Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - STERLING GROUP VENTURES, INC. - Exhibit 10.1

ACQUISITION AGREEMENT 

 THIS AGREEMENT made effective the 20th day of January, 2004.

BETWEEN

 Sterling Group Ventures, Inc.

  a business corporation duly incorporated

  under the laws of the state of Nevada with its business address at

  12880 Railway Avenue, Unit 35

  Richmond, BC V7E 6G4

  (“ Sterling Group”) 

AND

 Micro Express Ltd.

  a private business corporation duly incorporated

  under the laws of the British Virgin Islands, with its business address at

  Suite 900 – 789 West Pender Street

  Vancouver, BC V6C 1H2

  (“ Micro Express”)

 WHEREAS:

	A.	Sterling Group is a business corporation whose common
        shares are quoted on the OTC 

       Bulletin Board 

	 	 
	B.	Micro Express is a private company which is a party
        to an agreement with Sichuan Province Mining Ltd, which is 40% held by
        the Bureau of Sichuan Geology and Resources of the Sichuan Government.
        Under the terms of the agreement, Micro Express has the right to acquire
        at least 75% of the shares of a co-operative joint venture company to
        be formed and which will hold the necessary mining licenses (5). The business
        of the joint venture company is to develop the Jiajika spodumene property
        for the extraction of lithium, lithium salts, and other minerals. The
        initial capacity of the company is 900,000 tonnes/annum. The spodumene
        concentrate expected to be produced is 176,000 tonnes/annum and tantalum
        concentrate is 166 tonnes/annum. The total investment required is estimated
        at 238 million Chinese Yuan. The initial registered capital is 83 million
        Chinese Yuan, 35% of the total investment. Sichuan Mining Ltd will contribute
        21 million Chinese to hold 25% of the JV company. Micro Express will contribute
        62 million Chinese Yuan to hold 75% of the JV company. 

       Micro Express has also signed a letter of intent with
        Hunan Daoxian County Local Government to develop the lithium/rubidium
        mine in Daoxian, Hunan Province. The Hunan County will contribute a mining
        license and earn 10% of the 30 year mining joint venture to be formed.
        Micro Express will earn 90% by developing and putting the lithium mine
        into production. 

NOW, THEREFORE THIS AGREEMENT WITNESSES that in consideration
  of the mutual covenants herein contained, and other good and valuable consideration
  the receipt and sufficiency of which is hereby acknowledged by the Parties,
  and intending to be legally bound, the Parties covenant and agree as
  follows: 

- 1 -

 Article One

  Shares Exchange Between the Parties

	1.1	Subject to the terms and conditions set forth herein,
        Sterling Group has entered an agreement to acquire 100% of the issued
        and outstanding shares of Micro Express, This agreement is conditional
        upon Sterling Group undertaking proper due diligence and is subject to
        normal regulatory approval. 

          

	1.2	To effect the transaction under this Agreement, Sterling
        Group shall issue to Micro Express Shareholders and/or their nominees
        a total of 25,000,000 common shares of its capital stock immediately upon
        the execution of this Agreement . 

         

	1.3	For the avoidance of doubt, the common shares to be
        issued to Micro Express Shareholders under this Agreement shall be issued
        to Micro Express Shareholders and/or their nominees according to the ratio
        and percentage of subscription for shares by such Micro Express Shareholders
        and/or their nominees. 

          

	1.4	Micro Express Shareholders shall have the right to
        appoint directors to the Board of Directors of Sterling Group on the date
        of execution of this Agreement. Micro Express Shareholders agree to cause
        such director(s) of Sterling Group to be appointed as director(s) of Micro
        Express, provided that the majority directors of Micro Express consist
        of majority directors of Sterling Group, subsequent to the transaction
        contemplated herein. 

          

	1.5	Subject to and in accordance with section 1.4, the
        Parties understand that the number of directors of Sterling Group will
        be increased to include such business, finance, legal and other professional
        personnel as required for the operations of the Company. 

 Article Two

  Representations and Warranties of Sterling Group

	2.1	 Immediately prior to this Agreement, Sterling Group has a total of 11,
      360, 000 shares issued and outstanding, all in one class of common shares.
      In addition, Sterling Group has no options, warrants or other instrument
      convertible into shares. 
   
	2.2	Sterling Group represents and warrants to Micro Express
        Shareholders that Sterling Group is a corporation duly organized, validly
        existing and in good standing in all aspect under the laws of the state
        of Nevada.  

         

	2.3	Sterling Group represents and warrants that it is
        in good standing under the SEC rules and has been consistently in compliance
        with all SEC requirements for its common shares to be and quoted over
        the counter of the Bulletin Board of NASD.  

         

	2.4	Sterling Group represents and warrants that there
        is no action, claim, lawsuits pending or threatened against Sterling Group.
        Since the last audited Financial Statements and the unaudited interim
        financial statements for the third quarter 2003, there has been no change
        in liabilities or debt or change in circumstances of Sterling Group that
        has had or which Sterling Group may expect to have material change or
        adverse effect on the business, affairs and assets of Sterling Group.
        Sterling Group has no debts, liabilities to any third party other than
        those expressly disclosed in its audited and unaudited financial 

- 2 -

statements referenced hereto. For greater
  certainty, it has no indebtedness, liabilities or commitment in favour of any
  third party in respect of any of its business or activities which it pursued
  prior to this Agreement.

	2.5	Sterling Group represents and warrants that neither
        itself nor any of its current or former directors, officers has been the
        subject of investigation or any disciplinary action by the SEC for a minimum
        of three (3) years immediately prior to the execution of this Agreement.

          

	2.6	Sterling Group has full power and authority to enter
        into this Agreement and to consummate the transactions contemplated hereby;
        all approval and consent required in respect of the transactions hereunder
        have been given to and obtained by Sterling Group, and no further consent,
        approval or action or proceeding on the part of Sterling Group, its shareholders
        or its directors is required; the execution, delivery and performance
        of this Agreement by Sterling Group and its directors have been duly and
        validly approved by Sterling Group, its directors and shareholders pursuant
        to the Certificate of Incorporation and By-Laws of Sterling Group. 

         

	2.7	The execution, delivery and performance of this Agreement
        by Sterling Group will not violate any laws, regulations, rules, provisions
        or policies, including without limitation, SEC and NASD rules, provisions
        and policies. Nothing contained and contemplated herein will adversely
        affect the current and post-transaction listing status and privileges
        of Sterling Group’s common shares traded Over the Counter Bulletin
        Board of NASD. 

         

	2.8	Since the last financial statements, ending on September
        30, 2003, there has been no change in circumstances that has had or Sterling
        Group may expect to have a material adverse effect on the assets, business
        and affairs of Sterling Group. 

 Article Three

  Representations and Warranties of Micro Express Shareholders  

	3.1	Micro Express Shareholders
        are the owners of all the Transferred Shares in the capital stock of Micro
        Express. 

          

	3.2	Micro Express is a business
        corporation duly incorporated in the British Virgin Islands. 

         

	3.3	Each of Micro Express Shareholders
        has the full power and authority to enter into this Agreement and to consummate
        the transactions contemplated hereby. All approval, consent required in
        respect of the transaction hereunder have been given and have been obtained
        by Micro Express Shareholders. No further consent, approval or action
        or proceeding on the part of Micro Express Shareholders is required.

          

	3.4	The transfer and assignment
        by each of Micro Express Shareholders of the Transferred Shares shall
        in all aspects be considered as separate transfer and assignment. 

         

	3.5	Since inception, Micro Express’s
        business has been operated substantially in accordance with all laws,
        rules, regulations, orders of competent regulatory authorities, and there
        has not been 

         

	 	(1)
   	any event or change in circumstances
        that has had, or which Micro Express Shareholders expect to have, a materials
        adverse effect on Micro Express or its business;

          

	 	(2)	any change in liabilities of Micro Express
        that has had, or which Micro Express Shareholders may expect to have,
        a material effect on Micro Express or its business;

- 3 -

 

	 	(3)
   	any incidence, assumption or guarantee
        of any indebtedness of Micro Express for borrowed money of Micro Express;

         

	 	(4)
   	any payments by Micro Express in respect
        of any indebtedness of Micro Express for borrowed money or in satisfaction
        of any liabilities of Micro Express;

         

	 	(5)
   	the creation, assumption or sufferance
        of the existence of any lien on any assets reflected on Micro Express’s
        Financial Statements;

         

	 	(6)
   	any change by Micro Express in its accounting
        principles, methods or practices in the manner it keeps its books and
        records;

         

	 	(7)
   	any distribution, dividend or bonus
        by Micro Express to any of its respective officers, directors, stockholders
        or affiliates, or any of their respective affiliates or associates; and

         

	 	(8)
   	any material capital expenditure or
        commitment by Micro Express or material sale, assignment, transfer, lease
        or other disposition of or agreement to sell, assign, transfer, lease
        or otherwise dispose of any assets or property by Micro Express other
        than in the ordinary course of business.

          

	3.6 	Micro Express has the full corporate power and authority
        to carry on the business presently being carried on by it and as proposed
        to be carried on by it. 

          

	3.7 	Micro Express holds all licenses, and permits as
        may be requisite for carrying on its business in the manner in which it
        has heretofore been carried on. 

          

	3.8	There has been no change in circumstances which has
        had or which Micro Express Shareholders may expect to have any adverse
        effect on the assets, business and affairs of Micro Express. 

 Article Four

  Covenants

	4.1	This Agreement shall enter into force and be binding on the Parties as
      from the date first above written. 

        
	4.2	The Parties shall cooperate and work with each other in good faith to
      provide to each other with all information necessary to enable the Parties
      to complete their respective due diligence. 

      Article Five

    Miscellaneous Provisions

	5.1 	This Agreement shall be governed by and construed
        in accordance with the laws of the British Columbia and those of Canada
        applicable thereto. 

          

	5.2 	Any and all disputes arising out of or in connection
        with this Agreement, or in respect of any defined legal relationship associated
        therewith or derived there from, shall be first addressed through consultation
        and/or mediation. Disputes unresolved through consultation and mediation
        shall be referred to and finally resolved by arbitration under the Rules
        of and before the International Chamber of Commerce (“ICC”)
        International Court of Arbitration in Vancouver, Canada, as those rules
        may be amended and replaced from time to time. 

- 4 -

	5.3	The arbitration tribunal shall consist of three (3)
        arbitrators to be named and appointed in accordance with the applicable
        rules of procedures of the ICC International Court of Arbitration. For
        the avoidance of doubt, each Sterling Group and Micro Express Shareholders
        acting jointly shall have the right to name one (1) arbitrator and the
        chairman and the third arbitrator of the tribunal shall be appointed pursuant
        to the applicable rules of procedure. The final award of the arbitration
        tribunal shall be final and binding upon the Parties. The losing Party
        shall bear and reimburse the prevailing Party costs and expenses associated
        with the preparation and prosecution of the arbitration and any enforcement
        proceedings, including attorney fees on solicitor-client basis, unless
        otherwise directed by the arbitration tribunal or court of competent jurisdiction.
        

          

	5.4	Where the losing Party fails to comply with such order
        and award, the prevailing Party shall be free to apply to a court of competent
        jurisdiction for an order of enforcement or such other orders or relief
        as may be properly granted by the court.

          

	5.5	Nothing contained herein will limit or prohibit the
        rights of either Party to apply to a court of competent jurisdiction for
        interim protection such as, by way of example, an interim injunction or
        order enforcing its rights hereunder in a court of competent jurisdiction,
        prior or subsequent to the arbitration. 

          

	5.6	No condoning, excusing or overlooking by a Party
        of any default, breach or non-observance by the other at any time or times
        in respect of any covenants, provisions, or conditions of this Agreement
        shall operate as a waiver of such Party’s rights under this Agreement
        in respect of any continuing or subsequent default, breach or non-observance,
        so as to defeat in any way the rights of such Party in respect of any
        such continuing or subsequent default or breach and no waiver shall be
        inferred from or implied by anything done or omitted by such Party in
        the absence of an express waiver in writing.

          

	5.7	No amendment or other modification of this Agreement
        will be binding unless executed in writing by the Parties hereto. The
        Parties shall cooperate in order to comply with all legal and regulatory
        provisions required to maintain and continue the trading status of the
        shares of Sterling Group at NASD. 

          

	5.8	This Agreement and everything contained herein will
        inure to the benefit of and be binding upon the Parties and their permitted
        successors and assigns. 

          

	5.9	This Agreement may be executed in counterparts and
        by facsimile transmission, each such counterpart together shall constitute
        a single instrument. Three (3) original copies of such counterparts executed
        by each Party shall be forth with delivered to all other Parties by registered
        express mail. 

          

	5.10	For all purposes, this Agreement shall be deemed
        to be signed and executed at Vancouver, British Columbia, Canada. 

          

	5.11	Schedules annexed hereto shall form an integral part
        of this Agreement. 

          

	5.12	This Agreement shall enter into force as of the date
        first above written. 

 IN WITNESS WHEREOF the Parties have duly executed this agreement.

- 5 -

	THE COMMON SEAL of Sterling Group Inc., was	)	 
	hereto affixed in the presence of:	)	 
	 	)	 
	/s/ James Hutchison	)	 
	Authorised Signatory	)	c/s
	 	)	 
	 	)	 
	_______________	)	 
	Authorised Signatory	)	 
	 	 	 
	 	 	 
	THE SEAL and/or Signature of Micro Express	)	 
	Shareholders were hereto affixed in the presence of:	 )	 
	 	)	 
	 	)	 
	/s/ Raoul Tsakok	)	c/s
	Authorised Signatory	)	 
	 	)	 
	________________	)	 
	Authorised Signatory	)	 

  

  Schedule I Financial Statements of Sterling Group 

 Schedule II Financial Statements of Micro Express 

  

- 7 -Exhibit 10.51

 

Form of 2004 Purchase Warrant

 

 

AVI BIOPHARMA, INC.

 

WARRANT

 

	
  Warrant No.
  2004-1 PW

  	
   

  	
  Date of Original Issuance: January
         , 2004

  

 

AVI
BioPharma, Inc., an Oregon corporation (the “Company”), hereby certifies that, for
value received,
                                or
its registered assigns (the “Holder”), is entitled to purchase from the Company up to a total
of
               
shares of common stock, $.0001 par value per share (the “Common Stock”), of the Company (as adjusted
from time to time as provided in Section 9, each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at an exercise price (as
adjusted from time to time as provided in Section 9, the “Exercise Price”) per Warrant Share equal to $5.50
at any time after July 23, 2004 and from time to time thereafter through and
including December 8, 2008 (the “Expiration Date”), and subject to the following
terms and conditions:

 

1.             Definitions.  In addition to the terms defined elsewhere
in this Warrant, the following terms shall have the meanings shown in this
Section 1:

 

1.1           “Business Day” means a day in which both the New York Stock Exchange and major banks
in New York, New York are open.

 

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

 

1.3           “Principal Market” means the Nasdaq
National Market or, if the Common Stock is traded or quoted on a different
market in the future, such other market.

 

1.4           “Registration Statement” means the Form S-3
Registration Statement filed with the SEC as Registration No. 333-109105.

 

1.5           “Subsidiary” means a subsidiary of the Company.

 

1.6           “Trading day(s)” means a day in which
trading or quotations occur on the Principal Market.

 

1.7           “Transfer Agent” means the Company’s
transfer agent, currently Mellon Investor Services, LLC

 

2.             Registration of
Warrant.  The Company shall register
this Warrant, upon records to be maintained by the Company for that purpose
(the “Warrant Register”), in the
name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise hereof or
any distribution to the Holder, and for all other purposes, absent actual
notice to the contrary.

 

 

 

3.             Registration of
Transfers.  The Company shall
register the transfer of any portion of this Warrant in the Warrant Register,
upon surrender of this Warrant, with the Form of Assignment attached hereto
duly completed and signed, to the Transfer
Agent or to the Company at its address specified herein.  Upon any such registration or transfer, a
new warrant to purchase Common Stock, in substantially the form of this Warrant
(any such new warrant, a “New Warrant”),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder.  The acceptance of the New Warrant by the
transferee thereof shall be deemed the acceptance by such transferee of all of
the rights and obligations of a holder of a Warrant.

 

4.             Exercise and
Duration.  This Warrant shall be
exercisable by the registered Holder at any time and from time to time on or
after the date hereof to and including the Expiration Date.  At 6:30 p.m., New York City time, on the
Expiration Date, the portion of this Warrant available for exercise and not
exercised prior thereto shall be and become void and of no value.

 

5.             Delivery of
Warrant Shares.

 

(a)    Upon
delivery of the Form of Election to Purchase (in the form of Exhibit A) (the “Exercise Notice”) to the Company (with the
Warrant Shares Exercise Log in the form of Exhibit B hereto) at its address for
notice set forth in Section 13 and (i) upon payment of the Exercise Price
multiplied by the number of Warrant Shares that the Holder intends to purchase
hereunder or (ii) upon notifying the Company that this Warrant is being
exercised pursuant to a Cashless Exercise (as defined in Section 5(e)), the
Company shall promptly (but in no event later than three (3) trading days after the Date of Exercise (as
defined herein)) issue and deliver to the Holder electronically through the
Depository Trust Corporation, or if unable to do, deliver certificates for, the
Warrant Shares issuable upon such exercise, which Warrant Shares shall be
issued under the Registration Statement
and shall be freely tradable on the Principal
Market.

 

A “Date of Exercise” means the date on which
the Holder shall have delivered to the Company (i) the Form of Election to
Purchase (with the Warrant Exercise Log attached to it), appropriately completed
and duly signed and (ii) (A) payment of the Exercise Price for the number of
Warrant Shares so indicated by the Holder to be purchased or (B) notification
to the Company that this Warrant is being exercised pursuant to a Cashless
Exercise.

 

(b)    If
by the fifth Trading day after a
Date of Exercise the Company fails to deliver the required number of Warrant
Shares in the manner required pursuant to Section 5(a), then the Holder will
have the right to rescind such exercise.

 

(c)    If
by the third Trading day after a
Date of Exercise the Company fails to deliver the required number of Warrant
Shares in the manner required pursuant to Section 5(a), and if after such fifth
Trading day the Holder purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”),
then the Company shall (1) pay in cash to the Holder the amount by which (x)
the Holder’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased 

 

2

 

exceeds (y) the amount obtained
by multiplying (A) the number of Warrant Shares that the Company was required
to deliver to the Holder in connection with the exercise at issue by (B) the
closing price of the Common Stock at the time of the obligation giving rise to
such purchase obligation and (2) at the option of the Holder, either reinstate
the portion of the Warrant and equivalent number of Warrant Shares for which
such exercise was not honored or deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company timely complied with
its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with a market price on the date of exercise
totaled $10,000, under clause (1) of the immediately preceding sentence the
Company shall be required to pay the Holder $1,000.  The Holder shall provide the Company written notice, which notice
shall include such supporting documentation as reasonably necessary to
substantiate the amounts payable, indicating the amounts payable to the Holder
in respect of the Buy-In.

 

(d)           The Company’s
obligations to issue and deliver Warrant Shares in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or inaction
by the Holder to enforce the same, any waiver or consent with respect to any
provision hereof, the recovery of any judgment against any Person or any action to enforce the same,
or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or
alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in connection with
the issuance of Warrant Shares.  Nothing
herein shall limit a Holder’s right to pursue any other remedies available to
it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to
timely deliver certificates representing shares of Common Stock upon exercise
of the Warrant as required pursuant to the terms hereof.

 

(e)           If the Warrant Shares
to be issued are not registered and available for issuance pursuant to an
effective registration statement,
then, notwithstanding anything contained herein to the contrary, the Holder of
this Warrant may, at its election exercised in its sole discretion, exercise this
Warrant in whole or in part and, in lieu of paying the Exercise Price in cash,
elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to
the following formula (a “Cashless Exercise”):

 

	
   

  	
  Net Number =

  	
   (A x B) - (A x C)

  	
   

  
	
   

  	
   

  	
  B

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  For purposes
  of the foregoing formula:

  	
   

  

 

A= the total
number of shares with respect to which this Warrant is then being exercised;

 

B= the greater
of the (i) closing price per share of the Common Stock (as reported by Bloomberg)
on the Trading day immediately
preceding the date of the Exercise Notice or (ii) the 

 

3

 

average of the
closing prices per share of Common Stock (as reported by Bloomberg) for the ten
(10) Trading days immediately
preceding the date of the Exercise Notice ; and

 

C= the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.

 

6.             Charges, Taxes and
Expenses.  Issuance and delivery of
the shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
shares, all of which taxes and expenses shall be paid by the Company; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the registration of any Warrant
Shares or Warrants in a name other than that of the Holder.  The Holder shall be responsible for all
other tax liability that may arise as a result of holding or transferring this
Warrant or receiving Warrant Shares upon exercise hereof.

 

7.             Replacement of
Warrant.  If this Warrant is
mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation hereof, or in
lieu of and substitution for this Warrant, a New Warrant, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested.  Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company
may prescribe.

 

8.             Reservation of
Warrant Shares.  The Company
covenants that it will at all times reserve and keep available out of the
aggregate of its authorized but unissued and otherwise unreserved Common Stock,
solely for the purpose of enabling it to issue Warrant Shares upon exercise of
this Warrant as herein provided, the number of Warrant Shares which are then
issuable and deliverable upon the exercise of this entire Warrant. The Company
covenants that all Warrant Shares so issuable and deliverable shall, upon
issuance and the payment of the applicable Exercise Price in accordance with
the terms hereof, be duly and validly authorized, issued and fully paid and
nonassessable.

 

9.             Certain
Adjustments.  The Exercise Price and
number of Warrant Shares issuable upon exercise of this Warrant are subject to
adjustment from time to time as set forth in this Section 9.

 

(a)    Stock
Dividends and Splits.  If the
Company, at any time while this Warrant is outstanding, (i) pays a stock
dividend on its Common Stock or otherwise makes a distribution on any class of
capital stock that is payable in shares of Common Stock, (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, or (iii)
combines outstanding shares of Common Stock into a smaller number of shares,
then in each such case the Exercise Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event.

 

4

 

(b)    Pro
Rata Distributions.  If the Company,
at any time while this Warrant is outstanding, distributes to all holders of
Common Stock (i) evidences of its indebtedness, (ii) any security (other than a
distribution of Common Stock covered by the preceding paragraph), (iii) rights
or warrants to subscribe for or purchase any security, or (iv) any other asset
(in each case, “Distributed Property”),
then, at the request of any Holder delivered before the 90th day after the
record date fixed for determination of stockholders entitled to receive such
distribution, the Company will deliver to such Holder, within five (5) Trading days after such request (or, if
later, on the effective date of such distribution), the Distributed Property
that such Holder would have been entitled to receive in respect of the Warrant
Shares for which such Holder’s Warrant could have been exercised immediately
prior to such record date.  If such
Distributed Property is not delivered to a Holder pursuant to the preceding
sentence, then upon any exercise of the Warrant that occurs after such record
date, such Holder shall be entitled to receive, in addition to the Warrant
Shares otherwise issuable upon such conversion, the Distributed Property that
such Holder would have been entitled to receive in respect of such number of
Warrant Shares had the Holder been the record holder of such Warrant Shares
immediately prior to such record date.

 

(c)    Fundamental
Transactions.  If, at any time while
this Warrant is outstanding: (i) the Company effects any merger or
consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially
all of its assets in one or a series of related transactions, (iii) any tender
offer or exchange offer (whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental Transaction”), then the Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the same amount and
kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant
Shares then issuable upon exercise in full of this Warrant (without taking into
account any limitations on exercise) (the “Alternate
Consideration”).  For
purposes of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one (1) share of
Common Stock in such Fundamental Transaction, and the Company shall apportion
the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration.  If holders of Common
Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. 
At the Holder’s option and request, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the Holder a
new warrant substantially in the form of this Warrant and consistent with the
foregoing provisions and evidencing the Holder’s right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise
thereof.  The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions
of this paragraph (c) and insuring that the Warrant (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.

 

5

 

(d)           Number of Warrant
Shares.  Simultaneously with any
adjustment to the Exercise Price pursuant to paragraphs (a) or (b) of this
Section, the number of Warrant Shares that may be purchased upon exercise of
this Warrant shall be increased or decreased proportionately, so that after
such adjustment the aggregate Exercise Price payable hereunder for the adjusted
number of Warrant Shares shall be the same as the aggregate Exercise Price in
effect immediately prior to such adjustment.

 

(e)           Calculations.  All calculations under this Section 9
shall be made to the nearest cent or the nearest 1/100th of a share, as
applicable.  The number of shares of
Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.

 

(f)            Notice of
Adjustments.  Upon the occurrence of
each adjustment pursuant to this Section 9, the Company at its expense
will promptly compute such adjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment, including a
statement of the adjusted Exercise Price and adjusted number or type of Warrant
Shares or other securities issuable upon exercise of this Warrant (as
applicable), describing the transactions giving rise to such adjustments and
showing in detail the facts upon which such adjustment is based.  Upon written request, the Company will
promptly deliver a copy of each such certificate to the Holder and to the
Company’s Transfer Agent.

 

(g)           Notice of Corporate
Events.  If the Company (i) declares
a dividend or any other distribution of cash, securities or other property in
respect of its Common Stock, including without limitation any granting of
rights or warrants to subscribe for or purchase any capital stock of the
Company or any Subsidiary, (ii)
authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for any Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least twenty (20) calendar days
prior to the applicable record or effective date on which a Person would need to hold Common Stock in
order to participate in or vote with respect to such transaction, and the
Company will take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Warrant prior to
such time so as to participate in or vote with respect to such transaction;
provided, however, that the failure to deliver such notice or any defect
therein shall not affect the validity of the corporate action required to be
described in such notice and provided that such information shall be publicly
disclosed pursuant to Regulation FD prior to or in conjunction with such notice
being provided to the Holder.

 

10.           Payment of Exercise
Price.  The Holder shall pay the
Exercise Price in cash by delivering immediately available funds or, if
permitted by Section 5(e), through a Cashless Exercise.

 

11.           Limitation on
Exercise.  The Company shall not
effect the exercise of this Warrant, and the Holder shall not have the right to
exercise this Warrant, to the extent that after giving effect to such exercise,
such Person (together with such Person’s affiliates) would beneficially own
in excess of 4.99% of the shares of Common Stock outstanding immediately 

 

6

 

after giving effect to such
exercise.  For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned by
such Person and its affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude shares of
Common Stock which would be issuable upon (i) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by such Person and its
affiliates and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company or exercisable for securities of
the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein.  Except as
set forth in the preceding sentence, for purposes of this paragraph, beneficial
ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. 
For purposes of this Warrant, in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of outstanding shares
of Common Stock as reflected in (1) the Company’s most recent Form 10-K, Form
10-Q or other public filing with the Securities and Exchange Commission, as the
case may be, (2) a more recent public announcement by the Company or (3) any
other notice by the Company or the Transfer
Agent of the Company setting forth the number of shares of Common
Stock outstanding.  For any reason at
any time, upon the written or oral request of the Holder, the Company shall
within one Business Day confirm
orally and in writing to the Holder the number of shares of Common Stock then
outstanding.  In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including the
Warrants, by the Holder and its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported.

 

12.           No Fractional Shares.  No fractional shares of Warrant Shares will
be issued in connection with any exercise of this Warrant.  In lieu of any fractional shares which
would, otherwise be issuable, the Company shall pay cash equal to the product
of such fraction multiplied by the closing price of one Warrant Share as
reported on the Principal Market
on the date of exercise.

 

13.           Notices.  Any and all notices or other communications
or deliveries hereunder (including without limitation any Exercise Notice)
shall be in writing and shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section prior to 6:30 p.m.
(New York City time) on a Trading day,
(ii) the next Trading day after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section on a day that is
not a Trading day or later than
6:30 p.m. (New York City time) on any Trading
day, (iii) the Trading day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice
is required to be given.  The addresses
for such communications shall be:  (i)
if to the Company, to AVI BioPharma, Inc., One S.W. Columbia, Suite 1105,
Portland, Oregon 97258, Attention: Alan P. Timmins (facsimile: 503-227-0751)
with a copy to Hurley, Lynch & Re, P.C., 747 SW Mill View Way, Bend, OR
97702, Attention: Robert A. Stout, Esq. (facsimile: 541-317-5507) or (ii) if to
the Holder, to the address or facsimile number appearing on the Warrant
Register or such other address or facsimile number as the Holder may provide to
the Company in 

 

7

 

accordance with this Section
with a copy to Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New
York 10022, Attention: Eleazer Klein, Esq. (facsimile: 212-593-5955).

 

14.           Warrant Agent.  The Company shall serve as warrant agent
under this Warrant.  Upon thirty (30)
days’ notice to the Holder, the Company may appoint a new warrant agent.  Any corporation into which the Company or
any new warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business
shall be a successor warrant agent under this Warrant without any further
act.  Any such successor warrant agent
shall promptly cause notice of its succession as warrant agent to be mailed (by
first class mail, postage prepaid) to the Holder at the Holder’s last address
as shown on the Warrant Register.

 

15.           Miscellaneous.

 

(a)  This Warrant shall be
binding on and inure to the benefit of the parties hereto and their respective
successors and assigns.  Subject to the
preceding sentence, nothing in this Warrant shall be construed to give to any
Person other than the Company and the Holder any legal or equitable right,
remedy or cause of action under this Warrant. 
This Warrant may be amended only in writing signed by the Company and
the Holder and their successors and assigns.

 

(b)  All questions concerning
the construction, validity, enforcement and interpretation of this Warrant
shall be governed by and construed and enforced in accordance with the internal
laws of the State of New York, without regard to the principles of conflicts of
law thereof.  Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Warrant (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced in the state and federal courts sitting
in the City of New York, Borough of Manhattan. 
Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of this Warrant), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper.  Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Warrant and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereto (including its affiliates, agents,
officers, directors and employees) hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Warrant or the transactions
contemplated hereby. If either party shall commence an action or proceeding to
enforce any provisions of this Warrant, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its reasonable
attorneys fees and other costs and 

 

8

 

expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

 

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

 

(d)  In case any one or more of
the provisions of this Warrant shall be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Warrant shall not in any way be affected or impaired thereby and the
parties will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute therefor, and
upon so agreeing, shall incorporate such substitute provision in this Warrant.

 

9

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.

 

	
   

  	
  AVI
  BIOPHARMA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Alan P. Timmins

  
	
   

  	
  Title:

  	
  President and
  Chief Operating Officer

  
					

 

 

Exhibit
A

 

FORM
OF ELECTION TO PURCHASE

 

To AVI BioPharma, Inc.:

 

In accordance with Warrant No. [ 
] issued to the undersigned, the undersigned hereby elects to purchase
                         
shares of common stock (“Common Stock”),
$0.0001 par value per share, of AVI BioPharma, Inc.

 

1.  Form of Warrant Exercise Price.  The Holder intends that payment of the
Exercise Price shall be made as:

 

	
   

  	
   

  	
  “Cash Exercise” with respect to
                         
  Warrant Shares; and/or

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “Cashless Exercise” with respect to
                                
  Warrant Shares (to the extent permitted by the terms of the Warrant).

  

 

2.  Payment of Exercise Price.  In the event that the holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the holder shall pay the sum of $                              
to the Company in accordance with the terms of the Warrant.

 

By its delivery of this Form of Election To Purchase, the Holder
represents and warrants to the Company that in giving effect to the exercise
evidenced hereby the Holder will not beneficially own in excess of the number
of shares of Common Stock (determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934) permitted to be owned under Section 11 of this
Warrant to which this notice relates.

 

The undersigned requests that the shares of Common Stock issuable upon
this exercise be issued in the name of

 

PLEASE INSERT SOCIAL SECURITY

OR TAX IDENTIFICATION
NUMBER: 
                                   

 

	
   

  
	
   

  
	
   

  
	
  Facsimile Number:

  
	
   

  
	
  Authorization:

  
	
   

  
	
  Account Number:

  
	
  (if electronic book entry transfer)

  

 

 

	
  Transaction Code
  Number:                                                                                                                                                            
  (if electronic book entry transfer)

  
	
   

  
	
  Please print
  name and address

  
	
   

  
	
   

  
	
   

  

 

 

Exhibit B

 

Warrant Shares Exercise Log

 

	
  Date

  	
   

  	
  Number of
  Warrant 

  Shares Available to 

  be Exercised

  	
   

  	
  Number of
  Warrant 

  Shares Exercised

  	
   

  	
  Number of
  Warrant 

  Shares Remaining to 

  be Exercised

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

Exhibit C

 

FORM OF ASSIGNMENT

 

[To be completed and signed only upon transfer of Warrant]

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto
                                                       
the right represented by the within Warrant to purchase                               
shares of Common Stock of AVI BioPharma, Inc. to which the within Warrant
relates and appoints
                           
attorney to transfer said right on the books of AVI BioPharma, Inc. with full
power of substitution in the premises.

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature must
  conform in all respects to 

  name of holder as specified on the face of 

  the Warrant)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address of
  Transferee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  In the presence of:

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