Exhibit 10.29


 


200,000 sq ft.


 


LEASE AGREEMENT


 


LEASE AGREEMENT ENTERED INTO BY AND BETWEEN BBVA BANCOMER SERVICIOS, S.A. AS TRUSTEE OF
“SUBMETRÓPOLI DE TIJUANA” TRUST, REPRESENTED HEREIN BY MS. BERTHA LETICIA DEL RÍO
MARTÍNEZ (HEREINAFTER REFERRED TO AS “LESSOR”),
AND DJ ORTHOPEDICS DE MÉXICO, S.A. DE C.V.,
REPRESENTED HEREIN BY MR. JUAN JOSE LOPEZ BOJORQUEZ HEREINAFTER REFERRED TO AS “LESSEE”), PURSUANT TO THE FOLLOWING
RECITALS AND CLAUSES:


 


RECITALS:


 


1.             LESSOR, through its
representative, hereby states:


 


1.1.          That her principal
is a Mexican banking institution duly organized in accordance with the laws of
the United Mexican States.


 


1.2.          That
under public instrument number 112,091 dated September 18, 1975, granted
before Mr. Mario Monroy Estrada, Notary Public Number 31 for Mexico City,
which was recorded at the Public Registry of Property and Commerce for the city
of Tijuana, Baja California, Mexico, under record number 39,965 page 242
of Volume 123 of the First Section, it was formalized in public instrument the
Trust called “Submetrópoli de Tijuana”.


 


1.3.          That
under public instrument number 3,705 dated June 17, 1997, granted before
Mr. Gabriel Moreno Lozano, then Notary Public Number 7 for the city of
Tijuana, Baja California, Mexico, recorded at the Public Registry of Property
and Commerce of Tijuana, Baja California, Mexico, under record number
5’110,624, Civil Section, dated July 7, 1997, it was granted the trustee
substitution of “Submetrópoli de Tijuana” Trust, under which LESSOR was designated
a trustee of aforementioned trust, and received all the patrimony of the trust
which included among others the real estate property subject matter hereof.


 


1.4.          That
it is duly represented herein by Ms. Bertha Leticia Del Río Martínez, who
has full power and authority to execute this Agreement on its behalf, as
evidenced by the public instrument attached hereto as
Exhibit “A”. Furthermore, Ms. Bertha
Leticia Del Río Martínez hereby represents that such authority has not been
limited nor revoked in any manner whatsoever.


 


1.5.          That under official
letter number SD-616/03 dated September 8, 2003, issued by the Direction
of Urban Administration of the City of Tijuana, which was recorded at the
Public Registry of Property and Commerce of Tijuana, under record number
5’335,178, Civil Section, dated September 1st, 2003, it was
authorized the subdivision of Lot 2-T3 of “Colonia El Florido” of the city of
Tijuana, Baja California, into several plots of land among which the subject
matter hereof was included.


 


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1.6.          That it wishes to enter into this lease agreement subject to the terms
and conditions herein set forth in order to lease to LESSEE the LEASED
PREMISES, as such term is hereinafter defined, being part of such LEASED
PREMISES the following tracks of land that resulted from the subdivision of Lot
2-T3 of “Colonia El Florido” of the city of Tijuana, Baja California:


 


1.6.1.       Fraction
2-TX of “Colonia El Florido” of the city of Tijuana, Baja California, Mexico,
with a surface area of 14,918.565 square meters;


 


1.6.2.       Fraction
2-TY of “Colonia El Florido” of the city of Tijuana, Baja California, Mexico,
with a surface area of 13,993.406 square meters; and


 


1.6.3.       Fraction
2-TZ of “Colonia El Florido” of the city of Tijuana, Baja California, Mexico,
with a surface area of 14,055.144 square meters.


 


Above mentioned tracks of land will be hereinafter
jointly referred to as the “Lots”. A drawing that describes the Lots and their
metes and bounds and the Expansion Area is attached hereto as Exhibit “B”.


 


1.7.          That it intents to construct certain improvements over the Lots,
consisting of an industrial facility with an approximate construction area of 200,000 (two hundred thousand) square feet (hereinafter the “Industrial Facility”). Such Industrial Facility and the Lots are
herein jointly referred to as the “LEASED
PREMISES”. The preliminary
drawings, specifications and work schedule of the Industrial Facility that will
form part of the “LEASED PREMISES” are attached hereto as Exhibit “C”.


 


2.             LESSEE, through its representative, hereby
states:


 


2.1.          It is a corporation duly incorporated under the laws of the United
Mexican States, as evidenced in public instrument number 4,565 of volume 65
dated November 21st, 1994, granted before Notary Public Number 2
for the city of Tecate, Baja California, Mexico, which was recorded at the
Public Registry of Property and Commerce of Tijuana, Baja California, under
record number 5017824, Commerce Section.


 


2.2.          That it is duly represented herein by Mr. Juan Jose Lopez
Bojorquez, who has full power and authority to execute this Agreement on its
behalf, as evidenced by the public instrument attached hereto as Exhibit “D”. Furthermore, Juan Jose Lopez Bojorquez hereby represents that such
authority has not been limited nor revoked in any manner whatsoever.


 


2.3.          That prior to the execution hereof it invited LESSOR to participate in
its request of an industrial building made under Bid Number 90301-1.


 


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2.4.          That
the winner of its request for an industrial building made under Bid Number
90301-1, was LESSOR. A  copy of the Bid requirements is
attached hereto as Exhibit “E”.


 


2.5.          That
it wishes to execute this agreement in accordance with the terms and conditions
herein set forth.


 


Having
stated the foregoing, the parties hereto agree to the following:


 


C L A U S E S:


 


FIRST.                   LEASE.


 


Subject to the terms and conditions herein set
forth, the LESSOR hereby leases to LESSEE and LESSEE hereby leases from LESSOR
the LEASED PREMISES, which are integrated by the plots of land known as Fractions
“2-TY”, “2-TZ” and “2-TX” which
resulted from the subdivision of Lot 2-T3 of “Colonia El Florido” of the city
of Tijuana, Baja California, which are described in Exhibit “B” hereof, and by the Industrial Facility to be
constructed thereon by LESSOR pursuant to this Agreement.


 


SECOND.              QUIET ENJOYMENT.


 


2.1.          Subject
to the timely performance of each and all of LESSEE’s obligations hereunder,
LESSOR guarantees that LESSEE shall have the quiet enjoyment of the LEASED
PREMISES without hindrance, ejection or molestation by LESSOR.


 


2.2.          This
lease shall survive any foreclosure of any lien or any mortgage of LESSOR and
any default in payment of any such lien or mortgage shall in no way prejudice the terms of this Lease or any extensions thereof.


 


2.3.          LESSEE
acknowledges that a set of protective covenants have been established as
mandatory and legally binding on all occupants and tenants of the development
that the LEASED PREMISES form part. Such restrictive covenants are attached to
this lease as Exhibit “F” and
LESSEE declares to know them and accept to their binding nature.


 


THIRD.                  PERMITS.


 


LESSOR
agrees to obtain and pay for the corresponding construction permits and
licenses required to construct the Industrial Facility and improvements which
will form part of the LEASED PREMISES, subject matter hereof.


 


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FOURTH.              IMPROVEMENTS.


 


4.1.          The LESSOR, at it’s own cost and expense shall
construct the LEASED PREMISES in compliance with all general construction laws,
ordinances, regulations and other governmental authorizations applicable within
the City of Tijuana, Baja California, Mexico, and shall perform all work,
furnish all materials, and obtain all permits necessary to bring the LEASED
PREMISES into compliance with requirements of the Lease, in accordance with the
Final Drawings, Specifications, Schedule of Work and Construction Terms to be
prepared based on the preliminary and general specifications attached hereto as
Exhibit “C” and LESSEE’s Bid
90301-1 requirements attached hereto as Exhibit “E”.


 


4.2.          For the preparation of the Final
Drawings, Specifications, Schedule of Work and Construction Terms, the parties,
prior to the execution hereof, have begun to follow this schedule:


 


4.2.1.       On January 19,
2004, an initial draft of drawings and designs for construction of
the Industrial Facility (the “Architectural
Project”), will be delivered to LESSEE;


 


4.2.2.       By January 27,
2004, LESSEE shall review and, in its case, approve the
Architectural Project; within eight (8) calendar days after LESSEE receives
such final architectural project, informing LESSOR thereof.


 


4.3.          Once the Final Drawings, Specifications,
Schedule of Work and Construction Terms have been completed and accepted by the
parties, as set forth herein, all documents relative thereto shall be included
in Exhibit “C” hereof, and
shall form an integral part of this Lease Agreement.


 


4.4.          As agreed by the parties and will be
established in the Final Specifications, Schedule of Work and Construction
Terms, LESSOR shall diligently complete the Industrial Facility to be
constructed on the LEASED PREMISES in order that LESSEE may occupy such
Industrial Facility pursuant to the following preliminary schedule:


 


4.4.1.       Preferential Occupancy. Understood as such date when LESSOR
advises LESSEE, that LESSEE may begin to initiate the installation of machinery
or equipment within the warehouse area of the Industrial Facility, as defined in
Exhibit “C”. The parties
agree that the Industrial Facility will be ready for LESSEE’s Preferential
Occupancy on or before the expiration of a twenty
eight (28) week term as from the date on which LESSOR begins the
construction of the Industrial Facility after it has concluded the grading,
compaction and leveling of the Lots.


 


4.4.2.       Final Occupancy. Understood as such date
when LESSOR advises LESSEE, that LESSEE commence to possess the LEASED PREMISES
as lessee subject only to punch list items which may be completed by


 


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LESSOR within a fifteen (15) calendar day term.The
Industrial Facility will be ready for LESSEE’s final occupancy on or before the
expiration of a thirty six (36) week term as from the date on which LESSOR begins
the construction of the Industrial Facility after it has concluded the grading,
compaction and leveling of the Lots.


 


4.5.          LESSOR
will proceed diligently with construction and completion of the LEASED PREMISES
and deliver LESSEE the LEASED PREMISES for its Final Occupancy, no later than
August 14, 2004, (“Commencement Date”)  as
the same may be extended pursuant to paragraphs
4.6, 4.8 of this Clause  and
the other applicable provisions of this Lease and its exhibits.


 


4.6.          If
LESSEE requests any change(s) in the Architectural Project and any such
requested changes are approved by LESSOR, which approval shall not be
unreasonably withheld, conditioned or delayed, LESSOR shall advise LESSEE
(prior to the commencement of any constructions changes to the Architectural
Project) of any costs and/or delays. LESSOR shall not be obligated to carry out
such requested changes unless it has received in advance full payment of the
cost of same.


 


4.7.          If
LESSEE shall enter the LEASED PREMISES during the Preferential Occupancy
Period, LESSEE shall obtain proper insurance against any potential risks and
liabilities for injury to its authorized personnel, employees or contractors
and damages to property or equipment installed by LESSEE, therefore any ingress
by LESSEE or its authorized personnel, employees or contractors during the
Preferential Occupancy Period shall be at their own
risk. LESSOR shall be responsible for any injury in regards to its own
personnel, employees or contractors or for any loss or damage caused by any
negligent act or omissions of LESSOR, its contractors, licensees, agents,
invitees or employees during such Preferential Occupancy Period.


 


4.8.          The
LESSOR during the Preferential Occupancy Period it expressly waives any and all
rights to receive rents from LESSEE, therefore LESSEE will not be obligated to
pay rent as per this Lease Agreement during the Preferential Occupancy Period.


 


4.9.          The
parties agree that the Date of Final Occupancy shall be extended for a term
equivalent to delays attributable to LESSEE or LESSEE’s contractors or
subcontractors, weather, acts of God or force majure. Delays considered
attributable to the weather shall be jointly determined between the parties and
duly recorded in the Construction Log. Should a representative of LESSEE not be
present when there is a delay due to weather, then LESSOR’s Construction
Supervisor shall record the reason for such delay.


 


4.10.        The LESSEE, at its
own expense and with the prior written approval of the LESSOR, may add new improvements
and may alter, extend, improve or add to any of the improvements and buildings
now or hereafter on the LEASED


 


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PREMISES, provided that such alterations,
extensions, improvements and additions do not adversely affect the structural
strength of the Industrial Facility or improvements on the LEASED PREMISES, or
reduce the fair market value of the LEASED PREMISES immediately prior thereto;
and provided further that said alterations are effected with diligence, in a
good and workman-like manner, and in accordance with all applicable laws,
ordinances, regulations and governmental practices. LESSOR’s written approval
shall not be required in the event any such improvements do not exceed the
amount of $25,000.00US Cy., (TWENTY FIVE THOUSAND DOLLARS 00/100 US Cy.),
provided the same do not affect the structure of the Industrial Facility.


 


4.11.        Notwithstanding
the foregoing and unless otherwise agreed in writing by LESSOR, LESSEE at the
termination of this Lease shall return the Leased Premises in the same
conditions as received, except for normal ware and tear; additionally LESSEE
hereby expressly waives any right that it may have to request LESSOR for the
payment of any compensation for LESSEE’s improvements specifically waiving
LESSEE any and all right that it might have under article 2297 of the Civil
Code for the State of Baja California.


 


4.12.        LESSEE
shall indemnify and hold harmless the LESSOR from all claims, liens, damages
and costs resulting from or arising out of the LESSEE’s acts, omissions or lack
of performance of any of its obligations filed or initiated by LESSEE’s
contractors, employees, workers, agents, representatives or principals or by
the “Instituto Mexicano del Seguro Social (IMSS)”, Tax authorities, or the
“Fondo Nacional de la Vivienda para los Trabajadores (INFONAVIT)”, resulting
from any claim, demand or obligation incurred by such personnel during the
installation of improvements and related activities at the LEASED PREMISES during
the Preferential Occupancy Period and up to the Commencement Date hereof and in
such other periods on which LESSEE carries out any leasehold improvement,
provided, however, LESSOR must notify LESSEE in writing of any such claims,
liens or demands, within 48 hours from receipt thereof for this indemnity to
apply, so that LESSEE may file a defense in respect of any such claim, lien or
demand.


 


4.13.        The LESSOR shall
indemnify and hold harmless the LESSEE from all claims, liens, damages and
costs resulting from or arising out of the LESSOR’S acts, omissions or lack of
performance of any of its obligations filed or initiated by LESSOR’S
contractors, employees, workers, agents representatives or principals or by the
“Instituto Mexicano del Seguro Social (“IMSS”), Tax Authorities, or the Fondo
Nacional de Vivienda para los Trabajadores (“INFONAVIT”), resulting from any
claim, demand or obligation incurred by such personnel during the construction
of the LEASED PREMISES and up to the Commencement Date hereof, provided,
however, LESSEE must notify LESSOR in writing of any such claims, liens or
demands, within 48 hours from receipt thereof for this indemnity to apply, so
that LESSOR may file a defense in respect of any such claim, lien or demand.


 


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FIFTH.                   USE OF THE LEASED PREMISES.


 


5.1.          The
purpose for which the LESSEE shall use the LEASED PREMISES shall be: general
office, warehouse, light manufacturing, storage, services, repair, engineering,
sales, product demonstration, training of customers and employees, ancillary
storage, parking of cars and all other uses incidental and related to a
manufacturing, warehouse and office facility, and for no other purposes without
the written consent of the LESSOR. LESSEE may not use the LEASED PREMISES for
any other purposes without LESSOR’s prior written authorization.


 


5.2.          During
the Term of this Lease, the LESSEE shall not do or permit anything to be done
in the LEASED PREMISES which shall in any way conflict with any laws, statutes,
ordinances, Park Restrictions or governmental rules.


 


5.3.          The
Park Restrictions are attached hereto and incorporated into this Lease by
reference as Exhibit “F”.


 


5.4.          The
LESSOR represents and warrants that the LEASED PREMISES is located in an area
authorized for light industrial manufacturing purposes as evidenced with the
documentation attached hereto as Exhibit “G”.


 


SIXTH.                  LEASE TERM.


 


6.1.          Effectiveness. This Lease will be in effect as of its date
of execution.


 


6.2.          Lease
Term. This Lease will remain
in effect until the expiration of a ten
(10) year term (the “Lease Term”, or the “Term of this Lease”) as of the Final Occupancy Date, or
August 14, 2004, whichever happens first (hereinafter the “Rent Commencement Date”).


 


6.3.          Renewal
Options. Subject to the terms and conditions of Clause
Twenty Fourth hereof, LESSEE
shall have an option to extend the Term of this Lease for two (2) terms of
five (5) years each.


 


SEVENTH.            RENTAL AND TERMS AND
CONDITIONS OF PAYMENT.


 


7.1.          For
the first twelve months of the Lease Term, and starting as from the Rent
Commencement Date, the LESSEE agrees to pay without demand and the LESSOR
agrees to accept as the full rental for the LEASED PREMISES, the amount of U.S.$0.393 Dollars (point three nine three Dollars U.S. Cy.) plus the corresponding Value
Added Tax per square foot of the total area of the Industrial Facility
(200,000.00 square feet), per month, for a total of US$78,600.00 Dollars (Seventy Eight Thousand Six Hundred dollars
00/100 U.S. Cy.) plus the corresponding Value Added Tax (hereinafter the “Initial Rent”). The parties


 


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acknowledge
that the total area may vary, in which case, the monthly total of the rental
price shall be adjusted accordingly.


 


7.2.          The
LESSEE shall pay the Value Added Tax which may be applicable to the monthly
lease payments, and the LESSOR shall issue the corresponding invoice therefore,
containing all requirements of Fiscal Law.


 


7.3.          Such
amount of the Initial Rent will in effect for a term of twelve months as of the
Rent Commencement Date. The Initial Rent will be increase every twelve month
period as of the expiration of the twelfth month starting on the Rent
Commencement Date, and the increase will be of 3.0% (Three) compounded for each
twelve (12) month period.


 


7.4.          The
above monthly installments may be paid by the LESSEE in U.S. Dollars or in
Mexican currency, at the average rate of exchange in effect on the date of
payment, for the purchase of U.S. Dollars offered by BBVA Bancomer, S.A., in
Tijuana, Baja California, México. All lease payments shall be made in advance
during the first five days of each month during the term hereof at LESSOR’s
address, which is located at Paseo de los Héroes #9188, Piso 5, Edificio Rodeo,
Zona Río, Tijuana, Baja California, Mexico, or at any other address that from
time to time the LESSOR indicates.


 


7.5.          If
the Rent Commencement date of this Lease is a day other than the first day of a
calendar month, the amount of the first monthly rental payment shall be that
pro rata portion of the monthly rental payment which is equal to the pro rata
portion of the first calendar month that the LEASED PREMISES were occupied by
the LESSEE; and the amount of the final rental payment hereunder shall be that
pro rata portion of the then monthly rental payment which is equal to the pro
rata portion of the last calendar month during which this Lease shall be in
effect.


 


7.6.          In
the event LESSEE does not pay the rent within the five (5) day term as set
forth above, LESSEE shall pay LESSOR late payment interests at the rate of 2%
(Two Percent) monthly. Such interest shall continue to accrue until such time
payment has been effected by LESSEE.


 


7.7.          LESSEE
hereby agrees not to withhold nor compensate rental payments. Therefore LESSEE
will timely pay under the agreed terms all rental and other payments that
correspond to LESSOR as well as all other payments required to be effected by
LESSEE.


 


7.8.          As
part of the consideration for the execution hereof by LESSOR, LESSEE covenants
and agrees to timely and fully comply with each and all of its obligations
hereunder.


 


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EIGHTH.                TAXES AND UTILITIES.


 


8.1.          LESSOR
guarantees to LESSEE that the connections and infrastructure required by the
LESSEE to contract for telephone, electricity, water and sewer, including all
connections and the installation of one 750 KVA transformer and one 300 KVA
transformer, for a total of 1,050 KVA’S of electricity at 13,200 volts, and any
other capacities and installations required under Bid Number 90301-1, attached
hereto as Exhibit “E”, will be installed and available on site at the
LEASED PREMISES on the Final Occupancy Date or on the Commencement Date hereof,
to enable the LESSEE to contract such public services, provided it timely pays
the hook up and capacity fees that may correspond from the perimeter of the
LEASED PREMISES. The parties agree that the LESSOR shall provide all
infrastructure and connections up to the building of the LEASED PREMISES and
the LESSEE shall be responsible and liable for payment in a timely manner of
all hook-up and capacity fees that may correspond for such services from the
perimeter of the LEASED PREMISES.


 


8.2.          LESSEE
shall, as of the Rent Commencement Date and during the Term of this Lease,
timely pay all electrical service charges, water and sewer charges, telephone
charges and other public utilities available for the LEASED PREMISES.


 


8.3.          LESSEE
shall provide evidence of payment of such utilities at the request of LESSOR.


 


NINTH.                  ASSIGNMENT – SUBLEASING.


 


LESSEE
shall not transfer, mortgage, pledge or otherwise encumber this Lease, nor any
interest herein, without the prior written consent of LESSOR, which consent
will not be withheld unreasonably, LESSEE shall have the right to sublease all
or a portion of the LEASED PREMISES or to assign this Lease with the prior
written consent of the LESSOR, but any such subletting or assignment shall not
relieve LESSEE nor LESSEE’s Guarantor of their obligations hereunder especially
those pertaining to the payment of rentals and those warranted by the Guaranty
attached hereto as Exhibit “H”.


 


TENTH.                     MAINTENANCE AND REPAIRS.


 


10.1.        LESSOR
will only be responsible for the structural integrity of the building,
including foundations, floor, structure, roof, exterior walls, exterior paved
areas, underground utilities and storm drainage system.


 


10.2.        LESSOR
warranties for a one year period, as of the Rent Commencement Date, all basic
building components and for the lease term the roof membrane. It is agreed and
understood by the LESSEE that, except in the cases set forth herein below, none
of its employees, contractors, dependents or representatives may access the
roof for any work whatsoever without the prior written authorization of


 


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the LESSOR. The only cases on which LESSEE will be
authorized to access the roof, without LESSOR’s prior written authorization,
will be in case of an emergency to prevent further damage to the LEASED
PREMISES, products, equipment and lost of lives, and in those other cases
required for the maintenance of the roof equipment such as air conditioning and
air injection systems.


 


10.3.        LESSOR will not be
responsible for repair needed as a result of the improper use or negligent acts
of LESSEE, its employees, agents or visitors.


 


10.4.        LESSEE shall be
responsible for all maintenance and repair tasks and works, including those of
preventive maintenance and for repair of all the building components and
exterior areas, including preventive maintenance of those items mentioned in paragraph 10.1 above, that the LEASED
PREMISES may require.


 


10.5.        LESSEE shall keep
and maintain the LEASED PREMISES clean and free from trash, debris and
pollutants.


 


10.6.        LESSOR and LESSEE
covenant and agree that if any of them fail to comply with their maintenance
and repair obligations pursuant to paragraphs
10.1 and 10.4 above, the other party shall have the right to perform
the obligations of the other pursuant to the terms of Clause Seventeenth hereof.


 


ELEVENTH.          INSURANCE.


 


11.1.        As of the Rent
Commencement Date and throughout the Lease Term, the LESSOR shall insure the
LEASED PREMISES against loss or damage caused by fire, lightning, all risks
included within an extended coverage endorsement (cobertura
de extension de cubierta),  all risks included
within a hydro meteorological phenomenon endorsement (fenomenos
hidrometereologicos),  earthquake and
volcanic eruption, debris removal and all other casualties covered by an
Extended Coverage Insurance Policy, in the amount of the full insurable value
of US$5’300,000.00 Dollars (expressed in Dollars, Currency of the United States
of America, but payable in Mexican Currency) of the LEASED PREMISES, buildings
and improvements thereon, including the foundation and excavation thereof.


 


11.2.        Aforementioned
insurance policy shall include insurance against risks such as: fire,
lightning, explosion, hurricane and wind damage, hail, airplane and other
vehicles, smoke, earthquakes, strikes, riots, civil disorders, vandalism, acts
of war (declared or undeclared), acts of terrorism, falling of trees, volcanic
eruption, mud avalanche, rain flooding, removal of debris, and rental
interruption insurance to cover rents payable during the time in which any of
above casualties occur. The rental interruption insurance shall cover a period
of twelve (12) months, and shall be renewed annually.


 


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11.3.        The insurance
required to be provided by the LESSOR under this Clause shall be purchased by
the LESSOR on an annual basis during the Term of this Lease. The amount of the
premium payable of such insurance shall be reimbursed to the LESSOR by the
LESSEE upon LESSOR’s request.


 


11.4.        The
LESSEE at its sole cost and expense, shall insure the contents, and at its sole
cost and expense, shall maintain general public liability insurance against
claims for personal injury, death or property damage upon, in or about, such
insurance to afford protection to the limit of not less than US$1,000,000.00
(One Million Dollars currency of the United States of America).


 


11.5.        It is agreed and
understood by the parties that for the securing of the above insurance
policies, LESSEE may use its umbrella coverage, provided that LESSOR be
designated as beneficiary. Should LESSEE elect to provide insurance under its
umbrella coverage, it shall notify in advance LESSOR and provide evidence
thereof.


 


TWELFTH.           DESTRUCTION.


 


12.1.        In
case of damage to or destruction of the Industrial Facility or improvements on
the LEASED PREMISES for causes not attributable to LESSEE, LESSOR will
promptly, and with the insurance proceeds, make such repairs, restoration or
rebuilding to the extent that is necessary to provide the LESSEE with premises
possessing equal utility, design and construction to that which existed prior
to such damage or destruction; and this Lease shall remain in full force and effect
during the time such repairs, restoration or rebuilding are/is being effected,
provided, however, that during such restoration or repair period, in its case,
rental payments will be paid through the above mentioned rental interruption
insurance. To the extent that such rental interruption insurance does not cover
the rental payments, the rent would be equitably abated during such restoration
or repair period.


 


12.2.        In
the event that such repairs, restoration or rebuilding cannot be accomplished
within four (4) months after occurrence of the damage or destruction, in
accordance with a reasonable estimate from LESSOR, either party may, terminate
this Lease through written notice to the other party served within the term of
15 (fifteen) calendar as of the date on which LESSOR issued LESSEE a notice in
the sense that such repairs and or reconstruction can not be accomplished
within such four (4) month term.


 


12.3.        However,
if fifty-percent (50%) or more of the replacement cost of the Industrial
Facility or improvements on the LEASED PREMISES are damaged or destroyed during
the last year of (1) the original Lease Term or (2) any extension of
the original Lease Term; and if LESSEE shall not exercise any right of
extending the Lease Terms then in effect, LESSOR may elect to terminate this
Lease by written notice delivered to the LESSEE within thirty (30) days of such
damage.


 


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THIRTEENTH.                     EXPROPRIATION


 


13.1.        In
the event the whole of the LEASED PREMISES is taken by expropriation for any
public or quasi-public use or purpose, during the Lease Term, this lease shall
terminate and conclude on the date that the possession is taken by the
expropriator.


 


13.2.        In
the event of termination of the Lease because of such taking(s) or
expropriations, the award shall be divided between the LESSOR and the LESSEE in
accordance with their respective interests on the LEASED PREMISES according to
the terms of this agreement. For purposes of determining LESSEE’s interests,
LESSEE shall keep accurate records of improvements it effects to or within the
LEASED PREMISES. In addition thereto LESSEE, on its own behalf, may begin any
legal action, any claims to which it may be entitled because of such taking,
such as: moving expenses, fixture losses and special damages


 


FOURTEENTH.    SURRENDER


 


14.1.        LESSEE
shall, on the last day of the Term of this Lease or its extension or upon
earlier termination, surrender and deliver the LEASED PREMISES into the
possession and use of the LESSOR without delay, in good order, condition and
repair, except for normal wear and tear due to normal use and the passage of
time. For purpose hereof, the parties shall, within a term of one
(1) month prior to the end of the Lease Term, effect a joint inspection in
order to determine the conditions of the LEASED PREMISES.


 


14.2.        All
signs, inscriptions, canopies and installations of like nature made by LESSEE
shall be removed at or prior to the expiration of the term of this Lease.


 


14.3.        All
furniture, trade fixtures and business equipment installed by LESSEE may be
removed by LESSEE at any time during or at the end of the term and the LESSEE
shall, at its own expense, repair all damage resulting from the installation or
removal thereof.


 


14.4.        In the
event LESSEE does not remove timely its improvements, machinery or equipment,
LESSOR will have the option to: (1) remove LESSEE properties on LESSEE’s
account; or (2) that such properties remain for the benefit of the LEASED
PREMISES without causing the payment of a consideration.


 


12

















 


FIFTEENTH.                         HOLDOVER


 


The
LESSEE shall at the termination of the Lease by lapse of time or otherwise,
yield up immediate possession of the LEASED PREMISES to LESSOR , and failing to
do so will pay as liquidated damages starting as of the termination hereof and
for the whole time such possession is withheld thereafter, the price of then
current rent plus 100% (one hundred) percent of the same, but the provisions of
this Clause shall not be held as a waiver by LESSOR of any right of reentry as
herein set forth; nor shall the receipt of said payment or any part thereof, or
any act in apparent affirmation of tenancy, operate as waiver of the right of
LESSOR to recover the LEASED PREMISES.


 


SIXTEENTH.                        LESSOR’S RIGHT TO
PERFORM LESSEE’S COVENANTS


 


16.1.      If LESSEE
shall at any time fail to perform any one or more of its agreements made in
this Lease, LESSOR, after ten days written notice to LESSEE (or without notice
in the case of an emergency) and without waiving or releasing LESSEE from any
obligation of LESSEE contained in this Lease, may but shall be under no
obligation to perform any act on LESSEE’s part to be performed as provided in
this Lease, and may enter upon the LEASED PREMISES for that purpose and take
all such actions thereon as may be necessary therefore. All sums, paid by
LESSOR and all costs and expenses incurred by LESSOR in connection with the
performance of any such obligation of LESSEE, shall be payable by LESSEE to
LESSOR on demand.


 


16.2.         In
addition to any other right or remedies hereunder or under applicable law, the
untimely payment or reimbursement by LESSEE of any amount owed or required to
be reimbursed hereunder shall cause late payment interests at a rate of 24%
(twenty four percent) annually, which interests shall continue to accrue until
such time payment and/or reimbursement has been effected by LESSEE.


 


SEVENTEENTH.                        LESSEE’S RIGHT TO
PERFORM LESSOR’S COVENANTS


 


17.1.        If
LESSOR shall at any time fail to perform any one or more of its agreements made
in this Lease, LESSEE, after ten days written notice to LESSOR (or without
notice in the case of an emergency) and without waiving or releasing LESSOR
from any obligation of LESSOR contained in this Lease, may but shall be under
no obligation to perform any act on LESSOR’s part to be performed as provided
in this Lease, and may take all such actions thereon as may be necessary
therefore. All sums paid by LESSEE and all costs and expenses incurred by
LESSEE in connection with the performance of any such obligations of LESSOR,
shall be payable by LESSOR to LESSEE on demand.


 


17.2.        In
addition to any other right or remedies hereunder or under applicable law, the
untimely payment or reimbursement by LESSOR of any amount owed or required to be
reimbursed hereunder shall cause late payment interests at a rate of 24%
(twenty four percent) annually, which interests shall continue to accrue until
such time payment and/or reimbursement has been effected by LESSOR.


 


13
















 


EIGHTEENTH.                     ENTRY ON LEASE PREMISES BY
LESSOR


 


18.1.        LESSEE shall permit
LESSOR and its authorized representatives to enter the LEASED PREMISES at all
reasonable times for the purpose of inspecting the same and performing any work
therein that may be required of it or that may be necessary by reason of LESSEE’s
failure to make repair or perform such work or to commence the same after ten
days written notice from LESSOR.


 


18.2.        Nothing herein shall
imply any duty upon the part of LESSOR to do any such work and performance
thereof by LESSOR shall not constitute a waiver of LESSEE’s default in failing
to perform the same.


 


18.3.        LESSOR shall have the
right to enter the LEASED PREMISES at all reasonable times during usual
business hours for the purpose of showing the same to prospective purchasers or
renters of the LEASED PREMISES at any time within six months prior to the
expiration of this Lease.


 


18.4.        The
LESSOR shall exercise its authority under this provision in such a way as to
minimize interference with the business operations of the LESSEE.


 


NINETEENTH.                     GUARANTIES


 


19.1.        LESSOR hereby
acknowledges to have received from LESSEE as deposit, the amount of US$259,380.00 Dollars (Two Hundred Fifty
Nine Thousand Three Hundred and Eighty 00/100 DOLLARS U.S. Cy.) in order to
guarantee LESSEE’s obligations hereunder, which in part shall be applied
towards the entire first three (3) months of rental payments (said portion
will include the corresponding IVA tax). LESSEE shall have the obligation,
within ten (10) working days after the termination of the lease and the
delivery of possession of the LEASED PREMISES to LESSOR, to deliver evidence of
payment of all utilities, and completion of any and all repairs and clean up of
the LEASED PREMISES.


 


19.2.        Likewise, the LESSEE
shall obtain and deliver to the LESSOR, to the satisfaction of LESSOR at the
execution hereof an unqualified guarantee from D.J. ORTHOPEDICS, LLC. as to
LESSEE’s obligations hereunder, including but not limited to rental payments.
Such guaranty shall be under the terms of the form of “Guaranty of Lease” which
is attached hereto as Exhibit “H”.


 


TWENTIETH.                      SUBORDINATION.


 


20.1.        LESSEE
agrees, at the request of LESSOR, to subordinate this lease (including any
extensions) to any mortgage or security interest placed upon the LEASED


 


14

















 


PREMISES,
provided that the holder agrees not to disturb the possession and other rights
of LESSEE under this lease so long as LESSEE continues to perform its
obligation hereunder and in the event of acquisition of title by said holder
through foreclosure proceedings or otherwise, to accept LESSEE as tenant of the
LEASED PREMISES and to perform the LESSOR’s obligations hereunder and LESSEE
agrees to recognize such holder or any other person acquiring title to the
LEASED PREMISES. LESSEE and LESSOR agree to execute and deliver any appropriate
instruments necessary to carry out the agreements contained herein.


 


20.2.        LESSEE and its Guarantor
D.J. ORTHOPEDICS, LLC. represent and warrant to LESSOR that LESSEE’s Guarantor
D.J. ORTHOPEDICS, LLC. is a subject of credit with US financial institutions.
LESSEE and LESSEE’s Guarantor D.J. ORTHOPEDICS, LLC. shall provide LESSOR, upon
LESSOR’s request and as reasonably required, all financial information and
documentation that may be required to enable LESSOR to secure financing with
this Lease Agreement.


 


20.3.        LESSEE as of the date of
execution hereof hereby waives the right of first refusal referred to under Article 2321
of the Civil Code for the State of Baja California. Furthermore, LESSEE hereby
agrees that LESSOR is entitled to freely, convey, assign or otherwise transfer
title to the LEASED PREMISED.


 


TWENTY FIRST.                EARLY TERMINATION.


 


21.1.        The occurrence of any of
the following events shall allow LESSOR to terminate this Lease immediately,
through the issuance to LESSEE of a simple written notice:


 


21.1.1.     The
lack of payment by LESSEE of two or more consecutive monthly rental payments or
the failure by LESSEE to make any other payment required to be made by LESSEE
when due;


 


21.1.2.     The
failure by LESSEE to observe or perform on timely basis any of the covenants,
conditions or provisions of this Lease when such default shall continue for
thirty (30) days after notice thereof from LESSOR to LESSEE, or, in the case of
a default which cannot with due diligence be cured within thirty (30) days,
LESSEE fails to commence such cure promptly within such thirty (30) day period
and thereafter diligently prosecute such cure to completion;


 


21.1.3.     The making of any general arrangement or any
general assignment by LESSEE or D.J. ORTHOPEDICS, LLC. for the benefit of their
creditors;


 


21.1.4.     If
a term of ninety (90) calendar days has elapsed after the filing by or against
LESSEE or its guarantor D.J. ORTHOPEDICS, LLC. of a petition to have LESSEE or
D.J. ORTHOPEDICS, LLC. adjudged insolvent, or a petition of reorganization or
arrangement under any law relating to


 


15

















 


insolvency if such petition is not dismissed within
such ninety (90) calendar days term;


 


21.1.5.     The appointment of a trustee or receiver to take
possession of all or substantially all of LESSEE’s or its guarantor D.J.
ORTHOPEDICS, LLC. assets;


 


21.1.6.     The attachment, execution or other judicial seizure
of all or substantially all of LESSEE’s or D.J. ORTHOPEDICS, LLC. assets;


 


21.1.7.     That LESSEE or D.J. ORTHOPEDICS, LLC. declare in
writing their inability to pay their debts;


 


21.1.8.     If LESSEE uses the LEASED PREMISES for uses other
than those which have been approved by LESSOR;


 


21.1.9.     If LESSEE suspends its activities for any reason or
abandons or vacates the LEASED PREMISES for any reason whatsoever for more than
a month. In such event LESSOR may take possession of the LEASED PREMISES 15
(fifteen) calendar days after it issues the termination notice. For such
purposes LESSOR is hereby authorized by LESSEE to request competent authority
under a “Jurisdicción Voluntaria”  action to return possession of the
LEASED PREMISES in the understanding that LESSEE hereby waives any right to be
notified. This procedure is in addition to any other action that LESSOR may
have.


 


21.1.10.   That LESSEE be subject to a labor strike, duly
sanction by the competent labor authority;


 


21.1.11.   If LESSEE fails to comply with any law or
regulations.


 


21.2.        In the event this
Lease is terminated by LESSOR pursuant to paragraph
21.1 above, LESSEE shall pay LESSOR as conventional penalty for such
early termination, an amount equivalent to the sum of all monthly rental
payments (based on the then current monthly rent) for the remaining period of
the Lease Term, and in its case for the remaining of the renewal term.


 


21.3.        LESSOR shall in no
event be charged with default in any of its obligations hereunder unless and
until LESSOR shall have failed to perform such obligations within thirty (30)
days after written notice to LESSOR by LESSEE, specifically describing such
failure.


 


TWENTY SECOND.           INDEMNIFICATION


 


With regard to the LEASED PREMISES, LESSOR agrees to
indemnify, defend and save LESSEE harmless from any claims for personal injury
or property damage which


 


16

















 


may
be made against the LESSEE during the Lease Term, and which arise out of the
negligence or tortuous conduct of the LESSOR, its servants, employees, agents,
assignees, representatives, licenses or invitees; and LESSEE agrees to
indemnify, defend and save LESSOR harmless from any claims for personal injury
or property damage which may be made against the LESSOR during the Lease Term,
and which arise out the negligence or tortuous conduct of the LESSEE, its
servants, employees, agents, assignees, representatives, licensees or invitees.


 


TWENTY THIRD.               ENVIRONMENTAL.


 


23.1.        LESSOR acknowledges that
LESSEE may use hazardous materials, as defined in applicable legislation, and
LESSEE agrees to use any such materials in accordance with such applicable
legislation; accordingly, LESSEE agrees that during the term of this Agreement
LESSEE shall maintain the LEASED PREMISES environmentally clean and that there
shall be neither soil nor ground water contamination which would constitute a
violation to applicable environmental laws and regulations. In addition, at the
time of delivery of the LEASED PREMISES to LESSOR, the LEASED PREMISES will be
free from any environmental liability, and that there shall be neither soil nor
ground water contamination which would constitute a violation to applicable
environmental laws and regulations. In the event that during the term of this Agreement
or when LESSEE delivers possession of the LEASED PREMISES to LESSOR, the LEASED
PREMISES, any surrounding soil, underground or underground waters present any
type of contamination, LESSEE hereby agrees and binds itself to clean and
restore the LEASED PREMISES or such contaminated, soil, underground or
underground waters, thus releasing and holding LESSOR harmless with respect to
any obligation, fine, sanction or liability towards third parties, which
derives from such contamination.


 


23.2.        The parties hereto agree
that 30 (thirty) days prior to the scheduled termination of this Lease or at
the time it is early terminated, LESSEE shall carry out an environmental study
over the LEASED PREMISES through an expert third party, in order to determine
if there is any soil or ground water contamination or any other environmental
condition on or affecting the LEASED PREMISES. If as a result of such
environmental study, the LEASED PREMISES are determined to be contaminated by
any actions of LESSEE, its employees, agents, contractors or any other party
acting for LESSEE, LESSEE shall clean-up whatever contamination exists over the
LEASED PREMISES in order for the LEASED PREMISES to comply with the
specifications indicated to LESSOR by the expert in charge of affecting the
environmental study over the LEASED PREMISES.


 


23.3.        Furthermore, LESSEE
hereby agrees to maintain at all times LESSOR harmless and free of any
environmental liability that may arise from any act or omission caused by the
LESSEE, his employees, representatives, directives, contractors,
subcontractors, or guests on the LEASED PREMISES during the term of this Lease.


 


17

















 


23.4.        LESSOR warrants to
LESSEE that the LEASED PREMISES does not contain hazardous waste in violation
of the Laws of Mexico or any Mexican competent agency or authority. LESSOR
shall indemnify and hold LESSEE harmless from any and all liabilities, costs
and expenses which may result from the presence of hazardous waste on or in the
surface soils of the LEASED PREMISES on or from such premises, which predates
LESSEE’s occupancy of such LEASED PREMISES, whether now known or discovered at
a later date.


 


TWENTY FOURTH.           RENEWAL OF LEASE.


 


24.1.        LESSEE shall have an
option to extend the Term of this Lease for two (2) additional terms of
five (5) years, each. The option shall be exercised at the sole discretion
of the LESSEE in writing, and said writing shall be delivered to LESSOR at
least six (6) months prior to the expiration of the then current Lease
Term. Unless otherwise agreed in writing by LESSOR, LESSEE’s option to extend the
lease term is subject to the condition that LESSEE fully and timely complies
with each and all of its obligations hereunder.


 


24.2.        It is agreed and
understood by the LESSEE that in the event the Term of this Lease is renewed,
the Guaranty granted pursuant to Exhibit “H”
hereof in favor of LESSOR shall continue to be in full force and
effect during the extension periods.


 


24.3.        All renewal options five
year terms will have the same economics of the initial term and will be
exercisable at the lesser of fair market value or the prior year’s rent plus
rental escalation at 3% (three percent) annually.


 


TWENTY FIFTH.                OPTION TO LEASE THE ADJACENT
PREMISES AND RIGHT OF FIRST REFUSAL.


 


25.1.        LESSOR hereby grants
LESSEE the exclusive right and option to lease an industrial building to be
constructed on the property adjacent to the LEASED PREMISES which is described
in Exhibit “B” attached
hereto (hereinafter the “Expansion Area”).  The
terms and conditions of the Lease Agreement to be entered by the parties over
the industrial building to be constructed on the Expansion Area, in its case,
shall be similar to those contained herein and the monthly rental price per
square foot of such building, shall be equal to the then current rental price
per square foot of the LEASED PREMISES, in the understanding that such rental
price shall be increased every twelve month period as provided for under paragraph 7.3 of Clause Seventh hereof.


 


25.2.        In the event the parties
enter into a Lease Agreement for the industrial building to be constructed on
the Expansion Area during the initial 10 (ten) year term of this Lease, such
initial 10 (ten) year term of this Lease shall reinitiate as of the date of


 


18

















 


execution
of the Lease Agreement for the industrial facility to be constructed on the
Expansion Area, in order that both Leases concurrently end upon the termination
of such 10 (ten) year term or of its renewals.


 


25.3.        The industrial building
to be constructed on the Expansion Area shall be constructed by LESSOR with
similar or identical specifications or materials to those used for the
construction of the industrial building of the LEASED PREMISES, unless
otherwise agreed in writing by the parties.


 


25.4.        The option to lease the
industrial building to be constructed on the Expansion Area shall be in effect
for a term that will expire two (2) years after the Rent Commencement
Date, at no cost to LESSEE. Once the term to exercise the above mentioned
option to rent has expired, subject to the provisions of paragraph 25.2 above,
and for a one (1) year period after the expiration of the option to lease
the Expansion Area, the LESSEE will have a right of first refusal to lease the
Expansion Area, provided LESSEE does not breach any of its covenants hereunder
or defaults any or all of its obligations. LESSEE’s breach of any of its
covenants hereunder or default of any or all of its obligations, shall automatically
revoke and terminate the effectiveness of the option to lease the Expansion
Area and of the right of first refusal.


 


25.5.        LESSEE shall have the
option to extend the term of the lease agreement for the industrial building to
be constructed on the Expansion Area in the same form as set forth in Clause Twenty Fourth hereof for the LEASED
PREMISES.


 


TWENTY SIXTH.               RECORDING.


 


26.1.        LESSOR and LESSEE
covenant and agree that in order to comply with applicable legislation, they
will jointly carry out all necessary procedures in order to record this Lease
Agreement with the corresponding Public Registry of Property and Commerce prior
to the LESSEE’s occupancy of the LEASED PREMISES. The corresponding fees of the
Public Registry of Property and Commerce for the recording of this Lease shall
be paid by LESSEE.


 


26.2.        It is
agreed and understood by the parties that such procedures will be jointly
carried out by LESSOR and LESSEE without involving LESSEE’s Guarantor, since
the guaranty granted by such company is subject to a foreign jurisdiction.


 


TWENTY SEVENTH.         NOTICES.


 


Whenever
it shall be necessary or desirable for either of the parties to serve any
notice of demand upon the other party pursuant to the provisions of this
agreement, such notice or demand shall be served personally, or by registered
or certified mail, return receipt requested, sent to the addressees set forth  hereunder,
until otherwise directed in writing by the party which wishes to change its
address.


 


19

















 


LESSOR:        Paseo de los Héroes #9188, Piso 5, Edificio
Rodeo, Zona Rio, Tijuana, Baja California, Mexico,


 


LESSEE:         Bulevar Insurgentes 316695-1, Delegación La
Presa, Tijuana, Baja California, Mexico.


 


TWENTY EIGHTH.             ENTIRE AGREEMENT


 


28.1.        This
agreement and its Exhibits contain all the agreements and conditions between
the parties. Therefore, the parties hereto agree that with the execution of
this agreement, any prior agreements have been duly fulfilled and complied
with, except as expressly set forth hereunder.


 


28.2.        If any
term, covenant, condition, or provision of this lease, or the application
thereof to any person or circumstance, shall to any extent be held by a court
of competent jurisdiction, to be invalid, void or unenforceable, the remainder
of the terms, covenants, conditions or provisions of this lease, or the
application thereof to any person or circumstance, shall remain in full force
end effect.


 


TWENTY NINTH.               AMENDMENTS.


 


This
agreement may not be modified orally or in any other form other than under
written agreement signed by the parties authorized representatives.


 


THIRTIETH.                         EXHIBITS.


 


The
documents that are attached hereto as exhibits form and integral part of this
Lease Agreement, and are described as follows:


 


	
  EXHIBIT

  	
   

  	
  DESCRIPTION

  
	
   

  	
   

  	
   

  
	
  A

  	
   

  	
  Power
  of Attorney of LESSOR’s representative.

  
	
  B

  	
   

  	
  Drawing
  that describes the Lots and the Expansion Area.

  
	
  C

  	
   

  	
  Preliminary
  drawings, specifications and work schedule of the Industrial Facility.

  
	
  D

  	
   

  	
  Power
  of Attorney of LESSEE’s representative.

  
	
  E

  	
   

  	
  LESSEE’s
  Bid 90301-1 requirements.

  
	
  F

  	
   

  	
  Regulations
  of Parque Industrial El Florido.

  
	
  G

  	
   

  	
  Official
  Documentation pertaining to the light industrial manufacturing zoning of the
  LEASED PREMISES.

  
	
  H

  	
   

  	
  Guaranty
  of Lease.

  



 


20

















 


THIRTY FIRST.                  GOVERNING LAW AND
JURISDICTION.


 


In the event of any controversy derived from this
Agreement, the parties expressly submit themselves to the applicable laws in
the State of Baja California, United Mexican States. Likewise, they submit
themselves to the jurisdiction of the competent courts of the City of Tijuana,
Baja California, Mexico, expressly waiving any other forum they might otherwise
have by reason of their present or future domiciles or any other reason
whatsoever.


 


IN WITNESS WHEREOF, the parties hereto have executed
and delivered this agreement on December 10, 2003, before the witnesses who
also sign the same.


 


	
   

  	
  “LESSOR”

  BBVA BANCOMER SERVICIOS, S.A.

  AS TRUSTEE OF “SUBMETRÓPOLI DE TIJUANA”
  TRUST

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Bertha Leticia Del Rio Martínez

  	
   

  
	
   

  	
  BERTHA LETICIA DEL RIO MARTÍNEZ

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  “LESSSEE”

  	
   

  
	
   

  	
  DJ ORTHOPEDICS DE MÉXICO, S.A. DE C.V.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Juan Jose Lopez Bojorquez

  	
   

  
	
   

  	
  JUAN JOSE LOPEZ BOJORQUEZ

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WITNESSES

  	
   

  



 


 


	
  /s/
  [Illegible]

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Name:

  



 


21