Exhibit 10.12




LEASE AGREEMENT

 


        THIS LEASE made and entered into as of the
20th day of October, 2005 by and
between Peter L. Krog having offices at 4 Centre Drive Orchard Park, NY
14127 (hereinafter referred to as "LANDLORD"); and Minrad Inc. having
offices at 847 Main Street; Buffalo, NY 14203 (hereinafter referred to as
("TENANT").

WITNESSETH:

        WHEREAS, LANDLORD is the equitable owner of an approximately 6.83 acre parcel
of land (the "Land") and a building to be constructed on the Land, both located
at 50 Cobham Drive; Orchard Park, NY 14127 (hereinafter referred to as the
"Building");

        WHEREAS, the Land is depicted with more particularity on Exhibit A
attached hereto;

        WHEREAS, the particulars of the Building are depicted with more particularity
on Exhibits B and C attached hereto;

        WHEREAS, TENANT desires to take and hire from LANDLORD and LANDLORD desires
to demise and lease to TENANT the Land and the Building subject to the terms and
conditions hereinafter stated; 

        NOW, THEREFORE, in consideration of the foregoing premises and of the
covenants and agreements hereinafter set forth, the LANDLORD and TENANT do
hereby covenant and agree as follows:

        1. Demised Property. LANDLORD does hereby demise and lease to TENANT,
its successors and assigns, and TENANT does hereby take and hire from LANDLORD,
the Land and the Building (hereinafter referred to as the "Leased Premises").
The floor space located in the Building shall aggregate not less than 37,400
square feet of office, lab and warehouse space, all as set forth on the floor
plan attached hereto as Exhibit B and made a part hereof and all the
improvements located thereon. Effective upon Delivery of Possession (as
hereinafter defined) and further provided TENANT is not in default in the
payment of rent under the 847 Main Lease (hereinafter defined), LANDLORD agrees
that the Lease Agreement between LANDLORD and TENANT, dated December 13, 2001,
with respect to the real property and improvements commonly know as 847 Main
Street; Buffalo, New York (the "847 Main Lease") shall cease to be of any
further force and effect and TENANT shall be released from and against any and
all liability for rent and other charges of any kind and nature thereafter
becoming due under the terms of the 847 Main Lease. Notwithstanding such
termination, LANDLORD and TENANT acknowledge and agree that TENANT shall have
the right to occupy the premises leased pursuant to the 847 Main Lease for not
more than thirty (30) days following Delivery of Possession. LANDLORD further
agrees to deliver to TENANT on Delivery of Possession, the sum of Twenty-Five
Thousand Dollars ($25,000), which sum shall be utilized by TENANT for moving and
similar transitional expenses related to its relocation from 847 Main Street to
the Leased Premises.

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        2. Warranty of Title. LANDLORD warrants to TENANT that it has a good
and legal right to execute and deliver this Lease and to grant and convey to
TENANT the leasehold estate herein provided for the term, at the property, and
upon the conditions herein set forth. The LANDLORD also warrants and agrees to
defend the title to the Building and the Leased Premises and covenants that
TENANT, so long as it shall not be in default hereunder, shall peaceably and
quietly have, hold, and enjoy the Leased Premises for the full term.

        3. Warranty of Compliance. LANDLORD covenants and agrees to construct
the Building in accordance with the floor plan attached hereto as Exhibit B
(including building partitions) and the specifications attached hereto as 
Exhibit C. LANDLORD hereby warrants and represents to TENANT that when
possession of the Leased Premises shall be delivered to TENANT in accordance
with Exhibit C, the construction of the Leased Premises and the Building
and the use of the same for business offices shall be in full compliance with
all laws, ordinances, codes and regulations of the Governmental Authorities (as
hereinafter defined) and insurance rating bureaus having jurisdiction
(including, without limitation, zoning and building codes) and shall not violate
the rights of any third parties. As used in this Lease the term "Governmental
Authority" shall mean the United States, State of New York and any political
subdivision thereof, and any agency, department, commission, board, bureau or
instrumentality of any of them.

        4. Term. 

        (A) The initial term of this Lease shall be ten (10) years commencing
		on the date on which "Delivery of Possession" shall occur. The Parties
		intend that Delivery of Possession" shall occur on or before June 1,
		2006. However, the Parties recognize and agree that such target date is
		a best guess estimate, which is and shall be subject to change, based
		upon numerous factors and conditions beyond LANDLORD's control. In any
		event, Delivery of Possession shall be deemed to occur when LANDLORD
		delivers to TENANT a certificate of occupancy from the Town of Orchard
		Park evidencing completion of the Leased Premises in accordance with 
		Exhibits B and C. 

	

        TENANT shall have the option to extend this Lease, at a base rental
equivalent to a 3% increase per year, for one (1) period of 5 years. The option
to extend this Lease for such period shall be exercised in writing by TENANT not
later than one hundred eighty (180) days prior to the expiration of the initial
term. In the event the option is exercised, all references herein to the lease
term, other terms of the lease, occupancy hereunder and like words shall be
deemed to refer to the term of the lease as so extended and no new lease
agreement need be executed and delivered to evidence the lease agreement between
LANDLORD and TENANT. TENANT shall have the option, commencing after the end of
year seven (7) of the initial term of this Lease and continuing during the
remainder of such initial term of this Lease only, to purchase the Land and
Building for the sum of Four Million Two Hundred Sixty Thousand Dollars
($4,260,000 ), such option shall be exercised
in writing by TENANT no later than one hundred eighty (180) days prior to the
expiration of the initial term. Upon the exercise of such option, the terms and
conditions of the purchase contract attached hereto as Exhibit E shall
apply.

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TENANT shall have the option at any time after the initial term of this Lease
and continuing during any and all renewal terms, if any, of this Lease to
purchase the Land and the Building for the sum of Three Million Nine Hundred
Fifty Thousand Dollars ($3,950,000), such option shall be exercised in writing
by TENANT ninety (90) days prior to the intended closing date for acquisition of
title. Upon exercise of such option, the terms and conditions of the purchase
contract attached hereto as Exhibit E shall apply.

        5. Fixed Rent. The fixed rent which shall be paid
by TENANT during Years One (1) through Five (5) of this Lease shall be $11.65
per square foot or an aggregate $435,710.00 per annum, payable at the rate of
$36,309.17 per month, The fixed rent which shall be paid by TENANT during
Years Six (6) and Seven (7) of this Lease shall be $12.25 per square foot or an
aggregate $ 458,150.00 per annum, payable at the rate of $ 38,179.17 per month;
The fixed rent which shall be paid by TENANT during Year Eight (8) of this Lease
shall be $12.50 per square foot or an aggregate $467,500.00 per annum, payable
at the rate of $ 38,958.33 per month; The fixed rent which shall be paid by
TENANT during Year Nine (9) of this Lease shall be $12.75 per square foot or an
aggregate $ 476,850.00 per annum, payable at the rate of $39,737.50 per month;
The fixed rent which shall be paid by TENANT during Year Ten (10) of this Lease
shall be $13.00 per square foot or an aggregate $ 486,200.00 per annum, payable
at the rate of $40,516.67 per month, together with a "Late Charge" of 5% per
month if the month rent is not received by the 10th day from the due date
thereof. The term "Lease Year" is defined to mean the twelve (12) calendar month
period commencing on Delivery of Possession and each twelve (12) calendar month
period thereafter. All rent payable hereunder shall be payable in advance in
monthly installments to LANDLORD at its address hereinabove set forth, or to
such other party or at such other place as the LANDLORD may from time to time in
writing designate.

        6. Deposit. Concurrently with the execution of this Lease Agreement,
TENANT shall deposit with LANDLORD a sum equal to the amount of the last month's
rent ($40,516.67), to be held by LANDLORD in an interest-bearing account as
security for the performance by TENANT of its obligations hereunder.. Should an
"Event of Default" as per Article 20 of this Lease Agreement occur, LANDLORD
shall be entitled to withdraw from such account the amount necessary to correct
such Event of Default.

        7. Condition of Premises.

        (A) Upon Delivery of Possession and at all times during the Term of
		this Lease Agreement, LANDLORD shall at its sole cost and expense cause
		the Leased Premises to be connected to the electric, gas, water, storm
		and sewer systems serving the Town of Orchard Park. LANDLORD warrants
		that at Delivery of Possession, the electrical, plumbing, heating,
		ventilation, air conditioning systems and related fixtures of each such
		system in the Building shall be in new and in first class working
		condition, adequate for TENANT's use of the Leased Premises. LANDLORD
		warrants that for a period of one (1) year from Delivery of Possession
		the electrical, plumbing, heating, ventilation, air conditioning systems
		and related fixtures of each such system shall be free of defects
		(including any defects in the installation thereof), merchantable and
		otherwise fit for its intended purposes. TENANT acknowledges that it
		will be responsible for all repairs, required subsequent to the
		expiration of such one-year warranty, to such electrical, 

		

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plumbing,
		heating, ventilation, air conditioning systems and related fixtures of
		such systems, and all necessary maintenance, repairs, alterations and
		replacements to such systems and related fixtures, irrespective of the
		cost thereof. LANDLORD agrees to extend to TENANT the benefit of any
		manufacturer's warranty which may apply to any such system.
		        (B) Throughout the Term, LANDLORD at its sole cost and expense shall
		make necessary repairs to the Building, and the exterior foundations,
		downspouts, gutters and roof of the Building.

		 

	

        8. Utilities. TENANT shall be responsible for paying for all charges
for gas, electricity, light, heat, water, sewerage, trash disposal, power and
telephone or other communications services used, rented or supplied to TENANT
upon, on or in connection with the Leased Premises, and shall indemnify LANDLORD
against any liability or damages for usage charges on account of any such
utility service supplied to the Leased Premises.

        9. Parking Lot Use, Landscaping and Maintenance. LANDLORD will at all
times during the term of this Lease (i) maintain adequate illumination of the
parking area during all twilight and night hours, (ii) maintain and keep the
parking area in good condition with a hard-top surface pavement and (iii)
maintain and keep the parking area in an orderly and clean manner, including the
removal of snow and ice and any trash, rubbish or debris which accumulates on
and around such area. TENANT shall be responsible for all grass cutting and
landscape maintenance following the initial seeding and installation of
landscaping by LANDLORD in accordance with the specifications attached hereto as
Exhibit C.

        10. Operating Costs.

        (A) TENANT agrees to pay as additional rent during the term of this
		Lease upon receipt of written notice, together with copies of paid
		bills, from LANDLORD, fire and liability insurance premiums; repair and
		maintenance of the parking lot, and sidewalks as specified in Section
		9, real property taxes and assessments as outlined in Section 11;
		and administrative expenses in an amount equal to 5% of the operating
		expenses paid by LANDLORD, together with a "Late Charge" of 5% per month
		if the additional rent is not received by the 30th day from the invoice
		date.

		        (B) TENANT shall have the right, at its own cost and expense (except
		as provided below), to audit or inspect LANDLORD's records with respect
		to the operating costs and real property taxes, as well as all other
		additional rent payable by TENANT hereunder for any Lease Year. TENANT
		shall give LANDLORD not less than thirty (30) days prior written notice
		of its intention to conduct any such audit. LANDLORD shall cooperate
		with TENANT during the course of such audit, which shall be conducted
		during normal business hours in LANDLORD's office. LANDLORD agrees to
		make such personnel 

		

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available to TENANT as is reasonably necessary for TENANT, or for
		TENANT's employees or agents to conduct such audit. If such audit
		discloses that the amount paid by TENANT as TENANT's operating expenses
		and/or real estate taxes, or of other additional rental payable by
		TENANT hereunder, has been overstated by more than three and one half
		percent (3.5%), then, in addition to immediately repaying such
		overpayment to TENANT with interest, LANDLORD shall also pay the
		reasonable costs incurred by TENANT in connection with such audit.
		        (C) Notwithstanding anything to the contrary in the Lease, operating
		costs shall not include (1) any costs of items considered capital
		repairs, replacements, improvements and equipment under generally
		accepted accounting principles consistently applied or otherwise or (2)
		costs incurred in connection with upgrading the Building and/or parking
		areas to comply with the current interpretation of disability, life,
		fire and safety codes, ordinances, statutes, or other laws, including,
		without limitation, the ADA, and including penalties or damages incurred
		due to such non-compliance.

	

        11. Taxes and Obligations. TENANT shall be responsible to pay all
applicable taxes on its trade fixtures and equipment. LANDLORD shall make all
payments required to be made under the terms of any payment in lieu of tax
arrangement and shall pay all applicable taxes, assessments (whether general or
special) and other obligations which are or may become a lien on or levied
against the Building and the Leased Premises as they may become due and payable
during the term of TENANT's occupancy thereof and make all payments required to
be made under the terms of any deed of trust or mortgage which may at any time
be a lien on the Leased Premises (the "Taxes"). TENANT shall thereafter
reimburse LANDLORD for all such Taxes, in the manner and in the time frame
provided herein. TENANT shall have the right to contest any tax or assessment
against the Land or the Building in good faith, at its own cost and expense,
provided, however, that notwithstanding such contest, TENANT shall not take any
action which would adversely affect, threaten or jeopardize the interest of the
LANDLORD in the Building or the Land; and TENANT shall promptly pay, indemnify
and save LANDLORD harmless from, all penalties and interest which may be charged
or imposed as a result of or during the pendency of, any such contest. In the
event of any such contest by TENANT, LANDLORD agrees to reasonably cooperate
with TENANT, provided, however, that such cooperation shall be without any cost
or expense to LANDLORD and shall not be construed so as to require LANDLORD to
withhold the payment of any tax, interest or penalty otherwise due and owing to,
or charged by, any taxing authority.

        LANDLORD shall submit copies of paid tax bills to TENANT as soon as
practicable after payment of such Taxes by LANDLORD and TENANT shall reimburse
LANDLORD therefor within thirty (30) days after submission.

        It is further agreed that for the first and last lease years of the Term, the
portion of all taxes, other than such as result from assessments attributable to
TENANT, to be paid by TENANT shall be pro rated, depending on the proportion
which each such Lease Year shall bear to the tax year in which it falls.

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        Notwithstanding anything to the contrary contained herein LANDLORD shall pass
through to TENANT all real property tax savings realized by LANDLORD by virtue
of The Erie County Industrial Development Agency's involvement with the
construction of the Building.

        12. Fire Insurance. LANDLORD, at all times during the initial and
extended terms hereof shall procure and keep in force, insurance on the Building
including the Leased Premises, insuring the same against loss or damage by fire
and such other hazards, casualties and contingencies as are customarily included
under policies of fire insurance with extended coverage. The fire insurance
shall be such amount as shall comply with the applicable co-insurance clause of
such insurance policy but not less than 80% of the replacement cost of the
insured property. Such insurance shall further contain an agreement by the
insurance company that the policy or policies will not be canceled or the
coverage changed without thirty (30) days prior written notice to LANDLORD and
TENANT. LANDLORD covenants that TENANT shall not be liable for damage to or
destruction of the Leased Premises by any fire or other casualty from any cause
whatsoever and LANDLORD shall obtain and maintain in effect, a waiver of
subrogation in favor of TENANT from its fire and casualty insurer, a copy of
which shall be delivered to TENANT. TENANT, all times during the initial and
extended term hereof, at its sole cost and expense, shall procure and keep in
force, insurance on TENANT's property, insuring the same against loss or damage
by theft, fire or such other hazards, casualties and contingencies as are
customarily included under policies of fire and theft insurance with extended
coverage. TENANT covenants that LANDLORD shall not be liable for damage to or
destruction of TENANT's property by fire or other casualty from any cause
whatsoever and TENANT shall obtain and maintain in effect, a waiver of
subrogation in favor of LANDLORD from its fire and casualty insurer, a copy of
which shall be delivered to LANDLORD. To the extent that any activities
conducted by TENANT at the Leased Premises result in an insurance surcharge to
LANDLORD, TENANT shall promptly reimburse LANDLORD for the cost thereof.

        13. Liability Insurance.

        (A) TENANT shall defend LANDLORD against, and shall be responsible
		for, and shall save LANDLORD harmless from and against, any and all
		claims for damages to persons or property resulting from or arising out
		of TENANT'S negligent acts or omissions at the Leased Premises
		throughout the term of this Lease. TENANT, at all times during the term
		hereof, at its sole cost and expense, shall procure, or cause to be
		procured, and keep in force comprehensive liability insurance, including
		personal injury and property damage, insuring against all claims and
		liability arising out of the use or occupancy of the Lease Premises by
		TENANT, with limits of liability of not less then Two Million Dollars
		($2,000,000.00). The policy or policies of insurance shall be in
		standard form and shall name LANDLORD therein as an additional insured,
		together with TENANT. If so required, certificates evidencing such
		insurance coverage shall be furnished to LANDLORD by TENANT promptly
		upon the issuance of each such policy or renewal thereof.

		        (B) LANDLORD, at all times during the term hereof, shall procure or
		cause to be procured, and keep enforce comprehensive liability
		insurance, including personal injury and property damage, covering the
		parking area, the Common Areas and all other public 

		

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areas in and around
		the Building with limits of liability of not less than Two Million
		Dollars ($2,000,000.00). The policy or policies of insurance shall be
		standard form and shall name TENANT therein as an additional insured,
		together with LANDLORD, and shall be issued by insurers acceptable to
		TENANT. Premiums for all policies of insurance herein referred to and
		all renewals thereof shall be paid by LANDLORD on or before the
		beginning date of the next annual policy or renewal period and, if so
		requested, certificates thereof shall be furnished to TENANT by LANDLORD
		promptly upon the issuance of each such policy or renewal thereof.
	

        14. Signs and Advertising. TENANT may erect such signs on or about the
Leased Premises or the improvements thereof as shall conform to applicable
governmental ordinances; provided same are approved and consented to in writing
and in advance by LANDLORD, such approval and consent not to be unreasonably
withheld, conditioned or delayed.

        15. Ordinances. In the event any public authority shall require
correction of violations of any statute, ordinance, regulation, or building
code, corrections shall be made by LANDLORD at LANDLORD's expense except as to
such violations arising from any alterations or additions made by TENANT, in
which event TENANT's violations shall be corrected by TENANT at TENANT's
expense. TENANT shall comply with all statutes, ordinances and regulations of
government authorities now in effect or hereafter enacted relating to any
alterations or improvements made by it, keeping the Leased Premises in an
orderly condition, the use of the Leased Premises and the method of conducting
TENANT's business thereon. Under no circumstances, however, shall the foregoing
obligation of compliance be construed in such a way as to impose upon TENANT any
obligation to make structural changes to the Leased Premises.

        16. Subletting and Assigning. 

        (A) TENANT may not (except as hereinafter stipulated) assign this
		Lease and/or sublet the Leased Premises, or any part thereof, without in
		each instance obtaining the written permission of LANDLORD, which
		permission shall not be unreasonably withheld. TENANT may, without
		LANDLORD's permission, assign this lease and/or sublet the Leased
		Premises, or any part thereof, to an affiliated, subsidiary, reorganized
		corporation or any organization which acquires a majority of the shares
		or assets of the TENANT, a successor entity or the parent or parents of
		TENANT for the purpose of continued operation hereunder of the business
		conducted on said Leased Premises in substantially the same manner as
		before, provided, however, that written notice of such assignment or
		sublease shall be given to the LANDLORD. No assignment or subletting
		shall relieve TENANT of the obligations imposed upon it by the terms of
		this Lease.

		        (B) LANDLORD reserves the right to transfer and/or assign this Lease
		at any time while this Lease is in effect. TENANT will be provided with
		written notice that such an assignment has occurred. Upon such transfer,
		the LANDLORD, will have no further obligation or liability to the TENANT
		for obligations thereafter arising or accruing under 

		

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the terms and
		conditions of this Lease Agreement. No such assignment shall relieve
		LANDLORD from any then-accrued obligations hereunder.
	

        17. Destruction of Building by Fire or Other Casualty. In the event of
a partial or total destruction of the Leased Premises, whether by fire,
unavoidable casualty, act of God, or otherwise, then LANDLORD shall forthwith
repair the same; said partial destruction shall in no way annul or void this
Lease, except that TENANT shall be entitled to a proportionate reduction of rent
from the time of the casualty until such repairs are fully completed, such
proportionate reduction to be based upon the extent to which the damage and
making of Premises. If during the last Lease Year of the Term, the Leased
Premises are totally destroyed or rendered substantially untenantable by any
fire, unavoidable casualty, act of God or otherwise, and thereby rendered unfit
for use, then and in that event, this Lease shall terminate and the TENANT shall
be relieved of any further rental payments provided for herein from the date of
such destruction.

        18. Alterations. TENANT shall not make any structural improvements or
additions in or to the Premises without the prior written consent of LANDLORD,
such consent not to be unreasonably withheld, conditioned or delayed. TENANT
shall have the right from time to time and at any time, without LANDLORD's
consent but with reasonable prior written notice to LANDLORD, to perform the
following work within the Premises, provided that such following work does not
materially interfere or materially adversely effect the Building HVAC or
electrical systems: (i) install, remove and relocate nonstructural office
partitioning, (ii) paint and install wall coverings, (iii) install and remove
office furniture, (iv) relocate electrical outlets, (v) install and remove
workstations, (vi) install and remove carpeting and other floor coverings and
(vii) make interior, non-structural alterations. 

        TENANT agrees that LANDLORD shall have the first right to bid on any and all
TENANT required alterations and that LANDLORD shall perform all such TENANT
required alterations; provided that LANDLORD's services, price and schedule for
such TENANT required alterations are comparable to other bids, as
reasonably determined by TENANT.


        19. Use and Occupancy. TENANT, at all times during the term of this
Lease, shall have sole and exclusive control and right of use and occupancy of
the Leased Premises and all improvements thereon, including the right to
restrict access to the Leased Premises for security purposes. LANDLORD, or its
representatives, shall have the right, however, to enter the Leased Premises, at
any reasonable time, after reasonable notice, for the purpose of inspection of
the Leased Premises or performing any work which LANDLORD elects to undertake or
is required to perform under the provisions of this Lease. TENANT shall use the
Leased Premises solely for the purpose of medical equipment research and
development, and for no other purpose without the prior written consent of
LANDLORD; but TENANT shall not use or occupy or permit the Leased Premises to be
used or occupied, nor do or permit anything to be done on the Leased Premises,
which is unlawful or which shall make void or voidable the appropriate insurance
then contemplated by this Lease to be in force with respect thereto, or which
will cause any part thereof, or which will constitute a public or private
nuisance.

        20. Events of Default / Remedies & Damages/ Waiver. 

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        (A) The following shall constitute Events of Default:

		        (1) In the event TENANT shall be in default in the payment of any
		fixed rent, additional rent or charges required to be paid by TENANT (a
		"Payment") to LANDLORD under this Lease, and such default continues for
		a period of ten (10) days after written notice thereof. 

		        (2) In the event TENANT shall be in default in the performance of any
		other covenants, terms, conditions, provisions, rules and regulations of
		this Lease excepting those items listed in the above section (a) above
		(a "Non-Monetary Default") and if such Non-Monetary Default is not cured
		within twenty (20) days after written notice thereof given by LANDLORD,
		excepting such Non-Monetary Default that cannot be cured completely
		within such twenty (20) day period providing TENANT, within such twenty
		(20) day period, has promptly commenced to proceed with diligence and in
		good faith to remedy such Non-Monetary Default.

		        (3) Subject to Section 365 of the Bankruptcy Reform Act of 1978 as
		amended, in the event of the filing of a petition proposing the
		adjudication of TENANT as a bankrupt or insolvent or the reorganization
		of TENANT or an arrangement by TENANT with its creditors, whether
		pursuant to the Federal Bankruptcy Act or any similar federal or state
		proceeding and such action is not dismissed within sixty (60) days after
		the date of its filing. 

		        (B) Remedies and Damages:

		        (1) If any Event of Default occurs, LANDLORD individually and/or by
		and through its agent (Duke, Holzman, Yaeger & Photiadis LLP) may, at
		its option and in addition to any and all other rights or remedies
		provided LANDLORD in this Lease or at law or equity, immediately, or at
		any time thereafter, and without demand or notice (except as provided
		herein):

		(a) without waiving the Event of Default, apply all
						or part of the security deposit, if any, to cure the
						Event of Default and TENANT shall on demand restore the
						security deposit to its original amount;

						(b) without waiving such Event of Default, apply
						thereto any overpayment of rents to curing the Event of
						Default in lieu of refunding or crediting the same to
						TENANT;

						(c) if the Event of Default pertains to work or other
						obligations (other than the payment of rent or
						additional rent) to be performed by TENANT, without
						waiving such Event of Default, enter upon the Leased
						Premises and perform such work or other obligation, or
						cause such work or other obligation to be performed, for
						the account of TENANT; and TENANT shall on demand pay to
						LANDLORD the cost of performing such work or other
						obligation plus five percent (5%) thereof as
						administrative costs;

						

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d) issue a written notice declaring TENANT in
						monetary default for nonpayment of fixed rent,
						additional rent and/or late charges and providing TENANT
						with seven (7) days from the issuance of said written
						notice to cure all monetary default(s). In the event all
						monetary defaults are not cured within the seven (7) day
						cure period, LANDLORD may issue a written notice stating
						that the term of this Lease will expire on a date at
						least five (5) days thereafter, in which case the term
						of this Lease shall automatically expire on the date so
						fixed in such notice as fully and completely as if it
						were the date herein definitely fixed for the expiration
						of the term, and all right, title and interest of the
						TENANT hereunder shall thereupon cease and expire, and
						the TENANT shall thereupon quit and surrender the Leased
						Premises to LANDLORD, it being the intention of the
						parties hereto to create hereby a conditional
						limitation.
					
				
			
		
		        (2) Notwithstanding any termination of this Lease or termination of
		TENANT's rights to possession, TENANT shall pay and be liable for (on
		the days fixed herein for the payment thereof) the several installments
		of rent and additional rent as and when due, as if this Lease had not
		been terminated and as if LANDLORD had not entered and whether the
		Leased Premises are relet or remain vacant in whole or in part, but in
		the event the Leased Premises are relet by LANDLORD, TENANT shall be
		entitled to a credit in the net sum of rent and additional rent received
		by the LANDLORD in reletting after deduction of all expenses (other than
		fit out or remodeling) incurred in reletting the Leased Premises, and in
		collecting such rents and additional rent. In the event of any
		termination of this Lease or termination of TENANT's right to possession
		following the occurrence of an Event of Default, LANDLORD shall use
		commercially reasonable efforts to mitigate its damages by reletting the
		Leased Premises.

		        (3) In the event of a reletting, LANDLORD may apply the rent
		therefrom first to the payment of LANDLORD's reasonable expenses
		including but not limited to attorney's fees incurred, reasonable
		expense of reletting, repairs, brokerage fees, subdividing and then to
		the payment of rent and all other sums due from TENANT hereunder, and
		TENANT shall remain liable for any deficiency. 

		        (C) Waiver of Rights of Redemption. TENANT hereby expressly
		waives any and all rights of redemption granted by or under any present
		or future laws in the event of TENANT's being evicted or dispossessed
		for any cause, or in the event of LANDLORD's obtaining possession of the
		Leased Premises by reason of the violation, by TENANT, of any of the
		covenants or conditions of this Lease, or otherwise. 

	

        21. Notices. Any notice to LANDLORD provided for herein shall be
deemed to have been served only when such notice in writing addressed to
LANDLORD, or to the party to whom rent was last paid, has been deposited in a
regular receptacle of the U.S. Postal Service by registered or certified mail,
addressed to the address hereinabove set forth. Any notice to TENANT as provided
for herein, may be issued by LANDLORD and/or its agent (Duke, Holzman, Yaeger &
Photiadis LLP) and shall be deemed to have been served only when such notice in
writing has been deposited in a regular receptacle of the U.S. Postal Service by


Page 10 of 15


registered or certified mail addressed to TENANT at the Leased Premises, with a
copy at the same time and in the same manner to TENANT's attorneys, Hodgson Russ
LLP, One M&T Plaza, Suite 2000, Buffalo, New York 14203 Attention: Robert B.
Fleming, Jr., Esq. 

        22. Legal Fees. TENANT agrees to pay all fees incurred by
LANDLORD, including without limitation, all reasonable attorney fees, costs, and
disbursements, related to the enforcement of any provision of this Lease.

        23. Interference. Should an adjudication of a competent court or
regulation of any government authority prohibit TENANT from establishing its
business on said Leased Premises, or order TENANT to discontinue, in whole or in
part, its business thereon, then TENANT may terminate this Lease, unless such
order results from willful negligence of TENANT in its use of the Leased
Premises.

        24. Condemnation. In the event during the term of this Lease or any
extension thereof, the entire Lease Premises are acquired by the exercise of the
power of eminent domain, or so much thereof as shall render the same not
reasonably suitable to TENANT's uses, this Lease shall terminate at the time
possession must be surrendered, and the TENANT shall be relieved of all future
rental payments provided for herein. 

        25. Subordination. This Lease shall be subject and subordinate at all
times to the lien of any mortgage or deed of trust which may now be or hereafter
may be made a lien on the Leased Premises by LANDLORD or its assigns. Although
no instrument or act on the part of TENANT shall be necessary to effectuate such
subordination, TENANT will, nevertheless, execute such further instruments
subordinating the Lease to the lien of any such mortgage or deed of trust as may
be reasonably required by the lender, provided, however, and notwithstanding
anything herein contained to the contrary, that as long as the said TENANT, its
successors and assigns, shall fully perform the covenants and conditions
contained herein, including the payment of all rentals hereunder, any successor
to LANDLORD by virtue of the foreclosure of such mortgage or deed of trust (or
deed in lieu thereof) shall be bound by the terms and conditions of this Lease,
including, without limitation, the options to purchase the Building and the Land
as set forth in Paragraph 4 of this Lease and TENANT shall have the right to
peaceably occupy and possess the Leased Premises under this Lease without
interruption or disturbance by the purchaser at a foreclosure sale. To the
extent, the Building or the Land are encumbered by a mortgage at the time of
execution and delivery hereof, as a condition to the effectiveness of this
Lease, LANDLORD shall deliver to TENANT a non-disturbance agreement in form and
content acceptable to TENANT in TENANT's sole discretion. 

        26. Holding Over. LANDLORD shall give TENANT at least thirty (30) days
prior written notice if LANDLORD shall expect or demand that TENANT vacate the
Leased Premises upon the expiration of this Lease or any renewal thereof. If
TENANT should continue to occupy the Leased Premises without having exercised
its option to renew (if any) or without an Agreement in writing as to the terms
of such continued possession, then such additional tenancy shall be on a
month-to-month basis at 125% of the previous existing rental and under the same
terms and conditions as provided in this Lease or the renewal thereof. In case
of such 

Page 11 of 15


continued possession, the month-to-month tenancy created thereby may be
canceled at the end of any calendar month by not less than thirty (30) days
prior written notice from either party.

        27. Notices. Any notice to LANDLORD provided for herein shall be
deemed to have been served only when such notice in writing addressed to
LANDLORD, or to the party to whom rent was last paid, has been deposited in a
regular receptacle of the U.S. Postal Service by registered or certified mail,
addressed to the address hereinabove set forth, with a copy at the same time and
in the same manner to LANDLORD's attorneys, Duke, Holzman, Yaeger & Photiadis
LLP, 1800 Main Place Tower, Buffalo, New York 14202, Attention: Robert L.
Bencini, Esq. Any notice to TENANT as provided for herein shall be deemed to
have been served only when such notice in writing has been deposited in a
regular receptacle of the U.S. Postal Service by registered or certified mail
addressed to TENANT at the Leased Premises, with a copy at the same time and in
the same manner to TENANT's attorneys, Hodgson Russ LLP, One M&T Plaza, Suite
2000, Buffalo, New York 14203 Attention: Robert B. Fleming, Jr., Esq..

        28. Captions. The captioned appearing at the beginning of each of the
sections of this Lease are for reference only and are not to be considered a
part of this Lease.

        29. Binding. This Lease shall inure to the benefit of and be binding
upon the heirs, devisees, executors, administrators, successors and assigns of
the parties hereto.

        30. Modification. This Lease constitutes the whole agreement between
the parties. There are no terms, obligations, covenants, or conditions other
than contained herein. No modification or variation hereof shall be deemed valid
unless evidenced by an agreement in writing and signed by the duly authorized
representatives of the respective parties.

        31. Recording. TENANT may in its discretion cause a memorandum of this
Lease to be recorded in the Office of the Clerk of Erie County, New York.

        32. Quiet Enjoyment. LANDLORD covenants that for so long as TENANT is
not in default hereunder, TENANT shall quietly enjoy the Leased Premises.

        33. Situs. This Lease Agreement shall be governed by the Laws of the
State of New York as the same may exist during the term hereof.

        34. ECIDA Required Provisions. The following provisions are required
by the Erie County Industrial Development Agency to be included in all
subleases, and are agreed to by LANDLORD and TENANT:

        (A) The Premises have been or will be acquired by the Erie County
		Industrial Development Agency (the "Agency") and will be leased by the
		Agency to Peter L. Krog (or a legal entity to be formed by him) (the
		"Sublessor") pursuant to a lease agreement dated as of ________________
		(the "Agency Lease Agreement").

		        (B) The Sublessee (hereinabove previously referred to as "TENANT")
		shall operate the demised premises in accordance with the sublease and
		as a qualified "project" in accordance with and as defined in the New
		York State Industrial Development Agency 

		

Page 12 of 15


		

Act (Title 1 of Article 18-A of
		the General Municipal Law), as amended, and Chapter 293 of the 1970 Laws
		of New York, as amended.
		        (C) The Sublessee shall furnish to the Agency, upon request, such
		information as the Agency shall reasonably request regarding the leased
		premises and employment by the Sublessee (past, present, and future) at
		the leased premises.

		        (D) Neither the Sublease, nor any interest therein, shall be
		assigned, modified or amended without the prior written consent of the
		Agency, as set forth in the Agency Lease Agreement. Any of the foregoing
		notwithstanding, to the extent the Sublessee is permitted to
		sub-sublease the demised premises or assign its interest in the Sublease
		without the prior written consent or the Sublessor, no consent of the
		Agency shall be required provided that any sub-sublease or assignment is
		consistent with, and includes appropriate provisions relating to ,
		Agency ownership of the Premises.

		        (E) The Sublessee and Sublessor represent, warrant and covenant that
		facilities or property that are primarily used in making retail sales to
		customers who personally visit such facilities constitute less than
		on-third of the total cost of the project, as that term is defined in
		the Agency Lease Agreement. For purposes of this Paragraph 8,
		retail sales shall mean: (i) sales by a registered vendor under Article
		28 of the Tax Law of the State of New York primarily engaged in the
		retail sale of tangible personal property, as defined in Section 1101
		(b) (4) (I) of the Tax Law of the State of New York; or (ii) sales of a
		service to such customers.

		        (F) Except as is otherwise provided by collective bargaining
		contracts or agreements, and except for skilled laboratory or scientific
		positions, new employment opportunities for positions with annual
		salaries of $50,000 or less created by the Sublessee at the Premises
		shall be listed by the Sublessee with the New York State Department of
		Labor Community Services Division, and with the administrative entity of
		the service delivery area created by the Federal Job Training
		Partnership Act (P.L. NO.97-300) in which the Premises are located.
		Except as is otherwise provided by collective bargaining contracts or
		agreements and except for skilled laboratory or scientific positions,
		the Sublessee agrees, where practicable, to first consider for positions
		with annual salaries of $50,000 or less persons eligible to participate
		in the Federal Job Training Partnership (P.L. NO. 97-300) programs who
		shall be referred by administrative entities of service delivery areas
		created pursuant to such act or by the Community Services Division of
		the New York State Department of Labor for such new employment
		opportunities.

	

Page 13 of 15


        IN WITNESS WHEREOF, LANDLORD and TENANT have each caused this Lease Agreement
to be executed and delivered, all as of the day and year first above written.



	

		LANDLORD
	

		TENANT

		
	 	MINRAD INC.
	 	 	 
	
/s/ Peter L. Krog                      
 

			By:	/s/ William H. Burns, Jr.                           
		
	
Peter L. Krog 

			 	William H. Burns, Jr., President


Page 14 of 15


STATE OF NEW YORK )

                                            :ss.

COUNTY OF ERIE )

        On the 20th day of October, in the year 2005, before me, the undersigned,
personally appeared PETER L. KROG, personally known to me or proved to me
on the basis of satisfactory evidence to be the individual(s) whose name(s) is
(are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.

                                                                                                   
/s/ Richard P. Tamulski                           


                                                                                                                Notary Public

                                                                                                                   
RICHARD P. TAMULSKI

                                                                                                          
NOTARY PUBLIC, STATE OF NY,

                                                                                                          
QUALIFIED IN ERIE COUNTY, MY

                                                                                                           
COMMISSION EXPIRES 3/30/2006



											
										
									
								
							
						
					
				
			
		
	

STATE OF NEW YORK )

                                            :ss.

COUNTY OF ERIE )

On the _____ day of October, in the year 2005, before me, the undersigned,
personally appeared WILLIAM H. BURNS, JR., personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.

                                                                                                  
/s/ Richard P. Tamulski                           


                                                                                                                Notary Public

                                                                                                                   
RICHARD P. TAMULSKI

                                                                                                          
NOTARY PUBLIC, STATE OF NY,

                                                                                                          
QUALIFIED IN ERIE COUNTY, MY

                                                                                                           
COMMISSION EXPIRES 3/30/2006

Page 15 of 15