Exhibit 10.67


 


SECURITIES
PURCHASE AGREEMENT


 


This Securities Purchase Agreement (this “Agreement”)
is dated as of January 29, 2009, between AVI BioPharma, Inc., an
Oregon corporation (the “Company”), and each purchaser identified on the
signature pages hereto (each, including its successors and assigns, a “Purchaser”
and collectively the “Purchasers”).


 


WHEREAS, subject to the terms and conditions
set forth in this Agreement and pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the “Securities Act”), the
Company desires to issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, desires to purchase from the Company, securities of
the Company as more fully described in this Agreement.


 


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


 


ARTICLE I.

DEFINITIONS


 


1.1                               Definitions.  In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following terms have
the meanings set forth in this Section 1.1:


 


“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.5.


 


“Action”
shall have the meaning ascribed to such term in Section 3.1(j).


 


“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 405 under the
Securities Act.


 


“Board of
Directors” means the board of directors of the Company.


 


“Business
Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or
other governmental action to close.


 


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


 


“Closing
Date” means the Trading Day on which all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to pay the
Subscription Amount and (ii) the Company’s obligations to deliver the
Securities, in each case, have been satisfied or waived, which is expected to
be January 30, 2009, but in any event in accordance with Rule 15c6-1
promulgated under the Exchange Act.


 


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“Closing
Price” means on any particular date (a) the last reported closing bid
price per share of Common Stock on such date on the Trading Market (as reported
by Bloomberg L.P. at 4:15 p.m. (New York City time)), (b) if there is
no such price on such date, then the closing bid price on the Trading Market on
the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m.
(New York City time)), (c)  if the Common Stock is not then listed or
quoted on a Trading Market and if prices for the Common Stock are then reported
in the “pink sheets” published by Pink OTC Markets, Inc. (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported, or (d) if
the shares of Common Stock are not then publicly traded the fair market value
as of such date of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Purchasers of a majority in interest of
the Shares then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the Company.


 


“Closing
Statement” means the Closing Statement in the form on Annex A
attached hereto.


 


 “Commission” means the United States
Securities and Exchange Commission.


 


“Common
Stock” means the common stock of the Company, par value $0.0001 per share,
and any other class of securities into which such securities may hereafter be
reclassified or changed.


 


“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock.


 


“Company
Counsel” means Davis Wright Tremaine LLP, Attn: Michael C Phillips, with
offices located at 23rd Floor, 1300 SW
Fifth Ave., Portland, Oregon 97201.


 


“Disclosure
Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.


 


“Evaluation
Date” shall have the meaning ascribed to such term in Section 3.1(r).


 


“Exchange Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.


 


“Exempt Issuance” means the issuance
of (a) shares of Common Stock or options to employees, officers or
directors of the Company pursuant to any stock or option plan duly adopted for
such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise or exchange
of or conversion of any Securities issued hereunder and/or other securities
exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on 


 


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the date of this Agreement, provided that
such securities have not been amended since the date of this Agreement to
increase the number of such securities or to decrease the exercise price,
exchange price or conversion price of such securities, and (c) securities
issued pursuant to acquisitions or strategic transactions approved by a
majority of the disinterested directors of the Company, provided that any such
issuance shall only be to a Person (or to the equityholders of a Person) which
is, itself or through its subsidiaries, an operating company or an asset in a
business synergistic with the business of the Company and shall provide to the
Company additional benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities.


 


“FDA” shall have the meaning ascribed
to such term in Section 3.1(gg).


 


“FDCA” shall have the meaning ascribed
to such term in Section 3.1(gg).


 


 “FWS” means Feldman Weinstein &
Smith LLP with offices located at 420 Lexington Avenue, Suite 2620, New
York, New York 10170-0002.


 


“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).


 


“Indebtedness”
shall have the meaning ascribed to such term in Section 3.1(z).


 


“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).


 


“Liens”
means a lien, charge, security interest, encumbrance, right of first refusal,
preemptive right or other restriction.


 


“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).


 


“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(m).


 


 “Per Share Purchase Price” equals
$1.16, subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the Common
Stock that occur after the date of this Agreement.


 


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


 


“Pharmaceutical
Product” shall have the meaning ascribed to such term in Section 3.1(gg).


 


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


 


“Prospectus”
means the final prospectus filed for the Registration Statement.


 


“Prospectus
Supplement” means the supplement to the Prospectus complying with Rule 424(b) of
the Securities Act that is filed with the Commission and delivered by the
Company to each Purchaser at the Closing.


 


“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.8.


 


“Registration
Statement” means the effective registration statement with Commission file No. 333-138299
which registers the sale of the Shares, the Warrants and the Warrant Shares by
the Purchasers.


 


“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).


 


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


 


“Rule 424”
means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.


 


 “SEC Reports” shall have the meaning
ascribed to such term in Section 3.1(h).


 


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


 


“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.


 


“Shares”
means the shares of Common Stock issued or issuable to each Purchaser pursuant
to this Agreement.


 


“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation
SHO under the Exchange Act (but shall not be deemed to include the location
and/or reservation of borrowable shares of Common Stock).


 


 “Subscription Amount” means, as to each
Purchaser, the aggregate amount to be paid for Shares and Warrants purchased
hereunder as specified below such Purchaser’s name on the signature page of
this Agreement and next to the heading “Subscription Amount,” in United States
dollars and in immediately available funds.


 


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“Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1(a), and
shall, where applicable, also include any direct or indirect subsidiary of the
Company formed or acquired after the date hereof.


 


“Trading
Day” means a day on which the principal Trading Market is open for trading.


 


“Trading
Market” means any of the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the NYSE Alternext,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select
Market, the New York Stock Exchange or the OTC Bulletin Board (or any
successors to any of the foregoing).


 


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


 


“Transfer
Agent” means BNY Mellon Shareowner Services, the current transfer agent of
the Company, with a mailing address of 480 Washington Boulevard, Jersey City,
NJ 07310 and a facsimile number of 201-680-4620, and any successor transfer
agent of the Company.


 


“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.12(b).


 


“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the
Purchasers at the Closing in accordance with Section 2.2(a) hereof,
which Warrants shall be exercisable six months after the issue date and have a
term of exercise equal to five years, in the form of Exhibit A
attached hereto.


 


“Warrant
Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.


 


ARTICLE II.

PURCHASE AND SALE


 


2.1                                 Closing.  On the Closing Date, upon the terms and
subject to the conditions set forth herein, substantially concurrent with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to
sell, and the Purchasers, severally and not jointly,  agree to purchase, up to an aggregate of $16,500,077
of Shares and Warrants.  Each Purchaser
shall deliver to the Company, via wire transfer or a certified check of
immediately available funds equal to such Purchaser’s Subscription Amount as
set forth on the signature page hereto executed by such Purchaser and the
Company shall deliver to each Purchaser its respective Shares and a Warrant as
determined pursuant to Section 2.2(a), and the Company and each Purchaser shall
deliver the other items set forth in Section 2.2 deliverable at the
Closing.  Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at the offices of FWS or such other location as the parties shall
mutually agree.


 


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2.2                               Deliveries.


 


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


 


(i)                                     this Agreement
duly executed by the Company;


 


(ii)                                  a legal opinion of
Company Counsel, substantially in the form of Exhibit B attached
hereto;


 


(iii)                               a copy of the
irrevocable instructions to the Company’s transfer agent instructing the
transfer agent to deliver via the Depository Trust Company Deposit Withdrawal
Agent Commission System (“DWAC”) Shares equal to such Purchaser’s
Subscription Amount divided by the Per Share Purchase Price, registered in the
name of such Purchaser;


 


(iv)                              a Warrant registered in
the name of such Purchaser to purchase up to a number of shares of Common Stock
equal to 100% of the number of Shares purchased by such Purchaser, with an
exercise price equal to $1.16, subject to adjustment therein (such Warrant
certificate may be delivered within three Trading Days of the Closing Date);
and


 


(v)                                 the Prospectus and
Prospectus Supplement (which may be delivered in accordance with Rule 172
under the Securities Act).


 


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


 


(i)                                     this Agreement
duly executed by such Purchaser; and


 


(ii)                                  such Purchaser’s
Subscription Amount by wire transfer to the account as specified in writing by
the Company.


 


2.3                               Closing
Conditions.


 


(a)           The obligations of
the Company hereunder in connection with the Closing are subject to the
following conditions being met:


 


(i)                                     the accuracy in all material respects on the Closing
Date of the representations and warranties of the Purchasers contained herein
(unless as of a specific date therein);


 


(ii)                                  all obligations,
covenants and agreements of each Purchaser required to be performed at or prior
to the Closing Date shall have been performed;
and


 


(iii)                               the delivery by each Purchaser of the items set forth in Section 2.2(b) of
this Agreement.


 


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(b)                                 The respective obligations of the Purchasers
hereunder in connection with the Closing are subject to the following
conditions being met:


 


(i)                                     the accuracy in all material respects when made and
on the Closing Date of the representations and warranties of the Company
contained herein (unless as of a specific date therein);


 


(ii)                                  all obligations,
covenants and agreements of the Company required to be performed at or prior to
the Closing Date shall have been performed;


 


(iii)                               the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;


 


(iv)                              there shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and


 


(v)                                 from the date hereof
to the Closing Date, trading in the Common Stock shall not have been suspended
by the Commission or the Company’s principal Trading Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any time prior to
the Closing Date, trading in securities generally as reported by Bloomberg L.P.
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the reasonable
judgment of each Purchaser, makes it impracticable or inadvisable to purchase
the Securities at the Closing.


 


ARTICLE III.

REPRESENTATIONS AND WARRANTIES


 


3.1                               Representations
and Warranties of the Company. 
Except as set forth in the Disclosure Schedules, which Disclosure Schedules
shall be deemed a part hereof and shall qualify any representation or otherwise
made herein to the extent of the disclosure contained in the corresponding
section of the Disclosure Schedules, the Company hereby makes the following
representations and warranties to each Purchaser:


 


(a)                                  Subsidiaries.  All of the direct and indirect subsidiaries
of the Company are set forth on Schedule 3.1(a).  The Company owns, directly or indirectly, all
of the capital stock or other equity interests of each Subsidiary free and
clear of any Liens, and all of the issued and outstanding shares of capital
stock of each Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights to subscribe for or purchase
securities.  If the Company has no
subsidiaries, all other references to the Subsidiaries or any of them in the
Transaction Documents shall be disregarded.


 


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(b)           Organization
and Qualification.  The Company and
each of the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and, to the extent applicable under the laws of the respective
state of incorporation,  in good standing
under the laws of the jurisdiction of its incorporation or organization, with
the requisite power and authority to own and use its properties and assets and
to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in
violation nor default of any of the provisions of its respective certificate or
articles of incorporation, bylaws or other organizational or charter
documents.  Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a
material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company’s ability to perform in any material respect on a
timely basis its obligations under any Transaction Document (any of (i), (ii) or
(iii), a “Material Adverse Effect”) and no Proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing or seeking
to revoke, limit or curtail such power and authority or qualification.


 


(c)           Authorization;
Enforcement.  The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further action is required
by the Company, the Board of Directors or the Company’s stockholders in
connection therewith other than in connection with the Required Approvals.  Each Transaction Document to which it is a
party has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof and thereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions
may be limited by applicable law.


 


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


 


(e)           Filings,
Consents and Approvals.  The Company
is not required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filings required pursuant to Section 4.4
of this Agreement, (ii) the filing with the Commission of the Prospectus
Supplement, (iii) application(s) to each applicable Trading Market
for the listing of the Securities for trading thereon in the time and manner
required thereby and (iv) such filings as are required to be made under
applicable state securities laws (collectively, the “Required Approvals”).


 


(f)            Issuance
of the Securities; Registration.  The
Securities are duly authorized and, when issued and paid for in accordance with
the applicable Transaction Documents, will be duly and validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the
Company.  The Warrant Shares, when issued
in accordance with the terms of the Warrants, will be validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the
Company.  The Company has reserved from
its duly authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to this Agreement and the Warrants. The Company has prepared
and filed the Registration Statement in conformity with the requirements of the
Securities Act, which became effective on November 22, 2006 (the “Effective Date”), including the
Prospectus, and such amendments and supplements thereto as may have been
required to the date of this Agreement. 
The Registration Statement is effective under the Securities Act and no
stop order preventing or suspending the effectiveness of the Registration
Statement or suspending or preventing the use of the Prospectus has been issued
by the Commission and no proceedings for that purpose have been instituted or,
to the knowledge of the Company, are threatened by the Commission.  The Company, if required by the rules and
regulations of the Commission, proposes to file the Prospectus, with the
Commission pursuant to Rule 424(b).  At the time the Registration Statement and any
amendments thereto became effective, at the date of this Agreement and at the
Closing Date, the Registration Statement and any amendments thereto conformed
and will conform in all material respects to the requirements of the Securities
Act and did not and will not contain any untrue statement of a material fact or
omit to state any material fact required 


 


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to be stated therein or necessary to make the statements therein not
misleading; and the Prospectus and any amendments or supplements thereto, at
time the Prospectus or any amendment or supplement thereto was issued and at
the Closing Date, conformed and will conform in all material respects to the
requirements of the Securities Act and did not and will not contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The offering and sale of the Securities (the “Offering”)
are being made pursuant the Registration Statement (including the Prospectus
contained therein (the “Base Prospectus”)) filed by the Company with the
Securities and Exchange Commission (the “Commission”), (2) if applicable,
certain “free writing prospectuses” (as that term is defined in Rule 405
under the Securities Act), that have been or will be filed with the Commission
and delivered to the Purchasers on or prior to the date hereof, and (3) a
Prospectus Supplement (the “Prospectus Supplement” and together with the
Base Prospectus, the “Prospectus”) containing certain supplemental information
regarding the Securities and terms of the Offering that have been or will be
filed with the Commission and has been or will be delivered to the Purchasers
(or made available to the Purchasers by the filing by the Company of an
electronic version thereof with the Commission on or prior to the time the
Purchasers have executed this Agreement, other than the Prospectus Supplement
which shall be filed with the Commission no later than two (2) days
subsequent to the execution of this Agreement).


 


(g)           Capitalization.  The capitalization of the Company is as set
forth on Schedule 3.1(g).  The
Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other
than pursuant to the exercise of employee stock options under the Company’s
stock option plans, the issuance of shares of Common Stock to employees
pursuant to the Company’s employee stock purchase plans and pursuant to the
conversion and/or exercise of Common Stock Equivalents outstanding as of the
date of the most recently filed periodic report under the Exchange Act.  No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents.  Except as a result of the purchase and sale
of the Securities and except as set forth on Schedule 3.1(g), there are
no outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common
Stock or Common Stock Equivalents.  The
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.  No further
approval or authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the Securities.  There are no stockholders agreements, voting
agreements or other 


 


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similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among
any of the Company’s stockholders.


 


(h)           SEC
Reports; Financial Statements.  The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, together with the Prospectus and the Prospectus Supplement,
being collectively referred to herein as the “SEC Reports”) on a timely
basis or has received a valid extension of such time of filing and has filed
any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The Company has never been an issuer subject to Rule 144(i) under
the Securities Act. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing.  Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.


 


(i)            Material
Changes; Undisclosed Events, Liabilities or Developments.  Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there
has been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or disclosed
in filings made with the Commission, (iii) the Company has not altered its
method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company
stock option plans.    Except for the
issuance of the Securities contemplated by this Agreement or as set forth on Schedule
3.1(i), no event, liability, fact, circumstance, occurrence or development
has occurred or 


 


11





















 


exists or is reasonably expected to occur or exist with respect to the
Company or its Subsidiaries or their respective business, prospects,
properties, operations, assets or financial condition that would be required to
be disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is made.


 


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


 


(k)           Labor
Relations.  No material labor dispute
exists or, to the knowledge of the Company, is imminent with respect to any of
the employees of the Company, which could reasonably be expected to result in a
Material Adverse Effect.  None of the
Company’s or its Subsidiaries’ employees is a member of a union that relates to
such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good. 
No executive officer, 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 or
non-competition agreement, or any other contract or agreement or any
restrictive covenant in favor of any third party, and, to the knowledge of the
Company,  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.  The Company and its
Subsidiaries are in compliance with all U.S. federal, state, local and foreign
laws and regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.


 


(l)            Compliance.  Neither the Company nor any Subsidiary: (i) is
in default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that 


 


12





















 


it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not such
default or violation has been waived), (ii) is in violation of any
judgment, decree or order of any court, arbitrator or governmental body or (iii) is
or has been in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign, federal,
state and local laws applicable to its business and all such laws that affect
the environment, except in each case as could not have or reasonably be
expected to result in a Material Adverse Effect or as otherwise disclosed in
the Company’s SEC Reports..


 


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


 


(n)           Title
to Assets.  The Company and the
Subsidiaries have good and marketable title in fee simple to all real property
owned by them and good and marketable title in all personal property owned by
them that is material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties.  Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the Subsidiaries
are in compliance.


 


(o)           Patents
and Trademarks.  The Company and the
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other intellectual property rights and
similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the “Intellectual
Property Rights”).  Neither the
Company nor any Subsidiary has received a notice (written or otherwise) that
any of the Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person.  To the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.  The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value of
all of their intellectual properties, except where failure to do so could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.


 


13





















 


(p)           Insurance.  The Company and the Subsidiaries are insured
against such losses and risks and in such amounts as are prudent and customary
in the businesses in which the Company and the Subsidiaries are engaged,
including, but not limited to, directors and officers insurance coverage.  Neither the Company nor any Subsidiary has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.


 


(q)           Transactions
With Affiliates and Employees. 
Except as set forth in the SEC Reports, none of the officers or
directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any “related party
transaction, as defined in the Rules and Regulations, with the Company or
any Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $120,000
other than for (i) payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) other employee benefits, including stock option
agreements under any stock option plan of the Company.


 


(r)            Sarbanes-Oxley;
Internal Accounting Controls.  The
Company is in material compliance with all provisions of the Sarbanes-Oxley Act
of 2002 which are applicable to it as of the Closing Date.  The Company
and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are
executed in accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission’s rules and
forms.  The Company’s certifying officers
have evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the Company’s most recently
filed periodic report under the Exchange Act (such date, the “Evaluation
Date”).  The Company presented in its
most recently filed periodic report under the Exchange Act the conclusions of
the certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no
changes in the Company’s internal control over financial reporting (as such
term is defined in the Exchange Act) that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.


 


14





















 


(s)           Certain
Fees.  Except as set forth in the
Prospectus Supplement, no brokerage or finder’s fees or commissions are or will
be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect
to the transactions contemplated by the Transaction Documents.  The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by the Transaction Documents.


 


(t)            Investment
Company. The Company is not, and is not an Affiliate of, and immediately
after receipt of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the Investment Company Act of
1940, as amended.  The Company shall
conduct its business in a manner so that it will not become an “investment
company” subject to registration under the Investment Company Act of 1940, as
amended.


 


(u)           Registration
Rights.  No Person has any right to
cause the Company to effect the registration under the Securities Act of any
securities of the Company not already covered by an existing registration
statement or where failure to do so would not have a Material Adverse Effect.


 


(v)           Listing
and Maintenance Requirements.  The
Common Stock is registered pursuant to Section 12(b) or 12(g) of
the Exchange Act, and the Company has taken no action designed to, or which to
its knowledge is likely to have the effect of, terminating the registration of
the Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration.  The Company has not, in
the 12 months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.


 


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


 


(x)            Disclosure.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company confirms that neither it nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any information
that it believes constitutes or might 


 


15





















 


constitute material, non-public information which is not otherwise
disclosed in the Prospectus Supplement.  
The Company understands and confirms that the Purchasers will rely on
the foregoing representation in effecting transactions in securities of the
Company.  All of the disclosure furnished
by or on behalf of the Company to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, including the Disclosure Schedules
to this Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The press releases disseminated by the
Company during the twelve months preceding the date of this Agreement taken as
a whole do not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made
and when made, not misleading.  The
Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2 hereof.


 


(y)           No
Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would cause
this Offering of the Securities to be integrated with prior offerings by the
Company for purposes of any applicable shareholder approval provisions of any
Trading Market on which any of the securities of the Company are listed or
designated.


 


(z)            Solvency.  Based on the consolidated financial condition
of the Company as of the Closing Date, after giving effect to the receipt by
the Company of the proceeds from the sale of the Securities hereunder, (i) the
fair saleable value of the Company’s assets exceeds the amount that will be
required to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital to carry on its
business as now conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof, and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash,
would be sufficient to pay all amounts on or in respect of its liabilities when
such amounts are required to be paid.  The
Company does not intend to incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to be payable
on or in respect of its debt).  The
Company has no knowledge of any facts or circumstances which lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Closing
Date.  Schedule 3.1(z) sets
forth as of the date hereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary
has commitments.  For the purposes of
this Agreement, “Indebtedness” means (x) any liabilities for
borrowed money 


 


16





















 


or amounts owed in excess of $50,000 (other than trade accounts payable
incurred in the ordinary course of business), (y) all guaranties,
endorsements and other contingent obligations in respect of indebtedness of
others, whether or not the same are or should be reflected in the Company’s
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (z) the present value of any lease
payments in excess of $50,000 due under leases required to be capitalized in
accordance with GAAP.  Neither the
Company nor any Subsidiary is in default with respect to any Indebtedness.


 


(aa)         Tax
Status.  Except for matters that
would not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect, the Company and each Subsidiary has filed
all necessary federal, state and foreign income and franchise tax returns and
has paid or accrued all taxes shown as due thereon, and the Company has no
knowledge of a tax deficiency which has been asserted or threatened against the
Company or any Subsidiary.


 


(bb)         Foreign
Corrupt Practices.  Neither the
Company, nor to the knowledge of the Company, any agent or other person acting
on behalf of the Company, has (i) directly or indirectly, used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds, (iii) failed
to disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.


 


(cc)         Accountants.  The Company’s accounting firm is set forth on
Schedule 3.1(cc) of the Disclosure Schedules.  To the knowledge and belief of the Company,
such accounting firm (i) is a registered public accounting firm as
required by the Exchange Act and (ii) shall express its opinion with
respect to the financial statements to be included in the Company’s Annual
Report for the year ending December 31, 2008.


 


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


 


17




















 


(ee)         Acknowledgement
Regarding Purchaser’s Trading Activity. 
Anything in this Agreement or elsewhere herein to the contrary
notwithstanding (except for Sections 3.2(e) and 4.14 hereof), it is
understood and acknowledged by the Company that: (i) none of the
Purchasers have been asked by the Company to agree, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or “derivative” securities based on securities issued by the
Company or to hold the Securities for any specified term; (ii) past or
future open market or other transactions by any Purchaser, specifically
including, without limitation, Short Sales or “derivative” transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Company’s publicly-traded securities;
(iii) any Purchaser, and counter-parties in “derivative” transactions to
which any such Purchaser is a party, directly or indirectly, presently may have
a “short” position in the Common Stock, and (iv) each Purchaser shall not
be deemed to have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction. 
The Company further understands and acknowledges that (y) one or
more Purchasers may engage in hedging activities at various times during the
period that the Securities are outstanding, including, without limitation,
during the periods that the value of the Warrant Shares deliverable with
respect to Securities are being determined, and (z) such hedging
activities (if any) could reduce the value of the existing stockholders’ equity
interests in the Company at and after the time that the hedging activities are
being conducted.  The Company
acknowledges that such aforementioned hedging activities do not constitute a
breach of any of the Transaction Documents.


 


(ff)           Regulation
M Compliance.  The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to
pay to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and
(iii), compensation paid to the Company’s placement agent in connection with
the placement of the Securities.


 


(gg)         FDA.  As to each product subject to the jurisdiction of the U.S. Food
and Drug Administration (“FDA”)
under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations
thereunder (“FDCA”) that
is manufactured, packaged, labeled, tested, distributed, sold, and/or marketed
by the Company or any of its Subsidiaries (each such product, a “Pharmaceutical Product”), such
Pharmaceutical Product is being manufactured, packaged, labeled, tested,
distributed, sold and/or marketed by the Company in compliance with all
applicable requirements under FDCA and similar laws, rules and regulations
relating to registration, investigational use, premarket clearance, licensure,
or application approval, good manufacturing practices, good laboratory
practices, good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the failure to
be in compliance would not have a Material Adverse Effect.  There is no pending, completed or, to the
Company’s knowledge, threatened, action (including any lawsuit, arbitration, or
legal or administrative or regulatory proceeding, charge, complaint, or
investigation) 


 


18





















 


against the Company or any
of its Subsidiaries, and none of the Company or any of its Subsidiaries has
received any notice, warning letter or other communication from the FDA or any
other governmental entity, which (i) contests the premarket clearance,
licensure, registration, or approval of, the uses of, the distribution of, the
manufacturing or packaging of, the testing of, the sale of, or the labeling and
promotion of any Pharmaceutical Product, (ii) withdraws its approval of,
requests the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating to, any
Pharmaceutical Product, (iii) imposes a clinical hold on any clinical
investigation by the Company or any of its Subsidiaries, (iv) enjoins production
at any facility of the Company or any of its Subsidiaries, (v) enters or
proposes to enter into a consent decree of permanent injunction with the
Company or any of its Subsidiaries, or (vi) otherwise alleges any
violation of any laws, rules or regulations by the Company or any of its
Subsidiaries, and which, either individually or in the aggregate, would have a
Material Adverse Effect. 
The properties, business and operations of the Company have been and are
being conducted in all material respects in accordance with all applicable
laws, rules and regulations of the FDA.  The Company has not been
informed by the FDA that the FDA will prohibit the marketing, sale, license or
use in the United States of any product proposed to be developed, produced or
marketed by the Company nor has the FDA expressed any concern as to approving
or clearing for marketing any product being developed or proposed to be
developed by the Company.


 


3.2           Representations and Warranties of
the Purchasers.  Each Purchaser, for
itself and for no other Purchaser, hereby represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):


 


(a)           Organization;
Authority.  Such Purchaser is either
an individual or an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with full
right, corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by this Agreement and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and performance by such Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate, partnership, limited liability company or similar action, as
applicable, on the part of such Purchaser. 
Each Transaction Document to which it is a party has been duly executed
by such Purchaser, and when delivered by such Purchaser in accordance with the
terms hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except: (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.


 


(b)           Own Account.  Such Purchaser is acquiring the Securities as
principal for its own account and not with a view to or for distributing or
reselling such Securities or any part thereof in violation of the Securities
Act or any applicable state securities law, has no present intention of
distributing any of such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect arrangement or 


 


19

















 


understandings with any other persons to distribute or regarding the
distribution of such Securities in violation of the Securities Act or any
applicable state securities law (this representation and warranty not limiting
such Purchaser’s right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws).  Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its business.


 


(c)           Purchaser Status.  At the time such Purchaser was offered the
Securities, it was, and as of the date hereof it is, and on each date on which
it exercises any Warrants, it will be either: (i) an “accredited investor”
as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a “qualified institutional buyer” as defined in
Rule 144A(a) under the Securities Act.  Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act.


 


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


 


(e)           Certain
Transactions and Confidentiality. 
Other than consummating the transactions contemplated hereunder, such
Purchaser has not, nor has any Person acting on behalf of or pursuant to any
understanding with such Purchaser, directly or indirectly executed any
purchases or sales, including Short Sales, of the securities of the
Company during the period commencing as of the time that such Purchaser first
received a term sheet (written or oral) from the Company or any other Person representing
the Company setting forth the material terms of the transactions contemplated
hereunder and ending immediately prior to the execution hereof.  Notwithstanding the foregoing, in the case of
a Purchaser that is a multi-managed investment vehicle whereby separate
portfolio managers manage separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser’s assets, the representation
set forth above shall only apply with respect to the portion of assets managed
by the portfolio manager that made the investment decision to purchase the
Securities covered by this Agreement. 
Other than to other Persons party to this Agreement, such Purchaser has
maintained the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction).  Notwithstanding the foregoing, for
avoidance of doubt, nothing contained herein shall constitute a representation
or warranty, or preclude any actions, with respect to the identification of the
availability of, or securing of, available shares to borrow in order to effect
Short Sales or similar transactions in the future.


 


The Company acknowledges and agrees that the
representations contained in Section 3.2 shall not modify, amend or affect
such Purchaser’s right to rely on the Company’s representations and warranties
contained in this Agreement or any representations and warranties contained in
any other Transaction Document or any other document or instrument executed
and/or delivered in connection with this Agreement or the consummation of the
transaction contemplated hereby.


 


20

















 


ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES


 


4.1           Warrant Shares.  If all or any portion of a Warrant is
exercised at a time when there is an effective registration statement to cover
the issuance or resale of the Warrant Shares or if the Warrant is exercised via
cashless exercise, the Warrant Shares issued pursuant to any such exercise
shall be issued free of all legends.  If
at any time following the date hereof the Registration Statement (or any
subsequent registration statement registering the sale or resale of the Warrant
Shares) is not effective or is not otherwise available for the sale or resale
of the Warrant Shares, the Company shall immediately notify the holders of the
Warrants in writing that such registration statement is not then effective and
thereafter shall promptly notify such holders when the registration statement
is effective again and available for the sale or resale of the Warrant Shares
(it being understood and agreed that the foregoing shall not limit the ability
of the Company to issue, or any Purchaser to sell, any of the Warrant Shares in
compliance with applicable federal and state securities laws).  The Company shall use best efforts to keep a
registration statement (including the Registration Statement) registering the
issuance or resale of the Warrant Shares effective during the term of the
Warrants. Upon a cashless exercise of a Warrant, the holding period for
purposes of Rule 144 shall tack back to the original date of issuance of
such Warrant.


 


4.2           Furnishing of Information.  Until the earliest of the time that (i) no
Purchaser owns Securities or (ii) the Warrants have expired, the Company
covenants to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act even if the Company
is not then subject to the reporting requirements of the Exchange Act.  As long as any Purchaser owns Securities, if
the Company is not required to file reports pursuant to the Exchange Act, it
will prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities, including without limitation, under Rule 144.
The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, to the extent required from time
to time to enable such Person to sell such Securities without registration
under the Securities Act, including without limitation, within the requirements
of the exemption provided by Rule 144.


 


4.3           Integration.  The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder approval
is obtained before the closing of such subsequent transaction.


 


4.4           Securities Laws Disclosure;
Publicity.  The Company shall, by
8:30 a.m. (New York City time) on the Trading Day immediately following
the date hereof, issue a press release disclosing the material terms of the
transactions contemplated hereby, and shall file a Form 8-K within the
time limit required by Commission rules, including the Transaction Documents as
exhibits hereto.  From and after the
issuance of such press release, the Company shall have publicly disclosed all
material, non-public information delivered to any of the Purchasers by the 


 


21

















 


Company or any of its
subsidiaries, or any of their respective officers, directors, employees or
agents in connection with the transactions contemplated by the Transaction
Documents.  The Company shall not
publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except (a) as
required by federal securities law in connection with the filing of final
Transaction Documents (including signature pages thereto) with the
Commission and (b) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under this clause
(b).


 


4.5           Shareholder Rights Plan.  No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or similar anti-takeover plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement between the
Company and the Purchasers.


 


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


 


4.7           Use of Proceeds.  Except as set forth on Schedule 4.7
attached hereto, the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and shall not use such
proceeds for: (a) the satisfaction of any portion of the Company’s debt
(other than payment of trade payables in the ordinary course of the Company’s
business and prior practices), (b) the redemption of any Common Stock or
Common Stock Equivalents or (c) the settlement of any outstanding
litigation.


 


4.8           Indemnification of Purchasers.   Subject to the provisions of this Section 4.8,
the Company will indemnify and hold each Purchaser and its directors, officers,
shareholders, members, partners, employees and agents (and any other Persons
with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, shareholders, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling
persons (each, a “Purchaser Party”) harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of
any of the representations, warranties, covenants or agreements made by the
Company in this Agreement or 


 


22

















 


in the other Transaction
Documents or (b) any action instituted against a Purchaser in any
capacity, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser’s representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by such
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or
malfeasance).  If any action shall be
brought against any Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly notify the
Company in writing, and the Company shall have the right to assume the defense
thereof with counsel of its own choosing reasonably acceptable to the Purchaser
Party.  Any Purchaser Party shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the
employment thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion
of counsel, a material conflict on any material issue between the position of
the Company and the position of such Purchaser Party, in which case the Company
shall be responsible for the reasonable fees and expenses of no more than one
such separate counsel.  The Company will
not be liable to any Purchaser Party under this Agreement (y) for any
settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (z) to
the extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by such Purchaser Party in this
Agreement or in the other Transaction Documents.


 


4.9           Reservation of Common Stock.
As of the date hereof, the Company has reserved and the Company shall continue
to reserve and keep available at all times, free of preemptive rights, a
sufficient number of shares of Common Stock for the purpose of enabling the
Company to issue Shares pursuant to this Agreement and Warrant Shares pursuant
to any exercise of the Warrants.


 


4.10         Listing of Common Stock. The
Company hereby agrees to use best efforts to maintain the listing or quotation
of the Common Stock on the Trading Market on which it is currently listed, and
concurrently with the Closing, the Company shall apply to list or quote all of
the Shares and Warrant Shares on such Trading Market and promptly secure the
listing of all of the Shares and Warrant Shares on such Trading Market. The
Company further agrees, if the Company applies to have the Common Stock traded
on any other Trading Market, it will then include in such application all of
the Shares and Warrant Shares, and will take such other action as is necessary
to cause all of the Shares and Warrant Shares to be listed or quoted on such
other Trading Market as promptly as possible. 
The Company will then take all action reasonably necessary to continue
the listing and trading of its Common Stock on a Trading Market and will comply
in all respects with the Company’s reporting, filing and other obligations
under the bylaws or rules of the Trading Market.


 


23

















 


4.11         Participation in Future Financing.


 


(a)           From
the date hereof until the date that is the six (6) month anniversary of
the Closing Date, upon any issuance by the Company or any of its Subsidiaries
of Common Stock or Common Stock Equivalents for cash consideration,
Indebtedness (or a combination of units hereof) (a “Subsequent Financing”),
each Purchaser shall have the right to participate in up to an amount of the
Subsequent Financing equal to 50% of the Subsequent Financing (the “Participation
Maximum”) on the same terms, conditions and price provided for in the
Subsequent Financing, unless the Subsequent Financing is a registered public
offering, in which case the Company shall offer each Purchaser the right to
participate in such public offering when it is lawful for the Company to do so,
but no Purchaser shall be entitled to purchase any particular amount of such
public offering.


 


(b)           At
least five (5) Trading Days prior to the closing of the Subsequent
Financing, the Company shall deliver to each Purchaser a written notice of its
intention to effect a Subsequent Financing (“Pre-Notice”), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a “Subsequent Financing Notice”). 
Upon the request of a Purchaser, and only upon a request by such Purchaser, for
a Subsequent Financing Notice, the Company shall promptly, but no later than
one (1) Trading Day after such request, deliver a Subsequent Financing
Notice to such Purchaser.  The Subsequent Financing Notice shall describe
in reasonable detail the proposed terms of such Subsequent Financing, the
amount of proceeds intended to be raised thereunder and the Person or Persons
through or with whom such Subsequent Financing is proposed to be effected and
shall include a term sheet or similar document relating thereto as an
attachment.


 


(c)           Any
Purchaser desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City
time) on the fifth (5th) Trading Day after all of the Purchasers have received
the Pre-Notice that the Purchaser is willing to participate in the Subsequent
Financing, the amount of the Purchaser’s participation, and representing and
warranting that the Purchaser has such funds ready, willing, and available for
investment on the terms set forth in the Subsequent Financing Notice.  If the Company receives no such notice from a
Purchaser as of such fifth (5th)
Trading Day, such Purchaser shall be deemed to have notified the Company that
it does not elect to participate.


 


(d)           If
by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of the
Purchasers have received the Pre-Notice, notifications by the Purchasers of
their willingness to participate in the Subsequent Financing (or to cause their
designees to participate) is, in the aggregate, less than the total amount of
the Subsequent Financing, then the Company may effect the remaining portion of
such Subsequent Financing on the terms and with the Persons set forth in the
Subsequent Financing Notice.


 


(e)           If
by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of the
Purchasers have received the Pre-Notice, the Company receives responses to a
Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate
amount of the Participation Maximum, each such Purchaser shall have the right
to purchase its Pro Rata Portion (as defined below) of the Participation
Maximum.  “Pro Rata Portion” means the ratio of (x) the
Subscription Amount of Securities purchased on 


 


24





















 


the Closing Date by a Purchaser participating under this Section 4.11
and (y) the sum of the aggregate Subscription Amounts of Securities
purchased on the Closing Date by all Purchasers participating under this Section 4.11.


 


(f)            The
Company must provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set forth above
in this Section 4.11, if the Subsequent Financing subject to the initial
Subsequent Financing Notice is not consummated for any reason on the terms set
forth in such Subsequent Financing Notice within 30 Trading Days after the date
of the initial Subsequent Financing Notice.


 


(g)           Notwithstanding the foregoing, this Section 4.11
shall not apply in respect of (i) an Exempt Issuance or (ii) an
underwritten public offering of Common Stock.


 


4.12         Subsequent Equity Sales.


 


(a)           From
the date hereof until 90 days after the Closing Date, neither the Company nor
any Subsidiary shall issue, enter into any agreement to issue or announce the
issuance or proposed issuance of any shares of Common Stock or Common Stock
Equivalents; provided, however, that the 90 day period set forth
in this Section 4.12 shall be extended for the number of Trading Days
during such period in which (i) trading in the Common Stock is suspended
by any Trading Market, or (ii) the Registration Statement is not effective
or the prospectus included in the Registration Statement may not be used by the
Purchasers for the resale of the Shares and Warrant Shares.


 


(b)           From
the date hereof until one (1) year from the Closing Date, the Company
shall be prohibited from effecting or entering into an agreement to effect any
issuance by the Company or any of its Subsidiaries of Common Stock or Common
Stock Equivalents for cash consideration (or a combination of units hereof)
involving a Variable Rate Transaction.  “Variable
Rate Transaction” means a transaction in which the Company (i) issues
or sells any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or
other price that is based upon and/or varies with the trading prices of or
quotations for the shares of Common Stock at any time after the initial
issuance of such debt or equity securities, or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date
after the initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly related to
the business of the Company or the market for the Common Stock or (ii) enters
into any agreement, including, but not limited to, an equity line of credit,
whereby the Company may sell securities at a future determined price.  Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such issuance, which
remedy shall be in addition to any right to collect damages.


 


(c)           Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of an Exempt
Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.


 


25
















 


4.13         Equal
Treatment of Purchasers.  No
consideration (including any modification of any Transaction Document) 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 is also offered to all of the parties to the Transaction
Documents.  For clarification purposes,
this provision constitutes a separate right granted to each Purchaser by the
Company and negotiated separately by each Purchaser, and is intended for the
Company to treat the Purchasers as a class and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.


 


4.14         Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly
with the other Purchasers, covenants that neither it nor any Affiliate acting
on its behalf or pursuant to any understanding with it will execute any
purchases or sales, including Short Sales of any of the Company’s securities
during the period commencing with the execution of this Agreement and ending at
such time that the transactions contemplated by this Agreement are first
publicly announced pursuant to the initial press release as described in Section 4.4.  Each Purchaser, severally and not
jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company pursuant to the initial press release as described in Section 4.4,
such Purchaser will maintain the confidentiality of the existence and terms of
this transaction and the information included in the Disclosure
Schedules.  Notwithstanding the foregoing
and notwithstanding anything contained in this Agreement to the contrary, the
Company expressly acknowledges and agrees that (i) no Purchaser makes any
representation, warranty or covenant hereby that it will not engage in
effecting transactions in any securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.4, (ii) no
Purchaser shall be restricted or prohibited from effecting any transactions in
any securities of the Company in accordance with applicable securities laws
from and after the time that the transactions contemplated by this Agreement
are first publicly announced pursuant to the initial press release as described
in Section 4.4 and (iii) no Purchaser shall have any duty of
confidentiality to the Company or its Subsidiaries after the issuance of the
initial press release as described in Section 4.4.  Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Purchaser’s assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the covenant set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.


 


4.15         Delivery
of Warrants After Closing.  The
Company shall deliver, or cause to be delivered, the respective Warrant
certificates purchased by each Purchaser to such Purchaser within 3 Trading
Days of the Closing Date.


 


ARTICLE V.

MISCELLANEOUS


 


5.1           Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the 


 


26

















 


Closing has not been consummated on or before February 2, 2009; provided,
however, that no such termination will affect the right of any party to
sue for any breach by the other party (or parties).


 


5.2           Fees
and Expenses.   Except as expressly
set forth in the Transaction Documents to the contrary, each party shall pay
the fees and expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Agreement.  The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in
connection with the delivery of any Securities to the Purchasers.


 


5.3           Entire
Agreement.  The Transaction
Documents, together with the exhibits and schedules thereto, the Prospectus and
the Prospectus Supplement, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules.


 


5.4           Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of: (a) the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached
hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the
next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto on a day that is not a Trading Day or
later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
second (2nd)
Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (d) upon actual receipt by the
party to whom such notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.


 


5.5           Amendments;
Waivers.  No provision of this
Agreement may be waived, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by the Company and the
Purchasers or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought. 
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right.


 


5.6           Headings.  The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.


 


5.7           Successors
and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns.  The Company may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of each Purchaser (other than by merger).  Any Purchaser may assign any or all of its
rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided 


 


27

















 


that such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction Documents that
apply to the “Purchasers.”


 


5.8           No
Third-Party Beneficiaries.  This
Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.8.


 


5.9           Governing
Law.  All questions concerning the
construction, validity, enforcement and interpretation of the Transaction
Documents shall be governed by and construed and enforced in accordance with
the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof.  Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in the City of New York, borough of
Manhattan for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents),
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 improper or is an
inconvenient venue for such proceeding. 
Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to
limit in any way any right to serve process in any other manner permitted by
law.  If either party shall commence an
action or proceeding to enforce any provisions of the Transaction Documents,
then, in addition to the obligations of the Company under Section 4.8, the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.


 


5.10         Survival.  The representations and warranties contained
herein shall survive the Closing and the delivery of the Securities.


 


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


 


28

















 


5.12         Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.


 


5.13         Rescission
and Withdrawal Right. 
Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) any of the other Transaction Documents,
whenever any Purchaser exercises a right, election, demand or option under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may
rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights; provided, however,
that in the case of a rescission of an exercise of a Warrant, the applicable
Purchaser shall be required to return any shares of Common Stock subject to any
such rescinded exercise notice concurrently with the return to such Purchaser
of the aggregate exercise price paid to the Company for such shares and the
restoration of such Purchaser’s right to acquire such shares pursuant to such
Purchaser’s Warrant (including, issuance of a replacement warrant certificate
evidencing such restored right).


 


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


 


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


 


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


 


29

















 


law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of
any such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.


 


5.17         Independent
Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any
Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the
performance or non-performance of the obligations of any other Purchaser under
any Transaction Document.  Nothing
contained herein or in any other Transaction Document, and no action taken by
any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as
a partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by
the Transaction Documents.  Each
Purchaser shall be entitled to independently protect and enforce its rights
including, without limitation, the rights arising out of this Agreement or out
of the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.  Each Purchaser has been
represented by its own separate legal counsel in their review and negotiation
of the Transaction Documents.  For
reasons of administrative convenience only, each Purchaser and its respective
counsel have chosen to communicate with the Company through FWS.  FWS does not represent any of the Purchasers
and only represents Rodman & Renshaw, LLC, the Placement Agent for the
Offering.  The Company has elected to
provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do
so by any of the Purchasers.


 


5.18         Liquidated
Damages.  The Company’s obligations
to pay any partial liquidated damages or other amounts owing under the
Transaction Documents is a continuing obligation of the Company and shall not
terminate until all unpaid partial liquidated damages and other amounts have
been paid notwithstanding the fact that the instrument or security pursuant to which
such partial liquidated damages or other amounts are due and payable shall have
been canceled.


 


5.19         Saturdays,
Sundays, Holidays, etc.  If the last
or appointed day for the taking of any action or the expiration of any right
required or granted herein shall not be a Business Day, then such action may be
taken or such right may be exercised on the next succeeding Business Day.


 


5.20         Construction.
The parties agree that each of them and/or their respective counsel has
reviewed and had an opportunity to revise the Transaction Documents and,
therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto. In
addition, each and every reference to share prices and shares of Common Stock
in any Transaction Document shall be subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement.


 


30

















 


5.21         WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE
LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES
FOREVER TRIAL BY JURY.


 


(Signature Pages Follow)


 


31

















 


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


 


 


	
  AVI BioPharma, Inc.

  	
   

  	
  Address for Notice:

  
	
   

  	
   

  	
   

  
	
  By:

  	
       /s/ Leslie Hudson 

  	
   

  	
  Fax:

  
	
   

  	
  Name: Dr. L. Hudson 

  	
   

  	
   

  
	
   

  	
  Title: President & CEO 

  	
   

  	
   

  
	
  With a copy to (which shall not constitute notice):

  	
   

  	
   

  



 


 


[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR
PURCHASER FOLLOWS]


 


32

















 


[PURCHASER
SIGNATURE PAGES TO AVII SECURITIES PURCHASE AGREEMENT]


 


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


 


 


	
  Name of
  Purchaser: 

  	
   

  
	
   

  
	
  Signature
  of Authorized Signatory of Purchaser: 

  	
      /s/

  
	
   

  
	
  Name of
  Authorized Signatory:

  	
   

  
	
   

  
	
  Title of
  Authorized Signatory: 

  	
   

  
	
   

  
	
  Email Address of
  Authorized Signatory:

  	
   

  
	
   

  
	
  Facsimile Number
  of Authorized Signatory: 

  	
   

  
	
   

  
	
  Address for Notice
  of Purchaser:

  	
   

  
							



 


 


Address for Delivery of
Securities for Purchaser (if not same as address for notice):


 


 


Subscription Amount: $      


 


Shares:


 


Warrant Shares: 


 


EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]


 


 


[SIGNATURE PAGES CONTINUE]


 


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