INVESTMENT AGREEMENT

(ii)                                   a liquidation or dissolution of AVI;

(iii)                                a merger or consolidation involving AVI or any subsidiary of AVI after the completion of which:  (i) in the case of a merger (other than a triangular merger) or a consolidation involving AVI, the shareholders of AVI immediately prior to the completion of such merger or consolidation beneficially own (within the meaning of Rule 13d-3 promulgated under the Exchange Act or comparable successor rules), directly or indirectly, outstanding voting securities representing less than fifty percent (50%) of the combined voting power of the surviving entity in such merger or consolidation, and (ii) in the case of a triangular merger involving AVI or a subsidiary of AVI, the shareholders of AVI immediately prior to the completion of such merger beneficially own (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rules), directly or indirectly, outstanding voting securities representing less than fifty percent (50%) of the combined voting power of the surviving entity in such merger and less than fifty percent (50%) of the combined voting power of the parent of the surviving entity in such merger;

(iv)                               an acquisition by any person, entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act or any comparable successor provisions), other than any employee benefit plan, or related trust, sponsored or maintained by AVI or an affiliate of AVI and other than in a merger or consolidation of the type referred to in clause “(c)” of this definition of Change of Control, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rules) of outstanding voting securities of AVI representing more than thirty-three and 1/3 percent (33-1/3%) of the combined voting power of AVI (in a single transaction or series of related transactions); or

(v)                                  individuals who, as of the date hereof or replacements therefore who have been initially nominated by the then current members of the AVI Board of Directors, are members of the AVI Board of Directors (the “Incumbent Board”), cease for any reason to constitute at least sixty percent (60%) of the AVI Board of Directors, provided that if election, or nomination for election by AVI’s shareholders, of any new member of the AVI Board of Directors is approved by a vote of at least sixty percent (60%) of the Incumbent Board, such new member of the Board shall be considered as a member of the Incumbent Board.

“ Closing ” means the later to occur of the payment for Purchased Shares by Investor and the delivery by AVI to Investor of a stock certificate for Purchased Shares as provided in Section 2. “ Closing Date ” shall be the date on which the stock certificate for Purchased Shares is delivered to Investor.

“ Code ” means the United States Internal Revenue Code of 1986, as amended.

“ Common Stock ” means shares of Common Stock of AVI, par value $0.0001 per share.

“ Confidential Information ” means know-how, trade secrets, unpublished information, scientific and technical information, inventions, methods, plans, processes, characteristics, data, business plans and the like disclosed (whether before or during the term of this Agreement) by one of the parties (the “disclosing party”) to the other party (the “receiving party”) or generated under this Agreement or the other Transaction Documents, excluding information which: (i) was

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already in the possession of receiving party prior to its receipt from the disclosing party (provided that the receiving party is able to provide the disclosing party with reasonable documentary proof thereof and, if received from a third party, that such information was acquired without any party’s breach of a confidentiality or non-disclosure obligation to the disclosing party related to such information ); (ii) is or becomes part of the public domain by reason of acts not attributable to the receiving party;  (iii) is or becomes available to receiving party from a source other than the disclosing party which source, has rightfully obtained such information and has no obligation of non-disclosure or confidentiality to the disclosing party with respect thereto; or (iv) has been independently developed by the receiving party without breach of this Agreement or use of any Confidential Information of the other party.

“ Disclosure Schedule ” has the meaning given in Section 3.

“ Drug ” has the meaning defined in the License and Development Agreement.

“ Environmental Laws or Regulations ” means any one or more of the following:  the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”) as amended by the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), 42 U.S.C. § 9601 et seq.; the Federal Resource Conservation and Recovery Act of 1976 (“RCRA”), 42 U.S.C. § 6921 et seq.; the Clean Water Act, 33 U.S.C. § 1321 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; any other federal, state, county, municipal, local, foreign or other statute, law, ordinance or regulation which may relate to pesticides, agricultural or industrial chemicals, wastes, Hazardous Substances, or the environment; and all regulations promulgated by a regulatory body pursuant to any of the foregoing statutes, laws, regulations, or ordinances.

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

“ FDA ” means the U.S. Food and Drug Administration.

“ Field ” has the meaning defined in the License and Development Agreement.

“ Financial Statements ” means AVI’s financial statements included in SEC Documents.

“ Hazardous Substance ” means asbestos, urea formaldehyde, polychlorinated biphenyls, nuclear fuel or materials, chemical waste, radioactive materials, explosives, known carcinogens, petroleum products, pesticides, fertilizers, or other substance which is dangerous, toxic, or hazardous, or which is a pollutant, contaminant, chemical, material or substance defined as hazardous or as a pollutant or contaminant in, or the use, transportation, storage, release or disposal of which is regulated by, any Environmental Laws or Regulations.

“ Initial Market Price ” means the average (rounded to the nearest full cent, with the cents rounded up if the third decimal place is 5 or more) of the volume weighted closing sale prices of a share of Common Stock as reported on the Nasdaq Stock Market as of the end of the regular trading session, as reported in The Wall Street Journal, for the twenty (20) consecutive Nasdaq trading days ending on and including the Nasdaq trading day immediately preceding the Effective Date of this Agreement.

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“ Intellectual Property ” means letters patent and patent applications; trademarks, service marks and registrations thereof and applications therefor; copyrights and copyright registrations and applications; all discoveries, ideas, technology, know–how, trade secrets, processes, formulas, drawings and designs, computer programs or software; and all amendments, modifications, and improvements to any of the foregoing.

“ Investor ” has the meaning defined in the recitals hereto.

“ Knowledge ” or “ knowledge ” means actual knowledge of a fact or the knowledge which such person could reasonably be expected to have based on reasonable inquiry and consistent with such person’s duties and responsibilities. The knowledge of AVI shall include only the knowledge of AVI’s directors and/or officers.

“ License and Development Agreement ” has the meaning defined in the recitals hereto.

“ Liens ” means liens, mortgages, charges, security interests, claims, voting trusts, pledges, encumbrances, options, assessments, restrictions, or third-party or spousal interests of any nature.

“ Material Adverse Effect ” means a material adverse effect on (a) the business, operations, results of operations, assets (including intangible assets), liabilities, prospects, or condition (financial or otherwise) of AVI and the AVI Subsidiaries, taken as a whole, or (b) the ability of AVI to perform its obligations under this Agreement or any of the Transaction Documents or any other agreement or instrument to be entered into in connection with this Agreement.

“ Purchase Election ” has the meaning defined in the License and Development Agreement.

“ Purchased Shares ” means the shares of Common Stock purchased by Investor pursuant to Section 2.

“ SEC ” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act.

“ SEC Documents ” means all documents filed by AVI with the SEC after December 31, 2000.

“ Securities Act ” means the Securities Act of 1933, as amended, and all rules and regulations promulgated thereunder.

“ Supply Agreement ” has the meaning defined in the recitals hereto.

“ Transaction Documents ” means the License and Development Agreement and the Supply Agreement.

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(b)                                  Definitional Provisions.

(i)                                      The words “hereof,” “herein,” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provisions of this Agreement.

(ii)                                   Terms defined in the singular shall have a comparable meaning when used in the plural, and vice–versa.

(iii)                                Reference to an “Exhibit” or to a “Schedule” are, unless otherwise specified, to one of the Exhibits or Schedules attached to or referenced in this Agreement, and references to a “Section” are, unless otherwise specified, to one of the Sections of this Agreement.

(iv)                               The term “person” includes any individual, partnership, joint venture, corporation, trust, unincorporated organization or government or any department or agency thereof.

2.       PURCHASE OF COMMON STOCK

AVI shall sell, issue and deliver to Investor, and Investor shall purchase from AVI, such number of shares of Common Stock (rounded to the nearest whole share) which shall equal five million dollars ($5,000,000) divided by the Initial Market Price (the “Purchased Shares”). The purchase price for the Purchased Shares shall be payable by wire transfer of funds to AVI’s account within one (1) day of the Effective Date as follows:

AVI BioPharma, Inc.

4575 SW Research Way, Suite 200

Corvallis, OR  97333

Account # 153591259962

US Bank

1607 Main Street

Vancouver, WA  98660-2975

US Bank contact:  Erik Bjorvik (503) 275-5879

Transmit No. 125000105

A certificate representing Purchased Shares shall be issued by AVI in a form acceptable to Investor and its counsel within one (1) day of receipt by AVI of payment for the Purchased Shares.

3.       REPRESENTATIONS AND WARRANTIES OF AVI

Except as set forth in the Disclosure Schedule attached hereto as Schedule A , AVI hereby makes the following representations and warranties to the Investor:

(a)                                   Authorization; Enforcement; No Conflicts .  AVI is duly organized and validly exists under the laws of the State of Oregon and has the requisite corporate power and authority to enter into and to consummate the transactions contemplated hereby and otherwise to carry out

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its obligations hereunder. The execution and delivery of this Agreement by AVI and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of AVI and no further consent or action is required by AVI, its Board of Directors or its stockholders. This Agreement has been (or upon delivery will be) duly executed by AVI and is, or when delivered in accordance with the terms hereof, will constitute, the valid and binding obligation of AVI enforceable against AVI in accordance with its terms, subject to bankruptcy, insolvency, and other similar laws affecting the rights of creditors generally and subject to the exercise of judicial discretion in accordance with principles of equity. The execution, delivery and performance of this Agreement by AVI and the consummation by AVI of the transactions contemplated hereby do not and will not: (i) conflict with or violate any provision of AVI’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 an AVI debt or otherwise) or other understanding to which AVI is a party or by which any property or asset of AVI 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 AVI is subject (including federal and state securities laws and regulations), or by which any property or asset of AVI is bound or affected; except in the case of each of clauses (i), (ii) and (iii), such as could not, individually or in the aggregate: (x) materially and adversely affect the legality, validity or enforceability of this Agreement, (y) have or result in a materially detrimental effect on the results of operations, assets, business or financial condition of AVI, or (z) adversely impair AVI’s ability to perform fully on a timely basis its obligations under the Agreement (any of (x), (y) or (z), a “ Material Adverse Effect ”).

(b)                                  Filings, Consents and Approvals; Issuance of Securities .  AVI is not 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 AVI of this Agreement, other than (i) the filings of a Form 8-K disclosing the transaction contemplated hereby, (ii) the application(s) to The Nasdaq National Market (the “ Principal Market ”) for the listing of the Purchased Shares for trading thereon in the time and manner required thereby, and (iii) applicable filings under federal and applicable state blue sky laws (collectively, the “ Required Approvals ”). “ Person ” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. The Purchased Shares are duly authorized and, when issued and paid for in accordance with this Agreement will be duly and validly issued, fully paid and nonassessable, and free and clear of all Liens. The issuance by AVI of the Purchased Shares has not been registered under the Securities Act and, accordingly, the Purchased Shares may not be, sold, assigned or transferred without registration unless the Purchased Shares are subsequently registered or are exempt under applicable exemptions from registration under the Securities Act.

(c)                                   SEC Reports; Financial Statements .  AVI has filed all reports required to be filed by it under the Securities Act and the Securities Exchange Act of 1934, as amended (the “ 1934

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Act ”), including pursuant to Section 13(a) or 15(d) thereof, for the two (2) years preceding the date hereof (the foregoing materials being collectively referred to herein as the “ SEC Reports ”) 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. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities 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 financial statements of AVI 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 AVI 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.

(d)                                  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 reasonably be expected to result in a Material Adverse Effect, (ii) AVI 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 AVI’s financial statements pursuant to GAAP or required to be disclosed in filings made with the SEC, (iii) AVI has not altered its method of accounting or the identity of its auditors, (iv) AVI 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) AVI has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing AVI stock option and purchase plans.

(e)                                   Disclosure .  All disclosures provided to the Investor regarding AVI, its business and the transactions contemplated hereby, furnished by or on behalf of AVI 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. None of the statements, documents, certificates or other items prepared or supplied by AVI with respect to the transactions contemplated hereby, including, without limitation, reports, data, analyses and correspondence relating to the Drug, contains an untrue statement of a material fact or omits a material fact necessary to make the statements contained therein not misleading. There is no fact which