Document:

Exhibit 10.36

 

ENTEROMEDICS INC.

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”)
is made and entered on May 22, 2017 (the “Agreement Date”), between ENTEROMEDICS INC. (“Company”),
a Delaware corporation with its principal place of business at 2800 Patton Road, St. Paul, Minnesota 55113; and Rajesh K. Nihalani
(“Employee”), a California resident whose address is 55 Clifford, Irvine, California, 92618, for the purpose of
setting forth the terms and conditions of Employee’s employment by Company.

 

W I T N E S S E T H:

 

WHEREAS,
the Company desires to employ Employee as the Chief Technology Officer of the Company, and for Employee to hold such position,
on the terms and conditions, and for the consideration, hereinafter set forth and Employee desires to be employed by the Company
and hold such position on such terms and conditions and for such consideration; and

 

WHEREAS,
Employee executed a Nondisclosure and Non-Solicitation Agreement with the Company on May 22, 2017 (“Nondisclosure Agreement”),
which is attached as Exhibit A to this Agreement and fully incorporated herein.

 

NOW,
THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, the Company
and Employee agree as follows:

 

ARTICLE I

EMPLOYMENT, TERM AND DUTIES

 

1.1         Employment.
Company hereby employs Employee as its Chief Technology Officer, and Employee accepts such employment and agrees to perform services
for Company pursuant to the terms and conditions set forth in this Agreement.

 

1.2         Term.
The term of this Agreement shall commence on the Agreement Date and, unless earlier terminated in accordance with Article III
of this Agreement, shall terminate one year from the Agreement Date (the “Term”); provided, however, that the Term
of this Agreement shall automatically renew for successive one-year terms thereafter unless, at least 90 days before the expiration
of the initial Term or any additional Term, either party provides written notice to the other of its or his desire to terminate
this Agreement.

 

1.3         Position
and Duties.

 

1.3.1       Service
with Company. During the Term, Employee agrees to perform such duties and responsibilities as are assigned to him from time
to time by Company’s Chief Executive Officer (the “CEO”) and/or Board of Directors (the “Board”).

 

1.3.2       Performance
of Duties. During the Term, Employee agrees to serve Company in an executive capacity as its Chief Technology Officer, and
shall perform such duties as are required by the CEO and/or the Board.

 

    

     

    

 

ARTICLE II

COMPENSATION, BENEFITS AND EXPENSES

 

2.1        Base
Salary. Subject to the provisions of Article III of this Agreement, during the Term, Company shall pay Employee a “Base
Salary” of $300,000.00 on an annualized basis or such higher annual rate as may from time to time be approved by the Board.
Such Base Salary shall be paid in substantially equal regular periodic payments, less deductions and withholdings, in accordance
with Company’s regular payroll procedures, policies and practices for executive officers, as such may be modified from time
to time. The Base Salary shall be reviewed by the Board annually for potential adjustment on the basis of performance; and Employee
shall be eligible, at Company’s sole discretion, for annual salary increases consistent with Company’s procedures,
policies and practices. If Employee’s Base Salary is increased from time to time during the Term, the increased amount shall
become the Base Salary for the remainder of the Term and any extensions of the Term and for as long thereafter as required pursuant
to Article III as applicable, subject to any subsequent increases.

 

2.2        Incentive
Compensation. In addition to Base Salary, Company shall make Employee eligible for such cash and equity awards pursuant to
Company’s Incentive Compensation Plan, if any, as may be applicable and adopted by Company. Except to the extent as otherwise
provided in Article III in connection with a termination of Employee’s employment, payment of incentive compensation
will be subject to Employee achieving certain objectives set annually by Employee and the Compensation Committee of the Board,
with the target amount of any cash incentive compensation for any calendar year to be approved by the Compensation Committee of
the Board, which target in no event shall be more than 32% (subject to performance of the specified objectives) of Employee’s
Base Salary in effect from time to time. Employee and the Compensation Committee will meet and review the objectives set by the
Compensation Committee for each upcoming calendar year before March 31 of such year and before June 30 for the calendar
year 2017. Company shall pay any such incentive compensation for which Employee may be eligible for a calendar year on or before
March 15 of the following year (provided that Employee is employed on such date). Employee will not be entitled to receive
incentive compensation for any calendar year in which Employee’s employment is terminated, except as may be provided in Article III.

 

2.3        Participation
in Benefits. During the Term of Employee’s employment by Company, Employee shall be entitled to participate in the employee
benefits offered generally by Company to its employees, to the extent that Employee’s position, tenure, salary, health and
other qualifications make Employee eligible to participate. Without limiting the foregoing, Employee shall be eligible to participate
in any pension plan, or group life, health or accident insurance or any other plan or policy that may presently be in effect or
that may hereafter be adopted by Company for the benefit of its employees and/or corporate officers generally. With regard to health
insurance, Employee requests, and the Company agrees to pay, a gross sum of $1,500.00 per month, less deductions and withholdings,
for each month in which Employee does not elect coverage under the health insurance plan offered by the Company, as Employee intends
to remain insured under a plan existing prior to the Agreement Date. Employee and the Company agree that such payments shall cease
if and when Employee elects coverage under an insurance plan offered by the Company. Employee is eligible to receive four (4) weeks
of vacation on an annual basis, subject to Company’s “Paid Time Off” policy. Employee’s participation in
such benefits shall be subject to the terms of the applicable plans,
as the same may be amended from time to time. Company does not guarantee the adoption or continuance of any particular employee
benefit during Employee’s employment; and nothing in this Agreement is intended to, or shall in any way restrict the right
of Company to amend, modify or terminate any of its benefit plans during the Term of this Agreement.

 

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ARTICLE III

TERMINATION AND COMPENSATION FOLLOWING TERMINATION

 

3.1         Termination.
Subject to the respective continuing obligations of the parties under this Agreement, this Agreement and Employee’s employment
hereunder may be terminated as of the applicable date, whether before or at the end of the Term (the “Separation Date”)
under any of the following circumstances:

 

3.1.1       Termination
by Mutual Agreement. By mutual written agreement of the parties at any time, which may specify a Separation Date.

 

3.1.2       Termination
by Employee’s Death. If Employee dies during the Term, the date of his death shall be his Separation Date.

 

3.1.3       Termination
Due to Employee’s Disability. If Employee becomes Disabled, the Separation Date shall be the effective date of his resignation
or his discharge by the Company because of the Disability, whichever occurs first. For purposes of this Agreement, “Disabled”
or “Disability” means the incapacity or inability of Employee, whether due to accident, sickness or otherwise (with
the exception of the illegal use of drugs), to perform the essential functions of Employee’s position under this Agreement,
with or without reasonable accommodation (provided that no accommodation that imposes undue hardship on Company will be required)
for an aggregate of 90 days during any period of 180 consecutive days, or such longer period as may be required under applicable
law.

 

If Employee (or his legal representative,
if applicable) does not agree with the Company’s decision to terminate his employment hereunder because of Disability, the
question of Employee’s Disability shall be subject to the certification of a qualified medical doctor mutually agreed to
by Company and Employee (or, in the event of Employee’s incapacity to designate a doctor, Employee’s legal representative).
In the absence of such agreement, each such party shall nominate a qualified medical doctor and the two doctors shall select a
third doctor, who shall make the determination as to Employee’s Disability. The decision of the designated physician shall
be binding upon the parties in the same manner as the decision of an arbitrator under Section 4.5.

 

3.1.4       Termination
by Company for Cause. Company may terminate this Agreement and Employee’s employment for Cause immediately upon written
notice to Employee. For purposes of this Agreement, “Cause” means: (a) willful breach of Employee’s duties
to Company or willful breach of this Agreement; (b) Employee’s conviction of any felony or any crime involving fraud,
dishonesty, or moral turpitude; (c) Employee’s willful participation in any fraud against or affecting Company or any
subsidiary, affiliate, customer, supplier, client, agent, or employee thereof; or (d) any other act that Company reasonably
determines constitutes gross or willful misconduct materially detrimental to Company including,
but not limited to, unethical practices, dishonesty, disloyalty, or any other acts harmful to Company; provided, however that a
for Cause termination pursuant to clause (a), if susceptible of cure, which determination is in the sole discretion of Company
to make, shall not become effective unless Employee fails to cure such failure to perform or breach within 30 days after his
receipt of written notice from Company, such notice to describe such failure to perform or breach and identity what reasonable
actions shall be required to cure such failure to perform or breach.

 

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For purposes of this Section 3.1.4,
no act, or failure to act, on Employee’s part shall be considered “dishonest” or “willful” unless
done, or omitted to be done, by Employee in bad faith and without reasonable belief that his action or omission was in or not opposed
to, the best interest of Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or based upon the advice of counsel for Company shall be conclusively presumed to be done, or omitted to be done,
by Employee in good faith and in the best interests of Company. Furthermore, the term “Cause” shall not include ordinary
negligence or failure to act, whether due to an error in judgment or otherwise, if Employee has exercised substantial efforts in
good faith to perform the duties reasonably assigned or appropriate to his position.

 

3.1.5       Termination
by Employee without Good Reason. Employee may at any time voluntarily terminate his employment under this Agreement, for any
reason or no reason, with 30 days’ written notice.

 

3.1.6       Termination
by Company without Cause. Company may terminate Employee’s employment under this Agreement at any time for any reason
or no reason with 30 days’ written notice, except that no notice shall be required for a termination without Cause following
a “Change in Control” as defined in Employee’s Incentive Stock Option Agreement(s) or Non-Incentive Stock
Option Agreement(s), as the case may be, with Company (collectively, the “Stock Option Agreements”).

 

3.1.7       Termination
by Employee for Good Reason. Employee may at any time voluntarily terminate his employment pursuant to this Agreement for Good
Reason (as defined below); provided, however, that any resignation by Employee for Good Reason shall not be effective unless and
until the following two conditions have been satisfied: (a) he has notified Company in writing of the facts that he believes
constitute Good Reason, within 90 days after such facts first becomes known to him; and (b) Company fails to cure such Good
Reason within 30 days after its receipt of that notice. Employee’s resignation shall be effective before the end of
that 30-day period as of any earlier date on which Company refuses to cure or denies the existence of such Good Reason. The effective
date of any resignation for Good Reason shall be a Separation Date. If Company timely cures such Good Reason, or it is determined
that the reason for Employee’s resignation was not a Good Reason, he shall be deemed not to have resigned unless he elects
to resign under Section 3.1.5.

 

For purposes of this Agreement, “Good
Reason” means, at any time: (a) the assignment by Company to Employee of employment duties, functions or responsibilities
that are significantly different from, and result in a substantial diminution of, Employee’s duties, functions or responsibilities,
including without limitation any requirement that Employee report to another officer of Company, rather than directly to the Board;
(b) a material reduction in Employee’s Base Salary or the minimum target amount provided under Section 2.2 for
his cash incentive compensation for any calendar year; (c) a Company requirement that Employee be based at any office or location
more than 25 miles from Employee’s primary work location before the date of this Agreement; or (d) any other action
or inaction that constitutes a material breach of this Agreement by Company.

 

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3.1.8       Termination
at End of Term. The termination of this Agreement and Employee’s employment, as of the end of the initial Term or any
additional Term, pursuant to the operation of the provisions of Section 1.2, shall entitle Employee only to the payments provided
in Sections 3.2.3 and 3.3.

 

3.2        Compensation
following Termination of Employment. If Employee’s employment pursuant to this Agreement is terminated before the end
of the Term, or by Company as of the end of the Term, Employee shall be entitled to the following compensation and benefits upon
such termination:

 

3.2.1       Payment
of Base Salary. If Employee’s employment is terminated pursuant to any subsection of Section 3.1, Company shall,
within 14 calendar days following the Separation Date, pay to Employee, Employee’s surviving spouse (or, if none, Employee’s
estate), as the case may be, any amounts due to Employee for Base Salary through the Separation Date.

 

If a termination occurs pursuant to Section 3.l.5
(by Employee without Good Reason), when Company receives Employee’s notice Company shall have the option, at its discretion
(a) to continue to engage Employee’s services through the 30 day notice period until the Separation Date, or (b) terminate
the use of Employee’s services during the 30 day notice period before the Separation Date but treat Employee as if he
were providing services through the 30 day notice period until the Separation Date for purposes of determining Employee’s
compensation due him pursuant to this Section 3.2.1.

 

3.2.2       Payment
of Severance for Termination by Company without Cause or by Employee for Good Reason. If (a) Employee’s employment
is terminated pursuant to either of Sections 3.1.6 (by Company without Cause) or 3.1.7 (by Employee for Good Reason), (b) Employee
has executed and delivered to Company, within 60 days after the effective date of that termination, a written release in substantially
the same form as is attached hereto as Exhibit B, and (c) the rescission period specified therein has expired, Company
shall, subject to any payment delay required by Section 3.2.6, continue to pay, as severance pay, Employee’s Base Salary
(at the rate in effect on the Separation Date, for a period of 12 months following the Separation Date, and Employee shall be permitted
to exercise all shares that are vested under his Options as of the Separation Date and those Options that would have vested within
one year following the Separation Date immediately or at any time during the five-year period (but not after the end of each Option’s
original term) following the Separation Date. Such payments of Base Salary will be at the usual and customary pay intervals of
Company and will be subject to all appropriate deductions and withholdings. For purposes of Employee’s qualification for
severance pay, his right to any series of such payments due under this Agreement is treated as the right to a series of separate
payments, each of which is subject to all of the requirements of this Section 3.2.2.

 

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3.2.3       Payment
of Severance at End of Term. If (a) Employee’s employment terminates pursuant to Section 3.1.8, (b) Employee
has executed and delivered to Company, within 60 days after the effective date of that termination, a written release in substantially
the same form as is attached hereto as Exhibit B, and (c) the rescission period specified therein has expired, Company
shall, subject to any payment delay required by Section 3.2.6, continue to pay, as severance pay, Employee’s Base Salary
at the rate in effect on the Separation Date, for a period of 12 months following the Separation Date, and Employee shall be permitted
to exercise all shares vested under his Options as of the Separation Date and those Options that would have vested within one year
following the Separation Date immediately or at any time during the five-year period (but not after the end of each Option’s
original term) following the Separation Date.

 

3.2.4       Effects
of Change in Control. Upon the occurrence of a Change in Control (as defined in Section 3.1.6), Company agrees that, notwithstanding
any contrary provisions of the Stock Option Agreements or Company’s Stock Incentive Plan, the vesting schedule of Employee’s
stock options granted in the Stock Option Agreements (the “Options”) shall accelerate such that on the date the Change
in Control is completed, 100% of any then-unvested shares subject to the Options held by Employee shall immediately vest; provided,
however, that if, in connection with the consummation of the transaction resulting in the Change in Control, Employee receives
a cash payment with respect to each Option (after they become fully vested) equal to the difference or “spread’’
between (a) the per share amount paid to holders of Company’s common stock in such transaction and (b) the per
share exercise price under the applicable Stock Option Agreement, his Options shall be cancelled upon the consummation of the Change
in Control in exchange for such cash payment; provided, further, that if in connection with or within the first two years
after the Change in Control (as defined in Section 3.1.6), Employee’s employment is terminated pursuant to either of
Sections 3.1.6 (by Company without Cause) or 3.1.7 (by Employee for Good Reason), and (a) Employee has executed and delivered
to Company, within 60 days after the effective date of that termination, a written release in substantially the same form
attached hereto as Exhibit B, and (b) the rescission period specified therein has expired, then, in addition to the payments
under Section 3.2.2:

 

(A)         within
14 calendar days following the Separation Date, the Company shall also pay to Employee, or Employee’s surviving spouse (or,
if none, Employee’s estate), as the case may be, any amounts to which Employee is entitled as of the Separation Date, as
a pro rata portion of any unpaid cash incentive compensation determined under Section 2.2 for the calendar year in which the
Separation Date occurs. That pro rated cash incentive compensation shall be based on whether Employee’s objectives were achieved
(also pro rated to the extent possible) during the portion of the year before the Separation Date; and the pro rated amount shall
be based on the number of days in that portion, as compared with the entire year; and

 

(B)          the
vesting schedule of Options held by Employee shall accelerate such that on the Separation Date connected with or after a Change
in Control, 100% of any unvested shares under the Options shall immediately vest and shall be exercisable immediately or at any
time during the five-year period (but not after the end of each Option’s original term) following the Separation Date, notwithstanding
any contrary provisions of the Stock Option Agreements or Company’s Stock Incentive Plan; provided, however, that if, in
connection with the consummation of the transaction resulting in the Change in Control, Employee receives a cash payment with respect to each Option (after they become fully
vested under this paragraph) equal to the difference or “spread” between (a) the per share amount paid to holders
of Company’s common stock in such transaction and (b) the per share exercise price under the applicable Stock Option
Agreement, his Options shall be cancelled upon the consummation of the Change in Control in exchange for such cash payment. The
parties hereto agree and acknowledge that, with respect to any Options previously granted to Employee that were intended by the
parties to be treated as “incentive stock options” within the meaning of Code Section 422, such Options, to the
extent they may be exercised by Employee more than 90 days following the Separation Date, shall be treated as non-qualified
Options, notwithstanding any contrary provisions of the Stock Option Agreements.

 

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3.2.5       General
Provision Regarding Treatment of Options. Except as otherwise specified in Sections 3.2.2 and 3.2.4 of this Agreement,
the terms of the Stock Incentive Plan and Stock Option Agreements, as applicable, shall govern the treatment of the Options following
the Separation Date.

 

3.2.6       Potential
Delay of Severance Payments. If, as of the Separation Date, (a) Company’s common stock is publicly traded (as determined
under Code Section 409A), (b) Employee is a “specified employee” (as determined under Code Section 409A),
and (c) any portion of the severance pay due Employee under Sections 3.2.2, 3.2.3 (and, if applicable, paragraph (A) of
Section 3.2.4) would exceed the sum of the applicable limited separation pay exclusions (or otherwise not qualify for any
exclusion) as determined pursuant to Code Section 409A, then payment of the excess amount shall be delayed until the first
regular payroll date of Company following the six month anniversary of Employee’s Separation Date (or the date of his death,
if earlier than that anniversary), and shall include a lump sum equal to the aggregate amounts that Employee would have received
had payment of this excess amount commenced as provided in Sections 3.2.2, 3.2.3 (and, if applicable, paragraph (A) of Section 3.2.4)
after the Separation Date. If Employee continues to perform any services for Company (as an employee or otherwise) after the Separation
Date, such six month period shall be measured from the date of Employee’s “separation from service” as defined
pursuant to Code Section 409A. Each payment under this Agreement shall be treated as a separate payment for purposes of Code
Section 409A.

 

3.3         Benefits
Following Certain Employment Terminations. If Employee’s employment is terminated pursuant to any of Sections 3.1.2,
3.1.3, 3.1.6, 3.l.7 or 3.1.8, Company shall provide, at the sole cost of Company (except for any share of the cost for benefits
for Employee and Employee’s spouse and any eligible dependents that Employee was required to pay immediately before the Separation
Date), continuing coverage under any of its medical, dental and life insurance programs for Employee (if Employee survives) and
Employee’s spouse and any eligible dependents, to the extent any such coverage was in effect for any of those individuals
immediately before the Separation Date and is extended under COBRA. The Company’s provision of continuing coverage will end
after the greater of the following periods: (a) if applicable, the period during which Employee is entitled to receive his
Base Salary as severance pay under Section 3.2.2 or 3.2.3; or (b) the first 12 months after the Separation Date,
irrespective of any then pre-existing health conditions of Employee, Employee’s spouse or any eligible dependents; provided,
however, that Company may discontinue any such coverage for which it does not receive timely payment of Employee’s share
of the cost due after the Separation Date; and provided further that, in each case, such continued participation is not prohibited
by any applicable laws or would not otherwise jeopardize the tax qualified
status of any such programs. All reimbursement under this Section 3.3 shall terminate upon commencement of new employment
by Employee with an employer that offers health care coverage to its employees. If any such continuing participation is prohibited
by applicable law or would otherwise jeopardize the tax qualified status of any medical, dental or life insurance plan and, as
a result, Company terminates any such coverage, it shall promptly reimburse Employee (or Employee’s spouse and eligible dependents,
as the case may be) for the cost of obtaining comparable third party coverage irrespective of any then preexisting health conditions
of any of them who was covered immediately before the Separation Date. Any period of continuing coverage under this Section 3.3
shall run at the same time as the applicable continuing coverage required to be offered to Employee, Employee’s spouse or
eligible dependents under applicable laws.

 

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Except as otherwise provided in this Section 3.3, the benefits
to which Employee (or, as applicable, Employee’s spouse, eligible dependents or estate) may be entitled upon termination
of his employment, pursuant to the plans and policies of Company described in Article II of this Agreement, shall be determined
and paid in accordance with such plans, policies and applicable laws.

 

3.4        Surrender
of Records and Property. Upon termination of Employee’s employment with Company, Employee shall deliver promptly to Company
all Confidential Information as defined in Section 4.1 and all Company property including, but not necessarily limited to
records, manuals, books, blank forms, documents, letters, memoranda, business plans, minutes, notes, notebooks, reports, computer
disks, computer software, computer programs (including source code, object code, on-line files, documentation, testing materials
and plans and reports), computer print-outs, member or customer lists, credit cards, keys, identification, products, access cards,
designs, drawings, sketches, devices, specifications, formulae, data, tables or calculations or copies thereof, and all other tangible
or intangible property relating in any way to the business of Company that are the property of Company or any subsidiary or affiliate,
if any, or which relate in any way to the business, products, practices or techniques of Company or any subsidiary or affiliate.

 

ARTICLE IV

MISCELLANEOUS PROVISIONS

 

4.1        Company
Remedies. Employee acknowledges and agrees that the restrictions and agreements contained in this Agreement and in the Nondisclosure
Agreement that is attached as Exhibit A to this Agreement are reasonable and necessary to protect legitimate interests of
Company; that the services to be rendered by Employee are of a special, unique and extraordinary character; that it would be difficult
to replace such services; that any violation of the Nondisclosure Agreement would be highly injurious to Company; that Employee’s
violation of the Nondisclosure Agreement would cause Company irreparable harm that would not be adequately compensated by monetary
damages; and that the remedy at law for any breach of any of the provisions of the Nondisclosure Agreement will be inadequate.
Accordingly, Employee specifically agrees that Company shall be entitled, in addition to any remedy at law, to preliminary and
permanent injunctive relief and specific performance for any actual or threatened violation of this Agreement and to enforce the
provisions of the Nondisclosure Agreement.

 

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4.2         Assignment.
This Agreement shall not be assignable, in whole or in part, by Employee without the written consent of Company and any purported
or attempted assignment or transfer of this Agreement or any of Employee’s duties, responsibilities or obligations hereunder
shall be void. This Agreement shall inure to the benefit of and be binding upon Employee, Employee’s heirs and personal representatives.
This Agreement shall inure to the benefit of and be binding upon Company and its successors and assigns. Notwithstanding the foregoing,
Company may not, without the written consent of Employee, assign its rights and obligations under this Agreement to any business
entity that has become the successor to Company in the event of a sale, merger, liquidation or similar transaction. After any such
assignment by Company to which Employee has given such consent, Company shall be discharged from all further liability hereunder
and such successor assignee shall thereafter be deemed to be Company for the purposes of all provisions of this Agreement.

 

4.3         Notices.
All notices, requests, demands and other communications under this Agreement shall be in writing, shall be deemed to have been
duly given on the date of service if personally served on the parties to whom notice is to be given, or on the third day after
mailing if mailed to the parties to whom notice is given, whether by first class, registered, or certified mail, and properly addressed
as follows:

 

	 	If to Company, at:	EnteroMedics Inc.
	 	 	Attn:  Human Resources
	 	 	2800 Patton Road
	 	 	St. Paul, MN 55113
	 	 	 
	 	If to Employee, at:	Rajesh K. Nihalani
	 	 	55 Clifford
	 	 	Irvine, CA 92618

 

Any party may change the address for the purpose of this Section by
giving the other written notice of the new address in the manner set forth above.

 

4.4         Governing
Law/Venue. The validity, interpretation, performance and enforcement of this Agreement shall be governed by the laws of the
State of California, without regard to conflicts of laws principles thereof. The parties irrevocably consent and agree that the
venue of any cause of action seeking injunctive relief shall be federal and state courts located in Orange County, California and
the parties further irrevocably consent to the personal jurisdiction of such courts for any such action.

 

4.5         Arbitration.
The parties irrevocably consent that, except to the extent provided in this section and Section 4.4, any litigation or other
dispute arising between the parties, in connection with the interpretation or enforcement of this Agreement, that has not been
settled through negotiation within a period of 30 days after the date on which either party shall first have notified the
other party in writing of the existence of the dispute, shall be settled by final and binding arbitration under the then-applicable
Employment Arbitration Rules of the American Arbitration Association (“AAA”); and a court judgment on the award
may be entered in any court having competent jurisdiction. Notwithstanding the foregoing, neither
party shall be entitled or required to seek arbitration regarding any cause of action that would entitle such party to injunctive
relief.

 

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Any such arbitration shall be conducted by one neutral arbitrator
appointed by mutual agreement of the parties or, failing such agreement, in accordance with the AAA Rules. The arbitrator shall
be an experienced attorney with a background in employment law. Any arbitration shall be conducted in Orange County, California.
An arbitration award may be enforced in any court of competent jurisdiction. Notwithstanding any contrary provision in the AAA
Rules, the following additional procedures and rules shall apply to any such arbitration:

 

		(a)	Each party shall have the right to request from the arbitrator, and the arbitrator shall order upon good cause shown, reasonable
and limited pre-hearing discovery, including: (i) exchange of witness lists, (ii) no more than two (2) depositions
under oath of named witnesses at a mutually convenient location (neither deposition to exceed seven (7) hours), (iii) written
interrogatories (no more than twenty-five (25) in number), and (iv) document requests (no more than twenty-five (25) in number,
including subparts);

 

		(b)	Upon conclusion of the pre-hearing discovery, the arbitrator shall promptly hold a hearing upon the evidence to be adduced
by the parties and shall promptly render a written opinion and award;

 

		(c)	The arbitrator may award damages consistent with the terms of this Agreement but may not award or assess punitive damages against
either party; and

 

		(d)	Each party shall bear 50% of the fees and costs of the arbitrator, subject to the power of the arbitrator, in his or her sole
discretion, to award all such fees and costs to the prevailing party.

 

4.6        Construction.
Notwithstanding the general rules of construction, both Company and Employee acknowledge that both parties were given an equal
opportunity to negotiate the terms and conditions contained in this Agreement, and agree that the identity of the drafter of this
Agreement is not relevant to any interpretation of the terms and conditions of this Agreement.

 

To the extent any provision of this Agreement may be deemed
to provide a benefit to Employee that is treated as non-qualified deferred compensation pursuant to Code Section 409A, such
provision shall be interpreted in a manner that qualifies for any applicable exemption from compliance with Code Section 409
or, if such interpretation would cause any reduction of benefit(s), such provision shall be interpreted (if reasonably possible)
in a manner that complies with Code Section 409A and does not cause any such reduction.

 

4.7        Severability.
In the event any provision of this Agreement (or portion thereof) shall be held illegal or invalid for any reason, said illegality
or invalidity shall not in any way affect the legality or validity of any other provision of this Agreement. To the extent any
provision (or portion thereof) of this Agreement shall be determined to be invalid or unenforceable in any jurisdiction, such provision
(or portion thereof) shall be deemed to be deleted from this Agreement as to such jurisdiction only, and the validity and enforceability
of the remainder of such provision and of this Agreement shall be unaffected.

 

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4.8        Entire
Agreement. This Agreement, including the Nondisclosure Agreement that is attached as its Exhibit A and fully incorporated
herein, is the final, complete and exclusive agreement of the parties and sets forth the entire agreement between Company and Employee
with respect to Employee’s employment by Company, and there are no undertakings, covenants or commitments other than as set
forth herein. The Agreement may not be altered or amended, except by a writing executed by Employee and a member of the Board.
This Agreement supersedes, terminates, replaces and supplants any and all other prior understandings or agreements between the
parties relating in any way to the hiring or employment of Employee by Company.

 

4.9        Survival.
The parties expressly acknowledge and agree that the provisions of this Agreement that by their express or implied terms extend
beyond the expiration of this Agreement or the termination of Employee’s employment under this Agreement, shall continue
in full force and effect, notwithstanding Employee’s termination of employment under this Agreement or the expiration of
this Agreement.

 

4.10      Waivers.
No failure on the part of either party to exercise, and no delay in exercising, any right or remedy under this Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy under this Agreement preclude any
other or further exercise thereof or the exercise of any other right or remedy granted hereby or by any related document or by
law.

 

4.11      Attorneys’
Fees for Negotiating Agreement. Upon receipt by Company of a statement for legal services from the attorneys representing Employee,
Company shall reimburse Employee or pay on behalf of Employee the reasonable and necessary attorneys’ fees and associated
expenses incurred by Employee in connection with the negotiation of this Agreement, provided, that such fees and expenses shall
not exceed $5,000.00.

 

4.12      Attorneys’
Fees for Resolving Disputes. If any party to this Agreement is made or shall become a party to any litigation (including arbitration)
commenced by or against the other party involving the enforcement of any of the rights or remedies of such party, or arising on
account of a default of the other party in its performance of any of the other party’s obligations hereunder, then the prevailing
party in such litigation shall be entitled to receive from the other party all costs incurred by the prevailing party in such litigation,
plus reasonable attorneys’ fees to be fixed by the court or arbitrator (as applicable), with interest thereon from the date
of judgment or arbitrator’s decision at the rate of 8% or, if less, the maximum rate permitted by law.

 

[Signature Page Follows]

 

    11

     

    

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

 

	 	ENTEROMEDICS INC.
	 	 
	 	/s/ Dan W. Gladney
	 	Dan W. Gladney
	 	CEO and Chairman
	 	 
	 	 
	 	/s/ Rajesh K. Nihalani
	 	Rajesh K. Nihalani

 

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EnteroMedics Inc.

 

Nondisclosure and Non-Solicitation Agreement

 

This is an agreement between                                                         
(“Employee”) and EnteroMedics Inc., its affiliates, successors and assigns (“Employer”). The parties agree
that Employer would be substantially harmed if Employee competes with Employer during employment with Employer or after termination
of employment with Employer. The parties further agree that Employer would be substantially harmed if Employee were to disclose
its Confidential, Proprietary and Trade Secret Information.

 

Therefore, in consideration of Employer’s employment of
Employee for monetary compensation, benefits, access to Employer’s Trade Secrets and/or Confidential Information, and/or
other valuable consideration provided by Employer, Employee agrees as follows:

 

I.           Nondisclosure
of Confidential, Proprietary, and Trade Secret Information

 

Employee agrees not to disclose Confidential Information to
any other third party or company, other than in connection with Employee’s employment with Employer, or use such information,
directly or indirectly, for any purpose whatsoever, without the prior written consent of Employer.

 

For purposes of this Agreement, “Confidential Information”
means any information that is not generally known to the public or to other persons who can obtain economic value from its disclosure
or use; information which derives independent economic benefit from not being known to such persons; and information about the
activities or business of Employer that is not generally known to others engaged in similar business or activities, its products,
services, finances, trade secrets, contracts, patents filed or pending, the techniques used in completing customer projects, research
and development, data and information, processes, designs, engineering, marketing plans or techniques, organization or operation.
The foregoing list is intended to be illustrative rather than comprehensive. Additionally, the term “confidential information”
shall mean any confidential information as that term is defined in any Agreement Employer may have with its customers or other
third parties from time to time.

 

II.          Assignment
of Inventions

 

		A)	Disclosure and Assignment of Inventions and Other Works. During the term of this Agreement and for one year following
the Separation Date, Employee shall promptly disclose to Employer in writing all ideas, improvements and discoveries, whether or
not such are patentable or copyrightable, and whether or not in writing or reduced to practice (“Inventions”) and any
writings, drawings, diagrams, charts, tables, databases, software (in object or source code and recorded on any medium), and any
other works of authorship, whether or not such are copyrightable (“Works of Authorship”) that are conceived, made,
discovered, written or created by Employee alone or jointly with any person, group or entity, whether during the normal hours of
his employment at Employer or on Employee’s own time. Employee hereby assigns all rights to all such Inventions and Works
of Authorship to Employer. Employee shall give Employer all the assistance it reasonably requires for Employer to perfect, protect,
and use its rights to such Inventions and Works of Authorship. Employee shall sign all such documents,
take all such actions and supply all such information that Employer considers necessary or desirable to transfer or record the
transfer of Employer’s entire right, title and interest in such Inventions and Works of Authorship and to enable Employer
to obtain exclusive patent, copyright, or other legal protection for Inventions and Works of Authorship anywhere in the world,
provided Employer shall bear all reasonable expenses of Employee in rendering such cooperation.

 

     

     

    

 

		B)	Prior Inventions. Employee has set forth on Exhibit A attached hereto a list of all significant Inventions, to
the best of his knowledge, that Employee has, alone or jointly with others, made prior to his employment with Employer that Employee
considers to be Employee’s property or the property of third parties and that Employee wishes to exclude from the scope of
this Agreement (collectively referred to as “Prior Inventions”). If no such disclosure is attached, or permission supporting
evidence is available, Employee represents that there are no Prior Inventions. If, during Employee’s employment with Employer,
Employee incorporates a Prior Invention into an Employer product or process, Employer is hereby granted a nonexclusive, royalty-free,
irrevocable, perpetual, worldwide license (with rights to sublicense through multiple tiers of sublicenses) to make, have made,
modify, use and sell such Prior Invention. Notwithstanding the foregoing, Employee agrees that Employee will not incorporate, or
permit to be incorporated, Prior Inventions in any Employer Inventions without Employer’s prior written consent.

 

		C)	Notice and Acknowledgement. In accordance with Minnesota Statute § 181.78, the foregoing paragraph does not
require Employee to assign or offer to assign to Employer any of Employee’s rights in an Invention that Employee developed
entirely on Employee’s own time without using Employer’s equipment, supplies, facilities or trade secret information,
and (a) that does not relate directly to Employer’s business or to Employer’s actual or demonstrably anticipated
research or development, or (b) that does not result from any work performed by Employee for Employer. For the purpose of
this Section, “Employer’s business” shall be defined as development pertaining to implantable medical devices
to treat obesity or devices to apply signals to a vagus nerve to treat a gastrointestinal disorder (e.g., obesity, pancreatitis
or irritable bowel syndrome).

 

To the extent a provision in this Agreement purports
to require Employee to assign Inventions otherwise excluded by this paragraph, the provision is against the public policy of the
State of Minnesota and is unenforceable. By signing this Agreement, Employee acknowledges receipt of the notification required
by Minnesota Statute § 181.78.

 

III.         Non-Solicitation
of Employees

 

Employee hereby acknowledges that Employer’s employees,
consultants and other contractors constitute vital and valuable aspects of its business and missions on a worldwide basis. In recognition
of that fact, for a period of one year following the termination of this Agreement for any reason whatsoever, Employee shall not
solicit, or assist anyone else in the solicitation of, any of Employer’s then-current employees, consultants and other contractors
to terminate their respective relationships with Employer and to become employees, consultants and other contractors of any enterprise
with which Employee may then be associated, affiliated or connected.

 

    2

     

    

 

IV.        Employer
Remedies

 

Employee acknowledges and agrees that the restrictions and agreements
contained in this Agreement are reasonable and necessary to protect legitimate interests of Employer, that the services to be rendered
by Employee are of a special, unique and extraordinary character, that it would be difficult to replace such services, that any
violation of this Agreement would be highly injurious to Employer, Employee’s violation of any provision of this Agreement
would cause Employer irreparable harm that would not be adequately compensated by monetary damages, and that the remedy at law
for any breach of this Agreement will be inadequate. Accordingly, Employee specifically agrees that Employer shall be entitled,
in addition to any remedy at law, to preliminary and permanent injunctive relief and specific performance for any actual or threatened
violation of this Agreement and to enforce the provisions of this Agreement. Should a breach of the agreement occur, Employer will
be entitled to recover costs, including attorney’s fees, incurred in enforcing the terms of the Agreement for each breach.
If a Court finds any part of the Agreement to be invalid, the remainder of the provisions shall remain in full force and effect
to the extent possible.

 

V.         Governing
Law/Venue

 

The validity, interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of Minnesota, without regard to conflicts of laws principles thereof.
The parties irrevocably consent and agree that the venue of any cause of action seeking injunctive relief shall be Minnesota District
Court, Hennepin County, and the parties further irrevocably consent to the personal jurisdiction of the Minnesota District Court
for any such action.

 

VI.        Construction

 

Notwithstanding the general rules of construction, both
Employer and Employee acknowledge that both parties were given an equal opportunity to negotiate the terms and conditions contained
in this Agreement, and agree that the identity of the drafter of this Agreement is not relevant to any interpretation of the terms
and conditions of this Agreement.

 

VII.      Severability

 

In the event any provision of this Agreement (or portion thereof)
shall be held illegal or invalid for any reason, said illegality or invalidity shall not in any way affect the legality or validity
of any other provision of this Agreement. To the extent any provision (or portion thereof) of this Agreement shall be determined
to be invalid or unenforceable in any jurisdiction, such provision (or portion thereof) shall be deemed to be deleted from this
Agreement as to such jurisdiction only, and the validity and enforceability of the remainder of such provision and of this Agreement
shall be unaffected.

 

VIII.     Waiver

 

Failure by Employer to enforce any provision of this Agreement
will not constitute a waiver of or a prohibition against any further enforcement of that provision or any other provision of this
Agreement.

 

    3

     

    

 

IX.E      ntire
Agreement and Amendment

 

This Agreement supersedes all previous agreements between the
parties concerning the subject matter of this Agreement. All amendments to this Agreement must be in writing and signed by the
parties to be effective.

 

X.         At
Will Employment

 

This Agreement is not an employment agreement for any specified
period of time and Employee understands that either Employee or Employer may terminate the employment relationship at any time
and for any reason or no reason at all.

 

XI.        Succession
and Survival

 

This Agreement and the rights, duties and obligations of this
Agreement shall survive the termination of Employee’s employment with Employer and shall inure to the benefit of and shall
be binding upon Employee’s heirs, assigns and personal representatives and the successors of Employer.

 

	Executed this	 	day of	20     .	 	 

 

EMPLOYEE

 

	By:	 	 
	 	 	 
	Printed Name:	 	 
	 	 	 	 

 

ENTEROMEDICS INC.

 

	By:	 	 
	 	 	 
	Printed Name:	 	 
	 	 	 
	Its:	 	 
	 	 	 	 

 

    4

     

    

 

EXHIBIT A

 

	To:	EnteroMedics Inc.

 

From:

 

Date:

 

	Subject:	Prior Inventions

 

		1.	Except as listed in Section 2 below, the following is a complete list of all inventions or improvements relevant to the
subject matter of my employment by EnteroMedics, Inc. (“Employer”) that have been made or conceived or first reduced
to practice by me alone or jointly with others prior to my engagement by Employer:

 

		o	No inventions or improvements.

 

		o	See below:

 

 

 

		o	Additional sheets attached

 

		2.	Due to a prior confidentiality agreement, I cannot complete the disclosure under Section 1 above with respect to
inventions or improvements generally listed below, the proprietary rights and duty of confidentiality with respect to which I owe
to the following parties:

 

	 	 	Invention or Improvement	 	Party(ies)	 	Relationship
	1.	 	 	 	 	 	 
	 	 	 	 	 	 	 
	2.	 	 	 	 	 	 
	 	 	 	 	 	 	 
	3.	 	 	 	 	 	 

 

		o	Additional sheets attached

 

    5

     

    

 

EXHIBIT B

 

CONFIDENTIAL SEPARATION AGREEMENT AND
GENERAL RELEASE

 

This Confidential Separation Agreement and
General Release (hereinafter “Agreement”) is entered into by and between                
(hereinafter “you”) and EnteroMedics Inc. (hereinafter “EnteroMedics”).

 

WHEREAS,
you and EnteroMedics entered into an Employment Agreement dated              
(“Employment Agreement”) which terminates effective              ,
except as to certain provisions outlined below;

 

WHEREAS,
EnteroMedics wishes to provide you with the separation benefits described in Section 2 below; and

 

WHEREAS,
you and EnteroMedics want to fully and finally settle all issues, differences, and claims, whether potential or actual, between
you and EnteroMedics, including, but not limited to, any claim that might arise out of your employment with EnteroMedics or the
termination of your employment with EnteroMedics;

 

NOW,
THEREFORE, in consideration of the provisions and of the mutual covenants contained herein, you and EnteroMedics
agree as follows:

 

1.       Separation
from Employment. Effective                 (your
 “date of separation”), your employment with EnteroMedics terminates. Except as provided in this Agreement, all benefits
and privileges of employment end as of your date of separation.

 

2.       Separation
Benefits. As consideration for your promises and obligations under this Agreement, and subject to the terms and conditions
of this Agreement, including the release of claims set forth below, EnteroMedics agrees to pay you, as separation pay, the gross
amount of                , less applicable deductions
and withholdings for state and federal taxes, which amount represents 12 months of your base salary as of your date of separation.
The separation pay will be divided and paid to you in substantially equal periodic payments at the usual and customary pay intervals
of EnteroMedics, less deductions and withholdings. The payments will begin within 30 business days of the date on which EnteroMedics
receives this Agreement signed by you, provided that you do not revoke or rescind this Agreement as set forth below. You
agree that you are not entitled to the separation benefits provided to you in this Agreement if you do not sign this Agreement.

 

3.       Incentive
Compensation. You are not entitled to receive incentive compensation for calendar year      .

 

4.       Medical,
Dental, and Life Insurance. If you elect to extend EnteroMedics-provided medical, dental, and/or life insurance coverage
under COBRA after your date of separation, then EnteroMedics will provide, at its sole cost (except for any share of the cost
for benefits for you and your spouse and any eligible dependents that you were required to pay immediately before your date
of separation) such extended coverage for you and your spouse and any eligible dependents, to the extent any such coverage
was in effect for any of you and those individuals immediately before your date of separation, for 12 calendar months after
your date of separation. EnteroMedics’ obligations under this Section 4 shall terminate upon commencement of new
employment by you with an employer that offers health care coverage to its employees. You agree that any COBRA premium paid
on your behalf and/or any reimbursement made to you for COBRA premiums paid by you will be treated as taxable by
EnteroMedics. Except as otherwise provided in this Section 4, the benefits to which you (or, as applicable, your spouse
and eligible dependents) may be entitled upon termination of your employment shall be determined and paid in accordance with
such plans, policies and applicable laws.

 

    

     

    

 

5.       Stock
Options. All options to purchase shares of common stock of EnteroMedics held by you (the “Options”) are subject
to the terms of one or more Stock Option Agreements between you and the Company (each, an “Option Agreement”) and were
granted pursuant to the EnteroMedics Inc. Amended and Restated 2003 Stock Incentive Plan, as amended (the “Plan”).
Pursuant to the terms and conditions set forth in the Option Agreements, EnteroMedics agrees that, notwithstanding anything to
the contrary set forth in such Option Agreements or the Plan, during the two-year period following your date of separation, you
shall be permitted to exercise any Option immediately to the extent that such Option was vested as of your date of separation or
would have vested within one year of your date of separation had your employment with Company not terminated. Notwithstanding anything
to the contrary set forth in such Option Agreements or the Plan, EnteroMedics shall have a right, following your date of separation,
to buy back all such Options based on the per share exercise price under the applicable Option Agreement. The parties agree and
acknowledge that, with respect to any Options that were intended by the parties to be treated as “incentive stock options”
within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, such Options, to the extent they may be
exercised by you more than 90 days following your date of separation, shall be treated as non-qualified options, notwithstanding
any provision in the Option Agreements to the contrary.

 

6.       Confidential
Information; Noncompetition and Nonsolicitation. You executed an Executive Employment Agreement with EnteroMedics, a copy of
which is attached hereto as Exhibit A. All provisions of the Employment Agreement that, by their terms, survive the termination
of your employment will continue in full force and effect and are not negated or otherwise affected by this Agreement, including
but not limited to Section 4.1: Company Remedies; Section 4.4: Governing Law/Venue; Section 4.5: Arbitration; and
the Nondisclosure and Noncompetition Agreement attached to the Employment Agreement as its Exhibit A and fully incorporated
therein.

 

7.       Return
of EnteroMedics Property. You acknowledge that, on or before the date you sign this Agreement, you have returned all EnteroMedics
property in your possession, including, but not limited to, all files, memoranda, documents, records, copies of the foregoing,
any EnteroMedics credit card, computer, fax machine, printer, copier, keys, access cards, and any other property of EnteroMedics
in your possession. You also acknowledge that, on or before the date you sign this Agreement, you have provided EnteroMedics with
any and all pass codes and/or personal identification numbers used by you to access the EnteroMedics computer system, e-mail system,
and/or the Internet, and/or documents or files contained on and saved in the EnteroMedics computer system.

 

8.       Duty
to Cooperate. You agree that, beginning on the date you are presented with this Agreement, you will cooperate with
EnteroMedics with respect to the transition of your duties, the preservation of effective operations and customer service,
and EnteroMedics’ strategic and commercial initiatives. As part of your agreement to cooperate, you will provide a list
identifying the status of major projects under way, pending customer interactions, the status of sale cycles with customers,
the names and contact information of key contacts at customers, and any other information reasonably requested by
EnteroMedics regarding your duties and responsibilities. You further agree that, in the 30 day period following your
acceptance of this Agreement you will periodically make yourself accessible and available during normal business hours for
consultation with EnteroMedics representatives in connection with the transition of your duties and responsibilities. You
agree that such consultation may include appearing from time to time at the office of EnteroMedics for conferences.

 

    2

     

    

 

9.         Confidentiality.
You agree that the existence and terms and conditions of this Agreement (other than Exhibit A) shall remain confidential and
that you will not disclose any information concerning the provisions of this Agreement to any person or entity, including, but
not limited to, any present or former employee of EnteroMedics. These confidentiality provisions are subject to the following exceptions:
you may disclose the provisions of this Agreement to your attorneys, accountants, tax and financial advisors, and immediate family,
or in the course of legal proceedings involving EnteroMedics, or in response to a subpoena, court order, or inquiry by a government
agency. You further agree that, if any information concerning the provisions of this Agreement is revealed as permitted by this
section, you shall inform the recipient of the information that it is confidential, and the recipient shall agree to keep the information
confidential.

 

10.       Release.
By this Agreement, you intend to settle any and all claims that you have or may have against EnteroMedics as a result of EnteroMedics
hiring you, your employment with EnteroMedics, and the decision to terminate your employment with EnteroMedics. You agree that,
in exchange for EnteroMedics’ promises in this Agreement, and in exchange for the consideration provided to you by EnteroMedics,
described above in Section 2, you, on behalf of your heirs, successors and assigns, hereby release and discharge EnteroMedics,
its predecessors, successors, assigns, parents, affiliates, subsidiaries, and related companies, and their officers, directors,
shareholders, agents, servants, employees, and insurers (collectively “the Released Parties”) from all liability for
damages and from all claims that you may have against the Released Parties occurring up through the date you sign this Agreement.
You understand and agree that your release of claims in this Agreement includes, but is not limited to, any claims you may have
under: Title VII of the Federal Civil Rights Act of 1964, as amended; the Americans with Disabilities Act; the Equal Pay Act; the
Employee Retirement Income Security Act; the Age Discrimination in Employment Act of 1967, as amended; the Older Workers Benefit
Protection Act; the Family and Medical Leave Act; the Worker Adjustment and Retraining Notification Act of 1988; the False Claims
Act; the Minnesota Human Rights Act; Minnesota Equal Pay for Equal Work Law, Minn. Stat. §§ 181.66—181.71; Minn.
 § 181.81 (age discrimination); Minn. Stat. § 176.82 (retaliatory discharge); Minn. Stat. §§ 181.931, 181.932,
181.935 (whistleblower protection); Minn. Stat. §§ 181.940—181.944 (family leave); or any other federal, state,
or local statute, ordinance, or law.

 

You also agree and understand that you are giving up all
other claims, whether grounded in contract or tort theories, including but not limited to: wrongful discharge; breach of
contract; any claim for unpaid compensation (including, but not limited to, any claims for PTO or severance except as set
forth in this Agreement, or for incentive compensation); tortious interference with contractual relations; promissory
estoppel; detrimental reliance; breach of the implied covenant of good faith and fair dealing; breach of express or implied
promise; breach of manuals or other policies; breach of fiduciary duty; assault; battery; fraud; false imprisonment; invasion
of privacy; intentional or negligent misrepresentation; defamation, including libel, slander, discharge defamation and
self-publication defamation; discharge in violation of public policy; whistleblower; qui tam actions; intentional or
negligent infliction of emotional distress; or any other theory, whether legal or equitable.

 

    3

     

    

 

You understand that nothing contained in this Agreement, including
but not limited to this Section 10, will be interpreted to prevent you from filing a charge with the Equal Employment Opportunity
Commission (“EEOC”), or any other governmental agency, or from participating in or cooperating with an EEOC or other
governmental agency investigation or proceeding. However, you agree that you are waiving the right to monetary damages or other
individual legal or equitable relief awarded as a result of any such proceeding.

 

11.       Time
to Accept. You are hereby informed that the terms of this Agreement shall be open for acceptance and execution by you through
and including            , during which time you may consult with an attorney
and consider whether to accept this Agreement. Changes to this Agreement, whether material or immaterial, will not restart the
running of this acceptance period. You hereby are advised to consult with an attorney prior to signing this Agreement.

 

12.       Right
to Revoke and Rescind. You are hereby informed of your right to revoke your release of claims, insofar as it extends to potential
claims under the Age Discrimination in Employment Act, by informing EnteroMedics of your intent to revoke your release of claims
within 7 calendar days following your signing of this Agreement. You are also informed of your right to rescind your release of
claims, insofar as it extends to potential claims under the Minnesota Human Rights Act, by delivering a written rescission to EnteroMedics
within 15 calendar days after your signing of this Agreement. You understand that any such revocation or rescission must be made
in writing and delivered by hand or by certified mail, return receipt requested, postmarked on or before the last day within the
applicable revocation period to: Greg Lea, Senior Vice President, CFO and COO, EnteroMedics, Inc., 2800 Patton Road, St. Paul,
MN 55113.

 

If you exercise your right to revoke or rescind this Agreement,
EnteroMedics may, at its option, either nullify this Agreement in its entirety, or keep it in effect in all respects other than
as to that portion of your release of claims that you have revoked or rescinded. You agree and understand that if EnteroMedics
chooses to nullify the Agreement in its entirety, EnteroMedics will have no obligations under this Agreement to you or to others
whose rights derive from you.

 

13.       Entire
Agreement. This Agreement, as well as the exhibits hereto and any agreements referenced herein, is the final, complete and
exclusive agreement of the parties and sets forth the entire agreement between EnteroMedics and you with respect to your employment
by EnteroMedics, and there are no undertakings, covenants or commitments other than as set forth herein. The Agreement may not
be altered or amended, except by a writing executed by you and a member of the Board. Except as otherwise indicated, this Agreement
supersedes, terminates, replaces and supplants any and all prior understandings or agreements between the parties relating in any
way to you hiring or employment by EnteroMedics.

 

    4

     

    

 

14.       Governing
Law. The laws of the State of Minnesota will govern the validity, construction and performance of this Agreement, without regard
to the conflict of law provisions of any other jurisdictions. If any part of this Agreement is construed to be in violation of
any law, such part shall be modified to achieve the objective of the parties to the fullest extent permitted and the balance of
this Agreement shall remain in full force and effect. If such modification is not possible, said provision will be deemed severable
from the remaining provisions of this Agreement and the balance of this Agreement shall remain in full force and effect.

 

15.       Remedies.
To the extent that the EnteroMedics wishes to pursue remedies against you under Section 7.1 of the Employment Agreement, you
and EnteroMedics agree that such action shall be venued in Minnesota District Court, Hennepin County. For any other dispute, you
and EnteroMedics irrevocably consent that any litigation commenced or arising in connection with the interpretation or enforcement
of this Agreement that has not been settled through negotiation within a period of thirty (30) days after the date on which either
party shall first have notified the other party in writing of the existence of a dispute shall be settled by final and binding
arbitration under the then-applicable Employment Arbitration Rules of the American Arbitration Association (“AAA”).
Any such arbitration shall be conducted by one (1) neutral arbitrator appointed by mutual agreement of the parties or, failing
such agreement, in accordance with the AAA Rules. The arbitrator shall be an experienced attorney with a background in employment
law. Any arbitration shall be conducted in Minneapolis, Minnesota. An arbitration award may be enforced in any court of competent
jurisdiction. Notwithstanding any contrary provision in the AAA Rules, the following additional procedures and rules shall
apply to any such arbitration:

 

		(A)	Each party shall have the right to request from the arbitrator, and the arbitrator shall order upon good cause shown, reasonable
and limited pre-hearing discovery, including: (i) exchange of witness lists, (ii) no more than two (2) depositions
under oath of named witnesses at a mutually convenient location (neither deposition to exceed seven (7) hours), (iii) written
interrogatories (no more than twenty-five (25) in number), and (iv) document requests (no more than twenty-five (25) in number,
including subparts);

 

		(B)	Upon conclusion of the pre-hearing discovery, the arbitrator shall promptly hold a hearing upon the evidence to be adduced
by the parties and shall promptly render a written opinion and award;

 

		(C)	The arbitrator may award damages or injunctive relief consistent with the terms of this Agreement but may not award or assess
punitive damages against either party; and

 

		(D)	Each party shall bear his or its own costs and expenses of the arbitration and one-half (1/2) of the fees and costs of the
arbitrator, subject to the power of the arbitrator, in his or her sole discretion, to award all such reasonable costs, expenses
and attorneys’ fees to the prevailing party.

 

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16.       No
Admission. Nothing in this Agreement is intended to be, and nothing will be deemed to be, an admission of liability by EnteroMedics
or you that either party has violated any state or federal statute, local ordinance or principle of common law, or that either
party has engaged in any wrongdoing.

 

17.       Waiver.
No waiver of any provision of this Agreement shall be binding unless executed in writing by the party making the waiver. The waiver
by either party of a breach by the other party of any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach.

 

IN WITNESS WHEREOF, the parties have duly executed this Agreement
on the dates set forth below to be effective as of the date shown below.

 

I acknowledge and agree that I have read this Agreement in
its entirety and that I agree to the conditions and obligations set forth herein. Further, I agree that I have had adequate
time to consider the terms of this Agreement and that I am voluntarily entering into this Agreement with a full understanding of
its meaning. I understand that I am hereby advised to consult with an attorney before signing this Agreement.

 

	Dated:	 	 	 
	 	Rajesh K. Nihalani
	 	 
	 	 
	 	ENTEROMEDICS INC.
	 	 
	 	 
	Dated:	 	 	By	 
	 	 	 
	 	Its	 

 

    6Exhibit 10.37

 

	 	 
		EXHIBIT 10.38 AIR COMMERCIAL REAL ESTATE ASSOCIATION STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - GROSS (DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS) 1.Basic Provisions (“Basic Provisions”). 1.1 Parties: This Lease (“Lease”), dated for reference purposes only January 20, 2017, is made by and between San Clemente Holdings, LLC. (“Lessor”) and ReShape Medical Inc., a Delaware Corporation (“Lessee”), (collectively the “Parties,” or Individually a “Party”). 1.2 Premises: That certain real properly, Including all Improvements therein or to be provided by Lessor under the terms of this Lease, and commonly known as 1001 Calle Amanecer, San Clemente, located In the County of Orange, State of California , and generally described as (describe briefly the nature of the properly and, if applicable, the “Project”, If the property is located within a Project) an approximate 14,479 sq. ft, freestanding office/warehouse building  (“Premises”). (See also Paragraph 2) 1.3 Term: 5 years and 3 months (“Original Term”) commencing April 1, 2017 (“Commencement Date”) and ending June 30, 2022 (“Expiration Date”). (See also Paragraph 3) 1.4 Early Possession: If the Premises are available Lessee may have non-exclusive possession of the Premises commencing March 1, 2017 (“Early Possession Date”). (See also Paragraphs 3.2 and 3.3) 1.5Base Rent: $24,611. 30 per month (“Base Rent”), payable on the first day of each month commencing April 1, 2017. (See also Paragraph 4) □ If this box Is checked, there are provisions In this Lease for the Base Rent to be adjusted. See Paragraph 1.6Base Rent and Other Monies Paid Upon Execution: (a)Base Rent: $24, 614.30 for the period April 1, 2017 to April 30,2017 (b)Security Deposit: $28,000.00 (“Security Deposit”). (See also Paragraph 5) (c)Association Fees: $897. 58 for the period April 1, 2017 thru April 30, 2017 (d)Other: $N/A for N/A (e)Total Due Upon Execution of this Lease: $53,511.58. 1.7Agreed Use: General office and warehouse use for medical supply company (See also Paragraph 6) 1.8Insuring Party: Lessor Is the “Insuring Party”. The annual “Base Premium” is $2, 059.00 (See also Paragraph 8) 1.9Real Estate Brokers: (See also Paragraph 15 and 25) (a)Representation: The following real estate brokers (the “Brokers”) and brokerage relationships exist in this transaction (check applicable boxes): Johnston Pacific Commercial Real Estate, Inc. represents Lessor exclusively (“Lessor’s Broker”); CBRE Commercial Real Estate Services represents Lessee exclusively (“Lessee’s Broker”); or □ represents both Lessor and Lessee (“Dual Agency”). (b)Payment to Brokers: Upon execution and delivery of this Lease by both Parties, Lessor shall pay to the Brokers the brokerage fee agreed to In a separate written agreement (or-If there-ls no such agreement-the-sum-of-or% of the total Base Rent) for the brokerage services rendered by the Brokers. 1.10Guarantor. The obligations of the Lessee under this Lease are to be guaranteed by N/A (“Guarantor”). (See also Paragraph 37) 1.11Attachments. Attached hereto are the following, all of which constitute a part of this Lease: an Addendum consisting of Paragraphs 1 through J3 ; a plot floor plan depleting the Premises; a current set of the Rules and Regulations;  a Work Letter; n energy disclosure addendum Is attached; other (specify): Option to Extend, Disclosure for Lease (Exhibit B), Disclosure Regarding Real Estate Agency Relationship, Parking (Exhibit C) PAGE 1 OF 13 INITIALS INITIALSINITIALS ©2001 -AIR COMMERCIAL REAL ESTATE ASSOCIATIONFORM STG-23-09/15E

     

     

    

 

 

	 	 
		2. Premises. 2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. While the approximate square footage of the Premises may have been used in the marketing of the Premises for purposes of comparison, the Base Rent stated herein is NOT tied to square footage and is not subject to adjustment should the actual size be determined to be different. Note: Lessee is advised to verify the actual size prior to executing this Lease. 2.2 Condition. Lessor shall deliver the Premises to Lessee broom clean and free of debris on the Commencement Date or the Early Possession Date, whichever first occurs (“Start Date”), and, so long as the required service contracts described in Paragraph 7.1(b) below are obtained by Lessee and in effect within thirty days following the Start Date, warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems (“HVAC”), loading doors, sump pumps, if any, and all other such elements in the Premises, other than those constructed by Lessee, shall be in good operating condition on said date and that the surface and structural elements of the roof, bearing walls and foundation of any buildings on the Premises (the “Building”) shall be free of material defects, and that the Unit does not contain hazardous levels of any mold or fungi defined as toxic under applicable state or federal law. If a non-compliance with said warranty exists as of the Start Date, or if one of such systems or elements should malfunction or fall within the appropriate warranty period, Lessor shall, as Lessor’s sole obligation with respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee selling forth with specificity the nature and extent of such non-compliance, malfunction or failure, rectify same at Lessor’s expense. The warranty periods shall be as follows: (i) 6 months as to the HVAC systems, and (ii) 30 days as to the remaining systems and other elements of the Building. If Lessee does not give Lessor the required notice within the appropriate warranty period, correction of any such non-compliance, malfunction or failure shall be the obligation of Lessee at Lessee’s sole cost and expense, except for the roof, foundations, and bearing walls which are handled as provided in paragraph 7. Lessor also warrants, that unless otherwise specified in writing, Lessor is unaware of (i) any recorded Notices of Default affecting the Premise; (ii) any delinquent amounts due under any loan secured by the Premises; and (iii) any bankruptcy proceeding affecting the Premises. 2.3 Compliance. Lessor warrants that to the best of Its knowledge the improvements on the Premises comply with the building codes, applicable laws, covenants or restrictions of record, regulations, and ordinances (“Applicable Requirements”) that were in effect at the time that each Improvement, or portion thereof, was constructed. Said warranty does not apply to the use to which Lessee will put the Premises, modifications which may be required by the Americans with Disabilities Act or any similar laws as a result of Lessee’s use (see Paragraph 50), or to any Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the Applicable Requirements, and especially the zoning, are appropriate for Lessee’s intended use, and acknowledges that past uses of the Premises may no longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify the same at Lessor’s expense. If
Lessee does not give Lessor written notice of a non-compliance with this warranty with respect to ascertainable defects within 6 months following the Start Date, correction of that non-compliance shall be the obligation of Lessee at Lessee’s sole cost and expense, If the Applicable Requirements are hereafter changed so as to require during the term of this Lease the construction of an addition to or an alteration of the Premises and/or Building, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the Unit, Premises and/or Building (“Capital Expenditure”), Lessor and Lessee shall allocate the cost of such work as follows: (a) Subject to Paragraph 2.3(c) below, If such Capital Expenditures are required as a result of the specific and unique use of the Premises by Lessee as compared with uses by tenants in general, Lessee shall be fully responsible for the cost thereof, provided, however that if such Capital Expenditure is required during the last 2 years of this Lease and the cost thereof exceeds 6 months’ Base Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, in writing, within 10 days after receipt of Lessee’s termination notice that Lessor has elected to pay the difference between the actual cost thereof and an amount equal to 6 months’ Base Rent. If Lessee elects termination, Lessee shall Immediately cease the use of the Premises which requires such Capital Expenditure and deliver to Lessor written notice specifying in termination date at least 90 days thereafter. Such termination date shall, however, in no event be later earlier than the last day that Lessee could legally utilize the Premises without commencing such Capital Expenditure. (b) If such Capital Expenditure is not the result of the specific and unique use of the Premises by Lessee (such as, governmentally mandated seismic modifications arising from Lessee’s unique use of the Premises), then Lessor shall pay for such Capital Expenditure and Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease or any extension thereof, on the date that on which the Base Rent is due, an amount equal to 1/144th of the portion of such costs reasonably attributable to the Premises. Lessee shall pay Interest on the balance but may prepay its obligation at any time. If, however, such Capital Expenditure is required during the last 2 years of this Lease or if Lessor reasonably determines that it is not economically feasible to pay its share thereof, Lessor shall have the option to terminate this Lease upon 90 days prior written notice to Lessee unless Lessee notifies Lessor, In writing, within 10 days after receipt of Lessor’s termination notice that Lessee will pay for such Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any such Capital Expenditure, Lessee may advance such funds and deduct same, with interest, from Rent until Lessor’s share of such costs have been fully paid. If Lessee is unable to finance Lessor’s share, or if the balance of the Rent due and payable for the remainder of this Lease is not sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the right to terminate this Lease upon 30 days written notice to Lessor. The Parties agree that the Agreed Use of the Premises by Lessee shall not be considered a use which can or does result in remediation of any existing Hazardous Substance Condition effecting the Project. (c) Notwithstanding the above, the provisions concerning Capital Expenditures are Intended to apply only to non-voluntary, unexpected, and new Applicable Requirements. If the Capital Expenditures are Instead triggered by Lessee as a result of an actual or proposed change in use, change in Intensity of use, or modification to the Premises then, and in that event, Lessee shall either: (i) Immediately cease such changed use or intensity of use and/or take such other steps as may be necessary to eliminate the requirement
for such Capital Expenditure, or (ii) complete such Capital Expenditure at its own expense. Lessee shall not, however, have any right to terminate this Lease. 2.4 Acknowledgements. Lessee acknowledges that: (a) It has been given an opportunity to inspect and moasure the Premises, (b) It has been advised by Lessor and/or Brokers to satisfy itself with respect to the size and condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with Applicable Requirements and the Americans with Disabilities Act), and their suitability for Lessee’s intended use, (c) Lessee has made such investigation as it deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises, subject to the express obligations., representations and warranties of Lessor contained herein(d) it is not relying on any representation as to the size of the Premises made by Brokers or Lessor, (e) the square footage of the Premises was not material to Lessee’s decision to lease the Premises and pay the Rent stated herein, and (f) neither Lessor, Lessor’s agents, nor Brokers have made any oral or written representations or warranties with respect to said matters other than as set forth in this Lease. In addition, Lessor acknowledges that: (i) Brokers have made no representations, Premises or warranties concerning Lessee’s ability to honor the Lease or suitability to occupy the Premises, and (ii) It is Lessor’s sole responsibility to investigate the financial capability and/or suitability of all proposed tenants. 2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in Paragraph 2 shall be of no force or effect if immediately prior to the Start Date Lessee was the owner or occupant of the Premises. In such event. Lessee shall be responsible for any necessary corrective work. 3. Term. 3.1 Term. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3. 3.2 Early Possession. Any provision herein granting Lessee Early Possession of the Premises is subject to and conditioned upon The Premises being available for such possession prior to the Commencement Date. Any grant of Early Possession only conveys a non-exclusive right to occupy the Premises. If Lessee totally or partially occupies the Premises prior to the Commencement Date. The obligation to pay Base Rent shall be abated for The period of such Early Possession, All other terms of this Lease (including but not limited to The obligations to pay Real Properly Taxes and Insurance premiums and to maintain the Premises) shell be in effect during such period. Any such Early Possession shall not affect the Expiration Date. 3.3 Delay in Possession, Lessor agrees to use Its best commercially reasonable efforts to deliver possession of The Premises to Lessee by The Commencement Date. If, despite said efforts, Lessor Is unable to deliver possession by such date, Lessor shall not be subject to any liability Therefor, nor shall such failure affect The validity of this Lease or change The Expiration Date. Lessee shall not, however, be obligated to pay Rent or perform Us other obligations until Lessor delivers possession of The Premises and any period of rent abatement that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to what Lessee would otherwise have enjoyed under The terms hereof, but minus any days of delay caused by The acts or omissions of Lessee. If possession is not delivered within 60 days after The Commencement Date, as The same may be extended under The terms of any Work Letter executed by Parties, Lessee may, at its option, by notice in writing within 10 days after The end of such 60 day period, cancel this Lease, In which event the Parties shall be discharged from all obligations hereunder. If such written notice Is not received by Lessor within said 10 day period, Lessee’s right to cancel
shall terminate. If possession of The Premises Is not delivered within 120 days after The Commencement Date, this Lease shall terminate unless other agreements are reached between Lessor and Lessee, in writing. 3.4 Lessee Compliance. Lessor shall not be required to deliver possession of the Premises to Lessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee shall be required to perform all of Its PAGE 2 OF 13 INITIALS ©2001 - AIR COMMERCIAL REAL ESTATE ASSOCIATION FORMSTG-23-09/15E INITIALS

 

     

     

    

 

 

	 	 
		obligations under this Lease from and after the Start Date, Including the payment of Rent, notwithstanding Lessor’s election to withhold possession pending receipt of such evidence of insurance. Further, If Lessee is required to perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied. 4. Rent. 4.1. Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent (“Rent”). 4.2 Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it is due. All monetary amounts shall be rounded to the nearest whole dollar. In the event that any invoice prepared by Lessor is inaccurate such inaccuracy shall not constitute a waiver and Lessee shall be obligated to pay the amount set forth in this Lease. Rent for any period during the term hereof which is for less than one full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at Its address stated herein or to such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a waiver of Lessor’s rights to the balance of such Rent, regardless of Lessor’s endorsement of any check so slating. In the event that any check, draft, or other Instrument of payment given by Lessee to Lessor Is dishonored for any reason, Lessee agrees to pay to Lessor The sum of $25 In addition to any Lolo Charge and Lessor, at its option, may require oil future payments to be made by Lessee to be by cashier’s check If Lessee breaches Its obligation to timely pay Base Rent more than two times In any annual period. Payments will be applied first to accrued late charges and attorney’s fees, second to accrued Interest, then to Base Rent, Insurance and Real Properly Taxes, and any remaining amount to any other outstanding charges or costs. 4.3 Association Fees. In addition to the Base Rent, Lessee shall pay to Lessor each month an amount equal to any owner’s association or condominium fees levied or assessed against the Premises. Said monies shall be paid at the same time and in the same manner as the Base Rent. 5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the Security Deposit as security for Lessee’s faithful performance of its obligations under this Lease. If Lessee falls to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount already due Lessor, for Rents which will be due in the future, and/ or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of the Security Deposit, Lessee shall within 10 days after written request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. If the Base Rent Increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional monies with Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the Initial Security Deposit bore to the initial Base Rent. Should the Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to Increase the Security Deposit to the extent necessary, In Lessor’s reasonable judgment, to account for any Increased wear and tear that the Premises may suffer as a result thereof. If
a change in control of Lessee occurs during this Lease and following such change The financial condition of Lessee Is, In Lessor’s reasonable Judgment, significantly reduced, Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on such change In financial condition. Lessor shall not be required to keep The Security Deposit separate from Its general accounts. Within 90 days after the expiration or termination of this Lease. Lessor shall return that portion of the Security Deposit not used or applied by Lessor. Lessor shall upon written request provide Lessee with on accounting showing how that portion of The Security Deposit that was not returned was applied. No part of the Security Deposit shall be considered to be held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease. 6. Use. 6.1 Use, Lessee shall use and occupy the Premises only for the Agreed Use, or any other legal use which is reasonably comparable thereto, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of or causes damage to neighboring premises or properties. Other than guide, signal and seeing eye dogs, Lessee shall not keep or allow in the Premises any pets, animals, birds, fish, or reptiles. Lessor shall not unreasonably withhold or delay its consent to any written request for a modification of the Agreed Use, so long as the same will not impair the structural integrity of the improvements on the Premises or the mechanical or electrical systems therein, and/or is not significantly more burdensome to the Premises. If Lessor elects to withhold consent, Lessor shall within 7 days after such request give written notification of same, which notice shall include an explanation of Lessor’s objections to the change in the Agreed Use. 6.2 Hazardous Substances. (a) Reportable Uses Require Consent. The term “Hazardous Substance” as used in this Lease shall mean any product, substance, or was to whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii) regulated or monitored by any governmental authority, or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substances shall Include, but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products or fractions thereof. Lessee shall not engage in any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of Lessor and timely compliance (at Lessee’s expense) with all Applicable Requirements. “Reportable Use” shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements requires that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably required to be used in the normal course of the Agreed Use, ordinary office supplies (copier toner, liquid paper, glue, etc.) and common household cleaning materials, so long as such use is in compliance with all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful
risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasements) and/or increasing the Security Deposit. (b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, other than as previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance. (c) Lessee Remediation. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee’s expense, comply with all Applicable Requirements and take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for Lessee, or any third party. (d) Lessee Indemnification. Lessee shall indemnify, defend and hold Lessor, its agents. employees, lenders and ground lessor, if any, harmless from and against any end all loss of rente and/or damages, liabilities, judgments, claims, expenses, penalties, and attorneys’ and consultants’ fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party (provided, however, that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises from adjacent properties not caused or contributed to by Lessee). Lessee’s obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement. (e) Lessor Indemnification. Except as otherwise provided in paragraph 8.7, Lessor and its successors and assigns shall indemnify, defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all environmental damages, including the cost of remediation and reasonable attorney fees, which result from Hazardous Substances which existed on the Premises prior to Lessee’s occupancy or which are caused by the gross negligence or willful misconduct of Lessor, Its agents or employees. Lessor’s obligations, as and when required by the Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. (f) Investigations and Remediations. Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to Lessee’s occupancy, unless such remediation measure is required as a result of Lessee’s
use (including “Alterations”, as defined in paragraph 7.3(a) PAGE 3 OF 13 NITIALS ©2001 - AIR COMMERCIAL REAL ESTATE ASSOCIATION FORMSTG-23-09/15E

 

     

     

    

 

 

	 	 
		below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and Lessor’s agents to have reasonable access to the Premises at reasonable times in a way that minimizes disruption to Lessee’s occupancy and business as much as practical in order to carry out Lessor’s investigative and remedial responsibilities. (g) Lessor Termination Option. If a Hazardous Substance Condition (see Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by the Applicable Requirements and this Lease shall continue in full force and effect, but subject to Lessor’s rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor’s option, either (i) investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor’s expense, in which event this Lease shall continue in full force and effect, or (ii) if the estimated cost to remediate such condition exceeds 12 times the then monthly Base Rent or $100,000, whichever is greater, give written notice to Lessee, within 30 days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of Lessor’s desire to terminate this Lease as of the date 60 days following the date of such notice. In the event Lessor elects to give a termination notice, Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee’s commitment to pay the amount by which the cost of the remediation of such Hazardous Substance Condition exceeds an amount equal to 12 times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days following such commitment. In such event, this Lease shall continue in full force and effect, and Lessor shall proceed to make such remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time provided, this Lease shall terminate as of the date specified in Lessor’s notice of termination. 6.3 Lessee’s Compliance with Applicable Requirements. Except as otherwise provided in this Lease, Lessee shall, at Lessee’s sole expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the requirements of any applicable fire insurance underwriter or rating bureau, and the reasonable recommendations of Lessor’s engineers and/or consultants which relate in any manner to the Premises, without regard to whether said Applicable Requirements are now in effect or become effective after the Start Date. Lessee shall, within 10 days after receipt of Lessor’s written request, provide Lessor with copies of all permits and other documents, and other Information evidencing Lessee’s compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements. Likewise. Lessee shall immediately give written notice to Lessor of: (i) any water damage to the Premises of which it has actual knowledge and any suspected seepage, pooling, dampness or other condition conducive to the production of mold; or (ii) any mustiness or other odors that might indicate the presence of mold in the Premises. In addition, Lessee shall provide Lessor with copies of its business license, certificate of occupancy and/or any similar document within 10 days of the receipt of the written request therefor.
6.4 Inspection; Compliance. Lessor and Lessor’s “Lender” (as defined in Paragraph 30) and consultants shall have the right to enter into Premises at any time, in the case of an emergency, and otherwise at reasonable times after reasonable notice, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirements, or a Hazardous Substance Condition (see paragraph 9.1) is found to exist or be imminent, or the inspection is requested or ordered by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such Inspection, so long as such inspection is reasonably related to the violation or contamination. In addition, Lessee shall provide copies of all relevant material safety data sheets (MSDS) to Lessor within 10 days of the receipt of a written request therefor. 7. Maintenance; Repairs; Utility Installations; Trade Fixtures and Alterations. 7.1 Lessee’s Obligations. (a) In General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee’s Compliance with Applicable Requirements), 7.2 (Lessor’s Obligations). 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, al Lessee’s sole expense, keep the Premises, Utility Installations (intended for Lessee’s exclusive use, no matter where located), and Alterations in good order, condition and repair (whether or not the portion of the Premises requiring repairs, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repair assure as a result of Lessee’s use, any prior use, the-elements or the ago of such portion of the Premises), including, but not limited to, all equipment or facilities, such as plumbing. HVAC equipment, electrical, lighting facilities, boilers, pressure vessels, fire protection system, fixtures, walls (Interior and exterior), ceilings, floors, windows, doors, plate glass, skylights, landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalks and parkways located in, on, or adjacent to the Premises. Lessee is also responsible for keeping the roof and roof drainage clean and free of debris. Lessor shall keep the surface and structural elements of the roof, foundations, and bearing walls in good repair (see paragraph 7.2). Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the service contracts required by Paragraph 7.1(b) below. Lessee’s obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair. Lessee shall, during the term of this Lease, keep the exterior appearance of the Building in a first-class condition (including, e.g. graffiti removal) consistent with the exterior appearance of other similar facilities of comparable ago and size in the vicinity, including, when necessary, the exterior repainting of the Building. (b) Service Contracts. Lessee shall, at Lessee’s sole expense, procure and maintain contracts, with copies to Lessor, in customary form and substance for, and with contractors specializing and experienced in the maintenance of the following equipment and improvements. If any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler, and pressure vessels, (iii) fire extinguishing systems, including fire alarm and/or smoke detection, (iv) landscaping and Irrigation systems, and (v) clarifiers. However, Lessor reserves the right, upon notice to Lessee, to procure and maintain any or all of such service contracts, and Lessee shall reimburse Lessor, upon demand, for the cost thereof. (c) Failure to Perform. If Lessee fails to perform Lessee’s obligations under this Paragraph 7.1, Lessor may enter
upon the Premises alter 10 days’ prior written notice to Lessee (except in the case of an emergency, in which case no notice shall be required), perform such obligations on Lessee’s behalf, and put the Premises in good order, condition and repair, and Lessee shall promptly pay to Lessor a sum equal to 115% of the cost thereof. (d) Replacement. Subject to Lessee’s indemnification of Lessor as set forth in Paragraph 6.7 below, and without relieving Lessee of liability resulting from Lessee’s failure to exercise and perform good maintenance practices, if an item described in Paragraph 7.1(b) cannot be repaired other than at a cost which is in excess of 50% of the cost of replacing such item, then such item shall be replaced by Lessor, and the cost thereof shall be prorated between the Parties (but only to the extent this Lease expressly requires Lessee to pay for some or all of such replacements in other provisions of this Lease and if not the cost thereof shall be borne by Lessor) and Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying the cost of such replacement by a fraction, the numerator of which is one, and the denominator of which is 144 (i.e. 1/144th of the cost per month). Lessee shall pay Interest on the unamortized balance but may prepay its obligation at any time. 7.2 Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance). 8 (Damage or Destruction) and 14 (Condemnation), it is intended by the Parties hereto that Lessor have no obligation, in any manner whatsoever, to repair and maintain the Premises, or the equipment therein, all of which obligations are intended to be that of the Lessee, except for the surface and structural elements of the roof, foundations and bearing walls, the repair of which shall be the responsibility of Lessor upon receipt of written notice that such a repair is necessary. It is the intention of the Parties that the terms of this Lease govern the respective obligations of the Parties as to maintenance and repair of the Premises, and they expressly waive the benefit of any statute now or hereafter in effect to the extent it is inconsistent with the terms of this Lease. 7.3 Utility Installations; Trade Fixtures; Alterations. (a) Definitions. The term “Utility Installations” refers to all floor and window coverings, air and/or vacuum lines, power panels, electrical distribution, security and fire protection systems, communication cabling, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. The term “Trade Fixtures” shall mean Lessee’s machinery and equipment that can be removed without doing material damage to the Premises. The term “Alterations” shall mean any modification of the improvements, other than Utility Installations or Trade Fixtures, whether by addition or deletion. “Lessee Owned Alterations and/or Utility Installations” are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a). (b) Consent Lessee shall not make any Alterations or Utility Installations to the Premises without Lessor’s prior written consent. Lessee may. however, make non-structural Alterations or Utility Installations to the Interior of the Premises (excluding the roof) without such consent but upon notice to Lessor, as long as they are not visible from the outside, do not involve puncturing, relocating or removing the roof or any existing walls, will not affect the electrical, plumbing, HVAC, and/or life safety systems, do not trigger the requirement for additional modifications and/or Improvement to the Premises resulting from Applicable Requirements. such as compliance with Title 24, and the cumulative cost thereof during this Lease as extended does not exceed a sum equal to 3 month’s Base Rent in the aggregate or a sum equal to one month’s
Base Rent. In any one year. Notwithstanding the foregoing, Lessee shall not make or permit any roof penetrations and/or install anything on the roof without the prior written approval of Lessor. Lessor may, as a precondition to granting such approval, require Lessee to utilize a contractor chosen and/or approved by Lessor. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee’s: (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility Installations shall be performed in a PAGE 4 OF 13 INITIALS INITIALS ©2001 -AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM STG-23-09/15E

 

     

     

    

 

 

	 	 
		workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications. For work which costs an amount in excess of one month’s Base Rent, Lessor may condition its consent upon Lessee providing a lien and completion bond in an amount equal to 150% of the estimated cost of such Alteration or Utility Installation and/or upon Lessee’s posting an additional Security Deposit with Lessor. (c) Liens; Bonds. Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims ore or may be secured by any mechanic’s or materialmen’s lien against the Premises or any interest therein. Lessee shall give Lessor not less than 10 days notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notices of non-responsibility. If Lessee shall contest the validity or any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equal to 150% of the amount of such contested lien, claim or demand, Indemnifying Lessor against liability for the same. If Lesser elects to participate in any such action, Lessee shall pay Lessor’s attorneys’ fees and costs. 7.4 Ownership; Removal; Surrender; and Restoration. (a) Ownership. Subject to Lessor’s right to require removal or elect ownership as hereinafter provided, all Alterations and Utility Installations made by Lessee shall be the property of Lessee, but considered a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise Instructed per paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration or termination of this Lease, become the property of Lessor and be surrendered by Lessee with the Premises. (b) Removal. By delivery to Lessee of written notice from Lessor not earlier than 90 and not later than 30 days prior to the end of the term of this Lease. Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or termination of this Lease. Lessor may require the removal at any time of all or any part of only Lessee Owned Alterations or Utility Installations made without the required consent. (c) Surrender; Restoration. Lessee shall surrender the Premises by the Expiration Date or any earlier terminal on date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. “Ordinary wear and tear” shall not include any damage or deterioration that would have been prevented by good maintenance practice. Notwithstanding the foregoing, if this Lease is for 12 months or less, then Lessee shall surrender the Premises In the same condition as delivered to Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair any damage occasioned by the Installation, maintenance or removal of Trade Fixtures, Lessee owned Alterations and/or Utility Installations, furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee. Lessee shall remove from the Premises any and all Hazardous Substances brought onto the Premises by or for Lessee, or any third party (except Hazardous Substances which were deposited via underground migration from areas outside of the Premises) to the level specified In Applicable Requirements. Trade Fixtures shall remain the properly of Lessee and shall be removed by Lessee.
Any personal property of Lessee not removed on or before the Expiration Date or any earlier termination date shall be deemed to have been abandoned by Lessee and may be disposed of or retained by Lessor as Lessor may desire. The failure by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 26 below. 8. Insurance; Indemnity. 8.1 Payment of Premium Increases. (a) Lessee shall pay to Lessor any Insurance cost Increase (“Insurance Cost Increase”) occurring during the term of this Lease. Insurance Cost Increase Is defined as any Increase In the actual cost of the Insurance required under Paragraph 0.2(b), 0.3(a) and 0.3(b), over and above the Base Premium as hereinafter defined calculated on an annual basis. Insurance Cost Increase shall Include but not be limited to increases resulting from the nature of Lessee’s occupancy, any act or omission of Lessee, requirements of the holder of mortgage or deed of trust covering the Premises, Increased valuation of the Premises and/or a premium rate Increase. The parties are encouraged to fill in the Base Premium in paragraph 1.8 with a reasonable premium for the Required Insurance based on the Agreed Use of the Premises. If the parties fall to Insert a dollar amount in Paragraph 1.8, then the Base Premium shall be the lowest annual premium reasonably obtainable for the Required Insurance as of the commencement of the Original Term for the Agreed Use of the Premises. In no event, however, shall Lessee to responsible for any portion of the Increase in the premium cost attributable to liability Insurance carried by Lessor under Paragraph 8.2(b) in excess of $2,000,000 per occurrence. (b) Lessee shall pay any such Insurance Cost Increase to Lessor within 30 days after receipt by Lessee of a copy of the premium statement or other reasonable evidence of the amount due. If the Insurance policies maintained hereunder cover other property besides the Premises, Lessor shall also deliver to Lessee a statement of the amount of such Insurance Cost Increase attributable only to the Premises showing in reasonable detail the manner in which such amount was computed. Premiums for policy periods commencing prior to, or extending beyond the term of this Lease, shall be prorated to correspond to the term of this Lease. 8.2 Liability Insurance. (a) Carried by Lessee. Lessee shall obtain and keep in force a Commercial General Liability policy of Insurance protecting Lessee and Lessor as an additional insured against claims for bodily Injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such Insurance shall be on an occurrence basis providing single limit coverage in on amount not less than $1,000,000 per occurrence with an annual aggregate of not less than $2,000,000. Lessee shall add Lessor as an additional Insured by means of an endorsement at least as broad as the Insurance Service Organization’s “Additional insured-Managers or Lessors of Premises” Endorsement. The policy shall not contain any Intra-Insured exclusions as between Insured persons or organizations, but shall Include coverage for liability assumed under this Lease as an ‘Insured contract” for the performance of Lessee’s indemnity obligations under this Lease. The limits of said Insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. Lessee shall provide an endorsement on its liability policy(ies) which provides that its Insurance shall be primary to and not contributory with any similar Insurance carried by Lessor, whose Insurance shall be considered excess Insurance only. (b) Carried by Lessor. Lessor shall maintain liability Insurance as described in Paragraph 8.2(e), In addition to, and not in lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional
insured therein. 8.3 Property Insurance - Building, Improvements and Rental Value. (a) Building and Improvements. The Insuring Party shall obtain and keep in force a policy or policies in the name of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender Insuring loss or damage to The Premises. The amount of such Insurance shall to equal to the full Insurable replacement cost of The Premises, as The same shall exist from time to time, or The amount required by any Lendor, but in no ovant more than The commercially reasonable and available Insurable value thereof. Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee’s personal property shall be Insured by Lessee not by Lessor. If the coverage is available and commercially appropriate, such policy or policies shall Insure against all risks of direct physical loss or damage (except the perils of flood and/or earthquake unless required by a Lender or included in the Base Premium), Including coverage for debris removal and The enforcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or replacement of any portion of The Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision In lieu of any coinsurance clause, waiver of subrogation, and Inflation guard protection causing an increase In The annual properly Insurance coverage amount by a factor of not less than The adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for The city nearest to where the Premises are located. If such Insurance coverage has a deductible clause, the deductible amount shall not exceed $5,000 per occurrence, and Lessee shall be liable for such deductible amount In the event of an Insured Loss. (b) Rental Value. The Insuring Party shall obtain and keep in force a policy or policies In The name of Lessor with loss payable to Lessor and any Lender. Insuring The loss of the full Rent for one year with an extended period of indemnity for an additional 180 days of (“Rental Value Insurance”). Said Insurance shall contain on agreed valuation provision in lieu of any coinsurance clause, and The amount of coverage shall be adjusted annually to reflect the projected Rent otherwise payable by Lessee, for the next 12 month period. Lessee shall be liable for any deductible amount in the event of such loss. (c) Adjacent Premises. If the Premises are part of a larger building, or of a group of buildings owned by Lessor which are adjacent to the Premises, the Lessee shall pay for any Increase In the premiums for the properly Insurance of such building or buildings If said Increase is caused by Lessee’s acts, omissions, use or occupancy of the Premises. 8.4 Lessee’s Properly; Business Interruption Insurance; Worker’s Compensation Insurance. (a) Property Damage. Lessee shall obtain and maintain Insurance coverage on all of Lessee’s personal property, Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such Insurance shall be full replacement cost coverage with a deductible of not to exceed $10,000 per occurrence. The proceeds from any such Insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. (b) Business Interruption. Lessee shall obtain and maintain loss of Income and extra expense Insurance In amounts as will reimburse Lessee for direct or Indirect loss of earnings attributable to all perils commonly Insured against by prudent lessees in the business of Lessee or attributable to prevention of access to the Premises as a result of such perils. (c) Worker’s Compensation Insurance. Lessee shall obtain and maintain Worker’s Compensation Insurance in such amount as may be required by Applicable Requirements. Such policy shall Include a ‘Waiver of Subrogation’ endorsement. Lesser shall provide Lessor with a PAGE 5 OF 13 INITIALS ©2001 - AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM STG-23-09/15E

 

     

     

    

 

 

	 	 
	

	copy of such endorsement along with the certificate of Insurance or copy of the policy required by paragraph 8.5. (d) No Representation of Adequate Coverage. Lessor makes no representation that the limits or forms of coverage of Insurance specified herein are adequate to cover Lessee’s property, business operations or obligations under this Lease. 8.6 Insurance Policies. Insurance required herein shall be by companies maintaining during the policy term a “General Policyholders Rating” of at least A-, VII, as set forth in the most current issue of ‘Bost’s Insurance Guide”, or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which Invalidates the required Insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certified copies of policies of such Insurance or certificates with copies of the required endorsements evidencing the existence and amounts of the required Insurance. No such policy shall be cancelable or subject to modification except after 30 days prior written notice to Lessor. Lessee shall, at least 10 days prior to The exploration of such policies, furnish Lessor with evidence of renewals or “insurance binders” evidencing renewal thereof, or Lessor may order such Insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fall to procure and maintain the Insurance required to be carried by II, the other Party may, but shall not be required to, procure and maintain the same. 8.6 Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages against the other, for loss of or damage to its property arising out of or incident to the perils required to be Insured against herein. The effect of such releases and waivers is not limited by the amount of Insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have their respective property damage Insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the Insurance is not invalidated thereby. 8.7 Indemnity. Except for Lessor’s gross negligence or willful misconduct, Lessor shall Indemnify, protect, defend and hold harmless the Premises, Lessor and its agents, Lessor’s master or ground lessor, partners and Lenders, from and against any and all claims, toss of rents and/or damages, lions, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or liabilities arising out of, involving, or in connection with, the use and/or occupancy of the Premises by Lessee. If any action or proceeding is brought against Lessor by reason of any of the foregoing matters. Lessee shall upon notice defend the same at Lessee’s expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or Indemnified. 8.8 Exemption of Lessor and its Agents from Liability. Notwithstanding the negligence or breach of this Lease by Lessor or its agents, neither Lessor nor its agents shall be liable under any circumstances for: (i) Injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee’s employees, contractors, Invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, indoor air quality, the presence of mold or from the breakage, leakage. obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing. HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the building of which the Premises are a part, or from other sources or places, (ii) any damages arising from any act or neglect of any other tenant of Lessor or from the failure of Lessor or its agents to enforce the provisions of any other lease in the Project, or (iii) Injury to Lessee’s business or for any loss of income or profit therefrom. Instead, it is intended that Lessee’s sole recourse in the event of such damages or injury be to file a claim on the insurance policy(ies) that Lessee is required to maintain pursuant to the provisions of paragraph 8. 8.9 Failure to Provide Insurance. Lessee acknowledges that any failure on its part to obtain or maintain the insurance required herein will expose Lessor to risks and potentially cause Lessor to incur costs not contemplated by this Lease, the extent of which will be extremely difficult to ascertain. Accordingly, for any month or portion thereof that Lessee does not maintain the required insurance and/or does not provide Lessor with the required binders or certificates evidencing the existence of the required insurance, the Base Rent shall be automatically increased, without any requirement for notice to Lessee, by an amount equal to 10% of the then existing Base Rent or $100, whichever is greater. The parties agree that such increase in Base Rent represents fair and reasonable compensation for the additional risk/ costs that Lessor will incur by reason of Lessee’s failure to maintain the required insurance. Such increase in Base Rent shall in no event constitute a waiver of Lessee’s Default or Breach with respect to the failure to maintain such insurance, prevent the exercise of any or the other rights and remedies granted hereunder, nor relieve Lessee of its obligation to maintain the insurance specified in this Lease. 9. Damage or Destruction. 0.1 Definitions. (a) “Premises Partial Damage” shall mean damage or destruction to the Improvements on the Premises, other than Lessee Owned Alterations and Utility Installations, which can reasonably be repaired in 6 months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total. (b) “Premises Total Destruction” shall mean damage or destruction to the Premises, other than Lessee Owned Alterations and Utility Installation and Trade Fixtures, which cannot reasonably be repaired in 6 months or less from the date of the damage or destruction. Lessor shall notify Lessee in witting within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total. (c) “Insured Loss” shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits involved. (d) “Replacement Cost” shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation. (e) “Hazardous Substance Condition” shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance, in, on, or under the Premises which requires restoration. 9.2 Partial Damage - Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue In full force and effect; provided,
however, that Lessee shall, at Lessor’s election, make the repair of any damage or destruction the total cost to repair of which is $10,000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute the shortage in proceeds (except as to the deductible which is Lessee’s responsibility) as and when required to complete said repairs. In the event, however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within 10 days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said 10 day period, The party responsible for making The repairs shall complete them as soon as reasonably possible and this Lease shall remain In full force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10 days thereafter to: (i) make such restoration and repair as Is commercially reasonable with Lessor paying any shortage In proceeds, In which case this Lease shall remain In full force and effect, or (ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that There may be some Insurance coverage, but The net proceeds of any such Insurance shall be made available for the repairs If made by either Party. 9.3 Partial Damage - Uninsured Loss. If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (In which event Lessee shall make the repairs al Lessee ’s expense). Lessor may either: (i) repair such damage as soon as reasonably possible at Lessor’s expense, In which event this Lease shall continue In full force and effect, or (ii) terminate this Lease by giving written notice to Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective 60 days following The date of such notice. In the event Lessor elects to terminate this Lease. Lessee shall have The right within 10 days after receipt of The termination notice to give written notice to Lessor of Lessee’s commitment to pay for The repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof with in 30 days after making such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after The required funds are available. If Lessee docs not make The required commitment, this Lease shall terminate as of the date specified In The termination notice. 9.4 Total Destruction. Notwithstanding any other provision hereof, If a Premises Total Destruction occurs, this Lease shall terminate 60 days following such Destruction. If the damage or destruction was caused by The gross negligence or willful misconduct of Lesses, Lessor shall have The right to recover Lessor’s damages from Lessee, except as provided In Paragraph 8.6. 9.5 Damage Near End of Term. If at any time during The last 6 months of this Lease There is damage for which The cost to repair exceeds one month’s Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective 60 days following the date of occurrence
of such damage by giving a written termination notice to Lessee with in 30 days after The date of occurrence of such damage. Notwithstanding The foregoing, If Lessee at that time has an exercisable option to extend this Lease or to purchase The Premises, then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor with any shortage In Insurance proceeds (or adequate assurance thereof) needed to make there before The earlier or (i) The date which Is 10 days alter Lessee’s receipt of Lessor’s, written notice purporting to terming this Lease, or (ii) PAGE 6 OF 13 -^*-^_ INITTALS INITIALS ©2001 ■ AIR COMMERCIAL REAL ESTATE ASSOCIATION FORMSTG-23-09/15E

     

     

    

 

 

	 	 
		the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage In Insurance proceeds, Lessor shall, at Lessor’s commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease shall continue In full force end effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified In the termination notice and Lessee’s option shall be extinguished. 9.6 Abatement of Rent; Lessee’s Remedies. (a) Abatement. In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which Lessee Is not responsible under this Lease, the Rent payable by Lessee for the period required for the repair, remediation or restoration of such damage shall be abated In proportion to the degree to which Lessee ’s use of the Premises Is impaired, but not to exceed the proceeds received from the Rental Value Insurance. All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided herein. (b) Remedies. If Lessor Is obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within 90 days after such obligation shall accrue, Lessee may, at any limo prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee’s election to terminate this Lease on a date not less than 60 days following the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within 30 days thereafter, this Lease shall terminate as of the date specified In said notice. If the repair or restoration Is commenced within such 30 days, this Lease shall continue in full force and effect provided that Lessor prosecutes such repair or restoration to completion with reasonable diligence. “Commence” shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs. 9.7 Termination; Advance Payments. Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee’s Security Deposit as has not been, or is not then required to be, used by Lessor. 10. Real Property Taxes. 10.1 Definition. As used herein, the term “Real Property Taxes” shall Include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal Income or estate taxes); improvement bond; and/or license fee Imposed upon or levied against any legal or equitable Interest of Lessor In the Premises or the Project, Lessor’s right to other Income therefrom, and/or Lessor’s business of leasing, by any authority having the direct or Indirect power to tax and where the funds are generated with reference to the Building address. Real Property Taxes shall also Include any tax, fee, levy, assessment or charge, or any increase therein: (i) Imposed by reason of events occurring during The term of this Lease, including but not limited to, a change In The ownership of the Premises, and (ii) levied or assessed on machinery or equipment provided by Lessor to Lessee pursuant to this Lease. 10.2 (a) Payment of Taxes. Lessor shall pay the Real Property Taxes applicable to the Premises provided, however, that Lessee shall pay to Lessor the amount, If any, by which Real Property Taxes applicable to the Premises
Increase over the fiscal tax year during which The Commencement Date Occurs (Tax Increase”). Payment of any such Tax Increase shall be made by Lessee to Lessor within 30 days after receipt of Lessor’s written statement selling forth the amount due and computation thereof. If any such taxes shall cover any period of time prior to or after the expiration or termination of this Lease, Lessee’s share of such taxes shall be prorated to cover only that portion of the tax bill applicable to the period that this Lease is In effect. In the event Lessee Incurs a late charge on any Rent payment, Lessor may estimate the current Real Property Taxes, and require that the Tax Increase be paid in advance to Lessor by Lessee monthly In advance with the payment of the Base Rent. Such monthly payment shall be an amount equal to the amount of the estimated installment of the Tax Increase divided by the number of months remaining before the month In which said Installment becomes delinquent. When the actual amount of the applicable Tax Increase Is known, the amount of such equal monthly advance payments shall be adjusted as required to provide the funds needed to pay the applicable Tax Increase. If The amount collected by Lessor Is Insufficient to pay the Tax Increase when due, Lessee shall pay Lessor, upon demand, such additional sums as are necessary to pay such obligations. Advance payments may be Intermingled with other moneys of Lessor and shall not bear Interest. In the event of a Breach by Lessee In the performance of its obligations under this Lease, then any such advance payments may be treated by Lessor as an additional Security Deposit. (b) Additional Improvements. Notwithstanding anything to the contrary In this Paragraph 10.2, Lessee shall pay to Lessor upon domand therefor the entirety of any Increase In Real Property Taxes assessed by reason of Alterations or Utility Installations placed upon the Premises by Lessee or at Lessee’s request or by reason of any alterations or Improvements to the Premises made by Lessor subsequent to the execution of this Lease by the Parties. 10.3 Joint Assessment. If the Premises are not separately assessed, Lessee’s liability shall be an equitable proportion of the Tax Increase for all of the land and Improvements Included within the tax parcel assessed, such proportion to be conclusively determined by Lessor from the respective valuations assigned In the assessor’s work sheets or such other Information as may be reasonably available. 10.4 Personal Property Taxes. Lessee shall pay, prior to delinquency, all taxes assessed against and levied upon Lessee Owned Alterations, Utility Installations, Trade Fixtures, furnishings, equipment and all personal properly of Lessee. When possible, Lessee shall cause Its Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee’s said property shall be assessed with Lessor’s role property, Lessee shall pay Lessor the taxes attributable to Lessee’s property within 10 days after receipt of a written statement setting forth the taxes applicable to Lessee’s property. 11. Utilities and Services. Lessee shall pay for all water, gas, heat, light, power, telephone, Iresh disposal and other utilities and services supplied to the Premises, together with any taxes thereon. If any such services are not separately metered or billed to Lessee, Lessee shall pay a reasonable proportion, to be determined by Lessor, of all charges Jointly metered or billed. There shall be no abatement of rent and Lessor shall not be liable In any respect whatsoever for the Inadequacy, stoppage, Interruption or discontinuance of any utility or service due to riot, strike, labor dispute, breakdown, accident, repair or other cause beyond Lessor’s reasonable control or In cooperation with governmental request or directions. 12. Assignment and Subletting. 12.1 Lessor’s Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, “assign or assignment”) or sublet all or any part of Lessee’s Interest In this Lease or In the Premises without Lessor’s prior written consent. Landlord’s consent shall not be withheld, delayed or conditioned unreasonably. (b) Unless Lessee Is a corporation and its stock is publicly traded on a national stock exchange, a change In the control of Lessee shall constitute an assignment requiring consent. The transfer, on a cumulative basis, of 25% 50% or more of the voting control of Lessee shall constitute a change in control for this purpose. (c) The Involvement of Lessee or Its assets In any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee’s assets occurs, which results or will result in a reduction of the Net Worth of Lessee by an amount greater than 25% of such Net Worth as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which Lessor has consented, or as It exists Immediately prior to said transaction or transactions constituting such reduction, whichever was or Is greater, shall be considered an assignment of this Lease to which Lessor may withhold Its consent, “Net Worth of Lessee” shall mean the net worth of Lessee (excluding any guarantors) established under generally accepted accounting principles. (d) An assignment or subletting without consent shall, at Lessor’s option, be a Default curable after notice per Paragraph 13.1(d), or a nondurable Breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a nondurable Breach, Lessor may other: (i) terminator this Lease, or (ii) upon 30 days written notice, Increase The monthly Base Rent to 110% of the Base Rent then In effect. Further, In the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to 110% of the price previously In effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the remainder of the Lease term shall be Increased to 110% of the scheduled adjusted rent. (e) Lessee ’s remedy for any breach of Paragraph 12.1 by Lessor shall be limited to compensatory damages under Injunctive relief. (f) Lessor may reasonably withhold consent to a proposed assignment or subletting If Lessee Is In Default at The time consent Is requested provided that no default shall be deemed to take place until after the giving of notice and the passage of time to cure to the extent provided In this Lease. (g) Notwithstanding the foregoing, allowing a diminimus portion of the Premises, ie. 20 square feet or less, to be used by a third party vendor In connection with the Installation of a vending machine or payphone shall not constitute a subletting. 12.2 Terms and Conditions Applicable to Assignment and Subletting. (a) Regardless of Lessor’s consent, no assignment or subletting shall: (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be performed by Lessee. (b) Lessor may accept Rent or performance of Lessee’s obligations from any person other than Lessee pending approval or disapproval of on assignment. Neither a delay In the approval or disapproval of such assignment nor the acceptance of Rent or performance shall PAGE 7 OF 13 Tyhrti INITIALS INITIALS ©2001 - AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM STG-23-09/15E

 

     

     

    

 

 

	 	 
		constitute a waiver or estoppel of Lessor’s right to exercise its remedies for Lessee’s Default or Breach. (c)Lessor’s consent to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting. (d)In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee’s obligations under this Lease, Including any assignee or sublessee, without first exhausting Lessor’s remedies against any other person or entity responsible therefor to Lessor, or any security held by Lessor. (o) Each request for consent to an assignment or subletting shall be in writing, accompanied by Information relevant to Lessor’s determination as to the financial and operational responsibility and appropriateness of the proposed assigned or sublessee, Including but not limited to the intended use and/or required modification of the Premises, If any, together with a fee of $500 as consideration for Lessor’s considering and processing sold request. Lessee agrees to provide Lessor with such other or additional Information and/or documentation as may be reasonably requested. (See also Paragraph 36) (f) Any assigned of. or sublessee under, this Lease shall, by reason of accepting such assignment, entering Into such sublease, or entering into possession of the Premises or any portion thereof, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or Inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing. (g) Lessor’s consent to any assignment or subletting shall not transfer to the assigned or sublessee any Option granted to the original Lessee by this Lease unless such transfer Is specifically consented to by Lessor in writing. (See Paragraph 39.2) 12.3 Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein: (a)Lessee hereby assigns and transfers to Lessor all of Lessee's interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee's obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee's obligations, Lessee may collect said Rent. In the event that the amount collected by Lessor exceeds Lessee's then outstanding obligations any such excess shall be refunded to Lessee. Lessor shall not. by reason of the foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee's obligations under this Lease to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary. (b)In the event of a Breach by Lessee, Lessor may, at its option, require sublessee to attom to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior
Defaults or Breaches of such sublessor. (c)Any matter requiring the consent of the sublessor under a sublease shall also require the consent of Lessor. (d)No sublessee shall further assign or sublet all or any part of the Premises without Lessor's prior written consent. (e)Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any, specified In such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee. (f)Neither the use by nor the subletting to a parent or subsidiary of Lessee or to any subsidiary of any subsidiary or parent of Lessee of all or a portion of the Premises shall be (deemed an assignment of sublease or other transfer requiring lessor’s consent hereafter. 13. Default; Breach; Remedies. 13.1 Default; Breach. A "Default'' is defined as a failure by the Lessee to comply with or perform any of the terms, covenants, conditions or Rules and Regulations under this Lease. A "Breach" is defined as the occurrence of one or more of the following Defaults, and the failure of Lessee to cure such Default within any applicable grace period: (a) The abandonment of the Premises; or the vacating of the Premises without providing a commercially reasonable level of security, or where the coverage of the property insurance described in Paragraph 8.3 is jeopardized as a result thereof, or without providing reasonable assurances to minimize potential vandalism. (b) The failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder which failure continues for five days following the delivery of written notice to Lessor, Whether to Lessor or to a third party, When due, to provide reasonable evidence of insurance or surety bond, or to fulfill any obligation under this Lease Which endangers or threatens life or property, Where such failure continues for a period of 3 business days following written notice to Lessee. THE ACCEPTANCE BY LESSOR OF A PARTIAL PAYMENT OF RENT OR SECURITY DEPOSIT SHALL NOT CONSTITUTE A WAIVER OF ANY OF LESSOR'S RIGHTS, INCLUDING LESSOR'S RIGHT TO RECOVER POSSESSION OF THE PREMISES. (c) The failure of Lessee to allow Lessor and/or its agents access to the Premises or the commission of waste, act or acts constituting public or private nuisance, and/or an illegal activity on the Premises by Lessee where such actions continue for a period of 3 business days following written notice to Lessee. In the event that Lessee commits waste, a nuisance or an illegal activity a second time then, the Lessor may elect to throat such conduct as a non-curable Broach rather than a Default. (d)The failure by Lessee to provide (i) reasonable written evidence of compliance with Applicable Requirements to the extent Lessee responsible under this Lease for compliance with such Applicable Requirements, (ii) the service contracts, (iii) the rescission of an unauthorized assignment or subletting, (iv) an Estoppel Certificate or financial statements, (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any document requested under Paragraph 42, (viii) material safety data sheets (MSDS), or (ix) any other documentation or Information which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of 10 days following written notice to Lessee. (e)A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of The rules adopted under Paragraph 40 hereof, other than these described In subparagraphs 13.1(a), (b), (c) or (d), above, where such Default continues for a period of 30 days after written notice; provided, however, that if the nature of Lessee’s Default is such that more than 30 days are reasonably required for its cure, then it shall not be deemed to be a Breach If Lessee commences such cure within said 30 day period and thereafter diligently
prosecutes such cure to completion. (f) The occurrence of any of the following events: (i) The making of any general arrangement or assignment for the benefit of creditors; (ii) becoming a “debtor” as defined In 11 U.S.C. §101 or any successor statute thereto (unless, In the case of a petition filed against Lessee, the some is dismissed within 60 days); (iii) The appointment of a trustee or receiver to take possession of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Leese. where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other Judicial seizure of substantially all of Lessee’s assets located at the Premises or of Lessee’s Interest in this Lease, where such seizure is not discharged within 30 days; provided, however, In the event that any provision of this subparagraph (e) Is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions. (g)The discovery that any financial statement of Lessee or of any Guarantor given to Lessor was materially false. (h) If the performance of Lessee’s obligations under this Lease is guaranteed: (i) The death of a Guarantor, (ii) the termination of a Guarantor’s liability with respect to this Lease other than in accordance with the terms of such guaranty, (iii) a Guarantor’s becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’s refusal to honor the guaranty, or (v) A Guarantor’s breach of its guaranty obligation on an anticipatory basis, and Lessee’s failure, within 60 days following written notice of any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease. 13.2Remedies. If Lessee falls to perform any of its affirmative duties or obligations, within 10 days after written notice (or in case of an emergency, without notice), Lessor may, at its option, perform such duty or obligation on Lessee’s behalf, including but not limited to the obtaining of reasonably required bonds, Insurance policies, or governmental licenses, permits or approvals. Lessee shall pay to Lessor an amount equal to 115% of the costs and expenses Incurred by Lessor in such performance upon receipt of an invoice therefor. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach: (a) Terminate Lessee’s right to possession of the Premises by any lawful means, In which case this Lease shall terminate and Lessee shall Immediately surrender possession to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) The unpaid Rent which had been earned at the time of termination; (ii) the worth at The time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that The Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee’s failure to perform its obligations under this Lease of which in the ordinary course of things would be likely to result therefrom, Including but not limited to the cost of recovering possession of the Premises, expenses of reletting, Including necessary renovation and alteration of the Premises, reasonable attorneys’ fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired term of PAGES
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		this Lease. The worth at the time of award of the amount referred to in provision (iii) of the Immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent. Efforts by Lessor to mitigate damages caused by Lessee’s Breach of this Lease shall not waive Lessor’s right to recover any damages to which Lessor is otherwise entitled. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover In such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. if a notice and grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful detainer statute shall also constitute the notice required by Paragraph 13.1. In such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for In this Lease and/or by said statute. (b)Continue the Lease and Lessee’s right to possession and recover the Rent as it becomes due, In which event Lessee may sublet or assign, subject only to reasonable limitations. Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor’s Interests, shall not constitute a termination of the Lessee’s right to possession. (c)Pursue any other remedy now or hereafter available under the laws or Judicial decisions of the state wherein the Premises are located. The expiration or termination of this Lease and/or the termination of Lessee’s right to possession shall not relieve Lessee from liability under any Indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee’s occupancy of The Premises. 13.3Inducement Recapture. Any agreement for free or abated rent or other charges, the cost of tenant Improvements for Lessee paid for or performed by Lessor, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, Inducement or consideration for Lessee’s entering into this Lease, all of which concessions are hereinafter referred to as “Inducement Provisions,” shall be deemed conditioned upon Lessee’s full and faithful performance of all of the terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, Inducement or consideration theretofore abated, given or paid by Lessor under such an Inducement Provision shall be Immediately due and payable by Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of The Breach which Initialed the operation of this paragraph shall not be deemed a waiver by Lessor of the provisions of this paragraph unless specifically so slated in writing by Lessor at the time of such acceptance. 13.4Late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to Incur costs not contemplated by this Leese, the exact amount of which will be extremely difficult to ascertain. Such costs Include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender. Accordingly, If any Rent shall not be received by Lessor within 5 days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall Immediately pay
to Lessor a one-time late charge equal to 10% of each such overdue amount or $100, whichever is greater. The Parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of such late payment. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee’s Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the other lights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for 3 consecutive Installments of Base Rent, Then notwithstanding any provision of this Lease to the contrary, Base Rent shall, at Lessor’s option, become due and payable quarterly in advance. 13.5Interest. Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor, when due shall bear Interest from the 31st day after It was due. The Interest (“Interest”) charged shall be computed at the rate of 10% per annum but shall not exceed the maximum rate allowed by law. Interest is payable in addition to the potential late charge provided for in Paragraph 13.4. 13.6Breach by Lessor. (a)Notice of Breach, Lessor shall not be deemed in breach of this Lease unless Lessor falls within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall In no event be less than 30 days after receipt by Lessor, and any Lender whose name and address shall have been furnished Lessee In writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor’s obligation is such that more than 30 days are reasonably required for Its performance, then Lessor shall not be In breach if performance Is commenced within such 30 day period and Thereafter diligently pursued to completion. (b)Performance by Lessee on Behalf of Lessor. In the event that neither Lessor nor Lender cures said breach within 30 days after receipt of said notice, or If having commenced said cure they do not diligently pursue It to completion, then Lessee may elect to cure said breach at Lessee’s expense and offset from Rent the actual and reasonable cost to perform such cure, provided however, that such offset shall not exceed an amount equal to the greater of one month’s Base Rent or The Security Deposit, reserving Lessee’s right to seek reimbursement from Lessor for any such expense In excess of such offset. Lessee shall document the cost of said cure and supply said documentation to Lessor. 14.Condemnation. If the Premises or any portion Thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively “Condemnation”), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs, if more than 10% of the Building, or more than 25% of that portion of the Premises not occupied by any building, Is taken by Condemnation, Lessee may, at Lessee’s option, to be exercised In writing with ln 10 days after Lessor shall have given Lessee written notice of such taking (or In The absence of such notice, within 10 days after The condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease In accordance with The foregoing, this Lease shall remain In full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction In utility of The Premises caused by such Condemnation. Condemnation awards and/or payments shall be the properly of Lessor, whether such award shall be made as compensation for diminution In value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be entitled to any compensation paid by the condemnor
for Lessee’s relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease Is terminated pursuant to The provisions of this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the properly of the Lessee and Lessee shall be entitled to any and all compensation which is payable therefor, In The event that this Lease Is not terminated by reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such Condemnation. 15.Brokerage Fees. 15.1Additional Commission. In addition to The payments owed pursuant to Paragraph 1.9 above, Lessor agrees that: (a) If Lessee exercises any Option, (b) If Lessee or anyone affiliated with Lessee acquires any rights to The Premises or other premises owned by Lessor and located within the same Project, if any, within which the Premises is located, (c) If Lessee remains In possession of the Premises, with the consent of Lessor, after the expiration of this Lease, or (d) if Base Rent is Increased, whether by agreement or operation of an escalation clause herein, then, Lessor shall pay Brokers a fee In accordance with the fee schedule of The Brokers In effect at the time the Lease was executed. 15.2Assumption of Obligations. Any buyer or transferee of Lessor’s interest In this Lease shall be deemed to have assumed Lessor’s obligation hereunder. Brokers shall be third party beneficiaries of the provisions of Paragraphs 1.9,15, 22 and 31. If Lessor fails to pay to Brokers any amounts due as and for brokerage fees pertaining to this Lease when due, then such amounts shall accrue Interest. In addition, if Lessor fails to pay any amounts to Lessee’s Broker when due, Lessee’s Broker may send written notice to Lessor and Lessee of such failure and If Lessor fails to pay such amounts within 10 days after said notice, Lessee shall pay said monies to Its Broker and offset such amounts against Rent. In addition, Lessee’s Broker shall be deemed to be a third party beneficiary of any commission agreement entered Into by and/or between Lessor and Lessor’s Broker for the limited purpose of collecting any brokerage fee owed. 15.3Representations and Indemnities of Broker Relationships, Lessee and Lessor each represent and warrant to the other that It has had no dealings with any person, firm, broker or finder (other than the Brokers, if any) In connection with this Lease, and that no one other than said named Brokers is entitled to any commission or finder’s fee in connection herewith. Lessee and Lessor do each hereby agree to Indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the Indemnifying Party, Including any costs, expenses, attorneys’ fees reasonably Incurred with respect thereto. 16.Estoppel Certificates. (a)Each Party (as “Responding Part”) shall within 10 days after written notice from The other Party (The “Requesting Party”) execute, acknowledge and deliver to the Requesting Party a statement in writing in form similar to the then most current “Estoppel Certificate” form published by The AIR Commercial Real Estate Association, plus such additional information, confirmation and/or statements as may be reasonably requested by The Requesting Party. (b)If the Responding Party shall fall to execute or deliver The Estoppel Certificate within such 10 day period, The Requesting Party may execute an Estoppel Certificate staling that: (i) The Lease Is In full force and effect without modification except as may be represented by the Requesting Party, (ii) there are no uncured defaults in the Requesting Party’s performance, and (iii) If Lessor is the Requesting Party, not more than one month’s rent has been paid In advance. Prospective purchasers and encumbrancers may rely upon The
Requesting Party’s Estoppel Certificate, and The Responding Party shall be estopped from denying the truth of The facts contained In said Certificate. In addition, Lessee acknowledges that any failure on its provide such an Estoppel Certificate will expose Lessor to risks and potentially cause Lessor to Incur costs not contemplated by this extent of which will be extremely difficult to ascertain. Accordingly, should the Lessee fall to execute and/or deliver a requested Estoppel PAGE 9 OF 13 INITIALS INITIALS ©2001 - AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM STG-23-09/15E

 

     

     

    

 

 

	 	 
		Certificate in a timely fashion the monthly Base Rent shall be automatically Increased, without any requirement for notice to Lessee, by an amount equal to 10% of the then existing Base Rent or $100, whichever Is greater for remainder of the Lease. The Parties agree that such increase in Base Rent represents fair and reasonable compensation for the additional risk/costs that Lessor will Incur by reason of Lessee’s failure to provide the Estoppel Certificate. Such Increase in Base Rent shall In no event constitute a waiver of Lessee’s Default or Breach with respect to the failure to provide the Estoppel Certificate nor prevent the exercise of any of the other rights and remedies granted hereunder. (c) If Lessor desires to finance, refinance, or sell The Premises, or any part thereof, Lessee and all Guarantors shall within 10 days after written notice from Lessor deliver to any potential lender or purchaser designated by Lessor such financial statements as may be reasonably required by such lender or purchaser, including but not limited to Lessee’s financial statements for The past 3 years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth. 17.Definition of Lessor. The term “Lessor” as used herein shell mean the owner or owners at the time in question of the fee title to the Premises, or, if this is a sublease, of The Lessee’s Interest in the prior lease. In The event of a transfer of Lessor’s title or Interest in the Premises or this Lease, Lessor shall deliver to the transferee or assignee (In cash or by credit) any unused Security Deposit held by Lessor. Upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations end/or covenants in this Lease to be performed by the Lessor shall be binding only upon The Lessor as hereinabove defined. 18. Severability. The Invalidity of any provision of this Lease, as determined by a court of competent Jurisdiction, shall In no way affect The validity of any other provision hereof. 19. Days. Unless Otherwise specifically indicated to the contrary, the word “days” as used In this Lease shall mean and refer to calendar days. 20. Limitation on Liability. The obligations of Lessor under this Lease shall not constitute personal obligations of Lessor or its partners, members, directors, officers or shareholders, and Lessee shall look to the Promises, and to no other assets of Lessor, for The satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against Lessor’s partners, members, directors, officers or shareholders, or any of Their personal assets for such satisfaction. 21. Time of Essence Time is of the essence with respect to the performance or all obligations to be performed or observed by the Parties under this Lease. 22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all agreements between The Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, its own Investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the use, nature, quality and character of The Premises. Brokers have no responsibility with respect (hereto or with respect to any default or breach hereof by either Party. 23.Notices. 23.1 Notice Requirements. All notices required or permitted by this Lease or applicable law shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular, certified or registered
mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, or by email, and shall be deemed sufficiently given If served in a manner specified In this Paragraph 23. The addresses noted adjacent to a Party’s signature on this Lease shall be that Party’s address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee’s taking possession of The Premises, The Premises shall constitute Lessee’s address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time thereafter designate in writing. 23.2 Date of Notice. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given 72 hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantees next day delivery shall be deemed given 24 hours after delivery of the same to the Postal Service or courier. Notices delivered by hand, or transmitted by facsimile transmission or by email shall be deemed delivered upon actual receipt. If notice Is received on a Saturday, Sunday or legal holiday, It shall be deemed received on The next business day. 24.Waivers. (a) No waiver by Lessor of The Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of The same or of any other term, covenant or condition hereof. Lessor’s consent to, or approval of, any act shall not be deemed to render unnecessary The obtaining of Lessor’s consent to, or approval of, any subsequent or similar act by Lessee, or be construed as The basis of an estoppel to enforce The provision or provisions of this Lease requiring such consent. (b)The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee In connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to In writing by Lessor at or before the time of deposit of such payment. (C) THE PARTIES AGREE THAT THE TERMS OF THIS LEASE SHALL GOVERN WITH REGARD TO ALL MATTERS RELATED THERETO AND HEREBY WAIVE THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE TO THE EXTENT THAT SUCH STATUTE IS INCONSISTENT WITH THIS LEASE. 25. Disclosures Regarding The Nature of a Real Estate Agency Relationship. (a) When entering Into a discussion with a real estate agent regarding a real estate transaction, a Lessor or Lessee should from the outset understand what type of agency relationship or representation It has with The agent or agents in the transaction. Lessor and Lessee acknowledge being advised by The Brokers in this transaction, as follows: (i) Lessor’s Agent. A Lessor’s agent under a listing agreement with the Lessor acts as The agent for the Lessor only. A Lessor’s agent or subagent has The following affirmative obligations: To The Lessor: A fiduciary duly of almost care, Integrity, honesty, and loyalty In dealings with The Lessor. To the Lessee and the Lessor: a. Diligent exercise of reasonable skills and care in performance of The agent’s duties. b. A duty of honest and fair dealing and good faith, c. A duty to disclose all facts known to the agent materially affecting The value or desirability of The properly that are not known to, or within The diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential Information obtained from The other Party which
does not involve the affirmative duties set forth above. (ii) Lessee’s Agent. An agent can agree to act as agent for The Lessee only. In these situations, the agent Is not The Lessor’s agent, even If by agreement the agent may receive compensation for services rendered, either In full or In part from the Lessor. An agent acting only for a Lessee has The following affirmative obligations. To the Lessee: A fiduciary duty of almost care, Integrity, honesty, and loyally In dealings with The Lessee. To the Lessee and the Lessor: a. Diligent exercise of reasonable skills and care In performance of The agent’s duties, b. A duty of honest and fair dealing and good faith, c. A duty to disclose nil facts known to the agent materially affecting the value or desirability of The properly that are not known to, or within the diligent attention and observation of, The Parties. An agent Is not obligated to reveal to either Party any confidential Information obtained from The other Party which does not Involve the affirmative duties set forth above. (iii) Agent Representing Both Lessor and Lessee. A real estate agent, either acting directly or through one or more associate licenses, can legally be The agent of both The Lessor and The Lessee In a transaction, but only with the knowledge and consent of both The Lessor and The Lessee. In a dual agency situation, the agent has the following affirmative obligations to both the Lessor and the Lessee: a. A fiduciary duty of almost care, Integrity, honesty and loyally In The dealings with either Lessor or The Lessee, b. Other duties to The Lessor and The Lessee as staled above in subparagraphs (I) or (II). In representing both Lessor and Lessee, the agent may not without The express permission of The respective Party, disclose to the other Party that The Lessor will accept rent in an amount less than that Indicated in the listing or that the Lessee is willing to pay a higher rent than that offered. The above duties of the agent in a real estate transaction do not relieve a Lessor or Lessee from The responsibility to protect Their own Interests. Lessor and Lessee should carefully road all agreements to assure that They adequately express their understanding of the transaction. A real estate agent Is a person qualified to advise about real estate. If legal or lax advice is desired, consult a competent professional. (b) Brokers have no responsibility with respect to any default or breach hereof by either Party. The Parties agree that no lawsuit or other legal proceeding Involving any breach of duty, error or omission relating to this Lease may be brought against Broker more than one year after The Start Date and that the liability (Including court costs and attorneys’ fees), of any Broker with respect to any such lawsuit and/or legal proceeding shall not exceed the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker’s liability shall not be applicable to any gross negligence or willful misconduct of such Broker. (c) Lessor and Lessee agree to Identify to Brokers as “Confidential” any communication or information given Brokers that is considered by such Party to be confidential. 26. No Right To Holdover. Lessee has no right to retain possession of The Premises or any part thereof beyond The expiration or termination of this Lease. In The event that Lessee holds over, then the Base Rent shall be Increased to 150% of the Base Rent applicable Immediately preceding the expiration or termination. Holdover Base Rent shall be calculated on monthly basis. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee. PAGE 10 OF 13 INITIALS INITIALS ©2001 • AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM STG-23-09/15E

 

     

     

    

 

 

	 	 
		27. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, Wherever possible, be cumulative with all other remedies at law or in equity. 28. Covenants and Conditions; Construction of Agreement All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions. In construing this Lease, all headings and titles are for the convenience of the Parties only and shall not be considered a part of this Lease. Whenever required by the context, the singular shall include the plural and vice versa. This Lease shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared it. 29. Binding Effect; Choice of Law. This Lease shall be binding upon the parties, their personal representatives, successors and assigns and be governed by the laws of the State in Which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in Which the Premises are located. 30. Subordination; Attornment; Non-Disturbance. 30.1 Subordination. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust. or other hypothecation or security device (collectively. "Security Device"), now or hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such Security Devices (in this Lease together referred to as "Lender") shall have no liability or obligation to perform any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee, Where upon this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof. 30.2 Attornment. In the event that Lessor transfers title to the Premises, or the Premises are acquired by another upon the foreclosure or termination of a Security Device to which this Lease is subordinated (i) Lessee shall, subject to the non-disturbance provisions of Paragraph 30.3, attorn to such new owner, and upon request enter into a new lease, containing all of the terms and provisions of this Lease, with such new owner for the remainder of the term hereof, or, at the election of the new owner, this Lease will automatically become a new lease between Lessee and such new owner, and (ii) Lessor shall thereafter be relieved of any further obligations hereunder and such new owner shall assume all of Lessor’s obligations, except that such new owner shall not: (a) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership; (b) be subject to any offsets or defenses which Lessee might have against any prior lessor, (c) be bound by prepayment of more than one month's rent, or (d) be liable for the return of any security deposit paid to any prior lessor which was not paid or credited to such new owner. 30.3. Non-Disturbance. With respect to Security Devices entered into by Lessor after the execution of this Lease. Lessee’s subordination of this Lease shall be subject to receiving a commercially reasonable non-disturbance agreement (a “Non-Disturbance Agreement”) from the Lender which Non-Disturbance Agreement provides that Lessee’s possession of the Premises, and this Lease, Including any options to extend the term hereof, will not be disturbed so long as Lessee is not In Breach hereof and attorns to the record owner of the Premises. Further, within 60 days after the execution of this Lease, Lessor shall, if request by Lessee, use its commercially reasonable efforts to obtain a Non-Disturbance Agreement from the holder of any pre-existing Security
Device which is secured by the Premises. In the event that Lessor is unable to provide the Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee’s option, directly contact Lender and attempt to negotiate for the execution and delivery of a Non-Disturbance Agreement. 30.4 Self-Executing. The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any subordination, attomment and/or Non-Disturbance Agreement provided for herein. 31. Attorneys' Fees. If any Party or Broker brings an action or proceeding involving the Premises Whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorney’s fees. Such fees may be awarded in the same suit or recovered in a separate suit, Whether or not such action or proceeding is pursued to decision or judgment. The term, "Prevailing Party" Shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorney’s fees award shall not be computed in accordance with any court fee schedule. but shall be such as to fully reimburse all attorneys' fees reasonably Incurred. In addition, Lessor shall be entitled to attorneys' fees, costs and expenses Incurred in the preparation and service of notices of Default and consultations in connection therewith. whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a reasonable minimum per occurrence for such services and consultation). 32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor’s agents shall have the right to enter the Premises at any time, In the case of an emergency, and otherwise at reasonable times after reasonable prior notice for the purpose of showing the same to prospective purchasers, lenders, or tenants, and making such alterations, repairs, improvements or additions to the Premises as Lessor may deem necessary or desirable and the erecting, using and maintaining of utilities, services, pipes and conduits through the Premises and/or other premises as long as there is no material adverse effect to Lessee's use of the Premises All such activities shall be without abatement of rent or liability to Lessee. 33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without Lessor's prior written consent. Lessor shall not Ile obligated to exercise any standard of reasonableness in determining whether to permit an auction. 34. Signs. Lessor may place on the Premises ordinary "For Sale” signs at any time and ordinary "For Lease" signs during the last 6 months of the term hereof. Except for ordinary "for sublease” signs, Lessee shall not place any sign upon the Premises without Lessor's prior written consent. All signs must comply with all Applicable Requirements. 35. Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the premises; provided, however, that Lessor may elect to continue any one or all existing subtenancies. Lessor’s failure within 10 days following any such event to elect to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor’s election to have such event constitute the termination of such interest. 36. Consents.
Except as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not the unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses (including but not limited to architects', attorneys', engineers' and other consultants' fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents to an assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefor provided that Lessee shall not be obligated to pay more than $1,000 for legal fees in this connection. Lessor's consent to any act, assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessor's consent shall not preclude the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. In the event that either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such determination, the determining party shall furnish its reasons in writing and in reasonable detail within 10 business days following such request.   37. Guarantor. 37.1 Execution. The Guarantors, if any, shall each execute a guaranty in the form most recently published by the AIR Commercial Real Estate Association. 37.2 Default. It shall constitute a Default of the Lessee If any Guarantor fails or refuses, upon request to provide: (a) evidence of the execution of the guaranty, including the authority of the party signing on Guarantor’s behalf to obligate Guarantor, and in the case of a corporate Guarantor, a certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect. 38. Quiet Possession. Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions and provisions on Lessee's part to be observed and performed under this Lease, Lessee shall have quite possession and quiet enjoyment of the Premises during the term hereof. 39. Options. If Lessee is granted any Option, as defined below, then the following provisions shall apply: 39.1 Definition. "Option" shall mean: (a) the right to extend or reduce the term of or renew this Lease or to extend or reduce the term of or renew any lease that Lessee has on other property of Lessor; (b) the right of first refusal or first offer to lease either the Premises or other property of Lessor; (c) the right to purchase, the right of first offer to purchase or the right of first refusal to purchase the Promises or other property of Lessor. 39.2 Options Personal To Original Lessee. Any Option granted to Lessee in this Lease is personal to the original Lessee, and cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession of the Promises and, if requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning or subletting. 39.3 Multiple Options. In the event that Lessee has any multiple Options to extend or renew this Lease, a later Option cannot be exercised unless the prior Options have been validly exercised. 39.4 Effect of Default on Options. PAGE 11 OF 13 INITIALS 2001-AIR COMMERCIAL REAL ESTATE ASSOCIATION INITIALS FORM STG-23-09/15E

 

     

     

    

 

 

	 	 
		(a) Lessee shall have no right to exercise an Option: (i) during the period commencing with the giving of any notice of Default and continuing until said Default is cured, (ii) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee), (iii) during the time Lessee is in Breach or this Lease, or (iv) in the event that Lessee has been given 3 or more notices of separate Default. whether or not the Defaults are cured, during the 12 month period Immediately preceding the exercise of the Option. (b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason or Lessee's inability to exercise an Option because of the provisions of Paragraph 39.4(a). (c) An Option shall terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and prior to the commencement or the extended term or completion of the purchase, (i) Lessee fails to pay Rent for a period of 30 days after such Rent becomes due (without any necessity of Lessor to give notice thereof), or (ii) if Lessee commits a Breach of this Lease. 40. Multiple Buildings. If the Premises are a part of a group of buildings controlled by Lessor, Lessee agrees that it will abide by and conform to all reasonable rules and regulations which Lessor may make from time to time for the management, safety, and care of said properties, including the care and cleanliness of the grounds and including the parking, loading and unloading of vehicles, and to care its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform. Lessee also agrees to pay its fair share of common expenses incurred in connection with such rules and regulations. 41. Security Measures. Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties. 42. Reservations. Lessor reserves to itself the right, from time to time, to grant, without the consent or joinder of Lessee, such easements, rights and dedications that Lessor deems necessary, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights, dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate any such easement rights, dedication, map or restrictions. 43. Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment “under protest” and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay. A Party who does not initiate suit for the recovery of sums paid “under protest” within 6 months shall be deemed to have waived its right to protest such payment. 44. Authority; Multiple Parties; Execution. (a) If either Party hereto is a corporation, trust, limited, liability company, partnership, or similar entity, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf, Each Party shall, within 30 days after request, deliver to the other Party satisfactory evidence of such authority.
(b) If this Lease is executed by more than one person or entity as “Lessee”, each such person or entity shall be jointly and severally liable hereunder. It is agreed that any one of the named Lessees shall be empowered to execute any amendment to this Lease, or other document ancillary thereto and bind all of the named Lessees, and Lessor may rely on the same as if all of the named Lessees had executed such document. (c) This Lease may be executed by the Parties in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. 45. Conflict. Any conflict between the printed provisions of this Lease and typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions. 46. Offer. Preparation of this Lease by either Party or their agent and submission of same to the other Party shall not be deemed an offer to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto. 47. Amendments. This Lease may be modified only in writing, signed by the Parties in interest at the time of the modification. As long as they do not materially change Lessee’s obligations hereunder, Lease agrees to make such reasonable non-monetary modifications to this Lessee as may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises. 48. Waiver of Jury Trail. THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO TRAIL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE PROPERTY OR ARISING OUT OF THIS AGREEMENT. 49. Arbitration of Disputes. An Addendum requiring the Arbitration of disputes between the Parties and/or Brokers arising out of this Lease is is not attached to this Lease. 50. Accessibility; Americans with Disabilities Act. (a) The Premises: have not undergone an inspection by a Certified Access Specialist (CASp). have undergone an inspection by a Certified Access Specialist (CASp) and it was determined that the Premises met all applicable construction-related accessibility standards pursuant to California Civil Code §55.51 et seq. have undergone an inspection by a Certified Access Specialist (CASp) and it was determined that the Premises did not meet all applicable contruction-related accessibility standard pursuant to California Civil code §55.51 et seq. (b) Since compliance with the Americans with Disabilities Act (ADA) is dependent upon Lessee’s specific use of the Premises, Lessor makes no warranty or representation as to whether or not the Premises comply with ADA or any similar legislation. In the event that Lessee’s use of the Premises requires modifications or additions to the Premises in order to be in ADA compliance, Lessee agrees to make any such necessary modifications and/or additions at Lessee’s expense. LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE; TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES. ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO: 1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. 2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE. WARNING: IF THE PREMISES IS LOCATED IN A
STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY NEEO TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES IS LOCATED. The parties hereto have executed this Lease at the place and on the dates specified above their respective signatures. Executed at: San Clemente, CA  Executed at: San Clemente, CA On: 1-26-17 On: JAN 27,2017 By LESSOR: By LESSEE: San Clemente Holdings, LLC ReShape Medical Inc.   By: Jonathan Parry By: Mike Mangano Name Printed: Jonathan Parry Name Printed: Mike Mangano Title: Member Title: CEO & President  By: By: INITIALS INITIALS FORM STG-23-09/15E

 

     

     

    

 

 

	 	 
		Name Printed: Name Printed: Title: Title: Address: P.O Box 74268, San Clemente, CA Address: 1001 Calle Amanecer, San Clemente, CA 92673 92673 Telephone: (888)557-7910 Telephone: (949)429-6680 Facsimile: (888)557-7911 Facsimile: (949)429-6684 Email: jon.parry@bemus.com Email: mmangano@reshapemedical.com Email: Email: Federal ID No. 35-2251634 Federal ID No. 20-3387999 BROKER: BROKER: Johnston Pacific Commercial Real Estate, Inc CBRE Commercial Real Estate Services, Att: Rob Johnston Att: Brian Cole - Jeff Carr Title: President Title: Agents Address: 1305 Calle Avanzado, San Clemente, Address: 3501 Jamboree Road, Suite 100, CA, 92673 Newport Beach, CA 92660 Telephone: (949)366-2020 Telephone: (949)725-8500 Facsimile: (949)366-2088 Facsimile: (949)725-8545 Email: rob@johnston-pacific.com Email: brian.cole@cbre.com Federal ID No. Federal ID No. Broker/Agent BRE License #: 01121630 Broker/Agent BRE License #: 01770986 - 01009600 NOTICE: These forms are often modified to meet changing requirements of law and Industry needs. Always write or call to make sure you are utilizing the most current form: AIR Commercial Real Estate Association, 500 N Brand Blvd, Suite 900, Glendale, CA 91203. Telephone No. (213) 687-8777. Fax No.: (213) 687-8616. (c) Copyright 2001 - By AIR Commercial Real Estate Association. All rights reserved. No part of these works may be reproduced In any form without permission in writing. PAGE 13 OF 13 INITIALS 2001-AIR COMMERCIAL REAL ESTATE ASSOCIATION INITIALS FORM STG-23-09/15E

 

     

     

    

 

 

	 	 
		ADDENDUM ADDENDUM TO THAT CERTAIN STANDARD SINGLE-TENANT LEASE-GROSS, DATED FOR REFERENCE PURPOSES ONLY, JANUARY 20, 2017, MADE BY AND BETWEEN SAN CLEMENTE HOLDINGS, LLC., AS LESSOR, AND RESHAPE MEDICAL INC. AS LESSEE, FOR THE PROPERTY LOCATED AT 1001 CALLE AMANECER, SAN CLEMENTE, CALIFORNIA 1. LEASE PREPARATION: This Lease, Addendum, and Exhibits have been prepared by Johnston Pacific Commercial Real Estate, Inc., at the request of Lessor and Lessee. The Lessor and Lessee agree to indemnify, defend, and hold harmless Johnston Pacific Commercial Real Estate, Inc., its respective agents and employees, from and against any claims, expenses, losses and liability, including without limitation, attorney fees and costs that may be occasioned as a result of completing this Standard Industrial/Commercial Lease Form, Addendum, and Exhibits. Lessor and Lessee acknowledge being advised by Johnston Pacific Commercial Real Estate, Inc., to have this Lease, Addendum and Exhibits reviewed by their respective attorneys. 2. BASE MONTHLY RENT: April 1, 2017 through March 31, 2018: $24,614.30 per month ($1.70 Gross per sq. ft. per month) April 1, 2018 through March 31, 2019: $25,250.75 per month ($1.75 Gross per sq. ft. per month) April 1, 2019 through March 31, 2020: $26,062.20 per month ($1.80 Gross per sq. ft. per month) April 1, 2020 through March 31, 2021: $26,786.151 per month ($1.85 Gross per sq. ft. per month) April 1, 2021 through June 30, 2022: $27,510. 10 per month ($1.90 Gross per sq. ft. per month) 3. BUILDING PREPARATION: Lessor shall provide Lessee a Tenant Improvement allowance of $75,000.00 to be utilized for building improvements to be constructed petan mutually agreed upon plan. Lessor shall reimburse Lessee upon completion of their work as evidenced by paid invoices. Said improvements shall consist of additional private offices and other interior modifications. Lessor shall use its best efforts to negotiate with the existing tenant to have the tenant's furniture remain. Should Lessor be unsuccessful, Lessee has the Lessor's permission to negotiate directly with tenant. 4. LESSEE'S EXISTING LEASE TERMINATION: This lease for 1001 Calle Amanecer shall be null and void if Lessee has not received said mutually executed lease termination by February 1, 2017. 5. RENTAL ABATEMENT: Lessee shall be granted rental abatement of monthly base rent during the months of May 2017, June 2017, and July 2017 of the lease term. 6. PARKING: Lessee shall receive the reserved use of forty-nine (49) parking stalls for the lease term. All parking stalls shall be free for the lease term. Please see parking Exhibit C. 7. BUILDING IDENTIFICATION: Lessee shall have the right to install a sign on the exterior of the building pursuant to the building association sign criteria and the City of San Clemente's sign code at Lessee's sole cost and expense. Lessee shall remove said sign prior to vacating the premises and a grees to return the area around and underneath the sign to its original condition. 8. INCONSISTENCIES: Capitalized terms in this Addendum shall have the same meaning as those terms in the Leese. If there are any inconsistencies between the provisions of the Lease and this Addendum, the provisions of this Addendum shall control. Lessor's Initials: Lessee's Initials: F:\JP Office\WORD\Addendum\1001 Calle Amanecer- SC Holding LLC ReShape Medical. 12-5-16.doc

 

     

     

    

 

 

	 	 
		All other terms and conditions of the Lease shall remain the same. The parties hereto have executed this Lense at the place and on the dates specified above their respective signatures. Executed at: Executed at: On: On: By LESSOR: San Clemente Holdings, LLC By LESSEE: Reshape Medical Inc. By: By: Name Printed: Jonathan Parry Name Printed: Mike Manga Title: Member Title: CEO & President By: By: Name Printed: Jonathan Parry Name Printed: Mike Manga Title: Member Title: CEO & President Address: P.O. Box 74268, San Clemente. CA 92673 Address: 1001 Calle Amanecer San Clemente CA 92673 Telephone: (888) 557-7910 Telephone: (949) 429-6680 Facsimile: (888) 557-7911 Facsimile: (949) 429-6684 Email: ion.parry@bemus.com Email: mmangano@reshapemedical.com F;\JP Office\WORD\Addendum\l001 Calle Amanecer- SC Holding LLC • ReShape Medical 12-5-16.doc

 

     

     

    

 

 

	 	 
		Exhibit A 1001 Calle Amanecer, San Clemente Existing Layout Warehouse Warehouse Lessor’s Initials: Lessor’s Initials: JPOFFICE/WORD/Exhibits/1001 Calle Amanecer· Exhibit A·12-5-16

 

     

     

    

 

 

	 	 
		OPTION(S) TO EXTEND STANDARD LEASE ADDENDUM Dated January 20, 2017 By and Between (Lessor) San Clemente Holdings, LLC. By and Between (Lessee) ReShape Medical, Inc. Address of Premises: 1001 Calle Amanecer, San Clemente, CA 92673 Paragraph 51 A. OPTION(S) TO EXTEND: Lessor hereby grants to Lessee the option change to extend the term of this Lease for 1 additional 36 month period(s) commencing when the prior term expires upon each and all of the following terms and conditions: (i) In order to exercise an option to extend, Lessee must give written notice of such election to Lessor and Lessor must receive the same at least 3 but not more than 6 months prior to the date that the option period would commence, time being of the essonco. If proper notification of the exercise of an option is not given and/or received, such option shall automatically expire. Options (If there are more than one) may only be exercised consecutively. (ii) The provisions of paragraph 39, Including those relating to Lessee’s Default set forth in paragraph 39.4 of this Lease, are conditions of this Option. (iii) Except for the provisions of this Lease granting an option or options to extend the term, all of the terms and conditions of this Lease except where specifically modified by this option shall apply. (iv) This Option is personal to the original Lessee, and cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession of the premises and without the intention of thereafter assigning or subletting. (v) The monthly rent for each month of the option period shall be calculated as follows, using the method(s) indicated below: (Check Method(s) to be Used and Fill in Appropriately) 1. Cost of Living Adjustment(s) (COLA) a. On (Fill in COLA Dates): the Base Rent shall be adjusted by the change, if any, from the Base Month specified below, in the Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of Labor for (select one): CPI W (Urban Wage Earners and Clerical Workers) or CPI U (All Urban Consumers), for (Fill in Urban Area): All Items (1982-1984=100), herein referred to 88” CPI”. b. The monthly Base Rent payable In accordance with paragraph A.I.a. of this Addendum shall be calculated as follows: the Base Rent set forth in paragraph 1.5 of the attached Lease, shall be multiplied by fraction the numerator of which shell be the CPI of the calendar month 2 months prior to the month(s) specified In paragraph A.I.a. above during which the adjustment is to take effect, and the denominator of which shall be the CPI of the calendar month which is 2 months prior to (select one): the first month of the term of this Lease as set forth in paragraph 1.3 (“Baso Month”) or  (Fill In Other Base Month”): The sum so calculated shall constitute the new monthly Base Rent hereunder, but in no event, shall any such new monthly Base Rent be less than the Base Rent payable for the month immediately preceding the rent adjustment. c. In the event the compilation and/or publication of the CPI shall be transferred to any other governmental department or bureau or agency or shall be discontinued, then the Index most nearly the same as the CPI shall be used to make such calculailon. In the event that the Parties cannot agree on such alternative Index, then the matter shall be submitted for decision to the American Arbitration Association In accordance with the then rules of said Association and the decision of the arbitrators shall be binding upon the parties. The cost of said Arbitration shall be paid equally by the Parties.  ii. Market Rental Value Adjustment(s) (MRV) a. On (Fill in MRV adjustment Date(s)) July 1, 2022 the Base Rent shall be adjusted to the “Markel Rental Value” of the property as follows: 1) Four months prior to each Markel Rental Value Adjustment Date described above, the Parties
shall attempt to agree upon what the new MRV will be on the adjustment date. If agreement cannot be reached, within thirty days, then: (a) Lessor and Lessee shall immediately appoint a mutually acceptable appraiser or broker to establish the new MRV within the next 30 days. Any associated costs will be split equally between the Parties or, (b) Both Lessor and Lessee shall each Immediately make a reasonable determination of the MRV and submit such determination, In Initials page 1 of 2 ©2000 – air commercial real estate association OE-4-04/14E FORM air commercial real estate association INITIALS INITIALS

 

     

     

    

 

 

	 	 
		writing, to arbitration in accordance with the following provisions: (i) Within 15 days thereafter, Lessor and Lessee shall each select an appraiser or Broker ("Consultant" – check one) of their choice to act as an arbitrator. The two arbitrators so appointed shall Immediately select a third mutually acceptable Consultant to act as a third arbitrators. (ii) the 3 arbitrators shall within 30 days of the appointment of the third arbitrators reach a decision as to what the actual MRV for the premises Is, and whether Lessor’s or Lessee’s submitted MRV is the closest thereto. The decision of a majorly of the arbitrators shall be binding on the parties. The submitted MRV which is determined to be the closest to the actual MRV shall thereafter be used by the parties. (iii) If either of the parties fails to appoint an arbitrators within the specified 15 days, the arbitrators timely appointed by one of them shall reach a decision on his or her own, and said decision shall be binding on the parties. (iv) the entire cost of such arbitrators shall be paid by the party whose submitted MRV is not selected, i.e. the one that is NOT the closest to the actual MRV. 2) when determining MRV, the Lessor, Lessee and consultants shall consider the terms of comparable market transactions which shall include, but not limited to, rent, rental adjustments, abated rent, lease term and financial condition of tenants. 3) notwithstanding the foregoing, the new Base Rent shall not be less than the rent payable for the month immediately proceeding the rent adjustment, b. upon the establishment of each now market Rental Value: 1) the new MRV will become the new “base rent” for the purpose of calculating any further Adjustments, and 2) the first month of each Market Rental Value term shall become the new “Base Month” for the purpose of calculating any further Adjustment. III. Fixed Rental Adjustment (s) (FRA) The Base Rent Shall be Increased to the Following amounts on the dates set forth below: On (Fill in FRA Adjustment Date(s)): The New Base Rent shall be: IV. Initial term Adjustments. The formula used to calculate adjustments to the Base Rate during the original Term of the Lease shall continue to be used during the extended term. B. NOTICE: Unless specified otherwise herein, notice of any rental adjustments, Other than Fixed Rental Adjustments, shall be made as specified in paragraph 23 of the Lease. C. BROKER’S FEE: The Brokers shall be paid a Brokerage Fee for each adjustment specified above in accordance with paragraph 15 of the lease or if applicable, paragraph 9 of the sublease. NOTICE: These forms are often modified to meet changing requirements of law and industry needs. Always write or call to make sure you are utilizing the most current form: AIR Commercial real Estate Association, 500 N Brand Blvd, Suite 900, Clendate, CA 91203. Telephone No. (213) 687-8777. For No: (213) 687-8616. PAGE 2 of 2 ©2000 – AIR COMMERCIAL REAL ESTATE ASSOCIATION INITIALS INITIALS FORM OE-4-04/14E

 

     

     

    

 

 

	 	 
		EXHIBIT B DISCLOSURE FOR LEASE For AIR Lease Form Prepared by Johnston Pacific Commercial Real Estate, Inc. PREMISES: 1001 Catle Amanceer, San Clemente, California, 92673 (the “Premises”) 1. LEGAL EFFECT. Upon acceptance of a binding Lease (“Lease”), Lessor and Lessee both intent to have a binding legal agreement for the leasing of the Premises on the terms and conditions set forth therein. Lessor and Lessee acknowledge that Broker (as defined in the Lease) is not qualified to practice law or authorized to give legal advice or counsel as to any legal matters affecting the Lease. Broker hereby advises. Lessor and Lessee to consult with their respective attorneys In connection with any questions each may have as to legal ramifications of the Lease prior to the execution thereof 2. FORM or LEASE, the lease is a standard form document. Broker has, at the direction of lessor and/or Lessee, merely "filled in the blanks" based on prior discussions and/or correspondence of the parties. Lessor and Lessee each acknowledge that the Lease is delivered subject to the express condition that broker has merely followed the Instruction, of the parties In preparing this document and does not assume any responsibility for Its accuracy, completeness or form. Lessor and Lessee acknowledge and undersigned that in providing the Lease, broker has acted to expedite this transaction on behalf of Lessor and/or Lessee and has functioned within the scope of professional ethics by doing so. 3. CONCURRENT offers, Lessor and Lessee acknowledge and consent that broker may represent concurrent and/or· competing offers with regard to the purchase or lease of the Premises from one or more prospective buyers or Lessees without further notice. 4. NO INDEPENDENT INVESTIGATION. Lessor or and Lessee acknowledge and understand that any financial statements, information, reports or written materials of any nature whatsoever, as provided by the parties to broker and thereafter submitted by broker to either Lessor and/or Lessee, are so provided without any independent investigation by broker, and as such, broker assumes no responsibility or liability for the accuracy or validly of the same Any verification of such submitted documents Is solely and completely the responsibility of the party to whom such documents have been submitted. 5. NO WARRANTY. lessor and Lessee acknowledge and agree that no warranties, recommendations or representations are or will be made by Broker as to the accuracy, legal sufficiency, legal effect or tax consequences of any of the documents submitted by broker to lessor and/or Lessee or of the legal sufficiency, legal effect or tax consequences of the transactions contemplated thereby. Furthermore, Lessor and lessee acknowledge and agree that broker has not made and will not make any representations or warranties concerning the ability of Lessee to use the Premises for its intended use nor any other matter regarding the Premises, and the parties are relying solely on their own Investigation in executing the Lease. 6. NOTICE REGARDING HAZARDOUS WASTES OR SUBSTANCES AND UNDERGROUND STORAGE TANKS. Although Broker will disclose any actual knowledge It possesses with respect to the existence of any hazardous wastes, substances or underground storage tanks at the Premises, Broker has not made (and will not make) any independent investigations or obtained reports with respect thereto, except as may be described in a separate written document signed by Broker. All parties hereto acknowledge understand that, except as set forth in the preceding sentence, Broker makes no representations or warranties regarding the existence or nonexistence of hazardous wastes, substances or underground storage tanks at the Premises, Lessor and Lessee acknowledge that Broker has recommended that they should each contact one or more professionals, such as a civil engineer, geologist, industrial hygienist or other environmental consultants, for
advice concerning the existence of hazardous wastes, substances or underground storage tanks. 7. DISCLOSURE RESPECTING AMERICANS WITH DISABILITIES ACT: The Americans with Disabilities Act, as well as certain state and local laws, is intended to make many business establishments equally accessible to persons with a variety of disabilities; modifications to real property may be required by such laws. Broker is not qualified to advise you as to what, if any, changes may be required now or in the future. The undersigned acknowledge that Broker has recommended that they consult attorneys and qualified professionals for information regarding whether the Premises Is in compliance with applicable law and/or whether modifications and changes are required. 8. CORPORATE SIGNATURES. Although there is a presumption under California law that the signature of a corporate president is inadequate to bind the corporation, a California Court of Appeals In a 1998 case allowed a party to rebut the normal presumption. Therefore, if either of the parties to the Lease is a corporation, It Is advisable: (I) that the Lease be signed by two officers of the corporation. e.g. the president or vice president and the secretary or chief financial officer (note: one individual signing in both the capacity of president and secretary may not be sufficient and/or (ii) that the corporation provides a duly executed resolution authorizing the transaction. 9. USE AND OCCUPANCY DISCLOSURE, Broker recommends that Lessee hire qualified contractor(s), consultant(s) or other professional(s) to confirm and verify that the physical characteristics of the Property (including, but not limited to, building, office and land sizes, fire sprinkler capacity, electrical power and all utilities, ceiling clear height, loading door sizes and quantity, railroad service, parking spaces, heating/cooling systems, type of construction, restroom(s) number and size, year built, improvements arc to Lessee's satisfaction and that they are adequate to accommodate Lessee's Intended use. Broker also recommends that Lessee hire qualified professionals to confirm with applicable governmental agencies that the use and zoning of the Property are acceptable for Lessee's intended use and that Lessee will be able to obtain all permits, licenses and other approvals necessary for the intended use. 10. SEISMIC REINFORCEMENT DISCLOSURE, Some cities and counties have established or may be establishing minimum standards for structural seismic resistance for certain buildings constructed prior to 1933, 1976, and, possibly other dates. Some structures will be required to comply with various standards set forth by the appropriate governmental agencies. Broker Is not qualified advise you as to what, if any changes may be required now or ln the future. The undersigned acknowledge that Broker has recommended that they consult a qualified architect, attorney or other consultant for information regarding this matter. 11. MOLD DISCLOSURE, Toxic or other molds may be present within a property on concentrations that may pose a threat to the health of humans. Toxic or other dangerous molds may or may not be visible to potential user of the property. In order to ascertain the nature and extent of toxic or other molds present in the property, It Is necessary to conduct testing using a qualified environmental expert specializing in mold Inspection and analysis. Broker advises Lessee to retain the services of an environmental testing expert for this purpose. 12. DISCLOSURE REGARDING CITY ORDINANCES. Some cities have enabled ordinances which provide, among other matters, for car and truck parking restrictions and regulations, truck loading and requirements, and maximum building sizes that can be utilized for n particular use. Additionally, some cities have imposed special taxes, such as the City of Vernon, for warehouse or partial warehouse uses. All of these restrictions and/or regulations vary from city to city, and they are constantly changing. Broker Is not qualified to advise you whether the Premises (and/or any related
property) might, In the future, violate these or any other ordinances, nor is broker qualified to advise you as to the impact thereof. Broker recommends that each party carefully review all applicable codes, regulations, and ordinances affecting the Premises and consult with their attorneys, consultants, engineers, and contractors to determine whether the Premises (and/or any related property) and the proposed use is and In the future will be In compliance with same. The undersigned acknowledge that they received and read the above disclosure. Dated: 1.26.17 LESSOR: San Clemente Holdings, LLC. BY: NAME PRINTED; Johnathan Parry Dated: Jan 27, 2017 LESSEE: ReShape Medical Inc. NAME PRINTED: Mike Mangano

 

     

     

    

 

 

	 	 
		DISCLOSURE REGARDING REAL ESTATE AGENCY RELATIONSHIP (As required by the Civil Code) When you enter into a discussion with a real estate agent regarding a real estate transaction, you should from the outset understand what type of agency relationship or representation you wish to have with the agent in the transaction. SELLER'S AGENT ("Seller" Includes both a vendor and a lessor) A Seller’s agent under a listing agreement with the Seller acts as the agent for the Seller only. A Seller’s agent or a subagent of that agent has the following affirmative obligations: To the Seller: A fiduciary duty of utmost care, integrity, honesty and loyalty in dealings with the Seller. To the Buyer and the Seller: (a) Diligent exercise of reasonable skill and care in performance of the agent’s duties. (b) A duty of honest and fair dealing and good faith. (c) A duty lo disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the parties. An agent is not obligate to reveal to either party any confidential information obtained from the other party that does not involve the affirmative duties set forth above. BUYER'S AGENT ("Buyer" includes both a purchaser and a lessee). A selling agent can, with a Buyer’s consent, agree to act as agent for the Buyer only. In these situations, the agent is not the Seller’s agent, even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Seller. An agent acting only for a Buyer has the following affirmative obligations: To the Buyer: A fiduciary duty of utmost care, integrity, honesty and loyalty in dealings with the Buyer. To the Buyer and the Seller: (a) Diligent exercise of reasonable skill and care in performance of the agent's duties. (b) A duty of honest and fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the parties. An agent is not obligated to reveal to either party any confidential information obtained from the other party that does not involve the affirmative duties set forth above. AGENT REPRESENTING BOTH SELLER AND BUYER A real estate agent, either acting directly or through one or more associate licensees, can legally be the agent of both the Seller and the Buyer in a transaction, but only with the knowledge and consent of both the Seller and the Buyer. In a dual agency situation, the agent has the following affirmative obligations to both the Seller and the Buyer: (a) A fiduciary duly of utmost care, Integrity, honesty and loyalty in the dealings with either the Seller or the Buyer. (b) Other duties to the Seller and the Buyer as stated above in their respective sections. In representing both Seller and Buyer, the agent may not, without the express permission of the respective party, disclose to the other party that the Seller will accept a price less than the listing price or that the Buyer will pay a price greater than the price offered. The above duties of the agent in a real estate transaction do not relieve a Seller or Buyer from the responsibility to protect his or her own interests. You should carefully, read all agreements to assure that they adequately express your understanding of the transaction. A real estate agent is a person qualified to advise about real estate. If legal or tax advice is desired, consult a competent professional. Throughout your real property transaction, you may receive more than one disclosure form, depending upon the number of agents assisting in the transaction. The law requires each agent, with whom you have more than a causal relationship to present you with this disclosure form. You should read contents each time is presented to you, considering the relationship between you and the
real estate agent in your specific transaction. This disclosure form includes the provisions of Sections 2079.13 to 2079.24, Inclusive, of the Civil Code set forth on page 2.Read it carefully, I/WE ACKNOWLEDGE RECEIPT OF A COPY OF THIS DISCLOSURE AND THE PORTIONS OF THE CIVIL CODE PRINTED ON THE BACK (OR A SEPARATE PAGE). Buyer Seller Lessor Lessee Date: San Clemente Holdings, LLC., 1.26.17 San Clemente Holdings, LLC., Buyer Seller Lessor Lessee Date: Agent Johnston Pacific Commercial Real Estate, Inc. BRE Lic. # 01121630 Real Estate Broker (Firm) By: Rob Johnston BRE Lic. # 01121630 Date: (Salesperson or Broker-Associate) NOTE: When the listing brokerage company also represents Buyer/Lessee: The Listing Agent shall have one Agency Disclosure form signed by Seller/lessor and a second Agency Disclosure form signed by Buyer/Lessee. When Seller/Lessor and Buyer/Lessee are represented by different brokerage companies: (i) the Listing Agent shall have one Agency Disclosure form signed by Seller/Lessor and (ii) the Buyer’s/Lessee’s Agent shall have one Agency Disclosure form signed by Buyer/Lessor and either that same or a different Agency Disclosure form presented to Seller/Lessor for signature prior to presentation of the offer. If the same form is used, Seller/Lessor may sign here: Date: Seller/Lessor THIS FORM HAS BEEN PREPARED BY THE AIR COMMERCIAL REAL ESTATE ASSOCIATION. NO REPRESENTATION IS MADE AS TO THE LEGAL VALIDITY OR ADEQUACY OF THIS FORM FOR ANY SPECIFIC TRANSACTION. PLEASE SEEK LEGAL COUNSEL AS TO THE APPROPRIATENESS OF THIS FORM. PAGE 1 OF 3 INITIALS  INITIALS ©2014 – AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM AD-1-03/15E

 

     

     

    

 

 

	 	 
		DISCLOUSURE REGARDING REAL ESTATE AGENCY RELATIONSHIP CIVIL CODE SECTIONS 2079.13 THROUGH 2079.24 (2079.16 APPEARS ON THE FRONT) 2070.13 As Used In Sections 2079.14 to 2079.24, Inclusive, the following terms have the following meanings: (a) “Agent” means a person acting under provisions of Title 9 (commencing with Section 2295) In a real property transaction, and Includes a person who is licensed as a real estate broker under Chapter 3 (commencing with Section 10130) of Part 1 of Division 4 of the Business and Professions Code, and under whose license a listing is executed or an offer to purchase is obtained. (b) "Associate licensee” means a person who is licensed as a real estate broker or salesperson under Chapter 3 (commencing with Section 10130) of Part 1 of Division 4 of the Business and Professions Code and who is either licensed under a broker or has entered into a written contract with a broker to act as the broker's agent in connection with acts requiring a real estate license and to function under the broker’s supervision in the capacity of an associate licensee. The agent in the real property transaction bears responsibility for his or her associate licensees who perform as agents of the agent. When an associate licensee owes a duty to any principal, or to any buyer or seller who is not a principal, in a real property transaction, that duty is equivalent to the duty owed to that party by the broker for whom the associate licensee functions. (c) “Buyer” means a transferee in a real property transaction, and includes a person who executes an offer to purchase real property form a seller through an agent, or who seeks the services of an agent in more than a casual, transitory, or preliminary manner, with the object of entering into a real property transaction. “Buyer” includes vendee or lessee. (d) “Commercial real property” means all real property in the state, except single-family residential real property, dwelling units made subject to Chapter 2 (commencing with Section 1940) of Title 5, mobile homes, as defined In Section 798.3, or recreational vehicles, as defined in Section 799.29. (e) “Dual agent” means an agent acting, either directly or through an associate licensee, as agent for both the seller and the buyer in a real property transaction. (f) “Listing agreement” means a contract between an owner of real property and an agent, by which the agent has been authorized to sell the real property or to find or obtain a buyer. (g) “Listing agent” means a person who has obtained a listing of real property to act as an agent for compensation. (h) “Listing price” Is the amount expressed in dollars specified in the listing for which the seller is willing to sell the real property through the listing agent. (I) “Offering price” is the amount expressed in dollars specified in an offer to purchase for which the buyer is willing to buy the real property. (J) “Offer to purchase” means a written contract executed by a buyer acting through a selling agent that becomes the contract for the sale of the real property upon acceptance by the seller. (K) “Real property” means any estate specified by subdivision (1) or (2) of Section 761 in property that constitutes or is improved with one to four dwelling units, any commercial real property, any leasehold in these types of property exceeding one year’s duration, and mobile homes, when offered for sale or sold through an agent pursuant to the authority contained in Section 10131.6 of the business and professions Code. (L) “Real property transaction” means a transaction for the sale of real property in which an agent is employed by one or more of the principals to act in that transaction, and includes a listing or an offer to purchase. (m) “Soil,” “sale,” or “sold” refers to a transaction for the
transfer of real property from the seller to the buyer, and Includes exchanges of real properly between the seller and buyer, transactions for the creation of a real property sales contract within the meaning of Section 2985, and transactions for the creation of a leasehold exceeding one year's duration, (n) “Seller” means the transferor in a real property transaction, and includes an owner who lists real property with an agent, whether or not a transfer results, or who receives an offer to purchase real property of which he or she is the owner from an agent on behalf or another. “seller" Includes both a vendor and a lessor. (o) "Selling agent” means a listing agent who acts alone, or an agent who acts in cooperation with a listing, agent, and who sells or finds and obtains a buyer for the real property, or an agent who locates property for a buyer or who finds a buyer for a property for which no listing exists and presents an offer to purchase to the seller. (p) “subagent" means a person to whom an agent delegates agency powers as provided In Article 5 (commencing with Section 2349) or Chapter 1 of Title 9. However, “subagent” does not include an associate licensee who is acting under the supervision of an agent in a real property transaction. 2079.14 Listing agents and selling agents shall provide the seller and buyer in a real property transaction with a copy of the disclosure form specified in Section 2079.16, and, except as provided in subdivision (c), shall obtain a signed acknowledgement of receipt from that seller or buyer, except as provided in this section or Section 2079.15, as follows; (a) The listing agent, if any, shall provide the disclosure form to the seller prior to entering into the listing agreement, (b) The selling agent shall provide the disclosure form to the seller as soon as practicable prior to presenting the seller with an offer to purchase, unless the selling agent previously provided the seller with a copy of the disclosure form pursuant to subdivision (a). (c) Where the selling agent does not deal on a face-to-face basis with the seller, the disclosure form prepared by the selling agent may be furnished to the seller (and acknowledgement of receipt obtained for the selling agent from the seller) by the listing agent, or the selling agent may deliver the disclosure form by certified mall addressed to the seller at his or her last known address, in which case no signed acknowledgement of receipt is required. (d) The selling agent shall provide the disclosure form to the buyer as soon as practicable prior to execution of the buyer’s offer to purchase, except that if the offer to purchase is not prepared by the selling agent, the selling agent shall present the disclosure form to the buyer not later than the next business day after the selling agent receives the offer to purchase from the buyer. 2079.15 In any circumstance in which the seller or buyer refuses to sign an acknowledgement of receipt pursuant to Section 2079.15, the agent, or an associate licensee acting for agent, shall set forth, sign, and date a written declaration of the facts of the refusal. 2079.16 Reproduced on Page 1 of this form. 2079.17 (a) As soon as practicable, the selling agent shall disclose to the buyer and seller whether the selling agent is acting in the real property transaction exclusively as the buyer’s agent, exclusively as the seller’s agent, or as a dual agent representing both the buyer and the seller. This transaction exclusively as the buyer’s agent, exclusively as the seller’s agent, or as a dual agent representing both the buyer and the seller. This relationship shall be confirmed in the contract to purchase and sell real property or in a separate writing executed or acknowledged by the seller, the buyer, and the selling agent prior to or coincident with execution of that contract by the buyer and the seller, respectively. (b) As soon as practicable, the listing agent shall disclose to the seller whether the listing agent
is acting in the real property transact in exclusively as the seller’s agent, or as a dual agent representing both the buyer and seller. This relationship shall be confirmed in the contract to purchase and sell real property or In a separato writing executed or acknowledged by the seller and the listing agent prior to or coincident with the execution of that contract by the seller. 9c) The confirmation required by subdivisions (a) and (b) shall be in the following form. (DO NOT COMPLETE, SAMPLE ONLY) is the agent of (check one)  the seller exclusively, or  both the buyer and seller. (Name of Listing Agent)  (DO NOT COMPLETE, SAMPLE ONLY) is the agent of (check one)  the buyer exclusively, or  both the buyer and seller,  the seller exclusively, or (Name of Selling Agent if not the same as the Listing Agent)  (d) The disclosures and confirmation required by this section shall be in addition to the disclosure required by Section 2079.14. 2079.18 No selling agent in a real property transaction may act as an agent for the buyer only, when the selling agent is also acting as the listing agent in the transaction. 2079.19 The payment of compensation or the obligation to pay compensation to an agent by the seller or buyer is not necessarily determinative of a particular agency relationship between an agent and the seller or buyer. A listing agent and a selling agent may agree to share any compensation or commission paid, or any right to any compensation or commission for which an obligation arises as the result of a real estate transaction, and the terms of any such agreement shall not necessarily be determinative of a particular relationship. 2079.20 Nothing in this article prevents an agent from selecting, as a condition of the agent’s employment, a specific form of agency relationship not specifically prohibited by this article if the requirements of Section 2079.14 and Section 2079.17 are compiled with. 2079.21 A dual agent shall not disclose to the buyer that the seller is willing to sell the property at a price less than the listing price, without the express written consent of the buyer. This section does not alter in any way the duty or responsibility of a dual agent to any principal with respect to confidential information other than price. 2079.22 Nothing in this article precludes a listing agent form also being a selling agent, and the combination of these functions in one agent does not, of itself, make that agent a dual agent. 2079.23 (a) A contract between the principal and agent may be modified or altered to change the agency relationship at any time before the performance of the act which is the object of the agency with the written consent of the parties to the agency relationship. (b) A lender or an auction company retained by a lender to control aspects of a transaction of real property subject to this part, including validating the sales price, shall not require, as a condition of receiving the lender’s approval of the transaction, the homeowner or listing agent to defend or indemnify the lender or auction company from any liability alleged to result from the actions of the lender or auction company. Any clause, provision, covenant, or agreement purporting to impose an obligation to defend or indemnify a lender or an auction company in violation of this subdivision is against public policy, void, and unenforceable. INITIALS INITIALS

 

     

     

    

 

 

	 	 
		2070.24 Nothing In this article shall be construed to either diminish the duty or disclosure owed buyers and sellers by agents and their associate licensees, subagents, and employees or to relieve agents and their associate licensees, subagents, and employees from liability for their conduct in connection with acts governed by this article or for any breach of a fiduciary duty or a duty of disclosure, NOTICE: These forms are often modified to meet changing requirements of law and Industry needs. Always write or call to make sure you are utilizing the most current form: AIR Commercial Real Estate Association, 500 N Brand Blvd, Suite 900, Glendale, CA 91203. Telephone No. (213) 687-9777. Fax No.: (213) 687-8616. INITIALS INITIALS ©2014 - AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM AD 1-03/15E

 

     

     

    

 

 

	 	 
		DISCLOSURE REGARDING REAL ESTATE AGENCY RELATIONSHIP (As required by the Civil Code) When you enter into a discussion with a real estate agent regarding a real estate transaction, you should from the outset understand what type of agency relationship or representation you wish to have with the agent in the transaction. SELLER'S AGENT ("Seller" includes both s vendor and a lessor) A Seller's agent under a listing agreement with the Seller acts as the agent for the Seller only. A Seller's agent or a subagent of that agent has the following affirmative obligations: To the Seller: A fiduciary duty of atmost care, Integrity, honesty and loyally in dealings with the Seller. To the Buyer and the Seller: (a) Diligent exercise of reasonable skill and care in performance of the agent's duties. (b) A duty of honest end fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the parties. An agent is not obligated to reveal to either party any confidential Information obtained from the other party that does not involve the affirmative duties set forth above. BUYER'S AGENT ("Buyer" Includes both a purchaser and a lessee). A selling agent can, with a Buyer's consent, agree to act as agent for the Buyer only. In these situations, the agent is not the Seller's agent, even If by agreement the agent may receive compensation for services rendered, either in full or in part from the Seller. An agent acting only for a Buyer has the following affirmative obligations: To the Buyer: A fiduciary duty of atmost care, integrity, honesty and loyally in dealings with the Buyer. To the Buyer and the Seller: (a) Diligent exercise of reasonable skill and care in performance of the agent's duties. (b) A duty of honest and fair dealing and good faith. (c) A duly to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the parties. An agent is not obligated to reveal to either party any confidential information obtained from the other party that done not Involve the affirmative duties set forth above. AGENT REPRESENTING BOTH SELLER AND BUYER A real estate agent, either acting directly or through one or more associate licensees, can legally be the agent of both the Seller and the Buyer in a transaction, but only with the knowledge and consent of both the Seller and the Buyer. In a duel agency situation, the agent has the following affirmative obligations to both the Seller and the Buyer: (a) A fiduciary duty of atmost care, Integrity, honesty and loyalty in the dealings with either the Seller or the Buyer. (b) Other duties to the Seller and the Buyer as stated above in their respective sections. In representing both Seller and Buyer, the agent may not, without the express permission of the respective party, disclose to the other party that the Seller will accept a price less than the listing price or that the Buyer will pay a price greater than the price offered. The above duties of the agent in a real estate transaction do not relieve a Seller or Buyer from the responsibility to protect his or her own Interests. You should carefully read all agreements to assure that they adequately express your understanding of the transaction. A real estate agent is a person qualified to advise about real estate. If legal or tax advice is desired, consult a competent professional. Throughout your real property transaction you may receive more than one disclosure form, depending upon the number of agents assisting in the transaction. The law requires each agent with whom you have more than a causal relationship to present you with this disclosure form. You should read the contents each time It is presented to you, considering the relationship between you and the real estate agent in your
specific transaction. This disclosure form includes the provisions of Sections 2079.13 to 2079.24, Inclusive, of the Civil Code set forth on page 2. Read it carefully. I/WE ACKNOWLEDGE RECEIPT OF A COPY OF THIS DISCLOSURE AND THE PORTIONS OF THE CIVIL CODE PRINTED ON THE BACK (OR A SEPARATE PAGE). Buyer Seller Lessor Lessee Date: JAN 27, 2017 ReShape Medical Inc. Buyer Seller Lessor Lessee Date: Agent CBRE Commercial Real Estate Services BRE Lic. # 01770986 Real Estate Broker (Firm) By: Brian Cole BRE Lic. # 01770986 Date: (Salesperson or Broker-Associate) NOTE: When the listing brokerage company also represents Buyer/Lessee: The Listing Agent shall have one Agency Disclosure form signed by Seller/Lessor and a second Agency Disclosure form signed by Buyer/Lessee. When Seller/Lessor and Buyer/Lessee are represented by different brokerage companies: (i) the Listing Agent shell have one Agency Disclosure form signed by Seller/Lesser and (ii) the Buyer/Lessee's Agent shall have one Agency Disclosure form signed by Buyer/Lessee and either that same or a different Agency Disclosure form presented to Seiler/Lessor for signature prior lo presentation of the offer. If the same form is used. Seller/Lessor may sign here: Seller/Lessor Date: THIS FORM HAS BEEN PREPARED BY THE AIR COMMERCIAL REAL ESTATE ASSOCIATION. NO REPRESENTATION IS MADE AS TO THE LEGAL VALIDITY OR ADEQUACY OF THIS FORM FOR ANY SPECIFIC TRANSACTION. PLEASE SEEK LEGAL COUNSEL AS TO THE APPROPRIATENESS OF THIS FORM. INITIALS ©2014 - AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM AD 1-03/15E

 

     

     

    

 

 

	 	 
		DISCLOSURE REGARDING REAL ESTATE AGENCY RELATIONSHIP (AD PAGE 2 OF 2) CIVIL CODE SECTIONS 2079.24 (2079.16 APPEARS ON THE FRONT) 2070.13 As used in Sections 2079.14 to 2079.24, inclusive, the following terms have the following meanings: (a) “Agent” means a person acting under provisions of Title 9 (commencing with Section 2295) in a real property transaction, and includes a person who is licensed as a real estate broker under Chapter 3 (commencing with Section 10130) of Part 1 of Division 4 of the Business and Professions Code, and under whose license a listing is executed or an offer to purchase is obtained. (b) “Associate licenses” means a person who is licensed as a real estate broker or salesperson under Chapter 3 (commencing with Section 10130) of Part 1 of Division 4 of the Business and Professions Code and who is either licensed under a broker or has entered into a written contract with a broker to act as the broker's agent in connection with acts requiring a real estate license and to function under the broker's supervision in the capacity of an associate licensee. The agent in the real property transaction bears responsibility for his or her associate licensees who perform as agents of the agent. When an associate licensee owes a duty to any principal, or to any buyer or seller who is not a principal, in a real property transaction, that duty is equivalent to the duty owed to that party by the broker for whom the associate licensee functions. (c) “Buyer” means a transferee in a real property transaction, and includes a person who executes an offer to purchase real property from a seller through an agent, or who seeks the services of an agent in more than a casual, transitory, or preliminary manner, with the object of entering into a real property transaction. “Buyer” includes vendee or lessee. (d) “Commercial real property” means all real property in the state, except single-family residential real property, dwelling units made subject to Chapter 2 (commencing with Section 1940) of Title 5, mobile homes, as defined in Section 798.3, or recreational vehicles, as defined in Section 799.29. (e) “Dual agent” means an agent acting, either directly or through an associate licensee, as agent for both the seller and the buyer in a real property transaction. (f) “Listing agreement” means a contract between an owner of real property and an agent, by which the agent has been authorized to sell the real property or to find or obtain a buyer. (g) “Listing agent” means a person who has obtained a listing of real property to act as an agent for compensation. (h) “Listing price” is the amount expressed in dollars specified in the listing for which the seller is willing to sell the real property through the listing agent. (i) “Offering price” is the amount expressed in dollars specified in an offer to purchase for which the buyer is willing to buy the real property. (j) “Offer to purchase” means a written contract executed by a buyer acting through a selling agent that becomes the contract for the sale of the real property upon acceptance by the seller. (k) “Real property” means any estate specified by subdivision (1) or (2) of Section 761 in property that constitutes or is improved with one to four dwelling units, any commercial real property, any leasehold in these types of property exceeding one year's duration, and mobile homes, when offered for sale or sold through an agent pursuant to the authority contained in Section 10131.6 of the Business and Professions Code. (l) “Real property transaction” means a transaction for the sale of real property in which an agent is employed by one or more of the principals to act in that transaction, and includes a listing or an offer to purchase. (m) “Sell,” “sale,” or “sold” refers to a transaction for the transfer
of real property from the seller to the buyer, and includes exchanges of real property between the seller and buyer, transactions for the creation of a real property sales contract within the meaning of Section 2985, and transactions for the creation of a leasehold exceeding one year's duration. (n) “Seller” means the transferor in a real property transaction, and includes an owner who lists real property with an agent, whether or not a transfer results, or who receives an offer to purchase real property of which he or she is the owner from an agent on behalf of another. “Seller” includes both a vendor and a lessor. (o) “Selling agent” means a listing agent who acts alone, or an agent who acts in cooperation with a listing agent, and who sells or finds and obtains a buyer for the real property, or an agent who locates property for a buyer or who finds a buyer for a property for which no listing exists and presents an offer to purchase to the seller. (p) “Subagent” means a person to whom an agent delegates agency powers as provided in Article 5 (commencing with Section 2349) of Chapter 1 of Title 9. However, “subagent” does not include an associate licensee who is acting under the supervision of an agent in a real property transaction. 2079.14 Listing agents and selling agents shall provide the seller and buyer in a real property transaction with a copy of the disclosure form specified in Section 2079.16, and, except as provided in subdivision (c), shall obtain a signed acknowledgement of receipt from that seller or buyer, except as provided in this section or Section 2079.15, as follows: (a) The listing agent, if any, shall provide the disclosure form to the seller prior to entering into the listing agreement. (b) The selling agent shall provide the disclosure form to the seller as soon as practicable prior to presenting the seller with an offer to purchase, unless the selling agent previously provided the seller with a copy of the disclosure form pursuant to subdivision (a). (c) Where the selling agent does not deal on a face-to-face basis with the seller, the disclosure form prepared by the selling agent may be furnished to the seller (and acknowledgement of receipt obtained for the selling agent from the seller) by the listing agent, or the selling agent may deliver the disclosure form by certified mail addressed to the seller at his or her last known address, in which case no signed acknowledgement of receipt is required. (d) The selling agent shall provide the disclosure form to the buyer as soon as practicable prior to execution of the buyer's offer to purchase, except that if the offer to purchase is not prepared by the selling agent, the selling agent shall present the disclosure form to the buyer not later than the next business day after the selling agent receives the offer to purchase from the buyer. 2079.15 In any circumstance in which the seller or buyer refuses to sign an acknowledgement of receipt pursuant to Section 2079.14, the agent, or an associate licensee acting for an agent, shall set forth, sign, and date a written declaration of the facts of the refusal. 2079.16 Reproduced on Page 1 of this form. 2079.17 (a) As soon as practicable, the selling agent shall disclose to the buyer and seller whether the selling agent is acting in the real property transaction exclusively as the buyer's agent, exclusively as the seller's agent, or as a dual agent representing both the buyer and the seller. This relationship shall be confirmed in the contract to purchase and sell real property or in a separate writing executed or acknowledged by the seller, the buyer, and the selling agent prior to or coincident with execution of that contract by the buyer and the seller, respectively. (b) As soon as practicable, the listing agent shall disclose to the seller whether the listing agent is acting in the real property transaction exclusively as the seller's agent, or as a dual agent representing both the buyer and seller. This relationship shall be confirmed in the
contract to purchase and sell real property or in a separate writing executed or acknowledged by the seller and the listing agent prior to or coincident with the execution of that contract by the seller. (c) The confirmation required by subdivisions (a) and (b) shall be in the following form. (DO NOT COMPLETE. SAMPLE ONLY) is the agent of (check one): ☐ the seller exclusively, or ☐ both the buyer and seller. (Name of Listing Agent) (DO NOT COMPLETE. SAMPLE ONLY) is the agent of (check one): ☐ the buyer exclusively, or ☐ the seller exclusively, or (Name of Selling Agent if not the same as the Listing Agent) ☐ both the buyer and seller. (d) The disclosures and confirmation required by this section shall be in addition to the disclosure required by Section 2079.14. 2079.18 No selling agent in a real property transaction may act as an agent for the buyer only, when the selling agent is also acting as the listing agent in the transaction. 2079.19 The payment of compensation or the obligation to pay compensation to an agent by the seller or buyer is not necessarily determinative of a particular agency relationship between an agent and the seller or buyer. A listing agent and a selling agent may agree to share any compensation or commission paid, or any right to any compensation or commission for which an obligation arises as the result of a real estate transaction, and the terms of any such agreement shall not necessarily be determinative of a particular relationship. 2079.20 Nothing in this article prevents an agent from selecting, as a condition of the agent's employment, a specific form of agency relationship not specifically prohibited by this article if the requirements of Section 2079.14 and Section 2079.17 are complied with. 2079.21 A dual agent shall not disclose to the buyer that the seller is willing to sell the property at a price less than the listing price, without the express written consent of the seller. A dual agent shall not disclose to the seller that the buyer is willing to pay a price greater than the offering price, without the express written consent of the buyer. This section does not alter in any way the duty or responsibility of a dual agent to any principal with respect to confidential information other than price. 2079.22 Nothing in this article precludes a listing agent from also being a selling agent, and the combination of these functions in one agent does not, of itself, make that agent a dual agent. 2079.23 (a) A contract between the principal and agent may be modified or altered to change the agency relationship at any time before the performance of the act which is the object of the agency with the written consent of the parties to the agency relationship. (b) A lender or an auction company retained by a lender to control aspects of a transaction of real property subject to this part, including validating the sales price, shall not require, as a condition of receiving the lender's approval of the transaction, the homeowner or listing agent to defend or Indemnify the lender or auction company from any liability alleged to result from the actions of the lender or auction company. Any clause, provision, covenant, or agreement purporting to Impose an obligation to defend or Indemnify a lender or an auction company in violation of this subdivision is against public policy, void, end unenforceable. PAGE 2 OF 3 INITIALS INITIALS ©2014 - AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM AD 1-03/15E

 

     

     

    

 

 

	 	 
		2079.24 Nothing in this article shall be construed to either diminish the duty of disclosure owed buyers and sellers by agents and their associate licensees, subagents, and employees or to relieve agents and their associate licensees, subagents, and employees from liability for their conduct in connection with acts governed by this article or for any breach of a fiduciary duty or a duty of disclosure. NOTICE: These forms are often modified to meet changing requirements of law and industry needs. Always write or call to make sure you are utilizing the most current form: AIR commercial Real Estate Association, 500 N Brand Blvd, Suite 900, Glendale, CA 91203, Telephone No. (213) 687-8777. Fax No.:(213) 687-8616 PAGE 3 OF 3 INITIALS INITIALS ©2014 - AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM AD 1-03/15E

 

     

     

    

 

 

	 	 
		Exhibit C 1001 Calle Amanecer, San Clemente Parking Lessor’s Initials: Lessee’s Initials: JPOFFICE/WORD/Exhibits/1001 Calle Amanecer – Parking – Exhibit C – 01-26-17

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