Document:

Exhibit 10.58

 

Portions of this document have been redacted and filed separately with
the Securities and Exchange Commission.

Redacted sections marked with “*****.”

 

SPONSORED RESEARCH AGREEMENT

 

THIS SPONSORED RESEARCH AGREEMENT (this “Agreement”), effective
the 12th day of October, 2007  (the “Effective
Date”), is entered into by and between AVI BIOPHARMA, INC., an Oregon  Corporation, with principal offices located
at One SW Columbia, Suite 1105, Portland, Oregon 97258  (“Company”),
and CHARLEY’S FUND, INC., a 501(c)(3) tax-exempt public non-profit
organization with a mailing address of P.O. Box 297, South Egremont, MA,
01258 (the “Sponsor”).

 

WITNESSETH:

 

WHEREAS, the Sponsor wishes to promote
scientific research leading to exon skipping therapeutics related to Duchenne
muscular dystrophy; and

 

WHEREAS, the Company has developed a proprietary
antisense chemistry and has certain employees who possess knowledge, know-how
and experience in substantive fields relating to such research and
commercialization efforts;

 

WHEREAS, the Company has a cooperative
development and license agreement with Ercole Biotech, Inc., and cross
licensing rights to intellectual property important for the freedom to operate;

 

WHEREAS,  the Sponsor is
willing to fund such research by the Company, with the objective, as set forth
herein, leading to an Investigational New Drug (IND) filing with the Food and
Drug Administration; and

 

WHEREAS, it is the intent of the Sponsor and the
Company to complete the research to identify a viable candidate and to
demonstrate the safety and efficacy of the putative therapeutic used for exon
skipping, sufficiently to file an IND and proceed to human clinical trials
required for regulatory approval of said therapeutic,

 

NOW, THEREFORE, in consideration of the premises herein
contained, and for other good and valuable consideration, the parties agree as
follows:

 

1.      Definitions

 

For purposes of this Agreement, the following
definitions apply:

 

1.1           “Affiliates” shall mean any corporation
or other entity that controls, is controlled by, or is under common control
with, a party.  A corporation or other
entity shall be regarded as in control of another corporation or entity if it
owns or directly or indirectly controls more than 50% of the voting securities
or other ownership interest of the other corporation or entity, or if it 

 

 

possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of the corporation or other entity.

 

1.2           “Agreement Period” shall mean the period
commencing on the Effective Date of this Agreement and ending upon completion
of the Research Project.

 

1.3           “Company Inventions” shall have the
meaning provided in Section 8.1 hereof.

 

1.4           “Confidential Information” shall have the
meaning provided in Section 6.1 hereof.

 

1.5           “FDA” shall mean the United States Food
and Drug Administration.

 

1.6           “Field” shall mean the treatment or
prevention of Duchenne Muscular Dystrophy or any other muscular dystrophy.

 

1.7           “Invention” shall have the meaning provided
in Section 8.1 hereof.

 

1.8           “Investigators” shall have the meaning
provided in section 2.1 hereof.

 

1.9           “Joint Inventions” shall have the meaning
provided in Section 8.1 hereof.

 

1.10         “Major Market” shall mean any one of the following:

 

(a)  The United States;

 

(b)  Japan; or

 

(c)  Any
of the following five (5) European countries: Germany, The United Kingdom,
France, Italy, or Netherlands.

 

1.11         “Net Sales” means the gross amount
invoiced for sales of Research Products by Sponsor, its affiliates, and sublicensees,  to an independent third party in an
arms-length transaction,  less:

 

(a)  Trade, quantity and cash discounts
allowed;

 

(b)  Discounts,
refunds, rebates, chargebacks, retroactive price adjustments, and any other
allowances which effectively reduce the net selling price;

 

(c)  Credits for actual Research Product
returns;

 

(d)  Any tax
imposed on the production, sale, delivery or use of the Research Product,
including, without limitation, sales, use, excise or value added taxes.

 

1.12         “Option” shall have the meaning provided
in Section 9.2 hereof.

 

1.13         “Option Term” shall have the meaning
provided in Section 9.2 hereof.

 

1.14         “Project Funds” shall have the meaning
provided in Section 4.1 hereof.

 

 

1.15         “Project Team” shall have the meaning
provided in Section 2.1 hereof.

 

1.16         “Research Product” shall have the meaning
provided for in Section 4.3.6 hereof

 

1.17         “Research Project” shall mean the
research described in the Study Protocol hereof.

 

1.18         “Results” shall have the meaning provided
in Section 3.4 hereof.

 

1.19         “Sponsor Inventions” shall have the
meaning provided in Section 8.1 hereof.

 

1.20         “Study Protocol” shall mean the protocol
set forth in Appendix A with attached Gantt chart hereto, which is
incorporated herein by reference and made a part hereof as if fully set forth
herein, as such protocol may be modified from time to time by mutual written
agreement of the Company and the Sponsor.

 

2.      Research

 

2.1           The Principal Investigator for the
Research Project shall be Dr. Patrick Iversen.  The Principal Investigator shall be
responsible for directing and overseeing the conduct of the Research Project
using appropriately qualified collaborating investigators, including Dr. Ryszard
Kole, CSO, Ercole Biotech, Dr. Stephen Wilton, University of Western
Australia, and Dr. Qi Lu, Carolina’s Healthcare Foundation, and scientists
and research technicians who are under the Principal Investigator’s direction
and control and are employed by the Company (collectively,  the Principal Investigator, the collaborating
investigators, and the Company employees working on the Research Project
constitute the “Project Team”).

 

2.2           Subject to the terms and conditions of
this Agreement, the Company and the Principal Investigator shall perform the
Research Project in accordance with the Study Protocol.  No change to the Study Protocol shall be
effective without the prior written consent of the Sponsor.  The Company and the Principal Investigator shall
use reasonable efforts to distinguish the research performed under this Agreement
from all other work the Principal Investigator performs for other purposes and
shall keep records pertaining to such other work separately from the records to
be maintained pursuant to Section 2.7 to the extent practicable.

 

2.3           The Company shall provide the Sponsor
with written evidence of approval of the Research Project by the responsible
body within the Company, if such approval is necessary, and with copies of any
documents used in the conduct of the Research Project, including, but not limited
to, all documentation required by the Study Protocol.

 

2.4           The Company shall provide the support
necessary for the Project Team to complete the Research Project, which support
shall include, but is not limited to, human resources, space, dedicated research
time, and computing, laboratory, and all other equipment, all in accordance
with the Study Protocol attached as Appendix A.

 

2.5           The Company shall also accept and
administer the Project Funds.  The
Company’s use of the Project Funds shall be strictly for purposes of the
Research Project and shall be subject to the terms and conditions set forth in
APPENDIX B, which is incorporated herein by reference and made part of
this Agreement.  NO PART OF THE
PROJECT FUNDS

 

 

SHALL BE USED FOR INDIRECT EXPENSES OF THE PROJECT TEAM OR THE Company.  Except as specified in the Study Protocol
relating to work to be conducted by collaborating investigators, no part of the
Project Funds shall be transferred to another organization, whether or not the
Principal Investigator or any other member of the Project Team becomes
associated with that other organization unless the prior written consent of the
Sponsor is obtained by the Company.  The
Company shall be required to repay to the Sponsor any part of the Project Funds
used in contravention of the express terms of this Agreement.

 

2.6           The Company shall ensure that the
Research Project shall be conducted in strict compliance with any applicable
federal, state, or local laws, regulations, or guidelines pertaining to good
research practices and/or good laboratory practices.

 

2.7           The Company shall keep accurate and
complete financial and scientific records relating to the Research Project and
will make such records reasonably available to the Sponsor for review and/or
copying during normal business hours.

 

2.8           The Company shall promptly advise the
Sponsor of any changes in the senior personnel comprising the Project
Team.  If, for any reason, the Principal
Investigator (i) ceases to be associated with the Company, (ii) becomes
debarred  or receives notice of an action or
threat of an action with respect to debarment under the provisions of the
Generic Drug Enforcement Act of 1992, 21 U.S.C. Section 306(a) and
(b), or (iii) otherwise becomes unavailable to work on the Research Project,
the Company shall promptly so notify the Sponsor in writing and will propose a
qualified replacement scientist at the Company whose appointment as Principal
Investigator shall be subject to the approval of Sponsor.  The Company shall consult with and reasonably
consider and take into account the Sponsor’s view with respect to the
replacement of the Principal Investigator, provided that, in the case of a
proposed replacement chosen by the Company and who is on the Advisory
Committee, the Sponsor agrees that it will give its approval to such
replacement for the Principal Investigator.

 

3.      Reports to the Sponsor

 

3.1           During the Agreement Period, the Sponsor
may meet with the Principal Investigator from time to time to discuss the
planning and progress of the Research Project. 
An Advisory Committee made up of three members or advisors from the
Company, three members or advisors from the Sponsor, a member from Ercole
Biotech and an external collaborator will meet once per quarter to review
progress of the Research Project. The Company will have final decision-making
authority on all drug development, strategic, and other decisions.

 

3.2           During the Agreement Period and for three
(3) years thereafter, the Company shall make available to the Sponsor
copies of all data and other information generated pursuant to this Agreement
including, without limitation, all raw data obtained as a result of studies
conducted in the course of the Research Project and all experimental procedures
developed under the Research Project.

 

3.3           At least every three (3) months
during the conduct of the Research Project, the Company, in coordination with
the Principal Investigator, shall provide the Sponsor with an interim written
progress report concerning the Research Project.

 

 

3.4           A final written report setting forth the
results achieved under and pursuant to the Research Project and recommendations
for next actions shall be submitted by the Company to the Sponsor within ninety
(90) days of completion or earlier termination of the research that is the
subject of this Agreement.  Such final
report shall include a complete summary of the research carried out and
detailed experimental results of the research protocols performed in the course
of the Research Project (collectively, the “Results”).

 

3.5           Each written progress report to the
Sponsor, including the final report, shall be accompanied by a financial
statement from the Company describing in reasonable detail the disposition to
date of the Project Funds.

 

3.6           During the Agreement Period and for five (5) years
thereafter, authorized employees and agents of the Sponsor or of the FDA shall
have access to the Company and its personnel and records relating to the
Research Project for the purpose of determining compliance with this Agreement
and the Study Protocol and federal, state, and local laws and regulations and
any applicable guidelines for the conduct of research.  Such access by employees and agents of the
Sponsor shall be on reasonable notice and during normal business hours, and individuals
conducting such visits shall be bound by appropriate confidentiality agreements
with the Company.

 

4.      Payments and Repayment Rights

 

4.1           Subject to the terms and conditions of
this Agreement including the repayment rights provided for in Section 4.3,
the Sponsor shall pay the Company a total amount of Two Million Four Hundred
and Fifty-two Thousand Dollars ($2,452,000.00) which amount is inclusive of all
direct costs of Research Project activities (the “Project Funds”) as follows:

 

***** ($*****) shall be paid within ten (10) days
of the parties’ execution of this Agreement; ***** ($*****) shall be paid three
(3) months from the Effective Date of this Agreement subject to Sponsor’s
receipt of the first progress report demonstrating completion of that research
component of the Research Project; ***** ($*****) shall be paid six (6) months
from the Effective Date of this Agreement subject to the Sponsor’s receipt of
the second progress report demonstrating completion of that research component
of the Research Project; and ***** ($*****) shall be paid nine (9) months
from the Effective Date of this Agreement subject to the Sponsor’s receipt of
the third progress report demonstrating completion of that research component
of the Research Project. The Sponsor shall not be obligated to make any
payments to the Company in addition to those set forth in this Section 4.1
unless the parties otherwise mutually agree in writing.

 

4.2           The Company shall provide to the Sponsor
all information necessary to make the payments described above, including, but
not limited to, the name of the payee, its tax identification number, and the
name and address of the contact person to whom payments should be sent.

 

4.3           The Company and the Sponsor agree to the
following commercial terms with regard to the development and commercialization
of a Research Product:

 

 

4.3.1        The Company shall make a lump sum payment to the
Sponsor of ***** ($*****) (the “First Payment”) within thirty (30) days after
the end of the fiscal quarter during which the first commercial sale into a
Major Market of the Research Product occurs.

 

4.3.2        The Company shall make a lump sum payment to the
Sponsor of ***** ($*****) (the “Second Payment”) within thirty days (30) after
the end of the fiscal quarter during which the first anniversary of the first
commercial sale into a Major Market of the Research Product occurs.

 

4.3.3        The Company shall make a lump sum payment to the
Sponsor of ***** ($*****) (the “Third Payment”) within thirty days (30) after
the end of the fiscal quarter during which the second anniversary of the first
commercial sale into a Major Market of the Research Product occurs.

 

4.3.4        In the event the Company or one of its Affiliates
enters into any sort of partnership (a license agreement, research and
development agreement, collaboration or similar arrangement) with a corporate
partner that includes the right to sell, distribute promote or market the
Research Product or any of the underlying intellectual property and

 

(i)            if, prior to the second anniversary of the first
commercial sale of a Research Product in a Major Market country, the corporate
partner agrees to pay an upfront cash license fee or similar payment which is
earned upon signing, the Company or its Affiliates shall pay to the Sponsor,
within thirty (30) days of Company’s receipt of such payment from the corporate
partner, *****% of the cash received as an upfront fee or the total Project
Funds, less any amount already repaid to the Sponsor by the Company, whichever
is less.

 

(ii)           and if, thereunder, the Company is entitled to
development milestone payments, the Company or its Affiliates shall, within
thirty (30) days of receipt of any such payments, make repayments to the
Sponsor in the amount of *****% of each individual milestone payment
specifically related to the progress for the development of a Research Product,
limited to *****% of the Project Funds at each of such milestone payment, until
the Project Funds amount is repaid in full.

 

4.3.5        Without limiting the foregoing, in the event that the
full amount of the Project Funds have not been repaid to the Sponsor at first
commercial sale into a Major Market of the Research Product via the payment
mechanisms of Section 4.3.4, the Company shall make payments to the
Sponsor as provided for in Sections 4.3.1, 4.3.2, and 4.3.3..

 

4.3.6        “Research Product” shall mean any product containing
any molecular candidate arising or derived from the research funded hereunder
which is developed as a human therapeutic agent for skipping exon 50 in the indication
Duchenne Muscular Dystrophy.

 

 

4.3.7        Repayments to the Sponsor under all mechanisms in this
Article 4 shall not exceed the total Project Funds as provided for in Section 4.1.

 

5.      Right of the Company to
Seek Additional Funding

 

5.1           The Sponsor strongly encourages the
Company, through the efforts of the Principal Investigator, to seek additional
funding for the laboratories of the Investigators from the Federal government
or other sponsors of research and acknowledges that such additional sponsors
may retain rights in and to such funded research.

 

6.      Confidentiality

 

6.1           The Sponsor and the Company acknowledge
that each party may receive confidential technical and business information of
the other party (“Confidential Information”) during the Agreement Period.  Each party hereto agrees that, during the
Agreement Period and for a five (5) year period thereafter, that it will
maintain in strict confidence, and will not 
disclose to any third party, any Confidential Information of the other
party, whether in oral, written, graphic or electronic form.  Each party hereto agrees (i) not to use
Confidential Information of the other party except for purpose of conducting
Research Project activities in accordance with the Study Protocol or for such
other purposes consistent with the intent and terms of this Agreement and (ii) not
to disclose Confidential Information of the other party to third parties
without the express written permission of the other party, except that (a) each
party shall not be prevented from disclosing Confidential Information to its
employees, officers, independent contractors and Affiliates requiring access
thereto for the purposes of this Agreement provided each such employee,
officer, independent contractor or Affiliate is bound by an agreement regarding
confidentiality and non-use at least as restrictive as the obligations in this Article 6,
and (b) such information may be disclosed insofar as such disclosure is
necessary to allow either the Company or the Sponsor, as the case may be, (A) to
defend itself against litigation, (B) to file and prosecute patent
applications on any Invention in accordance with Article 8 hereof, or (C) to
comply with judicial decree, government action or applicable law or regulation,
provided that the party shall give prior written notice to the other party so
that the other party may attempt to obtain a protective order requiring that
the Confidential Information be disclosed only to the extent required by such
order, law or regulation, and that it be used only for the purposes for which
the decree, action, law or regulation requires such disclosure to be made.  The parties agree that no advance notice to
the Sponsor is required for AVI’s compliance with its reporting requirements to
the Securities and Exchange Commission (SEC) . 
The parties will take all steps necessary to ensure that its employees,
officers, independent contractors, and Affiliates comply with the terms and
conditions of this Agreement. 
Notwithstanding the foregoing, such obligation of confidentiality shall
not apply to information that the receiving party can establish by competent
evidence:

 

	
  (i)

  	
  at the time of disclosure is in the public domain;

  
	
   

  	
   

  
	
  (ii)

  	
  has come into the public domain through no fault of
  the receiving party or its employees and agents;

  

 

 

(iii) was known to
the receiving party prior to its disclosure by the disclosing party, as
evidenced by the receiving party’s written records; or

 

(iv) is disclosed to
the receiving party, without restriction on disclosure, by a third party that
is not under an obligation of non-disclosure to the disclosing party.

 

6.2           The
Company (including, for purposes of this Section 6.2, the Principal
Investigator) shall have the right, and is encouraged, to publish or present
the Results of the Research Project, provided the Sponsor has the opportunity
to review and comment on any proposed manuscripts or the substance of any
presentations describing said Research Project or Results at least thirty (30)
days prior to their submission to a third party for publication or review.  In the event that the rights to the Research
Product have been licensed to Sponsor pursuant to Article 9, then the
positions of the Parties with respect to the provisions of this Section 6.2
shall be reversed. The reviewing party shall review any draft and give its
comments to the publishing party promptly. 
The publishing party shall comply with the reviewing party’s request to
delete references to the reviewing party’s Confidential Information in any such
publication and the publishing party agrees to withhold publication an
additional thirty (30) days to permit the reviewing party to obtain patent or
other intellectual property protection, if the reviewing party deems it
necessary.

 

7.      Use of the Other Party’s Name; Public Statements

 

Each party agrees that it will not at any time during
or following expiration or termination of this Agreement use the name of the
other party or its employees or any other names, insignia, symbol(s), or
logotypes associated with the other party or any variant or variants thereof
orally or in any literature, advertising, or other materials without the prior
written consent of the other party except for right to publish set forth in Section 6.2
and Company’s compliance with its reporting requirements to the SEC, which
consent may be withheld at the other party’s sole discretion.  Notwithstanding the foregoing, the Company
agrees that the Sponsor may use the names of the Company, the Principal
Investigator and his collaborators in connection with generally publicizing on
its website, in press releases or in other publications of the Sponsor provided
that such usages are limited to identifying the Company and/or the Principal
Investigators and briefly describing the nature of the Research Project and the
Sponsor agrees that Company may use Sponsor’s name in connection with any board
or investor presentation, or press release related thereto, or as may be
requested by any funding entity, governmental entity, or academic publisher, or
as required by law.  Prior to
publicizing, both parties agree to give the other party an opportunity to
review press releases using the other’s name and discussing the work involved
in the project.

 

8.      Ownership and Patents

 

8.1           Company shall own all data obtained in
the Research Project, research protocols related to the Research Project, and
Results, and shall have the right to submit all such information to support
regulatory filings related to the Research Product and other products that may
be developed by the Company.

 

 

8.2           Ownership of any discovery, invention,
method, process or other know-how made, conceived or first reduced to practice
in the performance of the Research Project during the project period by the
Company and its affiliates, the Principal Investigator and/or the Sponsor and
all intellectual property arising therefrom (collectively, “Inventions”) shall
be determined as follows:  All Inventions
conceived or reduced to practice during the project period solely by employees,
agents or consultants of the Company, including, without limitation, the
Principal Investigator (“Company Inventions”) shall be owned solely by the
Company.  All Inventions conceived or
reduced to practice during the project period solely by employees, agents or
consultants of the Sponsor (“Sponsor Inventions”) shall be owned solely by the
Sponsor.  All Inventions conceived or
reduced to practice jointly during the project period by employees, agents or
consultants of the Company, on the one hand, and employees, agents or
consultants of the Sponsor, on the other hand (“Joint Inventions”), shall vest
according to U.S. patent law.  The
Company represents and warrants that all Company employees and other
individuals or entities performing any part of the Research Project are
obligated to assign to the Company all inventions and intellectual property
rights that are necessary to enable the Company to grant the Sponsor all rights
the Company purports to grant under this Agreement.

 

8.3           As soon as the Company reasonably
believes a Company Invention or Joint Invention has been conceived or reduced
to practice hereunder (and in any event within a reasonable time after its
disclosure to the Company Technology Office), the Company shall disclose such
invention in writing to the Sponsor in sufficient detail to allow the Sponsor
to evaluate its significance.

 

8.4           The Company shall have the first right to
prosecute any patent application(s) covering any Company Inventions.  Within a reasonable time after disclosure of
any such Company Invention to the Sponsor, the Company shall notify the Sponsor
in writing if it intends to pursue patent protection for such Company
Invention.  If the Company elects to
pursue patent protection, it shall promptly prepare, file and prosecute any
U.S. or foreign application(s) to protect such Company Invention.  The Company shall bear all expenses in
connection with such preparation, filing, prosecution and maintenance of U.S.
and foreign patent applications.  For
such Company elected patent applications, the Company shall be responsible for
making decisions regarding the scope and content of such patent application(s) and
the prosecution thereof.  The Sponsor
shall be responsible for the costs of patent filing and prosecution for Sponsor
Inventions  or if the Sponsor requests
that the Company files a patent application. 
The Company and Sponsor shall each make reasonable efforts to keep the
other advised as to all developments with respect to such application(s).

 

8.5           For Joint Inventions, the Company and
Sponsor will negotiate in good faith, at the time of disclosure, the management
and prosecution of the invention including any cost related thereto.

 

8.6           Sponsor grants Company an exclusive,
worldwide, fully paid-up, royalty-free license under Sponsor’s interest in any
Joint Inventions and to Sponsor Inventions to make, use and sell Research
Products.

 

 

9. Granting of Exclusive License

 

9.1           The parties acknowledge and agree that they intend to use their reasonable best efforts to complete the Research Project as described in the Study Protocol.  In the event the Company and its Affiliates and partners elect to discontinue to pursue the development and/or commercialization of a Research Product for reasons other than safety and efficacy, the Company and its Affiliates, at the request of the Sponsor, hereby grants the Sponsor the exclusive royalty-bearing, fully paid up, worldwide license or sublicense as the case may be, with the right to sublicense, to the Research Product, on terms consistent with the requirements of the Ercole Biotech-Isis Pharmaceuticals collaboration agreement and Ercole Biotech-AVI BioPharma collaboration agreement, under patents owned or licensed by the Company or its Affiliates to research, to develop, to use, to sell, to offer for sale, to distribute Research Products, to import, to export and to employ methods covered by any such patents or by Company Inventions or Company’s interest in Joint Inventions relating to the Research Product.  In consideration for the exclusive license to use and sell the Research Product
 
9.1.1        if the Sponsor obtains a license to the Research Product while the Research Product is in the research or preclinical phase of the Research Project, a total royalty of *****% of Net Sales of Research Product shall be paid to the Company and its Affiliates by the Sponsor and its licensees.
 
9.1.2        If the Sponsor obtains a license to Research Product during or at the conclusion of Phase I clinical testing, a total royalty of *****% of Net Sales of Research Product shall be paid to the Company and its Affiliates by the Sponsor and its licensees.
 
9.1.3        If the Sponsor obtains a license to Research Product after the initiation of a Phase II clinical trial, a total royalty of *****% of Net Sales of Research Product shall be paid to the Company and its Affiliates by the Sponsor and its licensees.
 
9.2           The Company shall have the right of first refusal to manufacture research, clinical and commercial quantities of Research Product for the Sponsor or the Sponsor’s commercial partner.  Should the Company not exercise its first right to manufacture, the exclusive license granted to the Sponsor shall be expanded to include the right to develop to make, and to have made, Research Product and to employ methods covered by or incorporating Company Inventions or Company’s interest in Joint Inventions which permit the commercialization of the Research Product to the worldwide market.  The Company shall transfer the Research Product production process to a mutually agreeable third party contract manufacturer under an agreement that contains appropriate provisions for recovery of technology transfer costs and for limiting disclosure or other use of the Company’s technology.
 

9.3           Except
as expressly provided herein and including Article 9, nothing in this
Agreement shall restrict either party’s use, license or exploitation in any way
of its interest in its own or any Joint Inventions.

 

 

10. Termination

 

10.1         This
Agreement shall remain in effect for the Agreement Period unless extended by
written agreement of the parties, or earlier terminated in accordance with this
Article 10.

 

10.2         Either
party may terminate this Agreement for any material breach of this Agreement by
the other party if such breach is not cured within thirty (30) days after the
breaching party receives written notice of such breach by the non-breaching
party.  Such termination shall be
effective upon expiration of such thirty (30) day period.

 

10.3         Termination
of this Agreement shall not affect the rights and obligations of the parties
that shall have accrued prior to termination, including, without limitation,
the confidentiality obligations set forth in this Agreement.  In the event of any termination of this
Agreement prior to expiration of the Agreement Period (other than termination
by the Sponsor pursuant to Section 10.2), the Sponsor shall pay the
reasonable costs incurred by the Company in winding down and terminating the
Research Project, including the costs of the Research Project during the
wind-down period and all costs and non-cancelable commitments made prior to
termination.  After termination, the
Company will submit a final report of all costs incurred and all funds received
under this Agreement as set forth in Section 3.4.  The report shall be accompanied with a check
for any funds remaining which were paid to the Company under Section 4.1,
if any.  The provisions of
Sections 2.7, 3.2, 3.4, 3.5, 3.6, 4.3 and 10.3 and Articles 6, 7, 8,
9, 12, 13, 16, 17, 18, 19, 20 and 21 shall survive termination or expiration of
this Agreement.

 

11. Force Majeure

 

Neither party shall be responsible to the other for any failure or delay in performing any of its obligations under this Agreement if such delay or nonperformance is caused by strike, stoppage of labor, lockout or other labor trouble, fire, flood or other weather event, earthquake, accident, explosion, war, act of terrorism, act of God or act of the government of any country or of any local government or any other cause beyond the reasonable control of the defaulting party.

 

12. Liability and Warranty

 

Each party to this agreement agrees to indemnify the
other party from damage to persons or property resulting from the negligence on
the part of itself, its employees, its agents, or its officers.  Neither party assumes any responsibility to
the other party for the consequences of any act or omission of any person, firm
or corporation not a party to this agreement.

 

The research results are preliminary in nature.  Company makes no representations and extends
no warranties of any kind, either expressed or implied, with regards to
research results.

 

13.  Independent
Contractors

 

The Sponsor and the Company shall at all times act as
independent parties, and nothing contained in this Agreement shall be construed
or implied to create an agency or partnership. 
Neither party shall have the authority to contract or incur expenses on behalf
of the other except 

 

 

as may be expressly
authorized by separate written agreement between the parties.  The Principal Investigator and members of the
Project Team shall not be deemed to be employees of the Sponsor.

 

14. Other Employment

 

The Company warrants that the Principal Investigator
is permitted to enter into this Agreement (but not to bind the Company) and
that the terms and conditions hereof are consistent with the Principal
Investigators’ obligations to the Company.

 

15. Tax Status

 

The Company represents
and certifies to the Sponsor that it is a publicly traded company.

 

16. Choice of Law

 

This Agreement shall be governed by and shall be
construed in accordance with the laws of the Commonwealth of Massachusetts
without regard to the conflicts of laws provisions thereof.

 

17. Severability

 

If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality
or enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.

 

18. Waiver

 

The failure of any party hereto to insist upon strict
performance of any provisions of this Agreement or to exercise any right
hereunder will not constitute a waiver of that provision or right.

 

19. Notices

 

Any notice or communication required or permitted to
be given or made under this Agreement by one of the parties to the other shall
be in writing and shall be deemed to have been sufficiently given or made for
all purposes if such notice or communication is either emailed and its receipt
is acknowledged by the recipient, or mailed by certified mail, postage prepaid,
addressed to such other party at its respective address as follows:

 

If to the Sponsor:                                         Attn:  Benjamin D. Seckler, MD, President

Charley’s Fund, Inc.

P.O. Box 297

South Egremont, MA 01258

Email:  bseckler@gmail.com

 

If to the Company:            Attn:
Chief Executive Officer

AVI BioPharma, Inc.

One SW Columbia, Suite 1105,

Portland, Oregon 97258

 

 

20. Assignment

 

This Agreement may not be assigned
by the Company without prior notice to Sponsor, except in connection with
a merger, recapitalization, reorganization, consolidation, sale of securities,
sale of assets or any transaction to an affiliate of the Company; provided,
however, no such transaction shall relieve Company of its obligations or
adversely affect Sponsor’s rights hereunder.  The Sponsor may assign
this Agreement without the Company’s consent (i) in connection with a
merger, consolidation or sale of all or substantially all of Sponsor’s assets
or stock, or (ii) to an affiliate of the Sponsor.  In addition, the Sponsor may assign all or
any part of its rights under Articles 8 and 9 to any third party upon
written notice to the Company.

 

21. Entirety

 

This Agreement represents the entire agreement of the
parties, and it expressly supersedes all previous written and oral
communications between the parties. 
Except as otherwise expressly provided in this Agreement, no amendment,
alteration, or modification of this Agreement or any Appendix attached hereto
shall be valid unless executed in writing by authorized signatories of both
parties.

 

 

IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be executed by their duly authorized
representatives to be effective as of the Effective Date.

 

 

	
  CHARLEY’S FUND, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:  Benjamin
  D. Seckler, MD

  
	
   

  	
   

  	
  Title:    President

  

 

 

	
  AVI BIOPHARMA, INC.

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:  K.
  Michael Forrest

  
	
   

  	
   

  	
  Title:    Chief
  Executive Officer

  

 

 

APPENDIX A

 

Preclinical Proposal for Skipping
Exon 50 for Duchenne Muscular Dystrophy

 

*****

 

I.  Background:

 

*****

 

II.
Applicable Work in Progress

 

A.  Objective: *****

 

*****

 

B.  Objective: *****

 

*****

 

C.  Objective: *****

 

*****

 

D.  Objective: *****

 

*****

 

E.  Objective:  *****

 

*****

 

III.  Specific
Aims of Future Studies *****

 

Aim
1:  *****

 

*****

 

Aim 2:  *****

 

*****

 

Aim
3:  *****

 

*****

 

 

Aim  4.  *****

 

*****

 

Aim
5:  *****

 

*****

 

Aim 6: *****

 

*****

 

Aim 7: *****

 

*****

 

 

APPENDIX B

 

Project Cost Estimates

 

Aim
1:  *****

 

	
  Materials:

  	
   

  	
  $

  	
   *****

  
	
  Labor:

  	
   

  	
  $

  	
   *****

  
	
  Total:

  	
   

  	
  $

  	
   *****

  

 

Aim 2:   *****

 

	
  Materials:

  	
   

  	
   

  	
   *****

  
	
  Labor:

  	
   

  	
  $

  	
   *****

  
	
  Total:

  	
   

  	
  $

  	
   *****

  

 

Aim
3:   *****

 

	
  Materials:

  	
   

  	
  $

  	
  *****

  
	
  *****:

  	
   

  	
  $

  	
  *****

  
	
  Labor:

  	
   

  	
  $

  	
  *****

  
	
   

  	
   

  	
  $

  	
  *****

  

 

Aim 4:   *****

 

	
  Materials:

  	
   

  	
  $

  	
  *****

  
	
  *****:

  	
   

  	
  $

  	
  *****

  
	
  Labor:

  	
   

  	
  $

  	
  *****

  
	
  Total:

  	
   

  	
  $

  	
  *****

  

 

Aim
5:   *****

 

	
  Materials:

  	
   

  	
  $

  	
   *****

  
	
  Labor:

  	
   

  	
  $

  	
   *****

  
	
  Total

  	
   

  	
  $

  	
   *****

  

 

Aim
6:   *****

 

	
  Materials:

  	
   

  	
  $

  	
  *****

  
	
  *****

  	
   

  	
  $

  	
  *****

  
	
  *****

  	
   

  	
  $

  	
  *****

  
	
  Labor:

  	
   

  	
  $

  	
  *****

  
	
  Total:

  	
   

  	
  $

  	
  *****

  

 

 

Aim 7: *****

 

	
  Labor:

  	
   

  	
  $

  	
  *****

  

 

	
  Total
  Estimated Cost, All Aims:

  	
  $

  	
  2,452,000.00Exhibit 10.59

 

 

AGREEMENT

 

dated as of October 29,
2007

 

by and among

 

AVI BioPharma, Inc.,

 

AVI Shareholder Advocacy
Trust,

 

The Shareholder Advocate
LLC, and

 

Richard Macary

 

 

This
SHAREHOLDER’S TRUST AGREEMENT dated as of October 29, 2007 (this “Agreement”) is made and entered into by and among AVI
BioPharma, Inc., an Oregon corporation (the “Company”),
the AVI Shareholder Advocacy  Trust, a
Delaware trust (“Trust”), The Shareholder Advocate
LLC, a Delaware limited liability company, (“Managing
Trustee”) and Richard Macary (“Macary”) (each
a “Party” and, collectively, the “Parties”).

 

WHEREAS,
the Trust was formed with its central goal to improve the quality of the
Company’s management;

 

WHEREAS,
the Managing Trustee is the trustee in charge of the management of the Trust;

 

WHEREAS,
Macary is the sole manager and a member of the Managing Trustee;

 

and

 

WHEREAS,
the Parties wish to provide for representation on the Board of Directors of the
Company (the “Board of Directors”) for two (2) directors
nominated by the Trust; all as hereinafter set forth.

 

NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth in
this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:

 

1.             DEFINITIONS

 

1.1          Definitions.

 

(a)             Except as otherwise specifically
indicated, the following terms have the following meanings for all purposes of
this Agreement:

 

“Affiliate”
has the meaning assigned thereto in Rule 12b-2 promulgated under the
Exchange Act.

 

“Bylaws”
means the Amended and Restated Bylaws of the Company, as the same may be
amended and restated from time to time.

 

“Articles
of Incorporation” means the Articles of Incorporation of the Company, as the same
may be amended and restated from time to time.

 

“Commission”
means the Securities and Exchange Commission.

 

“Director
Termination Date” means the earliest of: 
(i) the first date on which (x) any member of the Restricted
Group engages in any of the activities prohibited by Article IV if
such violation is not wholly cured within three (3) business days
following written notice thereof by the Company, (y) any member of the
Restricted Group engages in a Schedule 13D Transaction, or (z) the
filing of an amendment to the Schedule 13D previously filed by certain of
the Restricted Group with the Commission indicating that any member of the
Restricted Group has a plan or proposal to engage in, or that it has engaged
in, a Schedule 13D Transaction (other than an 

 

 

amendment
filed following the execution and delivery of this Agreement announcing such
execution and delivery or subsequent filings necessitated by the terms of this
Agreement and actions by the parties hereunder);  or (ii) the first date on which there
shall be no Restricted Group Directors then in office as members of the Board
of Directors and the Restricted Group Designee shall not have named a successor
to any of the Restricted Group Directors in accordance with Section 2.1 hereof.

 

“Equity
Securities” means Voting Securities, Convertible Securities and Rights to
Purchase Voting Securities.

 

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

 

“Governmental
or Regulatory Authority” means any court, tribunal, arbitrator, authority,
agency, commission, official or other instrumentality of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision, or any stock exchange or market in which the Common
Stock is listed for trading or traded.

 

“Independent
Director” means any member of the Board of Directors who is an independent
director as defined in Rule 4200(15) of the Nasdaq Marketplace Rules (as
currently in effect and as may be amended from time to time) and as defined in
any other applicable securities laws, rules or regulations.

 

“Person”
means any individual, corporation, limited liability company, partnership,
trust, other entity or group (within the meaning of Section 13(d)(3) of
the Exchange Act).

 

“Representatives”
of any Person means such Person’s managers, trustees, directors, officers,
employees, legal, investment banking and financial advisors, accountants and
any other agents and representatives of such entity.

 

“Restricted
Group” means, collectively, (i) the Trust, (ii) the Managing Trustee,
(iii) Macary,  (iv) any and all
Affiliates of any of the Persons described in clauses (i) through (iii), (v) any
Person as to which voting power over Voting Securities, directly or indirectly,
is controlled or shared by any of the Persons described in clauses (i) through
(iii), (vi) the then current trustee, managers, officers, directors, or
employees of any Person described in clauses (i) through (iii) above,
(vii) with respect to any Person described in clauses (i) through (vi) above
who is an individual, (a) any and all immediate family members of such
Person, (b) the heirs, executors, personal representatives and
administrators of any of the foregoing Persons, (c) any and all trusts
established for the benefit of any of the foregoing Persons, and (d) any
and all charitable foundations the investment decisions of which are controlled
by any of the foregoing Persons, and (vii) the other members of any and
all groups (within the meaning of Section 13(d)(3) of the Exchange
Act) of which any Person described in clauses (i) through (vi) above
is a member.

 

“Restricted
Group Designee(s)” means Macary and any other individuals subsequently
designated from time to time by the Restricted Group; provided,
however, that no individual who is an officer, director, partner or
shareholder of any competitor of the Company or any of its subsidiaries (other
than a shareholder which owns less than 5% of the voting stock or power of a
competitor which is a publicly-traded company) shall serve as a Restricted
Group Designee.

 

 

“Restricted
Group Directors” means the individuals named to the Board of Directors in
accordance with Section 2.1 below.

 

“Schedule
13D Transaction” means any action or transaction described in any of paragraphs
(a) through (j) of Item 4 of Schedule 13D promulgated by the
Commission. “Schedule 13D Transaction” shall not include any transaction
described in paragraph (a) of Item 4 of Schedule 13D if, after taking
into account all such contemporaneous transactions, the aggregate beneficial
ownership of the Restricted Group shall not have changed.

 

“Standstill
Termination Date” means the earlier of the Director Termination Date or the
close of the 2010 annual meeting of the Company’s shareholders; provided, however, the Standstill Termination Date shall be
extended to the close of the 2012 annual meeting of the Company’s shareholders
if, at  the discretion of the Board of
Directors, the Restricted Group Directors are nominated and are elected by the
shareholders to terms ending at such 2012 annual meeting.

 

“Voting
Securities” means the Common Stock and any other securities of the Company of
any kind or class having the power generally to vote for the election of
directors; “Convertible Securities” means securities of the Company which are
convertible or exchangeable (whether presently convertible or exchangeable or
not) into Voting Securities; “Rights to Purchase Voting Securities” means
options and rights issued by the Company (whether presently exercisable or
not) to purchase Voting Securities or Convertible Voting Securities (but
not including the Rights); and “Outstanding Voting Securities” means at any
time the then issued and outstanding Voting Securities (not including shares
issuable upon the conversion of any Convertible Securities or upon the exercise
of any Rights to Purchase Voting Securities).

 

(b)           In addition, the following terms are
defined in the Sections set forth below:

 

	
  “Board of Directors”

  	
  — Preamble

  
	
   

  	
   

  
	
  “Common Stock”

  	
  — Preamble

  
	
   

  	
   

  
	
  “Company”

  	
  — Preamble

  
	
   

  	
   

  
	
  “Managing Trustee”

  	
  —Preamble

  
	
   

  	
   

  
	
  “Macary”

  	
  —Preamble

  
	
   

  	
   

  
	
  “Trust”

  	
  —Preamble

  

 

(c)           Unless the context of this Agreement
otherwise requires, (i) words of any gender include each other gender; (ii) words
using the singular or plural number also include the plural or singular number,
respectively; (iii) the terms “hereof,” “herein,” “hereby” and derivative
or similar words refer to this entire Agreement; (iv) the terms “Article”
or “Section” refer to the specified Article or Section of this
Agreement and (v) all references to statutes, rules and regulations
are to the enumerated statutes, rules and regulations and any successor
statute, rule or regulation. Whenever this Agreement refers to a number of
days, such number shall refer to calendar days unless business or trading days
are specified.

 

 

2.             BOARD OF
DIRECTORS

 

2.1          Composition of Board of Directors.

 

(a)             No later than October 31, 2007,
pursuant to the powers granted to it under the Bylaws the Board of Directors
shall accept the resignation of Alan P. Timmins and James B. Hicks, PhD,
and appoint Dr. Gil Price and Mr. William Goolsbee as the Restricted
Group Directors to fill the vacancies on the Board of Directors created by such
resignations.  If such resignations and
appointments have not been received, accepted or made effective as of such
date, the Company shall be deemed to be in breach of this Agreement, and each
member of the Restricted Group shall be relieved of all obligations under this
Agreement, without prejudice to any remedies against the Company that each may
have under this Agreement, at law or in equity.

 

(b)            Until the Standstill Termination
Date, at each meeting of shareholders of the Company at which the terms of the
Restricted Group Directors are scheduled to expire, subject to approval of such
Restricted Group Directors by the Nominating and Corporate Governance Committee
of the Board of Directors (such approval not to be withheld unless required by
the fiduciary duties of the directors serving on such committees), the Board of
Directors shall nominate the Restricted Group Directors to stand for election
as directors of the Company for a succeeding term in accordance with the
Company’s procedures for nomination of directors as provided for in its Bylaws
and the charter of the Nominating and Corporate Governance Committee, recommend
such election and solicit proxies in respect thereof and vote the shares of
Common Stock represented by all proxies granted by shareholders in connection
with the solicitation of proxies by the Board of Directors in connection with
such meeting in favor of the Restricted Group Directors, except for such
proxies that specifically indicate a vote to withhold authority with respect to
the Restricted Group Directors.

 

(c)             Until the Standstill Termination
Date, including the Standstill Termination Date, the Board of Directors shall
cause any vacancy created on the Board of Directors by reason of the death,
resignation or removal of a then serving Restricted Group Director to be filled
promptly by a successor Restricted Group Director selected from a list of
nominees with high personal integrity and ethics, relevant expertise and
professional experience and such other reasonable qualifications, as determined
by the Nominating and Corporate Governance Committee of the Board of Directors
(such other qualifications to be communicated to the Restricted Group Designee
by the Company in the same notice from the Company described in the following
sentence) (collectively, “Qualified Nominees”),
which shall include not less than two (2) Qualified Nominees for each
vacant Restricted Group Director position and the information required by Section 2.2.  Such list shall be submitted by the
Restricted Group Designee not more than thirty (30) days following notice from
the Company of the effective date of such vacancy in accordance with Section 6.3.  In the event the Restricted Group Designee
shall not deliver the list of Qualified Nominees within such 30-day period, the
Board of Directors may replace such Restricted Group Director in its sole
discretion.

 

(d)           While serving on the Board of
Directors and any committee thereof, each Restricted Group Director shall be
entitled to all the rights and privileges of the other directors and committee
members, including, without limitation, access to the Company’s outside
advisors; provided, however, that each Restricted
Group Director shall not be entitled to participate in or 

 

 

observe, and shall upon the good
faith request of the Board of Directors or any such committee recuse himself or
herself from, any meeting or portion thereof at which the Board of Directors or
any such committee is evaluating and/or taking action with respect to (x) the
ownership of Voting Securities specifically by any member of the Restricted
Group, (y) the exercise of any of the Company’s rights or enforcement of
any of the obligations of any member of the Restricted Group under this
Agreement or (z) any transaction proposed by, or with, any member of the
Restricted Group. The Board of Directors or any such committee shall be
entitled to take such actions as it shall deem reasonably necessary or
appropriate to carry out the provisions of the preceding sentence.

 

2.2          Information About Restricted Group
Directors.

 

Notwithstanding
anything to the contrary herein, each Restricted Group Director shall be an
Independent Director and, in furtherance of this requirement, each Restricted
Group  Director shall promptly provide to the
Company, as the Company may from time to time reasonably request, information
regarding such Restricted Group Director for purposes of determining whether
the Restricted Group Director is an Independent Director or for inclusion in
any form, report, schedule, registration statement, definitive proxy statement or
other documents required to be filed by the Company with the Commission or any
other Governmental or Regulatory Authority. 
In the event that it is determined that a Restricted Group Director is
not an Independent Director, the Board of Directors shall notify the Restricted
Group Designee of such determination and, not less than 30 days following such
notification, the Restricted Group Designee shall provide a list of Qualified
Nominees in accordance with Section 2.1.  The Board of Directors shall select a
Qualified Nominee for election by the Board of Directors or shareholders of the
Company as the case may be.  In no event
shall a Restricted Group Director who is not an Independent Director be
nominated or elected by  the Board of
Directors.   A Restricted Group Director
who is no longer independent shall resign as a director not more than 30 days
following the request from the Board of Directors.

 

2.3          Board and Company Policies.

 

It
shall be a precondition to the right of the initial Restricted Group Directors,
and their respective successors, to attend any meeting of the Board of
Directors or committee thereof that each such individual shall have agreed, in
the same manner as each other member of the Board of Directors, to abide by the
written policies of the Board of Directors and the committees thereof
(including, without limitation, the Code of Business Conduct and Ethics), as
amended from time to time, and written policies of the Company applicable to
members of the Board of Directors (including, without limitation, the Insider
Trading Policy, as amended from time to time).

 

 

3.             STANDSTILL AND
OTHER AGREEMENTS

 

3.1          Standstill.

 

From
the date hereof through the Standstill Termination Date, no member of the
Restricted Group will, directly or indirectly, (i) engage in any “solicitation”
of “proxies” (as such terms are used in the proxy rules promulgated under
the Exchange Act, but disregarding the exclusion in clause (iv) of Rule 14a-1(l)(2) but
including any exempt solicitation pursuant to Rule 14a-2(b)(1) or
(2)), submit any proposal (including nominations of director candidates, except
as provided in Section 2.1) for consideration at any annual or
special meeting of the shareholders of the Company (including pursuant to Rule 14a-8
promulgated under the Exchange Act), (ii) form, join or in any way
participate in a “group” (as defined in Section 13(d)(3) of the
Exchange Act) with respect to any Equity Securities which proposes to take
any action or enter into any transaction that is prohibited by this Section,
nor will they provide any financing or other material assistance to any such
group for any such purpose, (iii) engage in any Schedule 13D
Transaction or file any amendment to the Schedule 13D previously filed by
any member of the Restricted Group with the Commission indicating that any
member of the Restricted Group has a plan or proposal to engage in, or that it
has engaged in, a Schedule 13D Transaction (other than an amendment filed
following the execution and delivery of this Agreement announcing such
execution and delivery or subsequent filings necessitated by the terms of this
Agreement and actions by the parties thereunder); provided,
however, that the foregoing prohibition shall not prohibit filings
believed in good faith, after consultation with counsel, to be required by law
as a consequence thereof; and provided further
that, to the extent practicable, any such filings shall be provided to the
Company in advance of filing and the Company shall be permitted a reasonable
opportunity to comment thereon (it being understood that such filings may be
required to be filed with the Commission promptly); (iv) subject to the
proviso below, publish (in print or otherwise, whether in connection with an
interview, website publication or otherwise) any comments, remarks, articles or
online postings (including listings in the form of blogs, chat rooms or
otherwise) that are objectively viewed as materially disparaging or denigrating
in any way of the Company or, other than in the context of statements not involving
the Company, any of its officers, directors, employees (including any calls or
suggestions for the resignation or termination of any of the foregoing and
including in their capacities as officers, directors or employees of the
Company or otherwise), plans, intellectual property or other intangible rights,
operating methods, products, product candidates, research and development,
results of operation, press releases, articles, publications or papers, the
purpose of this subparagraph being that, subject to the proviso below, all
members of the Restricted Group will either be supportive of the Company and
its officers, directors, employees, plans, results, research, etc., or will be
silent with respect thereto; provided, however, notwithstanding the aforesaid, Macary,
either directly or through any organization that employs or contracts with him
for stock, investment or market analysis, may 
publish and distribute analyst reports in Macary’s customary form and
manner to his or its clients with respect to whether such clients should buy,
sell or hold shares of Company Common Stock so long as such reports do not
contain any material non-public information or breach any confidentiality
obligation by Macary to the Company.

 

 

3.2          Termination of Trust.

 

Upon
the appointment of the Restricted Group Directors as provided above in Section 2.1,
Macary shall take all actions necessary to terminate the existence and
operation of the Trust, subject to the provisions of this Section.  Without limiting the foregoing, Macary shall
post as the Trust’s final posting on the Trust’s website a statement in support
of the Company’s actions as described in Section 2.1 above and
indicating that the objectives of the Trust have been achieved and, as a
result, the Trust is being terminated and all funds previously contributed to
the Trust and not expended as of the date of termination will be returned (such
posting, at Macary’s discretion, may remain posted of up to 90 days following
the date of appointment of the Restricted Group Directors)

 

4.             REPRESENTATIONS AND
WARRANTIES OF THE RESTRICTED GROUP

 

Subject
to any information set forth on the attached Disclosure Schedule, each of the
Trust, the Managing Trustee and Macary hereby represents and warrants to the
Company as follows:

 

4.1          Authority.

 

This
Agreement has been duly and validly executed and delivered by each such party
and constitutes a legal, valid and binding obligation of such party enforceable
against such party in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

 

4.2          No Conflicts.

 

The
execution and delivery by each such Party of this Agreement does not, and the
performance by such Party’s obligations under this Agreement and the
consummation of the transactions contemplated hereby will not:

 

(a)             conflict with or result in a
violation or breach of any term or provision of any law, statute, rule or
regulation or any order, judgment or decree of any Governmental or Regulatory
Authority applicable to such Party or any of such Party’s properties or assets;
or

 

(b)            (i) conflict with or result in
a violation or breach of, (ii) constitute (with or without notice or lapse
of time or both) a default under, (iii) require such Party to obtain
any consent, approval or action of, make any filing with or give any notice to
any Person as a result or under the terms of, or (iv) result in the
creation or imposition of any lien upon any of such Party’s properties or
assets under, any contract, agreement, plan, permit or license to which such
Party is a party.

 

 

4.3          Governmental Approvals and Filings.

 

No
consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority on the part of any such Party is required in connection
with the execution and delivery of this Agreement, any filing with the
Commission required in connection with the execution and/or delivery of this
Agreement or the joint press release referred to in Section 6.1.

 

4.4          Restricted Group Shares.

 

Except
as set forth on Section 4.4 of the Disclosure Schedule, the members
of the Restricted Group do not beneficially own any shares of Common Stock.

 

5.             REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

 

The
Company hereby represents and warrants to the other Parties to this Agreement
as follows:

 

5.1          Incorporation.

 

The
Company is a corporation duly incorporated and validly exists under the laws of
the State of Oregon. The Company has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby.

 

5.2          Authority.

 

The
execution and delivery by the Company of this Agreement, and the performance by
the Company of its obligations hereunder, have been duly and validly authorized
by the Board of Directors, no other corporate action on the part of the Company
or its shareholders being necessary. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors’ rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

 

5.3          No Conflicts.

 

The
execution and delivery by the Company of this Agreement do not, and the
performance by the Company of its obligations under this Agreement and the
consummation  of the transactions
contemplated hereby will not:

 

(a)             conflict with or result in a
violation or breach of any of the terms, conditions or provisions of the
Articles of Incorporation or Bylaws;

 

(b)            conflict with or result in a
violation or breach of any term or provision of any law, statute, rule or
regulation or any order, judgment or decree of any Governmental or Regulatory
Authority applicable to the Company or any of its properties or asset; or

 

 

(c)             (i) conflict with or result in
a violation or breach of, (ii) constitute (with or without notice or lapse
of time or both) a default under, (iii) require the Company to obtain
any consent, approval or action of, make any filing with or give any notice to
any Person as a result or under the terms of or (iv) result in the
creation or imposition of any lien upon the Company or any of its properties or
assets under, any contract, agreement, plan, permit or license to which the
Company is a party.

 

5.4          Governmental Approvals and Filings.

 

No
consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority on the part of the Company is required in connection with
the execution and delivery of this Agreement, other than any filing with the
Commission required in connection with the execution and/or delivery of this
Agreement or the joint press release referred to in Section 6.1.

 

6.             GENERAL
PROVISIONS

 

6.1          Publicity.

 

The
Restricted Group Designee and the Company will cooperate with each other in the
development and distribution of a joint press release announcing the execution
and delivery of this Agreement.  Subject
to the Company’s duties and obligations under applicable federal and state
securities laws, such press release to be in form and substance reasonably
satisfactory to each of the Restricted Group Designee, each Restricted Group
Director, and the Company.

 

6.2          Amendment and Waiver.

 

(a)             This Agreement may be amended,
supplemented or modified only by a written instrument duly executed by or on
behalf of each party hereto.

 

(b)            Any term or condition of this
Agreement may be waived at any time by the party that is entitled to the
benefit thereof, but no such waiver shall be effective unless set forth in a
written instrument duly executed by or on behalf of the party waiving such term
or condition. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed as
a waiver of the same or any other term or condition of this Agreement on any
future occasion.  All remedies, either
under this Agreement or by law or otherwise afforded, will be cumulative and
not alternative.

 

6.3          Notices.

 

(a)             For all purposes of this Agreement,
the Company shall not be required to recognize any notice purportedly delivered
by or on behalf of any other member of the Restricted Group unless such notice
is delivered to the Company by or on behalf of the Restricted Group Designee.

 

(b)            All notices, requests and other
communications hereunder must be in writing and will be deemed to have been
duly given only if delivered personally or by facsimile transmission or by
reputable overnight courier (postage prepaid) to the parties at the
following addresses or facsimile numbers:

 

 

If to any member of the Restricted Group, to:

 

AVI
Shareholder Advocacy Trust

The
Shareholder Advocate, LLC

Attn: Richard
Macary

330
Madison Avenue, 6th Flr.

New
York, NY 10017

Fax:
212-922-0363

Tel:
646-240-8787

 

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

 

Kirkpatrick &
Lockhart Preston Gates Ellis LLP

925
Fourth Avenue, Suite 2900

Seattle,
WA 98104-1158

Facsimile:
206-622-7022

Attention:
Eric Simonson

 

If to the Company, to:

 

AVI
BioPharma, Inc.

Suite 1110

One
S.W. Columbia Ave.

Portland,
Oregon 97258

Facsimile
No.:  (503) 227-0751

Attn:  Chief Executive Officer

 

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

 

Davis
Wright Tremaine LLP

23rd
Floor

1300
S.W. Fifth Avenue

Portland,
Oregon 97201

Facsimile:
503-778-5299

Attention:
Michael C. Phillips. Esq.

 

All
such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section, be deemed given upon receipt, and (iii) if
delivered by overnight courier in the manner described above to the address as
provided in this Section, be deemed given upon receipt (in each case regardless
of whether such notice, request or other communication is received by any other
person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this Section). Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other parties hereto.

 

 

6.4          Entire Agreement.

 

This
Agreement, including all schedules hereto supersede all prior discussions and
agreements among the parties hereto with respect to the subject matter hereof,
and contains the sole and entire agreement among the parties hereto with
respect to the subject matter hereof. 
Notwithstanding anything to the contrary herein, the terms, conditions
and provisions of those respective Non-Disclosure Agreements dated as of September 1,
2007 by and between the Company on the one hand and Macary on the other shall
remain in full force and effect and nothing herein shall be deemed to modify or
effect the enforceability or applicability of such agreements.

 

6.5          No Third Party Beneficiary.

 

The
terms and provisions of this Agreement are intended solely for the benefit of
each Party hereto and the other members of the Restricted Group, and it is not
the intention of the Parties to confer third-party beneficiary rights upon any
other Person.

 

6.6          No Assignment; Binding Effect.

 

Neither
this Agreement nor any right, interest or obligation hereunder may be assigned
by any Parties hereto without the prior written consent of the other Parties
hereto and any attempt to do so will be void. Subject to the preceding sentence,
this Agreement is binding upon, inures to the benefit of and is enforceable by
the Parties hereto and their respective successors and assigns and legal
representatives.

 

6.7          SPECIFIC PERFORMANCE.

 

The
Parties acknowledge that money damages are not an adequate remedy for
violations of any provision of this Agreement and that any Party may, in such
Party’s sole discretion, apply to a court of competent jurisdiction for
specific performance for injunctive or such other relief as such court may deem
just and proper in order to enforce any such provision or prevent any violation
hereof and, to the extent permitted by applicable law, each Party waives any
objection to the imposition of such relief.

 

6.8          Headings.

 

The
headings used in this Agreement have been inserted for convenience of reference
only and do not define or limit the provisions hereof.

 

 

6.9          Invalid Provisions.

 

If any
provision of this Agreement is held to be illegal, invalid or unenforceable
under any present or future law, and if the intended rights of any party hereto
under this Agreement will not be forfeited in any material respect as a result
thereof, (i) such provision will be fully severable, (ii) this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof and (iii) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom.

 

6.10        Governing Law.

 

This
Agreement shall be governed by and construed in accordance with the laws of the
State of Oregon applicable to a contract executed and performed in such State,
without giving effect to the conflicts of laws principles thereof.

 

6.11        Consent to Jurisdiction and Service
of Process.

 

Each
party hereby irrevocably submits to the exclusive jurisdiction of the United
States District Court for the District of Oregon or the Circuit Court for
Multnomah County, State of Oregon in any action, suit or proceeding arising in
connection with this Agreement, agrees that any such action, suit or proceeding
shall be brought only in such court (and waives any objection based on forum non conveniens or any other objection to venue therein
to the extent permitted by law), and agrees to delivery of service of process
by any of the methods by which notices may be given pursuant to Section 6.3,
with such service being deemed given as provided in such Section; provided, however,  that such consent to jurisdiction is solely
for the purpose referred to in this Section 6.11 and shall not be
deemed to be a general submission to the jurisdiction of said courts or in the
State of Oregon other than for such purpose. Nothing herein shall affect the
right of any party to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the other in any other
jurisdiction.

 

6.12        Counterparts.

 

This
Agreement may be executed in any number of counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
instrument.

 

[SIGNATURE PAGE FOLLOWS]

 

 

SIGNATURE PAGE TO THAT CERTAIN
SHAREHOLDER’S TRUST AGREEMENT DATED AS OF OCTOBER 29, 2007

 

IN WITNESS WHEREOF, the Parties have caused this
Agreement to be executed by their duly authorized representatives and to be
effective on the Effective Date.

 

	
  COMPANY

  	
  TRUST

  
	
   

  	
   

  
	
  AVI BioPharma, Inc.

  	
  AVI Shareholder Advocacy
  Trust

  The Shareholder Advocate LLC
 Managing Trustee

  
	
   

  	
   

  
	
  By:

  	
  /s/ K. Michael Forrest

  	
   

  	
  By:

  	
  /s/ Richard Macary

  
	
  Name: K. Michael Forrest

  	
   

  	
   

  	
  Name: Richard Macary

  	
   

  
	
  Title: Chief Executive
  Officer

  	
  Title: Manager

  
	
   

  	
   

  
	
   

  	
  MANAGING TRUSTEE

  The Shareholder Advocate LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard Macary

  
	
   

  	
  Name: Richard Macary

  	
   

  
	
   

  	
  Title: Manager

  
	
   

  	
   

  
	
   

  	
  MACARY

  
	
   

  	
   

  
	
   

  	
  /s/ Richard Macary

  
	
   

  	
  Richard Macary

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