Document:

Exhibit 10.48

 

SECURITIES PURCHASE AGREEMENT

 

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

 

WHEREAS:

 

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

 

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

 

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

 

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

 

1.                                       PURCHASE AND SALE OF PURCHASED SHARES
AND WARRANTS.

 

(a)                                  Purchase of Purchased Shares and Warrants.

 

 

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

 

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

 

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

 

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

 

2.                                       REPRESENTATIONS
AND WARRANTIES OF EACH BUYER.

 

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

 

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

 

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

 

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

 

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

 

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

 

3.                                       REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

8

 

to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.

 

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

 

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

 

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

 

9

 

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

 

(u)                                 Integration.  Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated, nor will
the Company or any of its Subsidiaries take any action or steps that would
cause the offering of the Securities to be integrated with other offerings.

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

4.                                       COVENANTS.

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

12

 

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

 

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

 

5.                                       ISSUANCES; TRANSFER AGENT INSTRUCTIONS.

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

15

 

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

 

9.                                       MISCELLANEOUS.

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

	
   

  	
  If to the Company:

  
	
   

  
	
   

  	
  AVI Biopharma, Inc.

  
	
   

  	
  One SW Columbia Street, Suite 1105

  
	
   

  	
  Portland, Oregon 97258

  
	
   

  	
  Telephone:

  	
  (503) 227-0554

  
	
   

  	
  Facsimile:

  	
  (503) 227-0751

  
	
   

  	
  Attention:

  	
  Chief Executive Officer

  
	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Hurley, Lynch & Re, P.C.

  
	
   

  	
  747 SW Mill View Way

  
	
   

  	
  Bend, Oregon 
  97702

  
				

 

17

 

	
   

  	
  Telephone:

  	
  (541) 317-5505

  	 

	
   

  	
  Facsimile:

  	
  (541) 317-5507

  	 

	
   

  	
  Attention:

  	
  Robert A. Stout, Esq.

  	 

	
   

  
	
   

  	
  If to the Transfer Agent:

  
	
   

  
	
   

  	
  Mellon Investor Services LLC

  
	
   

  	
  520 Pike Street, Suite 1220

  
	
   

  	
  Seattle, WA 98101

  
	
   

  	
  Telephone:

  	
  (800)  610 –
  3775

  
	
   

  	
  Facsimile:

  	
  (206)  674 –
  3059

  
	
   

  	
  Attention:

  	
  Dennis Treibel

  
					

 

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

 

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

 

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

 

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

 

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

 

18

 

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

 

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

 

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

 

19

 

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

 

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

 

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

 

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

 

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

 

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

 

20

 

Documents, whenever any
Buyer exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within
the periods therein provided, then such Buyer may rescind or withdraw, in its
sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice to
its future actions and rights.

 

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

 

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

 

[Signature Page Follows]

 

21

 

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

 

	
  COMPANY:

  
	
   

  
	
  AVI
  BIOPHARMA, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Alan P. Timmins 

  
	
   

  	
  Title:

  	
  President and Chief
  Operating Officer

  
				

 

 

EXHIBITS

 

 

	
  Exhibit A

  	
   

  	
  Form of Additional
  Investment Right Warrants

  
	
  Exhibit B

  	
   

  	
  Form of Purchase Warrants

  
	
  Exhibit C

  	
   

  	
  Form of Irrevocable
  Transfer Agent Instructions

  
	
  Exhibit D

  	
   

  	
  Form of Secretary’s Certificate

  
	
  Exhibit E

  	
   

  	
  Form of Officer’s
  CertificateExhibit
10.49

 

[FORM OF
ADDITIONAL INVESTMENT RIGHT WARRANT]

 

AVI
BIOPHARMA, INC.

 

WARRANT

 

	
  AIR Warrant No. [  ]

  	
   

  	
  Date of Original Issuance:
  December 8, 2003

  

 

AVI BioPharma, Inc., an Oregon corporation (the “Company”), hereby certifies that, for value
received, [Name of Holder] 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 $4.62 at any time and from time to time from and after the date
hereof and through and including the Expiration Date (as defined below), and
subject to the following terms and conditions:

 

1.                                       Definitions.  In addition to the terms
defined elsewhere in this Warrant, capitalized terms that are not otherwise
defined herein and that are defined in the Securities Purchase Agreement, dated
as of December 4, 2003, by and among the Company and the buyers party thereto
including the original Holder (the “Purchase
Agreement”), shall have the meanings given to such terms in the
Purchase Agreement.  “Expiration Date” means January 22, 2004;
provided, however, if, at any time prior to the original Expiration Date the
Registration Statement is not effective and available for the issuance of the
Warrant Shares or the Warrant Shares are not otherwise freely tradable without
restriction by the holder, such original Expiration Date shall automatically be
extended by such number of trading days prior to the original Expiration Date
that the Registration Statement was not effective and available as required.

 

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
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, 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 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) payment of the Exercise Price
for the number of Warrant Shares so indicated by the Holder to be purchased.

 

(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 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

 

2

 

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.

 

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.

 

3

 

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.

 

(b)                                 Number of Warrant Shares. 
Simultaneously with any adjustment to the Exercise Price pursuant to
paragraph (a) 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.

 

(c)                                  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.

 

(d)                                 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.

 

(e)                                  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,

 

4

 

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.

 

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 9.99% of the shares of Common Stock outstanding
immediately 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 

 

5

 

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 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

 

6

 

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 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.

 

7

 

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:

  
	
   

  	
  Title:

  

 

 

Exhibit A

 

FORM OF
ELECTION TO PURCHASE

 

To
AVI BioPharma, Inc.:

 

In accordance with AIR 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.

 

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:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00059-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00059-of-00352.parquet"}]]