  Intellectual Property Rights.  The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and other intellectual property rights (“Intellectual Property Rights”)
necessary to conduct their respective businesses as now conducted and which the
failure to so own or possess could, individually or in aggregate, have
reasonably be expected to result in a Material Adverse Effect.  None of the Company’s material Intellectual
Property Rights have expired or terminated or are expected to expire or
terminate within two years from the date of this Agreement.  The Company does not have any knowledge of
any infringement by the Company or its Subsidiaries of Intellectual Property
Rights of others.  There is no claim,
action or proceeding being made or brought, or to the knowledge of the Company,
being threatened, against the Company or its Subsidiaries regarding its
Intellectual Property Rights.  The
Company is unaware of any facts or circumstances which would reasonably be
expected to give rise to any of the foregoing infringements or claims, actions
or proceedings.  The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.


 


14

















 


(x)  Environmental Laws.  The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. 
The term “Environmental Laws” means all federal, state, local or foreign
laws relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”)  into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.


 


(y)  Tax Status.  The Company and each of its Subsidiaries (i) has made or filed
all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set
aside on its books provision reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply.  There are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.


 


(z)  Internal Accounting Controls.  The Company and each of its 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 and liability
accountability, (iii) access to assets or incurrence of liabilities is
permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets and liabilities
is compared with the existing assets and liabilities at reasonable intervals
and appropriate action is taken with respect to any difference.


 


(aa)         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.


 


(bb)         Form S-3 Eligibility.  The Company is eligible to register the
Company Common Stock for resale by the Buyers under Form S-3 promulgated under
the 1933 Act.


 


(cc)         AVII Common Stock.


 


(i)            The transfer of the AVII Shares by
the Company have been registered by AVII under the 1933 Act.  1,000,000 of the AVII Shares were registered
by AVII pursuant to a registration statement filed on Form S-3 on December 21,
1999, as amended on


 


15

















 


January 25, 2000, and 1,684,211
of the AVII Shares were registered by AVII pursuant to a registration statement
filed on Form S-3 on September 15, 2000 (the “AVII Registration Statements”).  The “Plan of Distribution” section under
each of the AVII Registration Statements permits the pledge and transfer of the
AVII Shares as required pursuant to the Transaction Documents.


 


(ii)           The Company is the beneficial and
record owner of all of the AVII Shares, free and clear of any Liens, and upon
transfer in accordance with the applicable Transaction Documents, the Company
will transfer to the Buyers good and marketable title to such AVII Shares, free
and clear of any Liens.  Upon any such
transfer in accordance with the applicable Transaction Documents to the Buyers
of any AVII Shares, the AVII Shares shall be unrestricted and freely tradable
on the Principal Market without any delivery or other requirements whatsoever
and without the need to make any registration or other filing with the SEC.


 


(iii)          The Company has no legal obligation,
absolute or contingent, to any other Person to transfer or sell any of the AVII
Shares.  There is no action, claim,
suit, investigation or proceeding pending or, to the knowledge of the Company,
threatened by or against or affecting the Company or the Company’s ownership of
the AVII Shares before any court or governmental or regulatory authority or
body, that could effect the ability of the Company to pledge and transfer to
the Buyers any AVII Shares.  There are
no writs, decrees, injunctions or orders of any court or governmental or
regulatory agency, authority or body outstanding against the Company with
respect to the AVII Shares.


 


4.  COVENANTS.


 


(a)  Best Efforts.  Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.


 


(b)  Form D and Blue Sky.  The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing.  The Company shall, on or before the Closing Date, take such
action as the Company shall reasonably determine is necessary in order to
obtain an exemption for or to qualify the Securities for sale to the Buyers at
the Closing pursuant to this Agreement under applicable securities or “Blue
Sky” laws of the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so taken to
the Buyers on or prior to the Closing Date. 
The Company shall make all filings and reports relating to the offer and
sale of the Securities required under applicable securities or “Blue Sky” laws
of the states of the United States following the Closing Date.


 


(c)  Reporting Status.  Except as set forth in Section 6 of the
Notes or as set forth in Section 4(b) of the Warrants, until the date on which
the Investors (as defined in the Registration Rights Agreement) shall have sold
all the Conversion Shares, Interest Shares and Warrant Shares  and
none of the Notes  or Warrants is outstanding (the “Reporting Period”), the
Company shall file all reports required to be filed with the SEC pursuant to
the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would otherwise permit such termination.


 


16

















 


(d)  Use of Proceeds.  The Company will use the proceeds from the
sale of the Securities for working capital purposes and not for the (i)
repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries or (ii) redemption or repurchase of any of its equity securities.


 


(e)  Financial Information.  The Company agrees to send the following to
each Investor during the Reporting Period (i) unless the following are filed
with the SEC through EDGAR and are available to the public through the EDGAR
system, within one (1) Business Day after the filing thereof with the SEC, a
copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q,
any Current Reports on Form 8-K and any registration statements (other than on
Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as
the release thereof, facsimile copies of all press releases issued by the
Company or any of its Subsidiaries, and (iii) copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.  As used herein, “Business
Day” means any day other than Saturday, Sunday or other day on which
banking institutions in The City of New York are authorized or required by law
to remain closed.


 


(f)  Listing.  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 Company Common Stock are then listed (subject to official
notice of issuance) and shall maintain, so long as any other shares of Company
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 Company
Common Stock’s authorization for quotation on 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 Company Common Stock on the Principal
Market.  The Company shall pay all fees
and expenses in connection with satisfying its obligations under this Section
4(f).


 


(g)  Fees.  Subject to Section 8 below, at the Closing, the Company shall pay
an expense allowance of $117,000 to Smithfield Fiduciary LLC (a Buyer) or its
designee(s) (in addition to any other expense amounts paid to any Buyer prior
to the date of this Agreement) for reimbursement of reasonable legal and due
diligence expenses incurred in connection with the transactions contemplated by
the Transaction Documents, which amount shall be withheld by such Buyer from
its Purchase Price at the Closing.  The
Company shall be responsible for the payment of any placement agent’s fees or
broker’s commissions relating to or arising out of the transactions
contemplated hereby, including, without limitation, any fees or commissions
payable to the Agent.  The Company shall
pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, reasonable attorney’s fees and out-of-pocket
expenses) arising in connection with any claim relating to any such payment.  Except as otherwise set forth in the
Transaction Documents, each party to this Agreement shall bear its own expenses
in connection with the sale of the Securities to the Buyers.


 


(h)  Pledge of Securities.  The Company acknowledges and agrees that the
Securities may be pledged by an Investor (as defined in the Registration Rights
Agreement) in connection with a bona fide margin agreement or other loan or
financing arrangement that is secured by the Securities.  The pledge of Securities shall not be deemed
to be a transfer, sale or


 


17

















 


assignment of the Securities
hereunder, and no Investor effecting a pledge of Securities shall be required
to provide the Company with any notice thereof or otherwise make any delivery
to the Company pursuant to this Agreement or any other Transaction Document,
including, without limitation, Section 2(i) of this Agreement; provided that an
Investor and its pledgee shall be required to comply with the provisions of
Section 2(i) hereof in order to effect a sale, transfer or assignment of
Securities to such pledgee.  At the
appropriate Buyer’s expense, the Company shall execute and deliver such
reasonable documentation as a pledgee of the Securities may reasonably request
in connection with a pledge of the Securities to such pledgee by an Investor.


 


(i)  Disclosure of Transactions and Other
Material Information.  On or before
8:30 a.m., New York City Time, on  the first Trading Day following the
Closing Date, the Company shall file a Current Report on Form 8-K describing
the terms of the transactions contemplated by the Transaction Documents in the
form required by the 1934 Act, and attaching the material Transaction Documents
(including, without limitation, this Agreement (and all schedules to this
Agreement), the form of each of the Notes, the form of Warrant, the Pledge
Agreement, the Securities Account Control Agreement  and the Registration Rights
Agreement) as exhibits to such Form 8-K (including all attachments, the “8-K Filing”).  From and after the filing of the 8-K Filing
with the SEC, unless required pursuant to Section 3(i) of the Registration
Rights Agreement, no Buyer shall be in possession of any material, nonpublic
information received from the Company, any of its Subsidiaries or any of its
respective officers, directors, employees or agents, that is not disclosed in
the 8-K Filing.  Unless required
pursuant to Section 3(i) of the Registration Rights Agreement, 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 Buyer
with any material nonpublic information regarding the Company or any of its
Subsidiaries from and after the filing of the 8-K Filing with the SEC without
the express written consent of such Buyer. 
In the event of a breach of the foregoing covenant by the Company, any
of its Subsidiaries, or any of its or their respective officers, directors,
employees and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material nonpublic information without the prior approval by the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents.  No
Buyer shall have any liability to the Company, its Subsidiaries, or any of its
or their respective officers, directors, employees, stockholders or agents for
any such disclosure.  Subject to the foregoing,
neither the Company nor any Buyer shall issue any press releases or any other
public statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval
of any Buyer, to make any press release or other public disclosure with respect
to such transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) the Buyers shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).


 


(j)  Restriction on Redemption and Cash
Dividends.  So long as any Notes are
outstanding, the Company shall not, directly or indirectly, redeem, or declare
or pay any cash dividend or distribution on, the Company Common Stock without
the prior express written consent of the holders of Notes representing not less
than a majority of the aggregate principal amount of the then outstanding
Notes.


 


18

















 


(k)  Additional Notes.  For so long as any Buyer beneficially owns
any Securities, the Company will not issue any additional Notes and, except as
described in Schedule 4(k), the Company shall not issue any other securities
that would cause a breach or default under the Notes.


 


(l)  Conduct of Business.  So long as any Notes are outstanding, the
business of the Company and its Subsidiaries shall not be conducted in violation
of any law, ordinance or regulation of any governmental entity, except where
such violations would not result, either individually or in the aggregate, in a
Material Adverse Effect.


 


(m)  Variable Securities.  So long as any Notes or Warrants are outstanding,
the Company shall not, in any manner, issue or sell any rights, warrants or
options to subscribe for or purchase Company Common Stock or directly or
indirectly convertible into or exchangeable or exercisable for Company Common
Stock at a price which varies or may vary with the market price of the Company
Common Stock, including by way of one or more reset(s) to any fixed price
unless the conversion, exchange or exercise price of any such security cannot
be less than the then applicable Conversion Price (as defined in the Notes)
with respect to the Company Common Stock under any Note or the then applicable
Exercise Price (as defined in the Warrants) with respect to the Company Common
Stock under any Warrant.


 


(n)  Proxy Statement.  The Company shall provide each stockholder
entitled to vote at the next meeting of stockholders of the Company, which
shall not be later than August 15, 2003 (the “Stockholder Meeting Deadline”),
a proxy statement, which has been previously reviewed by the Buyers and a
counsel of their choice, soliciting each such stockholder’s affirmative vote at
such stockholder meeting for approval of the Company’s issuance of all of the
Securities as described in the Transaction Documents in accordance with
applicable law and the rules and regulations of the Principal Market (such
affirmative approval being referred to herein as the “Stockholder Approval”), and
the Company shall use its best efforts to solicit its stockholders’ approval of
such issuance of the Securities and to cause the Board of Directors of the
Company to recommend to the stockholders that they approve such proposal.  The Company shall be obligated to seek to
obtain the Stockholder Approval by the Stockholder Meeting Deadline.


 


(o)  Corporate Existence.  So long as any Buyer beneficially owns any
Notes, the Company shall maintain its corporate existence and shall not sell
all or substantially all of the Company’s assets, except in the event of a
merger or consolidation or sale of all or substantially all of the Company’s assets,
where the surviving or successor entity in such transaction (i) assumes the
Company’s obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded corporation
whose common stock is quoted on or listed for trading on the Principal Market
or The New York Stock Exchange, Inc.


 


(p)  Incurrence of Liens.  So long as any Notes are outstanding, the
Company shall not, directly or indirectly, allow or suffer to exist any Lien,
other than Permitted Liens (as defined in the Notes), upon any property or
assets (including accounts and contract rights) owned by the Company.


 


(q)  Reservation of Shares.  The Company shall take all action necessary
to at all times have authorized, and reserved for the purpose of issuance, no
less than 130% of the sum of


 


19

















 


(i) the number of shares of
Company Common Stock issuable upon conversion of, or as payment for interest
on, the Notes and (ii) the number of shares of Common Stock issuable upon
exercise of the Warrants.


 


(r)  AVII.  At the Closing, the Company shall deliver to each Buyer a true,
correct and complete copy of each prospectus pursuant to the AVII Registration
Statements.  Any transfer of the AVII
Shares by the Company to the Buyers shall be made pursuant to the AVII
Registration Statements, Rule 144(k) or other method acceptable to holders of
at least a majority of the aggregate principal amount the Notes then
outstanding.  The Company hereby agrees
to use its reasonable best efforts to cause AVII (i) unless Rule 144(k) is
available and to be used in order to transfer the AVII Shares by the Company to
the Buyers, until the date that the Company shall have transferred the AVII
Shares to the Buyers or none of the Notes is outstanding, to keep each AVII
Registration Statement continuously effective under the 1933 Act and, if and
when the Company deems it necessary, use reasonable best efforts to cause AVII
to file one or more prospectus supplements pursuant to Rule 424(b) and (ii) so
long as any other shares of AVII Common Stock shall be listed on the Principal
Market, to maintain the authorization for quotation on the Principal Market of
the AVII Shares.  The Company shall take
all actions necessary such that the AVII Shares shall remain free of any Lien.


 


(s)  Transfer of AVII Shares.  Upon transfer of any AVII Shares to a Buyer
pursuant to the terms of the Transaction Documents, including, without
limitation, pursuant to an Exchange, a Company Exchange or an Event of Default
(as each such term is defined in the Notes), the Company shall take all actions
necessary to transfer to Buyer, in accordance with the applicable terms of the
Transaction Documents, the AVII Shares free and clear of all Liens or restrictions
such that after such transfer the AVII Shares will be unrestricted and freely
tradable by the Buyer.  In connection
with the foregoing, the Company shall (i) cause Wilson, Sonsini, Goodrich &
Rosati, PC or other counsel reasonably acceptable to holders of Notes
representing at least a majority of the aggregate principal amount of the Notes
then outstanding to deliver to the transfer agent of AVII any necessary legal
opinion, and (ii) use reasonable best efforts to take any other actions
reasonably requested by any Buyer in connection with any such transfer.


 


5.  REGISTER; TRANSFER AGENT INSTRUCTIONS.


 


(a)  Register.  The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to
each holder of Notes or Warrants), a register for the Notes and the Warrants,
in which the Company shall record the name and address of the Person in whose
name the Notes  and the Warrants have been issued (including the name and
address of each transferee), the principal amount of Notes held by such Person
and the number of Warrant Shares issuable upon exercise of the Warrants held by
such Person.  The Company shall keep the
register open and available during business hours for inspection by any Buyer or
its legal representatives upon prior written notice.


 


(b)  Transfer Agent Instructions.  The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company (“DTC”), registered in the name of each Buyer
or its respective nominee(s), for the Conversion Shares, the Interest Shares,
if any, and the Warrant Shares  in such amounts as specified from time to
time by each Buyer to the Company upon conversion of the Notes or exercise of
the Warrants in the form of


 


20

















 


Exhibit F attached
hereto (the “Irrevocable Transfer Agent Instructions”).  The Company warrants that no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5(b), and stop transfer instructions to give effect to Section 2(j)
hereof, will be given by the Company to its transfer agent, and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other
Transaction Documents.  If a Buyer
effects a sale, assignment or transfer of the Securities in accordance with
Section 2(i), the Company shall permit the transfer and shall promptly instruct
its transfer agent to issue one or more certificates or credit shares to the
applicable balance accounts at DTC in such name and in such denominations as
specified by such Buyer to effect such sale, transfer or assignment.  In the event that such sale, assignment or
transfer involves Conversion Shares, Interest Shares or Warrant Shares sold,
assigned or transferred pursuant to an effective registration statement or
pursuant to Rule 144, the transfer agent shall issue such Securities to the
Buyer, assignee or transferee, as the case may be, without any restrictive
legend.  The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to a
Buyer.  Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5(b) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5(b), that a
Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.


 


6.  CONDITIONS TO THE COMPANY’S OBLIGATION TO
SELL.


 


(a)  Closing Date.  The obligation of the Company hereunder to
issue and sell the Notes  and the related Warrants to each Buyer at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:


 


(i)            Such Buyer shall have executed each
of the Transaction Documents to which it is a party and delivered the same to
the Company.


 


(ii)           Such Buyer shall have delivered to
the Company the Purchase Price (less, in the case of Smithfield Fiduciary LLC,
the amounts withheld pursuant to Section 4(g)) for the Notes and the related
Warrants being purchased by such Buyer at the Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by the
Company.


 


(iii)          The representations and warranties of
such Buyer shall be true and correct as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Closing Date.


 


21

















 


7.  CONDITIONS TO EACH BUYER’S OBLIGATION TO
PURCHASE.


 


(a)  Closing Date.  The obligation of each Buyer hereunder to
purchase the Notes  and the related Warrants at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer’s sole
benefit and may be waived by such Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:


 


(i)            The Company shall have executed and
delivered to such Buyer (i) each of the Transaction Documents and (ii) the
Notes (in such principal amounts as such Buyer shall have requested prior to
the Closing)  and the related Warrants (in such amounts as such Buyer shall
have requested prior to the Closing) being purchased by such Buyer at the
Closing pursuant to this Agreement.


 


(ii)           Such Buyer shall have received the
opinion of Wilson Sonsini Goodrich & Rosati, PC, the Company’s counsel,
dated as of the Closing Date, in form, scope and substance reasonably satisfactory
to such Buyer and in substantially the form of Exhibit G attached
hereto.


 


(iii)          The Company shall have delivered to
such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form
of Exhibit F attached hereto, which instructions shall have been
delivered to and acknowledged in writing by the Company’s transfer agent.


 


(iv)  The Company shall have delivered to such
Buyer a certificate evidencing the incorporation and good standing of the
Company and Sparta Pharmaceuticals, Inc. in each such corporation’s state of
incorporation issued by the Secretary of State of such state of incorporation
as of a date within 10 days of the Closing Date.


 


(v)           The Company shall have delivered to
such Buyer a certificate evidencing the Company’s qualification as a foreign
corporation and good standing issued by the Secretary of State of California as
of a date within 10 days of the Closing Date.


 


(vi)           The Company shall have delivered to
such Buyer a certified copy of the Certificate of Incorporation as certified by
the Secretary of State of the State of Delaware within 10 days of the Closing
Date.


 


(vii)         The Company shall have delivered to
such Buyer a certificate, executed by the Chief Executive Officer of the
Company and dated as of the Closing Date, as to (i) the resolutions consistent
with Section 3(b) as adopted by the Company’s Board of Directors (the “Resolutions”),
(ii) the Certificate of Incorporation and (iii) the Bylaws, each as in effect
at the Closing, in the form attached hereto as Exhibit H.


 


(viii)        The representations and warranties of
the Company shall be true and correct as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all respects with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with


 


22

















 


by the Company at or prior to
the Closing Date.  Such Buyer shall have
received a certificate, executed by the Chief Executive Officer of the Company,
dated as of the Closing Date, to the foregoing in the form attached hereto as Exhibit
I.


 


(ix)           The Company shall have delivered to
such Buyer a letter from the Company’s transfer agent certifying the number of
shares of Company Common Stock outstanding as of a date within five days of the
Closing Date.


 


(x)            The Company Common Stock (I) shall
be designated for quotation or listed on the Principal Market and (II) shall
not have been suspended by the SEC or the Principal Market from trading on the
Principal Market nor shall suspension by the SEC or the Principal Market have
been threatened either (A) in writing by the SEC or the Principal Market or (B)
by falling below the minimum listing maintenance requirements of the Principal
Market.


 


(xi)           The Company shall have obtained all
governmental, regulatory or third party consents and approvals, if any,
necessary for the sale of the Notes and the Warrants.


 


(xii)          The Company shall have delivered to
such Buyer such other documents relating to the transactions contemplated by
this Agreement as such Buyer or its counsel may reasonably request.


 


(xiii)         In accordance with the terms of the
Pledge Agreement and the Securities Account Control Agreement, the Company
shall have delivered to the Custodian certificate(s) representing the AVII
Shares, along with duly executed blank stock powers.


 


(xiv)        The Company shall have delivered to such
Buyer a true, correct and complete copy of each prospectus pursuant to the AVII
Registration Statements in accordance with Section 4(r).


 


8.  TERMINATION.  In the event that the Closing shall not have
occurred with respect to a Buyer on or before five (5) Business Days from the
date hereof due to the Company’s or such Buyer’s failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party’s
failure to waive such unsatisfied condition(s)), the nonbreaching party shall have
the option to terminate this Agreement with respect to such breaching party at
the close of business on such date without liability of any party to any other
party; provided, however, this if this Agreement is terminated pursuant to this
Section 8, the Company shall remain obligated to reimburse the non-breaching
Buyers for the expenses described in Section 4(g) above.


 


9.  MISCELLANEOUS.


 


(a)  Governing Law; Jurisdiction; Jury Trial.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York
or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.  Each party hereby irrevocably submits to the non-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


 


23

















 


herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of
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 to such party at the address for such 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 HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.


 


(b)  Counterparts.  This Agreement may be executed in two or
more identical counterparts, all of which 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; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original,
not a facsimile signature.


 


(c)  Headings.  The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.


 


(d)  Severability.  If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.


 


(e)  Entire Agreement; Amendments.  This Agreement supersedes all other prior
oral or written agreements between the Buyers, the Company, their affiliates
and Persons acting on their behalf with respect to the matters discussed
herein, and this Agreement and the instruments referenced herein contain the
entire understanding of the parties with respect to the matters covered herein
and therein and, except as specifically set forth herein or therein, neither
the Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. 
No provision of this Agreement may be amended other than by an
instrument in writing signed by the Company and the holders of Notes
representing at least a majority of the aggregate principal amount of the
Notes, or, if prior to the Closing Date, the Company and the Buyers listed on
the Schedule of Buyers as being obligated to purchase at least a majority of
the aggregate principal amount of the Notes, and any amendment to this
Agreement made in conformity with the provisions of this Section 9(e) shall be
binding on all Buyers and holders of Notes, as applicable.  No provision hereof may be waived other than
by an instrument in writing signed by the party against whom enforcement is
sought.  No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Notes then outstanding.  No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, holders of Notes or holders of the Warrants, as the case
may be.  The Company has not, directly
or indirectly,


 


24

















 


made any agreements with any Buyers relating
to the terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.


 


(f)  Notices.  Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: 
(i) upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
Business Day after deposit with an overnight courier service, in each case
properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall
be:


 


If to the Company:


 


SuperGen, Inc.

4140 Dublin Boulevard

Suite 200

Dublin, California 94568

Telephone:            (925) 560-0100

Facsimile:               (925) 560-0101

Attention:              Chief Executive
Officer


 


with a copy to:


 


Wilson Sonsini Goodrich & Rosati, PC

650 Page Mill Road

Palo Alto, California 93404

Telephone:            (650) 493-9300

Facsimile:               (650) 493-6811

Attention:              John V. Roos, Esq.


 


If to the Transfer Agent:


 


Mellon Investor Services LLC

235 Montgomery Street

23rd Floor

San Francisco, California  94104

Telephone:            (415) 743-1422

Facsimile:               (415) 989-8251

Attention:              Sharon Magidson


 


If to a Buyer,
to its address and facsimile number set forth on the Schedule of Buyers, with
copies to such Buyer’s representatives as set forth on the Schedule of Buyers,
or to such other address and/or facsimile number and/or to the attention of
such other Person as the recipient party has specified by written notice given
to each other party five (5) days prior to the effectiveness of such
change.  Written confirmation of receipt
(A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender’s
facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by an overnight
courier service shall


 


25

















 


be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.


 


(g)  Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Notes or the Warrants.  The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written consent of the
holders of Notes representing at least a majority of the aggregate principal
amount of the Notes then outstanding, including by merger or consolidation,
except pursuant to a Change of Control (as defined in Section 6(a) of the
Notes) with respect to which the Company is in compliance with Section 6 of the
Notes and Section 4(b) of the Warrants. 
A Buyer may assign some or all of its rights hereunder without the consent
of the Company, in which event such assignee shall be deemed to be a Buyer
hereunder with respect to such assigned rights.


 


(h)  No Third Party Beneficiaries.  This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns,
and is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.


 


(i)  Survival.  Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5
and 9 shall survive the Closing.  Each
Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.


 


(j)  Further Assurances.  Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.


 


(k)  Indemnification.  In consideration of each Buyer’s execution
and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company’s other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless each Buyer and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons’ agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any
Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents
or any other certificate, instrument or document contemplated hereby or thereby
or (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action


 


26

















 


brought on behalf of the Company) and arising
out of or resulting from (i) the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, (ii) any disclosure made by such
Buyer pursuant to Section 4(i), or (iii) the status of such Buyer or holder of
the Securities as an investor in the Company pursuant to the transactions
contemplated by the Transaction Documents. 
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. 
Except as otherwise set forth herein, the mechanics and procedures with
respect to the rights and obligations under this Section 9(k) shall be the same
as those set forth in Section 6 of the Registration Rights Agreement.


 


(l)  No Strict Construction.  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.


 


(m)  Remedies.  Each Buyer and each holder of the Securities shall have all
rights and remedies set forth in the Transaction Documents and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law.  Any Person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. 
Furthermore, the Company recognizes that in the event that it fails to
perform, observe, or discharge any or all of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to the
Buyers.  The Company therefore agrees
that the Buyers shall be entitled to seek temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages and
without posting a bond or other security.


 


(n)  Payment Set Aside.  To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their 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, 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.


 


(o)  Independent Nature of Buyers’ Obligations
and Rights.  The obligations of each
Buyer under any Transaction Document are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way
for the performance of the obligations of any other Buyer under any Transaction
Document.  Nothing contained herein or
in any other Transaction Document, and no action taken by any Buyer pursuant
hereto or thereto, shall be deemed to constitute the Buyers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Buyers are in any way acting in concert or as a group


 


27

















 


with respect to such obligations or the
transactions contemplated by the Transaction Documents.  Each Buyer confirms that it has
independently participated in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors.  Each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitations,
the rights arising out of this Agreement or out of any other Transaction
Documents, and it shall not be necessary for any other Buyer to be joined as an
additional party in any proceeding for such purpose.


 


[Signature
Page Follows]


 


28

















 


IN WITNESS WHEREOF,
each Buyer and the Company have caused this Securities Purchase Agreement to be
duly executed as of the date first written above.


 


	
  COMPANY:

  	
   

  	
  BUYERS:

  
	
   

  	
   

  	
   

  
	
  SUPERGEN, INC.

  	
   

  	
  SMITHFIELD
  FIDUCIARY LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ JOSEPH RUBINFELD

  	
   

  	
  By: 

  	
  /s/ Adam J. Chill

  
	
   

  	
  Name:

  	
  Joseph Rubinfeld

  	
   

  	
   

  	
  Name:

  	
  Adam J. Chill

  
	
   

  	
  Title:

  	
  President/Chief Executive Officer

  	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OMICRON MASTER
  TRUST

  
	
   

  	
   

  	
  By:  Omicron Capital L.P., as
  advisor

  
	
   

  	
   

  	
  By:  Omicron Capital Inc., its
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ OLIVIER MORALI

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Olivier Morali

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MAINFIELD
  ENTERPRISES INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ AVI VIGDER

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Avi Vigder

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CRANSHIRE CAPITAL
  L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ MITCHELL P. KOPIN

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Mitchell P. Kopin

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  President-Downsview Capital, Inc.,

  The General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OTAPE LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ RICHARD CAYNE

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Richard Cayne

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  General Counsel

  
								



 

















 


SCHEDULE
OF BUYERS


 


 


	
  (1)

  	
   

  	
  (2)

  	
   

  	
  (3)

  	
   

  	
  (4)

  	
   

  	
  (5)

  
	
  Buyer

  	
   

  	
  Address and
  Facsimile Number

  	
   

  	
  Aggregate

  Principal

  Amount of

  Notes

  	
   

  	
  Aggregate

  Number of

  Warrants

  	
   

  	
  Legal
  Representative’s

  Address and Facsimile Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Smithfield
  Fiduciary LLC

  	
   

  	
  c/o Highbridge Capital Management, LLC

  9 West 57th Street, 27th Floor

  New York, New York  10019

  Attention:  Ari J. Storch
                   Adam
  J. Chill Facsimile:  (212) 751-0755

  Telephone: (212) 287-4720

  Residence:  Cayman Islands

  	
   

  	
  $

  	
  10,750,000

  	
   

  	
  1,010,500

  	
   

  	
  Schulte Roth & Zabel LLP

  919 Third Avenue

  New York, New York  10022

  Attention:  Eleazer Klein, Esq.

  Facsimile: (212) 593-5955

  Telephone:  (212) 756-2376

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Omicron Master
  Trust

  	
   

  	
  c/o Omicron
  Capital L.P.

  153 E. 53rd Street

  48th Floor

  New York, New York 10022

  Attention:  Olivier Morali

  Facsimile:  (212) 508-7028

  Telephone:  (212) 508-7027

  Residence: Bermuda

  	
   

  	
  $

  	
  4,250,000

  	
   

  	
  399,500

  	
   

  	
  The Law Offices of Brian Pusch

  29 West 57th Street

  New York, NY 10019

  Attention:  Brian Pusch, Esq.

  Facsimile:  (212) 980-7055

  Telephone:  (212) 980-0408

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mainfield
  Enterprises Inc.

  	
   

  	
  c/o Cavallo
  Capital Corp.

  660 Madison Avenue, 18th Floor,

  New York, New York  10021

  Attention:  Mor Sagi

  Facsimile:  (212) 651-9010

  Telephone:  (212) 651-9005

  Residence: British Virgin Islands

  	
   

  	
  $

  	
  4,000,000

  	
   

  	
  376,000

  	
   

  	
  Bryan Cave LLP

  1290 Ave of the Americas

  New York, NY 10104

  Attention:  Ken Henderson, Esq.

  Facsimile:  (212) 541-1357

  Telephone:  (212) 541-2275

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cranshire Capital
  L.P.

  	
   

  	
  c/o
  Downsview Capital, Inc.

  The General Partner

  666 Dundee Road, Suite 1901

  Northbrook, IL  60062

  Attention:  Mitchell D. Kopin

  Facsimile:  (847) 562-9031

  Telephone:  (847) 562-9030

  Residence: Illinois

  	
   

  	
  $

  	
  1,250,000

  	
   

  	
  117,500

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OTAPE LLC

  	
   

  	
  c/o OTA LLC

  1 Manhattanville Rd.

  Purchase, NY  10577

  Attention:  Paul Masters

  Facsimile:  (914) 694-6335

  Telephone:  (914) 694-5857

  Residence: Delaware

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  94,000

  	
   

  	
  Piper Rudnick LLP

  1251 Avenue of the Americas

  New York, NY  10020

  Attention:  Theodore Altman, Esq.

  Facsimile:  (212) 835-6001

  Telephone:  (212) 835-6000

  



 

















 


EXHIBITS


 


Exhibit A                Form of Notes


Exhibit B                Form of Pledge Agreement


Exhibit C                Form of Securities Account
Control Agreement


Exhibit D                Form of Warrants


Exhibit E                 Form of Registration Rights
Agreement


Exhibit F                 Form of Irrevocable Transfer
Agent Instructions


Exhibit G                Form of Company Counsel Opinion


Exhibit H                Form of Chief Executive
Officer’s Certificate


Exhibit I                  Form of Officer’s Certificate


 


SCHEDULES


 


Schedule 3(a)        Subsidiaries


Schedule 3(d)        No Conflict


Schedule 3(m)       Undisclosed Liabilities


Schedule 3(p)        Transactions with Affiliates


Schedule 3(q)        Capitalization


Schedule 3(r)         Indebtedness and Other Contracts


Schedule 3(s)        Litigation


Schedule 3(v)        Title