AVI BIOPHARMA INC
EX-10.36
<DOCUMENT>
<TYPE>EX-10.36
<SEQUENCE>6
<FILENAME>j1207_ex10d36.htm
<DESCRIPTION>EX-10.36
<TEXT>
<html>

<head>
<title>Prepared by MerrillDirect</title>
</head>

<body>

<div>

<p align=right><b><font size=2>Exhibit
10.36</font></b></p>

<p align=center><b><font size=2>INVESTMENT
AGREEMENT </font></b><b><sup><font size=2>1</font></sup></b></p>

<p><font size=2>&nbsp;</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; THIS
INVESTMENT AGREEMENT (this &#147;Agreement&#148;) is made and entered into as of May 22,
2001 between AVI BIOPHARMA, INC. (&#147;AVI&#148;), an Oregon corporation, and MEDTRONIC
ASSET MANAGEMENT, INC. (&#147;Investor&#148;), a Minnesota corporation.</font></p>

<p align=center><b><font size=2>RECITALS</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS, AVI desires to issue and
sell to Investor, and Investor desires to purchase on the terms and subject to
the conditions set forth in this Agreement, certain shares of AVI Common Stock,
$0.0001 par value (&#147;Common Stock&#148;) and a warrant to purchase certain shares of
Common Stock in the form attached hereto as <b>Exhibit A</b> (the &#147;Warrant&#148;);</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS, at the First Closing (as
defined below), Medtronic, Inc. (&#147;Medtronic&#148;) and AVI are entering into a
License and Development Agreement in the form attached hereto as <b>Exhibit B </b>(the
&#147;License and Development Agreement&#148;);</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS, at the First Closing,
Investor and AVI are also entering into a Supply Agreement in the form attached
hereto as <b>Exhibit
C</b> (the &#147;Supply Agreement&#148;);</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS, at the First Closing,
Investor and AVI are also entering into a Registration Rights Agreement in the
form attached hereto as <b>Exhibit D </b>(the &#147;Registration Rights
Agreement&#148;); and</font></p>

<p align=center><b><font size=2>AGREEMENT</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOW, THEREFORE, in consideration of
the respective representations, warranties, covenants and agreements contained
herein, and for other valuable consideration, the receipt and adequacy of which
is hereby acknowledged, the parties hereto agree as follows:</font></p>

<p align=center><b><font size=2>ARTICLE
1<br>
DEFINITIONS</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Specific
Definitions</u>.&nbsp; As used in this
Agreement, the following terms shall have the meanings set forth or as
referenced below:</font></p>

<p><font size=2>&nbsp;&#147;<u>Affiliate</u>&#148; of a specified person
(natural or juridical) means a person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the person specified.&nbsp;
&#147;Control&#148; shall mean ownership of more than 50% of the shares of stock
entitled to vote for the election of directors in the case of a corporation,
and more than 50% of the voting power in the case of a business entity other
than a corporation.</font></p>





<hr size=1 width="25%" noshade color=black align=left>



<p><sup><font size=2 face=Times>1&nbsp;
</font></sup><font size=2>Information was omitted
from this document pursuant to a request for confidential treatment submitted
to the SEC; omitted information is marked with ***. The omitted material has
been filed separately with the SEC.<page></font></p>

<p><font size=2>&#147;<u>Agreement</u>&#148;
means this Agreement and all Exhibits and Schedules hereto.</font></p>

<p><font size=2>&#147;<u>AVI
Subsidiaries</u>&#148; means all subsidiaries of AVI, including but not limited to
the subsidiaries identified in the Disclosure Schedule.</font></p>

<p><font size=2>&#147;<u>Change
of Control</u>&#148; with respect to AVI means the occurrence of any of the
following:</font></p>

<dir>
<p><font size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a sale of assets representing fifty
percent (50%) or more of the net book value and of the fair market value of
AVI&#146;s consolidated assets (in a single transaction or in a series of related
transactions);</font></p>
</dir>

<dir>
<p><font size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a liquidation or dissolution of AVI;</font></p>
</dir>

<dir>
<p><font size=2>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a merger or consolidation involving AVI
or any subsidiary of AVI after the completion of which:&nbsp; (i)&nbsp;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)&nbsp;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;</font></p>
</dir>

<dir>
<p><font size=2>(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; an acquisition by any person, entity or
&#147;group&#148; (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 &#147;(c)&#148; 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</font></p>
</dir>

<dir>
<p><font size=2>(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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 &#147;Incumbent Board&#148;), 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&#146;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.<page></font></p>
</dir>

<p><font size=2>&#147;<u>Code</u>&#148;
means the United States Internal Revenue Code of 1986, as amended.</font></p>

<p><font size=2>&#147;<u>Common
Stock</u>&#148; means shares of Common Stock of AVI, par value $0.0001 per share.</font></p>

<p><font size=2>&#147;<u>Confidential
Information</u>&#148; 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 &#147;disclosing
party&#148;) to the other party (the &#147;receiving party&#148;) or generated under this
Agreement or the other Transaction Documents, excluding information which:</font></p>

<dir>
<p><font size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; was 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&#146;s breach of a confidentiality or
non-disclosure obligation to the disclosing party related to such information
);</font></p>
</dir>

<dir>
<p><font size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; is or becomes part of the public domain
by reason of acts not attributable to the receiving party;</font></p>
</dir>

<dir>
<p><font size=2>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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</font></p>
</dir>

<dir>
<p><font size=2>(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; has been independently developed by the
receiving party without breach of this Agreement or use of any Confidential
Information of the other party.</font></p>
</dir>

<p><font size=2>&#147;<u>Drug</u>&#148;
has the meaning given such term in the License and Development Agreement.</font></p>

<p><font size=2>&#147;<u>Disclosure
Schedule</u>&#148; has the meaning given in Article 3.</font></p>

<p><font size=2>&#147;<u>Exchange
Act</u>&#148; means the Securities Exchange Act of 1934, as amended, and all rules
and regulations promulgated thereunder.</font></p>

<p><font size=2>&#147;<u>Environmental
Laws or Regulations</u>&#148; means any one or more of the following:&nbsp; the Comprehensive Environmental Response
Compensation and Liability Act (&#147;CERCLA&#148;) as amended by the Superfund
Amendments and Reauthorization Act of 1986 (&#147;SARA&#148;), 42 U.S.C. &#167;&nbsp;9601 et
seq.; the Federal Resource Conservation and Recovery Act of 1976 (&#147;RCRA&#148;), 42
U.S.C. &#167;&nbsp;6921 et seq.; the Clean Water Act, 33 U.S.C. &#167;&nbsp;1321 et seq.;
the Clean Air Act, 42 U.S.C. &#167;&nbsp;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&nbsp; 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.<page></font></p>

<p><font size=2>&#147;<u>FDA</u>&#148;
means the U.S. Food and Drug Administration.</font></p>

<p><font size=2>&#147;<u>Financial
Statements</u>&#148; means AVI&#146;s financial statements included in SEC Documents.</font></p>

<p><font size=2>&#147;<u>First
Closing</u>&#148; has the meaning given in Section 8.1.</font></p>

<p><font size=2>&#147;<u>First
Closing Date</u>&#148; has the meaning given in Section 8.1</font></p>

<p><font size=2>&#147;<u>Fourth
Closing</u>&#148; has the meaning given in Section 8.4.</font></p>

<p><font size=2>&#147;<u>Fourth
Closing Date</u>&#148; has the meaning given in Section 8.4.</font></p>

<p><font size=2>&#147;<u>Fourth Closing Milestone</u>&#148; means
*&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp; *</font></p>

<p><font size=2>&#147;<u>Fourth
Closing Market Price</u>&#148; 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
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 five (5) consecutive Nasdaq trading days ending on and
including the Nasdaq trading day immediately preceding the date of the
occurrence of the Fourth Closing Milestone.</font></p>

<p><font size=2>&#147;<u>Hazardous
Substance</u>&#148; 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.</font></p>

<p><font size=2>&#147;<u>HSR
Act</u>&#148; means the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
regulations thereunder.</font></p>

<p><font size=2>&#147;<u>IND</u>&#148;
means an Investigational New Drug application as defined in 21 CFR Part 312.</font></p>

<p><font size=2>&#147;<u>Initial
Market Price</u>&#148; means the greater of (a) $5.00 per share of Common Stock, or
(b) the average (rounded to the nearest full cent, with the cents rounded up if
the third decimal place is 5 or more) of the 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 five
(5) consecutive Nasdaq trading days ending on and including the Nasdaq trading
day immediately preceding the date of this Agreement.&nbsp; It is acknowledged and agreed that the Initial Market Price is
$7.10 per share.<page></font></p>

<p><font size=2>&#147;<u>Intellectual
Property</u>&#148; 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&#150;how, trade secrets, processes, formulas, drawings and designs,
computer programs or software; and all amendments, modifications, and
improvements to any of the foregoing.</font></p>

<p><font size=2>&#147;<u>Knowledge</u>&#148;
or &#147;<u>knowledge</u>&#148; 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&#146;s duties and responsibilities.&nbsp; The knowledge of AVI shall include the
knowledge of AVI&#146;s directors and/or officers.</font></p>

<p><font size=2>&#147;<u>License
and Development Agreement</u>&#148; has the meaning defined in the recitals hereto.</font></p>

<p><font size=2>&#147;<u>Liens</u>&#148;
means liens, mortgages, charges, security interests, claims, voting trusts,
pledges, encumbrances, options, assessments, restrictions, or third-party or
spousal interests of any nature.</font></p>

<p><font size=2>&#147;<u>Material
Adverse Effect</u>&#148; 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.</font></p>

<p><font size=2>&#147;<u>Medtronic</u>&#148;
has the meaning defined in the recitals hereto.</font></p>

<p><font size=2>&#147;<u>NDA</u>&#148; means a New Drug Application
as defined in 21 CFR Part 314.</font></p>

<p><b><font size=2>&#147;</font></b><u><font size=2>PMA</font></u><b><font size=2>&#148;</font></b><font size=2>
means a Premarket Approval Application as defined in 21 CFR Part&nbsp;814.</font></p>

<p><font size=2>&#147;<u>Purchased
Securities</u>&#148; means the Purchased Shares, the Warrant and the Warrant Shares.</font></p>

<p><font size=2>&#147;<u>Purchased
Shares</u>&#148; means the Common Stock Shares purchased by Investor pursuant to
Article 2.</font></p>

<p><font size=2>&#147;<u>Registration
Rights Agreement</u>&#148; has the meaning defined in the Recitals hereto.</font></p>

<p><font size=2>&#147;<u>SEC</u>&#148;
means the Securities and Exchange Commission or any other federal agency at the
time administering the Exchange Act.</font></p>

<p><font size=2>&#147;<u>SEC
Documents</u>&#148; means all documents filed by AVI with the SEC after December 31,
2000.</font></p>

<p><font size=2>&#147;<u>Second
Closing</u>&#148; has the meaning given in Section 8.2.</font></p>

<p><font size=2>&#147;<u>Second
Closing Date</u>&#148; has the meaning given in Section 8.2.<page></font></p>

<p><font size=2>&#147;<u>Second Closing Milestone</u>&#148; means
*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *</font></p>

<p><font size=2>&#147;<u>Securities
Act</u>&#148; means the Securities Act of 1933, as amended, and all rules and
regulations promulgated thereunder.</font></p>

<p><font size=2>&#147;<u>Supply
Agreement</u>&#148; has the meaning defined in the recitals hereto.</font></p>

<p><font size=2>&#147;<u>Third
Closing</u>&#148; has the meaning given in Section 8.3.</font></p>

<p><font size=2>&#147;<u>Third
Closing Date</u>&#148; has the meaning given in Section 8.3.</font></p>

<p><font size=2>&#147;<u>Third
Closing Milestone</u>&#148; means *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *</font></p>

<p><font size=2>&#147;<u>Third
Closing Market Price</u>&#148; means&nbsp; the
average (rounded to the nearest full cent, with the cents rounded up if the
third decimal place is 5 or more) of the 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 five
(5) consecutive Nasdaq trading days ending on and including the Nasdaq trading
day immediately preceding the date of the occurrence of the Third Closing
Milestone.</font></p>

<p><font size=2>&#147;<u>Transaction
Documents</u>&#148; means the Warrant, the License and Development Agreement, the
Supply Agreement and the Registration Rights Agreement.</font></p>

<p><font size=2>&#147;<u>Waived
Amount</u>&#148; has the meaning given in Section 2.5.</font></p>

<p><font size=2>&#147;<u>Warrant</u>&#148;&nbsp; has the meaning defined in the recitals
hereto.</font></p>

<p><font size=2>&#147;<u>Warrant
Shares</u>&#148; means the shares of Common Stock issuable upon exercise of the
Warrant.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Definitional
Provisions</u>.</font></p>

<dir>
<p><font size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The words &#147;hereof,&#148; &#147;herein,&#148; and
&#147;hereunder&#148; 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.</font></p>
</dir>

<dir>
<p><font size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Terms defined in the singular shall have
a comparable meaning when used in the plural, and vice&#150;versa.<page></font></p>
</dir>

<dir>
<p><font size=2>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; References to an &#147;Exhibit&#148; or to a
&#147;Schedule&#148; are, unless otherwise specified, to one of the Exhibits or Schedules
attached to or referenced in this Agreement, and references to an &#147;Article&#148; or
a &#147;Section&#148; are, unless otherwise specified, to one of the Articles or Sections
of this Agreement.</font></p>
</dir>

<dir>
<p><font size=2>(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The term &#147;person&#148; includes any
individual, partnership, joint venture, corporation, trust, unincorporated
organization or government or any department or agency thereof.</font></p>
</dir>

<p align=center><b><font size=2>ARTICLE
2<br>
PURCHASE OF COMMON STOCK<br>
AND WARRANT</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Purchase
at First Closing</u>.</font></p>

<dir>
<p><font size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Purchased Shares</u>.&nbsp; At the First Closing, 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
ten million dollars ($10,000,000) divided by the Initial Market Price.
Certificates representing such shares shall be issued at the First Closing in
form acceptable to Investor and its counsel.&nbsp;
The purchase price for the shares purchased pursuant to this Section
shall be payable by wire transfer of funds to AVI&#146;s account as designated to
Investor in writing prior to or on the First Closing Date.</font></p>
</dir>

<dir>
<p><font size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Warrant</u>.&nbsp; At the First Closing, AVI shall issue and
deliver to Investor the Warrant to purchase three million (3,000,000) shares of
Common Stock at an initial exercise price equal to $10.00.</font></p>
</dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Purchase
at Second Closing</u>.&nbsp; Investor shall
give written notice to AVI of the occurrence of the Second Closing Milestone
within ten (10) business days thereafter.&nbsp;&nbsp;
Such notice shall specify the date of the occurrence thereof.&nbsp;&nbsp; Subject to the terms and conditions hereof,
including Section 2.5, and subject to the First Closing having occurred, within
thirty (30) days after such written notice Investor shall invest Two Million
Five Hundred Thousand Dollars ($2,500,000) in AVI in exchange for, and AVI
shall sell, issue and deliver to Investor, such number of shares of Common
Stock (rounded to the nearest whole share) which shall equal $2,500,000 divided
by the Initial Market Price.&nbsp;
Certificates representing any shares purchased under this Section shall
be issued at the Second Closing in form acceptable to Investor and its
counsel.&nbsp; The purchase price for the
shares purchased pursuant to this Section shall be payable by wire transfer of
funds to AVI&#146;s account as designated to Investor in writing prior to the Second
Closing Date.&nbsp; In addition to Investor&#146;s
rights under Section 2.5(a), Investor may, at Investor&#146;s option and by written
notice to AVI, elect to pay in cash some or all of the amounts payable under
this Section 2.2 as an additional capital contribution for Investor&#146;s Purchased
Shares previously purchased in lieu of requiring AVI to issue Purchased Shares
under this Section 2.2.<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Purchase
at Third Closing</u>.&nbsp; Investor shall
give written notice to AVI of the occurrence of the Third Closing Milestone
within ten (10) business days thereafter.&nbsp;&nbsp;
Such notice shall specify the date of the occurrence thereof.&nbsp;&nbsp; Subject to the terms and conditions hereof,
including Section 2.5, and subject to the First Closing and Second Closing
having occurred, within thirty (30) days after such written notice Investor
shall invest Two Million Five Hundred Thousand Dollars ($2,500,000) in AVI in
exchange for, and AVI shall sell, issue and deliver to Investor, such number of
shares of Common Stock (rounded to the nearest whole share) which shall equal
$2,500,000 divided by the Third Closing Market Price.&nbsp; Certificates representing any shares purchased under this Section
shall be issued at the Third Closing in form acceptable to Investor and its
counsel.&nbsp; The purchase price for the
shares purchased pursuant to this Section shall be payable by wire transfer of
funds to AVI&#146;s account as designated to Investor in writing prior to the Third
Closing Date.&nbsp;&nbsp;&nbsp; In addition to Investor&#146;s
rights under Section 2.5(a), Investor may, at Investor&#146;s option and by written
notice to AVI, elect to pay in cash some or all of the amounts payable under
this Section 2.3 as an additional capital contribution for Investor&#146;s Purchased
Shares previously purchased in lieu of requiring AVI to issue Purchased Shares
under this Section 2.3.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Purchase
at Fourth Closing</u>.&nbsp; Investor shall
give written notice to AVI of the occurrence of the Fourth Closing Milestone
within ten (10) business days thereafter.&nbsp;&nbsp;
Such notice shall specify the date of the occurrence thereof.&nbsp;&nbsp; Subject to the terms and conditions hereof,
including Section 2.5, and subject to the First Closing, Second Closing and
Third Closing having occurred, within thirty (30) days after such written
notice Investor shall invest Five Million Dollars ($5,000,000) in AVI in
exchange for, and AVI shall sell, issue and deliver to Investor, such number of
shares of Common Stock (rounded to the nearest whole share) which shall equal
$5,000,000 divided by the Fourth Closing Market Price.&nbsp; Certificates representing any shares
purchased under this Section shall be issued at the Fourth Closing in form
acceptable to Investor and its counsel.&nbsp;
The purchase price for the shares purchased pursuant to this Section
shall be payable by wire transfer of funds to AVI&#146;s account as designated to
Investor in writing prior to the Fourth Closing Date.&nbsp;&nbsp;&nbsp; In addition to Investor&#146;s rights under Section 2.5(a), Investor
may, at Investor&#146;s option and by written notice to AVI, elect to pay in cash
some or all of the amounts payable under this Section 2.4 as an additional
capital contribution for Investor&#146;s Purchased Shares previously purchased in
lieu of requiring AVI to issue Purchased Shares under this Section 2.4.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Certain
Limitations</u>.</font></p>

<dir>
<p><font size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notwithstanding Sections 2.2, 2.3 and
2.4 above, if the number of shares of Common Stock to be purchased by Investor
pursuant to Sections 2.2, 2.3. and 2.4, when added to the number of shares of
Common Stock previously purchased by Investor or issued to Investor upon
previous exercise of the Warrant, would exceed nineteen and nine-tenths percent
(19.9%) of the total number of issued and outstanding voting shares of AVI,
then Investor may elect in writing to do one of the following:</font></p>
</dir>

<dir><dir>
<p><font size=2>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; in lieu of purchasing Purchased Shares
at such Second Closing, Third Closing or Fourth Closing, respectively, Investor
shall pay the full amount required under Section 2.2, 2.3 or 2.4, as the case
may be, but Investor may, at Investor&#146;s option, specify a dollar amount of such
payment with respect to which Investor is suspending or waiving in writing the
requirement that shares of Common Stock under such Section be issued in
consideration for such payment (the &#147;Waived Amount&#148;), provided, however, that<page></font></p>
</dir></dir>

<dir><dir><dir>
<p><font size=2>(A)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Investor, at Investor&#146;s option and upon
prior written notice to AVI, may credit the Waived Amount against and reduce
the exercise price otherwise payable under the Warrant upon exercise thereof;
or</font></p>
</dir></dir></dir>

<dir><dir><dir>
<p><font size=2>(B)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Investor, at Investor&#146;s option on
written notice to AVI, may revoke such suspension or waiver, and within thirty
(30) days thereafter, AVI shall issue such number of shares of Common Stock as
is equal to the Waived Amount divided by the per share price payable under
Section 2.2, 2.3 or 2.4, as the case may be; or</font></p>
</dir></dir></dir>

<page>


<dir><dir>
<p><font size=2>(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; purchase the number of shares of Common
Stock described in Section 2.2, 2.3 or 2.4, respectively, subject to Investor
transferring effective voting control (by irrevocable proxy or other method
designated by Investor and reasonably acceptable to AVI) of such shares of
Common Stock in excess of 19.9% of the total number of issued and outstanding
voting shares of AVI to AVI&#146;s Chief Executive Officer for so long as such
shares, when added to all other shares of Common Stock of AVI owned by Investor
would exceed 19.9% of the total number of issued and outstanding voting shares
of AVI.</font></p>
</dir></dir>

<dir>
<p><font size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AVI will not, without Investor&#146;s
consent, redeem, repurchase or otherwise effect a recapitalization which would
result in Investor and its Affiliates owning more than nineteen and nine-tenths
percent (19.9%) of the total number of issued and outstanding voting shares of
AVI.</font></p>
</dir>

<dir>
<p><font size=2>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notwithstanding Sections 2.3 and 2.4
above, with respect to the Purchased Shares otherwise to be purchased and sold
at the Third Closing and at the Fourth Closing, if the Average Price with
respect to the Applicable Shares (determined without reference to the
Applicable Limit) is less than the Initial Market Price, then Investor shall
not be obligated to purchase, and AVI shall not be obligated to sell, the
Excess Shares unless and until Shareholder Approval is obtained with respect to
the issuance and sale of the Excess Shares.&nbsp;
If the Average Price for the Applicable Shares would equal or exceed the
Initial Market Price (determined without reference to the Applicable Limit),
then the provisions of this Section 2.5(c) shall not apply.&nbsp; If Shareholder Approval is required under
this Section 2.5(c), AVI shall use its best efforts to obtain Shareholder Approval
on or before the next annual AVI shareholder meeting occurring after the date
of the Third Closing Milestone or Fourth Closing Milestone, as the case may
be.&nbsp; If despite such best efforts,
Shareholder Approval is not so obtained&nbsp;
within fifteen months after the Third Closing Milestone or Fourth
Closing Milestone, as the case may be, at all times thereafter Investor shall
not be obligated to purchase, and AVI shall not be obligated to sell, the
Excess Shares.<page></font></p>
</dir>

<dir><dir>
<p><font size=2>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#147;Excess Shares&#148; means such number of
Purchased Shares otherwise issuable at the Third Closing or Fourth Closing, as
the case may be, that would cause the Applicable Shares to exceed the
Applicable Limit.</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#147;Applicable Shares&#148; means the number of
Purchased Shares issued to Investor at all previous Closing under this
Agreement plus such additional number of Purchased Shares otherwise issuable at
the Third Closing or the Fourth Closing, as the case may be, when added to the
number issued at previous Closings, as would equal the Applicable Limit.&nbsp; For avoidance of doubt, Applicable Shares
does not include the Warrant or the Warrant Shares issued or issuable upon
exercise thereof.</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#147;Applicable Limit&#148; means 19.9999% times
21,575,267 shares (or if lesser, the actual number of shares of capital stock
outstanding as of the date of this Agreement).</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>(iv)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#147;Average Price&#148; means weighted
average purchase price paid by Investor under this Agreement for the Applicable
Shares issued at the previous Closings and to be paid by Investor for the
Applicable Shares at the Third Closing or Fourth Closing, as the case may be.</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>(v)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#147;Shareholder Approval&#148; means the vote
required for purposes of approving share issuances of the type contemplated
hereby under the regulations of the National Association of Securities Dealers
(&#147;NASD&#148;).</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>(vi)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; References in this Section 2.5(c) to
specific dollar amounts or specific number of shares shall be equitably
adjusted for any stock splits or the like occurring after the date hereof.</font></p>
</dir></dir>

<dir>
<p><font size=2>(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Promptly after execution of this
Agreement (which may be before or after the First Closing), AVI shall request
in writing from NASD confirmation that no Shareholder Approval is required in
connection with the issuance and sale of Purchased Shares at the Second
Closing, Third Closing and Fourth Closing other than that the Shareholder
Approval, if any, required under Section 2.5(c) above.&nbsp; For purposes hereof, any Shareholder
Approval required for issuance of any Purchased Shares at the Second Closing,
Third Closing and Fourth Closing other than as set forth in Section 2.5(c) is
referred to herein as the &#147;Other Shareholder Approval.&#148;&nbsp; If it is determined, after consultation with
NASD, that Other Shareholder Approval is required in connection with the
purchase and sale of Purchased Shares otherwise issuable at the Second Closing,
Third Closing or Fourth Closing, as the case may be, it shall be a condition to
both Investor&#146;s obligation to purchase, and AVI&#146;s obligation to sell, such
Purchase Shares at the Second Closing, Third Closing and Fourth Closing, as the
case may be, that such Other Shareholder Approval be obtained (to the extent so
required).&nbsp; If such Other Shareholder
Approval is so required, AVI shall use its best efforts to obtain such Other
Shareholder Approval on or before the next annual AVI shareholder meeting
occurring after the date of the Second Closing Milestone, Third Closing
Milestone or Fourth Closing Milestone, as the case may be.&nbsp; If despite such best efforts, such Other
Shareholder Approval is not so obtained&nbsp;
within fifteen months after the Second Closing Milestone, Third Closing
Milestone or Fourth Closing Milestone, as the case may be, at all times
thereafter Investor shall not be obligated to purchase, and AVI shall not be
obligated to sell, any Purchased Shares for which such Other Shareholder
Approval is required but not so obtained.<page></font></p>
</dir>

<dir>
<p><font size=2>(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The parties acknowledge and agree that
if Investor and AVI are not obligated to purchase or sell Purchased Shares at a
Closing as a result of any Shareholder Approval or Other Shareholder Approval
requirements under Section 2.5(c) or 2.5(d), (i) Investor shall not be
obligated to make any payments under this Agreement or otherwise in lieu
thereof, and (ii) the rights and obligations of&nbsp; the parties and their Affiliates under the other terms and conditions
of this Agreement and the terms and conditions of the Transaction Documents
shall not be impaired or affected as a result thereof, and such Agreement and
Transaction Documents shall continue in accordance with their terms and
conditions.</font></p>
</dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Waiver
of Milestones</u>.&nbsp; Investor, at its
option, upon written notice to AVI may waive the requirement that one or more
of the Milestones referenced in Sections 2.2, 2.3 or 2.4 has occurred, in which
case, Investor shall purchase, and AVI shall sell, the Purchased Shares
pursuant to Section 2.2, 2.3 or 2.4, as the case may be, as though such waived
Milestone had occurred.&nbsp; If such a
waiver is made with respect to Section 2.3 or 2.4, the Third Closing Market
Price and the Fourth Closing Market Price shall be determined with respect the
date written notice of such waiver is given rather than the date of the
occurrence of the Third Closing Milestone or Fourth Closing Milestone, as the
case may be.&nbsp; Further, with respect to
each Closing, Investor, at its option, upon written notice to AVI may waive the
requirement that prior Closings shall have occurred, as referenced in Sections
2.2, 2.3 and 2.4.</font></p>

<p align=center><b><font size=2>ARTICLE
3<br>
REPRESENTATIONS AND WARRANTIES OF AVI</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AVI hereby makes the
representations and warranties in this Article 3 to Investor as of the date of
this Agreement and as of each Closing Date, as qualified by the disclosure
schedule attached hereto, and as updated pursuant to Section 6.1(m) (the
&#147;Disclosure Schedule&#148;).&nbsp; The Disclosure
Schedule is accurate and complete as of the date hereof.&nbsp; The Disclosure Schedule is arranged in
sections corresponding to the sections and subsections of this Article 3.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Organization,
Qualifications and Corporate Power</u>.</font></p>

<dir>
<p><font size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AVI and each AVI Subsidiary is a
corporation duly incorporated, validly existing and, to the extent applicable under
the laws of such jurisdiction, is in good standing under the laws of its
respective jurisdiction of incorporation and, to the extent applicable, is duly
licensed or qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification and where the failure to be so
licensed or qualified would have a Material Adverse Effect upon AVI, such AVI
Subsidiary or its respective business.&nbsp;
AVI and each AVI Subsidiary has, pursuant to the applicable laws, the
corporate power and authority to own and hold its properties and to carry on
its business as now conducted and as proposed to be conducted.&nbsp; AVI has the corporate power and authority to
execute, deliver and perform this Agreement and the Transaction Documents, and
to issue, sell and deliver the Purchased Securities.<page></font></p>
</dir>

<dir>
<p><font size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AVI does not (i) own of record or
beneficially, directly or indirectly, (A) any shares of capital stock or
securities convertible into capital stock of any other corporation, or (B) any
participating interest in any partnership, joint venture or other non-corporate
business enterprise, or (ii) control, directly or indirectly, any other entity.</font></p>
</dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Authorization
of Agreements, Etc</u>.</font></p>

<dir>
<p><font size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The execution and delivery by AVI of
this Agreement and the Transaction Documents, the performance by AVI of its
obligations hereunder and thereunder, and the issuance, sale and delivery of
the Purchased Securities have been duly authorized by all requisite corporate
action of AVI, its shareholders and directors, and will not violate any
provision of law, any order of any court or other agency of government, the
Articles of Incorporation or the Bylaws of AVI, as amended, or any provision of
any indenture, agreement or other instrument to which AVI or any of its
properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any Lien upon any of the properties or assets of AVI.</font></p>
</dir>

<dir>
<p><font size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Purchased Securities have been duly
authorized by all requisite action of AVI, its shareholders and its directors,
and the Purchased Shares and Warrant Shares when issued in accordance with this
Agreement, will be validly issued, fully paid and nonassessable shares of
Common Stock with no personal liability attaching to the ownership thereof and
will be free and clear of all Liens.&nbsp;
The issuance, sale or delivery of the Purchased Securities is not
subject to any preemptive right of stockholders of AVI or to any right of first
refusal or other right in favor of any person that has not been complied with
or duly waived.</font></p>
</dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Validity</u>.&nbsp; Each of this Agreement and the Transaction
Documents has been duly executed and delivered by AVI and constitutes the
legal, valid and binding obligation of AVI enforceable in accordance with its
terms except as may be limited by laws affecting creditors&#146; rights generally or
by judicial limitations on the right to specific performance.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Authorized
Capital Stock</u>.&nbsp; The authorized
capital stock of AVI consists of (a) 50,000,000 shares of Common Stock, par
value $0.0001, of which _21,575,267shares are issued and outstanding, and (b)
2,000,000 shares of preferred stock, par value $0.0001, none of which are
issued and outstanding.&nbsp; There are
issued and outstanding options to purchase an aggregate 2,866,335&nbsp; shares of Common Stock, warrants to purchase
an aggregate 7,352,003 shares of Common Stock, and no other outstanding
subscriptions, warrants, options, convertible securities, or other rights
(contingent or other) to purchase or otherwise acquire Common Stock or other
equity securities of AVI.&nbsp; There are no
agreements or arrangements under which AVI is obligated to register the sale of
any of its securities under the Securities Act.&nbsp; Except for an existing warrant held by SuperGen, Inc. to acquire
ten percent of the outstanding securities (as defined therein at the time of
exercise), there are no anti-dilution or price adjustment provisions contained
in any security issued by AVI (or in any agreement providing rights to security
holders) that will be triggered by the issuance of the Purchased
Securities.&nbsp; The designations, powers,
preferences, rights, qualifications, limitations and restrictions in respect of
each class of authorized equity securities of AVI are as set forth in AVI&#146;s
Articles of Incorporation, a true and correct copy of which has been provided
to Investor, and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding and enforceable
and in accordance with all applicable laws.&nbsp;
Except as provided for in AVI&#146;s Articles of Incorporation, AVI has no
obligation (contingent or other) to purchase, redeem or otherwise acquire any
of the equity securities or any interest therein or rights to acquire such
securities or to pay any dividend or make any other distribution in respect
thereof.&nbsp; To&nbsp; AVI&#146;s knowledge, there are no voting trusts or agreements,
stockholders&#146; agreements, pledge agreements, buy-sell agreements, rights of first
refusal, preemptive rights or proxies relating to any securities of AVI (whether
or not AVI is a party thereto).&nbsp; All of
the outstanding securities of AVI were issued in compliance with all applicable
federal and state securities laws.<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>SEC
Documents; Financial Statements</u>.&nbsp;
AVI has filed in a timely manner all documents that AVI was required to
file with the SEC during the twelve (12) months preceding the date of this
Agreement.&nbsp; As of their respective
filing dates, all SEC Documents complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as applicable.&nbsp; None of the SEC Documents contained, as of
their respective dates, any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, and such SEC Documents, when read as a whole, do not
contain any untrue statements of a material fact and do not omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.&nbsp; The Financial Statements comply in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto.&nbsp; The Financial Statements have been prepared
in accordance with United States generally accepted accounting principles
consistently applied, and fairly present AVI&#146;s consolidated financial position
as of the dates thereof and the results of AVI&#146;s consolidated operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end adjustments).&nbsp;
Except as set forth in the Financial Statements, neither AVI nor any AVI
Subsidiaries has any liabilities, contingent or otherwise, other than
liabilities incurred in the ordinary course of business subsequent to December
31, 2000, and liabilities of the type not required under United States
generally accepted accounting principles to be reflected in such Financial
Statements.&nbsp; Such liabilities incurred
subsequent to December 31, 2000, are not, in the aggregate, material to the
financial condition or operating results of AVI.<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Litigation;
Compliance with Law</u>.&nbsp; There is no:
(a) action, suit, claim, proceeding or investigation pending or, to AVI&#146;s
knowledge, threatened against or affecting AVI or any AVI Subsidiary, at law or
in equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (b) arbitration proceeding relating to AVI or any AVI Subsidiary
pending under collective bargaining agreements or otherwise or (c) governmental
inquiry pending or, to&nbsp; AVI&#146;s knowledge,
threatened against or affecting AVI or any AVI Subsidiary (including without
limitation any inquiry as to the qualification of AVI or any AVI Subsidiary to
hold or receive any license or permit), and there is no basis for any of the
foregoing.&nbsp; AVI has not received any
opinion or memorandum or legal advice from legal counsel to the effect that AVI
or any AVI Subsidiary is exposed, from a legal standpoint, to any liability or
disadvantage which may have a Material Adverse Effect.&nbsp; Neither AVI nor any AVI Subsidiary is in
default with respect to any order, writ, injunction or decree of any court or
of any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.&nbsp; There is no action, claim, proceeding,
investigation or suit by AVI or any AVI Subsidiary pending or threatened
against others.&nbsp; AVI and each AVI
Subsidiary have complied with all laws, rules, regulations and orders
applicable to its business, operations, properties, assets, products and
services.&nbsp; AVI and each AVI Subsidiary
has or will obtain prior to becoming necessary all necessary permits, licenses
and other authorizations required to conduct its business as conducted and as
proposed to be conducted which, if not obtained, would have, either
individually or in the aggregate, a Material Adverse Effect.&nbsp; There is no existing law, rule, regulation
or order, and AVI is not aware of any proposed law, rule, regulation or order,
whether federal or state, which would prohibit or restrict AVI or any AVI Subsidiary
from, or otherwise materially adversely affect AVI or any AVI Subsidiary in,
conducting its business in any jurisdiction in which it is now conducting
business or in which it proposes to conduct business.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Proprietary
Information of Third Parties</u>.&nbsp; No
third party has claimed or has reason to claim that any person employed by or
affiliated with AVI or any AVI Subsidiary has (a) violated or may be violating
any of the terms or conditions of his employment, non-competition or
nondisclosure agreement with such third party, (b) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party, or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees.&nbsp; To
AVI&#146;s knowledge, no third party has requested information from or otherwise
communicated with AVI or any AVI Subsidiary which suggests that such a claim
might be contemplated.&nbsp; To AVI&#146;s
knowledge, no person employed by or affiliated with AVI or any AVI Subsidiary
has employed or proposes to employ any trade secret or any information or
documentation proprietary to any former employer, and to AVI&#146;s knowledge, no
person employed by or affiliated with AVI or any AVI Subsidiary has violated any
confidential relationship which such person may have had with any third party,
in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of AVI or any AVI Subsidiary, and AVI has no reason to believe there will be
any such employment or violation.<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Title
to Properties</u>.&nbsp; AVI or the AVI
Subsidiaries have good and marketable title to its properties and assets
reflected in the most recent Financial Statements (other than properties and
assets disposed of in the ordinary course of business since the date thereof),
and all such properties and assets are free and clear of all Liens, except for
liens for or current taxes not yet due and payable and minor imperfections of
title, if any, not material in nature or amount and not materially detracting
from the value or impairing the use of the property or asset subject thereto or
impairing the business or proposed business of AVI.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Leasehold
Interests</u>.&nbsp; Each lease or agreement
to which AVI or any AVI Subsidiary is a party under which it is a lessee of any
property, real or personal, is a valid and existing agreement without any
default of AVI or any AVI Subsidiary thereunder and, to AVI&#146;s knowledge,
without any default thereunder of any other party thereto.&nbsp; No event has occurred and is continuing
which, with due notice or lapse of time or both, would constitute a default or
event of default by AVI or any AVI Subsidiary under any such lease or agreement
or, to AVI&#146;s knowledge, by any other party thereto.&nbsp; The possession of such property by AVI or such AVI Subsidiary has
not been disturbed and, to AVI&#146;s knowledge, no claim has been asserted or
threatened against AVI or such AVI Subsidiary adverse to its rights in such property.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.10&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Taxes</u>.&nbsp; AVI and
each AVI Subsidiary has timely filed, or caused to be timely filed, all
federal, state and local tax returns for income taxes, franchise taxes, sales
taxes, withholding taxes, property taxes and, to AVI&#146;s knowledge, all other
taxes of every kind whatsoever required by law to be filed, and all such tax
returns are complete and accurate and in accordance with all requirements
applicable thereto.&nbsp; The tax returns of
AVI or any AVI Subsidiary have never been audited by appropriate governmental
authorities and AVI does not know of any additional tax liabilities for any
periods for which such returns have been filed.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.11&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Patents, Trademarks, Etc</u>.&nbsp; AVI and each AVI Subsidiary owns or
possesses licenses or other rights to use all Intellectual Property necessary
to or used in the conduct of its business as conducted and as proposed to be
conducted, and no claim is pending or, to&nbsp;
AVI&#146;s knowledge, threatened to the effect that the operations of AVI or
any AVI Subsidiary infringe upon or conflict with the asserted rights of any
other person under any Intellectual Property, and to AVI&#146;s knowledge there is
no basis for any such claim (whether or not pending or threatened).&nbsp; Except as set forth in the SEC Documents, no
claim is pending or threatened to the effect that any such Intellectual
Property owned or licensed by AVI or any AVI Subsidiary, or which AVI or any
AVI Subsidiary otherwise has the right to use, is invalid or unenforceable by
AVI or such AVI Subsidiary, and to AVI&#146;s knowledge there is no basis for any
such claim (whether or not pending or threatened).&nbsp; To&nbsp; AVI&#146;s knowledge, all
technical information developed by and belonging to AVI or any AVI Subsidiary
which has not been patented has been kept confidential.&nbsp; Neither AVI nor any AVI Subsidiary has
granted or assigned to any other person or entity any right to develop,
manufacture, have manufactured, assemble or sell the products or proposed
products or to provide the services or proposed services of AVI or such AVI
Subsidiary. &nbsp;AVI has secured valid
written assignments from all consultants and employees who contributed to the
creation or development of Intellectual Property or the rights to such
contributions that AVI does not already own by operation of law.&nbsp; AVI has taken all necessary and appropriate
steps to protect and preserve the confidentiality of all Intellectual Property
not otherwise protected by patents, patent applications or copyright.&nbsp; AVI has a policy requiring each of its employees
and contractors to execute proprietary information and confidentiality
agreements substantially in AVI&#146;s standard forms and all current and former
employees and contractors of AVI and each AVI Subsidiary have executed such an
agreement.&nbsp; AVI has provided a true and
correct copy of such form to Investor.<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.12&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Loans and Advances</u>.&nbsp;
Except as disclosed in the SEC Documents or Disclosure Schedule, AVI and
the AVI Subsidiaries do not have any outstanding loans or advances to any
person and are not obligated to make any such loans or advances, except, in
each case, for advances to employees of AVI or such AVI Subsidiary in respect
of reimbursable business expenses anticipated to be incurred by them in
connection with their performance of services for AVI or such AVI Subsidiary.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.13&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Assumptions, Guaranties, Etc. of Indebtedness of Other
Persons</u>.&nbsp; Except as disclosed in the
Financial Statements, neither AVI nor any AVI Subsidiary has assumed,
guaranteed, endorsed or otherwise become directly or contingently liable on any
indebtedness of any other person (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor, or otherwise to
assure the creditor against loss), except for guaranties by endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business.<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.14&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Governmental Approvals</u>.&nbsp;
Subject to the accuracy of the representations and warranties of
Investor set forth in Article&nbsp;4, no registration or filing with, or
consent or approval of or other action by, any federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance by AVI of this Agreement, the Transaction
Documents, or for the issuance, sale and delivery of the Purchased Securities,
other than filings pursuant to state securities laws (all of which filings have
been made or will be timely made by AVI) in connection with the sale of the
Purchased Securities.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.15&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Brokers</u>.&nbsp; AVI has
no contract, arrangement or understanding with any broker, finder or similar
agent with respect to the transactions contemplated by this Agreement.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.16&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Transactions With Affiliates</u>.&nbsp; Except as disclosed in the SEC Documents, no director, officer,
employee or stockholder of AVI or any AVI Subsidiary, or member of the family
of any such person, or any corporation, partnership, trust or other entity in
which any such person, or any member of the family of any such person, has a
substantial interest or is an officer, director, trustee, partner or holder of
more than 5% of the outstanding capital stock thereof, is a party to any
transaction with AVI or any AVI Subsidiary, including any contract, agreement
or other arrangement providing for the employment of, furnishing of services
by, rental of real or personal property from or otherwise requiring payments to
any such person or firm.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.17&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Environmental Matters</u>.&nbsp;
AVI and each AVI Subsidiary has obtained, and is in full compliance
with, all permits, licenses or other approvals necessary under the
Environmental Laws or Regulations with respect to its business or assets, and
is in compliance with all Environmental Laws or Regulations.&nbsp; Neither AVI nor any AVI Subsidiary has taken
any action or failed to take any action with respect to its business, assets or
the real property presently or formerly used in connection therewith that might
result in, nor has AVI, any AVI Subsidiary or their businesses or assets ever
been subject to any investigations, administrative proceedings, litigation,
regulatory hearings, or other action threatened, proposed or pending that
alleged or alleges: (i) actual or threatened violation of or noncompliance with
any Environmental Law or Regulation; or (ii) actual or threatened personal
injury or property damage or contamination of any kind resulting from a release
or threatened release of a Hazardous Substance.<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.18&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Employees</u>.&nbsp;
To&nbsp; AVI&#146;s knowledge, no employee
of AVI or any AVI Subsidiary is in violation of any term of any employment
contract, patent disclosure agreement or any other contract or agreement with
any third party, the terms of which would restrict the right of any such
employee to be employed by AVI or any AVI Subsidiary because of the nature of
the business conducted or to be conducted by AVI or any AVI Subsidiary or for
any other reason or would conflict with such employee&#146;s obligation to use his
best efforts to promote the interests of AVI, and the continued employment by
AVI and the&nbsp; AVI Subsidiaries of their
present employees will not result in any such violations.&nbsp; There are no strikes or other labor disputes
against AVI or any AVI Subsidiary pending or, to the knowledge of AVI,
threatened which could have a Material Adverse Effect.&nbsp; Neither AVI nor any AVI Subsidiary is a
party to or bound by any collective bargaining agreement or other labor
agreement with any bargaining agent (exclusive or otherwise) of any of its
employees.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.19&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Insurance</u>.&nbsp; AVI
and each AVI Subsidiary maintains (a)&nbsp;insurance on all material assets of
a type customarily insured, covering property damage by fire or other casualty;
and (b)&nbsp;adequate insurance protection against all liabilities, claims, and
risks against which it is customary to insure.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.20&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Absence of Certain Changes</u>.&nbsp; Since December 31, 2000, no event has occurred which could have a
Material Adverse Effect.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.21&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Investment Company Status</u>.&nbsp; AVI is not and upon consummation of the sale of the Purchased
Securities will not be an &#147;investment company,&#148; a company controlled by an
&#147;investment company&#148; or an &#147;affiliated person&#148; of, or &#147;promoter&#148; or &#147;principal
underwriter&#148; for, an &#147;investment company&#148; as such terms are defined in the
Investment Company Act of 1940, as amended.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.22&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Regulatory Filings</u>. All
documentation, correspondence, reports, data, analysis and certifications
relating to or regarding any drugs of AVI, filed or delivered by or on behalf
of AVI with any governmental authority, agency or body was true and accurate
when so filed or delivered and, to the knowledge of AVI, remains true and
accurate except where any changes would not have a Material Adverse
Effect.&nbsp; AVI is not aware of any rule
making or similar proceedings before the FDA or comparable federal, state,
local or foreign government bodies which involve or affect AVI or any AVI
Subsidiary which could have a Material Adverse Effect.&nbsp; The descriptions of the results of tests or
evaluations contained in SEC Documents or delivered to the Investor are
accurate and complete in all material respects, and AVI has no knowledge of any
other tests or evaluations, the results of which reasonably call into question
descriptions of the results of tests or evaluations referred to in SEC
Documents or delivered to the Investor.&nbsp;
Neither AVI nor any AVI Subsidiary has received any notices or
correspondence from the FDA or any other governmental agency requiring the
termination, suspension or modification of any tests or evaluations conducted
by or on behalf of AVI or any AVI Subsidiary that are described in SEC
Documents or as delivered to the Investor.<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.23&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>State Takeover Laws</u>.&nbsp; The Board of the Company has approved the
transactions contemplated by this Agreement and the Transaction Documents such
that the provisions of Section 60.835 of the Oregon Business Corporations Act
will not apply to&nbsp; this Agreement, the
Transaction Documents or any of the transactions contemplated hereby or
thereby.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.24&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Nasdaq; Etc</u>.&nbsp; AVI
is in compliance with all applicable Nasdaq continued listing requirements for
the Nasdaq Stock Market and is listed in good standing on the Nasdaq Stock
Market.&nbsp; There are no proceedings
pending or, to AVI&#146;s knowledge, threatened against AVI relating to the
continued listing of AVI&#146;s Common Stock on the Nasdaq National Market and AVI
has not received any notice of, nor to the knowledge of AVI is there any basis
for, the delisting of the Common Stock from the Nasdaq National Market. AVI has
not engaged in the past three (3) months in any discussion with any
representative of any corporation or corporations regarding a proposed Change
of Control of the Company.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.25&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Disclosure</u>.&nbsp;
Neither this Agreement, nor any Schedule or Exhibit to this Agreement,
contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein not
misleading.&nbsp; 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.&nbsp; There is no fact which AVI has not disclosed to Investor and its
counsel in writing and of which AVI is aware which could have a Material
Adverse Effect.</font></p>

<p align=center><b><font size=2>ARTICLE
4<br>
REPRESENTATIONS AND WARRANTIES OF INVESTOR</font></b></p>

<p><font size=2>Investor
makes the following representations and warranties to AVI:</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Purchase
of Purchased Securities</u>.&nbsp; Investor
is an &#147;accredited investor&#148; within the meaning of Rule 501 under the Securities
Act and was not organized for the specific purpose of acquiring the Purchased
Securities.&nbsp; Investor has sufficient
knowledge and experience in investing in companies similar to AVI in terms of
AVI&#146;s stage of development so as to be able to evaluate the risks and merits of
Investor&#146;s investment in AVI and Investor is able financially to bear the risks
thereof.&nbsp; Investor has had an
opportunity to discuss AVI&#146;s business, management and financial affairs with
AVI&#146;s management<i>.</i>&nbsp; The Purchased
Securities are being acquired for Investor&#146;s own account for the purpose of
investment and not with a present view toward their public sale or
distribution; provided, however, that by making the representation herein,
Investor does not agree to hold any of the Purchased Securities for any minimum
or other specific term, except as set forth in Article 2 of this Agreement or
pursuant to the terms of the Registration Rights Agreement, and reserves the
right to dispose of the Purchased Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities
Act.&nbsp; Investor understands that (i) the
Purchased Securities have not been registered under the Securities Act by
reason of their issuance in a transaction exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) thereof or Rule 505
or 506 promulgated thereunder, (ii) the Purchased Securities must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (iii) the Purchased
Securities will bear a legend to such effect and (iv) AVI will make a notation
on its transfer books to such effect.<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Corporate
Authority</u>.&nbsp; The execution, delivery
and performance by Investor and Medtronic, as applicable, of this Agreement,
the Transaction Documents, and the transactions contemplated hereby and thereby
have been duly and validly authorized and approved by all requisite corporate
action on the part of Investor and Medtronic, and the execution and the
delivery of this Agreement, the Transaction Documents, and consummation of the
transactions contemplated hereby and thereby and compliance with and
fulfillment of the terms and provisions hereof and thereof will not (i)
conflict with or result in a breach of the terms, conditions or provisions of
or constitute a default under the Articles of Incorporation or Bylaws of
Investor or Medtronic, or (ii) require any affirmative approval, consent, authorization
or other order or action of any court, governmental authority, regulatory body,
creditor or any other person.&nbsp; Investor
and Medtronic have all requisite power and authority to do and perform all acts
and things required to be done by it under this Agreement, the Transaction
Documents and the agreements contemplated hereby and thereby.&nbsp; Each of this Agreement and the Transaction
Documents has been duly executed and delivered by Investor and Medtronic and
constitutes the legal, valid and binding obligation of those entities
enforceable in accordance with its terms except as may be limited by laws
affecting creditors&#146; rights generally or by judicial limitations on the right
to specific performance.</font></p>

<p align=center><b><font size=2>ARTICLE
5<br>
COVENANTS</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Best
Efforts</u>.&nbsp; AVI will use its best
efforts to satisfy in a timely fashion each of the conditions to be satisfied
under Article 6 of this Agreement.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.2 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Reporting Status; Eligibility to Use Form S-3</u>.&nbsp; AVI's Common Stock is registered under
Section 12 of the Exchange Act.&nbsp;
Throughout the Registration Period (as defined in the Registration
Rights Agreement), AVI will timely file all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC under
the reporting requirements of the Exchange Act, and AVI will not terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination.&nbsp; AVI currently meets, and
will take all reasonably necessary action to continue to meet, the
&quot;registrant eligibility&quot; requirements set forth in the general
instructions to Form S-3 (or any successor registration form thereto) to enable
the registration of the Registrable Shares (as defined in the Registration
Rights Agreement).<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Listing
of Additional Shares</u>. AVI will file with the NASDAQ National Market a
Notification Form for Listing of Additional Shares for an amount of shares of
Common Stock equal to at least the amount of the Purchased Shares as required
by the NASDAQ National Market regulatory requirements.&nbsp;AVI will also comply with all applicable Nasdaq continued listing
requirements for the Nasdaq Stock Market and shall remain in good standing on
the Nasdaq Stock Market.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.4 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>No Integration</u>.&nbsp;
AVI will not make any offers or sales of any security (other than the
Purchased Securities) under circumstances that would cause the offering of the
Purchased Securities to be integrated with any other offering of securities by
AVI (a) for the purpose of any stockholder approval provision applicable to AVI
or its securities or (b) for purposes of any registration requirement under the
Securities Act.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Regulatory
Approvals</u>.</font></p>

<dir>
<p><font size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AVI and Investor shall each use
commercially reasonable efforts to take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things as may be necessary or
applicable under the HSR Act, and will file and, if appropriate, use
commercially reasonable efforts to have declared effective or approved all
documents and notifications with the U.S. Federal Trade Commission and
Department of Justice and other governmental or regulatory bodies that they
deem necessary or appropriate for, the issuance of the Purchased Securities or
the Transaction Documents, and each party shall give the other information
reasonably requested by such other party pertaining to it and its subsidiaries
and affiliates to enable such other party to take such actions.&nbsp;&nbsp;&nbsp; The parties agree to make any such
required filing a reasonable period of time prior to the anticipated date of
the occurrence of any closing hereunder or exercise of the Warrant that gives
rise to such required filing.&nbsp;&nbsp; It shall
be a condition to the occurrence of any closing hereunder and to exercise of
the Warrant that any such actions or approvals required under the HSR Act be
declared effective or approved, or that any waiting periods (or extensions
thereof) under the HSR Act expire or terminate.&nbsp; Notwithstanding the foregoing or anything herein to the contrary,
Medtronic and its Affiliates shall not be required to make arrangements for or
to effect the cessation, sale, or other disposition of particular assets or
categories of assets or businesses of Medtronic, AVI, or any of their
Affiliates.</font></p>
</dir>

<dir>
<p><font size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Although the parties do not anticipate
any legislative, administrative or judicial objection to the consummation of
the transactions contemplated by this Agreement, AVI and Investor agree to each
use commercially reasonable efforts to contest and resist any action, including
legislative, administrative or judicial action, and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) (an &#147;Order&#148;) that is in effect and that
restricts, prevents or prohibits the consummation of the transactions
contemplated by this Agreement, including, without limitation, by vigorously
pursuing available avenues of administrative and judicial appeal.&nbsp; Notwithstanding the foregoing provisions of
this Section or anything in this Agreement to the contrary, nothing shall
require Investor to make or agree to make, any divestiture of any portion of
any business or assets of Investor or its Affiliates in order to obtain any
waiver, consent or approval, and neither Investor nor its Affiliate shall be
required to take or commit to take any action that limits its freedom of action
or rights with respect to AVI or the Purchased Securities.<page></font></p>
</dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Exclusivity</u>.&nbsp; AVI agrees that for a period commencing upon
execution of this Agreement until the earlier of the First Closing or
termination of this Agreement in accordance with Article 9, AVI will not
directly or indirectly encourage or solicit the submission of, or entertain
inquiries, proposals or offers from any person or entity (other than Medtronic or
its Affiliates), or otherwise provide information to or engage in discussions
with any other person or entity, in any way relating to the sale, licensing,
distribution or other disposition of the Drug.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Reserve
for Shares; Authorized Shares</u>.&nbsp; AVI
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock such number of its duly authorized shares of
Common Stock to comply with the terms of this Agreement and the Warrant.&nbsp; If at any time the number of shares of
authorized but unissued Common Stock shall not be sufficient to comply with the
terms of this Agreement and the Warrant, AVI will promptly take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares of Common Stock as shall be sufficient
for such purpose.&nbsp; AVI will obtain any
authorization, consent, approval or other action by or make any filing with any
court or administrative body that may be required under applicable securities
laws in connection with the issuance of any shares issued by it in order to
comply with the terms of this Agreement and the Warrant.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Corporate Existence</u>.&nbsp; So long as Investor beneficially owns any of
the Purchased Securities, AVI shall maintain its corporate existence, except in
the event of a merger, consolidation or sale of all or substantially all of
AVI&#146;s assets, as long as the surviving or successor entity in such transaction
(a) assumes AVI&#146;s obligations hereunder and under the other Transaction
Documents; (b) has no legal, contractual or other restrictions on its ability
to perform the obligations of AVI hereunder and under the Transaction
Documents; and (c) is a publicly traded corporation whose common stock and the
shares of capital stock issuable upon exercise of the Warrants are (or would be
upon issuance thereof) listed for trading on the Nasdaq Stock Market, New York
Stock Exchange or American Stock Exchange.</font></p>

<p align=center><b><font size=2>ARTICLE
6<br>
CONDITIONS TO CLOSING</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Conditions
to Investor&#146;s Obligations</u>.&nbsp; The obligations
of Investor to purchase and pay for the Purchased Shares and to accept the
Warrant pursuant to Section 2.1 at the First Closing, and, subject to further
compliance with the provisions of subsections&nbsp;
(m)and (n)below, to purchase and pay for the Purchased Shares being
purchased by Investor pursuant to Section 2.2 at the Second Closing Date,
pursuant to Section 2.3 at the Third Closing Date, and pursuant to Section 2.4
at the Fourth Closing Date, are subject to the satisfaction or waiver, on each
such respective Closing Date, of the conditions set forth below:<page></font></p>

<dir>
<p><font size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Representations and Warranties to be
True and Correct</u>.&nbsp; The
representations and warranties contained in Article 3 shall be true, complete
and correct on and as of such Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
President and Chief Financial Officer of AVI shall have certified to such
effect to Investor in writing.</font></p>
</dir>

<dir>
<p><font size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Performance</u>.&nbsp; AVI shall have performed and complied with
all terms and conditions contained in this Agreement and the Transaction
Documents which are required to be performed or complied with by AVI prior to
or at such Closing Date, and the President and Chief Financial Officer of AVI
shall have certified to Investor in writing to such effect and to the further
effect that all of the conditions set forth in this Section 6.1 have been
satisfied.</font></p>
</dir>

<dir>
<p><font size=2>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Execution and Delivery of
Transaction Documents.</u>&nbsp; AVI shall
have executed and delivered the Transaction Documents.</font></p>
</dir>

<dir>
<p><font size=2>(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>All Proceedings to be Satisfactory</u>.&nbsp; All corporate and other proceedings to be
taken by AVI in connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in form and substance to Investor
and its counsel, and Investor and its counsel shall have received all such
counterpart originals or certified or other copies of such documents as they
reasonably may request.</font></p>
</dir>

<dir>
<p><font size=2>(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Supporting Documents</u>.&nbsp; Investor and their counsel shall have
received copies of the following documents:</font></p>
</dir>

<dir><dir>
<p><font size=2>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a certificate of the Secretary of
State of the State of Oregon dated as of a date within five days prior to such
Closing Date as to the corporate existence of AVI and listing all documents of
AVI on file with said Secretary of State;</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a certificate of the Secretary of AVI
dated such Closing Date and certifying: (A) AVI&#146;s then current Articles of
Incorporation and Bylaws; (B) that attached thereto is a true and complete copy
of all resolutions adopted by the Board of Directors of AVI authorizing the
execution, delivery and performance of this Agreement, the Transaction
Documents, the issuance, sale and delivery of the Purchased Securities, and
that all such resolutions are in full force and effect and are all the resolutions
adopted in connection with the transactions contemplated by this Agreement and
the Transaction Documents; and (C) to the incumbency and specimen signature of
each officer of AVI executing this Agreement, the Transaction Documents, the
stock certificates representing the Purchased Shares, the Warrant, and any
certificate or instrument furnished pursuant hereto, and a certification by
another officer of AVI as to the incumbency and signature of the officer
signing the certificate referred to in this subsection (ii); and<page></font></p>
</dir></dir>

<dir><dir>
<p><font size=2>(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; such additional supporting documents and
other information with respect to the operations and affairs of AVI as Investor
or its counsel reasonably may request.</font></p>
</dir></dir>

<dir>
<p><font size=2>(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Required Consents</u>.&nbsp; AVI shall have obtained the written consent
or approval of each person whose consent or approval Investor reasonably
believes is required in connection with this Agreement and the Transaction
Documents, including but not limited to expiration or termination of any
waiting periods (and any extension thereof) under the HSR Act and all
applicable consents and approvals, in form and content satisfactory to
Investor, from the National Institute of Health with respect to the assignment
of the PHS License (as defined in the License and Development Agreement) to AVI
and the grant of a sublicense by AVI to Medtronic, Inc. with respect thereto.</font></p>
</dir>

<dir>
<p><font size=2>(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Litigation Affecting Closing</u>.&nbsp; No suit, action or other proceeding shall be
pending or threatened by any third party or by or before any court or
governmental agency in which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or the Transaction
Documents, or the consummation of the transactions contemplated hereby or
thereby, and no investigation that might result in any such suit, action or
other proceeding shall be pending or threatened.</font></p>
</dir>

<dir>
<p><font size=2>(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Legislation</u>.&nbsp; No statute, rule, regulation, order, or
interpretation shall have been proposed, enacted, entered or deemed applicable
by any domestic or foreign government or governmental or administrative agency
or court which would make the transactions contemplated by this Agreement or
the Transaction Documents illegal.</font></p>
</dir>

<dir>
<p><font size=2>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Opinion of Company&#146;s Counsel</u>.&nbsp; Investor shall have received from Hurley,
Lynch&nbsp;&amp; Re, P.C., counsel for AVI, an opinion dated as of such Closing
Date in form and scope satisfactory to Investor and their counsel,
substantially as follows:</font></p>
</dir>

<dir><dir>
<p><font size=2>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AVI and each AVI Subsidiary is a
corporation duly incorporated, validly existing and, to the extent applicable
under the laws of such jurisdiction, is in good standing under the laws of its
respective jurisdiction of incorporation and, to the extent applicable, is duly
licensed or qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification and where the failure to be so
licensed or qualified would have Material Adverse Effect.&nbsp; AVI and each AVI Subsidiary has, pursuant to
the applicable laws, the corporate power and authority to own and hold its
properties and to carry on its business as now conducted and as proposed to be
conducted.&nbsp; AVI has the corporate power
and authority to execute, deliver and perform this Agreement and the
Transaction Documents and to issue, sell and deliver the Purchased Securities.<page></font></p>
</dir></dir>

<dir><dir>
<p><font size=2>(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The authorized and outstanding capital
stock of AVI consists of that described in Section 3.4 of this Agreement.&nbsp; All such issued and outstanding shares,
options and warrants were duly authorized and validly issued, fully paid and
nonassessable and free and clear of any Liens, except as to restrictions on
transfer imposed by AVI to comply with federal and applicable state securities
laws.&nbsp; To such counsel&#146;s knowledge after
investigation, and except as disclosed to Investor, after reasonable
investigation, there are no other options, warrants, conversion privileges,
preemptive rights, rights of first refusal or other rights (or agreements with
respect to the issuance thereof) presently in existence to purchase or acquire
any of the authorized but unissued capital stock of AVI.</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; All necessary corporate action on the
part of AVI and of its officers, directors and shareholders has been taken for
the valid execution and delivery of this Agreement, the Transaction Documents,
and the performance of the obligations of AVI hereunder and thereunder. The
Board of the Company has approved the transactions contemplated by this
Agreement and the Transaction Documents such that the provisions of Section
60.835 of the Oregon Business Corporations Act will not apply to this
Agreement, the Transaction Documents or any of the transactions contemplated
hereby or thereby. This Agreement and the Transaction Documents have been
validly executed and delivered and are legal, valid and binding obligations of
AVI, enforceable against AVI in accordance with their respective terms.&nbsp; The
execution and delivery of this Agreement and the Transaction Documents and the
performance by AVI of its obligation hereunder and thereunder do not conflict
with or result in the violation of AVI&#146;s Articles of Incorporation or Bylaws;
or any material written agreement, instrument, order, writ, judgment or decree
known to such counsel to which AVI is a party or by which it is bound; or to
such counsel&#146;s knowledge, violate any existing law or regulation.</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>(iv)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Purchased Securities have been duly
authorized by all necessary corporate action on the part of AVI and, upon delivery
by AVI in accordance with the terms of this Agreement, will be duly and validly
issued, fully paid and nonassessable and free and clear of any Liens, except
that such Purchased Securities will be subject to restrictions on transfer
imposed by AVI to comply with federal and applicable state securities laws as
described in Article 4 hereof.</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>(v)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; To such counsel&#146;s knowledge after
investigation, except as disclosed in the Disclosure Schedule, there are no
actions, proceedings or investigations which are pending or threatened against
or affecting AVI, that, either in any case or in the aggregate, might result in
a Material Adverse Effect.</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>(vi)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; All consents, approvals, orders,
authorizations or registrations, qualifications, designations, declarations or
filings of or with any federal or state governmental authority on the part of
AVI required in connection with the consummation of the transactions
contemplated by this Agreement and the Transaction Documents have been made,
obtained or effected (provided, however, that filings under applicable state
securities laws may be made promptly after the Closing to the extent such
filings are permitted to be made after the sale of the Purchased
Securities).&nbsp; Based in part on the representations
of Investor in Article 4 of this Agreement, the offer, sale and issuance by AVI
of the Purchased Securities, all in conformity with the terms of this
Agreement, do not require registration under Section 5 of the Securities Act of
1933, as amended.<page></font></p>
</dir></dir>

<dir>
<p><font size=2>In
rendering such opinions, said counsel may rely on such certificates of public
officials and, with respect to factual matters, of officers of AVI as such
counsel deems necessary or appropriate, and such opinions may be limited in
scope and be subject to such qualifications as is customary under the
circumstances and as may be reasonably acceptable to counsel to Investor.</font></p>
</dir>

<dir>
<p><font size=2>(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>No Change of Control</u>.&nbsp; Since the date hereof, there shall not have
been any Change of Control.</font></p>
</dir>

<dir>
<p><font size=2>(k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>No Material Adverse Changes</u>.&nbsp; Since the date hereof, no event shall have
occurred which may result in a Material Adverse Effect.</font></p>
</dir>

<dir>
<p><font size=2>(l)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>No Default</u>.&nbsp; Since the date hereof, no default (or event
which, with the passage of time and/or the giving of notice, would constitute a
default) of AVI shall have occurred under this Agreement or the Transaction
Documents.</font></p>
</dir>

<dir>
<p><font size=2>(m)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Information to Be Provided to
Investor at Second, Third, and Fourth Closings</u>.&nbsp; Upon achieving each of the Second Closing Milestone, Third
Closing Milestone, and Fourth Closing Milestones, and in any event not less
than&nbsp; ten (10) business days prior to
the applicable Closing, AVI shall provide to Investor an updated Disclosure
Schedule that qualifies or supplements information contained in the
representations and warranties of AVI set forth in Article 3 hereof and in the
accompanying Disclosure Schedule, so as to reflect changes and developments in
the business, operations, and condition (financial or otherwise) of AVI
subsequent to the date hereof.&nbsp; Upon
receipt thereof, Investor&#146;s obligations shall be subject to Section 6.1(k) for
any information disclosed therein.</font></p>
</dir>

<dir>
<p><font size=2>(n)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Deadlines</u>.&nbsp; Investor&#146;s obligation at the Second Closing
shall be subject to the condition that the Second Closing Milestone shall have
occurred on or before *&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp; *;&nbsp;
Investor&#146;s obligation at the Third Closing shall be subject to the
condition that the Third Closing Milestone shall have occurred on or before
*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp; *; and Investor&#146;s obligation at the Fourth Closing shall be
subject to the condition that the Fourth Closing Milestone shall have occurred
on or before *&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *.</font></p>
</dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Conditions
to AVI&#146;s Obligations</u>.&nbsp; The
obligations of AVI to issue, sell and deliver certificates representing the
Purchased Shares and the Warrant pursuant to Article 2 are subject to the
satisfaction or waiver, on or before the respective Closing Date of the
conditions set forth below:<page></font></p>

<dir>
<p><font size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Execution of Transaction Documents</u>.&nbsp; Investor or Medtronic, as the case may be,
shall have executed and delivered the Transaction Documents.</font></p>
</dir>

<dir>
<p><font size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Representations and Warranties to be
True and Correct</u>.&nbsp; The
representations and warranties contained in Article 4 shall be true, complete
and correct on and as of such Closing Date with the same effect as though such
representations and warranties had been made on and as of such date.</font></p>
</dir>

<p align=center><b><font size=2>ARTICLE 7<br>
INDEMNIFICATION</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Indemnification
of Medtronic</u>.&nbsp; AVI shall indemnify,
defend and hold harmless Investor, Medtronic and each of its Affiliates, and
their respective officers, directors and stockholders (Investor, Medtronic and
such other indemnities referred to in this Article 7 as &#147;Medtronic&#148;) from and
against and in respect of any and all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, interest and penalties,
costs and expenses (including, without limitation, reasonable legal fees and
disbursements incurred in connection therewith and in seeking indemnification
therefor, and any amounts or expenses required to be paid or incurred in
connection with any action, suit, proceeding, claim, appeal, demand, assessment
or judgment) (&#147;Indemnifiable Losses&#148;), resulting from, arising out of, or
imposed upon or incurred by any person to be indemnified hereunder by reason of
any breach of any representation, warranty, covenant or agreement of AVI
contained in this Agreement, the Transaction Documents, or any agreement,
certificate or document executed and delivered by AVI pursuant hereto or in
connection with any of the transactions contemplated by this Agreement.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Third-Party
Claims</u>.&nbsp; If a claim by a third party
is made against Medtronic and if Medtronic intends to seek indemnity with
respect thereto under this Article 7, Medtronic shall promptly notify AVI of
such claim; provided, however, that failure to give timely notice shall not
affect the rights of Medtronic so long as the failure to give timely notice
does not materially and adversely affect AVI&#146;s ability to defend such claim
against a third party.&nbsp; Medtronic shall
not settle such claim without the consent of AVI, which consent shall not be
unreasonably withheld or delayed.&nbsp; If
AVI acknowledges in writing its indemnity obligations for Indemnifiable Losses
resulting therefrom, AVI may participate at its own cost and expense in the
settlement or defense of any claim for which indemnification is sought; <u>provided</u>
<u>that</u> such settlement or defense shall be controlled by Medtronic.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Cooperation
as to Indemnified Liability</u>.&nbsp; Each
party hereto shall cooperate fully with the other parties with respect to
access to books, records, or other documentation within such party&#146;s control,
if deemed reasonably necessary or appropriate by any party in the defense of
any claim which may give rise to indemnification hereunder.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Brokerage</u>.&nbsp; AVI will indemnify and hold harmless
Medtronic against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by AVI with any third party.<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Limitation on Certain Claims</u>.&nbsp; To
the extent Medtronic wishes to make a claim for indemnification under Section
7.1 with respect to Purchased Securities purchased at a Closing and the breach
of the Company&#146;s representations and warranties deemed made as of the Closing
Date applicable thereto, such claim for indemnification shall be made within
*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp; * after such Closing Date applicable to such purchase.&nbsp; However, the foregoing *&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
* limitation shall not apply to any claim for indemnification arising
out of any third party claim made against Medtronic, nor to the breach of any
representation or warranty made in Sections 3.1, 3.2, 3.3, 3.4, 3.11 or 3.23.</font></p>

<p align=center><b><font size=2>ARTICLE
8<br>
CLOSING</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>First
Closing</u>.&nbsp; The consummation of the
purchase and sale of the Purchased Shares and the issuance of the Warrant
pursuant to Section 2.1 (the &#147;First Closing&#148;) shall, subject to the
satisfaction of the conditions set forth in Article 6, occur not later than
thirty (30) days after the date hereof, as specified in writing by Investor
(the &#147;First Closing Date&#148;).&nbsp; At the
First Closing, the parties shall also execute the Transaction Documents.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Second
Closing</u>.&nbsp; The consummation of the
purchase and sale of the Purchased Shares pursuant to Section 2.2 (the &#147;Second
Closing&#148;) shall, subject to the satisfaction of the conditions set forth in
Article 6, take place within thirty (30) days after the written notice
referenced in such Section regarding the occurrence of the Second Closing
Milestone, as specified in writing by Investor, or on such other date as the
parties may agree (the &#147;Second Closing Date&#148;).</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Third
Closing</u>.&nbsp; The consummation of the
purchase and sale of the Purchased Shares pursuant to Section 2.3 (the &#147;Third
Closing&#148;) shall, subject to the satisfaction of the conditions set forth in
Article 6,&nbsp; take place within thirty
(30) days after the written notice referenced in such Section regarding the
occurrence of the Third Closing Milestone, as specified in writing by Investor,
or on such other date as the parties may agree (the &#147;Third Closing Date&#148;).</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Fourth
Closing</u>.&nbsp; The consummation of the
purchase and sale of the Purchased Shares pursuant to Section 2.4 (the &#147;Fourth
Closing&#148;) shall, subject to the satisfaction of the conditions set forth in
Article 6,&nbsp; take place within thirty
(30) days after the written notice referenced in such Section regarding the
occurrence of the Fourth Closing Milestone, as specified in writing by
Investor, or on such other date as the parties may agree (the &#147;Fourth Closing
Date&#148;).</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Closings</u>.&nbsp; Each of the Closings shall take place at the
offices of Medtronic in Minneapolis, Minnesota, or by telecopy exchange of
signature pages with originals to follow by overnight delivery, or in such
other manner or at such place as the parties hereto may agree.<page></font></p>

<p align=center><b><font size=2>ARTICLE
9<br>
TERMINATION AND DEFAULT</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Termination</u>.&nbsp; The obligation of the parties hereto to
consummate the remaining transactions contemplated hereby may be terminated and
abandoned at any time at or before the First Closing, Second Closing, Third
Closing or Fourth Closing if any of the following events occurs:</font></p>

<dir>
<p><font size=2>(a)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; by and at the option of Investor
or AVI, if the First Closing does not occur within sixty (60) days from the
date hereof, provided that Investor or AVI, as the case may be, is not then in
material default under this Agreement; or</font></p>
</dir>

<dir>
<p><font size=2>(b)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; by and at the option of Investor,
if the Second Closing&nbsp; Milestone, Third
Closing Milestone or Fourth Closing Milestone does not occur by the dates set
forth in Section 6.1(n); or</font></p>
</dir>

<dir>
<p><font size=2>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; by and at the option of Investor, if
AVI is in default under this Agreement or the Transaction Documents, and does
not cure such default within thirty (30) days after having received a notice
from Medtronic or Investor regarding such default; or</font></p>
</dir>

<dir>
<p><font size=2>(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; by and at the option of AVI, if&nbsp; Investor or Medtronic is in default under
this Agreement or the Transaction Documents, and does not cure such default
within thirty (30) days after having received a notice from AVI regarding such
default; or</font></p>
</dir>

<dir>
<p><font size=2>(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; by and at the option of Investor, any
event or circumstance occurs or exists that renders any condition to Investor&#146;s
obligations set forth in Article 6 incapable of being satisfied; or</font></p>
</dir>

<dir>
<p><font size=2>(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; by and at the option of Investor if the
conditions precedent in Section 6.1 hereof are not satisfied by AVI or waived
by Investor within thirty (30) days after written notice has been given by
Investor pursuant to Section 2.2, 2.3 or 2.4 hereof as the case may be; or</font></p>
</dir>

<dir>
<p><font size=2>(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; by and at the option of AVI if the
conditions precedent in Section 6.1 hereof are not satisfied by Investor or
waived by AVI within thirty (30) days after written notice has been given by
Investor pursuant to Section 2.2, 2.3 or 2.4 hereof as the case may be; or</font></p>
</dir>

<dir>
<p><font size=2>(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; by and at the option of Investor if AVI
exercises its option under Section 4.2 of the License and Development Agreement
to convert the license granted thereunder from exclusive to non-exclusive; or</font></p>
</dir>

<dir>
<p><font size=2>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; by and at the option of Investor if a
Material Adverse Effect with respect to AVI shall have occurred; or<page></font></p>
</dir>

<dir>
<p><font size=2>(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; by the mutual written consent of the
parties; or</font></p>
</dir>

<dir>
<p><font size=2>(k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; by and at the option of either Investor
or AVI if any governmental authority shall have issued an order, decree, or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting in any material respects the transactions contemplated hereby and
such order, decree, ruling or other action shall have become final and
nonappealable.</font></p>
</dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Effect</u>.&nbsp; Termination of this Agreement by a party
shall not relieve the other parties hereto of any liability for breach of
representation, warranty, covenant or agreement by such other parties including
liability for monetary damages and/or specific performance.&nbsp; Investor&#146;s or Medtronic&#146;s rights pursuant to
the Transaction Documents shall survive any termination of this Agreement.</font></p>

<p align=center><b><font size=2>ARTICLE
10<br>
OTHER PROVISIONS</font></b></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Further Assurances</u>.&nbsp;
At such time and from time to time on and after the Closing Date, upon
request by the other party, Investor and AVI will execute, acknowledge and
deliver, or will cause to be done, executed, acknowledged and delivered, all
such further acts, deeds, assignments, transfers, conveyances, powers of
attorney and assurances that may be required for the better conveying,
transferring, assigning, delivering, assuring and confirming to Investor, or to
its respective successors and assigns, all of the Purchased Shares or to
otherwise carry out the purposes of this Agreement.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Complete Agreement</u>.&nbsp;
This Agreement and the Transaction Documents (including all schedules
and exhibits hereto and thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof.&nbsp; There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein or
therein, with respect to the subject matter hereof and thereof.&nbsp; This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Survival of Representations, Warranties and Agreements</u>.&nbsp; The representations, warranties, covenants
and agreements contained in Articles 3 and 4 of this Agreement shall survive
each Closing and remain in full force and effect.&nbsp; No independent investigation of AVI by Investor, its counsel, or
any of its agents or employees shall in any way limit or restrict the scope of
the representations and warranties made by AVI in this Agreement.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.4&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Waiver, Discharge, Amendment, Etc.</u>&nbsp; The failure of any party hereto to enforce
at any time any of the provisions of this Agreement shall not, absent an
express written waiver signed by the party making such waiver specifying the
provision being waived, be construed to be a waiver of any such provision, nor
in any way to affect the validity of this Agreement or any part thereof or the
right of the party thereafter to enforce each and every such provision.&nbsp; No waiver of any breach of this Agreement
shall be held to be a waiver of any other or subsequent breach.&nbsp; This Agreement may be amended by AVI and
Investor, by mutual action approved by their respective Boards of Directors or
their respective officers authorized by such Board of Directors, at any
time.&nbsp; Any amendment to this Agreement
shall be in writing and signed by AVI and Investor.<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Notices.</u>&nbsp; All
notices or other communications to a party required or permitted hereunder
shall be in writing and shall be delivered personally or by telecopy (receipt
confirmed) to an executive officer of such party or shall be sent by a
reputable express delivery service or by certified mail, postage prepaid with
return receipt requested, addressed as follows:</font></p>

<p><font size=2>if
to Investor or Medtronic to:</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medtronic, Inc.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 710 Medtronic Parkway NE<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Minneapolis, MN 55432-5604</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; with separate copies thereof
addressed to</font></p>

<dir>
<table border=0 cellspacing=0 cellpadding=0 width="69%">
 <tr>
  <td width="19%" valign=bottom><font size=2>Attention:</font></td>
  <td width="74%" valign=bottom><font size=2>General Counsel</font></td>
  <td width="6%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="19%" valign=bottom>&nbsp;</td>
  <td width="74%" valign=bottom><font size=2>Mail Stop LC400</font></td>
  <td width="6%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="19%" valign=bottom>&nbsp;</td>
  <td width="74%" valign=bottom><font size=2>Telecopier No.:&nbsp; (763) 572-5459</font></td>
  <td width="6%" valign=bottom>&nbsp;</td>
 </tr>
</table>
</dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and</font></p>

<dir>
<table border=0 cellspacing=0 cellpadding=0 width="68%">
 <tr>
  <td width="19%" valign=bottom><font size=2>Attention:</font></td>
  <td width="74%" valign=bottom><font size=2>Vice President and
  Chief Development Officer</font></td>
  <td width="6%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="19%" valign=bottom>&nbsp;</td>
  <td width="74%" valign=bottom><font size=2>Mail Stop LC390</font></td>
  <td width="6%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="19%" valign=bottom>&nbsp;</td>
  <td width="74%" valign=bottom><font size=2>Telecopier No.:&nbsp; (763) 505-2542</font></td>
  <td width="6%" valign=bottom>&nbsp;</td>
 </tr>
</table>
</dir>

<p><font size=2>if
to AVI to:</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AVI BioPharma, Inc.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; One SW Columbia<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Portland, OR 97258<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Attn: President, Alan P.
Timmins</font></p>

<p><font size=2>With a copy to:</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; HURLEY, LYNCH &amp; RE, P.C.,<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 747 SW Industrial Way<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Bend, Oregon&nbsp; 97702<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Attn:&nbsp; Robert A. Stout, Esq.</font></p>

<p><font size=2>Any
party may change the above&#150;specified recipient and/or mailing address by
notice to the other party given in the manner herein prescribed.&nbsp; All notices shall be deemed given on the day
when actually delivered as provided above (if delivered personally or by
telecopy) or on the day shown on the return receipt (if delivered by mail or
delivery service).<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Public Announcement</u>.&nbsp;
In the event any party proposes to issue any press release or public
announcement concerning any provisions of this Agreement or the transactions
contemplated hereby, such party shall so advise the other party hereto, and the
parties shall thereafter use their best efforts to cause a mutually agreeable
release or announcement to be issued.&nbsp;
Neither party will publicly or privately disclose or divulge any
provisions of this Agreement or the transactions contemplated hereby without
the other parties&#146; written consent, except as may be required by applicable
law, rule, regulation, order or stock exchange regulation, and except for
communications to employees; provided that, prior to disclosure of any
provision of this Agreement that either party considers particularly sensitive
or confidential to any governmental agency or stock exchange, the parties shall
cooperate to seek confidential treatment or other applicable limitations on the
public availability of such information.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Expenses</u>.&nbsp; AVI
and Investor shall each pay their own expenses incident to this Agreement and
the preparation for, and consummation of, the transactions provided for herein.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Governing Law</u>.&nbsp;
The formation, legality, validity, enforceability and interpretation of
this Agreement shall be governed by the laws of the State of Minnesota, without
giving effect to the principles of conflict of laws; provided, however, that
nothing in Minnesota procedural law shall be deemed to alter or affect the
applicability of the Federal Arbitration Act as governing arbitration of
disputes as provided in Section 10.12 and, provided further, that no Minnesota
laws or rules of arbitration shall be applicable.&nbsp; Subject to Section 10.12 hereof, if arbitration is sought by
Investor, such arbitration shall be in Multnomah County, Oregon; and, if sought
by AVI, such arbitration shall be in Hennepin County, Minnesota; and in each
such case, the parties hereto hereby submit to the exclusive jurisdiction of
the United States federal and state courts located in such county with respect
to any dispute arising under this Agreement, the agreements entered into in
connection herewith or the transactions contemplated hereby or thereby, and
irrevocably consent to the exclusive jurisdiction and venue of such courts and
waive any objections they may have at any time to such exclusive jurisdiction
and venue.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Titles and Headings; Construction</u>.&nbsp; The titles and headings to the Articles and
Sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.&nbsp; This Agreement shall be
construed without regard to any presumption or other rule requiring
construction hereof against the party causing this Agreement to be drafted.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.10&nbsp;&nbsp;&nbsp; <u>Benefit</u>.&nbsp; Nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors or assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.11&nbsp;&nbsp;&nbsp; <u>Counterparts</u>.&nbsp; This
Agreement may be executed in any number of counterparts, each of which shall be
deemed as original and all of which together shall constitute one instrument.<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.12&nbsp;&nbsp;&nbsp; <u>Arbitration</u>.&nbsp; Any
dispute arising out of or relating to this Agreement or the Registration Rights
Agreement, including the formation, interpretation or alleged breach hereof,
shall be settled in accordance with the <b>Exhibit E</b> attached hereto.&nbsp; The results of such arbitration proceedings
shall be binding upon the parties hereto, and judgment may entered upon the
arbitration award in any court having jurisdiction thereof.&nbsp; Notwithstanding the foregoing, either party
may seek interim injunctive relief from any court of competent jurisdiction.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.13&nbsp;&nbsp;&nbsp; <u>Non-Disclosure.</u>&nbsp;
Each party agrees not to disclose or use (except as permitted or
required for performance by the party receiving such Confidential Information
of its rights or duties hereunder or under the Transaction Documents) any
Confidential Information of the other party obtained during the term of this
Agreement until the expiration of three (3) years after the earlier of the
First Closing or the termination of this Agreement.&nbsp; Each party further agrees to take appropriate measures to prevent
any such prohibited disclosure by its present and future employees, officers,
agents, subsidiaries, or consultants during such term<page></font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; IN WITNESS WHEREOF, each of the
parties has caused this Investment Agreement to be executed in the manner
appropriate for each, and to be dated as of the date first above-written.</font></p>

<p><font size=2>&nbsp;</font></p>

<table border=0 cellspacing=0 cellpadding=0 width="100%">
 <tr>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="58%" colspan=4 valign=top><b><font size=2>AVI BIOPHARMA, INC.</font></b></td>
 </tr>
 <tr>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="12%" valign=top>&nbsp;</td>
  <td width="26%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="5%" valign=top><font size=2>By:</font></td>
  <td width="26%" colspan=2 valign=top><font size=2>/s/ Denis Burger</font></td>
  <td width="26%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="26%" colspan=2 valign=top>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="26%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="5%" valign=top><font size=2>&nbsp;
  Its:</font></td>
  <td  align=center width="26%" colspan=2 valign=top><font size=2>CEO</font></td>
  <td width="26%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="26%" colspan=2 valign=top>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="26%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="12%" valign=top>&nbsp;</td>
  <td width="26%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="58%" colspan=4 valign=top><b><font size=2>MEDTRONIC ASSET MANAGEMENT, INC.</font></b></td>
 </tr>
 <tr>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="12%" valign=top>&nbsp;</td>
  <td width="26%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="5%" valign=top><font size=2>By:</font></td>
  <td width="26%" colspan=2 valign=top><font size=2>/s/ Michael D. Ellwein</font></td>
  <td width="26%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="26%" colspan=2 valign=top>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="26%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="5%" valign=top><font size=2>&nbsp;
  Its:</font></td>
  <td  align=center width="26%" colspan=2 valign=top><font size=2>VP</font></td>
  <td width="26%" valign=top>&nbsp;</td>
 </tr>
 <tr>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="13%" valign=top>&nbsp;</td>
  <td width="5%" valign=top>&nbsp;</td>
  <td width="26%" colspan=2 valign=top>
<hr size=2 width="100%" noshade color=black align=right></td>
  <td width="26%" valign=top>&nbsp;</td>
 </tr>
</table>

<p><font size=2>&nbsp;</font></p>

<p><u><font size=2>Exhibits
and Schedules</font></u><font size=2>:</font></p>

<p><font size=2>&nbsp;</font></p>

<p><font size=2>Exhibit
A - Warrant<br>
Exhibit B - License and Development Agreement<br>
Exhibit C &#150; Supply Agreement<br>
Exhibit D &#150; Registration Rights agreement<br>
Exhibit E &#150; Alternative Dispute Resolution<br>
AVI Disclosure Schedule</font></p>

<page>


<p>&nbsp;</p>

<p align=center><font size=2>EXHIBIT
E</font></p>

<p align=center><font size=2>ALTERNATIVE
DISPUTE RESOLUTION</font></p>

<p><font size=2>&nbsp;</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Negotiations</u>.&nbsp; If any dispute arises between AVI and
Investor with respect to the Investment Agreement or the Registration Rights
Agreement (the &#147;Agreements&#148;), or any alleged breach thereof, any party may, by
written notice to the other party, have such dispute referred to their
respective designees listed below or their successors for attempted resolution
by good faith negotiations within 30 days after such notice is received.&nbsp; Such designees are as follows:</font></p>

<dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; For AVI -&nbsp; the President of AVI or his/her designee</font></p>
</dir>

<dir><dir>
<p><font size=2>For
Investor - the President of Medtronic, Inc.&#146;s business unit to which the
Agreements relate, or his/her designee</font></p>
</dir></dir>

<p><font size=2>Any
settlement reached by the parties under this Section 1 shall not be binding
until reduced to writing and signed by the above-specified designees of
Investor and AVI.&nbsp; When reduced to
writing, such settlement agreement shall supersede all other agreements,
written or oral, to the extent such agreements specifically pertain to the
matters so settled.&nbsp; If the designees
are unable to resolve such dispute within such 30-day period, any party may
invoke the provisions of Section 2 below.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Arbitration</u>.&nbsp; All claims, disputes, controversies, and
other matters in question arising out of or relating to the Agreements,
including claims for Indemnifiable Losses and disputes regarding the making of
the Agreements, including claims of fraud in the inducement, or to the alleged
breach hereof, shall be settled by negotiation between the parties as described
in Section 1 above or, if negotiation is unsuccessful, by binding arbitration
in accordance with procedures set forth in Section 3 and 4 below.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Notice</u>.&nbsp; Notice of demand for binding arbitration
shall be given in writing to the other party and shall be delivered personally
or by facsimile (receipt confirmed) to an executive officer of such party or
shall be sent by a reputable express delivery service or by certified mail,
postage prepaid with return receipt requested, addressed as follows:</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Medtronic Asset Management, Inc.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 710 Medtronic Parkway NE<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Minneapolis, MN 55432-5604</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; with separate copies thereof
addressed to<page></font></p>

<dir>
<table border=0 cellspacing=0 cellpadding=0 width="63%">
 <tr>
  <td width="21%" valign=bottom><font size=2>Attention:</font></td>
  <td width="73%" valign=bottom><font size=2>General Counsel</font></td>
  <td width="5%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="21%" valign=bottom>&nbsp;</td>
  <td width="73%" valign=bottom><font size=2>Mail Stop LC400</font></td>
  <td width="5%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="21%" valign=bottom>&nbsp;</td>
  <td width="73%" valign=bottom><font size=2>Telecopier No.:&nbsp; (763) 572-5459</font></td>
  <td width="5%" valign=bottom>&nbsp;</td>
 </tr>
</table>
</dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and</font></p>

<dir>
<table border=0 cellspacing=0 cellpadding=0 width="72%">
 <tr>
  <td width="18%" valign=bottom><font size=2>Attention:</font></td>
  <td width="76%" valign=bottom><font size=2>Vice President and
  Chief Development Officer</font></td>
  <td width="4%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="18%" valign=bottom>&nbsp;</td>
  <td width="76%" valign=bottom><font size=2>Mail Stop LC390</font></td>
  <td width="4%" valign=bottom><font size=2>&nbsp;</font></td>
 </tr>
 <tr>
  <td width="18%" valign=bottom>&nbsp;</td>
  <td width="76%" valign=bottom><font size=2>Telecopier No.:&nbsp; (763) 505-2542</font></td>
  <td width="4%" valign=bottom>&nbsp;</td>
 </tr>
</table>
</dir>

<p><font size=2>if
to AVI to:</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; AVI BioPharma, Inc.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; One SW Columbia<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Portland, OR 97258<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Attn: President, Alan P.
Timmins</font></p>

<p><font size=2>With a copy to:</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; HURLEY,
LYNCH &amp; RE, P.C.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 747 SW Industrial Way<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Bend, Oregon&nbsp; 97702<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Attn:&nbsp; Robert A. Stout, Esq.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Any
party may change the above&#150;specified recipient and/or mailing address by
notice to the other party given in the manner herein prescribed.&nbsp; All notices shall be deemed given on the day
when actually delivered as provided above (if delivered personally or by facsimile
(upon appropriate electronic confirmation of successful transmission)) or on
the day shown on the return receipt (if delivered by mail or delivery
service).&nbsp;&nbsp; In no event may a notice of
demand of any kind be filed more than two years after the date the claim,
dispute, controversy, or other matter in question was asserted by one party
against another, and if such demand is not timely filed, the claim, dispute,
controversy, or other matter in question referenced in the demand shall be
deemed released, waived, barred, and unenforceable for all time, and barred as
if by statute of limitations.</font></p>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Binding Arbitration</u>.&nbsp; Upon filing of a notice of demand for
binding arbitration by any party hereto, arbitration shall be commenced and
conducted as follows:</font></p>

<dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Arbitrators</u>.&nbsp; All claims, disputes, controversies, and
other matters (collectively &#147;matters&#148;) in question shall be referred to and
decided and settled by a standing panel of three independent arbitrators, one
selected by each of AVI and Investor&#146;s representative and the third by the two
arbitrators so selected.&nbsp; The third
shall be a former judge of one of the U.S. District Courts or one of the U.S.
Court of Appeals or such other classes of persons as the parties may
agree.&nbsp; Selection of arbitrators shall
be made within 30 days after the date of the first notice of demand given
pursuant to Section 3 and within 30 days after any resignation, disability or
other removal of such arbitrator.&nbsp;
Following appointment, each arbitrator shall remain a member of the standing
panel, subject to removal for just cause or resignation or disability;
provided, however, an arbitrator can be removed by the party who appointed the
arbitrator, or in the case of the third arbitrator, by either party for any
reason at any time when no matter is in arbitration.<page></font></p>
</dir>

<dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Cost
of Arbitration</u>.&nbsp; The cost of each
arbitration proceeding, including without limitation the arbitrators&#146;
compensation and expenses, hearing room charges, court reporter transcript
charges etc., shall be borne by the party whom the arbitrators determine has
not prevailed in such proceeding, or borne equally by the parties if the
arbitrators determine that neither party has prevailed.&nbsp; The arbitrators shall also award the party
that prevails substantially in its pre-hearing position its reasonable
attorneys&#146; fees and costs incurred in connection with the arbitration.&nbsp; The arbitrators are specifically instructed
to award attorneys&#146; fees for instances of abuse of the discovery process.</font></p>
</dir>

<dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Location
of Proceedings</u>.&nbsp; All arbitration
proceedings shall be held in the county selected pursuant to Section 10.8 of
the Investment Agreement unless the parties agree otherwise.</font></p>
</dir>

<dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Pre-hearing
Discovery</u>.&nbsp; The parties shall have
the right to conduct and enforce pre-hearing discovery in accordance with the
then current Federal Rules of Civil Procedure, subject to these
limitations:&nbsp; Document discovery and
other discovery shall be under the control of and enforceable by the
arbitrators.&nbsp; The arbitrators shall
permit and facilitate such other discovery as they shall determine is
appropriate under the circumstances, taking into account the needs of the
parties and the desirability of making discovery expeditious and cost
effective.&nbsp; The arbitrators shall decide
discovery disputes.&nbsp; The arbitrators are
empowered:</font></p>
</dir>

<dir><dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to
issue subpoenas to compel pre-hearing document or deposition discovery;</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to enforce the discovery rights and obligations of the
parties; and</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to otherwise control the scheduling and conduct of the
proceedings.</font></p>
</dir></dir>

<dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notwithstanding any contrary
foregoing provisions, the arbitrators shall have the power and authority to,
and to the fullest extent practicable shall, abbreviate arbitration discovery
in a manner that is fair to all parties in order to expedite the arbitration
proceeding and render a final decision within six months after the pre-hearing
conference.</font></p>
</dir>

<dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Pre-hearing
Conference</u>.&nbsp; Within 45 days after
filing of notice of demand for binding arbitration, the arbitrators shall hold
a pre-hearing conference to establish schedules for completion of discovery,
for exchange of exhibit and witness lists, for arbitration briefs, for the
hearing, and to decide procedural matters and all other questions that may be
presented.<page></font></p>
</dir>

<dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Hearing
Procedures</u>.&nbsp; The hearing shall be
conducted to preserve its privacy and to allow reasonable procedural due
process.&nbsp; Rules of evidence need not be
strictly followed, and the hearing shall be streamlined as follows:</font></p>
</dir>

<dir><dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Documents
shall be self-authenticating, subject to valid objection by the opposing party;</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Expert reports, witness biographies, depositions, and
affidavits may be utilized, subject to the opponent&#146;s right of a live
cross-examination of the witness in person;</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Charts, graphs, and summaries shall be utilized to present
voluminous data, provided (i)&nbsp;that the underlying data was made available
to the opposing party 30 days prior to the hearing, and (ii)&nbsp;that the
preparer of each chart, graph, or summary is available for explanation and live
cross-examination in person;</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The hearing should be held on consecutive business days
without interruption to the maximum extent practicable; and</font></p>
</dir></dir>

<dir><dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (v)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
arbitrators shall establish all other procedural rules for the conduct of the
arbitration in accordance with the rules of arbitration of the Center for
Public Resources.</font></p>
</dir></dir>

<dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Governing
Law</u>.&nbsp; This arbitration provision
shall be governed by, and all rights and obligations specifically enforceable
under and pursuant to, the Federal Arbitration Act (9&nbsp;U.S.C. &#167;&nbsp;1 <u>et</u>
<u>seq</u>.) and the laws of the State of Minnesota shall be applied, without
reference to the choice of law principles thereof, in resolving matters
submitted to such arbitration.</font></p>
</dir>

<dir>
<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Consolidation</u>.&nbsp; No arbitration shall include, by
consolidation, joinder, or in any other manner, any additional person not a
party to this Agreement (other than affiliates of any such party, which
affiliates may be included in the arbitration), except by written consent of
the parties hereto containing a specific reference to this Agreement.</font></p>
</dir>

<page>


<dir>
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <font size=2>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Award</u>.&nbsp; The arbitrators shall be required to render
their final decision within six months after the pre-hearing conference.&nbsp; The arbitrators are empowered to render an
award of general compensatory damages and equitable relief (including, without
limitation, injunctive relief), but are not empowered to award punitive or
presumptive damages.&nbsp; The award rendered
by the arbitrators (1)&nbsp;shall be final; (2)&nbsp;shall not constitute a
basis for collateral estoppel as to any issue; and (3)&nbsp;shall not be
subject to vacation or modification, except in the event of fraud or gross
misconduct on the part of the arbitrators.</font></p>
</dir>

<p><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Confidentiality</u>.&nbsp; The parties hereto will maintain the
substance of any proceedings hereunder in confidence and make disclosures to
others only to the extent necessary to properly conduct the proceedings.</font></p>

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