Document:

Prepared by MerrillDirect

Exhibit 10.35

OFFICE LEASE

             THIS
OFFICE LEASE ("Lease")
is made between SPIEKER PROPERTIES, L.P.,
a California limited partnership ("Landlord"),
and AVI BIOPHARMA, INC., an Oregon
corporation, ("Tenant"),
as of May 8, 2001, (the "date of this
Lease").

BASIC LEASE INFORMATION

BUILDING:     Benjamin Franklin Plaza, One SW Columbia Street, Portland,
OR  97258

DESCRIPTION OF PREMISES:  Suite 1105 (the Premises is as outlined in
red on Exhibit
B)

RENTABLE AREA OF PREMISES:  Approximately 2,543 rentable square feet

PERMITTED USE: General
Office Use

SCHEDULED TERM COMMENCEMENT
DATE:  August 1, 2001

	SCHEDULED INITIAL TERM:	Thirty-six (36)months	SCHEDULED EXPIRATION DATE:  	July 31, 2004

BASE RENT:

	 	(a)	Initial
  Annual Base Rent: $64,846.50 
  ($25.50/rsf/year)	 	(c)  Subject to increase pursuant to Paragraph
  3.1(b) as follows:
	 	(b)	Initial
  Monthly Installment of Base Rent: 
  $5,404.00	 	08/01/02
  – 07/31/03  $5,563.00
  per month ($26.25/rsf/year)
08/01/03
  – 07/31/04  $5,722.00 per
  month    ($27.00/rsf/year)

SECURITY DEPOSIT:
Tenant shall maintain existing security deposit on account in the amount of
$3,659.00

BASE YEAR FOR OPERATING
EXPENSES:  Calendar
Year 2001

TENANT'S PROPORTIONATE SHARE OF
BUILDING:  0.96%

TENANT’S NAICS CODE: 325412

	TENANT CONTACT:	Name: Alan Timmins
	 	Telephone Number: 503.227.0554
	 	FAX: 503.227.0751
	 	 	 
	ADDRESSES FOR NOTICES:	To: 
  Tenant	To: 
  Landlord	 
	 	 	 	 	 
	 	 	One SW Columbia Street, Suite 1105	One SW Columbia Street, Suite 445	 
	 	 	Portland, OR  97258	Portland, OR  97258	 
	 	 	Attn: Alan Timmins	Attn: Vice President	 
	 	 	FAX: 
  503.227.0751	FAX: 
  503.973.5453	 
						

TENANT’S BILLING ADDRESS: Not
Applicable

LANDLORD’S REMITTANCE
ADDRESS:  Spieker
Properties, P.O. Box 3900, Department 30301, Portland, OR  97208

GUARANTOR:  Not
Applicable

             IN
WITNESS WHEREOF, the parties hereto have executed this Lease, consisting of the
foregoing Basic Lease Information, the following Standard Lease Provisions
consisting of Paragraphs 1 through 22
(the "Standard Lease Provisions")
and Exhibits A, B, C and D, all of
which are incorporated herein by this reference (collectively, this “Lease”). 
In the event of any conflict between the provisions of the Basic Lease
Information and the provisions of the Standard Lease Provisions, the Standard
Lease Provisions shall control.

	"Landlord"   	 	"Tenant" 	 
	 	 	 	 
	SPIEKER PROPERTIES, L.P.,

  a California limited partnership,	 	AVI BIOPHARMA, INC.,
an Oregon corporation	 
	 	 	 	 
	By: 
  Spieker Properties, Inc.,

  a Maryland corporation, its general

  partner	 	 	 
	 	 	 	 
	 	By:	 	By:	 
	 	

	

	 	Lynda M. Clarke	 	 	Alan Timmins	 
	 	 	 	 
	 	Its: Vice President	 	Its: President, Chief Operating Officer
	 	 	 	 
	 	Date:	 	Date:
	 	

	

								

STANDARD LEASE PROVISIONS

1.          Premises.  Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord, subject to all
of the terms and conditions set forth herein, those certain premises (the "Premises") described in the Basic Lease Information and as
outlined in red or as shown in the cross-hatched markings on the floor plan
attached hereto as Exhibit B.  The
parties agree that for all purposes hereunder the Premises shall be stipulated
to contain the number of square feet of rentable area described in the Basic
Lease Information.  The Premises are
located in that certain office building (the "Building") whose street address is as shown in the Basic
Lease Information.  The Building is
located on that certain land which is also improved with landscaping, parking
facilities and other improvements and appurtenances.  Such land, together with all such improvements and appurtenances
and the Building, are all or part of a project which may consist of more than
one building and additional facilities, as described in the Basic Lease
Information (collectively referred to herein as the "Project").  However,
Landlord reserves the right to make such changes, additions and/or deletions to
such land, the Building and the Project and/or the common areas and parking or
other facilities thereof as it shall determine from time to time.

2.          Term.

             (a)         Unless earlier terminated in accordance
with the provisions hereof, the term of this Lease (the "Term") shall be as set forth in the
Basic Lease Information; provided, however, in the event the Term Commencement
Date (defined below) occurs on a date other than the first day of a calendar
month, there shall be added to the Term the partial month (“Partial Lease Month”) from the Term
Commencement Date to (but not including) the first day of the calendar month
following the Term Commencement Date.

             (b)        Subject to the provisions of this
Paragraph 2, the Term shall commence on the date (the "Term Commencement Date") which
is the earlier of the date Landlord delivers the Premises to Tenant or the date
Tenant takes possession or commences use of any portion of the Premises for any
business purpose (including moving in). 
If this Lease contemplates the construction of tenant improvements in
the Premises by Landlord, Landlord shall be deemed to have delivered the
Premises to Tenant on the date determined by Landlord's space planner to be the
date of substantial completion of the work to be performed by Landlord (as
described in the Improvement Agreement, if any, attached hereto as Exhibit C) (the “Improvement Agreement”).  Notwithstanding the foregoing, in the event
that Landlord is delayed in delivering the Premises by reason of any act or
omission of Tenant, the Term Commencement Date shall be (unless Tenant takes
possession or commences use of the Premises prior thereto) the date the
Premises would have been delivered by Landlord had such Tenant caused delay(s)
not occurred.  This Lease shall be a
binding contractual obligation effective upon execution hereof by Landlord and
Tenant, notwithstanding the later commencement of the Term.  Tenant acknowledges that Tenant has
inspected and accepts the Premises in their present condition, “as is”, except
for tenant improvements (if any) to be constructed by Landlord in the Premises
pursuant to the Improvement Agreement, if any.

             (c)         In the event the Term Commencement Date
is delayed or otherwise does not occur on the Scheduled Term Commencement Date
specified in the Basic Lease Information, this Lease shall not be void or
voidable, the Term shall not be extended (except as provided in Paragraph
2(a)), and Landlord shall not be liable to Tenant for any loss or damage
resulting therefrom; provided that Tenant shall not be liable for any Rent
(defined below) for any period prior to the Term Commencement Date except as
may otherwise be provided in this Lease. 
Landlord may deliver to Tenant Landlord's standard form “Start-Up Letter” for Tenant's acknowledgment
and confirmation of the Term Commencement Date.  Tenant shall execute and deliver such Start-Up Letter to Landlord
within five (5) days after receipt thereof, but Tenant’s failure or refusal to
do so shall not negate Tenant’s acceptance of the Premises or affect
determination of the Term Commencement Date.

3.          Rent and
Operating Expenses.

             3.1        Base Rent

             (a)         Subject to the provisions of this
Paragraph 3.1, Tenant agrees to pay during the Term as Base Rent for the
Premises the sums specified in the Basic Lease Information (as increased from
time to time as provided in the Basic Lease Information or as may otherwise be
provided in this Lease) ("Base
Rent").

             (b)        Base Rent shall increase as set forth in
the Basic Lease Information or as may otherwise be provided in this Lease.

             (c)         Except as expressly provided to the
contrary herein, Base Rent shall be payable in equal consecutive monthly
installments, in advance, without deduction or offset, commencing on the Term
Commencement Date and continuing on the first day of each calendar month
thereafter.  However, the first full
monthly installment of Base Rent shall be payable upon Tenant's execution of
this Lease.  If the Term Commencement
Date is a day other than the first day of a calendar month, then the Rent for
the Partial Lease Month (the "Partial
Lease Month Rent") shall be prorated based on a month of 30
days.  The Partial Lease Month Rent
shall be payable by Tenant on the first day of the calendar month next
succeeding the Term Commencement Date.  Base Rent, all forms of additional rent payable hereunder by
Tenant and all other amounts, fees, payments or charges payable hereunder by
Tenant (collectively, “Additional Rent”)
shall (i) each constitute rent payable hereunder (and shall sometimes collectively
be referred to herein as "Rent"),
(ii) be payable to Landlord in lawful money of the United States when due
without any prior demand therefor, except as may be expressly provided to the
contrary herein, and (iii) be payable to Landlord at Landlord’s Remittance
Address set forth in the Basic Lease Information or to such other person or to
such other place as Landlord may from time to time designate in writing to
Tenant. Any Rent or other amounts payable to Landlord by Tenant hereunder for
any fractional month shall be prorated based on a month of 30 days.

             3.2        Operating Expenses.

             (a)         Subject to the provisions of this
Lease, Tenant shall pay to Landlord pursuant to this Paragraph 3.2 as
Additional Rent an amount equal to Tenant's Proportionate Share (defined below)
of the excess, if any, of Operating Expenses (defined below) allocable to each
Expense Year (defined below) over Operating Expenses allocable to the Base Year
(the “Base Year”) specified in the
Basic Lease Information (“Base Year Operating
Expenses”). Base Year Operating
Expenses shall not include market-wide labor-rate increases due to
extraordinary circumstances, including, but not limited to, boycotts and
strikes, and utility rate increases due to extraordinary circumstances
including, but not limited to, conservation surcharges, boycotts, embargoes or
other shortages, or amortized costs relating to capital improvements.  "Tenant's
Proportionate Share" is, subject to the provisions of this
Paragraph 3.2, the percentage number (representing the Premises’ share of the
Building and the Project) set forth in the Basic Lease Information.  An "Expense
Year" is any calendar year after the Base Year any portion of
which falls within the Term.

             (b)        "Operating
Expenses" means all costs, expenses and obligations incurred or
payable by Landlord because of or in connection with the operation, ownership,
repair, replacement, restoration, management or maintenance of the Project
during or allocable to the Base Year or an Expense Year (as applicable) during
the Term (other than costs, expenses or obligations specifically attributable
to Tenant or other tenants of the Building or Project), all as determined by
sound accounting principles reasonably selected by Landlord and consistently
applied, including without limitation the following:

                           (i)          All property taxes, assessments,
charges or impositions and other similar governmental ad valorem or other
charges levied on or attributable to the Project (including personal and real
property contained therein) or its ownership, operation or transfer, and all
taxes, charges, assessments or similar impositions imposed in lieu or
substitution (partially or totally) of the same (collectively, "Taxes").  "Taxes" shall also include (A) all taxes,
assessments, levies, charges or impositions on any interest of Landlord in the
Project, the Premises or in this Lease, or on the occupancy or use of space in
the Project or the Premises; or on the gross or net rentals or income from the
Project, including, without limitation, any gross income tax, excise tax, sales
tax or gross receipts tax levied by any federal, state or local governmental
entity with respect to the receipt of Rent; or (B) any possessory taxes charged
or levied in lieu of real estate taxes; and

                           (ii)         The cost of all utilities, supplies,
equipment, tools, materials, service contracts, janitorial services, waste and
refuse disposal, landscaping, and insurance (with the nature and extent of such
insurance to be carried by Landlord to be determined by Landlord in its sole
and absolute discretion); insurance deductibles; compensation and benefits of
all persons who perform services connected with the operation, management,
maintenance or repair of the Project; personal property taxes on and
maintenance and repair of equipment and other personal property; costs and fees
for administration and management of the Project, whether by Landlord or by an
independent contractor, and other management office operational expenses;
rental expenses for or a reasonable allowance for depreciation of, personal
property used in the operation, management, maintenance or repair of the
Project, license, permit and inspection fees; and all inspections, activities,
alterations, improvements or other matters required by any governmental or
quasi-governmental authority or by Regulations (defined below), for any reason,
including, without limitation, capital improvements, whether capitalized or
not; all capital additions, repairs, replacements and improvements made to the
Project or any portion thereof by Landlord (A) of a personal property nature
and related to the operation, repair, maintenance or replacement of systems,
facilities, equipment or components of (or which service) the Project or
portions thereof, (B) required or provided in connection with any existing or
future applicable municipal, state, federal or other governmental statutes,
rules, requirements, regulations, laws, standards, orders or ordinances
including, without limitation, zoning ordinances and regulations, and
covenants, easements and restrictions of record (collectively, “Regulations”), (C) which are designed to
improve the operating efficiency of the Project, or (D) determined by Landlord
to be required to keep pace or be consistent with safety or health advances or
improvements (with such capital costs to be amortized over such periods as
Landlord shall determine with a return on capital at such rate as would have
been paid by Landlord on funds borrowed for the purpose of constructing such
capital items); common area repair, resurfacing, replacement, operation and
maintenance; security systems or services, if any, deemed appropriate by
Landlord (but without obligation to provide the same); and any other cost or
expense incurred or payable by Landlord in connection with the operation,
ownership, repair, replacement, restoration, management or maintenance of the
Project.

                           (iii)        Notwithstanding
anything in this Lease to the contrary, in no event shall the component of
Operating Expenses for any Expense Year consisting of electrical costs be less
than the component of Base Year Operating Expenses consisting of electrical
costs.

             (c)         Variable items of Operating Expenses (e.g.,
expenses that are affected by variations in occupancy levels) for the Base Year
and each Expense Year during which actual occupancy of the Project is less than
ninety-five percent (95%) of the rentable area of the Project shall be
appropriately adjusted, in accordance with sound accounting principles
reasonably selected by Landlord, to reflect ninety-five percent (95%) occupancy
of the existing rentable area of the Project during such period.

             (d)        Prior to or shortly following the
commencement of (and from time to time during) each Expense Year of the Term
following the Term Commencement Date, Landlord shall have the right to give to
Tenant a written estimate of Tenant's Proportionate Share of the projected
excess, if any, of the Operating Expenses for the Project for such year over
the Base Year Operating Expenses. 
Commencing with the first day of the calendar month following the month
in which such estimate was delivered to Tenant, Tenant shall pay such estimated
amount (less amounts, if any, previously paid toward such excess for such year)
to Landlord in equal monthly installments over the remainder of such calendar
year, in advance on the first day of each month during such year (or remaining
months, if less than all of the year remains). 
Subject to the provisions of this Lease, Landlord shall endeavor to
furnish to Tenant within a reasonable period after the end of each Expense
Year, a statement (a "Reconciliation
Statement") indicating in reasonable detail the excess, if any,
of Operating Expenses allocable to such Expense Year over Base Year Operating
Expenses and the parties shall, within thirty (30) days thereafter, make any
payment or allowance necessary to adjust Tenant's estimated payments to
Tenant's actual share of such excess as indicated by such annual Reconciliation
Statement.

             (e)         Tenant shall pay ten (10) days before
delinquency all taxes and assessments levied against any personal property or
trade fixtures of Tenant in or about the Premises.  If any such taxes or assessments are levied against Landlord or
Landlord's property or if the assessed value of the Project is increased by the
inclusion therein of a value placed upon such personal property or trade
fixtures, Tenant shall, within ten (10) days of demand, reimburse Landlord for
the taxes and assessments so levied against Landlord, or any such taxes, levies
and assessments resulting from such increase in assessed value.

             (f)         Any delay or failure of Landlord in (i)
delivering any estimate or statement described in this Paragraph 3.2, or (ii)
computing or billing Tenant's Proportionate Share of excess Operating Expenses
shall not (A) constitute a waiver of its right to subsequently deliver such
estimate or statement or require any increase in Rent contemplated by this
Paragraph 3.2, or (B) in any way waive or impair the continuing obligations of
Tenant under this Paragraph 3.2. 
Provided that Tenant is not then in default under this Lease, subject to
compliance with Landlord’s standard procedures for the same, Tenant shall have
the right, upon the condition that Tenant shall first pay to Landlord the
amount in dispute, to have independent certified public accountants of national
standing (who are not compensated on a contingency basis) of Tenant’s selection
(and subject to Landlord’s reasonable approval) review Landlord’s Operating
Expense books and records relating to the Expense Year subject to a particular
Reconciliation Statement during the sixty-day period following delivery to
Tenant of the Reconciliation Statement for such Expense Year.  If such review discloses a liability for a
refund in excess of ten percent (10%) of Tenant’s Proportionate Share of
Operating Expenses previously reported, the cost of such review shall be borne
by Landlord; otherwise such cost shall be borne by Tenant.  Tenant waives the right to dispute or
contest, and shall have no right to dispute or contest, any matter relating to
the calculation of Operating Expenses or other forms of Rent under this
Paragraph 3.2 with respect to each Expense Year for which a Reconciliation
Statement is given to Tenant if no claim or dispute with respect thereto is
asserted by Tenant in writing to Landlord within sixty (60) days of delivery to
Tenant of the original or most recent Reconciliation Statement with respect
thereto.

4.          Delinquent
Payment; Handling Charges.  In the event Tenant is more than three (3) days late
in paying any amount of Rent or any other payment due under this Lease, Tenant
shall pay Landlord, within ten (10) days of Landlord's written demand therefor,
a late charge equal to five percent (5%) of the delinquent amount, or $150.00,
whichever amount is greater.  In addition,
any amount due from Tenant to Landlord hereunder which is not paid within ten
(10) days of the date due shall bear interest at an annual rate (the "Default
Rate") equal to twelve percent (12%).

5.          Security
Deposit.  Contemporaneously with the execution of this Lease,
Tenant shall pay to Landlord the amount of Security Deposit (the
“Security Deposit”) specified in the Basic Lease Information, which shall be held by
Landlord to secure Tenant's performance of its obligations under this Lease.
Landlord is hereby granted a security interest in the Security Deposit in
accordance with applicable law.  The
Security Deposit is not an advance payment of Rent or a measure or limit of
Landlord's damages upon a default by Tenant or an Event of Default (defined
below).  If Tenant defaults with respect
to any provision of this Lease, Landlord may, but shall not be required to,
use, apply or retain all or any part of the Security Deposit (a) for the
payment of any Rent or any other sum in default, (b) for the payment of any
other amount which Landlord may spend or become obligated to spend by reason of
such default by Tenant, and (c) to compensate Landlord for any other loss or
damage which Landlord may suffer by reason of such default by Tenant.  If any portion of the Security Deposit is so
used or applied, Tenant shall, within ten (10) days after demand therefor by
Landlord, deposit with Landlord cash in an amount sufficient to restore the
Security Deposit to the amount required to be maintained by Tenant hereunder.  Within a reasonable period following
expiration or the sooner termination of this Lease, provided that Tenant has
performed all of its obligations hereunder, Landlord shall return to Tenant the
remaining portion of the Security Deposit. The Security Deposit may be
commingled by Landlord with Landlord's other funds, and no interest shall be
paid thereon.  If Landlord transfers its
interest in the Premises, then Landlord may assign the Security Deposit to the
transferee and thereafter Landlord shall have no further liability or
obligation for the return of the Security Deposit.  Tenant hereby waives the provisions of all provisions of any
Regulations, now or hereinafter in force, which restricts the amount or types
of claim that a landlord may make upon a security deposit or imposes upon a
landlord (or its successors) any obligation with respect to the handling or
return of security deposits.

6.          Landlord's
Obligations.

             6.1        Services.  Subject to
the provisions of this Lease, Landlord shall use good faith efforts to furnish
to Tenant during the Term (a) city or utility company water at those points of
supply provided for general use of the tenants of the Building; (b) subject to
mandatory and voluntary Regulations, heating and air conditioning during
ordinary business hours of generally recognized business days designated by
Landlord (which in any event shall not include Saturdays, Sundays or legal
holidays) (“Business Hours) for the Building at such temperatures and in such
amounts as Landlord reasonably determines is appropriate for normal comfort for
normal office use in the Premises; (c) janitorial services to the Premises on
weekdays, other than on legal holidays, for Building-standard installations;
(d) nonexclusive passenger elevator service; and (e) adequate electrical
current during such Business Hours for equipment that does not require more
than 110 volts and whose electrical energy consumption does not exceed normal
office usage in a premises of the size of the Premises, as determined by
Landlord.  If Tenant desires any of the
services specified in this Paragraph 6.1 at any time other than during
Business Hours, then subject to such nondiscriminatory conditions and standards
as Landlord shall apply to the same, upon the written request of Tenant, such
services shall be supplied to Tenant in accordance with Landlord’s customary
procedures for the Building, including such advance request deadlines as
Landlord shall require from time to time, and Tenant shall pay to Landlord
Landlord's then customary charge for such services within ten (10) days after
Landlord has delivered to Tenant an invoice therefor.  Landlord reserves the right to change the supplier or provider of
any such service from time to time. 
Tenant shall not have the right to obtain any such service for the
Premises directly from a supplier or provider of such service except as
provided in Paragraph 6.4 below.

             6.2        Excess Utility Use.  Landlord
shall not be required to furnish electrical current for, and Tenant shall not
install or use, without Landlord's prior written consent, any equipment (a)
that requires more than 110 volts, (b) whose operation is in excess of, or
inconsistent with, the capacity of the Building (or existing feeders and risers
to, or wiring in, the Premises) or (c) whose electrical energy consumption
exceeds normal office usage of up to three (3) watts of connected load per
usable square foot ("Standard Usage").  Subject
to the provisions of this Paragraph 6.2, if Tenant's consumption of electricity
exceeds the electricity to be provided by Landlord above or Standard Usage
(which shall be determined by separate metering to be installed at Tenant’s
expense or by such other method as Landlord shall reasonably select), Tenant
shall pay to Landlord Landlord's then customary charge for such excess
consumption within ten (10) days after Landlord has delivered to Tenant an
invoice therefor.

             6.3        Restoration of Services.  Following
receipt of Tenant's request to do so, Landlord shall use good faith efforts to
restore any service specifically to be provided under Paragraph 6.1 that
becomes unavailable and which is in Landlord's reasonable control to restore;
provided, however, that in no case shall the unavailability of such services or
any other service (or any diminution in the quality or quantity thereof) or any
interference in Tenant’s business operations within the Premises render
Landlord liable to Tenant or any person using or occupying the Premises under
or through Tenant (including, without limitation, any contractor, employee, agent,
invitee or visitor of Tenant) (each, a "Tenant Party") for any damages of any nature whatsoever caused
thereby, constitute a constructive eviction of Tenant, constitute a breach of
any implied warranty by Landlord, or entitle Tenant to any abatement of Tenant's
rental obligations hereunder.

             6.4        Telecommunications Services.  Tenant may
contract separately with providers of telecommunications or cellular products,
systems or services for the Premises. 
Even though such products, systems or services may be installed or
provided by such providers in the Building, in consideration for Landlord’s
permitting such providers to provide such services to Tenant, Tenant agrees
that Landlord and the Landlord Indemnitees (defined below) shall in no event be
liable to Tenant or any Tenant Party for any damages of any nature whatsoever
arising out of or relating to the products, systems or services provided by
such providers (or any failure, interruption, defect in or loss of the same) or
any acts or omissions of such providers in connection with the same or any
interference in Tenant’s business caused thereby.  Tenant waives and releases all rights and remedies against
Landlord and the Landlord Indemnitees that are inconsistent with the foregoing.

7.          Improvements,
Alterations, Repairs and Maintenance.

             7.1        Improvements; Alterations.  Any
alterations, additions, deletions, modifications or utility installations in,
of or to the improvements contained within the Premises (collectively, "Alterations") shall be installed at Tenant's expense and only in
accordance with detailed plans and specifications, construction methods, and
all appropriate permits and licenses, all of which have been previously
submitted to and approved in writing by Landlord, and by a professionally qualified
and licensed contractor and subcontractors approved by Landlord.  No Alterations in or to the Premises may be
made without (a) Landlord's prior written consent and (b) compliance with such
reasonable requirements and construction regulations concerning such
Alterations as Landlord may impose from time to time.  Landlord will not be deemed to unreasonably withhold its consent
to any Alteration that violates Regulations, may affect or be incompatible with
the Building's structure or its HVAC, plumbing, telecommunications, elevator,
life-safety, electrical, mechanical or other basic systems, or the appearance
of the interior common areas or exterior of the Project, or which may interfere
with the use or occupancy of any other portion of the Project.  All Alterations made in or upon the Premises
shall, (i) at Landlord's option, either be removed by Tenant prior to the end
of the Term (and Tenant shall restore the portion of the Premises affected to
its condition existing immediately prior to such Alteration), or shall remain
on the Premises at the end of the Term, (ii) be constructed, maintained,
insured and used by Tenant, at its risk and expense, in a first-class, good and
workmanlike manner, and in accordance with all Regulations, and (iii) shall be
subject to payment of Landlord’s standard alterations supervision fee.  If any Alteration made or initiated by
Tenant or the removal thereof shall cause, trigger or result in any portion of
the Project outside of the Premises, any portion of the Building's shell and
core improvements (including restrooms, if any) within the Premises, or any
Building system inside or outside of the Premises being required by any
governmental authority to be altered, improved or removed, or may otherwise
potentially affect such portions of the Project or any other tenants of the
Project, Landlord shall have the option (but not the obligation) of performing
the same at Tenant's expense, in which case Tenant shall pay to Landlord
(within ten (10) days of Landlord’s written demand) in advance Landlord’s
reasonable estimate of the cost of such work, and any actual costs of such work
in excess of Landlord’s estimate, plus an administrative charge of fifteen
percent (15%) thereof.  At least ten
(10) days before beginning construction of any Alteration, Tenant shall give
Landlord written notice of the expected commencement date of that construction
to permit Landlord to post and record a notice of non-responsibility.  Upon substantial completion of construction,
if the law so provides, Tenant shall cause a timely notice of completion to be
recorded in the office of the recorder of the county in which the Building is
located.

             7.2        Repairs and Maintenance.  Tenant
shall maintain at all times during the Term the Premises and all portions and
components of the improvements and systems contained therein in a first-class,
good, clean, safe, and operable condition, and shall not permit or allow to
remain any waste or damage to any portion of the Premises.  Tenant shall repair or replace, as needed,
subject to Landlord's direction and supervision, any damage to the Building or
the Project caused by Tenant or any Tenant Party.  If any such damage occurs outside of the Premises or relates to
any Building system, or if Tenant fails to perform Tenant’s obligations under
this Paragraph 7.2 or under any other paragraph of this Lease within ten (10)
days’ after written notice from Landlord (except in the case of an emergency,
in which case no notice shall be required), then Landlord may elect to perform
such obligations and repair such damage itself at Tenant's expense.  The cost of all repair or replacement work
performed by Landlord under this Paragraph 7.2, plus an administrative
charge of fifteen percent (15%) of such cost, shall be paid by Tenant to
Landlord within ten (10) days of receipt of Landlord’s invoice therefor as
Additional Rent.  Tenant hereby waives
all common law and statutory rights or provisions inconsistent herewith,
whether now or hereinafter in effect. 
Landlord shall use reasonable efforts to maintain the common areas of
the Project at all times during the Term with the cost thereof constituting an
Operating Expense under Paragraph 3.2.

             7.3        Mechanic’s Liens.  Tenant
shall not cause, suffer or permit any mechanic's or materialman's lien, claim,
or stop notice to be filed or asserted against the Premises, the Building or
any funds of Landlord for any work performed, materials furnished, or
obligation incurred by or at the request of Tenant or any Tenant Party.  If any such lien, claim or notice is filed
or asserted, then Tenant shall, within ten (10) days after Landlord has
delivered notice of the same to Tenant, either (a) pay and satisfy in full the
amount of (and eliminate of record) the lien, claim or notice or (b) diligently
contest the same and deliver to Landlord a bond or other security therefor in
substance and amount (and issued by an issuer) satisfactory to Landlord.

8.          Use.  Tenant
shall continuously occupy and use the Premises only for general office use or
uses incidental thereto, all of which shall be consistent with the standards of
a first class office project (the "Permitted Use") and shall comply, at Tenant's expense, with all
Regulations relating to the use, condition, alteration, improvement, access to,
and occupancy of the Premises, including without limitation, Regulations
relating to Hazardous Materials (defined below).  Should any Regulation now or hereafter be imposed on Tenant or
Landlord by any governmental body relating to the use or occupancy of the
Premises or the Project common areas by Tenant or any Tenant Party or
concerning occupational, health or safety standards for employers, employees,
or tenants, then Tenant agrees, at its sole cost and expense, to comply
promptly with such Regulations if such Regulations relate to anything within
the Premises or if compliance with such Regulations is within the control of
Tenant and applies to an area outside of the Premises.  Tenant shall conduct its business and shall
cause each Tenant Party to act in such a manner as to (a) not release or permit
the release of any Hazardous Material in, under, on or about the Project in
violation of any Regulations, (b) use or store any Hazardous Materials (other
than incidental amounts of cleaning and office supplies) in or about the Premises
or (c) not create or permit any nuisance or unreasonable interference with or
disturbance of other tenants of the Project or Landlord in its management of
the Project or (d) not create any occupancy density in the Premises or parking
density with respect to Tenant and any Tenant Party at the Project greater than
those specified in the Basic Lease Information.  "Hazardous Material" means any hazardous, explosive, radioactive or
toxic substance, material or waste which is or becomes regulated by any local,
state or federal governmental authority or agency, including, without
limitation, any material or substance which is (i) defined or listed as a
"hazardous waste," "extremely hazardous waste,"
"restricted hazardous waste," "hazardous substance,"
"hazardous material," "pollutant" or
"contaminant" under any Regulation, (ii) a flammable explosive, (iii)
a radioactive material, (iv) a polychlorinated biphenyl, (v) asbestos or
asbestos containing material, or (vi) a carcinogen.

9.          Assignment
and Subletting.

             9.1        Transfers; Consent.  Tenant
shall not, without the prior written consent of Landlord, (a) assign, transfer,
mortgage, hypothecate, or encumber this Lease or any estate or interest herein,
whether directly, indirectly or by operation of law, (b) permit any other
entity to become a Tenant hereunder by merger, consolidation, or other
reorganization, (c) if Tenant is a corporation, partnership, limited liability
company, limited liability partnership, trust, association or other business
entity (other than a corporation whose stock is publicly traded), permit,
directly or indirectly, the transfer of any ownership interest in Tenant so as
to result in (i) a change in the current control of Tenant, (ii) a transfer of
twenty-five percent (25%) or more in the aggregate in any twelve (12) month
period in the beneficial ownership of such entity or (iii) a transfer of all or
substantially all of the assets of Tenant, (d) sublet any portion of the
Premises, or (e) grant any license, concession, or other right of occupancy of
or with respect to any portion of the Premises, or (f) permit the use of the
Premises by any party other than Tenant or a Tenant Party (each of the events
listed in this Paragraph 9.1 being referred to herein as a "Transfer").  If Tenant
requests Landlord's consent to any Transfer, then at least twenty (20) business
days prior to the effective date of the proposed Transfer, Tenant shall provide
Landlord with a written description of all terms and conditions of the proposed
Transfer and all consideration therefor (including a calculation of the
Transfer Profits described below), copies of the proposed documentation, and
the following information relating to the proposed transferee: name and
address; information reasonably satisfactory to Landlord concerning the
proposed transferee's business and business history; its proposed use of the
Premises; banking, financial, and other credit information; and general
references sufficient to enable Landlord to determine the proposed transferee's
creditworthiness and character. 
Landlord shall not unreasonably withhold its consent to any assignment
or subletting of the Premises, provided that the parties agree that it shall be
reasonable for Landlord to withhold any such consent if, without limitation,
Landlord determines in good faith that (A) the proposed transferee is not of a
reasonable financial standing or is not creditworthy, (B) the proposed
transferee is a governmental agency, (C) the proposed transferee, or any
affiliate thereof, is then an occupant in the Project or has engaged in
discussions with Landlord concerning a direct lease of space in the
Project,  (D) the proposed Transfer
would result in a breach of any obligation of Landlord or permit any other tenant
in the Project to terminate or modify its lease, (E) there is then in effect an
uncured Event of Default, (F) the Transfer would increase the occupancy density
or parking density of the Project or any portion thereof, (G) the Transfer
would result in an undesirable tenant mix for the Project, as determined in
good faith by Landlord, (H) the proposed transferee does not enjoy a good
reputation, as a business or as a tenant; or (I) any guarantor of the Lease
does not consent to such Transfer in a form satisfactory to Landlord.  Any Transfer made without Landlord's consent
shall be void and, at Landlord's election, shall constitute an Event of Default
by Tenant.  Tenant shall also, within
ten (10) days of written demand therefor, pay to Landlord $500 as a review fee
for each Transfer request, and reimburse Landlord for its reasonable attorneys'
fees and all other costs incurred in connection with considering any request
for consent to a proposed Transfer.  If
Landlord consents to a proposed Transfer, then the proposed transferee shall
deliver to Landlord Landlord’s standard form transfer consent and agreement
whereby the proposed transferee expressly assumes the Tenant's obligations
hereunder.  Landlord's consent to a
Transfer shall not release Tenant from its obligations under this Lease (or any
guarantor of this Lease of its obligations with respect thereto), but rather
Tenant and its transferee shall be jointly and severally liable for all
obligations under this Lease allocable to the space subject to such
Transfer.  Landlord's consent to any
Transfer shall not waive Landlord's rights as to any subsequent Transfers.  In the event of any claim by Tenant that
Landlord has breached its obligations under this Paragraph 9.1, Tenant’s
remedies shall be limited to recovery of its out-of-pocket damages and injunctive
relief.

             9.2        Cancellation and Recapture. 
Notwithstanding Paragraph 9.1, Landlord may (but shall not be obligated
to), within ten (10) business days after submission of Tenant's written request
for Landlord's consent to an assignment or subletting, cancel this Lease as to
the portion of the Premises proposed to be sublet or subject to an assignment
of this Lease (“Transfer Space”) as of the date such proposed Transfer is proposed
to be effective and, thereafter, Landlord may lease such portion of the
Premises to the prospective transferee (or to any other person or entity or not
at all) without liability to Tenant.  If
Landlord shall not cancel this Lease within such ten (10) business day period
and notwithstanding any Landlord consent to the proposed Transfer, Tenant shall
pay to Landlord, immediately upon receipt thereof, the entire excess ("Transfer
Profits") of all compensation and other consideration paid to or for the benefit
of Tenant (or any affiliate thereof) for the Transfer in excess of Base Rent
and Additional Rent payable by Tenant hereunder (with respect to the Transfer
Space) during the remainder of the Term (after straight-line amortization of
any reasonable brokerage commissions and tenant improvement costs paid by
Tenant in connection with the Transfer over the term of the Transfer).  In any assignment or subletting undertaken
by Tenant, Tenant shall diligently seek to obtain the maximum rental amount
available in the marketplace for comparable space available for primary
leasing.

10.        Insurance,
Waivers, Subrogation and Indemnity.

             10.1     Insurance.  Tenant
shall maintain throughout the Term each of the insurance policies described on Exhibit
D attached hereto and shall otherwise comply with the obligations and
requirements provided on Exhibit D.

             10.2     Waiver of Subrogation.  Landlord
and Tenant each waives any claim, loss or cost it might have against the other
for any injury to or death of any person or persons, or damage to or theft,
destruction, loss, or loss of use of any property (a "Loss"), to the extent the same is insured against (or is
required to be insured against under the terms hereof) under any “all risk”
property damage insurance policy covering the Building, the Premises,
Landlord's or Tenant's fixtures, personal property, leasehold improvements, or
business, regardless of whether the negligence of the other party caused such
Loss.

             10.3     Indemnity.  Subject to
Paragraph 10.2, Tenant shall indemnify, defend and hold Landlord, Spieker
Properties, Inc., and each of their respective directors, shareholders,
partners, lenders, members, managers, contractors, affiliates and employees
(collectively, "Landlord Indemnitees") from and against all claims, demands, proceedings,
losses, obligations, liabilities, causes of action, suits, judgments, damages,
penalties, costs and expenses (including, without limitation, reasonable
attorneys' fees and court costs) arising from or asserted in connection with
the use or occupancy of the Premises by Tenant or any Tenant Party, including,
without limitation, by reason of any release of any Hazardous Materials by
Tenant or any Tenant Party in, under, on, or about the Project, or any
negligence or misconduct of Tenant or of any Tenant Party in or about the
Premises, or Tenant's breach of any of its covenants under this Lease, except
in each case to the extent arising from the gross negligence or willful
misconduct of Landlord or any Landlord Indemnitee.  Except to the extent expressly provided in this Lease, Tenant
hereby waives all claims against and releases Landlord and each Landlord
Indemnitee for any injury to or death of persons, damage to property or
business loss in any manner related to (i) Tenant’s use and occupancy of the
Premises, (ii) acts of God, (iii) acts of third parties, or (iv) any matter
outside of the reasonable control of Landlord. 
This Paragraph 10.3 shall survive termination or expiration of this
Lease.

11.        Subordination;
Attornment.

             11.1     Subordination.  This Lease
is subject and subordinate to all present and future ground or master leases of
the Project and to the lien of all mortgages or deeds of trust (collectively, "Security
Instruments") now or hereafter encumbering the Project, if any, and to all renewals,
extensions, modifications, consolidations and replacements thereof, and to all
advances made or hereafter to be made upon the security of any such Security
Instruments, unless the holders of any such mortgages or deeds of trust, or the
lessors under such ground or master leases (such holders and lessors are
sometimes collectively referred to herein as "Holders") require in writing that this Lease be superior
thereto.  Notwithstanding any provision
of this Paragraph 11 to the contrary, any Holder of any Security Instrument may
at any time subordinate the lien of its Security Instrument to this Lease
without obtaining Tenant's consent by giving Tenant written notice of such
subordination, in which event this Lease shall be deemed to be senior to the
Security Instrument in question.  Tenant
shall, within fifteen (15) days of request to do so by Landlord, execute,
acknowledge and deliver to Landlord such further instruments or assurances as
Landlord may deem necessary or appropriate to evidence or confirm the
subordination or superiority of this Lease to any such Security Instrument;
provided, however, that at the request of Tenant made within five (5) days of
any such Landlord request, Landlord shall use commercially reasonable efforts
to obtain for the benefit of Tenant such Holder’s standard nondisturbance
agreement.  Tenant hereby irrevocably
authorizes Landlord to execute and deliver in the name of Tenant any such
instrument or instruments if Tenant fails to do so within said fifteen (15) day
period.

             11.2     Attornment.  Tenant
covenants and agrees that in the event that any proceedings are brought for the
foreclosure of any mortgage or deed of trust, or if any ground or master lease
is terminated, it shall attorn, without any deductions or set-offs whatsoever,
to the purchaser upon any such foreclosure sale, or to the lessor of such
ground or master lease, as the case may be, if so requested to do so by such
purchaser or lessor, and to recognize such purchaser or lessor as
"Landlord" under this Lease. 
If requested, Tenant shall enter into a new lease with that successor on
the same terms and conditions as are contained in this Lease (for the unexpired
portion of the Term then remaining).

12.        Rules and
Regulations.  Tenant shall comply, and shall
cause each Tenant Party to comply, with the Rules and Regulations of the
Building which are attached hereto as Exhibit A, and all such nondiscriminatory modifications,
additions, deletions and amendments thereto as Landlord shall adopt in good
faith from time to time.

13.        Condemnation.  If the
entire Project or Premises are taken by right of eminent domain or conveyed by
Landlord in lieu thereof (a "Taking"), this Lease shall terminate as of the date of the
Taking.  If any part of the Project
becomes subject to a Taking and such Taking will prevent Tenant from conducting
its business in the Premises in a manner reasonably comparable to that
conducted immediately before such Taking for a period of more than one hundred
eighty (180) days, then Tenant may terminate this Lease as of the date of such
Taking by giving written notice to Landlord within thirty (30) days after the
Taking, and all Rent paid or payable hereunder shall be apportioned between
Landlord and Tenant as of the date of such Taking.  If any material portion, but less than all, of the Project,
Building or the Premises becomes subject to a Taking, or if Landlord is
required to pay any of the proceeds received for a Taking to any Holder of any
Security Instrument, then Landlord may terminate this Lease by delivering
written notice thereof to Tenant within thirty (30) days after such Taking, and
all Rent paid or payable hereunder shall be apportioned between Landlord and
Tenant as of the date of such Taking. 
If this Lease is not so terminated, then Base Rent thereafter payable
hereunder shall be abated for the duration of the Taking in proportion to that
portion of the Premises rendered untenantable by such Taking.  If any Taking occurs, then Landlord shall
receive the entire award or other compensation for the land on which the
Project is situated, the Project, and other improvements taken, and Tenant may
separately pursue a claim (to the extent it will not reduce Landlord's award)
against the condemnor for the value of Tenant's personal property which Tenant
is entitled to remove under this Lease and moving and relocation costs.  Landlord and Tenant agree that the
provisions of this Paragraph 13 and the remaining provisions of this Lease
shall exclusively govern the rights and obligations of the parties with respect
to any Taking of any portion of the Premises, the Building, the Project or the
land on which the Building is located, and Landlord and Tenant hereby waive and
release each and all of their respective common law and statutory rights
inconsistent herewith, whether now or hereinafter in effect.

14.        Fire or
Other Casualty.

             14.1     Repair Estimate; Right to Terminate.  If all or
any portion of the Premises, the Building or the Project is damaged by fire or
other casualty (a "Casualty"), Landlord shall, within ninety (90) days after
Landlord’s discovery of such damage, deliver to Tenant its good faith estimate
(the "Damage Notice") of the time period following such notice needed to
repair the damage caused by such Casualty. 
Landlord may elect to terminate this Lease in any case where (a) any
portion of the Premises or any material portion of the Project are damaged and
(b) either (i) Landlord estimates in good faith that the repair and restoration
of such damage under Paragraph 14.2 ("Restoration") cannot reasonably be completed (without the
payment of overtime) within two hundred (200) days of Landlord's actual
discovery of such damage, (ii) the Holder of any Security Instrument requires
the application of any insurance proceeds with respect to such Casualty to be
applied to the outstanding balance of the obligation secured by such Security
Instrument, (iii) the cost of such Restoration is not fully covered by
insurance proceeds available to Landlord and/or payments received by Landlord
from tenants, or (iv) Tenant shall be entitled to an abatement of rent under
this Paragraph 14 for any period of time in excess of thirty-three percent
(33%) of the remainder of the Term. 
Such right of termination shall be exercisable by Landlord by delivery
of written notice to Tenant at any time following the Casualty until forty-five
(45) days following the later of (A) delivery of the Damage Notice or (B)
Landlord's discovery or determination of any of the events described in clauses
(i) through (iv) of the preceding sentence, and shall be effective upon
delivery of such notice of termination (or if Tenant has not vacated the
Premises, upon the expiration of thirty (30) days thereafter).

             14.2     Repair Obligation; Abatement of Rent.  Subject to
the provisions of Paragraph 14.1, Landlord shall, within a reasonable time
after the discovery by Landlord of any damage resulting from a Casualty, begin
to repair the damage to the Building and the Premises resulting from such
Casualty and shall proceed with reasonable diligence to restore the Building
and Premises to substantially the same condition as existed immediately before
such Casualty, except for modifications required by Regulations, and
modifications to the Building or the Project reasonably deemed desirable by
Landlord; provided, however, that Landlord shall not be required as part of the
Restoration to repair or replace any of the Alterations, furniture, equipment,
fixtures, and other improvements which may have been placed by, or at the
request of, Tenant or other occupants in the Building or the Premises. Landlord
shall have no liability for any inconvenience or annoyance to Tenant or injury
to Tenant's business as a result of any Casualty, regardless of the cause
therefor.  Base Rent, and Additional
Rent payable under Paragraph 3.2, shall abate if and to the extent a Casualty
damages the Premises or common areas in the Project required and essential for
access thereto and as a result thereof all or a material portion of the
Premises are rendered unfit for occupancy, and are not occupied by Tenant, for
the period of time commencing on the date Tenant vacates the portion of the
Premises affected on account thereof and continuing until the date the
Restoration to be performed by Landlord with respect to the Premises (and/or
required common areas) is substantially complete, as determined by Landlord's
architect.  Landlord and Tenant agree
that the provisions of this Paragraph 14 and the remaining provisions of this
Lease shall exclusively govern the rights and obligations of the parties with
respect to any and all damage to, or destruction of, all or any portion of the
Premises or the Project by Casualty, and Landlord and Tenant hereby waive and
release each and all of their respective common law and statutory rights
inconsistent herewith, whether now or hereinafter in effect.

15.        Parking.  Tenant
shall have the right to the nonexclusive use of such portion of the parking
facilities of the Project as are designated by Landlord from time to time for
such purpose for the parking of passenger-size motor vehicles used by Tenant
and Tenant Parties only and are not transferable without Landlord’s
approval.  The use of such parking
facilities shall be subject to the parking rules and regulations, as such rules
and regulations may be modified by Landlord from time to time, for the use of
such facilities.  Tenant and the Tenant
Parties shall not use more than Tenant’s allocated number of parking spaces
(based on the parking density for the Project established by Landlord) at any
time.  Tenant shall have
the use of up to and not exceeding two (2) unreserved parking stalls based upon
the building’s parking ratio of .75/1,000 rentable square feet, at the
prevailing monthly market rate per stall.

16.        Events of
Default.  Each of the following
occurrences shall be an "Event of Default" and shall constitute a material default and breach
of this Lease by Tenant:  (a) any
failure by Tenant to pay any installment of Base Rent, Additional Rent or to
make any other payment required to be made by Tenant hereunder when due; (b)
the abandonment or vacation of the Premises by Tenant, provided, however, that
unless Tenant is using the Premises for a retail use, abandonment or vacation
of the Premises shall not be an Event of Default so long as no other Event of
Default has occurred hereunder and provided Tenant has given Landlord five (5)
days’ prior written notice of its intent to vacate the Premises; (c) any
failure by Tenant to execute and deliver any estoppel certificate or other
document or instrument described in Paragraphs 10 (insurance), 11
(subordination) or 21.2 (estoppel certificates) requested by Landlord, where
such failure continues for five (5) days after delivery of written notice of
such failure by Landlord to Tenant; (d) any failure by Tenant to fully perform
any other obligation of Tenant under this Lease, where such failure continues
for thirty (30) days (except where a shorter period of time is specified in
this Lease, in which case such shorter time period shall apply) after delivery
of written notice of such failure by Landlord to Tenant; (e) the voluntary or
involuntary filing of a petition by or against Tenant or any general partner of
Tenant (i) in any bankruptcy or other insolvency proceeding, (ii) seeking any
relief under any state or federal debtor relief law, (iii) for the
appointment of a liquidator or receiver for all or substantially all of
Tenant's property or for Tenant's interest in this Lease, or (iv) for the
reorganization or modification of Tenant's capital structure (provided,
however, that if such a petition is filed against Tenant, then such filing
shall not be an Event of Default unless Tenant fails to have the proceedings
initiated by such petition dismissed within sixty (60) days after the filing
thereof); (f) the default of any guarantor of Tenant's obligations hereunder
under any guaranty of this Lease, the attempted repudiation or revocation of
any such guaranty, or the participation by any such guarantor in any other
event described in this Paragraph 16 (as if this Paragraph 16 referred to such
guarantor in place of Tenant); or (g) any other event, act or omission which
any other provision of this Lease identifies as an Event of Default.  Any notice of any failure of Tenant required
under this Paragraph 16 shall be in lieu of, and not in addition to, any notice
required under any Regulation.

17.        Remedies.  Upon the
occurrence of any Event of Default by Tenant, Landlord shall have, in addition
to any other remedies available to Landlord at law or in equity (all of which
remedies shall be distinct, separate, and cumulative), the option to pursue any
one (1) or more of the following remedies, each and all of which shall be
cumulative and nonexclusive, without any notice or demand whatsoever:

             (a)         Terminate this Lease, and Landlord may
recover from Tenant the following:  (i)
the worth at the time of any unpaid rent which has been earned at the time of
such termination; plus (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; plus (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus (iv) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to
perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom (specifically including, without
limitation, brokerage commissions and advertising expenses incurred, expenses
of remodeling the Premises or any portion thereof for a new tenant, whether for
the same or a different use, and any special concessions made to obtain a new
tenant); and (v) at Landlord's election, such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by applicable
law.  The term "rent" as used in this Paragraph
17(a) shall be deemed to be and to mean all sums of every nature required to be
paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to
others.  As used in Paragraphs 17(a)(i)
and (ii), above, the "worth at the time
of award" shall be computed by allowing interest at the Default
Rate, but in no case greater than the maximum amount of such interest permitted
by law.  As used in Paragraph 17(a)(iii)
above, the "worth at the time of
award" shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%).

             (b)        If Landlord does not elect to terminate
this Lease on account of any Event of Default by Tenant, Landlord may, from
time to time, without terminating this Lease, enforce all of its rights and
remedies under this Lease, including the right to recover all Rent as it
becomes due.

             (c)         Landlord shall at all times have the
rights and remedies (which shall be cumulative with each other and cumulative
and in addition to those rights and remedies available under Paragraphs 17(a)
and 17(b) above, or any law or other provision of this Lease), without prior
demand or notice except as required by applicable law, to seek any declaratory,
injunctive, or other equitable relief, to use self-help remedies, and to
specifically enforce this Lease, or restrain or enjoin a violation or breach of
any provision hereof.

             (d)        Following the occurrence of three
instances of payment of Rent more than ten (10) days late in any twelve (12)
month period, the late charge set forth in Paragraph 4 shall apply from the
date payment was due and Landlord may, without prejudice to any other rights or
remedies available to it, upon written notice to Tenant, require that all
remaining monthly installments of Rent payable under this Lease shall be
payable by cashier's check or electronic funds transfer three (3) months in
advance, and may require that Tenant increase the Security Deposit to an amount
equal to three times the current month’s Rent at the time of the most recent
default.  In addition, (i) upon the
occurrence of an Event of Default by Tenant, if the Premises or any portion
thereof are sublet, Landlord may, at its option and in addition and without
prejudice to any other remedies herein provided or provided by law, collect
directly from the sublessee(s) all rentals becoming due to the Tenant and apply
such rentals against other sums due hereunder to Landlord; (ii) without
prejudice to any other right or remedy of Landlord, if Tenant shall be in
default under this Lease, Landlord may cure the same at the expense of Tenant
(A) immediately and without notice in the case (1) of emergency, (2) where such
default unreasonably interferes with any other tenant in the Building, or (3)
where such default will result in the violation of any Regulation or the
cancellation of any insurance policy maintained by Landlord, and (B) in any
other case if such default continues for ten (10) days following the receipt by
Tenant of notice of such default from Landlord and all costs incurred by
Landlord in curing such default(s), including, without limitation, attorneys'
fees, shall be reimbursable by Tenant as Rent hereunder upon demand, together
with interest thereon, from the date such costs were incurred by Landlord, at
the Default Rate; and (iii) Tenant hereby waives for Tenant and for all those
claiming under Tenant all rights now and hereafter existing to redeem by order
or judgment of any court or by any legal process or writ, Tenant's right of
occupancy of the Premises after any termination of this Lease.

18.        Surrender
of Premises.  No act by Landlord shall be
deemed an acceptance of a surrender of the Premises, and no agreement to accept
a surrender of the Premises shall be valid unless it is in writing and signed
by Landlord.  At the expiration or
earlier termination of this Lease, Tenant shall deliver to Landlord all keys
(including any electronic access devices and the like) to the Premises, and
Tenant shall deliver to Landlord the Premises in the same condition as existed
on the date Tenant originally took possession thereof, ordinary wear and tear
excepted, provided that ordinary wear and tear shall not include repair and
clean up items.  By way of example, but
without limitation, repair and clean up items shall include cleaning of all
interior walls, carpets and floors, replacement of damaged or missing ceiling
or floor tiles, window coverings or cover plates, removal of any
Tenant-introduced markings, and repair of all holes and gaps and repainting
required thereby, as well as the removal requirements below.  In addition, prior to the expiration of the
Term or any sooner termination thereof, (a) Tenant shall remove such
Alterations as Landlord shall request and shall restore the portion of the
Premises affected by such Alterations and such removal to its condition
existing immediately prior to the making of such Alterations, (b) Tenant
shall remove from the Premises all unattached trade fixtures, furniture,
equipment and personal property located in the Premises, including, without
limitation, phone equipment, wiring, cabling and all garbage, waste and debris,
and (c) Tenant shall repair all damage to the Premises or the Project caused by
any  such removal including, without
limitation, full restoration of all holes and gaps resulting from any such
removal and repainting required thereby. 
All personal property and fixtures of Tenant not so removed shall, to
the extent permitted under applicable Regulations, be deemed to have been
abandoned by Tenant and may be appropriated, sold, stored, destroyed, or
otherwise disposed of by Landlord without notice to Tenant and without any
obligation to account for such items.

19.        Holding
Over.  If Tenant holds over after the
expiration or earlier termination of the Term hereof, with or without the
express or implied consent of Landlord, Tenant shall become and be only a
tenant at sufferance at a daily rent equal to one-thirtieth of the greater of
(a) the then prevailing monthly fair market rental rate as determined by
Landlord in its sole and absolute discretion, or (b) two hundred percent (200%)
of the monthly installment of Base Rent (and estimated Additional Rent payable
under Paragraph 3.2) payable by Tenant immediately prior to such expiration or
termination, and otherwise upon the terms, covenants and conditions herein
specified, so far as applicable, as reasonably determined by Landlord.  Neither any provision hereof nor any
acceptance by Landlord of any Rent after any such expiration or earlier
termination (including, without limitation, through any “lockbox”) shall be
deemed a consent to any holdover hereunder or result in a renewal of this Lease
or an extension of the Term, or any waiver of any of Landlord's rights or
remedies with respect to such holdover. 
Notwithstanding any provision to the contrary contained herein, (i)
Landlord expressly reserves the right to require Tenant to surrender possession
of the Premises upon the expiration of the Term or upon the earlier termination
hereof or at any time during any holdover, and the right to assert any remedy
at law or in equity to evict Tenant and collect damages in connection with any
such holdover, and (ii) Tenant shall indemnify, defend and hold Landlord
harmless from and against any and all claims, demands, actions, proceedings,
losses, damages, liabilities, obligations, penalties, costs and expenses,
including, without limitation, all lost profits and other consequential
damages, attorneys' fees, consultants' fees and court costs incurred or
suffered by or asserted against Landlord by reason of Tenant's failure to
surrender the Premises on the expiration or earlier termination of this Lease
in accordance with the provisions of this Lease.

20.        Substitution
Space.  Upon at least sixty (60) days’
prior written notice, Landlord may relocate Tenant within the Project (or to
any other facility owned by Landlord within the vicinity of the Project) to
space which is comparable in size, utility and condition to the Premises.  If Landlord relocates Tenant, Landlord shall
(a) reimburse Tenant for Tenant's reasonable out-of-pocket expenses for moving
Tenant's furniture, equipment and supplies from the Premises to the relocation
space and for reprinting Tenant's stationery of the same quality and quantity
as Tenant's stationery supply on hand immediately before Landlord's notice to
Tenant of the exercise of this relocation right, and (b) improve the relocation
space with improvements substantially similar to those Landlord is committed to
provide or has provided in the Premises under this Lease.  Upon such relocation, the relocation space
shall be deemed to be the Premises and the terms of this Lease shall remain in
full force and shall apply to the relocation space; provided, however, that (i)
if the rentable area of the relocation space is smaller than rentable area of
the Premises, then Tenant shall be entitled (from and after the relocation
date) to a reduction in Base Rent in proportion to the reduction in the
rentable area of the Premises, with a corresponding reduction in Tenant's Proportionate
Share and (ii) if the rentable area of the relocation space is larger than the
rentable area of the Premises, then the Base Rent and Tenant's Proportionate
Share shall not be modified in any way.

21.        Miscellaneous.

             21.1     Landlord Transfers and Liability.  Landlord
may, without restriction, sell, assign or transfer in any manner all or any
portion of the Project, any interest therein or any of Landlord's rights under
this Lease.  If Landlord assigns its
rights under this Lease, then Landlord shall automatically be released from any
further obligations hereunder, provided that the assignee thereof assumes in
writing all of Landlord’s obligations hereunder accruing after such
assignment.  The liability of Landlord
to Tenant for any default by Landlord under the terms of this Lease or with
respect to any obligation or liability related to the Premises or the Project
shall be recoverable only from the interest of Landlord in the Project, and
neither Landlord nor any affiliate thereof shall have any personal liability
with respect thereto and in no case shall Landlord be liable to Tenant for any
lost profits, damage to business, or any form of special, indirect or
consequential damage on account of any breach of this Lease.

             21.2     Estoppel Certificates; Financial
Statements.  At any time and from time to
time during the Term, Tenant shall, without charge, execute, acknowledge and
deliver to Landlord within ten (10) days after Landlord's request therefor, an
estoppel certificate in recordable form containing such factual certifications
and other provisions as are found in the estoppel certificate forms requested
by institutional lenders and purchasers. 
Tenant agrees in any case that (a) the foregoing certificate may be relied
on by anyone holding or proposing to acquire any interest in the Project from
or through Landlord or by any mortgagee or lessor or prospective mortgagee or
lessor of the Project or of any interest therein and (b) the form of estoppel
certificate shall be in the form of, at Landlord's election, the standard form
of such present or prospective lender, lessor or purchaser (or any form
substantially similar thereto), or any other form that Landlord shall
reasonably select.  At the request of
Landlord from time to time, Tenant shall provide to Landlord within ten (10)
days of Landlord’s request therefor Tenant’s and any guarantor’s current
financial statements.

             21.3     Notices.  Notices,
requests, consents or other communications desired or required to be given by
or on behalf of Landlord or Tenant under this Lease shall be effective only if
given in writing and sent by (a) registered or certified United States mail,
postage prepaid, (b) nationally recognized express mail courier that provides
written evidence of delivery, fees prepaid, or (c) facsimile and United States
mail, postage prepaid, and addressed as set forth in the Basic Lease
Information, or at such other address in the State of Oregon as may be
specified from time to time, in writing, or, if to Tenant, at the Premises.  Any such notice, request, consent, or other
communication shall only be deemed given (i) if sent by registered or certified
United States mail, on the day it is officially delivered to or refused by the
intended recipient, (ii) if sent by nationally recognized express mail courier,
on the date it is officially recorded by such courier, (iii) if delivered by
facsimile, on the date the sender obtains written telephonic confirmation that
the electronic transmission was received, or (iv) if delivered personally, upon
delivery or, if refused by the intended recipient, upon attempted delivery.

             21.4     Payment by Tenant; Non-Waiver.  Landlord's
acceptance of Rent (including, without limitation, through any “lockbox”)
following an Event of Default shall not waive Landlord's rights regarding such
Event of Default.  No waiver by Landlord
of any violation or breach of any of the terms contained herein shall waive
Landlord's rights regarding any future violation of such terms.  Landlord's acceptance of any partial payment
of Rent shall not waive Landlord's rights with regard to the remaining portion
of the Rent that is due, regardless of any endorsement or other statement on
any instrument delivered in payment of Rent or any writing delivered in
connection therewith; accordingly, Landlord's acceptance of a partial payment
of Rent shall not constitute an accord and satisfaction of the full amount of
the Rent that is due.

             21.5     Certain Rights Reserved by Landlord.  Landlord
hereby reserves and shall have the following rights with respect to the
Premises and the Project:  (a) to
decorate and to make inspections, repairs, alterations, additions, changes, or
improvements, whether structural or otherwise, in and about the Project, the
Building, the Premises or any part thereof; to enter upon the Premises and,
during the continuance of any such work, to temporarily close doors, entryways,
public space, and corridors in the Project or the Building; to interrupt or
suspend temporarily Building services and facilities; to change the name of the
Building or the Project; and to change the arrangement and location of
entrances or passageways, doors, and doorways, corridors, elevators, stairs,
restrooms, common areas, or other public parts of the Building or the Project;
(b) to take such measures as Landlord deems advisable in good faith for the
security of the Building and its occupants; to temporarily deny access to the
Building to any person; and to close the Building after ordinary business hours
and on Sundays and Holidays, subject, however, to Tenant's right to enter when
the Building is closed after ordinary business hours under such rules and
regulations as Landlord may reasonably prescribe from time to time during the
Term; and (c) to enter the Premises at reasonable hours (or at any time in an
emergency) to perform repairs, to take any action authorized hereunder, or to
show the Premises to prospective purchasers or lenders, or, during the last six
(6) months of the Term, prospective tenants.

             21.6     Miscellaneous.  If any
clause or provision of this Lease is illegal, invalid, or unenforceable under
present or future laws, then the remainder of this Lease shall not be affected
thereby.  This Lease may not be amended
except by instrument in writing signed by Landlord and Tenant. No provision of
this Lease shall be deemed to have been waived by Landlord unless such waiver
is in writing signed by Landlord.  The
terms and conditions contained in this Lease shall inure to the benefit of and
be binding upon the parties hereto, and upon their respective successors in
interest and legal representatives, except as otherwise herein expressly
provided.  This Lease constitutes the
entire agreement between Landlord and Tenant regarding the subject matter
hereof and supersedes all oral statements and prior writings relating
thereto.  Tenant and the person or
persons signing on behalf of Tenant represent and warrant that Tenant has full
right and authority to enter into this Lease, and that all persons signing this
Lease on its behalf are authorized to do so. 
If Tenant is comprised of more than one party, each such party shall be
jointly and severally liable for Tenant's obligations under this Lease.  All exhibits and attachments attached hereto
are incorporated herein by this reference. 
This Lease shall be governed by and construed in accordance with the
laws of the State of Oregon.  In any
action which Landlord or Tenant brings to enforce its respective rights
hereunder, the unsuccessful party shall pay all costs incurred by the prevailing
party, including without limitation, reasonable attorneys’ fees and court
costs.  Landlord is a real estate
organization licensed by the State of Oregon. 
Tenant shall not record this Lease or any memorandum hereof.  TO THE MAXIMUM EXTENT PERMITTED
BY LAW, LANDLORD AND TENANT EACH WAIVE RIGHT TO TRIAL BY JURY IN ANY LITIGATION
ARISING OUT OF OR WITH RESPECT TO THIS LEASE.  Submission
of this Lease to Tenant does not constitute an option or offer to lease and
this Lease is not effective otherwise until execution and delivery by both Landlord
and Tenant.  This Lease may be executed
in any number of counterparts, each of which shall be deemed an original. Time
is of the essence as to the performance of each covenant hereunder in which
time of performance is a factor.

 

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EXHIBIT A

RULES AND REGULATIONS

	1.	Driveways, sidewalks,
  halls, passages, exits, entrances, elevators, escalators and stairways shall
  not be obstructed by tenants or used by tenants for any purpose other than
  for ingress to and egress from their respective premises.  The driveways, sidewalks, halls, passages,
  exits, entrances, elevators and stairways are not for the use of the general
  public and Landlord shall in all cases retain the right to control and
  prevent access thereto by all persons whose presence, in the judgment of
  Landlord, shall be prejudicial to the safety, character, reputation and
  interests of the Building, the Project and its tenants, provided that nothing
  herein contained shall be construed to prevent such access to persons with
  whom any tenant normally deals in the ordinary course of such tenant’s
  business unless such persons are engaged in illegal activities.  No tenant, and no employees or invitees of
  any tenant, shall go upon the roof of any Building, except as authorized by
  Landlord.  No tenant, and no employees
  or invitees of any tenant shall move any common area furniture without
  Landlord’s consent.
	 	 
	2.	No sign, placard, banner,
  picture, name, advertisement or notice, visible from the exterior of the
  Premises or the Building or the common areas of the Building shall be
  inscribed, painted, affixed, installed or otherwise displayed by Tenant
  either on its Premises or any part of the Building or Project without the
  prior written consent of Landlord in Landlord’s sole and absolute
  discretion.  Landlord shall have the
  right to remove any such sign, placard, banner, picture, name, advertisement,
  or notice without notice to and at the expense of Tenant, which were
  installed or displayed in violation of this rule.  If Landlord shall have given such consent to Tenant at any
  time, whether before or after the execution of Tenant’s Lease, such consent
  shall in no way operate as a waiver or release of any of the provisions
  hereof or of the Lease, and shall be deemed to relate only to the particular
  sign, placard, banner, picture, name, advertisement or notice so consented to
  by Landlord and shall not be construed as dispensing with the necessity of
  obtaining the specific written consent of Landlord with respect to any other
  such sign, placard, banner, picture, name, advertisement or notice.
	 	 
	 	All
  approved signs or lettering on doors and walls shall be printed, painted,
  affixed or inscribed at the expense of Tenant by a person or vendor approved
  by Landlord and shall be removed by Tenant at the time of vacancy at Tenant’s
  expense.
	 	 
	3.	The directory of the
  Building or Project will be provided exclusively for the display of the name
  and location of tenants only and Landlord reserves the right to charge for
  the use thereof and to exclude any other names therefrom.
	 	 
	4.	No curtains, draperies,
  blinds, shutters, shades, screens or other coverings, awnings, hangings or
  decorations shall be attached to, hung or placed in, or used in connection
  with, any window or door on the Premises without the prior written consent of
  Landlord.  In any event with the prior
  written consent of Landlord, all such items shall be installed inboard of
  Landlord’s standard window covering and shall in no way be visible from the
  exterior of the Building.  All
  electrical ceiling fixtures hung in offices or spaces along the perimeter of
  the Building must be fluorescent or of a quality, type, design, and bulb
  color approved by Landlord.  No
  articles shall be placed or kept on the window sills so as to be visible from
  the exterior of the Building.  No
  articles shall be placed against glass partitions or doors which Landlord
  considers unsightly from outside Tenant’s Premises.
	 	 
	5.	Landlord reserves the
  right to exclude from the Building and the Project, between the hours of 6
  p.m. and 8 a.m. and at all hours on Saturdays, Sundays and legal holidays,
  all persons who are not tenants or their accompanied guests in the
  Building.  Each tenant shall be
  responsible for all persons for whom it allows to enter the Building or the
  Project and shall be liable to Landlord for all acts of such persons.
	 	 
	 	Landlord
  and its agents shall not be liable for damages for any error concerning the
  admission to, or exclusion from, the Building or the Project of any person.
	 	 
	 	During
  the continuance of any invasion, mob, riot, public excitement or other
  circumstance rendering such action advisable in Landlord’s opinion, Landlord
  reserves the right (but shall not be obligated) to prevent access to the
  Building and the Project during the continuance of that event by any means it
  considers appropriate for the safety of tenants and protection of the
  Building, property in the Building and the Project.
	 	 
	6.	All
  cleaning and janitorial services for the Building and the Premises shall be
  provided exclusively through Landlord. 
  Except with the written consent of Landlord, no person or persons
  other than those approved by Landlord shall be permitted to enter the
  Building for the purpose of cleaning the same.  Tenant shall not cause any unnecessary labor by reason of
  Tenant's carelessness or indifference in the preservation of good order and
  cleanliness of its Premises.  Landlord
  shall in no way be responsible to Tenant for any loss of property on the Premises,
  however occurring, or for any damage done to Tenant's property by the janitor
  or any other employee or any other person.
	 	 
	7.	Tenant shall see that all
  doors of its Premises are closed and securely locked and must observe strict
  care and caution that all water faucets or water apparatus, coffee pots or
  other heat-generating devices are entirely shut off before Tenant or its
  employees leave the Premises, and that all utilities shall likewise be
  carefully shut off, so as to prevent waste or damage.  Tenant shall be responsible for any damage
  or injuries sustained by other tenants or occupants of the Building or
  Project or by Landlord for noncompliance with this rule.  On multiple–tenancy floors, all
  tenants shall keep the door or doors to the Building corridors closed at all
  times except for ingress and egress.
	 	 
	8.	Tenant shall not use any
  method of heating or air-conditioning other than that supplied by
  Landlord.  As more specifically
  provided in Tenant’s lease of the Premises, Tenant shall not waste
  electricity, water or air–conditioning and agrees to cooperate fully
  with Landlord to assure the most effective operation of the Building’s
  heating and air–conditioning, and shall refrain from attempting to
  adjust any controls other than room thermostats installed for Tenant’s use.
	 	 
	9.	Landlord will furnish
  Tenant free of charge with two keys to each door in the Premises.  Landlord may make a reasonable charge for
  any additional keys, and Tenant shall not make or have made additional keys.  Tenant shall not alter any lock or access
  device or install a new or additional lock or access device or bolt on any
  door of its Premises, without the prior written consent of Landlord.  If Landlord shall give its consent, Tenant
  shall in each case furnish Landlord with a key for any such lock.  Tenant, upon the termination of its
  tenancy, shall deliver to Landlord the keys for all doors which have been
  furnished to Tenant, and in the event of loss of any keys so furnished, shall
  pay Landlord therefor.
	 	 
	10.	The restrooms, toilets,
  urinals, wash bowls and other apparatus shall not be used for any purpose
  other than that for which they were constructed and no foreign substance of
  any kind whatsoever shall be thrown into them.  The expense of any breakage, stoppage, or damage resulting from
  violation of this rule shall be borne by the tenant who, or whose employees
  or invitees, shall have caused the breakage, stoppage, or damage.
	 	 
	11.	Tenant shall not use or
  keep in or on the Premises, the Building or the Project any kerosene,
  gasoline, or inflammable or combustible fluid or material.
	 	 
	12.	Tenant shall not use,
  keep or permit to be used or kept in its Premises any foul or noxious gas or
  substance.  Tenant shall not allow the
  Premises to be occupied or used in a manner offensive or objectionable to Landlord
  or other occupants of the Building by reason of noise, odors and/or
  vibrations or interfere in any way with other tenants or those having
  business therein, nor shall any animals or birds be brought or kept in or
  about the Premises, the Building, or the Project.

 

	13.	No cooking shall be done
  or permitted by any tenant on the Premises, except that use by the tenant of
  Underwriters’ Laboratory (UL) approved equipment, refrigerators and microwave
  ovens may be used in the Premises for the preparation of coffee, tea, hot
  chocolate and similar beverages, storing and heating food for tenants and
  their employees shall be permitted. 
  All uses must be in accordance with all applicable federal, state and
  city laws, codes, ordinances, rules and regulations and the Lease.
	 	 
	14.	Except with the prior
  written consent of Landlord, Tenant shall not sell, or permit the sale, at
  retail, of newspapers, magazines, periodicals, theater tickets or any other
  goods or merchandise in or on the Premises, nor shall Tenant carry on, or
  permit or allow any employee or other person to carry on, the business of
  stenography, typewriting or any similar business in or from the Premises for
  the service or accommodation of occupants of any other portion of the
  Building, nor shall the Premises be used for the storage of merchandise or
  for manufacturing of any kind, or the business of a public barber shop,
  beauty parlor, nor shall the Premises be used for any illegal, improper,
  immoral or objectionable purpose, or any business or activity other than that
  specifically provided for in such Tenant’s Lease.  Tenant shall not accept hairstyling, barbering, shoeshine,
  nail, massage or similar services in the Premises or common areas except as
  authorized by Landlord.
	 	 
	15.	If Tenant requires telegraphic,
  telephonic, telecommunications, data processing, burglar alarm or similar
  services, it shall first obtain, and comply with, Landlord’s instructions in
  their installation.  The cost of
  purchasing, installation and maintenance of such services shall be borne
  solely by Tenant.
	 	 
	16.	Landlord will direct
  electricians as to where and how telephone, telegraph and electrical wires
  are to be introduced or installed.  No
  boring or cutting for wires will be allowed without the prior written consent
  of Landlord.  The location of burglar
  alarms, telephones, call boxes and other office equipment affixed to the
  Premises shall be subject to the prior written approval of Landlord.
	 	 
	17.	Tenant shall not install
  any radio or television antenna, satellite dish, loudspeaker or any other
  device on the exterior walls or the roof of the Building, without Landlord’s
  consent.  Tenant shall not interfere
  with radio or television broadcasting or reception from or in the Building, the
  Project or elsewhere.
	 	 
	18.	Tenant shall not mark, or
  drive nails, screws or drill into the partitions, woodwork or drywall or in
  any way deface the Premises or any part thereof without Landlord’s
  consent.  Tenant may install nails and
  screws in areas of the Premises that have been identified for those purposes
  to Landlord by Tenant at the time those walls or partitions were installed in
  the Premises.  Tenant shall not lay
  linoleum, tile, carpet or any other floor covering so that the same shall be
  affixed to the floor of its Premises in any manner except as approved in
  writing by Landlord.  The expense of
  repairing any damage resulting from a violation of this rule or the removal
  of any floor covering shall be borne by the tenant by whom, or by whose contractors,
  employees or invitees, the damage shall have been caused.
	 	 
	19.	No furniture, freight,
  equipment, materials, supplies, packages, merchandise or other property will
  be received in the Building or carried up or down the elevators except
  between such hours and in such elevators as shall be designated by Landlord.
	 	 
	 	Tenant
  shall not place a load upon any floor of its Premises which exceeds the load
  per square foot which such floor was designed to carry or which is allowed by
  law.  Landlord shall have the right to
  prescribe the weight, size and position of all safes, furniture or other
  heavy equipment brought into the Building. 
  Safes or other heavy objects shall, if considered necessary by
  Landlord, stand on wood strips of such thickness as determined by Landlord to
  be necessary to properly distribute the weight thereof.  Landlord will not be responsible for loss
  of or damage to any such safe, equipment or property from any cause, and all
  damage done to the Building by moving or maintaining any such safe, equipment
  or other property shall be repaired at the expense of Tenant.
	 	 
	 	Business
  machines and mechanical equipment belonging to Tenant which cause noise or
  vibration that may be transmitted to the structure of the Building or to any
  space therein to such a degree as to be objectionable to Landlord or to any
  tenants in the Building shall be placed and maintained by Tenant, at Tenant’s
  expense, on vibration eliminators or other devices sufficient to eliminate
  noise or vibration.  The persons employed
  to move such equipment in or out of the Building must be acceptable to
  Landlord.
	 	 
	20.	Tenant shall not install,
  maintain or operate upon its Premises any vending machine without the written
  consent of Landlord.
	 	 
	21.	There shall not be used
  in any space, or in the public areas of the Project either by Tenant or
  others, any hand trucks except those equipped with rubber tires and side
  guards or such other material handling equipment as Landlord may
  approve.  Tenants using hand trucks
  shall be required to use the freight elevator, or such elevator as Landlord
  shall designate.  No other vehicles of
  any kind shall be brought by Tenant into or kept in or about its Premises.
	 	 
	22.	Each tenant shall store
  all its trash and garbage within the interior of the Premises.  Tenant shall not place in the trash boxes
  or receptacles any personal trash or any material that may not or cannot be
  disposed of in the ordinary and customary manner of removing and disposing of
  trash and garbage in the city, without violation of any law or ordinance
  governing such disposal.  All trash,
  garbage and refuse disposal shall be made only through entry-ways and
  elevators provided for such purposes and at such times as Landlord shall
  designate.  If the Building has
  implemented a building-wide recycling program for tenants, Tenant shall use
  good faith efforts to participate in said program.
	 	 
	23.	Canvassing, soliciting,
  distribution of handbills or any other written material and peddling in the
  Building and the Project are prohibited and each tenant shall cooperate to prevent
  the same.  No tenant shall make room–to–room
  solicitation of business from other tenants in the Building or the Project,
  without the written consent of Landlord.
	 	 
	24.	Landlord shall have the
  right, exercisable without notice and without liability to any tenant, to
  change the name and address of the Building and the Project.
	 	 
	25.	Landlord reserves the
  right to exclude or expel from the Project any person who, in Landlord’s
  judgment, is under the influence of alcohol or drugs or who commits any act
  in violation of any of these Rules and Regulations.
	 	 
	26.	Without the prior written
  consent of Landlord, Tenant shall not use the name of the Building or the
  Project or any photograph or other likeness of the Building or the Project in
  connection with, or in promoting or advertising, Tenant’s business except
  that Tenant may include the Building’s or Project’s name in Tenant’s address.
	 	 
	27.	Tenant shall comply with
  all safety, fire protection and evacuation procedures and regulations
  established by Landlord or any governmental agency.
	 	 
	28.	Tenant assumes any and
  all responsibility for protecting its Premises from theft, robbery and
  pilferage, which includes keeping doors locked and other means of entry to
  the Premises closed.
	 	 
	29.	The requirements of
  Tenant will be attended to only upon appropriate application at the office of
  the Building by an authorized individual. 
  Employees of Landlord shall not perform any work or do anything
  outside of their regular duties unless under special instructions from
  Landlord, and no employees of Landlord will admit any person (tenant or
  otherwise) to any office without specific instructions from Landlord.

 

	30.	Landlord reserves the
  right to designate the use of the parking spaces on the Project.  Tenant or Tenant’s guests shall park
  between designated parking lines only, and shall not occupy two parking
  spaces with one car.  Parking spaces
  shall be for passenger vehicles only; no boats, trucks, trailers,
  recreational vehicles or other types of vehicles may be parked in the parking
  areas (except that trucks may be loaded and unloaded in designated loading
  areas).  Vehicles in violation of the
  above shall be subject to tow–away, at vehicle owner’s expense.  Vehicles parked on the Project overnight
  without prior written consent of the Landlord shall be deemed abandoned and
  shall be subject to tow–away at vehicle owner’s expense.  No tenant of the Building shall park in
  visitor or reserved parking areas. 
  Any tenant found parking in such designated visitor or reserved
  parking areas or unauthorized areas shall be subject to tow-away at vehicle
  owner’s expense.  The parking areas
  shall not be used to provide car wash, oil changes, detailing, automotive
  repair or other services unless otherwise approved or furnished by Landlord.  Tenant will from time to time, upon the
  request of Landlord, supply Landlord with a list of license plate numbers of
  vehicles owned or operated by its employees or agents.
	 	 
	31.	No smoking of any kind
  shall be permitted anywhere within the Building, including, without
  limitation, the Premises and those areas immediately adjacent to the
  entrances and exits to the Building, or any other area as Landlord
  elects.  Smoking in the Project is
  only permitted in smoking areas identified by Landlord, which may be
  relocated from time to time.
	 	 
	32.	If the Building furnishes
  common area conferences rooms for tenant usage, Landlord shall have the right
  to control each tenant’s usage of the conference rooms, including limiting
  tenant usage so that the rooms are equally available to all tenants in the
  Building.  Any common area amenities
  or facilities shall be provided from time to time at Landlord’s discretion.
	 	 
	33.	Tenant shall not swap or
  exchange building keys or cardkeys with other employees or tenants in the
  Building or the Project.
	 	 
	34.	Tenant shall be
  responsible for the observance of all of the foregoing Rules and Regulations
  by Tenant’s employees, agents, clients, customers, invitees and guests.
	 	 
	35.	These Rules and
  Regulations are in addition to, and shall not be construed to in any way
  modify, alter or amend, in whole or in part, the terms, covenants, agreements
  and conditions of any lease of any premises in the Project.
	 	 
	36.	Landlord may waive any
  one or more of these Rules and Regulations for the benefit of any particular
  tenant or tenants, but no such waiver by Landlord shall be construed as a
  waiver of such Rules and Regulations in favor of any other tenant or tenants,
  nor prevent Landlord from thereafter enforcing any such Rules and Regulations
  against any or all tenants of the Building.

             Landlord
reserves the right to make such other and reasonable rules and regulations as
in its judgment may from time to time be needed for safety and security, for
care and cleanliness of the Building and the Project and for the preservation
of good order therein.  Tenant agrees to
abide by all such Rules and Regulations herein stated and any additional rules
and regulations which are adopted.

EXHIBIT B

FLOOR PLAN

EXHIBIT C

LEASE IMPROVEMENT AGREEMENT

 

	 	1.	In
  consideration of the mutual covenants contained in the Lease of which this Exhibit C
  is a part, Landlord agrees to perform the following initial tenant
  improvement work in the Premises (“Tenant Improvements”)	 
	 	 	 	 
	 	•	Clean
  carpets throughout the Premises.
	 	 	 
	 	•	Provide
  touch-up paint where necessary within the Premises.
	 	 	 
	 	•	Provide
  a total of two (2) new duplex electrical outlets, as shown on the attached
  Exhibit B.
	 	 	 
	 	•	All
  other improvements are subject to Landlord’s review and approval, and shall
  be made at Tenant’s sole cost and responsibility.
	 	 	 
	2.	All
  the Tenant Improvements described above shall be performed by Landlord at its
  cost and expense using Building Standard materials and in the Building
  Standard manner.  As used herein, “Building
  Standard” shall mean the standards for a particular item selected from time
  to time by Landlord for the Building or such other standards as may be
  mutually agreed upon between Landlord and Tenant in writing.	 
	 	 	 
	3.	Without
  limiting the “as-is” provisions of the Lease, Tenant accepts the Premises in
  its “as-is” condition and acknowledges that Landlord has no obligation to
  make any changes or improvements to the Premises or to pay any costs expended
  or to be expended in connection with any such changes or improvements, other
  than the Tenant Improvements specified in Paragraph 1 of this Exhibit C.	 
	 	 	 
	4.	Tenant
  shall not perform any work in the Premises (including, without limitation,
  cabling, wiring, fixturization, painting, carpeting, replacements or repairs)
  except in accordance with Paragraph 7.1 of the Lease.	 
							

 

 

EXHIBIT D

 INSURANCE

Tenant’s Insurance.  Tenant
shall, at Tenant’s sole cost and expense, procure and keep in effect from the
date of this Lease and at all times until the end of the Term, the following
insurance coverage:

	1.	Property Insurance.  Insurance on all personal property and
  fixtures of Tenant and all improvements made by or for Tenant to the Premises
  on an “All Risk” or “Special Form” basis, for the full replacement value of
  such property.
	 	 
	2.	Liability Insurance.  Commercial General Liability insurance
  written on an ISO CG 00 01 10 93 or equivalent form, on an occurrence basis,
  with a per occurrence limit of at least $2,000,000, and a minimum general
  aggregate limit of at least $3,000,000, covering bodily injury and property
  damage liability occurring in or about the Premises or arising out of the use
  and occupancy of the Premises or the Project by Tenant or any Tenant
  Party.  Such insurance shall include
  contractual liability coverage insuring Tenant’s indemnity obligations under
  this Lease, and shall be endorsed to name Landlord, any Holder of a Security
  Instrument and any other party specified by Landlord as an additional insured
  with regard to liability arising out of the ownership, maintenance or use of
  the Premises.
	 	 
	3.	Worker’s Compensation and Employer’s Liability Insurance.  (a) Worker’s Compensation Insurance as
  required by any Regulation, and (b) Employer’s Liability Insurance in amounts
  not less than $1,000,000 each accident for bodily injury by accident and for
  bodily injury by disease, and for each employee for bodily injury by disease.
	 	 
	4.	Commercial Auto Liability Insurance.  Commercial auto liability insurance with a
  combined limit of not less than One Million Dollars ($1,000,000) for bodily
  injury and property damage for each accident.  Such insurance shall cover liability relating to any auto
  (including owned, hired and non-owned autos).
	 	 
	5.	Alterations Requirements.  In the event Tenant shall desire to
  perform any Alterations, Tenant shall deliver to Landlord, prior to
  commencing such Alterations (i) evidence satisfactory to Landlord that Tenant
  carries “Builder’s Risk” insurance covering construction of such Alterations
  in an amount and form approved by Landlord, (ii) such other insurance as
  Landlord shall nondiscriminatorily require, and (iii) a lien and completion
  bond or other security in form and amount satisfactory to Landlord.
	 	 
	6.	General Insurance Requirements.  All Tenant’s coverages described in thisExhibit D shall be endorsed to
  (i) provide Landlord with thirty (30) days’ notice of cancellation or change
  in terms; (ii) waive all rights of subrogation by the insurance carrier
  against Landlord; and (iii) be primary and non-contributing with Landlord’s
  insurance.  If at any time during the
  Term the amount or coverage of insurance which Tenant is required to carry
  under this Exhibit D is,
  in Landlord’s reasonable judgment, materially less than the amount or type of
  insurance coverage typically carried by owners or tenants of properties
  located in the general area in which the Premises are located which are
  similar to and operated for similar purposes as the Premises or if Tenant’s
  use of the Premises should change with or without Landlord’s consent,
  Landlord shall have the right to require Tenant to increase the amount or
  change the types of insurance coverage required under this Exhibit D.  All insurance policies required to be carried by Tenant under
  this Lease shall be written by companies rated AVII or better in “Best’s
  Insurance Guide” and authorized to do business in the State of Oregon.  Deductible amounts under all insurance
  policies required to be carried by Tenant under this Lease shall not exceed
  $10,000 per occurrence.  Tenant shall
  deliver to Landlord on or before the Term Commencement Date, and thereafter
  at least thirty (30) days before the expiration dates of the expired
  policies, certified copies of Tenant’s insurance policies, or a certificate
  evidencing the same issued by the insurer thereunder, and, if Tenant shall
  fail to procure such insurance, or to deliver such policies or certificates,
  Landlord may, at Landlord’s option and in addition to Landlord’s other
  remedies in the event of a default by Tenant under the Lease, procure the
  same for the account of Tenant, and the cost thereof (with interest thereon
  at the Default Rate) shall be paid to Landlord as Additional Rent.

Landlord’s Insurance. 
All insurance maintained
by Landlord shall be for the sole benefit of Landlord and under Landlord’s sole
control.

	1.	Property
  Insurance.  Landlord agrees to maintain property
  insurance insuring the Building against damage or destruction due to risk
  including fire, vandalism, and malicious mischief in an amount not less than
  the replacement cost thereof, in the form and with deductibles and
  endorsements as selected by Landlord. 
  At its election, Landlord may instead (but shall have no obligation
  to) obtain “All Risk” coverage, and may also obtain earthquake, pollution,
  and/or flood insurance in amounts selected by Landlord.
	 	 
	2.	Optional Insurance.  Landlord, at Landlord’s option, may also
  (but shall have no obligation to) carry (i) insurance against loss of rent,
  in an amount equal to the amount of Base Rent and Additional Rent that Landlord
  could be required to abate to all Building tenants in the event of
  condemnation or casualty damage for a period of twelve (12) months; and (ii)
  liability insurance and such other insurance as Landlord may deem prudent or
  advisable, including, without limitation, liability insurance in such amounts
  and on such terms as Landlord shall determine.  Landlord shall not be obligated to insure, and shall have no
  responsibility whatsoever for any damage to, any furniture, machinery, goods,
  inventory or supplies, or other personal property or fixtures which Tenant
  may keep or maintain in the Premises, or any leasehold improvements,
  additions or alterations within the Premises.Prepared by MerrillDirect

Exhibit
10.36

INVESTMENT
AGREEMENT 1

 

             THIS
INVESTMENT AGREEMENT (this “Agreement”) is made and entered into as of May 22,
2001 between AVI BIOPHARMA, INC. (“AVI”), an Oregon corporation, and MEDTRONIC
ASSET MANAGEMENT, INC. (“Investor”), a Minnesota corporation.

RECITALS

             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 (“Common Stock”) and a warrant to purchase certain shares of
Common Stock in the form attached hereto as Exhibit A (the “Warrant”);

             WHEREAS, at the First Closing (as
defined below), Medtronic, Inc. (“Medtronic”) and AVI are entering into a
License and Development Agreement in the form attached hereto as Exhibit B (the
“License and Development Agreement”);

             WHEREAS, at the First Closing,
Investor and AVI are also entering into a Supply Agreement in the form attached
hereto as Exhibit
C (the “Supply Agreement”);

             WHEREAS, at the First Closing,
Investor and AVI are also entering into a Registration Rights Agreement in the
form attached hereto as Exhibit D (the “Registration Rights
Agreement”); and

AGREEMENT

             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:

ARTICLE
1

DEFINITIONS

             1.1        Specific
Definitions.  As used in this
Agreement, the following terms shall have the meanings set forth or as
referenced below:

 “Affiliate” 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. 
“Control” 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.

1 
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.

“Agreement”
means this Agreement and all Exhibits and Schedules hereto.

“AVI
Subsidiaries” means all subsidiaries of AVI, including but not limited to
the subsidiaries identified in the Disclosure Schedule.

“Change
of Control” with respect to AVI means the occurrence of any of the
following:

(a)         a sale of assets representing fifty
percent (50%) or more of the net book value and of the fair market value of
AVI’s consolidated assets (in a single transaction or in a series of related
transactions);

(b)        a liquidation or dissolution of AVI;

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

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

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

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

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

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

(a)         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’s breach of a confidentiality or
non-disclosure obligation to the disclosing party related to such information
);

(b)        is or becomes part of the public domain
by reason of acts not attributable to the receiving party;

(c)         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

(d)        has been independently developed by the
receiving party without breach of this Agreement or use of any Confidential
Information of the other party.

“Drug”
has the meaning given such term in the License and Development Agreement.

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

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

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

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

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

“First
Closing” has the meaning given in Section 8.1.

“First
Closing Date” has the meaning given in Section 8.1

“Fourth
Closing” has the meaning given in Section 8.4.

“Fourth
Closing Date” has the meaning given in Section 8.4.

“Fourth Closing Milestone” means
*     *     *

“Fourth
Closing Market Price” means the average (rounded to the nearest full cent,
with the cents rounded up if the third decimal place is 5 or more) of the
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.

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

“HSR
Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
regulations thereunder.

“IND”
means an Investigational New Drug application as defined in 21 CFR Part 312.

“Initial
Market Price” 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.  It is acknowledged and agreed that the Initial Market Price is
$7.10 per share.

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

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

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

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

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

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

“NDA” means a New Drug Application
as defined in 21 CFR Part 314.

“PMA”
means a Premarket Approval Application as defined in 21 CFR Part 814.

“Purchased
Securities” means the Purchased Shares, the Warrant and the Warrant Shares.

“Purchased
Shares” means the Common Stock Shares purchased by Investor pursuant to
Article 2.

“Registration
Rights Agreement” has the meaning defined in the Recitals hereto.

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

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

“Second
Closing” has the meaning given in Section 8.2.

“Second
Closing Date” has the meaning given in Section 8.2.

“Second Closing Milestone” means
*      *      *

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

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

“Third
Closing” has the meaning given in Section 8.3.

“Third
Closing Date” has the meaning given in Section 8.3.

“Third
Closing Milestone” means *     
*      *

“Third
Closing Market Price” means  the
average (rounded to the nearest full cent, with the cents rounded up if the
third decimal place is 5 or more) of the 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.

“Transaction
Documents” means the Warrant, the License and Development Agreement, the
Supply Agreement and the Registration Rights Agreement.

“Waived
Amount” has the meaning given in Section 2.5.

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

“Warrant
Shares” means the shares of Common Stock issuable upon exercise of the
Warrant.

             1.2        Definitional
Provisions.

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

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

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

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

ARTICLE
2

PURCHASE OF COMMON STOCK

AND WARRANT

             2.1        Purchase
at First Closing.

(a)         Purchased Shares.  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. 
The purchase price for the shares purchased pursuant to this Section
shall be payable by wire transfer of funds to AVI’s account as designated to
Investor in writing prior to or on the First Closing Date.

(b)        Warrant.  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.

             2.2        Purchase
at Second Closing.  Investor shall
give written notice to AVI of the occurrence of the Second Closing Milestone
within ten (10) business days thereafter.  
Such notice shall specify the date of the occurrence thereof.   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. 
Certificates representing any shares purchased under this Section shall
be issued at the Second Closing in form acceptable to Investor and its
counsel.  The purchase price for the
shares purchased pursuant to this Section shall be payable by wire transfer of
funds to AVI’s account as designated to Investor in writing prior to the Second
Closing Date.  In addition to Investor’s
rights under Section 2.5(a), Investor may, at Investor’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’s Purchased
Shares previously purchased in lieu of requiring AVI to issue Purchased Shares
under this Section 2.2.

             2.3        Purchase
at Third Closing.  Investor shall
give written notice to AVI of the occurrence of the Third Closing Milestone
within ten (10) business days thereafter.  
Such notice shall specify the date of the occurrence thereof.   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.  Certificates representing any shares purchased under this Section
shall be issued at the Third Closing in form acceptable to Investor and its
counsel.  The purchase price for the
shares purchased pursuant to this Section shall be payable by wire transfer of
funds to AVI’s account as designated to Investor in writing prior to the Third
Closing Date.    In addition to Investor’s
rights under Section 2.5(a), Investor may, at Investor’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’s Purchased
Shares previously purchased in lieu of requiring AVI to issue Purchased Shares
under this Section 2.3.

             2.4        Purchase
at Fourth Closing.  Investor shall
give written notice to AVI of the occurrence of the Fourth Closing Milestone
within ten (10) business days thereafter.  
Such notice shall specify the date of the occurrence thereof.   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.  Certificates representing any shares
purchased under this Section shall be issued at the Fourth Closing in form
acceptable to Investor and its counsel. 
The purchase price for the shares purchased pursuant to this Section
shall be payable by wire transfer of funds to AVI’s account as designated to
Investor in writing prior to the Fourth Closing Date.    In addition to Investor’s rights under Section 2.5(a), Investor
may, at Investor’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’s Purchased Shares previously purchased in
lieu of requiring AVI to issue Purchased Shares under this Section 2.4.

             2.5        Certain
Limitations.

(a)         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:

(i)          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’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 “Waived Amount”), provided, however, that

(A)       Investor, at Investor’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

(B)        Investor, at Investor’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

(ii)         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’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.

(b)        AVI will not, without Investor’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.

(c)         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. 
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.  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.  If despite such best efforts,
Shareholder Approval is not so obtained 
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.

(i)          “Excess Shares” 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.

(ii)         “Applicable Shares” 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.  For avoidance of doubt, Applicable Shares
does not include the Warrant or the Warrant Shares issued or issuable upon
exercise thereof.

(iii)        “Applicable Limit” 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).

(iv)
      “Average Price” 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.

(v)        “Shareholder Approval” 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
(“NASD”).

(vi)       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.

(d)        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.  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 “Other Shareholder Approval.”  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’s obligation to purchase, and AVI’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).  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.  If despite such best efforts, such Other
Shareholder Approval is not so obtained 
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.

(e)         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  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.

             2.6        Waiver
of Milestones.  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.  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.  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.

ARTICLE
3

REPRESENTATIONS AND WARRANTIES OF AVI

             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
“Disclosure Schedule”).  The Disclosure
Schedule is accurate and complete as of the date hereof.  The Disclosure Schedule is arranged in
sections corresponding to the sections and subsections of this Article 3.

             3.1        Organization,
Qualifications and Corporate Power.

(a)         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. 
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.  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.

(b)        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.

             3.2        Authorization
of Agreements, Etc.

(a)         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.

(b)        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. 
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.

             3.3        Validity.  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’ rights generally or
by judicial limitations on the right to specific performance.

             3.4        Authorized
Capital Stock.  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.  There are
issued and outstanding options to purchase an aggregate 2,866,335  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.  There are no
agreements or arrangements under which AVI is obligated to register the sale of
any of its securities under the Securities Act.  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.  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’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. 
Except as provided for in AVI’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.  To  AVI’s knowledge, there are no voting trusts or agreements,
stockholders’ 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).  All of
the outstanding securities of AVI were issued in compliance with all applicable
federal and state securities laws.

             3.5        SEC
Documents; Financial Statements. 
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.  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.  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.  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.  The Financial Statements have been prepared
in accordance with United States generally accepted accounting principles
consistently applied, and fairly present AVI’s consolidated financial position
as of the dates thereof and the results of AVI’s consolidated operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end adjustments). 
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.  Such liabilities incurred
subsequent to December 31, 2000, are not, in the aggregate, material to the
financial condition or operating results of AVI.

             3.6        Litigation;
Compliance with Law.  There is no:
(a) action, suit, claim, proceeding or investigation pending or, to AVI’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  AVI’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.  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.  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.  There is no action, claim, proceeding,
investigation or suit by AVI or any AVI Subsidiary pending or threatened
against others.  AVI and each AVI
Subsidiary have complied with all laws, rules, regulations and orders
applicable to its business, operations, properties, assets, products and
services.  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.  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.

             3.7        Proprietary
Information of Third Parties.  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.  To
AVI’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.  To AVI’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’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.

             3.8        Title
to Properties.  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.

             3.9        Leasehold
Interests.  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’s knowledge,
without any default thereunder of any other party thereto.  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’s knowledge, by any other party thereto.  The possession of such property by AVI or such AVI Subsidiary has
not been disturbed and, to AVI’s knowledge, no claim has been asserted or
threatened against AVI or such AVI Subsidiary adverse to its rights in such property.

             3.10      Taxes.  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’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.  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.

             3.11      Patents, Trademarks, Etc.  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 
AVI’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’s knowledge there is
no basis for any such claim (whether or not pending or threatened).  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’s knowledge there is no basis for any
such claim (whether or not pending or threatened).  To  AVI’s knowledge, all
technical information developed by and belonging to AVI or any AVI Subsidiary
which has not been patented has been kept confidential.  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.  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.  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.  AVI has a policy requiring each of its employees
and contractors to execute proprietary information and confidentiality
agreements substantially in AVI’s standard forms and all current and former
employees and contractors of AVI and each AVI Subsidiary have executed such an
agreement.  AVI has provided a true and
correct copy of such form to Investor.

             3.12      Loans and Advances. 
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.

             3.13      Assumptions, Guaranties, Etc. of Indebtedness of Other
Persons.  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.

             3.14      Governmental Approvals. 
Subject to the accuracy of the representations and warranties of
Investor set forth in Article 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.

             3.15      Brokers.  AVI has
no contract, arrangement or understanding with any broker, finder or similar
agent with respect to the transactions contemplated by this Agreement.

             3.16      Transactions With Affiliates.  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.

             3.17      Environmental Matters. 
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.  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.

             3.18      Employees. 
To  AVI’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’s obligation to use his
best efforts to promote the interests of AVI, and the continued employment by
AVI and the  AVI Subsidiaries of their
present employees will not result in any such violations.  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.  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.

             3.19      Insurance.  AVI
and each AVI Subsidiary maintains (a) insurance on all material assets of
a type customarily insured, covering property damage by fire or other casualty;
and (b) adequate insurance protection against all liabilities, claims, and
risks against which it is customary to insure.

             3.20      Absence of Certain Changes.  Since December 31, 2000, no event has occurred which could have a
Material Adverse Effect.

             3.21      Investment Company Status.  AVI is not and upon consummation of the sale of the Purchased
Securities will not be an “investment company,” a company controlled by an
“investment company” or an “affiliated person” of, or “promoter” or “principal
underwriter” for, an “investment company” as such terms are defined in the
Investment Company Act of 1940, as amended.

             3.22      Regulatory Filings. 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.  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.  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. 
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.

             3.23      State Takeover Laws.  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.

             3.24      Nasdaq; Etc.  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.  There are no proceedings
pending or, to AVI’s knowledge, threatened against AVI relating to the
continued listing of AVI’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.

             3.25      Disclosure. 
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.  None of the statements,
documents, certificates or other items prepared or supplied by AVI with respect
to the transactions contemplated hereby, including, without limitation,
reports, data, analyses and correspondence relating to the Drug, contains an
untrue statement of a material fact or omits a material fact necessary to make
the statements contained therein not misleading.  There is no fact which AVI has not disclosed to Investor and its
counsel in writing and of which AVI is aware which could have a Material
Adverse Effect.

ARTICLE
4

REPRESENTATIONS AND WARRANTIES OF INVESTOR

Investor
makes the following representations and warranties to AVI:

             4.1        Purchase
of Purchased Securities.  Investor
is an “accredited investor” within the meaning of Rule 501 under the Securities
Act and was not organized for the specific purpose of acquiring the Purchased
Securities.  Investor has sufficient
knowledge and experience in investing in companies similar to AVI in terms of
AVI’s stage of development so as to be able to evaluate the risks and merits of
Investor’s investment in AVI and Investor is able financially to bear the risks
thereof.  Investor has had an
opportunity to discuss AVI’s business, management and financial affairs with
AVI’s management.  The Purchased
Securities are being acquired for Investor’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.  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.

             4.2        Corporate
Authority.  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.  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.  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’ rights generally or by judicial limitations on the right
to specific performance.

ARTICLE
5

COVENANTS

             5.1        Best
Efforts.  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.

             5.2        Reporting Status; Eligibility to Use Form S-3.  AVI's Common Stock is registered under
Section 12 of the Exchange Act. 
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.  AVI currently meets, and
will take all reasonably necessary action to continue to meet, the
"registrant eligibility" 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).

             5.3        Listing
of Additional Shares. 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. 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.

             5.4        No Integration. 
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.

             5.5        Regulatory
Approvals.

(a)         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.    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.   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.  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.

(b)        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 “Order”) 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.  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.

             5.6        Exclusivity.  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.

             5.7        Reserve
for Shares; Authorized Shares.  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.  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.  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.

             5.8        Corporate Existence.  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’s assets, as long as the surviving or successor entity in such transaction
(a) assumes AVI’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.

ARTICLE
6

CONDITIONS TO CLOSING

             6.1        Conditions
to Investor’s Obligations.  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 
(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:

(a)         Representations and Warranties to be
True and Correct.  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.

(b)        Performance.  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.

(c)         Execution and Delivery of
Transaction Documents.  AVI shall
have executed and delivered the Transaction Documents.

(d)        All Proceedings to be Satisfactory.  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.

(e)         Supporting Documents.  Investor and their counsel shall have
received copies of the following documents:

(i)          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;

(ii)         a certificate of the Secretary of AVI
dated such Closing Date and certifying: (A) AVI’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

(iii)        such additional supporting documents and
other information with respect to the operations and affairs of AVI as Investor
or its counsel reasonably may request.

(f)         Required Consents.  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.

(g)        Litigation Affecting Closing.  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.

(h)        Legislation.  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.

(i)          Opinion of Company’s Counsel.  Investor shall have received from Hurley,
Lynch & 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:

(i)          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.  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.  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.

(ii)         The authorized and outstanding capital
stock of AVI consists of that described in Section 3.4 of this Agreement.  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.  To such counsel’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.

(iii)        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.  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’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’s knowledge, violate any existing law or regulation.

(iv)       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.

(v)        To such counsel’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.

(vi)       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).  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.

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.

(j)          No Change of Control.  Since the date hereof, there shall not have
been any Change of Control.

(k)         No Material Adverse Changes.  Since the date hereof, no event shall have
occurred which may result in a Material Adverse Effect.

(l)          No Default.  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.

(m)        Information to Be Provided to
Investor at Second, Third, and Fourth Closings.  Upon achieving each of the Second Closing Milestone, Third
Closing Milestone, and Fourth Closing Milestones, and in any event not less
than  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.  Upon
receipt thereof, Investor’s obligations shall be subject to Section 6.1(k) for
any information disclosed therein.

(n)        Deadlines.  Investor’s obligation at the Second Closing
shall be subject to the condition that the Second Closing Milestone shall have
occurred on or before *     *     *; 
Investor’s obligation at the Third Closing shall be subject to the
condition that the Third Closing Milestone shall have occurred on or before
*      *     *; and Investor’s obligation at the Fourth Closing shall be
subject to the condition that the Fourth Closing Milestone shall have occurred
on or before *     *      *.

             6.2        Conditions
to AVI’s Obligations.  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:

(a)         Execution of Transaction Documents.  Investor or Medtronic, as the case may be,
shall have executed and delivered the Transaction Documents.

(b)        Representations and Warranties to be
True and Correct.  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.

ARTICLE 7

INDEMNIFICATION

             7.1        Indemnification
of Medtronic.  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 “Medtronic”) 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) (“Indemnifiable Losses”), 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.

             7.2        Third-Party
Claims.  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’s ability to defend such claim
against a third party.  Medtronic shall
not settle such claim without the consent of AVI, which consent shall not be
unreasonably withheld or delayed.  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; provided
that such settlement or defense shall be controlled by Medtronic.

             7.3        Cooperation
as to Indemnified Liability.  Each
party hereto shall cooperate fully with the other parties with respect to
access to books, records, or other documentation within such party’s control,
if deemed reasonably necessary or appropriate by any party in the defense of
any claim which may give rise to indemnification hereunder.

             7.4        Brokerage.  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.

             7.5       
Limitation on Certain Claims.  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’s representations and warranties deemed made as of the Closing
Date applicable thereto, such claim for indemnification shall be made within
*      *     * after such Closing Date applicable to such purchase.  However, the foregoing *     *     
* 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.

ARTICLE
8

CLOSING

             8.1        First
Closing.  The consummation of the
purchase and sale of the Purchased Shares and the issuance of the Warrant
pursuant to Section 2.1 (the “First Closing”) 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 “First Closing Date”).  At the
First Closing, the parties shall also execute the Transaction Documents.

             8.2        Second
Closing.  The consummation of the
purchase and sale of the Purchased Shares pursuant to Section 2.2 (the “Second
Closing”) 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 “Second Closing Date”).

             8.3        Third
Closing.  The consummation of the
purchase and sale of the Purchased Shares pursuant to Section 2.3 (the “Third
Closing”) 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 Third Closing Milestone, as specified in writing by Investor,
or on such other date as the parties may agree (the “Third Closing Date”).

             8.4        Fourth
Closing.  The consummation of the
purchase and sale of the Purchased Shares pursuant to Section 2.4 (the “Fourth
Closing”) 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 Fourth Closing Milestone, as specified in writing by
Investor, or on such other date as the parties may agree (the “Fourth Closing
Date”).

             8.5        Closings.  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.

ARTICLE
9

TERMINATION AND DEFAULT

             9.1        Termination.  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:

(a)
        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

(b)
       by and at the option of Investor,
if the Second Closing  Milestone, Third
Closing Milestone or Fourth Closing Milestone does not occur by the dates set
forth in Section 6.1(n); or

(c)         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

(d)        by and at the option of AVI, if  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

(e)         by and at the option of Investor, any
event or circumstance occurs or exists that renders any condition to Investor’s
obligations set forth in Article 6 incapable of being satisfied; or

(f)         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

(g)        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

(h)        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

(i)          by and at the option of Investor if a
Material Adverse Effect with respect to AVI shall have occurred; or

(j)          by the mutual written consent of the
parties; or

(k)         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.

             9.2        Effect.  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.  Investor’s or Medtronic’s rights pursuant to
the Transaction Documents shall survive any termination of this Agreement.

ARTICLE
10

OTHER PROVISIONS

             10.1      Further Assurances. 
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.

             10.2      Complete Agreement. 
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.  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.  This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.

             10.3      Survival of Representations, Warranties and Agreements.  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.  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.

             10.4      Waiver, Discharge, Amendment, Etc.  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.  No waiver of any breach of this Agreement
shall be held to be a waiver of any other or subsequent breach.  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.  Any amendment to this Agreement
shall be in writing and signed by AVI and Investor.

             10.5      Notices.  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:

if
to Investor or Medtronic to:

             Medtronic, Inc.

             710 Medtronic Parkway NE

             Minneapolis, MN 55432-5604

             with separate copies thereof
addressed to

	Attention:	General Counsel	 
	 	Mail Stop LC400	 
	 	Telecopier No.:  (763) 572-5459	 

             and

	Attention:	Vice President and
  Chief Development Officer	 
	 	Mail Stop LC390	 
	 	Telecopier No.:  (763) 505-2542	 

if
to AVI to:

             AVI BioPharma, Inc.

             One SW Columbia

             Portland, OR 97258

             Attn: President, Alan P.
Timmins

With a copy to:

             HURLEY, LYNCH & RE, P.C.,

             747 SW Industrial Way

             Bend, Oregon  97702

             Attn:  Robert A. Stout, Esq.

Any
party may change the above–specified recipient and/or mailing address by
notice to the other party given in the manner herein prescribed.  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).

             10.6      Public Announcement. 
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. 
Neither party will publicly or privately disclose or divulge any
provisions of this Agreement or the transactions contemplated hereby without
the other parties’ 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.

             10.7      Expenses.  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.

             10.8      Governing Law. 
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.  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.

             10.9      Titles and Headings; Construction.  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.  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.

             10.10    Benefit.  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.

             10.11    Counterparts.  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.

             10.12    Arbitration.  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 Exhibit E attached hereto.  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.  Notwithstanding the foregoing, either party
may seek interim injunctive relief from any court of competent jurisdiction.

             10.13    Non-Disclosure. 
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.  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

             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.

 

	 	 	 	AVI BIOPHARMA, INC.
	 	 	 	 	 	 	 
	 	 	 	By:	/s/ Denis Burger	 
	 	 	 	 	

	 
	 	 	 	 
  Its:	CEO	 
	 	 	 	 	

	 
	 	 	 	 	 	 	 
	 	 	 	MEDTRONIC ASSET MANAGEMENT, INC.
	 	 	 	 	 	 	 
	 	 	 	By:	/s/ Michael D. Ellwein	 
	 	 	 	 	

	 
	 	 	 	 
  Its:	VP	 
	 	 	 	 	

	 

 

Exhibits
and Schedules:

 

Exhibit
A - Warrant

Exhibit B - License and Development Agreement

Exhibit C – Supply Agreement

Exhibit D – Registration Rights agreement

Exhibit E – Alternative Dispute Resolution

AVI Disclosure Schedule

 

EXHIBIT
E

ALTERNATIVE
DISPUTE RESOLUTION

 

             1)          Negotiations.  If any dispute arises between AVI and
Investor with respect to the Investment Agreement or the Registration Rights
Agreement (the “Agreements”), 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.  Such designees are as follows:

             For AVI -  the President of AVI or his/her designee

For
Investor - the President of Medtronic, Inc.’s business unit to which the
Agreements relate, or his/her designee

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.  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.  If the designees
are unable to resolve such dispute within such 30-day period, any party may
invoke the provisions of Section 2 below.

             2)          Arbitration.  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.

             3)          Notice.  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:

             Medtronic Asset Management, Inc.

             710 Medtronic Parkway NE

             Minneapolis, MN 55432-5604

             with separate copies thereof
addressed to

	Attention:	General Counsel	 
	 	Mail Stop LC400	 
	 	Telecopier No.:  (763) 572-5459	 

             and

	Attention:	Vice President and
  Chief Development Officer	 
	 	Mail Stop LC390	 
	 	Telecopier No.:  (763) 505-2542	 

if
to AVI to:

             AVI BioPharma, Inc.

             One SW Columbia

             Portland, OR 97258

             Attn: President, Alan P.
Timmins

With a copy to:

             HURLEY,
LYNCH & RE, P.C.

             747 SW Industrial Way

             Bend, Oregon  97702

             Attn:  Robert A. Stout, Esq.

             Any
party may change the above–specified recipient and/or mailing address by
notice to the other party given in the manner herein prescribed.  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).   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.

             4)          Binding Arbitration.  Upon filing of a notice of demand for
binding arbitration by any party hereto, arbitration shall be commenced and
conducted as follows:

             (a)         Arbitrators.  All claims, disputes, controversies, and
other matters (collectively “matters”) 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’s representative and the third by the two
arbitrators so selected.  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.  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. 
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.

             (b)        Cost
of Arbitration.  The cost of each
arbitration proceeding, including without limitation the arbitrators’
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.  The arbitrators shall also award the party
that prevails substantially in its pre-hearing position its reasonable
attorneys’ fees and costs incurred in connection with the arbitration.  The arbitrators are specifically instructed
to award attorneys’ fees for instances of abuse of the discovery process.

             (c)         Location
of Proceedings.  All arbitration
proceedings shall be held in the county selected pursuant to Section 10.8 of
the Investment Agreement unless the parties agree otherwise.

             (d)        Pre-hearing
Discovery.  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:  Document discovery and
other discovery shall be under the control of and enforceable by the
arbitrators.  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.  The arbitrators shall decide
discovery disputes.  The arbitrators are
empowered:

             (i)          to
issue subpoenas to compel pre-hearing document or deposition discovery;

             (ii)         to enforce the discovery rights and obligations of the
parties; and

             (iii)        to otherwise control the scheduling and conduct of the
proceedings.

             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.

             (e)         Pre-hearing
Conference.  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.

             (f)         Hearing
Procedures.  The hearing shall be
conducted to preserve its privacy and to allow reasonable procedural due
process.  Rules of evidence need not be
strictly followed, and the hearing shall be streamlined as follows:

             (i)          Documents
shall be self-authenticating, subject to valid objection by the opposing party;

             (ii)         Expert reports, witness biographies, depositions, and
affidavits may be utilized, subject to the opponent’s right of a live
cross-examination of the witness in person;

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

             (iv)       The hearing should be held on consecutive business days
without interruption to the maximum extent practicable; and

             (v)        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.

             (g)        Governing
Law.  This arbitration provision
shall be governed by, and all rights and obligations specifically enforceable
under and pursuant to, the Federal Arbitration Act (9 U.S.C. § 1 et
seq.) 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.

             (h)        Consolidation.  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.

             (i)          Award.  The arbitrators shall be required to render
their final decision within six months after the pre-hearing conference.  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.  The award rendered
by the arbitrators (1) shall be final; (2) shall not constitute a
basis for collateral estoppel as to any issue; and (3) shall not be
subject to vacation or modification, except in the event of fraud or gross
misconduct on the part of the arbitrators.

             (j)          Confidentiality.  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.

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