Exhibit 10.48

 

SECURITIES PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of December 4, 2003,
by and among AVI Biopharma, Inc., an Oregon corporation, with headquarters
located at One SW Columbia Street, Suite 1105, Portland, Oregon 97258 (the
“Company”), and the investors listed on the Schedule of Buyers attached hereto
(individually, a “Buyer” and collectively, the “Buyers”).

 

WHEREAS:

 

A.                                   The Company and each Buyer desire to enter
into this transaction to purchase the securities set forth herein pursuant to a
currently effective shelf registration statement on Form S-3, which has at least
$75,000,000 in unallocated securities registered thereunder (Registration Number
333-109015) (the “Registration Statement”), which Registration Statement has
been declared effective in accordance with the Securities Act of 1933, as
amended (the “1933 Act”), by the United States Securities and Exchange
Commission (the “SEC”).

 

B.                                     Each Buyer wishes to purchase, and the
Company wishes to sell, upon the terms and conditions stated in this Agreement,
(i) that aggregate number of shares of common stock, par value $.0001 per share,
of the Company (the “Common Stock”), set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers (which aggregate amount for all Buyers
together shall be 3,246,753 shares of Common Stock and shall collectively be
referred to herein as the “Purchased Shares”); (ii) a warrant representing the
right to acquire up to that number of additional shares of Common Stock set
forth opposite such Buyer’s name in column (4) on the Schedule of Buyers (which
aggregate amount for all Buyers together shall be 1,623,377 shares of Common
Stock and shall collectively be referred to herein as the (the “Additional
Investment Right Warrants”), in substantially the form attached hereto as
Exhibit A (as exercised, collectively, the “Additional Investment Right Warrant
Shares”); and (iii) a warrant to acquire up to that number of additional shares
of Common Stock set forth opposite such Buyer’s name in column (5) on the
Schedule of Buyers (which warrants shall represent for all Buyers together the
right to acquire up to 974,026 shares of Common Stock and shall collectively be
referred to herein as the “Purchase Warrants”, and, together with the Additional
Investment Right Warrants, the “Warrants”), in substantially the form attached
hereto as Exhibit B (as exercised, collectively, the “Purchase Warrant Shares”
and, together with the Additional Investment Right Warrant Shares, the “Warrant
Shares”).

 

C.                                     The Purchased Shares, the Additional
Investment Right Warrants, the Additional Investment Right Warrant Shares, the
Purchase Warrants and the Purchase Warrant Shares are collectively referred to
herein as the “Securities”.

 

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

 

1.                                       PURCHASE AND SALE OF PURCHASED SHARES
AND WARRANTS.

 

(a)                                  Purchase of Purchased Shares and Warrants.

 

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Subject to the satisfaction (or waiver) of the conditions set forth in Sections
6 and 7 below, the Company shall issue and sell to each Buyer, and each Buyer
severally, but not jointly, agrees to purchase from the Company on the Closing
Date (as defined below), the number of Purchased Shares as is set forth opposite
such Buyer’s name in column (3) on the Schedule of Buyers, along with the
Additional Investment Right Warrants to acquire up to that number of Additional
Investment Right Warrant Shares as is set forth opposite such Buyer’s name in
column (4) on the Schedule of Buyers and Purchase Warrants to acquire up to that
number of Purchase Warrant Shares as is set forth opposite such Buyer’s name in
column (5) on the Schedule of Buyers (the “Closing”).  The Closing shall occur
on the Closing Date at the offices of Schulte Roth & Zabel LLP, 919 Third
Avenue, New York, New York 10022.

 

(b)                                 Purchase Price.  The purchase price for each
Purchased Share and related Warrants to be purchased by each Buyer at the
Closing shall be $4.62 (the “Purchase Price”).

 

(c)                                  Closing Date.  The date and time of the
Closing (the “Closing Date”) shall be 10:00 a.m., New York City Time, on
December 8, 2003, after notification of satisfaction (or waiver) of the
conditions to the Closing set forth in Sections 6 and 7 below (or such later
date as is mutually agreed to by the Company and each Buyer).

 

(d)                                 Form of Payment.  On the Closing Date, (i)
each Buyer shall pay its Purchase Price to the Company for the Purchased Shares
and Warrants to be issued and sold to such Buyer at the Closing, by wire
transfer of immediately available funds in accordance with the Company’s written
wire instructions, and (ii) the Company shall (A) cause the Company’s transfer
agent (the “Transfer Agent”) through the Depository Trust Company (“DTC”) Fast
Automated Securities Transfer Program, to credit such aggregate number of
Purchased Shares that such Buyer is purchasing as is set forth opposite such
Buyer’s name in column (3) of the Schedule of Buyers to such Buyer’s or its
designee’s balance account with DTC through its Deposit Withdrawal Agent
Commission system as specified in writing by such Buyer, (B) deliver to each
Buyer an Additional Investment Right Warrant pursuant to which such Buyer shall
have the right to acquire such number of Additional Investment Right Warrant
Shares as is set forth opposite such Buyer’s name in column (4) of the
Schedule of Buyers, in all cases duly executed on behalf of the Company and
registered in the name of such Buyer, and (C) deliver to each Buyer a Purchase
Warrant pursuant to which such Buyer shall have the right to acquire such number
of Purchase Warrant Shares as is set forth opposite such Buyer’s name in column
(5) of the Schedule of Buyers, in all cases duly executed on behalf of the
Company and registered in the name of such Buyer.

 

2.                                       REPRESENTATIONS AND WARRANTIES OF EACH
BUYER.

 

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

 

(a)                                  Validity; Enforcement.  This Agreement has
been duly and validly authorized, executed and delivered on behalf of such Buyer
and constitutes the legal, valid and binding obligation of such Buyer
enforceable against such Buyer in accordance with its terms, except as such
enforceability may be limited by general principles of equity or to applicable

 

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bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.

 

(b)                                 No Conflicts.  The execution, delivery and
performance by such Buyer of this Agreement and the consummation by such Buyer
of the transactions contemplated hereby will not (i) result in a violation of
the organizational documents of such Buyer or (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
such Buyer is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws) applicable to such Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.

 

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

 

(d)                                 Rule 144.  Such Buyer is not acquiring
pursuant to the Transaction Documents an aggregate number of shares of Common
Stock that will require such Buyer to sell any Securities pursuant to Rule 144
(as defined below).  Such Buyer will promptly inform the Company if it becomes
required to sell any Securities pursuant to such Rule.

 

3.                                       REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.

 

The Company hereby makes the following representations and warranties to each
Buyer:

 

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

 

(b)                                 Organization and Qualification.  Each of the
Company and each Subsidiary is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted.  Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents.  Each of the Company and the Subsidiaries is duly qualified
to do business and is in good standing as a foreign corporation or other entity
in each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate: (i) adversely affect the legality, validity or enforceability
of this Agreement, the Additional Investment Right Warrants, the Purchase

 

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Warrants, the Irrevocable Transfer Agent Instructions and any other documents or
agreements executed in connection with the transactions contemplated hereunder
(the “Transaction Documents”), (ii) have or result in a material adverse effect
on the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
or (iii) adversely impair the Company’s ability to perform fully on a timely
basis its obligations under any of the Transaction Documents (any of (i), (ii)
or (iii), a “Material Adverse Effect”).

 

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

 

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

 

(e)                                  Filings, Consents and Approvals.  Neither
the Company nor any Subsidiary is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) the filings required under Section 4(f), (ii) the filing with the SEC of the
prospectus supplement required by the Registration Statement pursuant to Rule
424(b) under the 1933 Act, (iii) the application(s) to the Nasdaq National
Market (the “Principal Market”) for the listing of the Purchased Shares and the
Warrant Shares for trading thereon in the time and manner required thereby, and
(iv) applicable Blue Sky filings (collectively, the “Required Approvals”). 
“Person” means an

 

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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.

 

(f)                                    Issuance of the Securities.  The
Securities are duly authorized and, when issued and paid for in accordance with
the applicable Transaction Documents, will be duly and validly issued, fully
paid and nonassessable, free and clear of all Liens.  The Company has reserved
from its duly authorized capital stock a sufficient number of Warrant Shares to
enable it to comply with its exercise obligations under the Warrants.  The
issuance by the Company of the Securities has been registered under the 1933 Act
and all of the Securities are freely transferable and tradable by the Buyers
without restriction.  The Purchased Shares and Warrants are being issued
pursuant to the Registration Statement and the issuance of the Purchased Shares,
the Warrants and the Warrant Shares has been registered by the Company under the
1933 Act.  The Registration Statement is effective and available for the
issuance of the Securities thereunder and the Company has not received any
notice that the SEC has issued or intends to issue a stop-order with respect to
the Registration Statement or that the SEC otherwise has suspended or withdrawn
the effectiveness of the Registration Statement, either temporarily or
permanently, or intends or has threatened in writing to do so.  The “Plan of
Distribution” section under the Registration Statement permits the issuance and
sale of the Securities hereunder and under the Warrants.  Upon receipt of the
Securities, the Buyers will have good and marketable title to such Securities
and the Purchased Shares and, upon exercise of the Warrants, the Warrant Shares
will be freely tradable on the Principal Market.

 

(g)                                 Capitalization.  The number of shares and
type of all authorized, issued and outstanding capital stock, options and other
securities of the Company (whether or not presently convertible into, or
exercisable or exchangeable for, shares of capital stock of the Company) is set
forth in Schedule 3.1(g).  All outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and nonassessable and
have been issued in compliance with all applicable securities laws.  No
securities of the Company are entitled to preemptive or similar rights, and no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents, except as set forth in Schedule 3.1(g).  Except as a
result of the purchase and sale of the Securities and except as disclosed in
Schedule 3.1(g), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible into or exercisable or
exchangeable for shares of Common Stock.  Except as disclosed in
Schedule 3.1(g), there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) and the issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Buyers) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, number of issuable
shares, exchange or reset price under such securities.  The Company will not
authorize the issuance of any additional securities unless there are sufficient
authorized shares of Common

 

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Stock (or any successor security thereto) available, taking into account all
potential adjustments or anti-dilution provisions in such securities, to satisfy
the rights of the Buyers to acquire the Securities and underlying securities in
the event of exercise of the Warrants.  Further, if at any time the number of
shares of Common Stock available for issuance were insufficient for any reason
to satisfy such rights of the Buyers, the Company would take immediate action to
cause sufficient authorized shares to be authorized or effect a reverse stock
split to provide sufficient shares to be available.

 

(h)                                 SEC Reports; Financial Statements.  The
Company has filed all reports required to be filed by it under the 1933 Act and
the Securities Exchange Act of 1934, as amended (the “1934 Act”), including
pursuant to Section 13(a) or 15(d) thereof, for the two (2) years preceding the
date hereof (or such shorter period as the Company was required by law to file
such material) (the foregoing materials being collectively referred to herein as
the “SEC Reports” and, together with the Schedules to this Agreement, the
“Disclosure Materials”) on a timely basis or has received a valid extension of
such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension.  The Company has delivered to each Buyer a true, correct
and complete copy of all SEC Reports filed within the ten (10) days preceding
the date hereof.  As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the 1933 Act and the 1934 Act and the
rules and regulations of the SEC promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.  The Registration Statement and any
prospectus included therein, including the prospectus supplement to be filed
covering the transactions covered hereby, complied in all material respects with
the requirements of the 1933 Act and the 1934 Act and the rules and regulations
of the SEC promulgated thereunder, and none of such Registration Statement or
any such prospectus contain or 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 case of any prospectus in the
light of the circumstances under which they were made, not misleading.  The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the SEC with respect thereto as in effect at the time of filing. 
Such financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

 

(i)                                     Material Changes.  Since the date of the
latest audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports: (i) there has been no event,
occurrence or development that, individually or in the aggregate, has had or
that could result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or required to be disclosed in

 

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filings made with the SEC, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock, and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company stock
option plans.  “Affiliate” means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 144. 
“Rule 144” means Rule 144 promulgated by the SEC pursuant to the 1933 Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such Rule.

 

(j)                                     Litigation.  There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which:
(i) adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities or (ii) could, if there were
an unfavorable decision, individually or in the aggregate, have or result in a
Material Adverse Effect.  Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. The Company does not have pending before the
SEC any request for confidential treatment of information.  There has not been,
and to the knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company or any current or former director
or officer of the Company.  The SEC 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 1934 Act or the 1933 Act, including the Registration
Statement.

 

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

 

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

 

(m)                               Regulatory Permits.  The Company and the
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign

 

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regulatory authorities necessary to conduct their respective businesses as
described in the SEC Reports, except where the failure to possess such permits
could not, individually or in the aggregate, have or result in a Material
Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation or
modification of any Material Permit.

 

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

 

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

 

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

 

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

 

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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.

 

(r)                                    Internal Accounting Controls.  The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The financial records of the Company accurately reflect in all
material respects the information relating to the business of the Company, the
location and collection of its assets, and the nature of all transactions giving
rise to the obligations or accounts receivable of the Company.  The Company has
established disclosure controls and procedures (as defined in 1934 Act Rules
13a-14 and 15d-14) for the Company and designed such disclosures controls and
procedures to ensure that material information relating to the Company is made
known to the certifying officers by others within the Company, particularly
during the period in which the Company’s Form 10-K (or 10-KSB) or 10-Q (or
10-QSB), as the case may be, is being prepared.  The Company’s certifying
officers have evaluated the effectiveness of the Company’s controls and
procedures as of a date within 90 days prior to the filing date of the Form 10-K
for the year ended December 31, 2002 (such date, the “Evaluation Date”).  The
Company presented in the Form 10-K for the quarter ended December 31, 2002 the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date. 
Since the Evaluation Date, there have been no significant changes in the
Company’s internal controls (as such term is defined in Item 307(b) of
Regulation S-K under the 1934 Act) or, the knowledge of the Company, in other
factors that could significantly affect the Company’s internal controls.

 

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

 

(t)                                    Certain Fees.  Except for the fees
described in Schedule 3.1(t), all of which are payable by the Company to the
registered broker-dealers named therein, no brokerage or finder’s fees or
commissions are or will be payable by the Company to any broker, financial

 

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advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by this Agreement, and the
Company has not taken any action that would cause any Buyer to be liable for any
such fees or commissions.  The Company agrees that the Buyers shall have no
obligation with respect to any fees or with respect to any claims made by or on
behalf of any Person for fees of the type contemplated by this Section in
connection with the transactions contemplated by this Agreement.

 

(u)                                 Integration.  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 stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated, nor will
the Company or any of its Subsidiaries take any action or steps that would cause
the offering of the Securities to be integrated with other offerings.

 

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

 

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

 

(x)                                   Application of Takeover Protections.  The
Company and its Board of Directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Buyers as a result of
the Buyers 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 Buyers’ ownership of
the Securities.

 

(y)                                 Disclosure.  The Company confirms that
neither it nor any other Person acting on its behalf has provided any of the
Buyers or their agents or counsel with any information that the Company believes
constitutes, nonpublic information.  The Company understands and confirms that
the Buyers will rely on the foregoing representations in effecting

 

10

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transactions in securities of the Company.  All disclosure provided to the
Buyers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. The Company acknowledges and agrees that no Buyer makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 2.

 

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

 

4.                                       COVENANTS.

 

(a)                                  Best Efforts.  Each party shall use its
best efforts timely to satisfy each of the covenants and the conditions to be
satisfied by it as provided in Sections 5, 6 and 7 of this Agreement.

 

(b)                                 Prospectus Supplement and Blue Sky.  On or
before the execution of this Agreement, the Company shall have delivered, and as
soon as practicable after the Closing the Company shall file, a prospectus
supplement to the Registration Statement with respect to the Securities as
required under and in conformity with the 1933 Act, including Rule 424(b)
thereunder.  If required, the Company, on or before the Closing Date, shall take
such action as the Company shall reasonably determine is necessary in order to
obtain an exemption for or to qualify the Securities for sale to the Buyers at
the Closing pursuant to this Agreement under applicable securities or “Blue Sky”
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to the
Buyers on or prior to the Closing Date.  The Company shall make all filings and
reports relating to the offer and sale of the Securities required under
applicable securities or “Blue Sky” laws of the states of the United States
following the Closing Date.

 

(c)                                  Reporting Status.  Until the date on which
the Buyers shall have sold all the Purchased Shares and Warrant Shares and none
of the Warrants is outstanding (the “Reporting Period”), the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.

 

(d)                                 Listing.  The Company shall promptly secure
the listing of all of the Purchased Shares and Warrant Shares upon each national
securities exchange and automated quotation system, if any, upon which the
Common Stock is then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all shares of Common Stock from time to time issuable under the terms
of the Transaction Documents.  The Company shall maintain the Common Stock’s
authorization for listing on the Principal Market.  Neither the Company nor any
of its Subsidiaries shall take any

 

11

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action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the Principal Market. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 4(d).

 

(e)                                  Fees.  At the Closing, the Company shall
pay an expense allowance of $25,000 to the lead Buyer or its designee(s), which
amount shall be withheld by such Buyer from its Purchase Price at the Closing.
The Company shall be responsible for the payment of any placement agent’s fees,
financial advisory fees, or broker’s commissions (other than for Persons engaged
by any Buyer) relating to or arising out of the transactions contemplated
hereby, including, without limitation, any fees or commissions payable to Rodman
& Renshaw, Inc. (the “Agent”).  The Company shall pay, and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment.  Except as otherwise set forth in
this Agreement or in the Transaction Documents, each party to this Agreement
shall bear its own expenses in connection with the sale of the Securities to the
Buyers.

 

(f)                                    Disclosure of Transactions and Other
Material Information.  The Company shall, on or before 8:30 a.m., New York City
Time, on December 4, 2003, issue a press release reasonably acceptable to the
Buyers disclosing all material terms of the transactions contemplated hereby. 
On or before 8:30 a.m., New York City Time, on the first business day following
the execution and delivery of this Agreement, the Company shall file a Current
Report on Form 8-K describing the terms of the transactions contemplated by the
Transaction Documents in the form required by the 1934 Act, and attaching the
forms of Warrants as exhibits to such filing (including all attachments, the
“8-K Filing”).  The Company shall not, and shall cause each of its Subsidiaries
and each of their respective officers, directors, employees and agents, not to,
provide any Buyer with any material, nonpublic information regarding the Company
or any of its Subsidiaries from and after the filing of the press release
referred to in the first sentence of this Section without the express written
consent of such Buyer.  In the event of a breach of the foregoing covenant by
the Company, any Subsidiary, or its each of respective officers, directors,
employees and agents, in addition to any other remedy provided herein or in the
Transaction Documents, a Buyer shall have the right to make a public disclosure,
in the form of a press release, public advertisement or otherwise, of such
material, nonpublic information without the prior approval by the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees
or agents.  No Buyer shall have any liability to the Company, its Subsidiaries,
or any of its or their respective officers, directors, employees, shareholders
or agents for any such disclosure.  Subject to the foregoing, neither the
Company nor any Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations, including the applicable rules and regulations of the Principal
Market (provided that in the case of clause (i) each Buyer shall be consulted by
the Company in connection with any such press release or other public disclosure
prior to its release).  Without the prior written consent of any applicable
Buyer, the Company shall not disclose the name of any Buyer in any filing,
announcement, release or otherwise.

 

12

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(g)                                 Reservation of Shares.  The Company shall
take all action necessary to at all times have authorized, and reserved for the
purpose of issuance, from and after the Closing Date, the number of shares of
Common Stock issuable upon exercise of the Warrants being issued at the Closing.

 

(h)                                 Additional Issuances of Securities;
Fundamental Transaction.  From the date hereof through February 10, 2004, the
Company will not, directly or indirectly, (i) offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition of) any of its or its Subsidiaries’
equity or equity equivalent securities, including without limitation any debt,
preferred stock or other instrument or security that is, at any time during its
life and under any circumstances, convertible into or exchangeable or
exercisable for shares of Common Stock or Options or Convertible Securities;
(ii) conduct or effect any transaction leading to, or distribute, Distributed
Property (as defined in the Purchase Warrants); or (iii) enter into or effect
any Fundamental Transaction (as defined in the Purchase Warrants).  “Options”
means any rights, warrants or options to subscribe for or purchase shares of
Common Stock or Convertible Securities.  “Convertible Securities” means any
stock or securities (other than Options) convertible into or exercisable or
exchangeable for shares of Common Stock.

 

5.                                       ISSUANCES; TRANSFER AGENT INSTRUCTIONS.

 

(a)                                  Issuances.  The Company will no later than
three trading days following the delivery by a Buyer of an exercise notice under
the Warrants to the Company or the Transfer Agent, deliver or cause to be
delivered to such Buyer unrestricted and freely tradable Warrant Shares under
the Registration Statement.

 

(b)                                 Transfer Agent Instructions.  The Company
shall issue irrevocable instructions to its transfer agent, and any subsequent
transfer agent, to issue certificates or credit shares to the applicable balance
accounts at DTC, registered in the name of each Buyer or its respective
nominee(s), for the Warrant Shares in such amounts as specified from time to
time by each Buyer to the Company upon exercise of the Warrants in the form of
Exhibit C attached hereto (the “Irrevocable Transfer Agent Instructions”).  The
Company represents and warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5 will be given by the
Company to its transfer agent with respect to the Securities, and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other
Transaction Documents.

 

(c)                                  Breach.  The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to a
Buyer.  Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 5, that a Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.

 

13

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

 

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

 

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

 

(ii)                                  Such Buyer shall have delivered to the
Company the Purchase Price for the Purchased Shares and the related Warrants
being purchased by such Buyer and each other Buyer at the Closing by wire
transfer of immediately available funds pursuant to the wire instructions
provided by the Company.

 

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

 

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

 

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

 

(i)                                     The Company shall have (i) executed and
delivered to such Buyer each of the Transaction Documents, (ii) electronically
delivered the Purchased Shares being purchased by such Buyer at the Closing
pursuant to this Agreement and (iii) executed and delivered the related Warrants
(in such amounts as such Buyer shall request) being purchased by such Buyer at
the Closing pursuant to this Agreement.

 

(ii)                                  Such Buyer shall have received the opinion
of Hurley, Lynch & Re, P.C., the Company’s outside counsel (“Company Counsel”),
dated as of the Closing Date, in a form reasonably acceptable to the Buyers.

 

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

 

14

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

 

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

 

(vi)                              The Company shall have delivered to such Buyer
a certified copy of the Articles of Incorporation, as amended to date (the
“Articles”) as certified by the Secretary of State of Oregon within 10 days of
the Closing Date.

 

(vii)                           The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions consistent with this transaction as
adopted by the Company’s Board of Directors in a form reasonably acceptable to
such Buyer, (ii) the Articles and (iii) the Bylaws of the Company, each as in
effect at the Closing, in the form attached hereto as Exhibit D.

 

(viii)                        The representations and warranties of the Company
shall be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all respects with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Closing Date.  Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as Exhibit E.

 

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

 

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

 

(xi)                                The Registration Statement shall be
effective and available for the issuance and sale of the Securities hereunder
and the Company shall have delivered to such Buyer the prospectus required
thereunder.

 

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

 

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

 

9.                                       MISCELLANEOUS.

 

(a)                                  Governing Law; Jurisdiction; Jury Trial. 
All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York.  Each party hereby irrevocably submits to the 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, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper.  Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law. 
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

 

(b)                                 Counterparts.  This Agreement may be
executed in two or more identical counterparts, all of which shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party; provided that a
facsimile signature shall be considered due execution and shall be binding upon
the signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.

 

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

 

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

 

16

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or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.

 

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

 

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

 

 

If to the Company:

 

 

AVI Biopharma, Inc.

 

One SW Columbia Street, Suite 1105

 

Portland, Oregon 97258

 

Telephone:

(503) 227-0554

 

Facsimile:

(503) 227-0751

 

Attention:

Chief Executive Officer

 

 

with a copy to:

 

 

 

Hurley, Lynch & Re, P.C.

 

747 SW Mill View Way

 

Bend, Oregon  97702

 

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Telephone:

(541) 317-5505

 

 

Facsimile:

(541) 317-5507

 

 

Attention:

Robert A. Stout, Esq.

 

 

 

If to the Transfer Agent:

 

 

Mellon Investor Services LLC

 

520 Pike Street, Suite 1220

 

Seattle, WA 98101

 

Telephone:

(800)  610 – 3775

 

Facsimile:

(206)  674 – 3059

 

Attention:

Dennis Treibel

 

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers and Schulte Roth & Zabel LLP 919 Third Avenue, New York, New York 10022,
Attention: Eleazer Klein, Esq., with copies to such Buyer’s representatives as
set forth on the Schedule of Buyers, or to such other address and/or facsimile
number and/or to the attention of such other Person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change.  Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from
an overnight courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

 

(g)                                 Successors and Assigns.  This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns, including any purchasers of the Purchased
Shares or the Warrants.  The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the holders
of Purchased Shares representing at least a majority of the number of the
Purchased Shares, including by merger or consolidation.  A Buyer may assign some
or all of its rights hereunder without the consent of the Company, in which
event such assignee shall be deemed to be a Buyer hereunder with respect to such
assigned rights.

 

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

 

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

 

(j)                                     Further Assurances.  Each party shall do
and perform, or cause to be done and performed, all such further acts and
things, and shall execute and deliver all such other agreements, certificates,
instruments and documents, as any other party may reasonably request

 

18

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in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.

 

(k)                                  Indemnification.  (i)  In consideration of
each Buyer’s execution and delivery of the Transaction Documents and acquiring
the Securities thereunder and in addition to all of the Company’s other
obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities
and all of their shareholders, partners, members, officers, directors, employees
and direct or indirect investors and any of the foregoing Persons’ agents or
other representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the “Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee is
a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out of or
resulting from (i) the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Shares, or (iii) the status of such Buyer or holder of the Securities as
an investor in the Company.  To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.

 

(ii)                                  Promptly after receipt by an Indemnitee
under this Section 9(k) of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving an
Indemnified Liability, such Indemnitee shall, if a claim for indemnification in
respect thereof is to be made against any indemnifying party under this
Section 9(k), deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnitee; provided, however, that an Indemnitee shall have the right to
retain its own counsel with the fees and expenses of not more than one counsel
for such Indemnitee to be paid by the indemnifying party, if, in the reasonable
opinion of the Indemnitee, the representation by such counsel of the Indemnitee
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnitee and any other party represented by
such counsel in such proceeding.  Legal counsel referred to in the immediately
preceding sentence shall be selected by the Investors holding at least a
majority of the Purchased Shares.  The Indemnitee shall cooperate fully with the
indemnifying party in

 

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connection with any negotiation or defense of any such action or Indemnified
Liabilities by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnitee that relates to
such action or Indemnified Liabilities.  The indemnifying party shall keep the
Indemnitee fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto.  No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent.  No indemnifying
party shall, without the prior written consent of the Indemnitee, consent to
entry of any judgment or enter into any settlement or other compromise which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnitee of a release from all liability in respect to such
Indemnified Liabilities or litigation.  Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnitee with respect to all third parties, firms or corporations relating to
the matter for which indemnification has been made.  The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnitee under this Section 9(k), except to the extent that
the indemnifying party is prejudiced in its ability to defend such action.

 

(iii).                            The indemnification required by this
Section 9(k) shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
Indemnified Liabilities are incurred.

 

(iv)                              The indemnity agreements contained herein
shall be in addition to (i) any cause of action or similar right of the
Indemnitee against the indemnifying party or others, and (ii) any liabilities
the indemnifying party may be subject to pursuant to the law.

 

(l)                                     No Strict Construction.  The language
used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict construction will be
applied against any party.

 

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

 

(n)                                 Rescission and Withdrawal Right. 
Notwithstanding anything to the contrary contained in (and without limiting any
similar provisions of) the Transaction

 

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Documents, whenever any Buyer 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 Buyer 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.

 

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

 

(p)                                 Independent Nature of Buyers’ Obligations
and Rights.  The obligations of each Buyer under any Transaction Document are
several and not joint with the obligations of any other Buyer, and no Buyer
shall be responsible in any way for the performance of the obligations of any
other Buyer under any Transaction Document.  Nothing contained herein or in any
other Transaction Document, and no action taken by any Buyer pursuant hereto or
thereto, shall be deemed to constitute the Buyers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction
Documents.  Each Buyer confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors.  Each Buyer shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.

 

[Signature Page Follows]

 

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

 

COMPANY:

 

AVI BIOPHARMA, INC.

 

 

By:

 

 

 

Name:

Alan P. Timmins

 

Title:

President and Chief Operating Officer

 

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EXHIBITS

 

 

Exhibit A

 

Form of Additional Investment Right Warrants

Exhibit B

 

Form of Purchase Warrants

Exhibit C

 

Form of Irrevocable Transfer Agent Instructions

Exhibit D

 

Form of Secretary’s Certificate

Exhibit E

 

Form of Officer’s Certificate

 

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