EXHIBIT
10.1


 


SETTLEMENT
AGREEMENT


 


THIS SETTLEMENT AGREEMENT (this “Agreement”),
dated as of April 20, 2010, is made by and between AVI BioPharma, Inc.,
an Oregon corporation with its principal executive office located in Bothell,
Washington (“AVI” or the “Company”), and George W. Haywood (“Mr. Haywood”),
Cheryl Haywood (“Ms. Haywood”), Rockall Emerging Markets Master
Fund Limited (the “Fund”), Meldrum Asset Management, LLC (“Meldrum”),
Con Egan (“Mr. Egan”) and Conor O’Driscoll (“Mr. O’Driscoll”)
(“Mr. Haywood”, “Ms. Haywood”, the “Fund”, “Meldrum”, “Mr. Egan”
and “Mr. O’Driscoll” each a “Shareholder Party” and, collectively,
the “Shareholder Group”) (each of the Company and the Shareholder Group,
a “Party” to this Agreement, and collectively, the “Parties”).  Leslie Hudson (“Hudson”) is executing
this Agreement solely for the purpose of his agreement with the provisions set
forth in Section 3(a) and Section 8 and K. Michael Forrest (“Forrest”)
is executing this Agreement solely for the purpose of his agreement with the
provisions set forth in Section 3(e).


 


WHEREAS, the Shareholder Group
may be deemed to beneficially own shares of common stock of AVI (the “Common
Stock”) totaling, in the aggregate, 13,371,529 shares, or approximately
11.9% of the Common Stock issued and outstanding on the date hereof;


 


WHEREAS, on March 16, 2010, Mr. Haywood,
Ms. Haywood and Meldrum requested that the Company call a special
shareholders meeting to (i) remove certain members of the Company’s board
of directors (the “Board”) and (ii) elect new directors to the
Board to fill vacancies left by the removal of directors; and


 


WHEREAS, the Company and the
Shareholder Group have agreed that it is in their mutual interests to enter
into this Agreement to set forth, among other things, the parties’ mutual
understanding relating to the 2010 annual meeting of shareholders (the “2010
Annual Meeting”) and other related personnel matters.


 


NOW, THEREFORE, in consideration
of the premises and the representations, warranties, and agreements contained
herein, and other good and valuable consideration, the Parties mutually agree
as follows:


 


1.  Representations and Warranties of
the Shareholder Group. The
Shareholder Group represents and warrants to the Company that (a) this
Agreement has been duly authorized, executed and delivered by the Shareholder
Group, and is a valid and binding obligation of the Shareholder Group,
enforceable against the Shareholder Group in accordance with its terms, except
as enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws generally
affecting the rights of creditors and subject to general equity principles; and
(b) the execution of this Agreement, the consummation of any of the transactions
contemplated hereby, and the fulfillment of the terms hereof, in each case in
accordance with the terms hereof, will not conflict with, or result in a breach
or violation of the organizational documents of the Shareholder Group as
currently in effect.


 


2.  Representations and Warranties of
the Company. The
Company hereby represents and warrants to the Shareholder Group that (a) this
Agreement has been duly authorized, executed and delivered by the Company, and
is a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws generally 


 


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affecting the rights of creditors
and subject to general equity principles; (b) the execution of this
Agreement, the consummation of any of the transactions contemplated hereby, and
the fulfillment of the terms hereof, in each case in accordance with the terms
hereof, will not (1) conflict with, result in a breach or violation of,
constitute a default (or an event which with notice or lapse of time or both
could become a default) under or pursuant to, result in the loss of a material
benefit or give any right of termination, amendment, acceleration or
cancellation under, or result in the imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to any law, any order of any court or other agency of
government, the Company’s Third Restated Articles of Incorporation (as amended)
(the “Restated Articles”), the Company’s First Restated Bylaws (the “Restated
Bylaws”), or the terms of any indenture, contract, lease, mortgage, deed
of trust, note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which the Company is a party or bound or
to which its property or assets is subject or (2) trigger any “change of
control” provisions in any agreement to which the Company is a party; and (c) no
consent, approval, authorization, license or clearance of, or filing or
registration with, or notification to, any court, legislative, executive or
regulatory authority or agency is required in order to permit the Company to
perform its obligations under this Agreement, except for such as have been
obtained.


 


3.  CEO Resignation; Board Matters; Nominations
at 2010 Annual Meeting.


 


(a)           Simultaneously with the execution of this Agreement and
the Separation and Mutual Release Agreement by and between Hudson and the
Company attached as Exhibit A hereto, Hudson hereby irrevocably resigns as
the Chief Executive Officer and director of the Company.  The Parties hereto agree and acknowledge that
the preceding sentence shall serve as Hudson’s formal irrevocable resignation
delivered to the Company and upon execution of this Agreement and the
Separation and Mutual Release Agreement, which agreement shall be executed
concurrently with the execution of this Agreement, no additional agreement,
notice or action shall be necessary to immediately effectuate such resignation
in accordance herewith.  Hudson agrees
that he shall not contest or seek to contest the validity or effectiveness of
such resignation.


 


(b)           As set forth in the Separation and Mutual Release
Agreement attached as Exhibit A, the Company hereby acknowledges that
Hudson will be due certain severance payments under Section 13(d) of
the Employment Agreement with the Company, dated February 8, 2008 and the
Company shall pay such amounts promptly in accordance with the terms of such
agreement.


 


(c)           Contemporaneous with the resignation of Hudson as the
Chief Executive Officer, the Company will appoint J. David Boyle II, the
Company’s current Senior Vice President and Chief Financial Officer as the
Company’s interim Chief Executive Officer. 
The Company agrees that a permanent replacement Chief Executive Officer
will not be made or approved by the Board until after the 2010 Annual Meeting,
provided that the Company may conduct a search for a permanent Chief Executive
Officer prior to such time.


 


(d)           The Parties acknowledge that the Board has amended,
subject to the execution of this Agreement by the Parties, (i) Section 3.2
of the Restated Bylaws to provide that the number of directors of the Company
shall be a minimum of one (1) and a maximum of seven (7) as
determined from time to time by the Board and that the Board has determined to
set the number at seven (7), and (ii) Section 3.10 of the Restated
Bylaws to clarify that a director appointed by the directors to fill a vacancy
shall fill the term of the director whose seat he or she is succeeding.


 


(e)           Simultaneously with the execution of this Agreement and
immediately prior to the effectiveness of the amendment to Section 3.2 of
the Restated Bylaws, Forrest hereby irrevocably resigns as a director of the
Company.  The Parties hereto agree and
acknowledge that the preceding sentence shall serve as Forrest’s formal
irrevocable resignation delivered to the Company and no additional agreement,
notice or action shall be necessary to immediately effectuate such resignation
in accordance 


 


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herewith.  Forrest agrees that he shall not contest or
seek to contest the validity or effectiveness of such resignation.


 


(f)            Simultaneously with the execution of this Agreement, the
Board and the Nominating and Corporate Governance Committee of the Board (the “Nominating
Committee”) shall appoint Anthony Chase (the “New Director”) to
serve as a director of the Company to fill the vacancy created by the Hudson
resignation and to serve in such capacity for the remainder of Hudson’s term or
until his successor is duly elected and qualified, subject to the terms of this
Agreement.  The Parties acknowledge that
each of the Nominating Committee and the Board has in good faith, reviewed and
approved the credentials of Anthony Chase and in the exercise of its fiduciary
duties, concluded that such candidate has business experience in such areas as
would reasonably be expected to enhance the Board, and the Nominating Committee
recommended to the Board that it appoint, and the Board appointed, the New
Director to fill the vacancy on the Board created by Hudson’s resignation and
the Board has appointed the New Director to serve as a member of the Nominating
Committee immediately upon his appointment to the Board.  The New Director also shall be eligible to be
a member of any other committee of the Board (as the Board may determine) if he
meets any independence or other requirements under applicable law and the rules and
regulations of the Nasdaq Stock Market or other securities exchange that the
Company’s securities may then be traded for service on such committee.


 


(g)           The Parties acknowledge that the Nominating Committee has
recommended to the Board, and the Board, in good faith after exercising its
fiduciary duties has determined that, in connection with the 2010 Annual
Meeting, the following persons to be included in the Company’s slate of nominees
for director shall (i) not include current directors Michael D. Casey (“Casey”)
and Christopher S. Henney (“Henney”), both of whom have previously
notified the Company of their decision not to stand for re-election of
directors at the end of their current term and (ii) shall include current
directors William Goolsbee (“Goolsbee”) and Gil Price (“Price”);


 


(h)           The New Director will be governed by the same protections
and obligations regarding confidentiality, conflicts of interests, fiduciary
duties, trading and disclosure policies and other governance guidelines, and
shall have the same rights and benefits, including (but not limited to) with
respect to insurance, indemnification, compensation and fees, as are generally
applicable to any non-employee directors of the Company.


 


(i)            The Company agrees that prior to the 2010 Annual Meeting,
the Board and all applicable committees of the Board shall not (i) increase
the size of the Board to more than seven (7) directors, (ii) make any
change in the composition of the Nominating Committee other than due to death
or resignation of a member of such committee, in which case any replacement
member of such committee shall be approved in writing by each member of the
Shareholder Group, which consent shall not be unreasonably withheld, (iii) make
any change in the Restated Bylaws or Restated Articles that adversely affects
the right and ability of shareholders to act by written consent, call for
special meetings, or remove and replace directors, or (iv) take any action
that would otherwise adversely affect the benefits to be received by the
Shareholder Group from this Agreement.


 


(j)            The Company agrees that the 2010 Annual Meeting will take
place no later than June 15, 2010, and assuming a quorum is present at
such meeting, such meeting shall not be adjourned prior to the valid election
of directors in accordance with the terms of this Agreement without the written
consent of each Shareholder Party.


 


4.  Standstill Restrictions.


 


(a)           Subject to applicable law, including Section 13(d) and
(g) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), the Shareholder Group (and each member of the Shareholder Group,
acting alone or together with any other person or group) shall not, and shall
cause their 


 


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Affiliates and Associates (as
defined below) under its control or direction not to, in any manner, directly
or indirectly:


 


(i)            for a period of one (1) year from the date of this
Agreement, solicit (as such term is used in the proxy rules of the
Securities and Exchange Commission (the “SEC”)) proxies or consents to
vote any securities of the Company, or make, or in any way participate in, any “solicitation”
of any “proxy” within the meaning of Rule 14a-1 promulgated by the SEC
under the Exchange Act to vote any shares of Common Stock with respect to any
matter, or become a “participant” in any “contested solicitation” for the
election of directors with respect to the Company (as such terms are defined or
used in the Exchange Act and the rules promulgated thereunder), other than
solicitations or acting as a participant in support of all of the Company’s
nominees and proposals;


 


(ii)           for a period of one (1) year from the date of this
Agreement, deposit any Common Stock in any voting trust or subject any Common
Stock to any arrangement or agreement with respect to the voting of any Common
Stock, other than any such voting trust, arrangement or agreement solely among
the Shareholder Group;


 


(iii)          for a period of one (1) year from the date of this
Agreement, otherwise act, alone or in concert with others to control or seek to
control of the Board, or to control, or seek to control or influence the
management or the policies of the Company, other than through non-public communications
with the Board;


 


(iv)          for a period of one (1) year from the date of this
Agreement, otherwise act, alone or in concert with others to control or seek to
remove any director from the Board, other than through non public
communications with the Board; or


 


(v)           for a period of one (1) year from the date of this
Agreement, alone or in concert with others, (1) seek to call a meeting of
shareholders, (2) seek representation on the Board, or (3) initiate,
propose or otherwise solicit shareholders of the Company for the approval of
shareholder proposals, or cause, encourage, or attempt to cause or encourage
any other person to initiate any shareholder proposal, except as specifically
contemplated in this Agreement.


 


(b)           Subject to applicable law, including Section 13(d) and
(g) of the Exchange Act and Rules 10b-5, 10b5-1 and 10b5-2 under the
Exchange Act, for a period of six (6) months from the date of this
Agreement:


 


(i)            Mr. Haywood and Ms. Haywood shall not, and
shall cause their Affiliates and Associates (as defined below) under their
control or direction not to, in any manner, directly or indirectly, purchase or
cause to be purchased or otherwise acquire or agree to acquire beneficial
ownership (as determined under Rule 13d-3 promulgated under the Exchange
Act) of any Common Stock or other securities issued by the Company, if in any
such case, immediately after the taking of such action, Mr. Haywood and Ms. Haywood
would, in the aggregate, collectively beneficially own more than 12% of the
then outstanding shares of Common Stock; provided that the foregoing percentage
of beneficially owned Common Stock shall not include any unexercised
outstanding warrants, or shares acquired upon exercise of such warrants, held
by either Mr. Haywood or Ms. Haywood; or


 


(ii)           the Fund, Meldrum, Mr. Egan and Mr. O’Driscoll
shall not, and shall cause their Affiliates and Associates (as defined below)
under their control or direction not to, in any manner, directly or indirectly,
purchase or cause to be purchased or otherwise acquire or agree to acquire
beneficial ownership (as determined under Rule 13d-3 promulgated under the
Exchange Act) of any Common Stock or other securities issued by the Company, if
in any such case, immediately after the taking of such action, the Fund,
Meldrum, Mr. Egan and Mr. O’Driscoll would, in the aggregate,
collectively beneficially own more than 6% of the then outstanding shares of
Common Stock; provided that the foregoing percentage of beneficially owned
Common Stock shall not include any unexercised outstanding 


 


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warrants, or shares acquired upon
exercise of such warrants, held by either the Fund, Meldrum, Mr. Egan and Mr. O’Driscoll.


 


(c)           Notwithstanding anything contained herein to the contrary,
any member of the Shareholder Group, and any Affiliate or Associate of any such
member, shall be entitled to:


 


(i)            subject to Section 5, vote their shares on any
proposal duly brought before the 2010 Annual Meeting, or otherwise vote as the
Shareholder Group or each individual member of the Shareholder Group determines
in its sole discretion;


 


(ii)           disclose, publicly or otherwise, how it intends to vote or
act with respect to any securities of the Company, any shareholder proposal or
other matter to be voted on by the shareholders of the Company (other than the
election of directors) and the reasons therefor; or


 


(iii)          propose a slate of nominees for election as directors
and/or one or more proposal(s) for consideration or approval by
shareholders at the 2011 annual meeting of shareholders (the “2011 Annual
Meeting”) to comply with the advance notice provisions or other
requirements of the Restated Articles or the Restated Bylaws.


 


(d)           As used in this Agreement, the terms “Affiliate”
and “Associate” shall have the respective meanings set forth in Rule 12b-2
promulgated by the SEC under the Exchange Act.


 


5.  Actions by the Shareholder Group.


 


(a)           At the 2010 Annual Meeting, the Shareholder Group shall
vote, and cause their respective officers, directors, employees and agents to
vote, all of the shares of Common Stock beneficially owned by him or them for (i) each
of the Company’s nominees (which nominees have been made in compliance with the
terms of this Agreement) for election to the Board and (ii) the ratification
of the appointment of the Company’s independent auditors.


 


(b)           Following execution of this Agreement by the Parties, the
Shareholder Group shall not submit any proposals or nominations for election to
the Board at the 2010 Annual Meeting and shall revoke its prior demand for a
special meeting of the shareholders and revoke all other demands previously
made to the Board.


 


(c)           Following execution of this Agreement by the Parties, the
Shareholder Group shall amend its Schedule 13D to indicate the termination of
the demand for a special meeting of shareholders and the execution of this
Agreement.


 


6.  Termination.  This
Agreement shall terminate and the obligations of the Parties under this
Agreement shall cease on the earlier of the following (the “Termination Date”):


 


(a)           at the option of the Company, upon a material breach by
the Shareholder Group of any obligation hereunder which has not been cured
within 14 days after the Shareholder Group receives written notice of such
breach from the Company;


 


(b)           at the option of the Shareholder Group, upon a material
breach by the Company of any obligation hereunder which has not been cured
within 14 days after the Company receives written notice of such breach from
the Shareholder Group;


 


(c)           seven days prior to the date that a Company shareholder
may first submit a nomination for the election of directors at the 2011 Annual
Meeting pursuant to the Restated Bylaws;


 


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(d)           on the day that the Board publicly announces its nominees
for election as directors at the 2011 Annual Meeting; or


 


(e)           at any time, upon the written consent of all of the
Parties.


 


7.  Public Announcement. The Company and the Shareholder Group
shall promptly disclose the existence of this Agreement after its execution
pursuant to a joint press release that is mutually acceptable to the parties,
including a description of the material terms of this Agreement.  Subject to applicable law, none of the
Parties shall disclose the existence of this Agreement until the joint press
release is issued.


 


8.  Releases.


 


(a)           The Shareholder Group hereby agrees for the benefit of the
Company, and, to the extent acting in such capacity, each controlling person,
officer, director, shareholder, agent, affiliate, employee, partner, attorney,
heir, assign, executor, administrator, predecessor and successor, past and
present, of the Company (the Company and each such person being a “Company
Released Person”) as follows:


 


(i)            The Shareholder Group, for themselves and for their
members, officers, directors, assigns, agents and successors, past and present,
hereby agrees and confirms that, effective from and after the date of this
Agreement, they hereby acknowledge full and complete satisfaction of, and
covenant not to sue, and forever fully release and discharge each Company
Released Person of, and hold each Company Released Person harmless from, any
and all rights, claims, warranties, demands, debts, obligations, liabilities,
costs, attorneys’ fees, expenses, suits, losses and causes of action of any
nature whatsoever, whether known or unknown, suspected or unsuspected, matured
or unmatured, fixed or contingent relating in any way to the affairs of the
Company that the Shareholder Group may have against the Company Released
Persons, in each case with respect to events occurring prior to the date of the
execution of this Agreement (collectively, “Shareholder Group Released
Claims”).


 


(ii)           The Shareholder Group understands and agrees that the
Shareholder Group Released Claims released by the Shareholder Group above
include not only those claims presently known but also include all unknown or
unanticipated claims, rights, demands, actions, obligations, liabilities, and
causes of action of every kind and character that would otherwise come within
the scope of the Shareholder Group Released Claims as described above  and
which if known by the Shareholder Group would have materially affected this
settlement with the Company. The Shareholder Group understands that they
may hereafter discover facts different from or in addition to what they now
believe to be true, which if known, could have materially affected this release
of the Shareholder Group Released Claims, but they nevertheless waive any
claims or rights based on different or additional facts.


 


(iii)          With respect to the Shareholder Group Released Claims, the
Shareholder Group, for themselves and for their members, officers, directors,
assigns, agents and successors, past and present, expressly waives as of the
date of the execution of the Agreement all provisions, rights and benefits of
California Civil Code section 1542 and all provisions, rights and benefits
conferred by any law of any state or territory of the United States, or
principle of common law, which is similar, comparable or equivalent to
California Civil Code section 1542. 
California Civil Code section 1542 provides:


 


A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME
OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.


 


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(b)           The Company hereby agrees for the benefit of the
Shareholder Group, and, to the extent acting in such capacity, each controlling
person, officer, director, stockholder, agent, affiliate, employee, partner,
attorney, heir, assign, executor, administrator, predecessor and successor,
past and present, thereof, as well as the New Director, but does not include
any member of the Board (the Shareholder Group and each such person being a “Shareholder
Released Person”) as follows:


 


(i)            The Company, for itself and for its affiliates,
directors, assigns, and successors, past and present, hereby agrees and confirms
that, effective from and after the date of this Agreement, it hereby
acknowledges full and complete satisfaction of, and covenants not to sue, and
forever fully releases and discharges each Shareholder Released Person of, and
holds each Shareholder Released Person harmless from, any and all rights,
claims, warranties, demands, debts, obligations, liabilities, costs, attorneys’
fees, expenses, suits, losses and causes of action of any nature whatsoever,
whether known or unknown, suspected or unsuspected, matured or unmatured, fixed
or contingent relating in any way to the affairs of the Company that the
Company may have against the Shareholder Released Persons, in each case with
respect to events occurring prior to the date of the execution of this Agreement
(collectively, “Company Released Claims”).


 


(ii)           The Company understands and agrees that the Company
Released Claims released by the Company above include not only those claims
presently known but also include all unknown or unanticipated claims, rights,
demands, actions, obligations, liabilities, and causes of action of every kind
and character that would otherwise come within the scope of the Company
Released Claims as described above and
which if known by the Company would have materially affected this settlement
with the Shareholder Group.  The
Company understands that it may hereafter discover facts different from or in
addition to what it now believes to be true, which if known, could have
materially affected this release of the Company Released Claims, but it
nevertheless waives any claims or rights based on different or additional
facts.


 


(iii)          With respect to the Company Released Claims, the Company,
for itself and for its affiliates, directors, assigns, and successors, past and
present, expressly waives as of the date of the execution of the Agreement all
provisions, rights and benefits of California Civil Code section 1542 and all
provisions, rights and benefits conferred by any law of any state or territory
of the United States, or principle of common law, which is similar, comparable
or equivalent to California Civil Code section 1542.  California Civil Code section 1542 provides:


 


A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME
OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.


 


(c)           The Parties intend that the foregoing releases be broad
with respect to the matters released, provided, however, this release of the
Shareholder Group Released Claims and the Company Released Claims shall not
include claims to enforce the terms of this Agreement; and provided further
that nothing in the foregoing release shall be deemed or construed, now or
hereafter, as limiting in any manner any right of indemnification inuring to
the benefit of any director or former director of the Company arising under the
Restated Articles, the Restated Bylaws or otherwise.


 


9.  Remedies.


 


(a)           Each of the Parties acknowledges and agrees that a breach
or threatened breach by any Party may give rise to irreparable injury
inadequately compensable in damages, and accordingly 


 


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each Party shall be entitled to
injunctive relief to prevent a breach of the provisions hereof and to enforce
specifically the terms and provisions hereof in any state or federal court
having jurisdiction, in addition to any other remedy to which such aggrieved
Party may be entitled to at law or in equity.


 


(b)           In the event a Party institutes any legal action to
enforce such Party’s rights under, or recover damages for breach of this
Agreement, the prevailing party or parties in such action shall be entitled to
recover from the other party or parties all costs and expenses, including but
not limited to reasonable attorneys’ fees, court costs, witness fees,
disbursements and any other expenses of litigation or negotiation incurred by
such prevailing party or parties.


 


10.  Notices. Any notice or other communication required or permitted to be given
under this Agreement will be sufficient if it is in writing, sent to the
applicable address set forth below (or as otherwise specified by a Party by
notice to the other Parties in accordance with this Section 12) and delivered
personally or sent by recognized overnight courier, postage prepaid, and will
be deemed given (a) when so delivered personally, or (b) if sent by
recognized overnight courier, one day after the date of sending.


 


If to the Company:


 


AVI BioPharma, Inc.


3450 Monte Villa Parkway, Suite 101


Bothell, WA 98021


Attention: Chief Executive
Officer


Telephone:  (541) 738-5112


Facsimile:  (425) 489-5933


 


with copies (which shall not
constitute notice to the Company) to:


 


Davis Wright Tremaine LLP


1300 SW Fifth Avenue, Suite 2300


Portland, OR 97201


Attention:  Michael Phillips


Telephone: (503) 778-5214


Facsimile: (503) 778-5299


 


and


 


Cooley Godward Kronish LLP


3175 Hanover Street


Palo Alto, CA 94304


Attention:  Nancy H. Wojtas


Telephone:  (650) 843-5819


Facsimile:  (650) 849-7400


 


if to any Shareholder Party:


 


c/o Gary T. Moomjian, Esq.


Moomjian, Waite, Wactlar &
Coleman, LLP


100 Jericho Quadrangle, Suite 225


Jericho, New York 11753


Telephone: (516) 937-5900


Facsimile: (516) 937-5050


 


with a copy (which shall not constitute
notice to any Shareholder Party) to:


 


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K&L Gates LLP


925 Fourth Avenue, Suite 2900


Seattle, Washington 98104


Attention:  Eric Simonson


Telephone:  (206) 370-7679


Facsimile:  (206) 370-6240


 


11.  Entire Agreement. This Agreement constitutes the entire
agreement between the Parties pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions of the Parties in connection with the subject
matter hereof.


 


12.  Counterparts; Facsimile. This Agreement may be executed in any
number of counterparts and by the Parties in separate counterparts, and
signature pages may be delivered by facsimile, each of which when so
executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.


 


13.  Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.


 


14.  Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of
Washington, without regard to choice of law principles that would compel the
application of the laws of any other jurisdiction.


 


15.  Severability. In the event one or more of the
provisions of this Agreement should, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.


 


16.  Successors and Assigns. This Agreement shall not be assignable
by any of the Parties. This Agreement, however, shall be binding on successors
of the Parties.


 


17.  Amendments. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by all of the Parties.


 


18.  Further Action. Each Party agrees to execute such
additional reasonable documents, and to do and perform such reasonable acts and
things necessary or proper to effectuate or further evidence the terms and
provisions of this Agreement.


 


[Signatures are on the
following page.]


 


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IN WITNESS WHEREOF, the Parties
have executed this Settlement Agreement as of the day and year first above
written.


 


 


	
   

  	
   

  	
  Mr. Haywood

  
	
   

  	
   

  	
   

  
	
  COMPANY

  	
   

  	
  /s/ George W. Haywood

  
	
   

  	
   

  	
  George W. Haywood

  
	
  AVI BIOPHARMA, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ J. David Boyle II

  	
   

  	
  Ms. Haywood

  
	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
  Interim President and CEO

  	
   

  	
  /s/ Cheryl Haywood

  
	
   

  	
   

  	
   

  	
  Cheryl Haywood

  
	
   

  	
   

  	
   

  	
   

  
	
  FUND

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Rockall Emerging Markets Master Fund Limited

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Mr. Egan

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  Meldrum Asset Management, LLC

  	
   

  	
  /s/ Con Egan

  
	
  Its:

  	
  Investment Manager

  	
   

  	
  Con Egan

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Con Egan

  	
   

  	
   

  
	
  Name:

  	
  Con Egan

  	
   

  	
   

  
	
  Title:

  	
  Manager

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Mr. O’Driscoll

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/ Conor O’Driscoll

  
	
  MELDRUM

  	
   

  	
  Conor O’Driscoll

  
	
  Meldrum Asset Management, LLC

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Con Egan

  	
   

  	
   

  
	
  Name:

  	
  Con Egan

  	
   

  	
   

  
	
  Title:

  	
  Manager

  	
   

  	
   

  



 


Only for purposes of indicating
agreement with Section 3(a) and Section 8 of this Settlement
Agreement


 


HUDSON


 


	
  /s/ Leslie Hudson

  	
   

  	
   

  
	
  Leslie Hudson

  	
   

  	
   

  



 


Only for purposes of indicating
agreement with Section 3(e) of this Settlement Agreement


 


FORREST


 


	
  /s/ K. Michael Forrest

  	
   

  	
   

  
	
  K. Michael Forrest

  	
   

  	
   

  



 


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