Document:

Exhibit
10.46

 

NEITHER THESE SECURITIES NOR
THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

 

AVI
BIOPHARMA, INC.

 

WARRANT

 

	
  Warrant No.
  [  ]

  	
   

  	
  Date of Original
  Issuance: May 5, 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 (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 $7.00 at any time
and from time to time from and after the date hereof and through and including
May 5, 2008 (the “Expiration Date”), 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 May 5, 2003,
between the Company and the original Holder (the “Purchase Agreement”), shall
have the meanings given to such terms in the Purchase Agreement.

 

 

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; Early Call

 

(a)          Subject to the provisions of Section 4(b),
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.

 

(b)         If at
any time after November 5, 2004, (1) the closing price per share of the Common
Stock as reported on Bloomberg has exceeded $12.50 (as appropriately adjusted
for any stock splits, stock dividends or stock combinations after the date
hereof) for a period of ten (10) consecutive Trading Days (the “Determination
Period”) and (2) a registration statement covering resales of the Common
Stock issuable upon exercise of the Warrants has been effective and available
for use at all times required pursuant to the Registration Rights Agreement and
is expected to remain effective and available for use until at least the last
date on which the registration statement is required to be kept effective under
the terms of the Registration Rights Agreement, then the Company may, at its
sole option, provide all of the Holders irrevocable written notice (“Call
Notice”) requiring all of the Holders to fully exercise all Warrants as of the
Call Date (as defined below).  If all of
the conditions described herein have been satisfied and continue to be
satisfied through the Call Date, any Warrant not exercised before the close of
business on the Call Date, shall automatically be deemed exercised in
accordance with Section 5(a) as of the close of trading on the Call Date and
the Company will deliver the Warrant Shares to the Holder upon receipt of a
completed Exercise Notice along with the original copy of the Warrant for
cancellation (or an affidavit of lost Warrant in accordance with Section 12)
and payment for the Warrant Shares as provided herein.  “Call Date” shall mean that Trading Day that
is at least thirty (30) days following the date on which the Company has given
the Call Notice to the Holders.

 

2

 

5.                                       Delivery
of Warrant Shares.

 

(a)          Upon delivery of the Form of Election to
Purchase (in the form of Exhibit A) (“Exercise Notice”) to the Company (with
the Warrant Shares Exercise Log in the form of Exhibit B hereto) at its address
for notice set forth in Section 13 and (i) upon payment of the Exercise Price
multiplied by the number of Warrant Shares that the Holder intends to purchase
hereunder or (ii) upon notifying the Company that this Warrant is being
exercised pursuant to a Cashless Exercise (as defined in Section 5(e)), the
Company shall promptly (but in no event later than three (3) Trading Days after
the Date of Exercise (as defined herein)) issue and deliver to the Holder, a
certificate for the Warrant Shares issuable upon such exercise free of
restrictive legends unless otherwise required by the Purchase Agreement.  The Company shall, upon request of the
Holder, if available, use its best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation.

 

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

 

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

 

(c)          If by the third Trading Day after a Date of
Exercise the Company fails to deliver the required number of Warrant Shares in
the manner required pursuant to Section 5(a), and if after such fifth Trading
Day the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in
cash to the Holder the amount by which (x) the Holder’s total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (A) the number of
Warrant Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue by (B) the closing price of the Common
Stock at the time of the obligation giving rise to such purchase obligation and
(2) at the option of the Holder, either reinstate the portion of the Warrant
and equivalent number of Warrant Shares for which such exercise was not honored
or deliver to the Holder the number of shares of Common Stock that would have
been issued had the Company timely complied with its exercise and delivery
obligations hereunder.  For example, if
the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of Common Stock
with a market price on the date of exercise totaled $10,000, under clause (1)
of the immediately preceding sentence the Company shall be required to pay the
Holder $1,000.  The Holder shall provide
the Company written notice, which notice shall include such supporting
documentation as reasonably necessary to substantiate the amounts payable,
indicating the amounts payable to the Holder in respect of the Buy-In.

 

3

 

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

 

(e)                                  If
at any time after one year from the date of issuance of this Warrant there is
no effective registration statement registering the resale of the shares of
Common Stock issuable upon exercise of this Warrant by the Holder, then,
notwithstanding anything contained herein to the contrary, the Holder of this
Warrant may, at its election exercised in its sole discretion, exercise this
Warrant in whole or in part and, in lieu of paying the Exercise Price in cash,
elect instead to receive upon such exercise the “Net Number” of shares of
Common Stock determined according to the following formula (a “Cashless Exercise”):

 

Net Number = (A x B) -
(A x C)

B

 

For purposes of the
foregoing formula:

 

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

 

B= the greater of the (i)
closing price per share of the Common Stock (as reported by Bloomberg) on the
Trading Day immediately preceding the date of the Exercise Notice or (ii) the
average of the closing prices per share of Common Stock (as reported by
Bloomberg) for the ten (10) Trading Days immediately preceding the date of the
Exercise Notice ; and

 

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

 

6.                                       Charges,
Taxes and Expenses.  Issuance and
delivery of certificates for 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 certificates, all of which taxes and expenses
shall be paid by the 

 

4

 

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
certificates for Warrant Shares or Warrants in a name other than that of the
Holder.  The Holder shall be responsible
for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.

 

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

 

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

 

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

 

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

 

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

 

5

 

that occurs after such record date, such Holder shall be entitled to
receive, in addition to the Warrant Shares otherwise issuable upon such
conversion, the Distributed Property that such Holder would have been entitled
to receive in respect of such number of Warrant Shares had the Holder been the
record holder of such Warrant Shares immediately prior to such record date.

 

(c)  Fundamental Transactions.  If, at any time while this Warrant is
outstanding: (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions,
(iii) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (iv)
the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then the Holder
shall have the right thereafter to receive, upon exercise of this Warrant, the
same amount and kind of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental Transaction if it
had been, immediately prior to such Fundamental Transaction, the holder of the
number of Warrant Shares then issuable upon exercise in full of this Warrant
(the “Alternate Consideration”).  For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one (1) share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction.  At the
Holder’s option and request, any successor to the Company or surviving entity
in such Fundamental Transaction shall issue to the Holder a new warrant
substantially in the form of this Warrant and consistent with the foregoing
provisions and evidencing the Holder’s right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof.  The terms of any agreement pursuant to which
a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this paragraph
(c) and insuring that the Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.

 

(d)                                 Intentionally
omitted.

 

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

 

(f)                                    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 

 

6

 

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.

 

(g)                                 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.

 

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

 

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

 

11.                                 Limitation
on Exercise.

 

(a)          Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Warrant (or otherwise in respect hereof)
shall be limited to the extent necessary to insure that, following such
exercise (or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons
whose beneficial ownership of Common Stock would be aggregated with the
Holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed
4.999% of the total number of issued and outstanding shares of Common Stock
(including for such purpose the shares of Common Stock issuable upon such exercise).  For such purposes, beneficial ownership
shall be determined in accordance with

 

7

 

Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder.  Each delivery
of an Exercise Notice hereunder will constitute a representation by the Holder
that it has evaluated the limitation set forth in this paragraph and determined
that issuance of the full number of Warrant Shares requested in such Exercise
Notice is permitted under this paragraph. 
By written notice to the Company, the Holder may waive the provisions of
this Section but (i) any such waiver will not be effective until the 61st day
after such notice is delivered to the Company, and (ii) any such waiver will
apply only to the Holder and not to any other holder of Warrants.

 

(b)         Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Warrant (or otherwise in respect hereof)
shall be limited to the extent necessary to insure that, following such
exercise (or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons
whose beneficial ownership of Common Stock would be aggregated with the
Holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed
9.999% of the total number of issued and outstanding shares of Common Stock
(including for such purpose the shares of Common Stock issuable upon such
exercise).  For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder.  Each delivery of an Exercise Notice
hereunder will constitute a representation by the Holder that it has evaluated
the limitation set forth in this paragraph and determined that issuance of the
full number of Warrant Shares requested in such Exercise Notice is permitted
under this paragraph.  By written notice
to the Company, the Holder may waive the provisions of this Section but (i) any
such waiver will not be effective until the 61st day after such notice is
delivered to the Company, and (ii) any such waiver will apply only to the
Holder and not to any other holder of Warrants.

 

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 Eligible Market on the date of exercise.

 

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

 

8

 

Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section.

 

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

 

15.                                 Miscellaneous.

 

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

 

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

 

9

 

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.

 

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

 

	
   

  	
  AVI BIOPHARMA, INC.

  
	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Alan P. Timmins.

  
	
   

  	
  Title:

  	
  President and
  Chief Operating

  Officer

  
					

 

10

 

Exhibit
A

 

FORM
OF ELECTION TO PURCHASE

 

To AVI BioPharma, Inc.:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

PLEASE INSERT SOCIAL
SECURITY

OR TAX IDENTIFICATION
NUMBER:                                        

 

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:Exhibit 10.47

 

REGISTRATION
RIGHTS AGREEMENT

 

This Registration Rights Agreement
(this “Agreement”) is made and entered into as of May 5, 2003, by and
among AVI BioPharma, Inc. an Oregon corporation (the “Company”), and
each of the purchasers identified on the signature pages hereto (each a “Purchaser”
and collectively, the “Purchasers”).

 

This Agreement is made pursuant to the
Securities Purchase Agreement, dated as of the date hereof among the Company
and the Purchasers (the “Purchase Agreement”).

 

The Company and the Purchasers hereby agree
as follows:

 

1.                                       Definitions.  Capitalized terms used and not
otherwise defined herein that are defined in the Purchase Agreement shall have
the meanings given such terms in the Purchase Agreement.  As used in this Agreement, the following
terms shall have the following meanings:

 

“Effectiveness Date” means the earlier of (a) the 50th
day following the Closing Date (unless the Registration Statement is reviewed
by the Commission, in which case the 80th day) and (b) the fifth
Trading Day following the date on which the Company is notified by the
Commission that such Registration Statement will not be reviewed or is no
longer subject to further review and comments.

 

“Effectiveness Period” shall have the
meaning set forth in Section 2(a).

 

“Filing Date” means, with respect to
the initial Registration Statement required to be filed hereunder, the 20th
day following the Closing Date.

 

“Holder” or “Holders” means the
holder or holders, as the case may be, from time to time of Registrable
Securities.

 

“Indemnified Party” shall have the
meaning set forth in Section 5(c).

 

“Indemnifying Party” shall have the
meaning set forth in Section 5(c).

 

“Losses” shall have the meaning set
forth in Section 5(a).

 

“Proceeding” means an action, claim,
suit, investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether commenced
or threatened.

 

“Prospectus” means the prospectus
included in a Registration Statement (including, without limitation, a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Registration Statement, and all other
amendments and supplements to the

 

1

 

Prospectus,
including post-effective amendments, and all material incorporated by reference
or deemed to be incorporated by reference in such Prospectus.

 

“Registrable Securities” means the
shares of Common Stock issued pursuant to the Purchase Agreement and issuable
upon exercise of the Warrants.

 

“Registration Statement” means the
initial registration statement required to be filed hereunder and any
additional registration statements contemplated by Section 2(d),
including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.

 

“Rule 144” means Rule 144 promulgated
by the Commission pursuant to the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.

 

“Rule 415” means Rule 415 promulgated
by the Commission pursuant to the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.

 

“Rule 424” means Rule 424 promulgated
by the Commission pursuant to the Securities Act, as such Rule may be amended
from time to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.

 

“Warrants” means the Common Stock
purchase warrants issued pursuant to the Purchase Agreement.

 

2.                                       Registration.

 

(a)                                  On
or prior to the Filing Date, the Company shall prepare and file with the
Commission a Registration Statement covering the Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415.  The Registration Statement shall be on Form
S-3 (except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall
be on another appropriate form in accordance herewith) and shall contain
(except if otherwise required by the Commission) the “Plan of Distribution”
attached hereto as Annex A.  The
Company shall cause the Registration Statement to become effective and remain
effective as provided herein. The Company shall use its best efforts to cause
the Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to its Effectiveness
Date, and shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act until the date which is the
earlier date of when (i) all Registrable Securities have been sold or (ii) all
Registrable Securities may be sold immediately without registration under the
Securities Act and without volume restrictions pursuant to Rule 144(k), as
determined by the counsel to the Company pursuant to an unqualified written
opinion letter to such effect, addressed and acceptable to the Company’s
transfer agent and the affected Holders (the “Effectiveness Period”).

 

2

 

(b)                                 If:
(a) any Registration Statement is not filed on or prior to the Filing Date; (b)
a Registration Statement filed hereunder is not declared effective by the
Commission by the Effectiveness Date; (c) after a Registration Statement is
filed with and declared effective by the Commission, such Registration
Statement ceases to be effective (by suspension or otherwise) as to all
Registrable Securities to which it is required to relate at any time prior to
the expiration of the Effectiveness Period without being succeeded within
fifteen (15) Trading Days by an amendment to such Registration Statement or by
a subsequent Registration Statement filed with and declared effective by the
Commission; (d) the Common Stock is not listed or quoted, or is suspended from
trading on the Nasdaq National Market for a period of three (3) Trading Days
(which need not be consecutive Trading Days); or (e) the exercise rights of the
Holders pursuant to the Warrants are suspended for any reason (any such failure
or breach being referred to as an “Event,” and for purposes of clause
(a), (b) or (e) the date on which such Event occurs, or for purposes of clause
(c) the date which such fifteen (15) Trading Day-period is exceeded, or for
purposes of clause (d) the date on which such three (3)  Trading Day period is exceeded, being
referred to as “Event Date”), then until the applicable Event is cured,
the Company shall pay to each Holder an amount in cash, as liquidated damages
and not as a penalty, equal to 1.0% for the first, and 2.0% for each
subsequent, thirty (30) day period (prorated for partial periods) on a daily
basis of the aggregate purchase price paid by such Holder pursuant to the
Purchase Agreement.  Such liquidated
damages shall be paid not less than each thirty (30) days during an Event and
within three (3) days following the date on which such Event has been cured by
the Company.  If the Company fails to
pay any liquidated damages pursuant to this Section in full within seven days
after the date payable, the Company will pay interest thereon at a rate of 18%
per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Holder, accruing daily from the date such liquidated
damages are due until such amounts, plus all such interest thereon, are paid in
full.

 

3.                                       Registration Procedures

 

In connection with the Company’s registration
obligations hereunder, the Company shall:

 

(a)                                  Not
less than three (3) Trading Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto, the
Company shall, (i) furnish to the Holders copies of all such documents proposed
to be filed (including documents incorporated or deemed incorporated by
reference) which documents will be subject to the review of such Holders, and
(ii) cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to conduct a reasonable investigation
within the meaning of the Securities Act. 
The Company shall not file the Registration Statement or any such Prospectus
or any amendments or supplements thereto to which the Holders of a majority of
the Registrable Securities shall reasonably object in good faith.

 

(b)                                 (i)  Prepare and file with the Commission such
amendments, including post-effective amendments, to the Registration Statement
and the Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale

 

3

 

under the Securities Act all of
the Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible, and in any event within ten (10) days, to any comments
received from the Commission with respect to the Registration Statement or any
amendment thereto and, as promptly as reasonably possible provide the Holders
true and complete copies of all correspondence from and to the Commission
relating to the Registration Statement; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.

 

(c)                                  Notify
the Holders of Registrable Securities to be sold as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than three (3) Trading
Days prior to such filing) and (if requested by any such Person) confirm such
notice in writing no later than one (1) Trading Day following the day (i)(A)
when a Prospectus or any Prospectus supplement or post-effective amendment to
the Registration Statement is proposed to be filed; (B) when the Commission
notifies the Company whether there will be a “review” of such Registration
Statement and whenever the Commission comments in writing on such Registration
Statement (the Company shall provide true and complete copies thereof and all
written responses thereto to each of the Holders); and (C) with respect to the
Registration Statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the Commission or any other Federal or
state governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale
in any jurisdiction, or the initiation or threatening of any Proceeding for
such purpose; and (v) of the occurrence of any event or passage of time that
makes the financial statements included in the Registration Statement
ineligible for inclusion therein or any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that requires
any revisions to the Registration Statement, Prospectus or other documents so
that, in the case of the Registration Statement or the Prospectus, as the case
may be, it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

 

(d)                                 Use
its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
of (i) any order suspending the effectiveness of the Registration Statement, or
(ii) any suspension of the qualification (or exemption from qualification) of
any of the Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.

 

(e)                                  Furnish
to each Holder, without charge, at least one conformed copy of the Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference,

 

4

 

and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.

 

(f)                                    Promptly
deliver to each Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request.  The Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.

 

(g)                                 Use
its best efforts to register or qualify or cooperate with the selling Holders
in connection with the registration or qualification (or exemption from such
registration or qualification) of all applicable Registrable Securities for
offer and sale under the securities or Blue Sky laws of all applicable
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or subject the Company to
any material tax in any such jurisdiction where it is not then so subject.

 

(h)                                 Cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a
transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Holders may request.

 

(i)                                     Upon
the occurrence of any event contemplated by Section 3(c)(v), as promptly as
reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

 

(j)                                     Comply
with all applicable rules and regulations of the Commission.

 

(k)                                  The
Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by such
Holder and such other reasonable information as the Company is required to
obtain for inclusion in the Registration Statement.

 

4.                                       Registration Expenses.  All fees
and expenses incident to the performance of or compliance with this Agreement
by the Company shall be borne by the Company whether or not any Registrable
Securities are sold pursuant to the Registration Statement.  The fees and 

 

5

 

expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing
prospectuses, (iii) messenger, telephone and delivery expenses, (iv) Securities
Act liability insurance, if the Company so desires such insurance, and (v) fees
and expenses of all other Persons retained by the Company in connection with
the consummation of the transactions contemplated by this Agreement.  In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit and the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.

 

5.                                       Indemnification

 

(a)                                  Indemnification
by the Company.  The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment
advisors and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) and the officers, directors, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable costs of preparation and reasonable attorneys’
fees) and expenses (collectively, “Losses”), as incurred, arising out of
or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that (1)
such untrue statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Company by such Holder expressly for
use therein, or to the extent that such information relates to such Holder or
such Holder’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in
any amendment or supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or (2) in the case of an occurrence of
an event of the type specified in Section 3(c)(ii)-(v), the use by such Holder
of an outdated or defective Prospectus after the Company has notified such
Holder in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of the Advice contemplated in Section 6(d).  The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which the
Company is aware in connection with the transactions contemplated by this
Agreement.

 

6

 

(b)                                 Indemnification
by Holders. Each Holder shall, severally and not jointly, indemnify and
hold harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as incurred, arising
solely out of or based solely upon: (x) such Holder’s failure to comply with
the prospectus delivery requirements of the Securities Act or (y) any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing
by such Holder to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (1) such untrue statements
or omissions are based solely upon information regarding such Holder furnished
in writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder’s proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement (it being understood that the Holder has approved Annex A hereto for
this purpose), such Prospectus or such form of Prospectus or in any amendment
or supplement thereto or (2) in the case of an occurrence of an event of the
type specified in Section 3(c)(ii)-(v), the use by such Holder of an outdated
or defective Prospectus after the Company has notified such Holder in writing
that the Prospectus is outdated or 
defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d).  In no
event shall the liability of any selling Holder hereunder be greater in amount
than the dollar amount of the net proceeds received by such Holder upon the
sale of the Registrable Securities giving rise to such indemnification
obligation.

 

(c)                                  Conduct
of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the “Indemnifying Party”) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to the Indemnified Party and the payment of
all fees and expenses incurred in connection with defense thereof; provided,
that the failure of any Indemnified Party to give such notice shall not relieve
the Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that it shall be finally determined
by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have proximately and
materially adversely prejudiced the Indemnifying Party.

 

An Indemnified Party shall have the right to
employ separate counsel in any such Proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless:  (1) the Indemnifying Party has agreed in writing to pay such fees
and expenses; (2) the Indemnifying Party shall have failed promptly to assume
the defense of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or (3) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall have been
advised by counsel that a

 

7

 

conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense thereof and such counsel
shall be at the expense of the Indemnifying Party).  The Indemnifying Party shall not be liable for any settlement of
any such Proceeding effected without its written consent, which consent shall
not be unreasonably withheld.  No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.

 

All fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten (10) Trading Days of written notice thereof to
the Indemnifying Party (regardless of whether it is ultimately determined that
an Indemnified Party is not entitled to indemnification hereunder; provided,
that the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).

 

(d)                                 Contribution.  If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable
considerations.  The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission.  The
amount paid or payable by a party as a result of any Losses shall be deemed to
include, subject to the limitations set forth in Section 5(c), any reasonable
attorneys’ or other reasonable fees or expenses incurred by such party in
connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.

 

The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section 5(d) were
determined by pro  rata allocation or by any other method of
allocation that does not take into account the equitable considerations
referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 5(d), no Holder
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the proceeds actually received by such Holder from the sale of
the Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged 

 

8

 

omission.  No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.

 

The indemnity and contribution agreements
contained in this Section are in addition to any liability that the
Indemnifying Parties may have to the Indemnified Parties.

 

6.                                       Miscellaneous

 

(a)                                  Remedies.  In the event of a breach by the Company or
by a Holder, of any of their obligations under this Agreement, each Holder or
the Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this
Agreement.  The Company and each Holder
agree that monetary damages would not provide adequate compensation for any losses
incurred by reason of a breach by it of any of the provisions of this Agreement
and hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate.

 

(b)                                 No
Piggyback on Registrations.  Except
as and to the extent specified in Schedule 6(b) hereto, neither the
Company nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in the
Registration Statement other than the Registrable Securities, and the Company
shall not after the date hereof enter into any agreement providing any such
right for inclusion of shares in the Registration Statement to any of its
security holders.  Except as and to the
extent specified in Schedule 6(b) hereto, the Company has not previously
entered into any agreement granting any registration rights with respect to any
of its securities to any Person which has not been fully satisfied.

 

(c)                                  Compliance.  Each Holder covenants and agrees that it
will comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.

 

(d)                                 Discontinued
Disposition.  Each Holder agrees by
its acquisition of such Registrable Securities that, upon receipt of a notice
from the Company of the occurrence of any event of the kind described in
Section 3(c), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder’s
receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement or until it is advised in writing (the “Advice”)
by the Company that the use of the applicable Prospectus may be resumed, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. 
The Company may provide appropriate stop orders to enforce the
provisions of this paragraph.

 

(e)                                  Piggy-Back
Registrations.  If at any time
during the Effectiveness Period  there
is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the Commission
a registration 

 

9

 

statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee benefit
plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any
such Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights.

 

(f)                                    Amendments
and Waivers. The provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
same shall be in writing and signed by the Company and the Holders of the then
outstanding Registrable Securities. 
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of certain Holders and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.

 

(g)                                 Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder 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 telephone number specified in this Section prior to 6:30 p.m.
(New York City time) on a Trading Day, (ii) the Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 6:30 p.m.
(New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (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 address for such notices and
communications shall be as follows:

 

	
  If to the Company:

  	
  AVI BioPharma, Inc.

  
	
   

  	
  One S.W. Columbia, Suite 1105

  
	
   

  	
  Portland, Oregon 97258

  
	
   

  	
  Facsimile:  (503) 227-0751

  
	
   

  	
   

  
	
  If to a Purchaser:

  	
  To the address set forth under such Purchaser name on the signature
  pages hereto.

  
	
   

  	
   

  
	
  If to any other Person who is then the registered Holder:

  
	
   

  	
   

  
	
   

  	
  To the address of such Holder as it appears in the stock transfer
  books of the Company

  

 

10

 

or such other address as may be designated in writing hereafter, in the
same manner, by such Person.

 

(h)                                 Successors
and Assigns.  This Agreement shall
inure to the benefit of and be binding upon the successors and permitted
assigns of each of the parties and shall inure to the benefit of each
Holder.  The Company may not assign its
rights or obligations hereunder without the prior written consent of each
Holder.  Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement.

 

(i)                                     Execution
and Counterparts.  This Agreement
may be executed in any number of counterparts, each of which when so executed
shall be deemed to be an original and, all of which taken together shall
constitute one and the same Agreement. 
In the event that any signature is delivered by facsimile transmission,
such signature shall create a valid binding obligation of the party executing
(or on whose behalf such signature is executed) the same with the same force
and effect as if such facsimile signature were the original thereof.

 

(j)                                     Governing
Law. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement 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 Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively 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 the any of
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such Proceeding is improper.  Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
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 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 hereto 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 Agreement or the transactions
contemplated hereby. If either party shall commence a Proceeding to enforce any
provisions of a Transaction Document, then the prevailing party in such
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 Proceeding.

 

(k)                                  Cumulative
Remedies.  The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.

 

11

 

(l)                                     Severability.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction.  It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without including
any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

 

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

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES TO FOLLOW]

 

12

 

IN WITNESS WHEREOF, the parties have executed
this Registration Rights Agreement as of the date first written above.

 

	
   

  	
  AVI BIOPHARMA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Denis R. Burger, Ph.D.

  
	
   

  	
  Name:

  	
  Denis R. Burger, Ph.D.

  
	
   

  	
  Title:

  	
  Chairman & Chief Executive Officer

  

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES OF PURCHASERS TO FOLLOW]

 

13

 

IN WITNESS WHEREOF, the parties have executed
this Registration Rights Agreement as of the date first written above.

 

 

	
   

  	
  SMITHFIELD FIDUCIARY LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Adam J. Chill

  	
   

  
	
   

  	
  Name:

  	
  Adam J. Chill

  
	
   

  	
  Title:

  	
  Authorized Signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  c/o Highbridge Capital Management, LLC

  9 West 57th Street, 27th Floor

  New York, NY  10019

  Fax:                           212-751-0755

  Tel:                            212-287-4720

  Attention:  Ari J. Storch / Adam J.
  Chill

  

 

14

 

	
   

  	
  On behalf of

  THE TAIL WIND FUND LIMITED

  Tail Wind Advisory & Management Ltd.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ David Crook

  	
   

  
	
   

  	
  Name:

  	
  David Crook

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  David Crook, Esq.

  Chief Executive Officer

  Tail Wind Advisory & Management Ltd.

  1st Floor, No. 1 Regent Street

  London, SW1Y 4NS, UK

  Tel:                            +44
  20 7468 7691 Fax:                                7657

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Please copy all
  correspondence to:
Peter J. Weisman, P.C.

  110 East 59th Street

  New York, NY  10005

  Tel:  +212-418-4792  Fax: 
  212-317-8855

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Please send the
  common shares a.s.a.p.

  directly to:
Bishop Rosen & Co.

  Attn:  Mr. D. Freedman

  100 Broadway, 18th Floor

  New York, NY  10006

  Tel:  +212-602-0654  Fax: 
  +212-602-0697

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Please send the
  warrants to:
The Tail Wind Fund, Ltd.

  MecaPierson (Bahamas) Ltd.

  Attn:  Ngaire Rolle,

  Windermere House, 404 East Bay St.,

  PO Box SS 5539, Nassau, Bahamas

  Tel:  242-393-8777  Fax: 
  242-393-9021

  

 

15

 

	
  OMICRON MASTER TRUST

  	
   

  	
  Address for Notice:

  
	
  By: 
  Omicron Capital L.P., as subadvisor

  	
   

  	
  c/o Omicron Capital L.P.

  
	
  By: 
  Omicron Capital Inc., its general partner

  	
   

  	
  810 Seventh Avenue, 39th Floor

  
	
   

  	
   

  	
  New York, New York 10019

  
	
  By:

  	
  /s/ Olivier
  Morali

  	
   

  	
   

  	
  Attn: Brian Daly

  
	
   

  	
  Olivier
  Morali, President

  	
   

  	
  Fax: (212) 803-5269

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Shares of Common Stock:

  	
  400,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Warrant Shares:

  	
  200,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Aggregate Purchase Price:

  	
  $2,000,000

  
						

 

16

 

	
  RIVERVIEW GROUP, LLC

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Terry
  Feeney

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Terry Feeney

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Chief
  Operating Officer

  	
   

  	
   

  	
   

  
	
  Address for
  Notice:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  666 5th Avenue, 8th Floor

  New York, New York 10103

  Attn:  Daniel Cardella

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Shares of Common Stock:

  	
  650,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Warrant Shares:

  	
  325,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Aggregate Purchase Price:

  	
  $3,250,000

  
								

 

17

 

	
  CRANSHIRE CAPITAL L.P.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Mitchell P. Kopin

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Mitchell P.
  Kopin

  	
   

  	
   

  	
   

  
	
  Title:

  	
  President – Downsview Capital

  	
   

  	
   

  	
   

  
	
   

  	
  The General Partner

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address for
  Notice:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attn: Mitchell Kopin

  666 Dundee Road

  Suite 1901

  Northbrook, IL 60062

  Fax: 847-562-9031

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Shares of Common Stock:

  	
  700,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Warrant Shares:

  	
  350,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Aggregate Purchase Price:

  	
  $3,500,000

  
	
   

  	
   

  	
   

  
	
  RODMAN & RENSHAW, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ John J.
  Borer III

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   John J. Borer III

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   Senior Managing Director

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address for Notice:

  330 Madison Avenue

  27th Floor

  New York, NY 10019

  Fax: 212-356-0536

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Shares of Common Stock:

  	
  200,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Warrant Shares:

  	
  100,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Aggregate Purchase Price:

  	
  $1,000,000

  
							

 

18

 

	
  SOLOMON STRATEGIC HOLDINGS, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Andrew P. MacKellar

  	
   

  	
   

  	
   

  
	
   

  	
  Andrew P.
  MacKellar

  	
   

  	
   

  	
   

  
	
   

  	
  Director

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address for Notice:

  c/o Andrew P. MacKellar

  Greenlands.

  The Red Gap

  Castletown, Isle of Man, IM9 1 HB, British Isles

  Fax: +44 1624 824191

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Please send the
  common shares

  a.s.a.p. directly to:
Bishop Rosen & Co.

  Attn:  Mr. D. Freedman

  100 Broadway, 18th Floor

  New York, NY 10006

  Tel: +212-602-0054 Fax: +212-

  602-0697

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Please send the
  warrants to:
Peter J. Weisman, P.C.

  110 East 59th Street

  New York, NY 10005

  Tel: +212-418-4792 Fax: 212-317-

  8855

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Shares of Common Stock:

  	
  50,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Warrant Shares:

  	
  25,000

  
	
   

  	
   

  	
   

  
	
   

  	
  Aggregate Purchase Price:

  	
  $250,000

  
							

 

19

 

Annex A

 

Plan of Distribution

 

The selling
stockholders and any of their pledgees, assignees and successors-in-interest
may, from time to time, sell any or all of their shares of common stock on any
stock exchange, market or trading facility on which the shares are traded or in
private transactions.  These sales may
be at fixed or negotiated prices.  The
selling stockholders may use any one or more of the following methods when
selling shares:

 

•                  ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;

 

•                  block trades in
which the broker-dealer will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction;

 

•                  purchases by a
broker-dealer as principal and resale by the broker-dealer for its account;

 

•                  an exchange
distribution in accordance with the rules of the applicable exchange;

 

•                  privately
negotiated transactions;

 

•                  short sales

 

•                  broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per share;

 

•                  a combination of
any such methods of sale; and

 

•                  any other method
permitted pursuant to applicable law.

 

The selling stockholders may also sell shares
under Rule 144 under the Securities Act, if available, rather than under this
prospectus.

 

Broker-dealers engaged by the selling
stockholders may arrange for other brokers-dealers to participate in
sales.  Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated.  The selling
stockholders do not expect these commissions and discounts to exceed what is
customary in the types of transactions involved.

 

The selling stockholders may from time to
time pledge or grant a security interest in some or all of the shares of common
stock or Warrants owned by them and, if they default in the performance of
their secured obligations, the pledgees or secured parties may offer and sell
the shares of common stock from time to time under this prospectus, or under an
amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act of 1933 amending the list of selling stockholders to
include the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus.

 

1

 

The selling stockholders also may transfer
the shares of common stock in other circumstances, in which case the
transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.

 

The selling stockholders and any
broker-dealers or agents that are involved in selling the shares may be deemed
to be “underwriters” within the meaning of the Securities Act in connection
with such sales.  In such event, any
commissions received by such broker-dealers or agents and any profit on the resale
of the shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.  The
selling stockholders have informed the Company that it does not have any
agreement or understanding, directly or indirectly, with any person to
distribute the Common Stock.

 

The Company is required to pay all fees and
expenses incident to the registration of the shares.  The Company has agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.

 

2

 

SCHEDULE 6(b)

 

TO

 

REGISTRATION RIGHTS AGREEMENT

DATED MAY 5, 2003

 

The Company may include up to 50,000 shares of its Common Stock issued
to Thomas Jefferson University in the Registration Statement.

 

3

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