Document:

exv10w5

 

Exhibit 10.5

OCULUS INNOVATIVE SCIENCES, INC.

SUMMARY OF TERMS OF

2004 STOCK PLAN

     Set forth below is a summary of certain principal terms and provisions of the Oculus
Innovative Sciences, Inc. 2004 Stock Plan (the “Plan”).

     1. Number of Shares Reserved for Issuance. An aggregate of Six Million (6,000,000)
shares of the Company’s Common Stock (“Common Stock”) has been authorized and reserved for issuance
under the Plan.

     2. Types of Options Issuable Under the Plan. Options granted under the Plan may, in
the discretion of the Company’s Board of Directors (the “Board”), be either “incentive stock
options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”) or “nonstatutory stock options” which do not meet the requirements of Section 422 of the
Code. Other than as provided in the Plan, there is no limit on the number of shares which may be
subject to an option; however, if the aggregate fair market value of the stock (determined as of
the time the option is granted) with respect to which incentive stock options exercisable for the
first time by any individual during any one calendar year under all of the Company’s incentive
stock option plans exceeds $100,000, such options representing stock in excess of this annual
limitation will be deemed to be nonstatutory stock options.

     3. Administration. The Plan will be administered by the Board, who may appoint a
committee (the “Committee”) of not less than two (2) members of the Board to administer the Plan on
behalf of the Board. The interpretation of the provisions of the Plan and determinations by the
Board or the Committee will be final and binding on all who participate in the Plan. Questions
concerning the Plan and its administration should be addressed to the Secretary at the Company’s
principal executive office.

     4. Eligibility. Any person, who is an employee, consultant or director of the Company
may be granted one or more options under the Plan. However, non-employee directors and consultants
may only be granted nonstatutory stock options. The Board or the Committee, as appropriate,
determines who will be granted options under the Plan (each such person who is granted an option
and participates in the Plan, an “Optionee”) and the number of shares to be subject to each option.

     5. Terms of Options. The terms of each option granted under the Plan will be
determined by the Board of Directors. Each option will be evidenced by a written stock option
agreement between the Company and the Optionee (the “Option Agreement”) and will be subject to the
following additional terms and conditions:

 

 

          (a) Exercise of Options. The Board will determine when and under what conditions
options granted may be exercised. Options are typically exercisable and vest cumulatively as to
one-fifth (1/5) of the shares subject to the option at the end of the first twelve (12) full months
after the vesting commencement date, as specified in the Option Agreement (the “Vesting
Commencement Date”), and as to one-fifth (1/5) of the shares for each twelve (12) full months
thereafter or as the Board determines at the time an option is granted. The form of payment for
shares to be issued upon the exercise of an option may, in the discretion of the Board or the
Committee, consist of cash, check, promissory notes, an exchange of shares of Common Stock held for
at least six (6) months or the exchange of shares of Common Stock to be issued upon the exercise of
such option in accordance with a broker-dealer sale and remittance procedure authorized by the
Board or the Committee thereof then administering the Plan, a combination thereof, or such other
consideration as determined by the Board.

     An option, or portion thereof, is exercised upon the Company’s receipt of written notice of
such exercise specifying the number of shares being purchased, accompanied by full payment for the
shares being purchased, as provided by the Board or the Committee, as appropriate, together with
any other representations or agreements required by the terms of the Plan or the Option Agreement.

          (b) Option Exercise Price. The purchase price of the shares issued pursuant to the
exercise of options granted under the Plan is determined by the Board and is intended to be not
less than eighty-five percent (85%), in the case of nonstatutory stock options, and one hundred
percent (100%), in the case of incentive stock options, of the fair market value per share of
Common Stock. In the case of a stock option granted to an Optionee who, immediately before the
grant of such option, owns stock representing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or its parents or subsidiaries, the per share
purchase price must be at least one hundred ten percent (110%) of the fair market value of Common
Stock.

     For the purpose of the Plan, if Common Stock is not publicly traded, the per share fair market
value of Common Stock issuable under an option will be determined by the Board in its sole
discretion, exercised in good faith. If Common Stock is publicly traded, the per share fair market
value of Common Stock issuable under an option will be the average of the bid and asked prices of
Common Stock on the date of grant as reported in The Wall Street Journal or by the NASDAQ System,
or if Common Stock is listed on an exchange or on the NASDAQ System, the closing price as of the
date of grant, as reported in The Wall Street Journal.

     (c) Termination of Employment. If an Optionee’s service or employment by the Company
terminates for any reason, other than the Optionee’s death or disability, Optionee may exercise his
options at any time within thirty (30) days (or such other period of time not exceeding three (3)
months as is determined by the Board or the Committee at the time of granting the option and as set
forth in the Option Agreement) after the date of such termination, but only to the extent the
options were vested on the date of such termination. If an Optionee should die or cease to be
employed by the Company because of disability while employed by the Company, the Optionee’s options
under the Plan may be exercised at any time within six (6) months after such death or disability,
in the case of death, by the Optionee’s estate or by a person

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who acquired the right to exercise the option by bequest or inheritance, or, in the case of
disability, by the Optionee, but in each case only to the extent such options were vested at the
date of such termination of employment. The Board may, however, with respect to nonstatutory stock
options, prior to the termination of such option, with the consent of the Optionee and subject to
certain conditions, extend the time a nonstatutory stock option may be exercised after the Optionee
ceases continuous status as an employee. Shares purchased following termination of employment will
still be subject to the terms of any agreement (e.g., a Stock Purchase Agreement), the execution of
which is a condition to exercise of the option. To the extent any portion of the option is not
exercised and not vested at the date of termination, or to the extent any exercisable portion of
the option is not exercised within the time permitted, the option shall terminate. Notwithstanding
the foregoing, no option may be exercised after the term of the option specified in the stock
option agreement.

          (d) Stock Purchase Agreement/Investment Representation Statement. In connection with
the purchase of shares upon the exercise of an option, an Optionee will be required to execute a
Stock Purchase Agreement or an Investment Representation Statement.

          (e) Right of First Refusal and Transfer Restrictions. The shares issued upon exercise
of an option shall not be transferable until the expiration of the six-month period following the
exercise of such option and, thereafter, will be subject to the right of first refusal by the
Company to purchase the shares in the event the Optionee proposes to sell or transfer such shares
and the Optionee’s right and ability to sell or to transfer the shares without the written consent
of the Company will be restricted, as set forth in the Option Agreement or the Stock Purchase
Agreement.

          (f) Expiration of Options. Options granted under the Plan may not have a term greater
than ten (10) years from the date of grant; provided, however, that any incentive
stock option granted to a shareholder who, immediately before the grant of such option, owns stock
representing more than ten percent (10%) of the total combined voting power of all classes of stock
of the Company shall expire no more than five (5) years from the date of grant. No option may be
exercised by any person after its expiration.

          (g) Nontransferability of Options. No option granted under the Plan may be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent or distribution and may be exercised during the lifetime of the Optionee only
by the Optionee.

          (h) Other Provisions. The Option Agreement evidencing the grant of an option may
contain such other terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Board of Directors.

     6. Stock Subject to the Plan — Adjustments Upon Changes in Capitalization or Merger.
The shares issued upon the exercise of an option may be authorized but unissued or reacquired
shares of Common Stock of the Company. The Plan contains appropriate anti-dilution provisions for
adjustment of the number of shares subject to options and of the option price in the event of stock
splits and certain other events described in the Plan.

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     In the event of a merger, consolidation or reorganization of the Company with another
corporation in which the Company is not the surviving corporation or as a result of which the
shares of Common Stock are exchanged for other properties, or substantially all of the asset of the
Company are sold, (i) the Board may make provision for assumption of all outstanding options by the
successor corporation, or (ii) if the other party to such merger, consolidation, reorganization,
share exchange or sale of assets does not assume the options, the outstanding options shall fully
vest, each optionee shall have the right to exercise his outstanding option for a period of fifteen
(15) days after the date of notice from the Company.

     7. Amendment and Termination of Plan. The Board of Directors may amend or terminate
the Plan at any time without the approval of the shareholders of the Company; provided,
however, the Board may not, without the approval of the shareholders of the Company,
increase the number of shares subject to the Plan, materially increase the benefits accruing to
participants under the Plan, materially change the designation of the class of persons eligible to
be granted options, remove the administration of the Plan from the Board (except to a Committee),
or extend the term of the Plan beyond ten (10) years. Any amendment or termination of the Plan
shall not affect options already granted, and such options shall remain in full force and effect as
if the Plan had not been amended or terminated.

     The above summary of the Plan is not intended to reflect all the provisions of the Plan which
may be of interest to a participant in the Plan and each participant or prospective participant in
the Plan is strongly urged to carefully review the Plan in its entirety.

     The following text pertaining to securities laws and taxation is provided for your information
only, and may not be correct as of the date any option is issued or exercised.

Securities Laws — Restrictions on Transfer

     The offer and sale of any security is subject to compliance with state and federal securities
laws and regulations. The issuance of the options and the offer and sale of the shares of Common
Stock which will be issued pursuant to the exercise of the options will be issued pursuant to an
exemption under the California Corporate Securities Law of 1968, as amended, pursuant to Section
25102(o).

     Neither the Plan nor the options and shares of Common Stock to be issued thereunder are
intended to be registered under the Securities Act of 1933, as amended (the “Act”). Rather, such
options and Common Stock will be issued in reliance on exemption(s) under the Act. To insure the
availability of such exemption(s), each Optionee will be required to make certain “investment
representations” to the Company at the time such Optionee exercises the option, including
representations covering investment intent and acknowledgements of disclosure by the Company of,
and access to, financial and other information concerning the Company. A restrictive legend will
be placed on the stock certificate stating that no sale or other disposition of the stock may be
made without meeting certain conditions, which include registration of the stock by the Company or
receipt by the Company of an opinion by an attorney that an exemption is available

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under the Act for a resale of the stock. Each Optionee is to be advised that, because the
Company’s securities have not been registered under the Act, any shares purchased upon exercise of
an option must be held indefinitely unless they are subsequently registered under the Act or an
exemption from such registration is available. Each Optionee is also to be advised that the
Company is under no obligation to register its Common Stock, and that there is no public market for
any of the Company’s securities and it is unlikely that any will develop in the foreseeable future.

     If the Company should subsequently register some of its stock with the Securities and Exchange
Commission, Rule 144, promulgated under the Act, may be applicable. It provides an exemption from
registration for limited resale of certain restricted securities acquired in a private placement,
if certain conditions are satisfied. These conditions include: (a) the availability of certain
public information about the Company; (b) the resale occurring not less than one (1) year after the
stock has been purchased and paid for; (c) the sale being made through a broker in an unsolicited
“broker’s transaction”; and (d) the amount of securities being sold during any three-month period
not exceeding certain specified volume limits.

     However, in the case of persons who are not affiliates of the Company at the time of sale and
have not been affiliates for the prior three (3) months, and who have beneficially owned their
stock for at least two (2) years prior to sale, conditions (c) and (d) do not apply under Rule 144
as promulgated at the time the Plan was adopted.

     Each Optionee is to be advised that the Company may not be filing reports pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, or otherwise satisfying the
current public information requirements of Rule 144 at the time the Optionee wishes to sell any
Common Stock purchased upon exercise of an option; and, if so, the Optionee would be precluded from
selling the securities under Rule 144 even if the one year minimum holding period has been
satisfied.

     Further, in the case of securities to which Rule 144 is not applicable, compliance with
Regulation A or some other registration exemption will be required. Even though Rule 144 as
adopted is not the exclusive means provided for the public sale of private placement securities,
other than through a registered offering, the staff of the Securities and Exchange Commission has
taken the position that persons proposing to sell private placement securities other than in a
registered offering and other than pursuant to Rule 144 will have to meet a substantial burden of
proof to establish that an exemption from registration is available for such offers or sales, and
that such persons and brokers and other persons who participate in such a transaction do so at
their own risk.

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Tax Information

     The federal income tax consequences of employee stock options are very complex and subject to
change from time to time. The following discussion is only a brief summary of the general rules
currently in effect which are applicable to employee stock options. A taxpayer’s particular
situation may be such that some variation of the general rules may apply. This summary does not
cover the state, local or foreign income tax consequences of the grant or exercise of employee
stock options under the Plan or the disposition of shares acquired upon exercise of such options,
including, without limitation, the ramifications or applicability of federal and state estate
taxes, inheritance taxes or death taxes. For precise advice as to specific transactions, Optionees
should consult their own tax advisor.

     Incentive Stock Options

     If an option granted under the Plan is an incentive stock option and the Optionee is an
employee of the company throughout the option period until at least 3 months before exercise of the
option, the Optionee will not recognize any income for purposes of the regular federal income tax
upon either the grant or the exercise of the option, and the Company will not be allowed a
deduction for federal income tax purposes in connection with such events. Upon a sale or other
disposition of the shares acquired by the Optionee upon exercise of the option, the income tax
treatment to the Optionee and the Company will depend primarily upon whether the Optionee has met
certain holding period requirements at the time of the sale or other disposition of the shares. In
addition, as discussed below, the exercise of an incentive stock option may subject the Optionee to
federal alternative minimum tax liability in the year of exercise.

     If an Optionee exercises an incentive stock option and does not dispose of the shares received
within two (2) years of the date of the grant of such option and within one (1) year after the
purchase of such shares by such Optionee, whichever ends later, any gain realized upon disposition
will be characterized as long-term capital gain and any loss will be long-term capital loss if the
shares constitute a capital asset in the hands of the Optionee. In either such case, the Company
will not be entitled to any federal income tax deduction in connection with such disposition.

     If the option is exercised by the estate of an Optionee, there is no required holding period
or employment requirement and the income recognized by the estate upon the subsequent disposal of
such shares acquired upon exercise of an option will be long or short-term capital gain as the case
may be, and the Company will not be entitled to any deduction for federal income tax purposes at
any time in connection with such option.

     If the Optionee disposes of the shares either within two (2) years after the date the option
is granted or within one (1) year after the transfer of the shares to such Optionee upon exercise
of the option, such disposition will be treated as a “disqualifying disposition,” and an amount
equal to the lesser of (1) the fair market value of the shares on the date of exercise less the
purchase price or (2) the amount realized from the disposition less the purchase price, will be
taxed as ordinary income in the taxable year in which the disposition occurs. Any such ordinary
income will increase the Optionee’s tax basis for purposes of determining gain or loss on the sale
or

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exchange of such shares. The excess, if any, of the amount realized over the fair market
value of the shares at the time of the exercise of the option will be treated as short-term or
long-term capital gain, as the case may be, and any loss realized upon the disposition will be
treated as a capital loss. An Optionee will be generally considered to have disposed of shares if
Optionee sells, exchanges, makes a gift of or transfers legal title to such shares (except by
pledge, in certain non-taxable exchanges, a transfer in insolvency proceedings or upon death or
transfers incident to a divorce). If the amount realized is less than the purchase price,
generally the Optionee will not recognize any income in connection with such disqualifying
disposition.

     The exercise of an incentive stock option may subject an Optionee to alternative minimum tax
liability in the year of exercise because the excess of the fair market value of the shares at the
time an incentive stock option is exercised over the option price of the shares is an adjustment in
determining an Optionee’s alternative minimum taxable income for such year. Consequently, an
Optionee may be obligated to pay alternative minimum tax in the year Optionee exercises an
incentive stock option. The alternative minimum tax (imposed to the extent it exceeds the
taxpayer’s regular tax) is 26-28% of an individual taxpayer’s alternative minimum taxable income.
Alternative minimum taxable income is determined by adjusting regular taxable income for certain
items, increasing that income by certain tax preference items and reducing this amount by the
applicable exemption amount ($45,000 in the case of a joint return, subject to reduction under
certain circumstances). If a disqualifying disposition of the stock acquired upon exercise of an
incentive stock option occurs in the same calendar year as exercise of the incentive stock option,
an individual would be required to recognize alternative minimum taxable income with respect to
incentive stock in the year of exercise as well as ordinary income in the same calendar year.
Usually, this results in no alternative minimum tax being recognized in connection with a
disqualifying disposition that occurs in the same calendar year as the exercise. In the case of a
disqualifying disposition which occurs after the year of exercise, an individual would be required
to recognize alternative minimum taxable income in the year of exercise and ordinary income in the
year of such disqualifying disposition in an amount determined under the rules described above.
The timing of the inclusion of alternative minimum taxable income in connection with the exercise
of an incentive stock option may depend on other factors such as whether the shares purchased upon
exercise of the option are subject to a substantial risk of forfeiture. In addition, an Optionee’s
alternative minimum tax liability is affected by the availability of a basis adjustment and other
complex rules. If a taxpayer incurs alternative minimum tax, a credit may become available which
may be used against regular income tax liability in later years. Optionees should consult their
tax advisors concerning the applicability of the alternative minimum tax to their own
circumstances.

     DUE TO THE COMPLEXITY AND UNCERTAINTY OF IRS POSITIONS AND INDIVIDUAL
CONSIDERATIONS ASSOCIATED WITH EXERCISING INCENTIVE STOCK OPTIONS, THE COMPANY
STRONGLY ENCOURAGES EACH OPTIONEE TO CONSULT THEIR OWN TAX ADVISORS CONCERNING,
AMONG OTHER MATTERS, THE APPLICABILITY OF THE ALTERNATIVE MINIMUM TAX AND
ADVISABILITY OF FILING A SECTION 83(b) ELECTION AS IT APPLIES TO SUCH OPTIONEE’S OWN
CIRCUMSTANCES.

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     The terms of an incentive stock option agreement may allow an Optionee to pay the option price
using shares of Common Stock having a fair market value equal to the price of the shares being
purchased. If an Optionee exercises an option and makes payment using shares of Common Stock of
the Company, neither the Company nor the Optionee should recognize any gain or loss at the time of
the exercise unless the shares used to purchase the incentive shares were previously acquired
through the exercise of an incentive stock option or other statutory option and the applicable
holding period requirements for favorable tax treatment have not been met at the time of the
transfer. For example, a transfer of shares acquired by an Optionee through a prior exercise of an
incentive stock option will be treated as a disqualifying disposition of such shares if the holding
period requirements applicable to incentive stock options are not met at the time such shares are
used to exercise an option, in which case the Optionee would recognize ordinary income equal to the
excess of the fair market value of the shares when they were received over the option price paid
therefor. However, the favorable tax treatment accorded to the incentive stock received will not
be affected.

     If an Optionee uses previously acquired shares of the Common Stock (other than shares received
upon the exercise of an incentive stock option with respect to which the applicable holding period
requirements for favorable tax treatment have not been met) to pay the option price, the shares
received which have a fair market value equal to the fair market value of the previously acquired
shares exchanged will retain the basis and the holding period of the shares exchanged for long-term
capital gain purposes. The balance of the shares received by the Optionee will have a basis of
zero and a holding period which commences on the date such shares are transferred to the Optionee.
If any of the shares subject to the above-described basis allocation are transferred in a
disqualifying disposition, the shares with the lowest basis will be treated as being transferred
first.

     In general, there will be no federal tax consequences to the Company upon the grant, exercise
or termination of an incentive stock option. However, (i) the Optionee may have alternative
minimum tax liability with respect to the exercise and (ii) in the event an Optionee sells or
disposes of stock received upon the exercise of an incentive stock option prior to satisfying the
two-year and one-year holding periods described above, the Company will be entitled to a deduction
for federal income tax purposes in an amount equal to the ordinary income, if any, recognized by
the Optionee upon disposition of the shares, provided the Company has satisfied its withholding
obligations, if any, under the Code.

     Nonstatutory Stock Options

     Nonstatutory stock options granted under the Plan do not qualify as “incentive stock options”
and, accordingly, do not qualify for any special federal tax benefits to Optionee. If an option
granted under the Plan is treated as a nonstatutory stock option, the Optionee will not recognize
any income at the time an Optionee is granted a nonstatutory option. However, upon exercise of the
Option, Optionee will generally recognize ordinary income for federal tax purposes measured by the
excess, if any, of the then fair market value of the shares over the option price, except as
otherwise provided below. The income recognized by Optionee will be subject to income tax
withholding by the Company out of the current earnings payable to the

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Optionee. If such earnings are insufficient to pay the withholding tax, the Optionee will be
required to make a direct payment to the Company to cover the withholding tax liability. The
Company may, in its sole discretion, accept shares of the Company’s stock in payment of an
Optionee’s withholding tax liability.

     The terms of a nonstatutory stock option agreement may allow the Optionee to pay the option
price using shares of Common Stock having an aggregate fair market value equal to the aggregate
option price of the shares being purchased. If an Optionee uses shares of Common Stock to pay the
option price due upon the exercise of a nonstatutory stock option, then the Optionee will not
recognize any taxable income to the extent that the shares of Common Stock received upon the
exercise of such option have a fair market value at the date of exercise equal to the fair market
value on such date of the shares of Common Stock delivered in payment of the option price. For
federal income tax purposes, these newly acquired shares will have the same basis and holding
period as the shares exchanged. The additional shares of Common Stock received upon the exercise
of the option will constitute ordinary income to the Optionee for the year of exercise in an amount
equal to the fair market value of such shares at the date of exercise. These additional shares
will have a basis equal to such fair market value and their holding period will commence on the
date such shares are transferred to the Optionee.

     Upon a sale of any shares acquired pursuant to the exercise of a nonstatutory stock option,
the difference between the sale price and the Optionee’s basis in the shares will be treated as a
long-term or short-term capital gain or loss, as the case may be. The Optionee’s tax basis for
determination of gain or loss upon any subsequent disposition of shares acquired upon the exercise
of a nonstatutory stock option will be the amount paid for such shares plus any ordinary income
recognized as a result of the exercise of such option.

     In general, there will be no federal income tax consequences to the Company upon the grant or
termination of a nonstatutory stock option or a sale or disposition of the shares acquired upon the
exercise of a nonstatutory stock option. However, upon the exercise of a nonstatutory stock
option, the Company will be entitled to a deduction for federal income tax purposes equal to the
amount of ordinary income that an Optionee is required to recognize as a result of the exercise of
a nonstatutory option, provided the Company has satisfied its withholding obligations under the
Code.

     The foregoing discussion is only a summary of certain federal income tax consequences to
Optionees and the Company in connection with the options and shares issuable under the Plan and
does not purport to be complete. Reference should be made to the applicable provisions of the Code
and the Income Tax Regulations promulgated thereunder. This summary also does not reflect
provisions of the income tax laws of any state or foreign country. Each participant in the Plan
should consult with his or her own tax advisor concerning the federal (and any local, state or
foreign) income tax consequences of his or her participation in the Plan and of becoming a
shareholder in the Company through the exercise of an option granted under the Plan.

Description of Common Stock

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     Each holder of Common Stock is entitled to one (1) vote for each share of Common Stock held by
the shareholder on all matters to be voted on by shareholders. Further, in any election of
directors, each shareholder is entitled to cumulate such shareholder’s votes if the candidate’s or
candidates’ name(s) have been placed in nomination prior to voting and such shareholder gives
notice of intention to cumulate votes, giving one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of shares held by such shareholder, or
distributing such number of votes among as many candidates as the shareholder shall deem fit.
Holders of Common Stock have no preemptive rights or other rights to subscribe for additional
shares. There are no conversion rights, redemption rights or sinking fund provisions with respect
to shares of Common Stock. All outstanding shares of Common Stock are, and those issuable upon
exercise of the options granted concurrently herewith will be, when issued, fully paid and are not
subject to further call or assessment by the Company.

     Holders of Common Stock are entitled to receive such dividends as may be declared by the Board
of Directors out of funds legally available therefor, and to share pro rata in any distribution to
holders of Common Stock.

Dated: June ___, 2004

[ End of Document ]

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OCULUS INNOVATIVE SCIENCES, INC.

2004 STOCK PLAN

Maximum Aggregate Number of Shares: 6,000,000

     1. Purposes of this Plan. The purposes of this 2004 Stock Plan are to attract and
retain the best available personnel, to provide an additional incentive to the Employees of the
Company and its Subsidiaries, to promote the success of the Company’s business and to enable the
Employees to share in the growth and prosperity of the Company by providing them with an
opportunity to purchase stock in the Company.

     Options granted hereunder may be either Incentive Stock Options or Nonstatutory Stock Options,
at the discretion of the Board and as reflected in the terms of the written stock option agreement.

     2. Definitions. As used herein, the following definitions shall apply:

          (a) “Board” shall mean the Board of Directors of the Company.

          (b) “Code” shall mean the Internal Revenue Code of the 1986, as amended.

          (c) “Common Stock” shall mean the Common Stock of the Company.

          (d) “Company” shall mean Oculus Innovative Sciences, Inc., a California corporation.

          (e) “Committee” shall mean the Committee appointed by the Board in accordance with Section 4
of this Plan, if one is appointed.

          (f) “Continuous Employment” or “Continuous Status as an Employee” shall mean the absence of
any interruption or termination of employment or service as an Employee by or to the Company or any
Parent or Subsidiary of the Company which now exists or is hereafter organized or acquired by or
acquires the Company. Continuous Employment shall not be considered interrupted in the case of
sick leave, military leave or any other bona fide leave of absence approved by the Board (if such
leave meets the requirements of the regulations promulgated under sections 421 and 422 of the Code)
or in the event of transfers between locations of the Company or between the Company, its Parent,
any of its Subsidiaries or its successors.

          (g) “Employee” shall mean any person, including officers and directors, employed by the
Company, its Parent, any of its Subsidiaries or its successors; or, for purposes of eligibility for
Nonstatutory Stock Options, any person employed by the Company, including officers and directors,
or any consultant to, or director of, the Company or any Parent or Subsidiary of the Company,
whether or not such consultant or director is an employee of such entities.

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          (h) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any
successor legislation.

          (i) “Incentive Stock Option” shall mean an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code.

          (j) “Non-Employee Director” shall mean a director who is a “Non-Employee Director,” as such
term is defined under Rule 16b-3(b)(3)(i) promulgated pursuant to the Exchange Act and any
applicable releases and opinions or the Securities and Exchange Commission.

          (k) “Nonstatutory Stock Option” shall mean an Option which is not an Incentive Stock Option.

          (l) “Option” shall mean a stock option granted pursuant to this Plan.

          (m) “Option Agreement” shall mean a written agreement in such form or forms as the Board
(subject to the terms and conditions of this Plan) may from time to time approve, evidencing an
Option.

          (n) “Optioned Stock” shall mean the Common Stock subject to an Option.

          (o) “Optionee” shall mean an Employee who is granted an Option.

          (p) “Outside Director” shall have the meaning as set forth in the regulations promulgated
under section 162(m) of the Code.

          (q) “Parent” shall mean a “parent corporation,” whether now or hereafter existing, as defined
in Sections 424(e) and (g) of the Code.

          (r) “Plan” shall mean this 2004 Stock Plan.

          (s) “Registration Date” shall mean the effective date of the first registration statement
which is filed by the Company and declared effective pursuant to Section 12(g) of the Exchange Act,
with respect to any class of the Company’s securities.

          (t) “Securities Act” shall mean the Securities Act of 1933, as amended, or any successor
legislation.

          (u) “Share” or “Shares” shall mean the Common Stock, as adjusted in accordance with Section 11
of this Plan.

          (v) “Stock Purchase Agreement” shall mean an agreement in such form or forms as the Board
(subject to the terms and conditions of this Plan) may from time to time

2

 

approve, which is to be
executed as a condition of purchasing Optioned Stock upon the exercise of an Option.

          (w) “Subsidiary” shall mean a subsidiary corporation, whether now or hereafter existing, as
defined in Sections 424(f) and (g) of the Code.

     3. Stock Subject to this Plan. Subject to the provisions of Section 11 of this Plan,
the maximum aggregate number of Shares which may be optioned and sold under this Plan is listed
above as “Maximum Aggregate Number of Shares”. The Shares may be authorized but unissued or
reacquired Shares.

     If an Option should expire or become unexercisable for any reason without having been
exercised in full, the unpurchased Shares which were subject thereto shall, unless this Plan shall
have been terminated, return to this Plan and become available for other Options under this Plan.
In the event that an Optionee shall exercise an Option by tendering Shares owned by such Optionee
pursuant to Section 7(c)(iv) hereof as payment of consideration in the exercise of the Option, only
the net number of additional Shares issued in excess of the number of Shares surrendered shall
count against the number of Shares reserved for issuance under the Plan.

     The Company intends that as long as it is not subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, and is not an investment company registered or required to be
registered under the Investment Company Act of 1940, as amended, all offers and sales of Options
and Common Stock issuable upon exercise of any Option shall be exempt from registration under the
provisions of Section 5 of the Securities Act, and this Plan shall be administered in such a manner
so as to preserve such exemption. The Company intends for this Plan to constitute a written
compensatory benefit plan within the meaning of Rule 701(b) of 17 CFR Section 230.701 (“Rule 701”)
promulgated by the Securities and Exchange Commission pursuant to the Securities Act. Unless
otherwise designated by the Committee at the time an Option is granted, all options granted under
this Plan by the Company, and the issuance of any Shares upon exercise thereof, are intended to be
granted in reliance on Rule 701.

     4. Administration of this Plan.

          (a) Procedure. This Plan shall be administered by the Board. The Board may appoint a
Committee consisting of two (2) or more Non-Employee Directors or Outside Directors (or such
greater number as is required to qualify for the exemption from the provisions of Section 16(b) of
the Exchange Act provided by Rule 16b-3 promulgated pursuant to the Exchange Act or section 162(m)
of the Code) to administer this Plan on behalf of the Board, subject to such terms and conditions
as the Board may prescribe. Once appointed, the Committee shall continue to serve until otherwise
directed by the Board. From time to time, the Board may increase the size of the Committee and
appoint additional members of the Board thereto, remove members (with or without cause) and appoint
new members of the Board in substitution therefor, fill vacancies, however caused, and remove all
members of the Committee and, thereafter, directly administer this Plan. Members of the Board or
Committee who are either eligible for Options or have been granted Options may vote on any matters
affecting the administration of this Plan or the grant of Options pursuant to this Plan, except
that no such

3

 

member shall act upon the granting of an Option to such person nor shall any such
member’s presence at a meeting of the Board of Directors establish the existence of a quorum at any
meeting of the Board or the Committee during which action is taken with respect to the granting of
an Option to such member.

          (b) Procedure After Registration Date. Notwithstanding the provisions of Section 4(a)
above, after the Registration Date this Plan shall be administered either by: (i) the full Board,
provided that at all times each member of the Board is a Non-Employee Director; or (ii) a Committee
which at all times consists solely of Board members who are Non-Employee Directors or Outside
Directors. After the Registration Date, the Board shall take all action necessary to administer
this Plan in accordance with the then-effective provisions of Rule 16b-3 promulgated under the
Exchange Act and section 162(m) of the Code, provided that any amendment to this Plan required for
compliance with such provisions shall be made in accordance with Section 13 of this Plan.

          (c) Powers of the Board and/or Committee. Subject to the provisions of this Plan, the
Committee or the Board, as appropriate, shall have the authority, in its discretion: (i) to grant
Incentive Stock Options and Nonstatutory Stock Options; (ii) to determine, upon review of relevant
information and in accordance with Section 7 of this Plan, the fair market value per Share; (iii)
to determine the exercise price of the Options, which exercise price and type of consideration
shall be determined in accordance with Section 7 of this Plan; (iv) to determine the Employees to
whom, and the time or times at which, Options shall be granted, and the number of Shares to be
subject to each Option; (v) to prescribe, amend and rescind rules and regulations relating to this
Plan; (vi) to determine the terms and provisions of each Option Agreement and each Stock Purchase
Agreement (each of which need not be identical with the terms of other Option Agreements and Stock
Purchase Agreements) and, with the consent of the holder thereof, to modify or amend each Option
Agreement and Stock Purchase Agreement; (vii) to determine whether any other agreement will be
required to be executed by any Employee as a condition to the exercise of an Option, and to
determine the terms and provisions of any such agreement (which need not be identical with the
terms of any other such agreement) and, with the consent of the Optionee, to amend any such
agreement; (viii) to interpret this Plan, the Option Agreements, the Stock Purchase Agreements or
any agreement entered into with respect to the grant or exercise of Options; (ix) to authorize any
person to execute on behalf of the Company any instrument required to effectuate the grant of an
Option previously granted by the Board or to take such other actions as may be necessary or
appropriate with respect to the Company’s rights pursuant to Options or agreements relating to the
grant or exercise thereof; and (x) to make such other determinations and establish such other
procedures as it deems necessary or advisable for the administration of this Plan.

          (d) Effect of the Board’s or Committee’s Decision. All decisions, determinations and
interpretations of the Board or the Committee shall be final and binding on all Optionees and any
other holders of Options.

     5. Eligibility. Options may be granted only to Employees. An Employee who has been
granted an Option may, if such Employee is otherwise eligible, be granted additional Options.

4

 

     6. Term of Plan. This Plan shall become effective upon the later to occur of its
adoption by the Board or its approval by vote of the requisite number of the outstanding shares of
the Company’s capital stock entitled to vote on the adoption of this Plan. This Plan shall
continue in effect for a term of ten (10) years after the earlier to occur of its adoption by the
Board or its approval by vote of the requisite number of the outstanding shares of the
Company’s capital stock entitled to vote thereon, unless sooner terminated in accordance with the
terms and provisions of this Plan.

     7. Option Price and Consideration.

          (a) Exercise Price. The exercise price per Share for the Shares to be issued pursuant
to the exercise of an Option shall be such price as is determined by the Board; provided,
however, that such price shall in no event be less than eighty-five percent (85%) with
respect to Nonstatutory Stock Options, and one hundred percent (100%) with respect to Incentive
Stock Options, of the fair market value per Share on the date of grant. In the case of an Option
granted to an Employee who, at the time the Option is granted, owns stock (as determined under
Section 424(d) of the Code) constituting more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or its Parent or Subsidiaries, the exercise price per
Share shall be no less than one hundred ten percent (110%) of the fair market value per Share on
the date of grant.

          (b) Fair Market Value. The fair market value per Share on the date of grant shall be
determined by the Board in its sole discretion, exercised in good faith; provided,
however, that where there is a public market for the Common Stock, the fair market value
per Share shall be the average of the closing bid and asked prices of the Common Stock on the date
of grant, as reported in The Wall Street Journal (or, if not so reported, as otherwise reported by
the National Association of Securities Dealers Automated Quotations (“NASDAQ”) System), or, in the
event the Common Stock is listed on a stock exchange or on the NASDAQ System, the fair market value
per Share shall be the closing price on the exchange or on the NASDAQ System as of the date of
grant of the Option, as reported in The Wall Street Journal.

          (c) Payment of Consideration. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be determined by the
Board at the time of grant of an Option and may consist entirely of cash, check, promissory notes,
Shares held by the Optionee for the requisite period necessary to avoid a charge to the Company’s
earnings for financial reporting purposes which have a fair market value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said Option shall be exercised, or
any combination of such methods of payment. Subject to subparagraphs (i) through (iv) hereto,
utilization of Shares as the method of payment may be completed by the tender of Shares then held
by the Optionee for the requisite period necessary to avoid a charge to the Company’s earnings for
financial reporting purposes. In making its determination as to the type of consideration to
accept, the Board shall consider if acceptance of such consideration is deemed to be such as may be
reasonably expected to benefit the Company.

5

 

               (i) If the consideration for the exercise of an Option is a promissory note, it shall be a
full recourse promissory note executed by the Optionee, bearing interest at a rate which shall be
sufficient to preclude the imputation of interest under the applicable provisions of the Code.
Until such time as the promissory note has been paid in full, the Company may retain the Shares
purchased upon exercise of the Option in escrow as security for payment of the promissory note.

               (ii) If the consideration for the exercise of an Option is the surrender of previously
acquired and owned Shares, the Optionee will be required to make representations and warranties
satisfactory to the Company regarding his title to the Shares used to effect the purchase,
including, without limitation, representations and warranties that the Optionee has good and
marketable title to such Shares free and clear of any and all liens, encumbrances, charges,
equities, claims, security interests, options or restrictions and has full power to deliver such
Shares without obtaining the consent or approval of any person or governmental authority other than
those which have already given consent or approval in a form satisfactory to the Company. The
value of the Shares used to effect the purchase shall be the fair market value of those Shares as
determined by the Board in its sole discretion, exercised in good faith.

               (iii) If the consideration for the exercise of an Option is to be paid through a broker-dealer
sale and remittance procedure, the Optionee shall provide (1) irrevocable written instructions to a
designated brokerage firm to effect the immediate sale of the purchased Shares and to remit to the
Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the
aggregate option price payable for the purchased Shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Company in connection with such purchase
and (2) written instructions to the Company to deliver the certificates for the purchased Shares
directly to such brokerage firm in order to complete the sale transaction.

               (iv) If an Optionee is permitted to exercise an Option by delivering Shares held by the
Optionee for the requisite period necessary to avoid a charge to the Company’s earnings for
financial reporting purposes, the option agreement covering such Option may include provisions
authorizing the Optionee to exercise the Option, in whole or in part, by: (1) delivering whole
Shares previously owned by such Optionee (whether or not acquired through the prior exercise of a
stock option) having a fair market value equal to the option price; and/or (2) directing the
Company to withhold from the Shares that would otherwise be issued upon exercise of the Option that
number of whole Shares having a fair market value equal to the option price. Shares of the
Company’s Common Stock so delivered or withheld shall be valued at their fair market value on the
date of exercise of the Option, as determined by the Committee and/or the Board, as appropriate.
Any balance of the exercise price shall be paid in cash or by check or a promissory note, each in
accordance with the terms of this Section 7.

     8. Options.

          (a) Terms and Provisions of Options. As provided in Section 4 of this Plan and
subject to any limitations specified herein, the Board and/or Committee shall have the authority to
determine the terms and provisions of any Option granted under this Plan or any

6

 

agreement required
to be executed in connection with the grant or exercise of an Option. Each Option granted pursuant
to this Plan shall be evidenced by an Option Agreement. Options granted pursuant to this Plan are
conditioned upon the Company obtaining any required permit or order from appropriate governmental
agencies authorizing the Company to issue such Options and Shares issuable upon exercise thereof.

          (b) Term of Option. The term of each Option may be up to ten (10) years from the date
of grant thereof as determined by the Board upon the grant of the Option and
specified in the Option Agreement, except that the term of an Incentive Stock Option granted
to an Employee who, at the time the Option is granted, owns stock comprising more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company or its Parent or
Subsidiaries, shall be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.

          (c) Exercise of Option.

               (i) Procedure for Exercise; Rights as a Shareholder. Any Option shall be exercisable
at such times, in such installments and under such conditions as may be determined by the Board and
specified in the Option Agreement, including performance criteria with respect to the Company
and/or the Optionee, and as shall be permissible under the terms of this Plan.

          An Option may be exercised in accordance with the provisions of this Plan as to all or any
portion of the Shares then exercisable under an Option, from time to time during the term of the
Option. An Option may not be exercised for a fraction of a Share.

          An Option shall be deemed to be exercised when written notice of such exercise has been given
to the Company at its principal business office in accordance with the terms of the Option
Agreement by the person entitled to exercise the Option and, except when the broker-dealer sale and
remittance procedure described in Section 7(c)(iii) hereto is used, full payment for the Shares
with respect to which the Option is exercised has been received by the Company, accompanied by an
executed Stock Purchase Agreement and any other agreements required by the terms of this Plan
and/or the Option Agreement. Full payment may consist of such consideration and method of payment
allowable under Section 7 of this Plan. Until the Option is properly exercised in accordance with
the terms of this paragraph, no right to vote or receive dividends or any other rights as a
stockholder exist with respect to the Optioned Stock. No adjustment shall be made for a dividend
or other right for which the record date is prior to the date the Option is exercised, except as
provided in Section 11 of this Plan.

          As soon as practicable after any proper exercise of an Option in accordance with the
provisions of this Plan, the Company shall, without transfer or issue tax to the Optionee, deliver
to the Optionee at the principal executive office of the Company or such other place as shall be
mutually agreed upon between the Company and the Optionee, a certificate or certificates
representing the Shares for which the Option shall have been exercised. The time of issuance and
delivery of the certificate(s) representing the Shares for which the Option shall have been
exercised may be postponed by the Company for such period as may be required by the

7

 

Company, with
reasonable diligence, to comply with any applicable listing requirements of any national or
regional securities exchange or any law or regulation applicable to the issuance or delivery of
such Shares. No Option may be exercised unless this Plan has been duly approved by the
shareholders of the Company in accordance with applicable law. Notwithstanding anything to the
contrary herein, the terms of a Stock Purchase Agreement required to be executed and delivered in
connection with the exercise of an Option may require the certificate or certificates representing
the Shares purchased upon exercise of an Option to be delivered and deposited with the Company as
security for the Optionee’s faithful performance of the terms of his Stock Purchase Agreement.

          Subject to Section 3 hereof, exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of this Plan and for sale
under the Option, by the number of Shares as to which the Option is exercised.

               (ii) Termination of Status as an Employee. If an Optionee ceases to serve as an
Employee for any reason other than death or disability and thereby terminates his Continuous Status
as an Employee, such Optionee shall have the right to exercise the Option at any time within thirty
(30) days (or such other period of time not exceeding three (3) months as is determined by the
Board at the time of granting the Option), following the date such Optionee ceases his Continuous
Status as an Employee of the Company to the extent that such Optionee was entitled to exercise the
Option at the date of such termination pursuant to the terms of the Option Agreement;
provided, however, that no Option shall be exercisable after the expiration of the
term set forth in the Option Agreement. To the extent that such Optionee was not entitled to
exercise the Option at the date of such termination pursuant to the terms of the Option Agreement,
or if such Optionee does not exercise such Option (which such Optionee was entitled to exercise)
within the time specified herein, the Option shall terminate.

               (iii) Death or Disability of Optionee. If an Optionee ceases to serve as an Employee
due to death or disability and thereby terminates his Continuous Status as an Employee, the Option
may be exercised at any time within six (6) months following the date of death or termination of
employment due to disability, in the case of death, by the Optionee’s estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, or, in the case of disability,
by the Optionee, but in any case only to the extent the Optionee was entitled to exercise the
Option at the date of his termination of employment by death or disability pursuant to the terms of
the Option Agreement; provided, however, that no Option shall be exercisable after
the expiration of the Option term set forth in the Option Agreement. To the extent that such
Optionee was not entitled to exercise such Option at the date of his termination of employment by
death or disability pursuant to the terms of the Option Agreement, or if such Option is not
exercised (to the extent it could be exercised) within the time specified herein, the Option shall
terminate.

               (iv) Extension of Time to Exercise. Notwithstanding anything to the contrary in this
Section 8, the Board may at any time and from time to time prior to the termination of a
Nonstatutory Stock Option, with the consent of the Optionee, extend the period of time during which
the Optionee may exercise his Nonstatutory Stock Option following the date the Optionee ceases such
Optionee’s Continuous Status as an Employee; provided, however,

8

 

that (1) the
maximum period of time during which a Nonstatutory Stock Option shall be exercisable following such
termination date shall not exceed an aggregate of six (6) months, (2) the Nonstatutory Stock Option
shall not become exercisable after the expiration of the term of such Option as set forth in the
Option Agreement as a result of such extension, and (3) notwithstanding any extension of time
during which the Nonstatutory Stock Option may be exercised, such Option, unless otherwise amended
by the Board, shall only be exercisable to the extent to which the Optionee was entitled to
exercise it on the date Optionee ceased Continuous Status as an Employee. To the extent that such
Optionee was not entitled to exercise the Option at the date of such termination, or if such
Optionee does not exercise an Option which Optionee was entitled to exercise within the time
specified herein, the Option shall terminate.

     9. Limit on Value of Optioned Stock. No Incentive Stock Option may be granted to an
Employee if, as a result of such grant, the aggregate fair market value (determined at the time an
Incentive Stock Option is granted) of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by an Optionee during any calendar year under all incentive stock
option plans of the Company, its Parents or its Subsidiaries, if any, exceeds One Hundred Thousand
Dollars ($100,000). After the Registration Date, the maximum number of Shares that may be awarded
to an Optionee during any calendar year shall not exceed 500,000.

     10. Nontransferability of Options. Options granted under this Plan may not be sold,
pledged, assigned, hypothecated, gifted, transferred or disposed of in any manner, either
voluntarily or involuntarily by operation of law, other than by will or by the laws of descent or
distribution, and may be exercised during the lifetime of the Optionee only by such Optionee.

     11. Adjustments Upon Changes in Capitalization or Merger.

          (a) Subject to any required action by the shareholders of the Company, the number of Shares
covered by each outstanding Option, and the number of Shares which have been authorized for
issuance under this Plan but as to which no Options have yet been granted or which have been
returned to this Plan upon cancellation or expiration of an Option, as well as the exercise or
purchase price per Share covered by each such outstanding Option, shall be proportionately adjusted
for any increase or decrease in the number of issued Shares resulting from a stock split, reverse
stock split, combination or reclassification of the Common Stock, or the payment of a stock
dividend (but only on the Common Stock) or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company (other than stock
bonuses to Employees, including, without limitation, officers and directors); provided,
however, that the conversion of any convertible securities of the Company shall not be
deemed to have been effected without the receipt of consideration. Such adjustment shall be made
by the Board, whose determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of Shares subject to this Plan or an
Option.

          (b) Except as otherwise provided in an individual Option Agreement, in the event of the
merger, consolidation or reorganization of the Company with or into another

9

 

corporation as a result
of which the Company is not the surviving corporation or as a result of which the outstanding
Shares are exchanged for or converted into cash or property or securities not of the Company, or
upon the sale of substantially all of the assets of the Company (each a “Reorganization”), (i) the
Board may make provision for the assumption of all outstanding Options by the successor corporation
or a Parent or a Subsidiary thereof, or (ii) if the other company does not assume the Option, the
Option shall, subject to the consummation of the Reorganization, fully vest and become fully
exercisable as to all of the Optioned Stock. If an Option becomes fully vested and exercisable in
connection with a Reorganization in lieu of being assumed, the Company shall notify the Optionee in
writing or electronically that the Option shall become fully exercisable, subject to the
consummation of the Reorganization, for a period of
fifteen (15) days from the date of such notice, and the Option shall terminate upon the
expiration of such period.

          (c) For the purposes of this Section 11, the Option shall be considered assumed if, following
the consummation of the Reorganization, the Option confers the right to purchase or receive, for
each Share of Optioned Stock subject to the Option immediately prior to the Reorganization, the
consideration (whether stock, cash, or other securities or property) received in the Reorganization
by holders of Common Stock for each share held on the effective date of the Reorganization;
provided, however, that if the consideration received in the Reorganization is not solely common
stock of the successor corporation or its Parent, the Board may, with the consent of the successor
corporation or its Parent, as applicable, provide for the consideration to be received upon the
exercise of the Option, for each share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent, as applicable, equal in fair market value to the
per Share consideration received by holders of Common Stock in the Reorganization.

          (d) No fractional shares of Common Stock shall be issuable on account of any action described
in this Section, and the aggregate number of shares into which Shares then covered by the Option,
when changed as the result of such action, shall be reduced to the largest number of whole shares
resulting from such action, unless the Board, in its sole discretion, shall determine to issue
scrip certificates in respect to any fractional shares, which scrip certificates, in such event,
shall be in a form and have such terms and conditions as the Board in its discretion shall
prescribe.

     12. Time of Granting Options. The date of grant of an Option shall be the date on
which the Board makes the determination granting such Option; provided, however,
that if the Board determines that such grant shall be as of some future date, the date of grant
shall be such future date. Notice of the determination shall be given to each Employee to whom an
Option is so granted within a reasonable time after the date of such grant.

     13. Amendment and Termination of this Plan.

          (a) Amendment and Termination. The Board may amend or terminate this Plan from time
to time in such respects as the Board may deem advisable and shall make any amendments which may be
required so that Options intended to be Incentive Stock Options shall at all times continue to be
Incentive Stock Options for the purpose of the Code, except that,

10

 

without approval of the holders
of a majority of the outstanding shares of the Company’s capital stock, no such revision or
amendment shall:

               (i) Increase the number of Shares subject to this Plan, other than in connection with an
adjustment under Section 11 of this Plan;

               (ii) Materially change the designation of the class of Employees eligible to be granted
Options;

               (iii) Remove the administration of this Plan from the Board (other than to the Committee);

               (iv) Materially increase the benefits accruing to participants under this Plan; or

               (v) Extend the term of this Plan.

          (b) Effect of Amendment or Termination. Except as otherwise provided in Section 11,
any amendment or termination of this Plan shall not affect Options already granted and such Options
shall remain in full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Company, which agreement must be in writing
and signed by the Optionee and the Company.

     14. Conditions Upon Issuance of Shares.

          (a) Shares shall not be issued pursuant to the exercise of an Option unless the exercise of
such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act, the Exchange Act,
applicable state securities laws, the rules and regulations promulgated thereunder, and the
requirement of any stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such compliance.

          (b) As a condition to the exercise of an Option, the Board may require the person exercising
such Option to execute an agreement with, and/or may require the person exercising such Option to
make any representation and warranty to, the Company as may in the judgment of counsel to the
Company be required under applicable law or regulation, including but not limited to a
representation and warranty that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is appropriate under any of the aforementioned relevant provisions of law.

     15. Reservation of Shares. The Company, during the term of this Plan, at all times
shall reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of this Plan.

11

 

     The Company, during the term of this Plan, shall use diligent efforts to seek to obtain from
appropriate regulatory agencies any requisite authorization in order to issue and sell such number
of Shares as shall be sufficient to satisfy the requirements of this Plan. The inability of the
Company to obtain the requisite authorization(s) deemed by the Company’s counsel to be necessary
for the lawful issuance and sale of any Shares hereunder, or the inability of the Company to
confirm to its satisfaction that any issuance and sale of any Shares hereunder will meet applicable
legal requirements, shall relieve the Company of any liability in respect to the failure to issue
or sell such Shares as to which such requisite authority shall not have been obtained.

     16. Stock Option and Stock Purchase Agreements. Options shall be evidenced by written
stock option agreements in such form or forms as the Board shall approve from time to time. Upon
the exercise of an Option, the Optionee shall sign and deliver to the Company a
Stock Purchase Agreement (if required to be executed and delivered to the Company by an
Optionee as a condition to the exercise of an Option) in such form or forms as the Board shall
approve from time to time.

     17. Shareholder Approval. Continuance of this Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months before or after the date this Plan is
adopted by the Board. If such shareholder approval is obtained at a duly held shareholders’
meeting, it may be obtained by the affirmative vote of the holders of a majority of the outstanding
shares of the Company entitled to vote thereon. All Options granted prior to shareholder approval
of this Plan are subject to such approval, and if such approval is not obtained within twelve (12)
months before or after the date this Plan is adopted by the Board all such Options shall expire and
shall be of no further force or effect.

     18. Taxes, Fees, Expenses and Withholding of Taxes.

          (a) The Company shall pay all original issue and transfer taxes (but not income taxes, if any)
with respect to the grant of Options and/or the issue and transfer of Shares pursuant to the
exercise thereof, and all other fees and expenses necessarily incurred by the Company in connection
therewith, and will from time to time use diligent efforts to comply with all laws and regulations
which, in the opinion of counsel for the Company, shall be applicable thereto.

          (b) The grant of Options hereunder and the issuance of Shares pursuant to the exercise thereof
is conditioned upon the Company’s reservation of the right to withhold, in accordance with any
applicable law, from any compensation payable to the Optionee any taxes required to be withheld by
federal, state or local law as a result of the grant or exercise of such Option or the sale of the
Shares issued upon exercise thereof. To the extent that compensation or other amounts, if any,
payable to the Optionee are insufficient to pay any taxes required to be so withheld, the Company
may, in its sole discretion, require the Optionee, as a condition of the exercise of an Option, to
pay in cash to the Company an amount sufficient to cover such tax liability or otherwise to make
adequate provision for the Company’s satisfaction of its withholding obligations under federal and
state law.

12

 

          (c) The Board or the Committee may, in its discretion and upon such terms and conditions as it
may deem appropriate (including the applicable safe-harbor provisions of SEC Rule 16b-3 and
interpretations thereof by the staff of the Securities and Exchange Commission) provide any or all
holders of outstanding option grants under this Plan with the election to have the Company
withhold, from the Shares otherwise issuable upon the exercise of such options, one or more of such
Shares with an aggregate fair market value equal to the minimum Federal and State income and
withholding taxes (“Taxes”) incurred in connection with the acquisition of such Shares. In lieu of
such direct withholding, one or more Optionees may also be granted the right to deliver shares of
Common Stock to the Company in satisfaction of such Taxes. The withheld or delivered shares shall
be valued at the Fair Market Value on the applicable determination date for such Taxes or such
other date required by the applicable safe-harbor provisions of SEC Rule 16b-3.

     19. Liability of Company. The Company, its Parent or any Subsidiary which is in
existence or hereafter comes into existence shall not be liable to an Optionee or other person if
it is determined for any reason by the Internal Revenue Service or any court having jurisdiction
that any Options intended to be Incentive Stock Options granted hereunder do not qualify as
incentive stock options within the meaning of Section 422 of the Code.

     20. Information to Optionee. The Company shall, upon request, provide without charge
to each Optionee during the period the Option is outstanding a balance sheet and income statement
of the Company. In the event that the Company provides annual reports or periodic reports to its
shareholders during the period in which an Optionee’s Option is outstanding, the Company shall,
upon request, provide to each Optionee a copy of each such report.

     21. Notices. Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery or upon deposit in the United States mail,
as first class, registered or certified mail, with postage and fees prepaid and addressed (i) if to
the Company, at its principal place of business to the attention of the Secretary of the Company,
or (ii) if to the Optionee, at the address set forth on the signature page of the Optionee’s Option
Agreement, or at such other address as either party may from time to time designate in writing to
the other. It shall be the obligation of each Optionee and each transferee holding Shares
purchased upon exercise of an Option to provide the Secretary of the Company, by letter mailed as
provided hereinabove, with written notice of a change in mailing address.

     22. No Enlargement of Employee Rights. This Plan is purely voluntary on the part of
the Company, and the continuance of this Plan shall not be deemed to constitute a contract between
the Company and any Employee, or to be consideration for or a condition of the employment or
service of any Employee. Nothing contained in this Plan shall be deemed to give any Employee the
right to be retained in the employ or service of the Company, its Parent, Subsidiary or a successor
corporation, or to interfere with the right of the Company or any such corporations to discharge or
retire any Employee at any time with or without cause and with or without notice. No Employee
shall have any right to or interest in Options authorized hereunder prior to the grant thereof to
such Employee, and upon such grant such Employee shall have only such rights and interests as are
expressly provided herein, subject, however, to all applicable

13

 

provisions of the Company’s Articles
of Incorporation, as the same may be amended from time to time.

     23. Legends on Certificates.

          (a) Federal Law. Unless an appropriate registration statement is filed pursuant to
the Securities Act of 1933 with respect to the Shares issuable under this Plan, each certificate
representing such Shares shall be endorsed thereon with legends substantially as follows:

	 	(1)	 	THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION
THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
	 
	 	(2)	 	THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

          (b) Additional Legends. Each document or certificate representing the Options or
Shares issuable under this Plan shall also contain legends as may be required under applicable blue
sky laws or by any Stock Purchase Agreement or other agreement the execution of which is a
condition to the exercise of an Option under this Plan.

     24. Availability of Plan. A copy of this Plan shall be delivered to the Secretary of
the Company and shall be shown to any eligible person making reasonable inquiry concerning it.

     25. Compliance with Exchange Act Rule 16b-3. With respect to persons subject to
Section 16 of the Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3, promulgated pursuant to the Exchange Act, or its successors.
To the extent any provision of this Plan or action by the Board or any Committee fails so to
comply, it shall be deemed null and void to the extent permitted by law and deemed advisable by the
Board or any Committee.

     26. Invalid Provisions. In the event that any provision of this Plan is found to be
invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability
shall not be construed as rendering any other provisions contained herein as invalid or

14

 

unenforceable, and all such other provisions shall be given full force and effect to the same
extent as though the invalid or unenforceable provision was not contained herein.

     27. Applicable Law. This Plan shall be governed by and construed in accordance with
the laws of the State of California.

[ End of Document ]

15

 

OCULUS INNOVATIVE SCIENCES, INC.

NONSTATUTORY STOCK OPTION AGREEMENT

(Standard Form)

	 	 	 	 	 	 	 
	Optionee:

	 	 	 	Grant Date:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Vesting	 	 
	 

	 	 	 	Commencement	 	 
	 

	 	 	 	Date:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Shares:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Exercise Price:	 	 
	 

	 	 	 	 	 	 

     Oculus Innovative Sciences, Inc., a California corporation (the “Company”), hereby grants to
the optionee named above (the “Optionee”) an option (the “Option”) to purchase the amount of shares
of Common Stock set forth above (the “Shares”) of the Company, at the Exercise Price set forth
above and on the terms set forth herein, and in all respects subject to the terms and provisions of
the Company’s 2004 Stock Plan (the “Plan”) applicable to nonstatutory stock options, which terms
and provisions hereby are incorporated by reference herein. Unless the context herein otherwise
requires, the terms defined in the Plan shall have the same meanings herein.

     1. Nature of the Option. The Option granted pursuant to this agreement (the
"Agreement”) is intended to be a nonstatutory stock option and is not intended to be an incentive
stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the “Code”), or otherwise to qualify for any special tax benefits to Optionee.

     2. Date of Grant; Term of Option. The Option is granted as of the Grant Date set
forth above, and it may not be exercised later than ten (10) years from such date.

     3. Option Exercise Price. The exercise price for the Option is the Exercise Price per
Share set forth above, which price is intended to be not less than eighty-five percent (85%) of the
fair market value thereof on the date the Option was granted (or not less than one hundred ten
percent (110%) of the fair market value thereof on the date the Option was granted, if the Optionee
owns stock representing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or its parents or subsidiaries immediately before the grant of such
Option).

     4. Exercise of Option. The Option shall be exercisable during its term only in
accordance with the terms and provisions of the Plan and the Option as follows:

1

 

          (a) Right to Exercise. The Option shall vest and be exercisable, cumulatively, during
its term as to one-fifth (1/5) of the Shares at the end of the first twelve (12)
full months of Continuous Status as an Employee of the Company following the Vesting
Commencement Date (as set forth above) and thereafter as to one-fifth (1/5) of the Shares at the
end of each successive one-year period of Continuous Status as an Employee of the Company after
such initial twelve month period until the Shares are fully vested.

          (b) Method of Exercise. The Option shall be exercisable by written notice which shall
state the election to exercise the Option, the number of Shares in respect to which the Option is
being exercised and such other representations and agreements as to Optionee’s investment intent
with respect to such Shares as may be required by the Company hereunder or pursuant to the
provisions of the Plan. Such written notice shall be signed by Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company or such other person as may be
designated by the Company. The written notice shall be accompanied by payment of the purchase
price and, at the Company’s option, either (i) an executed investment representation statement
acceptable to the Company (the “Investment Representation Statement”) or (ii) an executed stock
purchase agreement acceptable to the Company (the “Stock Purchase Agreement”). Payment of the
purchase price shall be made by check or such other consideration and method of payment authorized
by the Board pursuant to the Plan. The certificate or certificates for the Shares as to which the
Option shall be exercised shall be registered in the name of Optionee and shall carry the legends
set forth in the Plan, the Stock Purchase Agreement or the Investment Representation Statement, as
applicable, and/or as required under applicable law.

          (c) Restrictions on Exercise. The Option may not be exercised if the issuance of the
Shares upon such exercise would constitute a violation of any applicable federal or state
securities laws or other laws or regulations. As a condition to the exercise of the Option, the
Company may require Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.

     5. Investment Representations. In connection with the acquisition of the Option,
Optionee represents and warrants as follows:

          (a) Investment Intent. Optionee is acquiring the Option, and upon exercise of the
Option, Optionee will be acquiring the Shares for investment for Optionee’s own account, not as a
nominee or agent, and not with a view to, or for resale in connection with, any distribution
thereof.

          (b) Protection of Interests. Optionee, by reason of Optionee’s business or financial
experience, has the capacity to evaluate the merits and risks of purchasing Common Stock of the
Company and to make an informed investment decision with respect thereto and to protect Optionee’s
interests in connection with the acquisition of the Option and the Shares.

     6. Termination of Status as an Employee. If Optionee ceases to serve as an Employee
for any reason other than death or disability and thereby terminates Optionee’s

2

 

Continuous Status
as an Employee, Optionee shall have the right to exercise the Option (or any portion thereof not
yet exercised) at any time within thirty (30) days after the date of such termination up to the
amount that Optionee was entitled to exercise as determined on the date of
such termination. If Optionee ceases to serve as an Employee due to death or disability, the
Option may be exercised at any time within six (6) months after the date of death or termination of
employment due to disability, in the case of death, by Optionee’s estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, or in the case of disability,
by Optionee, but in any case only up to the amount that Optionee was entitled to exercise at the
date of such termination as determined on the date of such termination due to death or disability.
To the extent of any portion of the Option not vested and not exercisable at the date of
termination, or to the extent any exercisable portion of the Option is not exercised within the
time specified herein, the Option shall terminate. Notwithstanding the foregoing, the Option shall
not be exercisable after the expiration of the term set forth in Section 2 hereof.

     7. Withholding Tax Liability. The Company reserves the right to withhold, in
accordance with any applicable laws, from any compensation or other consideration payable to the
Optionee any taxes required to be withheld by federal, state or local law as a result of the grant
or exercise of the Option or the sale or other disposition of the Shares issued upon exercise of
the Option, and if such compensation or consideration is insufficient, the Company may require
Optionee to pay to the Company an amount sufficient to cover such withholding tax liability.

     8. Nontransferability of Option. The Option may not be sold, pledged, assigned,
hypothecated, gifted, transferred or disposed of in any manner either voluntarily or involuntarily
by operation of law or otherwise, other than by will or by the laws of descent or distribution, and
may be exercised during the lifetime of Optionee only by such Optionee. Subject to the foregoing
and the terms of the Plan, the terms of the Option shall be binding upon the executors,
administrators, heirs, successors and assigns of Optionee.

     9. Continuation of Employment. Neither the Option or the Plan nor any Option granted
thereunder shall confer upon any Optionee any right to continue in the employment of the Company,
its parent, subsidiary or a successor corporation or limit in any respect the right of the Company
or any such corporations to discharge the Optionee at any time, with or without cause and with or
without notice.

     10. Limitations on Transfer. In addition to any other limitation on transfer created
by applicable securities laws, Optionee will not sell, transfer, assign, encumber or otherwise
dispose of (including, without limitation by operation of law) any of Optionee’s right, title or
interest in and to all or any portion of the Shares except as provided in this Section and in any
event not prior to the expiration of the six-month period following the issuance of the Shares
pursuant to the exercise of this Option:

          (a) Right of First Refusal. In the event Optionee desires (or is required) to sell or
transfer in any manner all or a portion of the Shares, the Optionee shall first offer such Shares
for sale to the Company (or its assignee) at the same price (which price shall be no less

3

 

than the
fair market value of such Shares as of the date of such proposed transfer), and upon the same terms
(or reasonably similar terms) as those on which the Optionee is disposing of said Shares (“Right of
First Refusal”). Optionee shall offer such Shares to the Company by delivering a written notice
(the “Notice”) to the Company stating (i) Optionee’s bona fide
intention to sell or otherwise transfer such Shares, (ii) the number of such Shares to be sold
or otherwise transferred, (iii) the price for which Optionee proposes to sell such Shares and all
additional terms and conditions, if any, of the sale or transfer, and (iv) the name of the proposed
buyer or transferee. Optionee shall attach to the Notice a copy of the written offer, if any, of
the sale or transfer. In the event of a transfer not involving a sale of such Shares for a
specific sum of money, or if, in the sole judgment of the Company’s Board of Directors, the
proposed transfer does not involve a price for the Shares negotiated by the Optionee and Optionee’s
proposed transferee in a bona fide “arm’s length transaction,” the price of the Shares shall be
determined by the Company’s Board of Directors in the manner specified in Section 10(c) below.

          Within thirty (30) days after the Company’s receipt of the Notice (the “Acceptance Period”),
the Company (or its assignee) may elect to purchase all of the Shares (or, with the consent of the
Optionee, a portion thereof) to which the Notice refers, at the price per Share (or at the fair
market value of such Shares determined pursuant to Section 10(c) hereof in the case of a transfer
other than a bona fide arms-length transaction) and on the same terms and conditions (or terms and
conditions as similar as reasonably possible) as set forth in the Notice. If the Company (or its
assignee) elects to purchase such Shares hereunder, it shall notify Optionee in writing during the
Acceptance Period of its intention to purchase all of such Shares (or, with the consent of
Optionee, a portion thereof) and either (i) set a date and location for the closing of the
transaction on or prior to the last day of the Acceptance Period, or at such later date as the
parties may otherwise agree, at which time the Company (or its assignee) shall tender payment for
the Shares or (ii) close the transaction by including payment for the Shares with the Company’s
notice to Optionee. At such closing, the certificates representing the Shares so purchased shall
be delivered to the Company and canceled or, in the case of payment by the Company by mail, such
certificates shall be deemed to be canceled upon the date of such mailing of the Company’s payment
and, thereafter, shall be promptly returned by Optionee to the Company by certified or registered
mail. Optionee hereby authorizes and directs the Secretary or transfer agent of the Company to
transfer the Shares as to which the Right of First Refusal has been exercised from Optionee to the
Company (or its assignee). Optionee further authorizes the Company to refuse, or to cause its
transfer agent to refuse, to transfer or record any Shares to be transferred in violation of this
Agreement. If the Company (or its assignee) does not elect to purchase the Shares to which the
Notice refers, Optionee may sell or otherwise transfer the Shares to the third party named in the
Notice at the price and on the terms and conditions specified in the Notice or at a higher price,
provided that such sale or transfer is consummated within sixty (60) days from either (i) the lapse
of the Acceptance Period or (ii) the date of the Company’s written notice advising Optionee that it
does not intend to purchase the Shares hereunder, whichever occurs first in time and provided,
further, that any such sale or transfer is in accordance with all of the terms and conditions set
forth in this Agreement. In the event the Shares are not disposed of by the Optionee within said
60-day period, such Shares shall once again be subject to the Right of First Refusal herein
provided.

4

 

          (b) Involuntary Transfer. In the event of any transfer by operation of law or other
involuntary transfer (the “Involuntary Transfer”) of all or a portion of the Shares, the Company
shall have an option to purchase all of the Shares transferred (the “Involuntary Transfer Option”).
Upon such transfer, the Optionee and person acquiring the Shares shall promptly notify in writing
the Secretary of the Company of such transfer. The Company (or its
assignee) shall notify Optionee and the person acquiring the Shares as to whether the Company
(or its assignee) wishes to purchase the Shares pursuant to the Involuntary Transfer Option within
thirty (30) days after receipt by the Company of the written notice of the involuntary transfer of
the Shares. If the Company (or its assignee) elects to purchase said Shares hereunder, it shall
set a date for the closing of the transaction at a place specified by the Company (or its assignee)
not later than thirty (30) days after receipt by the Company of the written notice of the
involuntary transfer of the Shares, or at such later date as the parties may otherwise agree. At
such closing, the Company (or its assignee) shall tender payment for the Shares and the
certificates representing the Shares so purchased shall be canceled. Optionee hereby authorizes
and directs the Secretary or transfer agent of the Company to transfer the Shares as to which the
Involuntary Transfer Option has been exercised from the Optionee to the Company (or its assignee).
Optionee further authorizes the Company to refuse, or to cause its transfer agent to refuse, to
transfer or record any Shares to be transferred in violation of this Agreement.

          (c) Determination of Price. With respect to Shares to be transferred pursuant to the
Right of First Refusal where the price is not determined as a result of a bona fide arms-length
transaction by the Optionee under Section 10(a) or the Involuntary Transfer Option, the price per
share shall be a price set by the Board of Directors of the Company that will reflect the then
current fair market value of the Shares, as determined by the Board of Directors in good faith
after giving consideration to the factors set forth in Section 260.140.50 of Title 10 of the
California Code of Regulations or, upon the request of the Optionee, by an independent appraiser
acceptable to both the Company and the Optionee; provided, that the Optionee shall be required to
bear one-half of the cost of such independent appraisal.

          (d) Intra-family Transfers. Notwithstanding anything to the contrary contained
herein, Optionee shall have the right, at any time and from time to time during Optionee’s lifetime
or upon Optionee’s death, to transfer all or any portion of Optionee’s Shares (the “Transferred
Family Shares”) to Optionee’s spouse, any of Optionee’s issue, ancestors or descendants, or a trust
for the sole benefit of Optionee, Optionee’s spouse, any of Optionee’s issue, ancestors or
descendants (any such individual or trust is hereinafter referred to as an “Intra-family
Transferee”), provided that the Intra-family Transferee receiving the Transferred Family Shares
executes a consent to be bound by the terms of this Agreement with respect to the Transferred
Family Shares. The Transferred Family Shares shall be and remain subject to all of the terms and
conditions of this Agreement as were applicable to such Shares immediately prior to their transfer
pursuant to this Section 10(d); without limiting the foregoing, the obligations hereunder arising
out of the possession or ownership of such Transferred Family Shares shall be binding upon the
respective Intra-family Transferees. For purposes of exercising any rights under this Agreement,
the Company’s right to purchase the Shares of Optionee shall extend to any Shares owned by an
Intra-family Transferee.

5

 

          (e) Restriction on Alienation. Any sale, transfer, encumbrance, or other disposition
or purported sale, transfer, encumbrance or disposition of any of the Shares by Optionee, whether
voluntarily, by operation of law or otherwise, shall be null and void unless the terms, conditions
and provisions of this Agreement are strictly complied with. Optionee further authorizes the
Company to refuse, or cause its Transfer Agent to refuse, to transfer or record any Shares to be
transferred in violation of this Agreement.

          (f) Assignment by Company. The Company’s Right of First Refusal and Involuntary
Transfer Option, at the sole discretion of the Company, may be assigned in whole or in part to any
shareholder or shareholders of the Company.

          (g) Obligations Binding Upon Transferees. All transferees of Shares or any interest
therein will receive and hold such Shares or interests subject to the provisions of this Agreement,
including the Company’s Right of First Refusal and Involuntary Transfer Option. Any sale or
transfer of the Shares shall be void unless the provisions of this Agreement are met.

          (h) Termination of Rights. The Right of First Refusal and Involuntary Transfer Option
granted the Company by this Section 10 shall terminate at such time as a public market exists for
the Company’s Common Stock (or any other stock issued to purchasers in exchange for the Shares
purchased under this Agreement). For the purpose of this Agreement, a “public market” shall be
deemed to exist if the Common Stock is listed on a national securities exchange (as that term is
used in the Securities Exchange Act of 1934, as amended), or the Common Stock is traded on the
over-the-counter market and prices are published on business days in a recognized financial
journal.

          (i) Indebtedness. Any payment by the Company for purchase of Shares from Optionee may
be made by cancellation of any indebtedness owed to Company by Optionee.

          (j) Legends. All certificates representing any Shares of the Company purchased upon
exercise of the Options shall have endorsed thereon the following legends, or substantially similar
legends, in addition to any legends required by state securities laws, unless in the opinion of
counsel such legends are no longer necessary:

	 	(1)	 	THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
	 
	 	(2)	 	THE SECURITIES REPRESENTED BY THIS CERTIFICATE 

6

 

	 	 	 	MAY BE TRANSFERRED ONLY
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

          (k) Market Standoff Agreement. The Optionee, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, agrees not
to sell or otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by Optionee during the period not to exceed one hundred and eighty (180) days as
requested by the managing underwriter following the effective date of a registration statement of
the Company filed under the Securities Act (as hereafter defined), provided that all officers and
directors of the Company are required to enter into similar agreements. Such agreement shall be in
writing in a form satisfactory to the Company and such underwriter. The Company may impose
stop-transfer instructions with respect to the shares (or other securities) subject to the
foregoing restriction until the end of such period.

     11. The Plan. The Option is subject to, and the Company and Optionee agree to be
bound by, all of the terms and conditions of the Plan as such Plan may be amended from time to time
in accordance with the terms thereof, provided that no such amendment shall deprive Optionee,
without Optionee’s consent, of the Option or any rights hereunder. Pursuant to the Plan, the Board
of Directors of the Company is authorized to adopt rules and regulations not inconsistent with the
Plan as it shall deem appropriate and proper. A copy of the Plan in its present form is available
for inspection during business hours by Optionee or the persons entitled to exercise the Option at
the Company’s principal office.

     12. Entire Agreement; Amendment. This Agreement and the Plan (together with any
related Investment Representation Statement or Stock Purchase Agreement executed in connection
herewith) contain (or will contain) the entire understanding between the parties with respect to
the subject matter hereof and supersede all prior and contemporaneous written or oral negotiations
and agreements between them regarding the subject matter hereof. This Agreement may be amended
only in writing signed by each of the parties hereto.

	 	 	 	 	 
	 

	 	 OCULUS INNOVATIVE	 	 
	 

	 	 SCIENCES, INC.	 	 
	 
	 	 	 	 
	 

	 	 
 Signature
	 	 
	 
	 	 	 	 
	 

	 	 
 Printed
Name and Title
	 	 

7

 

     Optionee acknowledges receipt of a copy of the Plan, a copy of which is attached hereto, and
represents that Optionee has read and is familiar with the terms and provisions thereof, and hereby
accepts the Option subject to all of the terms and provisions thereof. Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the Board of Directors
or the Committee upon any questions arising under the Plan.

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 OPTIONEE	 	 
	 
	 	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 Signature	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 Printed Name	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Address:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	 	 	 

	 	 

8

 

OCULUS INNOVATIVE SCIENCES, INC.

INCENTIVE STOCK OPTION AGREEMENT

(Standard Form)

	 	 	 	 	 	 	 
	Optionee:

	 	 
	 	Grant Date:
	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 
	 	Vesting
	 	 
	 

	 	 
	 	Commencement
	 	 
	 

	 	 
	 	Date:
	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 
	 	Shares:
	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 
	 	Exercise Price:
	 	 
	 

	 	 	 	 	 	 

     Oculus Innovative Sciences, Inc., a California corporation (the “Company”), hereby grants to
the optionee named above (the “Optionee”) an option (the “Option”) to purchase the amount of shares
of Common Stock set forth above (the “Shares”) of the Company, at the Exercise Price set forth
above and on the terms set forth herein, and in all respects subject to the terms and provisions of
the Company’s 2004 Stock Plan (the “Plan”) applicable to incentive stock options, which terms and
provisions hereby are incorporated by reference herein. Unless the context herein otherwise
requires, the terms defined in the Plan shall have the same meanings herein.

     1.     Nature of the Option. The Option granted pursuant to this agreement (the
"Agreement”) is intended to be an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”).

     2.     Date of Grant; Term of Option. The Option is granted as of the Grant Date set forth
above, and it may not be exercised later than ten (10) years from such date; provided
however, that an Option granted to a shareholder who, immediately before such grant, owns stock
representing more than ten percent (10%) of the total combined voting power of all classes of stock
of the Company, its parents or subsidiaries immediately before the grant of such Option, may not be
exercised later than five (5) years from such date.

     3.     Option Exercise Price. The exercise price for the Option is the Exercise Price per
Share set forth above, which price is intended to be not less than one hundred percent (100%) of
the fair market value thereof on the date the Option was granted (or not less than one hundred ten
percent (110%) of the fair market value thereof on the date the Option was granted, if the Optionee
owns stock representing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or its parents or subsidiaries immediately before the grant of such
Option).

 

 

     4.     Exercise of Option. The Option shall be exercisable during its term only in
accordance with the terms and provisions of the Plan and the Option as follows:

          (a)     Right to Exercise. The Option shall vest and be exercisable, cumulatively, during
its term as to one-fifth (1/5) of the Shares at the end of the first twelve (12) full months of
Continuous Status as an Employee of the Company following the Vesting Commencement Date (as set
forth above) and thereafter as to one-fifth (1/5) of the Shares at the end of each successive
one-year period of Continuous Status as an Employee of the Company after such initial twelve-month
period until the Shares are fully vested.

          (b     Method of Exercise. The Option shall be exercisable by written notice which shall
state the election to exercise the Option, the number of Shares in respect to which the Option is
being exercised and such other representations and agreements as to Optionee’s investment intent
with respect to such Shares as may be required by the Company hereunder or pursuant to the
provisions of the Plan. Such written notice shall be signed by Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company or such other person as may be
designated by the Company. The written notice shall be accompanied by payment of the purchase
price and, at the Company’s option, either (i) an executed investment representation statement
acceptable to the Company (the “Investment Representation Statement”) or (ii) an executed stock
purchase agreement acceptable to the Company (the “Stock Purchase Agreement”). Payment of the
purchase price shall be made by check or such other consideration and method of payment authorized
by the Board pursuant to the Plan. The certificate or certificates for the Shares as to which the
Option shall be exercised shall be registered in the name of Optionee and shall carry the legends
set forth in the Plan, the Stock Purchase Agreement or the Investment Representation Statement, as
applicable, and/or as required under applicable law.

          (c)     Restrictions on Exercise. The Option may not be exercised if the issuance of the
Shares upon such exercise would constitute a violation of any applicable federal or state
securities laws or other laws or regulations. As a condition to the exercise of the Option, the
Company may require Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.

     5.     Investment Representations. In connection with the acquisition of the Option,
Optionee represents and warrants as follows:

          (a)     Investment Intent. Optionee is acquiring the Option, and upon exercise of the
Option, Optionee will be acquiring the Shares for investment for Optionee’s own account, not as a
nominee or agent, and not with a view to, or for resale in connection with, any distribution
thereof.

          (b)     Protection of Interests. Optionee, by reason of Optionee’s business or financial
experience, has the capacity to evaluate the merits and risks of purchasing Common Stock of the
Company and to make an informed investment decision with respect thereto and to protect Optionee’s
interests in connection with the acquisition of the Option and the Shares.

2

 

     6.     Termination of Status as an Employee. If Optionee ceases to serve as an Employee
for any reason other than death or disability and thereby terminates Optionee’s Continuous Status
as an Employee, Optionee shall have the right to exercise the Option (or any portion thereof not
yet exercised) at any time within thirty (30) days after the date of such termination up to the
amount that Optionee was entitled to exercise as determined on the date of such termination. If
Optionee ceases to serve as an Employee due to death or disability, the Option may be exercised at
any time within six (6) months after the date of death or termination of employment due to
disability, in the case of death, by Optionee’s estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, or in the case of disability, by Optionee, but in
any case only up to the amount that Optionee was entitled to exercise at the date of such
termination as determined on the date of such termination due to death or disability. To the
extent of any portion of the Option not vested and not exercisable at the date of termination, or
to the extent any exercisable portion of the Option is not exercised within the time specified
herein, the Option shall terminate. Notwithstanding the foregoing, the Option shall not be
exercisable after the expiration of the term set forth in Section 2 hereof.

     7.     Withholding Tax Liability. The Company reserves the right to withhold, in
accordance with any applicable laws, from any compensation or other consideration payable to the
Optionee any taxes required to be withheld by federal, state or local law as a result of the grant
or exercise of the Option or the sale or other disposition of the Shares issued upon exercise of
the Option, and if such compensation or consideration is insufficient, the Company may require
Optionee to pay to the Company an amount sufficient to cover such withholding tax liability. The
Optionee agrees to notify the Company immediately in the event of any disqualifying disposition
(within the meaning of Section 421(b) of the Code) of the Shares acquired upon exercise of an
incentive stock option.

     8.     Nontransferability of Option. The Option may not be sold, pledged, assigned,
hypothecated, gifted, transferred or disposed of in any manner either voluntarily or involuntarily
by operation of law or otherwise, other than by will or by the laws of descent or distribution, and
may be exercised during the lifetime of Optionee only by such Optionee. Subject to the foregoing
and the terms of the Plan, the terms of the Option shall be binding upon the executors,
administrators, heirs, successors and assigns of Optionee.

     9.     Continuation of Employment. Neither the Option or the Plan nor any Option granted
thereunder shall confer upon any Optionee any right to continue in the employment of the Company,
its parent, subsidiary or a successor corporation or limit in any respect the right of the Company
or any such corporations to discharge the Optionee at any time, with or without cause and with or
without notice.

     10.     Limitations on Transfer. In addition to any other limitation on transfer created
by applicable securities laws, Optionee will not sell, transfer, assign, encumber or otherwise
dispose of (including, without limitation by operation of law) any of Optionee’s right, title or
interest in and to all or any portion of the Shares except as provided in this Section and in any
event not prior to the expiration of the six-month period following the issuance of the Shares
pursuant to the exercise of this Option:

3

 

          (a)     Right of First Refusal. In the event Optionee desires (or is required) to sell or
transfer in any manner all or a portion of the Shares, the Optionee shall first offer such Shares
for sale to the Company (or its assignee) at the same price (which price shall be no less than the
fair market value of such Shares as of the date of such proposed transfer), and upon the same terms
(or reasonably similar terms) as those on which the Optionee is disposing of said Shares (“Right of
First Refusal”). Optionee shall offer such Shares to the Company by delivering a written notice
(the “Notice”) to the Company stating (i) Optionee’s bona fide intention to sell or otherwise
transfer such Shares, (ii) the number of such Shares to be sold or otherwise transferred, (iii) the
price for which Optionee proposes to sell such Shares and all additional terms and conditions, if
any, of the sale or transfer, and (iv) the name of the proposed buyer or transferee. Optionee
shall attach to the Notice a copy of the written offer, if any, of the sale or transfer. In the
event of a transfer not involving a sale of such Shares for a specific sum of money, or if, in the
sole judgment of the Company’s Board of Directors, the proposed transfer does not involve a price
for the Shares negotiated by the Optionee and Optionee’s proposed transferee in a bona fide “arm’s
length transaction,” the price of the Shares shall be determined by the Company’s Board of
Directors in the manner specified in Section 10(c) below.

          Within thirty (30) days after the Company’s receipt of the Notice (the “Acceptance Period”),
the Company (or its assignee) may elect to purchase all of the Shares (or, with the consent of the
Optionee, a portion thereof) to which the Notice refers, at the price per Share (or at the fair
market value of such Shares determined pursuant to Section 10(c) hereof in the case of a transfer
other than a bona fide arms-length transaction) and on the same terms and conditions (or terms and
conditions as similar as reasonably possible) as set forth in the Notice. If the Company (or its
assignee) elects to purchase such Shares hereunder, it shall notify Optionee in writing during the
Acceptance Period of its intention to purchase all of such Shares (or, with the consent of
Optionee, a portion thereof) and either (i) set a date and location for the closing of the
transaction on or prior to the last day of the Acceptance Period, or at such later date as the
parties may otherwise agree, at which time the Company (or its assignee) shall tender payment for
the Shares or (ii) close the transaction by including payment for the Shares with the Company’s
notice to Optionee. At such closing, the certificates representing the Shares so purchased shall
be delivered to the Company and canceled or, in the case of payment by the Company by mail, such
certificates shall be deemed to be canceled upon the date of such mailing of the Company’s payment
and, thereafter, shall be promptly returned by Optionee to the Company by certified or registered
mail. Optionee hereby authorizes and directs the Secretary or transfer agent of the Company to
transfer the Shares as to which the Right of First Refusal has been exercised from Optionee to the
Company (or its assignee). Optionee further authorizes the Company to refuse, or to cause its
transfer agent to refuse, to transfer or record any Shares to be transferred in violation of this
Agreement. If the Company (or its assignee) does not elect to purchase the Shares to which the
Notice refers, Optionee may sell or otherwise transfer the Shares to the third party named in the
Notice at the price and on the terms and conditions specified in the Notice or at a higher price,
provided that such sale or transfer is consummated within sixty (60) days from either (i) the lapse
of the Acceptance Period or (ii) the date of the Company’s written notice advising Optionee that it
does not intend to purchase the Shares hereunder, whichever occurs first in time and provided,
further, that any such sale or transfer is in accordance with all of the terms and conditions set
forth in this Agreement. In the event the Shares are not disposed of by the Optionee within said
60-day period, such Shares shall once

4

 

again be subject to the Right of First Refusal herein provided.

          (b)     Involuntary Transfer. In the event of any transfer by operation of law or other
involuntary transfer (the “Involuntary Transfer”) of all or a portion of the Shares, the Company
shall have an option to purchase all of the Shares transferred (the “Involuntary Transfer Option”).
Upon such transfer, the Optionee and person acquiring the Shares shall promptly notify in writing
the Secretary of the Company of such transfer. The Company (or its assignee) shall notify Optionee
and the person acquiring the Shares as to whether the Company (or its assignee) wishes to purchase
the Shares pursuant to the Involuntary Transfer Option within thirty (30) days after receipt by the
Company of the written notice of the involuntary transfer of the Shares. If the Company (or its
assignee) elects to purchase said Shares hereunder, it shall set a date for the closing of the
transaction at a place specified by the Company (or its assignee) not later than thirty (30) days
after receipt by the Company of the written notice of the involuntary transfer of the Shares, or at
such later date as the parties may otherwise agree. At such closing, the Company (or its assignee)
shall tender payment for the Shares and the certificates representing the Shares so purchased shall
be canceled. Optionee hereby authorizes and directs the Secretary or transfer agent of the Company
to transfer the Shares as to which the Involuntary Transfer Option has been exercised from the
Optionee to the Company (or its assignee). Optionee further authorizes the Company to refuse, or
to cause its transfer agent to refuse, to transfer or record any Shares to be transferred in
violation of this Agreement.

          (c)     Determination of Price. With respect to Shares to be transferred pursuant to the
Right of First Refusal where the price is not determined as a result of a bona fide arms-length
transaction by the Optionee under Section 10(a) or the Involuntary Transfer Option, the price per
share shall be a price set by the Board of Directors of the Company that will reflect the then
current fair market value of the Shares, as determined by the Board of Directors in good faith
after giving consideration to the factors set forth in Section 260.140.50 of Title 10 of the
California Code of Regulations or, upon the request of the Optionee, by an independent appraiser
acceptable to both the Company and the Optionee; provided, that the Optionee shall be required to
bear one-half of the cost of such independent appraisal.

          (d)     Intra-family Transfers. Notwithstanding anything to the contrary contained
herein, Optionee shall have the right, at any time and from time to time during Optionee’s lifetime
or upon Optionee’s death, to transfer all or any portion of Optionee’s Shares (the “Transferred
Family Shares”) to Optionee’s spouse, any of Optionee’s issue, ancestors or descendants, or a trust
for the sole benefit of Optionee, Optionee’s spouse, any of Optionee’s issue, ancestors or
descendants (any such individual or trust is hereinafter referred to as an “Intra-family
Transferee”), provided that the Intra-family Transferee receiving the Transferred Family Shares
executes a consent to be bound by the terms of this Agreement with respect to the Transferred
Family Shares. The Transferred Family Shares shall be and remain subject to all of the terms and
conditions of this Agreement as were applicable to such Shares immediately prior to their transfer
pursuant to this Section 10(d); without limiting the foregoing, the obligations hereunder arising
out of the possession or ownership of such Transferred Family Shares shall be binding upon the
respective Intra-family Transferees. For purposes of exercising any rights under this Agreement,
the Company’s right to purchase the Shares of Optionee shall extend to any Shares owned by an
Intra-family Transferee.

5

 

          (e     Restriction on Alienation. Any sale, transfer, encumbrance, or other disposition
or purported sale, transfer, encumbrance or disposition of any of the Shares by Optionee, whether
voluntarily, by operation of law or otherwise, shall be null and void unless the terms, conditions
and provisions of this Agreement are strictly complied with. Optionee further authorizes the
Company to refuse, or cause its Transfer Agent to refuse, to transfer or record any Shares to be
transferred in violation of this Agreement.

          (f)     Assignment by Company. The Company’s Right of First Refusal and Involuntary
Transfer Option, at the sole discretion of the Company, may be assigned in whole or in part to any
shareholder or shareholders of the Company.

          (g)     Obligations Binding Upon Transferees. All transferees of Shares or any interest
therein will receive and hold such Shares or interests subject to the provisions of this Agreement,
including the Company’s Right of First Refusal and Involuntary Transfer Option. Any sale or
transfer of the Shares shall be void unless the provisions of this Agreement are met.

          (h)     Termination of Rights. The Right of First Refusal and Involuntary Transfer Option
granted the Company by this Section 10 shall terminate at such time as a public market exists for
the Company’s Common Stock (or any other stock issued to purchasers in exchange for the Shares
purchased under this Agreement). For the purpose of this Agreement, a “public market” shall be
deemed to exist if the Common Stock is listed on a national securities exchange (as that term is
used in the Securities Exchange Act of 1934, as amended), or the Common Stock is traded on the
over-the-counter market and prices are published on business days in a recognized financial
journal.

          (i)     Indebtedness. Any payment by the Company for purchase of Shares from Optionee may
be made by cancellation of any indebtedness owed to Company by Optionee.

          (j)     Legends. All certificates representing any Shares of the Company purchased upon
exercise of the Options shall have endorsed thereon the following legends, or substantially similar
legends, in addition to any legends required by state securities laws, unless in the opinion of
counsel such legends are no longer necessary:

	 	(1)	 	THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

	 	(2)	 	THE SECURITIES REPRESENTED BY THIS CERTIFICATE

6

 

	 	 	 	MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN
THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.

          (k)     Market Standoff Agreement. The Optionee, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, agrees not to sell or otherwise
transfer or dispose of any Common Stock (or other securities) of the Company held by Optionee
during the period not to exceed one hundred and eighty (180) days as requested by the managing
underwriter following the effective date of a registration statement of the Company filed under the
Securities Act (as hereafter defined), provided that all officers and directors of the Company are
required to enter into similar agreements. Such agreement shall be in writing in a form
satisfactory to the Company and such underwriter. The Company may impose stop-transfer
instructions with respect to the shares (or other securities) subject to the foregoing restriction
until the end of such period.

     11.     The Plan. The Option is subject to, and the Company and Optionee agree to be
bound by, all of the terms and conditions of the Plan as such Plan may be amended from time to time
in accordance with the terms thereof, provided that no such amendment shall deprive Optionee,
without Optionee’s consent, of the Option or any rights hereunder. Pursuant to the Plan, the Board
of Directors of the Company is authorized to adopt rules and regulations not inconsistent with the
Plan as it shall deem appropriate and proper. A copy of the Plan in its present form is available
for inspection during business hours by Optionee or the persons entitled to exercise the Option at
the Company’s principal office.

     12.     Entire Agreement; Amendment. This Agreement and the Plan (together with any
related Investment Representation Statement or Stock Purchase Agreement executed in connection
herewith) contain (or will contain) the entire understanding between the parties with respect to
the subject matter hereof and supersede all prior and contemporaneous written or oral negotiations
and agreements between them regarding the subject matter hereof. This Agreement may be amended
only in writing signed by each of the parties hereto.

	 	 	 
	 

	 	OCULUS INNOVATIVE
	 

	 	SCIENCES, INC.
	 
	 	 
	 

	 	 
	 

	 	Signature
	 
	 	 
	 

	 	 
	 

	 	Printed Name and Title

7

 

     Optionee acknowledges receipt of a copy of the Plan, a copy of which is attached hereto, and
represents that Optionee has read and is familiar with the terms and provisions thereof, and hereby
accepts the Option subject to all of the terms and provisions thereof. Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the Board of Directors
or the Committee upon any questions arising under the Plan.

	 	 	 	 	 
	 

	 	 
	 	OPTIONEE
	 
	Date:

	 	 
	 	 
	 

	 	 
	 	 
	 

	 	 
	 	Signature
	 

	 	 
	 	 
	 
	 

	 	 	 	 
	 

	 	 	 	Printed Name
	 
	 

	 	 	Address:   
	 
	 

	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	 
	 

	 	 
	 	 

8exv10w7

 

Exhibit 10.7

LEASE

between

RNM LAKEVILLE, L.P.,

a California Limited Partnership

as LANDLORD

and

MICROMED LABORATORIES, INC.

a California corporation

as TENANT

October 26, 1999

 

 

LEASE

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	Paragraph	 	 	 	 	 	 
	1.

	 	SUMMARY AND DEFINITIONS
	 	 	1	 
	2.

	 	DEMISE
	 	 	2	 
	3.

	 	CONDITION AND ACCEPTANCE OF PREMISES
	 	 	2	 
	4.

	 	RENT
	 	 	2	 
	5.

	 	SECURITY DEPOSIT
	 	 	3	 
	6.

	 	UTILITIES; SERVICES
	 	 	3	 
	7.

	 	USE OF PREMISES
	 	 	4	 
	8.

	 	BROKERS
	 	 	4	 
	9.

	 	TENANT’S TAXES
	 	 	5	 
	10.

	 	ALTERATIONS, REPAIRS AND MAINTENANCE.
	 	 	5	 
	11.

	 	LIENS
	 	 	8	 
	12.

	 	ENTRY
	 	 	8	 
	13.

	 	INDEMNIFICATION AND EXCULPATION.
	 	 	8	 
	14.

	 	INSURANCE
	 	 	9	 
	15.

	 	NO SUBROGATION
	 	 	10	 
	16.

	 	DAMAGE OR DESTRUCTION
	 	 	10	 
	17.

	 	CONDEMNATION
	 	 	11	 
	18.

	 	DEFAULTS AND REMEDIES.
	 	 	12	 
	19.

	 	ENCUMBRANCES, ASSIGNMENT AND SUBLETTING
	 	 	15	 
	20.

	 	SUBORDINATION
	 	 	16	 
	21.

	 	ESTOPPEL CERTIFICATE
	 	 	17	 
	22.

	 	SIGNS
	 	 	17	 
	23.

	 	SURRENDER OF PREMISES
	 	 	17	 
	24.

	 	PROFESSIONAL FEES
	 	 	18	 
	25.

	 	GENERAL PROVISIONS.
	 	 	18	 
	ADDENDUM	 	 	1	 
	26.

	 	TENANT’S EXTENSION OPTION.
	 	 	1	 
	27.

	 	RIGHT OF FIRST REFUSAL.
	 	 	2	 
	28.

	 	PARKING
	 	 	3	 
	29.

	 	HAZARDOUS MATERIAL.
	 	 	3	 
	30.

	 	CONDITIONAL ABATEMENT OF BASE RENT
	 	 	6	 

Exhibits

   A   Definitions

   B   Floor Plan

   C   Opening/Closing Certificate

   D   Tenant Estoppel Certificate

   E   Rules and Regulations

   F   Hazardous Materials

i

 

LEASE

     RNM LAKEVILLE, L.P., a California Limited Partnership (with its successors called “Landlord”),
and MICROMED LABORATORIES, INC., a California corporation (with its successors called “Tenant”),
agree as follows as of October 26, 1999.

1.     SUMMARY AND DEFINITIONS: The following definitions and those in Exhibit A apply in this
Lease:

     1.1. Premises:

          (a) The space in the Building at 1129 North McDowell Blvd., Petaluma, California, depicted as
Premises on Exhibit B. The Rentable Area of the Premises is estimated to total 8,340 square feet
of Rentable Area. The Rentable Areas set forth in this Lease shall be conclusive on Landlord and
Tenant.

          (b) Notwithstanding the foregoing, until the first day of the seventh (7th) calendar month
following the Commencement Date (the “First Expansion Date”), Tenant shall lease, and the term
“Premises” shall include, only the approximately 4,000 square feet of Rentable Area designated as
Area A on Exhibit B (the “Initial Premises”). Commencing no later than the First Expansion Date,
Tenant shall lease, and the term “Premises” shall also include, the First Expansion Premises of
approximately 2,000 square feet of Rentable Area designated as Area B on Exhibit B. Commencing no
later than on the first day of the thirteenth (13th) calendar month following the Commencement Date
(the “Second Expansion Date”), Tenant shall lease, and the term “Premises” shall include, the
entire 8,340 square feet of Rentable Area designated on Exhibit B. Notwithstanding the above,
Tenant, at its option, may accelerate the First Expansion Date and/or Second Expansion Date by
delivering written notice thereof to Landlord not less than sixty (60) days prior to the requested
accelerated Expansion Date. On each Expansion Date, Base Rent, Tenant’s Share and other terms
affected by the Rentable Area of the Premises shall be adjusted to account for changes in the
Rentable Area of the Premises leased by Tenant.

     1.2. Term:

          (a) The Term shall commence on February 14, 2000 (the “Commencement Date”)

          (b) The Term shall end on the last day of the seventy-second calendar month after the
Commencement Date (the “Termination Date”). The Termination Date shall not be in any way extended
or advanced unless pursuant to the provisions herein.

     1.3. Base Rent and Tenant’s Share: Base Rent and Tenant’s Share per month during the
Term shall be as follows:

	 	 	 	 	 	 	 	 	 
	Months	 	Base Rent	 	 	Tenant's Share	 
	1 through day before
First Expansion Date
	 	$	3,400.00	 	 	 	6.83	%

 

 

	 	 	 	 	 	 	 	 	 
	Months	 	Base Rent	 	 	Tenant's Share	 
	First Expansion Date through
day before Second
Expansion Date
	 	$	5,100.00	 	 	 	10.25	%
	Second Expansion Date
through month 24
	 	$	7,089.00	 	 	 	14.24	%
	25-36
	 	$	7,373.00	 	 	 	 	 
	37-48
	 	$	7,668.00	 	 	 	 	 
	49-60
	 	$	7,975.00	 	 	 	 	 
	61-72
	 	$	8,294.00	 	 	 	 	 

     1.4. Use: The Premises shall be used and occupied only for the purpose of general
office use, microbiology laboratories, toxicology and chemical testing, research, development, and
related manufacturing, and other uses incidental thereto

     1.5. Security Deposit: $7,089.00.

     1.6. Brokers: Mark Levin of Meridian Commercial, Inc. as Tenant’s and Landlord’s
representative.

     1.7. Exhibits: Exhibits A, B, C, D, E, F and G.

2.      DEMISE. For the Term, Landlord leases the Premises to Tenant and Tenant leases the same
from Landlord, all upon and subject to the terms, covenants and conditions of this Lease. Except
as provided herein, Tenant will not enter the Premises until they are tendered by Landlord.

3.      CONDITION AND ACCEPTANCE OF PREMISES. Prior to the Commencement Date, Landlord shall
replace and repair all damaged ceiling tiles and removed exposed wiring within the Premises Except
for the foregoing, Tenant is accepting the Premises AS-IS. By taking possession of the Premises,
Tenant shall conclusively evidence that (subject only to matters noted in any punchlist which
Tenant may concurrently deliver to Landlord) the Premises are fully completed and are suitable for
Tenant’s purposes, that the Building, the Common Areas, and the Premises are in good and
satisfactory condition to the knowledge of Tenant, and that Tenant waives any defect therein which
is or may be known by Tenant or discoverable by Tenant upon reasonable inspection.

4.      RENT. All amounts due hereunder from Tenant to Landlord, whether designated as Base
Rent, Additional Rent, late charges, interest or otherwise, shall be deemed “rent” hereunder. From
the Commencement Date, Tenant will pay Landlord, without prior notice, demand, offset or deduction,
the following rent:

     4.1. Base Rent. Subject to the provisions of Paragraph 25.10, Tenant will pay the
Base Rent (prorated for any partial month) in advance on the first day of each month during the
term hereof, except that rent for the first thirty (30) days shall be conditionally abated pursuant
to the terms of Paragraph 30.

2

 

     4.2. Additional Rent. Tenant shall pay Tenant’s Share of Operating Expenses and Real
Property Taxes. The terms “Tenant’s Share”, “Operating Expenses” and “Real Property Taxes” are
defined in Exhibit A. For partial years, Operating Expenses and Real Property Taxes will be
calculated on a full-year basis, and then prorated. Tenant shall pay monthly installments of
Additional Rent on the first day of each month, in amounts specified in good faith by Landlord from
time to time, which, by the end of each calendar year (or by the Termination Date, if earlier),
will total Landlord’s estimate of Additional Rent paid for such year. As soon as is reasonably
practicable after the end of each calendar year during which Tenant paid Additional Rent based on
Landlord’s estimates as provided above, Landlord will furnish Tenant a statement of Operating
Expenses and Real Property Taxes for such year. Any amounts owing for that year shall, within
thirty (30) days, be paid by Tenant to Landlord. Any amounts overpaid shall, at Landlord’s option,
be credited against the next installment(s) of estimated Additional Rent due from Tenant, or be
refunded to Tenant. The parties’ obligations with respect to payment or refund of any deficiency
or overpayment shall survive termination or expiration of this Lease.

5.      SECURITY DEPOSIT. To secure its performance of its obligations under this Lease,
Tenant, upon execution of this Lease, will pay Landlord the Security Deposit. At any time the Base
Rent payable hereunder increases, Tenant shall increase the Security Deposit by an amount equal to
the monthly increase in Base Rent. Landlord may commingle the Security Deposit with other funds.
If Tenant defaults with respect to any provisions of this Lease, including but not limited to the
provisions relating to the payment of Rent, Additional Rent and any of the monetary sums due
herewith, Landlord may use, apply or retain all or any part of this Security Deposit for the
payment of any other amount which Landlord may spend or become obligated to spend by reason of
Tenant’s default or to compensate Landlord for any other loss or damage which Landlord may suffer
by reason of Tenant’s default. If any portion of said deposit is so used or applied, Tenant shall,
within ten (10) days after written demand therefore, deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to its original amount, and Tenant’s failure to do so
shall be a material breach of this Lease. Tenant shall forthwith on demand restore the Security
Deposit to its full original amount. If Tenant is not in default at the termination of this Lease,
Landlord will return any remaining Security Deposit, without interest upon receipt of Tenant’s
forwarding address, or as provided by law, whichever is later. Tenant shall not assign or encumber
the Security Deposit or attempt to do so, and Landlord shall not be bound by any such assignment or
encumbrance. Regardless of any Assignment, Landlord may return the Security Deposit to the
original Tenant.

6.     UTILITIES; SERVICES. Tenant shall contract for, and pay for, janitorial services for
the Premises using such janitorial contractor as Landlord shall approve, which approval shall not
be unreasonably withheld. If separately metered or provided, Tenant shall pay prior to delinquency
for all water, gas, light, heat, power, electricity, telephone, janitorial service, trash pick-up,
sewer charges, and all other services supplied to or consumed on the Premises, and all taxes and
surcharges thereon. If such utilities or services are not separately metered or provided, Tenant
shall pay Tenant’s Share of such

3

 

charges. Tenant shall pay to Landlord Tenant’s Share of the cost of all utilities and services
supplied in connection with the operation of the Common Areas.

7.     USE OF PREMISES. Tenant will use and occupy the Premises only for the purpose set forth
in Paragraph 1.4 and no other, using and maintaining the Premises in a careful, sanitary and proper
manner. Tenant shall be solely responsible for obtaining such use permits and other governmental
authorization as may be necessary for Tenant’s proposed use, and Tenant agrees that obtaining such
approvals and authorizations shall not be a condition to the effectiveness of this Lease. Tenant
will pay for any damage to any part of the Premises or Building caused by any negligence or willful
act by Tenant or Tenant’s employees, agents, contractors or invitees. Tenant will comply with the
Building’s Rules and Regulations and the CC&Rs and will not cause anywhere in the Building, or
permit in the Premises, (i) any activity or thing contrary to applicable law, ordinance,
regulation, restrictive covenant, or insurance regulation whether now in force or hereafter in
force; or which is in any way extra-hazardous or could jeopardize the coverage of normal insurance
policies or increase their cost; (ii) waste or nuisance, or any activity causing odors perceptible
outside the Premises; (iii) cooking or heating food, except for incidental use, solely for Tenant’s
employees, of microwave ovens and beverage-brewing devices, provided that the foregoing do not use
a flame and are approved by Underwriters Laboratories for residential use; (iv) overloading the
floors or the structural or mechanical systems of the Building; or (v) obstruct or interfere with
the rights of other tenants or users of the Building. Tenant shall not erect or place any item in
or upon the Common Areas. Tenant shall store its waste either inside the Premises or in its own
dumpsters located within outside trash enclosures. Tenant shall not store, place or maintain any
garbage, trash, rubbish, other refuse or Tenant’s personal property in any area of the Common Area
or exterior of the Premises at any time. Tenant at its sole expense shall be responsible to
maintain and keep the designated trash enclosures free of garbage, trash, rubbish, other refuse or
personal property. Tenant shall at Tenant’s sole cost and expense faithfully observe and promptly
comply with all local, state and federal laws, statutes, ordinances and governmental resolutions,
orders, rules, regulations and requirements (including, by way of example, building codes, Title
24, and the Americans With Disabilities Act of 1990) and with the requirements of any board of fire
underwriters (or other similar body now or hereafter constituted) whether now in force or which may
hereafter be in force with respect to Tenant’s use, occupancy, modification or possession of the
Premises, Tenant’s business conducted in the Premises or the design, equipment condition, use or
occupancy of the Premises. Tenant shall also comply with the CC&Rs and any other covenant,
condition or restriction affecting the Building. Without limiting the generality of the provisions
of this Paragraph 7, as between Landlord and Tenant, Tenant shall make all alterations to the
Premises, whether major or minor, reasonably necessary to comply at any time with the requirements
referred to in this Paragraph 7.

8.     BROKERS. Landlord and Tenant warrant that they have had no dealing with any finder,
broker or agent other than the Broker in connection with this Lease. Tenant will indemnify, defend
and hold Landlord harmless from and against any and all costs, expenses or liability for
commissions or other compensation or charges claimed by any finder, broker or agent other than the
Broker based on dealings with Tenant with respect

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to this Lease. Landlord will indemnify, defend and hold Tenant harmless from and against any and
all costs, expenses or liability for commissions or other compensation or charges claimed by any
finder, broker or agent other than the Broker based on dealings with Landlord with respect to this
Lease. Landlord shall pay the Broker a commission with respect to this Lease pursuant to a
separate agreement.

9.     TENANT’S TAXES. In addition to Tenant’s obligations to pay Real Property Taxes as set
forth in Section 4.2, Tenant shall be liable for and shall pay, before delinquency, all taxes
levied or assessed against or attributable to any personal property or trade fixtures in the
Premises. If any such taxes or value are included in Landlord’s taxes, Landlord may pay them
regardless of their validity (under proper protest, if requested by Tenant), and Tenant upon demand
will repay Landlord.

10.     ALTERATIONS, REPAIRS AND MAINTENANCE.

     10.1. Repairs and Maintenance.

          (a) Landlord shall, as an Operating Expense (except as excluded herein), repair and maintain
the exterior roof, exterior walls, foundations and structural portions of the Building and the
improvements within the Common Areas and the building standard plumbing, heating, ventilating, air
conditioning, and electrical systems serving the Building, and any sidewalks, landscaping
(including but not limited to irrigation systems and backflow prevention devices), driveways,
parking lots, fences and signs located within the Common Area, unless any such maintenance and
repairs are caused in part or in whole by the act, neglect or omission of any duty by Tenant or
Tenant’s employees, agents, contractors or invitees, in which case Tenant shall pay to Landlord, as
Additional Rent, the entire cost of such maintenance and repairs. Landlord shall not, however, be
obligated to paint the interior surface of exterior walls, ceiling or doors, nor shall Landlord be
required to maintain, repair or replace windows, doors, skylights or plate glass. Landlord shall
have no obligation to make repairs under this Paragraph 10.1(a) until a reasonable time after
receipt of written notice of the need for such repairs. Landlord shall replace, maintain, repair
or patch the roof membrane as an Operating Expense, and Tenant shall pay Tenant’s Share of the cost
thereof, pursuant to Paragraph 4.2 above. Tenant expressly waives the benefits of any statute
(including, without limitation, the provisions of subsection 1 of Section 1932, Section 1941 and
Section 1942 of the California Civil Code and any similar law, statute or ordinance now or
hereafter in effect) which would otherwise afford Tenant the right to make repairs at Landlord’s
expense (or to deduct the cost of such repairs from rent due hereunder) or to terminate this Lease
because of Landlord’s failure to keep the Premises in good order, condition and repair.

          (b) In all other regards, Tenant, at Tenant’s sole cost and expense, shall keep, maintain and
preserve the Premises in first class condition and repair and shall, promptly make all
non-structural repairs and replacements to the Premises and every part thereof, including but not
limited to floors, ceilings, windows, doors, skylights, interior walls, and the interior surfaces
of the exterior walls, plumbing, heating, air conditioning and ventilating equipment,
telecommunications equipment and intrabuilding

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network cabling, electrical and lighting facilities and equipment including circuit breakers
and exterior lighting attached to the Premises if and to the extent such items serve the Premises.
In the event Tenant fails to perform Tenant’s obligations under this Paragraph, Landlord shall give
Tenant notice to do such acts as Landlord deems are reasonably required to so maintain the
Premises. If Tenant, within ten (10) days after notice from Landlord, fails to commence to do the
work and diligently prosecute it to completion, then Landlord shall have the right (but not the
obligation) to do such acts and expend such funds at the expense of Tenant as are reasonably
required to perform such work. Any amount so expensed by Landlord shall be paid by Tenant promptly
after demand as Additional Rent. Landlord shall have no liability to Tenant for any damage,
inconvenience or interference with the use of the Premises by Tenant as a result of performing any
such work and other communications equipment and lines. Landlord hereby grants to Tenant the
nonexclusive right of access through designated portions of the Building for the purpose of
installation and maintenance of lines to the Premises.

     10.2. Alterations.

          (a) Tenant will not make or permit alterations, improvements or additions (including fixtures)
in or to the Premises including any alterations or improvements constructed or installed by Tenant
prior to the Commencement Date (collectively “Alterations”) without Landlord’s prior, written
consent. Tenant’s request for such consent shall be in writing, accompanied by proposed detailed
plans and specifications. Any approval by Landlord or Landlord’s architects or engineers of any
drawings, plans or specifications prepared on behalf of Tenant shall not in any way bind Landlord
or constitute a representation or warranty by Landlord as to the adequacy or sufficiency of such
drawings, plans or specifications, or the improvement to which they relate, but such approval shall
merely evidence the consent of Landlord to Tenant’s drawings, plans or specifications. Landlord
may require Tenant to provide Landlord, at Tenant’s cost and expense, a payment and performance
bond in an amount equal to the estimated cost of such Alterations, to insure Landlord against any
liability for any mechanic’s and materialmen’s liens and to insure completion of the work.
Alterations will be performed, if Landlord elects, by Landlord or a contractor designated by
Landlord, at Tenant’s cost and expense. Tenant may engage its own contractors to perform remodel
work upon written approval by Landlord. Promptly upon its receipt of written request from
Landlord, Tenant shall provide Landlord with certificates of insurance evidencing that Tenant’s
contractors performing the Alterations work are covered by liability insurance, with carriers and
in amounts reasonably acceptable to Landlord, and with Landlord named as an additional insured.
Tenant shall promptly upon execution of any construction contract relating to Alterations deliver
to Landlord a fully executed copy of such contract. In such event, Landlord shall charge a
five percent (5%) administration fee on all construction costs. Any and all plans must be
submitted to Landlord for approval and building permits must be obtained prior to commencement of
any construction remodeling. All alterations, additions and improvements constructed by Tenant
shall remain the property of Tenant during the Lease Term but shall not be damaged, altered, or
removed from the Premises. Subject to Paragraph 23, at the expiration or sooner termination of the
Lease Term, all alterations, additions, or improvements shall be surrendered to Landlord as a part
of the realty and shall then

6

 

become Landlord’s property. Tenant will promptly notify Landlord of the value thereof for
insurance and tax purposes. Tenant will hold Landlord forever harmless against any and all claims,
expenses (including taxes) and liabilities of every kind which may arise out of or in any way be
connected with any work performed by or on behalf of Tenant.

          (b) Tenant shall give Landlord not less than ten (10) days notice prior to the commencement of
any work in the Premises by or on behalf of Tenant, and Landlord shall have the right to post
notices of non-responsibility in or on the Premises or the Building as provided by law. All
Alterations, repairs and replacements by Tenant shall be made, constructed and installed in
accordance with all applicable laws, rules and ordinances (and Tenant shall perform all work
necessary to comply fully with all laws, ordinances and regulations necessitated by the
Alterations, whether structural or nonstructural, within or without the Premises) and the
requirements of any insurance carrier, and shall be of a quality and class at least equal to the
original work, performed in a good and workmanlike manner with grades of materials approved by
Landlord. Tenant will give Landlord opportunity to supervise all work. Tenant shall provide
Landlord with permit drawings, as-built sepia drawings, job cards and temporary certificates of
occupancy for all Alterations promptly upon their completion. Should Tenant make any Alterations
without Landlord’s prior written approval, or in violation of such approval or the requirements of
this Paragraph 10.2, Landlord may, at any time during the Term, either remove any part or all of
the same on Tenant’s behalf and at Tenants expense, or require that Tenant do so.

          (c) If during the term of this Lease, any alteration, addition or change of any sort, whether
structural or otherwise to all or any portion of the Premises or Building is required by law
(including, but not limited to, alterations required by the Americans with Disabilities Act of 1990
or any amendments thereto or any regulations prorogated thereunder (collectively the “ADA”) because
of (i) Tenant’s use or occupancy of the Premises or change of use or occupancy of the Premises,
(ii) Tenant’s application for any permit or governmental approval, (iii) Tenant’s construction or
installation of any leasehold improvements or trade fixtures, (iv) any violation by Tenant of any
Law (including any requirement of the ADA), (v) any special use of the Premises or any part thereof
by Tenant or any subtenant or assignee of Tenant (including, but not limited to any use for a
facility which constitutes, or if open to the public would generally constitute a “place of public
accommodation” under the ADA requirements), or (vi) any special needs of the employees of Tenant or
any assignee or subtenant of Tenant, then Tenant shall promptly make the same at its sole cost and
expense. Within ten (10) days after receipt, Tenant shall notify Landlord in writing and provide
Landlord with copies of (i) any notices alleging any violation of any Law relating to the Premises
or Tenant’s occupancy or use of the Premises, including any notices alleging violation of the
Premises or the ADA to any portion of the Building or the Premises; (ii) any claims made or
threatened in writing regarding non-compliance with the ADA or any Law relating to the Building or
the Premises; or (iii) any governmental or regulatory actions or investigations instituted or
threatened regarding non-compliance with the ADA or any Law relating to any portion of the Building
or the Premises.

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11.      LIENS. Tenant shall not permit any lien on any part of the Premises, Building or the
Common Areas allegedly resulting from any work or materials furnished or obligations incurred by or
for Tenant. Tenant shall discharge any such lien of record immediately upon its filing. Neither
this Lease, nor any request or consent of Landlord to the labor, materials or obligations, is a
consent to such a lien. Landlord may keep posted on the Premises any notices it deems necessary
for protection from such liens. Landlord may cause such liens to be released by any means it deems
proper, including payment, at Tenant’s expense and without affecting Landlord’s rights.

12.     ENTRY. Landlord may enter any part of the Premises at all reasonable hours (or in any
emergency or suspected emergency, at any hour), to (a) inspect, test, clean, or make repairs,
alterations and additions to the Building or the Premises as Landlord believes appropriate, or (b)
provide any service which Landlord is now or hereafter obligated to furnish to tenants of the
Building, or (c) show the Premises to prospective lenders, purchasers or tenants and, if they are
vacated, to prepare them for preoccupancy. Tenant hereby waives any claim for abatement of rent or
for damages for inconvenience to or interference, loss of occupancy or quiet enjoyment caused by
Landlord’s entry. Landlord shall at all times have keys to all doors to or in the Premises.

13.     INDEMNIFICATION AND EXCULPATION.

          (a) Subject to 13(b), Tenant will indemnify, defend and hold and save Landlord and its
employees, officers, directors, shareholders, partners and agents (each an “lndemnitee”) harmless
from all fines, suits, losses, costs, expenses, liabilities, claims, demands, actions, damages and
judgments (“Liabilities”) suffered by, recovered from or asserted against the Indemnitee, of every
kind and character, resulting from (i) the operation, condition, maintenance, use or occupancy of
the Premises, (ii) any bodily injury, death or property damage occurring in or about the Premises,
(iii) any act, omission or neglect of Tenant or its Agents, or (iv) any breach or default in the
performance in a timely manner of any obligation on Tenant’s part to be performed under this Lease.
Tenant, as a material part of the consideration to Landlord, hereby assumes all. risk of damage to
property or injury to persons, in, upon or about the Premises arising from any cause and Tenant
hereby waives all claims in respect thereof against Landlord.

          (b) Landlord will indemnify, defend and hold and save Tenant and its related Indemnitees
harmless from and against all Liabilities suffered by, recovered from or asserted against Tenant
and its related Indemnitees, of every kind and character, resulting from any injury or damage to
person or property within the Building but only to the extent caused by the gross negligence or
intentional misconduct of Landlord or its employees, agents, contractors or invitees (not including
other tenants of the Building).

          (c) If any such proceeding is brought, the indemnifying party will retain counsel reasonably
satisfactory to the indemnified party to defend the indemnified party at the indemnifying party’s
sole cost and expense. All such costs and expenses, including attorneys’ fees and court costs,
shall be a demand obligation owing by the indemnifying party to the indemnified party. The
indemnifying party’s obligations under this Paragraph 13 shall survive the termination or
expiration of this Lease.

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14.     INSURANCE. Tenant, during the term and any other period of occupancy, will, at its
expense, maintain insurance reasonably satisfactory to Landlord, but in no event less than:

          (a) General Liability insurance with combined single limits not less than $3,000,000.00, for
personal injury or death and property damage occurring in or about or related to the use of the
Premises or Tenant’s (or its agents, employees or representatives) use of the Building and Common
Areas. Such comprehensive general liability insurance shall be extended to include a “blanket
contractual liability” endorsement insuring Tenant’s performance of Tenant’s obligation to
indemnify Landlord contained in Section 13 and all of the other broadened liability features
normally contained in an extended liability endorsement, including, provided Tenant uses Hazardous
Materials pursuant to Paragraph 29 without limitation, “Pollution Liability”.

          (b) “All Risk” insurance for the full replacement cost of all Tenant’s property on the
Premises and all fixtures and leasehold improvements in the Premises. Unless this Lease is
terminated upon damage or destruction, the proceeds of such insurance will be used to restore the
foregoing.

          (c) Worker’s Compensation (as required by state law), and Employer’s Liability insurance in
the amount of not less than $500,000.00.

          (d) Business Interruption insurance to protect against any interruption or disturbance to
Tenant’s business conducted in the Premises for at least six (6) months.

     All policies required hereunder will be issued by carriers rated A-VII or better by Best’s Key
Rating Guide and licensed to do business in the State of California. The policies shall name
Landlord, Landlord’s managing agent and any other person or entity that Landlord may designate from
time to time as additional insureds, with primary coverage non-contributing to and not in excess of
any insurance Landlord may carry, and shall provide that coverage cannot be cancelled or materially
changed except upon thirty (30) days prior written notice to Landlord. At least thirty (30) days
prior to expiration of such policies, and promptly upon any other request by Landlord, Tenant shall
furnish Landlord with copies of policies, or certificates of insurance, evidencing maintenance and
renewal of the required coverage. In the event Tenant does not maintain said insurance, Landlord
may, in its sole discretion and without waiving any other remedies hereunder, procure said
insurance and Tenant shall pay to Landlord as Additional Rent the cost of said insurance plus a ten
percent (10%) administrative fee. If Landlord’s lender, insurance advisor or counsel reasonably
determines at any time that the amount of such coverage is not adequate, Tenant shall increase such
coverage to such amount as Landlord’s lender, insurance advisor or counsel reasonably deems
adequate. The limit of such insurance shall not limit the liability of Tenant.

     During the Term, Landlord shall insure the Building (excluding any property which Tenant is
obligated to insure) against damage with All-Risk insurance (including earthquake as commercially
available) and public liability insurance, all in such amounts and with such deductibles as
Landlord considers appropriate. Landlord may, but shall

9

 

not be obligated to, obtain and carry any other form or forms of insurance as it or its
Mortgagees may determine advisable. Tenant has no right to receive any proceeds from any insurance
policies carried by Landlord. Notwithstanding anything in the foregoing to the contrary, however,
Landlord may self-insure.

     If the acts or omissions of Tenant or Tenant’s employees, agents, contractors or invitees,
whether or not Landlord has consented to the same, increase the cost of Landlord’s insurance,
Tenant will pay the full cost of any such increase as additional rent.

15.     NO SUBROGATION. The parties shall use their best commercial efforts to obtain property
insurance policies affecting the Premises which include a clause or endorsement denying the insurer
any rights of subrogation against the other party. Landlord and Tenant waive any rights or
recovery against the other for any actually insured injury or loss and any injury or loss required
to be insured against hereunder to the extent permitted by the foregoing policies.

16.     DAMAGE OR DESTRUCTION. If the Premises or any part thereof are damaged by fire or
other casualty, Tenant will promptly notify Landlord.

     16.1. Cancellation of Lease; Restoration of Building. If the Building or the Premises
are damaged by fire or other casualty to the extent that substantial alteration or reconstruction
is required in Landlord’s sole opinion, Landlord may terminate this Lease by notifying Tenant
within sixty (60) days after the later of the date the damage occurs, or the date Landlord is so
notified by any holder (“Mortgagee”) of a mortgage or deed of trust (blanket or otherwise) covering
any part of the Building (“Mortgage”), in which event the rent under this Lease will be abated as
of the date of the fire or other casualty. In the event Landlord elects to terminate this Lease,
Tenant shall have the right within ten (10) days of receipt of the required notice to notify
Landlord, in which event this Lease shall continue in full force and effect, and Tenant shall
proceed to make such repairs as soon as reasonably possible (or Landlord may elect, in its sole
discretion, to require Tenant to pay to Landlord within ten (10) days following written request
therefor, or furnish evidence reasonably satisfactory to Landlord of Tenant’s ability to fund, that
portion of the cost of such repair or restoration which is not covered by insurance proceeds, in
which event Landlord shall proceed to make such repairs). If Tenant does not give such notice
within the ten (10) day period, this Lease shall be cancelled and terminated as of the date of the
occurrence of such damage. All insurance proceeds available from the fire and property damage
insurance carried by Landlord pursuant to Paragraph 14 shall be paid to and become the property of
Landlord. If this Lease is not terminated, then within seventy-five (75) days after the fire or
other casualty, or such greater period as may be reasonably necessary, Landlord will commence to
repair and restore the Premises and any portion of the Building required for access to the
Premises, and will diligently complete the same, but Landlord is not required (a) to expend more
for such repair of the Premises than the net insurance proceeds (after any payment required under
any Mortgage) reasonably allocable to the Premises, or (b) to rebuild, repair or replace any of
Tenant’s furniture, furnishings, fixtures or equipment removable by Tenant under the provisions of
this Lease or which Tenant has insured or is required to insure under the provisions of this Lease.
Notwithstanding the above, if the damage to

10

 

the Building or Premises was caused by the fault, omission or negligence of Tenant, its
agents, employees, contractors or invitees, such damage shall be repaired by and at the expense of
Tenant under the direction and supervision of Landlord, and there shall be not abatement of rent.

     16.2. Casualty Loss During Last Year of Lease. If the Premises are damaged by fire or
other casualty during the last twelve (12) months of the Term, whether or not the damage requires
substantial repair and reconstruction, Landlord may cancel this Lease as of the date of the fire or
casualty by notice to Tenant within thirty (30) days thereafter, provided, however, that if any
unexercised option to extend the Term is in then full force and effect, then Tenant may exercise
such option within the ten (10) days after receipt of such cancellation and this Lease shall
continue in effect for the remainder of the extended Term, subject to all the other provisions
hereof.

     16.3. Abatement of Rent. Landlord will allow Tenant a fair diminution of rent while
and to the extent the Premises are unfit for occupancy due to fire or other casualty. Except as
expressly provided to the contrary in this Lease, this Lease will not terminate, and Tenant will
not be entitled to damages or to any abatement of rent or other charges, as a result of a fire or
other casualty, repair or restoration Tenant hereby waives the provisions of California Civil Code
Sections 1932(2) and 1933(4) which permit termination of a lease upon destruction of Premises, and
any other present or future statute that may so permit.

17.     CONDEMNATION. If all or substantially all of the Building or of the Premises is taken
for any public or quasi-public use under any governmental law, ordinance or regulation or by right
of eminent domain or is sold to the condemning authority in lieu of condemnation, then this Lease
will terminate when physical possession is taken by the condemning authority. If a lesser but
material portion of the Building is thus taken or sold (whether or not the Premises are affected
thereby), Landlord may terminate this Lease by notice to Tenant within sixty (60) days after the
taking or sale, in which event this Lease will terminate when physical possession of the applicable
portion of the Building or the Premises is taken by the condemning authority. If the Lease is not
terminated, rent payable will be reduced by the amount allocable to any portion of the Premises so
taken or sold, and Landlord, at its sole expense, will restore the affected portion of the Building
to substantially its former condition as far as commercially feasible, but not beyond the work done
by Landlord in originally constructing the affected portion of the Building and installing tenant
improvements in the Premises. However, Landlord need not spend more for such restoration of the
Premises than the Premises’ allocable share of the net compensation or damages received by Landlord
for the part of the Building taken. Landlord shall be entitled to receive all of the compensation
awarded upon a taking of any part or all of the Building or Premises, including any award for any
unexpired term of this Lease. Tenant may seek an award in separate proceedings for its personal
property, trade fixtures and moving expenses.

     In the event of such taking or sale of the Premises or any part thereof for temporary use of
not more than one (1) year, this Lease shall remain unaffected and rent shall not abate, and Tenant
shall be entitled to such portion or portions of any award

11

 

made for such use with respect to the period of the taking which is within the Term, provided
that, if such taking shall remain in force at the expiration or earlier termination of this Lease,
Tenant shall then pay to Landlord a sum equal to the reasonable cost of performing Tenant’s
obligations with respect to surrender of the Premises.

     To the extent that it is inconsistent with the provisions of this Paragraph 17, each party
hereto hereby waives the provisions of Section 1265.130 of the California Code of Civil Procedure
allowing either party to petition a court to terminate this Lease in the event of a partial taking
of the Premises.

18.     DEFAULTS AND REMEDIES.

     18.1. Events of Default. The occurrence of one or more of the following events shall
constitute a material default and breach hereunder by Tenant

          18.1.1 Tenant fails to make a payment within five (5) days after it is due hereunder; or

          18.1.2 Tenant fails to comply with any other obligation under this Lease and does not cure
such failure as soon as reasonably practicable and in any event within twenty (20) days after
written notice; or

          18.1.3 Tenant attempts any Assignment (as defined in Paragraph 19) except as expressly
permitted pursuant to Paragraph 19; or

          18.1.4 Tenant or any Guarantor becomes insolvent, makes a transfer in fraud of creditors or an
assignment for the benefit of creditors, admits in writing its inability to pay its debts as they
become due, or files a petition under any Section or Chapter of the United States Bankruptcy Code
or any similar law or statute; or an order for relief is entered with respect to Tenant or any
Guarantor in any bankruptcy, reorganization or insolvency proceedings; or a pleading seeking such
an order is not discharged or denied within sixty (60) days after its filing; or the taking of any
action at the corporate or partnership level by Tenant to authorize any of the foregoing actions on
behalf of Tenant; or a receiver or trustee is appointed for all or substantially all assets of
Tenant or any guarantor or of the Premises or any of Tenant’s property located thereon in any
proceedings brought by Tenant or Guarantor, or any receiver or trustee is appointed in any
proceeding brought against Tenant or Guarantor and not discharged within sixty (60) days after
appointment or Tenant or Guarantor does not contest such appointment; or any part of Tenant’s
estate under this Lease is taken by process of law in any action against Tenant (but in the event
the at any provision of this Paragraph 18.1.4 is contrary to any applicable law, such provision
shall be of no force or effect); or

          18.1.5 Tenant fails to move into or take possession of the Premises within fifteen (15) days
after the Commencement Date, or abandons or vacates any substantial portion thereof, or fails for a
period of ten (10) consecutive business days to conduct its business therefrom (unless the Premises
are untenantable), or removes or attempts to remove substantially all of its removable property; or

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          18.1.6 Three (3) times within any twelve-month period, Tenant fails to fulfill an obligation
under this Lease, even if Tenant thereafter cures such failure within the time provided.

     Any notice specified above shall serve as, and not be in addition to, any notice required
under California Code of Civil Procedure Section 1161 or otherwise regarding unlawful detainer
actions.

     18.2. Remedies. On an event of default, Landlord may terminate this Lease by notice
to Tenant, or continue this Lease in full force and effect, and/or perform Tenant’s obligations on
Tenant’s behalf and at Tenants expense.

          18.2.1 If and when this Lease is so terminated, all rights of Tenant and those claiming under
it will terminate. In such event, Landlord may immediately recover from Tenant:

          (a) The worth at the time of award of any unpaid rent which had been earned at the time of
such termination; plus

          (b) The worth at the time of award of the amount by which the unpaid rent which would have
been earned after termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus

          (c) The worth at the time of award of the amount by which the unpaid rent for the balance of
the term after the time of award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided; plus

          (d) Any other amount necessary to compensate Landlord for all the detriment proximately caused
by Tenant’s failure to perform Tenant’s obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom, including but not limited to the unamortized
principal balance of any suspended rent, moving allowance, Tenant’s Allowance, Broker’s commission,
legal and other professional fees and other costs incurred by Landlord in connection with the
entering into of this Lease, using an amortization schedule equal to the initial term of this Lease
(or the Extension Term, if any Extension Option has been exercised) and a discount rate of the
Prime Rate plus 4% per annum, plus (A) expenses for cleaning, repairing or restoring the Premises;
(B) expenses for altering, remodeling or otherwise improving the Premises for the purpose of
reletting, including installation of leasehold improvements (whether such installation be funded by
a reduction of rent, direct payment or allowance to the succeeding lessee, or otherwise); (C) real
estate broker’s fees, advertising costs and other expenses of reletting the Premises; (D) costs of
carrying the Premises such as taxes and insurance premiums thereon, utilities and security
precautions; (E) expenses in retaking possession of the Premises; and (F) attorneys’ fees and court
costs.

     As used in Subsections (a) and (b) above, the “worth at the time of award” is computed by
allowing interest at the Prime Rate, plus four percent (4%) per annum (or at the maximum rate
permitted by law, whichever is less). As used in Subsection (c) above, the “worth at the time of
award” is computed by discounting such amount at the discount

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rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).
Until Tenant confirms in writing that this Lease is terminated, Landlord’s failure to relet the
Premises shall not constitute a failure to mitigate damages.

          18.2.2 Landlord shall have the remedy described in California Civil Code Section 1951.4
(Landlord may continue this Lease in effect after Tenant’s breach, even if Tenant has abandoned the
Premises, and enforce all of Landlord’s rights and remedies under this Lease, including the right
to recover rent as it becomes due, if Tenant has the right to sublet or assign, subject only to
reasonable limitations). Until this Lease is terminated as provided above, Landlord may (but shall
not be obligated to) sublet all or any portion of the Premises not occupied by Tenant (and, on
expiration or termination of any such sublease, may re-sublet) for all or part of the remainder of
the Term, on Tenant’s behalf and for Tenant’s account, on whatever terms and conditions Landlord in
Landlord’s sole but good faith discretion deems advisable. Tenant agrees that such subletting by
Landlord on Tenant’s behalf shall not be deemed to constitute termination of Tenant’s right to
possession within the meaning of California Civil Code Section 1951.4. Against the rents and sums
due from Tenant to Landlord during the remainder of the Term, credit will be given Tenant in the
net amount of rent received from the new tenant after deduction by Landlord for (a) the costs
incurred by Landlord in reletting the Premises (including, without limitation, repair and
remodeling costs, brokerage fees, legal fees and the like), and (b) all accrued sums, plus interest
and late charges if in arrears, under the terms of this Lease.

          18.2.3 Upon an event of default or when Tenant is no longer entitled to possession, Landlord
may enter the Premises and dispose of Tenant’s property as herein provided, and may perform
Tenant’s obligations hereunder on Tenant’s behalf. Tenant will reimburse Landlord on demand for
Landlord’s attorneys’ fees and other expenses in doing so. This Paragraph 18.2.3 shall survive
expiration or termination of this Lease.

     18.3. Continuing Liability. No repossession, re-entering or reletting of the Premises
or any part thereof by Landlord shall relieve Tenant or any Guarantor of its liabilities and
obligations under this Lease except to the extent Landlord has mitigated damages as a result of
reletting. Nothing in this Paragraph 18-3 shall reduce or eliminate Landlord’s duty to mitigate
its damages as required by law.

     18.4. Remedies Cumulative. All rights and remedies of Landlord under this Lease will
be non-exclusive of and in addition to any other remedies available to Landlord at law or in
equity.

     18.5. No Waiver. Landlord’s failure to insist on strict compliance with any terms
hereof or to exercise any right or remedy, does not waive the same. Waiver of any agreement
regarding any breach does not affect any subsequent or other breach, unless so stated. A receipt
by Landlord of any rent with knowledge of the breach of any covenant or agreement contained in this
Lease shall not be a waiver of the breach, and no waiver by Landlord of any violation or provision
of this Lease shall be effective unless expressed in writing and signed by Landlord. Payment by
Tenant or receipt by Landlord of a lesser amount than due under this Lease may be applied to such
of Tenant’s obligations as

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Landlord elects. No endorsement or statement on any check, and no accompanying letter, shall
make the same an accord and satisfaction, and Landlord may accept any check or payment without
prejudice to Landlord’s right to recover the balance of the rent or pursue any other remedy
provided in this Lease.

19.     ENCUMBRANCES, ASSIGNMENT AND SUBLETTING. Except upon Landlord’s written consent, which
shall not be unreasonably withheld or delayed, Tenant may not assign, transfer, or encumber this
Lease or any estate or interest herein, or permit the same to occur, or sublet or grant any right
of occupancy for any part of the Premises, or permit such occupancy by any other parties other than
Tenant and Tenant’s employees, or modify or terminate any agreement providing for any of the
foregoing (the foregoing collectively referred to as “Transfer,” and the other party thereto the
“Transferee”). Any prohibited Transfer is voidable by Landlord.

     19.1. Conditions of Transfer. Landlord’s consent to a Transfer may, without
limitation, be conditioned on Landlord’s determination whether (a) the Transferee will conduct
business of a quality equal to that of Tenant, consistent with the character of the Building and
its occupants, and consistent with any exclusives or other rights held by or contemplated for other
occupants, and (b) the Transferee’s financial responsibility shall equal or exceed that of Tenant
and that which is then required by Landlord, whichever is greater. Consent by Landlord to any
Transfer shall not be a waiver of Landlord’s rights as to any subsequent Transfers. Any approved
Transfer shall be expressly subject to the terms and conditions of this Lease. If Tenant’s
obligations under this Lease have been guaranteed by third parties (herein called “Guarantors”),
then Landlord’s consent to the Transfer may be conditioned upon Landlord’s receipt of the written
consent of each Guarantor to such Transfer and the terms thereof. In the event of any Transfer,
each transferor and all Guarantors will remain fully responsible and liable for all of Tenant’s
obligations under this Lease, and the Transferee will automatically be jointly and severally liable
to the extent of the transferred portion of the Premises. Upon an event of default, as hereinafter
defined, while a Transfer is in effect, Landlord may collect directly from the Transferee all sums
becoming due to Tenant under the Transfer and apply this amount against any sums due Landlord by
Tenant, and Tenant authorizes and directs any Transferee to make payments directly to Landlord upon
notice from Landlord. No direct collection by Landlord from any Transferee shall constitute a
novation or release of Tenant ___any Guarantor, a consent to the Transfer or a waiver of the
covenant prohibiting Transfers. Landlord ___Tenant’s agent, may endorse any check, draft or
other instrument payable to Tenant for sums due under a Transfer, and apply the proceeds in
accordance with this Lease; this agency is coupled with an interest and is irrevocable.

     19.2. Request to Assign or Sublet; Cancellation. With any request for consent to a
Transfer, Tenant will submit a copy of the proposed Transfer document to Landlord and notify
Landlord of the proposed effective date of the Transfer, the name of the proposed Transferee
(accompanied by evidence of the nature, character, and financial condition of the Transferee and
its business), and all terms and conditions (including rental) of or relating to the Transfer.
Notwithstanding anything to the contrary in this Paragraph 19, within thirty (30) days of such
request (or any time, if Tenant enters into any Transfer without obtaining the consent of
Landlord), Landlord, by notice to Tenant,

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may terminate this Lease (and, in the case of a sublease of less than all of the Premises,
Landlord may terminate this Lease in its entirely or may terminate this Lease as to all or any
portion of the Premises proposed to be sublet), as of the proposed effective date of the Transfer
as if that were the original Termination Date (or immediately, if Tenant enters into the Transfer
without obtaining the consent of Landlord). If Landlord so elects to terminate, Landlord shall
have the right to relet the Premises (or the portion of the Premises as to which this Lease is
terminated pursuant to Landlord’s election as a result of a partial sublease) or any portion
thereof to anyone (including the proposed Transferee) on any terms, and Tenant shall not be
entitled to any portion of any profit Landlord may realize as a result of any such reletting. If
this Lease is terminated as to a portion of the Premises as a result of the foregoing, then Base
Rent, Tenant’s Share of Operating Expenses, Tenant’s parking rights (if any), and any other
provisions hereof based upon the rentable area of the Premises shall be reduced by the amount
allocable to such portion of the Premises so terminated.

     19.3. Excess Rent. If the consideration Tenant receives for any Transfer exceeds the
rent payable under this Lease for the same period and portion of the Premises and Tenant’s
subleasing expenses such as broker’s commissions, advertising costs and tenant improvements, then
the excess shall be immediately due and payable by Tenant to Landlord as Additional Rent under this
Lease.

     19.4. Transfers to Related Entities. “Transfer” within the meaning of this Paragraph
19 shall not include any sublease or assignment of all or a portion of the Premises to any person,
corporation or partnership which controls, is controlled by or is under common control with Tenant,
if such affiliated entity assumes Tenant’s obligations hereunder. For purposes of this Paragraph
19.4, “control” shall mean ownership of at least 50% of all classes of stock of a corporation, all
memberships in a limited liability company or all classes of partners in a partnership. Tenant
shall notify Landlord of any such transfer to a related entity prior to its consummation.

20.     SUBORDINATION. This Lease and all rights of Tenant under this Lease are subordinate to
any of the following, and any modifications thereof, which may now or hereafter affect any portion
of the Building: any Mortgage, or any ground or underlying lease covering any part of the Building,
provided that the Mortgage holder or ground lessor shall agree that Tenant’s peaceable possession
of the Premises will not be disturbed on account of such subordination so long as Tenant is not in
default and performs all obligations hereunder. On sale by foreclosure of a Mortgage or sale in
lieu of foreclosure, Tenant will attorn to the purchaser if requested by such purchaser, and
recognize the purchaser as the Landlord under this Lease. These provisions are self-operative and
no further instrument is required to effect them; however, upon demand from time to time, Tenant
shall execute, acknowledge and deliver to Landlord any instruments necessary or proper to evidence
such subordination and/or attornment or, if Landlord so elects, to render any of the foregoing
subordinate to this Lease or to any or all rights of Tenant hereunder. Tenant further waives the
provisions of any current or future statute, rule or law which may give or purport to give Tenant
any right or election to terminate or otherwise adversely affect this Lease and the obligations of
Tenant hereunder in the event of any such foreclosure proceeding or sale, and agrees that this

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Lease shall not be affected in any way whatsoever by any such proceeding or sale unless the
Mortgagee, or the purchaser, shall declare otherwise.

21.     ESTOPPEL CERTIFICATE. Upon Landlord’s written request from time to time, Tenant will
execute and deliver to Landlord, within ten (10) days after Tenant’s receipt of Landlord’s written
request, certificates, an example of which is attached hereto as Exhibit D, certifying: (i) the
date of commencement of this Lease; (ii) the fact that this Lease is unmodified (except as the
certificate specifies) and in full force and effect; (iii) the date to which the sums payable under
this Lease have been paid: (iv) that there are no current defaults under this Lease by either
Landlord or Tenant except as specified; and (v) such other matters as Landlord requests. This
certification may be relied upon by any actual or prospective Mortgagee or purchaser of all or part
of the Building or any interest therein or in Landlord. Failure to so execute and deliver said
certificate will be conclusive upon Tenant (i) that this Lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) that there are no uncured defaults in
Landlord’s performance, and (iii) that no more than one (1) month’s rental has been paid in
advance; and Tenant irrevocably authorizes Landlord, as Tenant’s attorney-in-fact and in Tenant’s
name, to so execute and deliver said certificate.

22.     SIGNS. Tenant shall be permitted to post a sign (i) on the parapet above its entrance
way and (ii) on the existing sign monument outside the Building of such size as it comparable to
its relative space in the Building compared to other tenants, all at Tenant’s sole cost and
expense, and subject to compliance with the CC&Rs, all applicable Laws and Landlord’s prior,
written consent, which shall not be unreasonably withheld. Tenant shall not place, maintain, or
permit on any other exterior door, wall, or window of the Premises, or the Building, any other
sign, awning, canopy, marquee, or other advertising without the prior written consent of Landlord
in Landlord’s sole discretion. If Landlord consents to any sign, awning, canopy, marquee,
decoration, or advertising matter, Tenant shall maintain it in good appearance and repair at all
times during this Lease. If at the end of the Term, any of the items mentioned in this Section are
not removed from the Premises by Tenant, that item may, without damage or liability, be removed and
disposed of by Landlord at Tenant’s expense.

23.     SURRENDER OF PREMISES. As soon as its right to possession ends, Tenant will surrender
the Premises to Landlord with all originally painted interior walls washed, or re-painted if marked
or damaged and other interior walls and doors cleaned and repaired or replaced, all carpets cleaned
and in good condition, the HVAC equipment inspected, serviced and repaired by a reputable and
licensed service firm and all floors cleaned and waxed and otherwise in as good repair and
condition as when Tenant first occupied, except for reasonable wear and tear, and for damage or
destruction by fire or other casualty for which Tenant is not otherwise responsible. Tenant will
concurrently deliver to Landlord all keys to the Premises, and restore any locks which it has
changed to the system which existed at the commencement of the Term. If possession is not
immediately surrendered by Tenant, Landlord may enter upon and take possession of the Premises and
expel or remove Tenant and any other person who may be occupying the Premises or any part thereof.

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     23.1. Leasehold Improvements and Fixtures. At the expiration or termination of the
Term, Landlord may require the removal of any or all Alterations, personal property and equipment
from the Premises, and the restoration of the Premises to its condition as when Tenant first
occupied, except for reasonable wear and tear, at Tenant’s expense. Unless Landlord requires their
removal pursuant to this Lease, all Alterations made to the Premises shall remain upon and be
surrendered with the Premises at the expiration or termination of the Term. All personal property
and equipment on or about the Premises, other than that which is affixed to the Premises so that it
cannot be removed without material damage to the Premises or the Building, shall be removed from
the Premises by Tenant (if it is not in default) at the expiration or termination of the Term. All
removals by Tenant will be accomplished in a good and workmanlike manner so as not to damage any
portion of the Premises or Building, and Tenant will promptly repair and restore all damage done.
If Tenant does not so remove any property which it has the right or duty to remove, Landlord may
immediately either claim it as abandoned property, or remove, store and dispose of it in any manner
Landlord may choose, at Tenant’s cost and without liability to Tenant or any other party.
Notwithstanding the foregoing, Landlord acknowledges that Tenant will replace the carpet in several
rooms with commercial grade linoleum or similar flooring material and agrees that it will not
require Tenant to replace the carpet in those rooms so long as the flooring material is in good
condition, reasonable wear and tear excepted.

     23.2. Holding Over. If Tenant does not surrender the Premises as required and holds
over after its right to possession ends, Tenant shall become a tenant at sufferance only, at a
monthly rental rate equal to one hundred fifty percent (150%) of the total rent payable in the last
prior full month, or the then existing fair market rental, whichever is greater, without renewal,
extension or expansion rights, and otherwise subject to the terms, covenants and conditions herein
specified, so far as applicable. Nothing other than a fully executed written agreement of the
parties creates any other relationship. Tenant is liable for Landlord’s loss, costs and damage
from such holding over, including, without limitation, those from Landlord’s delay in delivering
possession to other parties. These provisions are in addition to other rights of Landlord
hereunder and as provided by law.

24.     PROFESSIONAL FEES. Landlord shall be entitled to reasonable attorneys’ fees and all
other 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. In any dispute between the parties (whether or not litigated)
arising hereunder or out of Tenant’s use or occupancy of the Premises, the prevailing party’s
reasonable costs and expenses (including fees of attorneys and experts) will be paid or reimbursed
by the unsuccessful party.

25.     GENERAL PROVISIONS.

     25.1. Mortgagee Protection. Tenant shall not sue Landlord for damages or exercise any
right to terminate until (a) it gives written notice to any Mortgagee whose name and address have
been furnished to Tenant, and (b) a reasonable time for remedying the act or omission giving rise
to such suit has elapsed following the giving of the notice, without the same being remedied.
During that time, Landlord shall not be

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considered in default, and Landlord and/or any Mortgagee and/or their employees, agents or
contractors may enter the Premises and do therein whatever may be necessary to remedy the act or
omission.

     25.2. Transfer of Landlord’s Interest. Landlord may transfer, assign or convey any or
all of its interest in the Building or its rights under this Lease. Upon transfer of its rights
under this Lease, Landlord is freed and relieved of all obligations under this Lease, the
transferee shall be deemed to have assumed those obligations, and Tenant will look solely to the
successor to Landlord. This Lease shall inure to the benefit of and bind all parties hereto and
their respective successors and assigns.

     25.3. Waiver. Tenant waives any right it may now or hereafter have (i) to redeem the
Premises or to have a continuance of this Lease after termination of the Lease, Tenant’s right of
occupancy or the Term (ii) for exemption of property from liability for debt or for distress for
rent, (iii) relating to notice or delay in levy of execution in case of eviction for nonpayment of
rent. The parties agree that in any litigation under this Lease for the relationship it creates,
the judge, rather than the jury, shall determine any matters of fact relating to Transfers,
bankruptcy or similar matters or to the structural or mechanical systems of the Building.

     25.4. Identification of Tenant. If there is more than one party constituting Tenant
or any Guarantor, their obligations are joint and several, and Landlord may proceed against any one
or more of them before proceeding against the others, nor shall any party constituting Tenant or
Guarantor be released for any reason whatsoever, including, without limitation, any amendment of
this Lease, any forbearance by Landlord or waiver of any of Landlord’s rights, the failure to give
any party constituting Tenant or Guarantor any notices, or the release of any party liable for the
payment of Tenant’s obligations. If there is more than one party constituting Tenant, any of them
acts for all others in every regard with respect to this Lease (including but not limited to any
renewal, extension, expiration, termination or modification).

     25.5. Interpretation of Lease. Tenant acquires no rights by implication from this
Lease, and is -not a beneficiary of any past, current or future agreements between Landlord and
third parties. Surrender or cancellation of this Lease shall not work a merger, and shall, at
Landlord’s option, assign to it all subleases or subtenancies. The delivery of keys to Landlord or
Landlord’s Managing Agent is not a termination of this Lease or a surrender of the Premises.
Headings in this Lease are for convenience only, and do not affect the meaning of the text. Unless
context indicates otherwise, words of any gender or grammatical number include all genders and
numbers. Where context conflicts with the definition of any term, context will control, but only
for that use and related uses. If any provision of this Lease or any application thereof is
invalid, void or illegal, no other provision or application shall be affected. Time is of the
essence of every provision of this Lease. California law governs this Lease. Neither party may
record this Lease or a copy or memorandum thereof Submission of this Lease to Tenant is not an
offer and Tenant will have no rights hereunder until each party executes a counterpart and delivers
it to the other party.

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     25.6. Limitation on Liability. Landlord’s rights hereunder are solely for Landlord’s
benefit, and Landlord has no duty to exercise them for the benefit of Tenant or others. Any
liability of Landlord to Tenant under this Lease, or arising from the relationship under it, is
limited to the lesser of (i) the value of the equity interest of Landlord in the Building or (ii)
twenty percent (20%) of the value of the Building, and Landlord and Landlord’s employees, officers,
directors, shareholders, partners and agents shall not be personally liable for any deficiency; but
this does not limit or deny any remedies which do not involve personal liability. Tenant shall
not, however, name Landlord’s employees, officers, directors, shareholders, partners and agents as
a defendant in any action seeking to impose personal liability on any one or more of them. If
Tenant proposes any action which requires Landlord’s consent and such consent is impermissibly
withheld, denied or delayed, Tenant may seek an injunction or specific performance but shall not be
entitled to damages therefor.

     25.7. Financial Statements. Tenant represents, warrants and covenants that financial
statements heretofore or hereafter furnished to Landlord, in connection with this Lease, are
accurate and are not materially misleading. At any time during the Term, Tenant shall, upon ten
(10) days prior written notice, provide Landlord with a current financial statement and financial
statements of the two (2) years prior to the current financial statement year, and prepared in
accordance with generally accepted accounting principles and, if such is Tenant’s normal practice,
audited by an independent certified public accountant.

     25.8. Quiet Enjoyment. If Tenant pays all sums and performs all its other obligations
under this Lease, Tenant shall and may peaceably and quietly have, hold and enjoy the Premises,
subject to this Lease and to rights to which the Lease is subordinate. Tenant acknowledges that it
may be subject to inconveniences typical of projects under development such as construction,
maintenance and repair in other areas of the Building, and further acknowledges that the Building
is subject to sight, sound and over flight by general aviation aircraft.

     25.9. Payments and Notices. Any notice or document shall be considered received when
personally delivered by mail, messenger, overnight courier or otherwise to, or whether actually
received or not, on the third day after deposit in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, addressed to the parties hereto at the
respective addresses set forth on the signature page of this Lease, or to Tenant at the Premises,
or at such other address as they may specify from time to time by written notice delivered in
accordance with this Paragraph 25.9, except that if such day is not a business day, the notice or
document will be considered delivered on the next business day. All payments required to be made
by Tenant to Landlord are to be paid, without prior demand except as may be specified and without
any setoff, deduction or counterclaim whatsoever, in legal tender of the United States of America
at the address set forth on the invoice or, if no invoice is submitted or no address is set forth,
at the address for the Landlord set forth on this Lease or at any other address as Landlord may
specify from time to time by written notice in accordance with this Paragraph 25.9.

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     25.10. Late Payments. If any amounts due hereunder from Tenant are not received by
Landlord within five (5) days after said amounts are due, Tenant shall also pay to Landlord a late
charge of five percent (5%) of all such past due amounts for which the parties agree is a fair and
reasonable estimate of the extra costs (including, without limitation, processing and accounting
charges) Landlord will incur by reason of the late payment. Acceptance of any late charge shall
not constitute a waiver of Tenant’s default with respect to such overdue amount, or prevent
Landlord from exercising any of its other rights and remedies. Any amounts overdue from Tenant
hereunder shall accrue interest from the date due at the Prime Rate plus four percent (4%) per
annum. If Tenant is late in the payment of Base Rent for two (2) consecutive months, Landlord may
require Tenant to pay Base Rent in advance on a quarterly basis. If any check or other payment
device is returned due to insufficient funds or any other reason, Landlord may require all future
payments to be made by money order or cashier’s check.

     25.11. Rules and Regulations. Tenant shall comply with the Rules and Regulations (as
changed from time to time as therein provided) attached hereto as Exhibit E.

     25.12. Rights Reserved by Landlord. In addition to other rights retained or reserved,
Landlord reserves the following rights, exercisable without notice and without liability to Tenant
and without effecting an eviction, constructive or actual, or in any way diminishing Tenant’s
obligations: (a) to change the name or street address of the Building; (b) to install and maintain,
modify or remove any signs on the exterior and interior of the Building; (c) to designate and
approve, prior to installation, all types of interior and exterior window treatments and to control
all internal lighting that may be visible from the exterior of the Building; (d) the exclusive
right to designate, limit, restrict and control any business and any service in or to the Building
or its tenants; (e) to keep, and to use in appropriate instances, keys to all doors within and into
the Premises (no locks shall be changed or added without the prior, written consent of Landlord).
(f) to decorate and make repairs, alterations or additions, whether structural or otherwise, in and
about any part of the Building and to enter the Premises for these purposes and, during such work,
to temporarily close doors, entryways, public space and corridors in the Building, to interrupt or
temporarily suspend Building services and facilities and to change the arrangement and location of
entrances or passageways, windows, doors and doorways, corridors, elevators, stairs, toilets, or
other public parts of the Building; (g) to approve the weight, size and location of safes and other
heavy equipment and articles in and about the Premises and the Building, and to require all such
items and furniture to be moved into and out of the Building and Premises only at times and in such
manner as Landlord directs (movement of Tenant’s property is entirely at the risk and
responsibility of Tenant, and Landlord reserves the right to require permits before allowing any
property to be moved into or out of the Building); (h) to have access for Landlord and other
tenants of the Building to any mail receptacles located in the Building according to the rules of
the United States Postal Service; (i) to close any part of the Common Areas to the extent necessary
in Landlord’s opinion to prevent the accrual of any prescriptive rights, to temporarily close any
part of the Common Areas to repair and maintain them or for any other reasonable purpose, or to
change the nature of the Common Areas, including without limitation changes in the location, size,
shape, and number of

21

 

driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, and walkways; and (j) to take all reasonable
measures Landlord considers advisable for the security of the Building and its occupants.

     25.13. Responsibility for Others. Where either party waives rights against the other
party, it also waives the same rights against the other party’s employees, officers, directors,
shareholders, partners, agents, contractors and invitees. The waiver shall be considered a waiver
on behalf of the party making it, of all that party’s employees, officers, directors, shareholders,
partners and agents, and of anyone claiming under any of them, including insurers and creditors.
Wherever in this Lease Tenant agrees not to do a particular thing, Tenant also agrees not to permit
its employees, agents, contractors or invitees to do so.

     25.14. Landlord’s Costs. Where Tenant is required to pay or reimburse Landlord for
the costs of any item, the cost shall be the reasonable and customary charge established by
Landlord from time to time, including a reasonable allocation of Landlord’s overhead,
administrative and related costs associated with the ownership and operation of the Building.
Failure to pay any reimbursable cost shall be treated as a failure to pay rent. In connection with
any request by Tenant for the consent of Landlord to an Alteration, Transfer or other act proposed
by Tenant under this Lease, Tenant shall pay Landlord’s reasonable costs and expenses incurred in
connection therewith, including attorneys’, architects’, engineers’ and other consultants’ fees.

     25.15. Invoices. Tenant will promptly notify Landlord of any dispute it may have
regarding Landlord’s invoices. If Tenant does not notify Landlord within thirty (30) days after
receiving the invoice, it shall be conclusively deemed to have agreed to the invoice and all
underlying acts.

     25.16. Force Majeure. When a period of time is herein prescribed for action to be
taken by Landlord, Landlord shall not be liable or responsible for, and there is excluded from the
computation for any such period of time, any delays due to strikes, riots, acts of God, shortages
of labor or materials, war, governmental laws, regulations or restrictions or any other cause of
any kind whatsoever which are beyond the control of Landlord. Subject to the preceding sentence,
time is of the essence of every part of this Lease.

     25.17. Lender Modification. Tenant agrees to make such reasonable modifications to
this Lease as may reasonably be required in connection with the obtaining of normal financing or
refinancing of the Building.

     25.18. Negotiated Transaction. The parties mutually acknowledge that this Lease has
been negotiated at arm’s length. The provisions of this Lease shall be deemed to have been drafted
by all of the parties and this Lease shall not be interpreted or constructed against any party
solely by virtue of the fact that such party or its counsel was responsible for its preparation.

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     25.19. Confidentiality. Tenant hereby agrees not to disclose the terms of this Lease
(specifically including, without limitation, the rent or rental rate to be paid by Tenant hereunder
and/or any tenant improvement allowance to be furnished by Landlord to Tenant) to any existing or
prospective tenant of the Building or other third party; provided, however, Tenant may disclose the
terms of this Lease to its accountant, bookkeeper or tax advisor or any employee of Tenant who has
a need to know such information for a legitimate business purpose, or if Tenant is otherwise
required to disclose such confidential information as permitted hereunder of the requirements of
this Paragraph and shall require each such person to comply with such confidentiality requirements.
In the event Tenant or any person to whom it discloses such confidential information fails in any
respect to comply with its obligations under this Paragraph, Tenant shall be liable to Landlord for
breach of this Paragraph 25.19, and Landlord may bring an action against Tenant for damages as a
result of such breach. In addition, nothing stated herein shall preclude or prohibit Landlord from
seeking an injunction to prevent disclosure of such confidential information or an order compelling
specific protection of such confidential information. The provisions of this Paragraph 25.19 shall
survive the termination of this Lease.

     THIS LEASE CONTAINS ALL AGREEMENTS OF THE PARTIES CONCERNING THIS SUBJECT MATTER, SUPERSEDING
ANY SUCH PRIOR AGREEMENTS, REPRESENTATIONS OR WARRANTIES, AND MAY BE AMENDED OR MODIFIED ONLY BY A
WRITTEN AGREEMENT SIGNED BY BOTH PARTIES.

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

	 	 	 	 	 
	LANDLORD’S ADDRESS	 	LANDLORD
	 
	 	 	 	 
	c/o RNM Properties

135 Main Street, Suite 1140

San Francisco, CA 94105
 

Attention: John R. McNulty	 	RNM LAKEVILLE, L.P., a California Limited Partnership

By RNM PETALUMA, INC., a California corporation, its Managing General Partner
	 
	 	 	 	 
	 

	 	By:	 	/s/ John R. McNulty
	 

	 	 	 	 
	 

	 	 	 	John R. McNulty, Its President
	TENANT’S ADDRESS

	 	Date:	 	10/28/99 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 	 	TENANT:
	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Attention: 	 	MICROMED LABORATORIES, INC., a California corporation
	 	 	 
	 
	 	 	 	 
	 

	 	By:	 	/s/ Hojabr Alimi
	 

	 	 	 	 
	Tenant and the person
executing this Lease on
Tenant’s behalf represent
and warrant that they are
duly authorized and
empowered so to execute and
deliver this Lease, and
that this Lease is binding
upon Tenant in accordance
with its terms.

	 	 	 	(signature)

	 

	 	 	 	Hojabr Alimi
	 

	 	 	 	 
	 

	 	 	 	(print name)

	 

	 	Its	 	 
	 

	 	 	 	President, CEO
	 

	 	 	 	 
	 

	 	 	 	(insert title)

	 

	 	Date:	 	10/26/99 
	 

	 	 	 	 

24

 

ADDENDUM

TO LEASE

     This Addendum is made and entered into by and between RNM Lakeville, L.P., a California
Limited Partnership, as Landlord, and MICROMED LABORATORIES, INC., a California corporation, as
Tenant, and is dated as of the date set forth on the first page of the Lease between Landlord and
Tenant to which this Addendum is attached (the “Lease”). The promises, covenants, agreements and
declarations made and set forth herein are intended to and shall have the same force and effect as
if set forth at length in the body of the Lease. To the extent that the provisions of this
Addendum are inconsistent with the terms and conditions of the Lease, the terms of this Addendum
shall control.

26.     TENANT’S EXTENSION OPTION.

     26.1. Grant of Option. Tenant shall have the right and option (the “Extension
Option”) to extend the Term of this Lease for two additional period of three (3) years each (each
an “Extension Term”), commencing immediately upon expiration of the then expiring Lease term (each,
an “Adjustment Date”), upon and subject to the terms, conditions and provisions below.

     26.2. Exercise of Extension Option. To exercise an Extension Option to extend the
term of this Lease for an Extension Term, Tenant must deliver written notice of Tenant’s intention
to exercise the Extension Option to Landlord not earlier than nine (9) months and not later than
six (6) months prior to the expiration of the Term. If Landlord does not receive such notice from
Tenant by that time, then Tenant’s Extension Option (and any subsequent Extension Option) shall
forever lapse unexercised and be of no further force or effect whatsoever.

     26.3. Effect of Exercise of Extension Option. If Tenant timely exercises an Extension
Option as provided herein, the term of this Lease shall (by delivery of Tenant’s notice of exercise
to Landlord and without further action by Landlord or Tenant) be extended for the Extension Term,
upon and subject to all of the terms, conditions and provisions set forth in this Lease, except as
provided below, and except that the Base Rent for the Extension Term shall equal to the Market Rate
(determined as provided below) for said period and Tenant shall have one fewer option to extend or
renew. There shall be no broker’s commission payable with respect to any Extension Term.

     26.4. Definition of Market Rate. As used in this Lease, the “Market Rate” shall be
the net effective fair market rental rate based on comparable lease transactions in comparable
projects located in the Lakeville/Petaluma market area, all based on the best information available
at the time of determination of the Market Rate. The Market Rate shall be based on prevailing
rentals then being charged to tenants in comparable buildings in the immediate area, or if none are
comparable, in the Lakeville/Petaluma market area, for space of equivalent quality, size and
location (or adjusting the rental rate as appropriate for differences therein), taking into such
account the size, nature and stature of the tenant, the length of the Extension Option period
during which such rate will

ADDENDUM — 1

 

 

apply, and differences in terms and provisions of the applicable leases, such as pass-throughs
of operating expenses and taxes, and the fact that no tenant improvement allowance will be
provided. The Market Rate shall not be reduced on account of any differences in leasing
commissions and shall not include the value of any Alterations made
and paid for by Tenant.

     26.5. Determination of Market Rate. If Tenant timely exercises an Extension Option,
then, during the thirty (30) day period following Landlord’s receipt of Tenant’s notice of exercise
of Tenant’s Extension Option, Landlord and Tenant shall meet and negotiate in good faith to agree
upon the Market Rate. If Landlord and Tenant are unable to agree upon the Market Rate prior to the
expiration of said thirty (30) day period, then Tenant’s exercise of its Extension Option shall be
deemed revoked, and the Lease shall terminate as of the Termination Date hereunder.

     26.6. Limitations on Extension Option. Time is of the essence as to the exercise of
Tenant’s Extension Option. If Landlord does not timely receive delivery of Tenant’s notice of
exercise of Tenant’s Extension Option, the option shall expire, lapse unexercised and be of no
further force or effect whatsoever, and Tenant shall have no further option to extend. Tenant’s
Extension Option is conditioned upon Tenant’s full, faithful and timely performance and observation
of all obligations and provisions to be performed or observed by Tenant under this Lease. Any
election to exercise the Extension Option shall be null and void at the option of Landlord (A) if
Tenant is in default hereunder at any time during the Term of the Lease or at the time of such
notice or at the Adjustment Date, or (B) if the named Tenant hereunder does not, at both the time
of exercise of the option to extend and the Adjustment Date, occupy all of the Premises (it being
the intent of the parties to this Lease that such extension option is personal to the original
Tenant hereunder, and shall not be assignable to or exercisable by or for the benefit of any
assignee, sublessee or other transferee of the original Tenant hereunder). Transfer of all or any
portion of Tenants rights under this Paragraph 26 is absolutely prohibited.

27.     RIGHT OF FIRST REFUSAL.

     27.1. Grant. As of the Commencement Date, Landlord grants to Tenant a right of first
refusal (the “Right of First Refusal”) to expand the Premises leased hereunder to include
approximately 5,413 square feet of Rentable Area contiguous to the Premises as designated as Area C
on Exhibit B (the “Additional Premises”) on a coterminous basis with this Lease and on the same
terms and conditions as set forth in this Lease. If, at any time during the term of this Right of
First Refusal, the Additional Premises becomes available to lease, Landlord shall notify Tenant in
writing of the availability of such Additional Premises and the date upon which it will be
available (“Landlord’s Notice”). If Tenant desires to exercise the Right of First Refusal, then
Tenant must irrevocably and unconditionally exercise its right in writing by delivering written
notice thereof to Landlord within ten (10) business days after Landlord’s Notice. If Tenant fails
to exercise its Right of First Refusal within the time period set forth above, then its Right of
First Refusal shall lapse and be of no further force or effect. Notwithstanding the above, in the
event that less than twenty-four (24) months are remaining in the then current term

ADDENDUM — 2

 

 

of this Lease, then, as a condition to entering into any lease with respect to the Additional
Premises, Tenant must exercise its next Extension Option, if any.

     27.2. Limitations of Right of First Refusal. Any election to exercise its Right of
First Refusal shall be null and void at the option of Landlord if Tenant is in default hereunder
beyond applicable notice and cure periods at the time of Landlord’s Notice or Tenant’s exercise of
its Right of First Refusal or on the date of the commencement of Tenant’s leasing of the Additional
Premises. In addition, Tenant’s Right of First Refusal shall be subject to any and all extension
options, rights of first offer or refusal granted by Landlord prior to the date of this Lease.

     27.3. Lease Terms After Exercise. If Tenant’s Right of First Refusal is duly
exercised, then the terms and conditions of this Lease shall remain in full force and effect,
except that Landlord and Tenant shall promptly thereafter execute an amendment to this Lease
modifying the definitions of Premises, Tenant’s Share of Operating Expenses, Base Rent, and such
other provisions as may be appropriate to incorporate the Additional Premises, including without
limitation parking allocations, maintenance, and pass throughs.

     28. PARKING. Tenant shall be entitled to the non-exclusive use of up to 2 unreserved and
unassigned parking spaces in the Common Areas per thousand feet of Rentable Area within the
Premises, in accordance with Landlord’s rules and regulations as may be amended from time to time.
Tenant shall not park any vehicle other than ordinary passenger vehicles in the Common Areas,
except for loading purposes. Loading and loading is permitted only on designated loading docks or
areas. Tenant shall not at any time park or permit the parking of Tenants vehicles or trucks, or
the vehicles or trucks of Tenant, its employees, invitees, suppliers or others, in any portion of
the Common Area not designated by Landlord for such use by Tenant. Tenant shall not abandon any
inoperative vehicles or equipment on any portion of the Common Area, nor shall Tenant, its
employees, invitees, suppliers or others park or store any vehicle (permitted size or otherwise) on
any portion of the Common Area, including designated parking areas, unattended for any period
longer than twenty-four (24) hours. Vehicles parked in violation of this Section shall be subject
to towing at Tenant’s expense.

29.     HAZARDOUS MATERIAL.

     29.1. Use Restrictions. Tenant shall not use, generate, manufacture, produce, store,
release, discharge or dispose of, on, under or about the Premises, or transport to or from the
Premises, any Hazardous Materials or allow its employees, Agents, contractors, invitees or any
other person or entity to do so except in full compliance with all Federal, state and local laws,
regulations and ordinances and this Agreement. The term “Hazardous Materials” shall include
without limitation: (1) Those substances included within the definitions of “hazardous substances”,
“hazardous materials”, “toxic substances” or “solid waste” under CERCLA, RCRA and the Hazardous
Materials Transportation Act, 49 U.S.C. Sections 1801, et seq. and in the regulations promulgated
pursuant to said Laws, (2) Those substances defined as “hazardous wastes” in Section 25117 of the
California Health & Safety Code, or as “hazardous substances” in Section

ADDENDUM — 3

 

 

25316 of the California Health & Safety Code, and in the regulations promulgated pursuant to
said Laws; (3) Those substances listed in the United States Department of Transportation Table (49
CFR 172.101 and amendments thereto) or designated by the Environmental Protection Agency (or any
successor agency) as hazardous substances; (4) Such other substances, materials and wastes which
are or become regulated under applicable local, state or federal Law or the United States
government, or which are or become classified as hazardous or toxic under federal, state or local
Laws or regulations; and (5) Any material, waste or substance which is (i) petroleum, (ii)
asbestos, (iii) polychlorinated biphenyls, (iv) designated as a “hazardous substance” pursuant to
Section 311 of the Clean Water Act of 1977, 33 U.S.C. Sections 1251, et seq. (33 U.S.C. Section
1321) or listed pursuant to Section 307 of the Clean Water Act of 1977 (33 U.S.C Section 1317), (v)
flammable explosives, or (vi) radioactive materials.

     29.2. Tenant’s Indemnity. Tenant shall be liable to Landlord for and indemnify and
hold Landlord harmless against all damages (including investigation and remedial costs),
liabilities, losses (including diminution of value of the Premises), fines, penalties, fees, and
claims arising out of Tenant’s and Tenant’s agents’ activities associated with Hazardous Materials,
including all costs and expenses incurred by Landlord in remediating, cleaning up, investigating or
responding to any governmental or third party claims, demands, orders or enforcement actions. In
the event Tenant and/or Tenant’s agents’ activities with Hazardous Materials create a contamination
problem on or adjacent to the Premises, the Building, Tenant shall promptly commence investigation
and remedial activities to fully clean up the problem. If appropriate or required by law, these
activities shall be conducted in conjunction with Federal, state and local oversight and approvals.
If any action of any kind is required or requested to be taken by any governmental authority to
clean-up, remove remediate or monitor any Hazardous Materials (the presence of which is the result
of the acts or omissions of Tenant or its Agents) and such action is not completed prior to the
expiration or earlier termination of the Lease, Tenant shall be deemed to have impermissibly held
over until such time as such required action is completed, and Landlord shall be entitled to all
damages directly or indirectly incurred in connection with such holding over, including, without
limitation, damages occasioned by the inability to re-let the Premises or a reduction of the fair
market and/or rental value of the Premises.

     29.3. Assignment and Subletting. It shall not be unreasonable for Landlord to
withhold its consent to any proposed assignment or subletting if (i) the proposed assignee’s or
subtenant’s anticipated use of the Premises involves the storage, generation, discharge, transport,
use or disposal of any Hazardous Material in a greater intensity and scope than Tenant’s
then-existing use, or (ii) the proposed assignee or subtenant has been required by any prior
landlord, Lender or governmental authority to “clean-up” or remediate any Hazardous Material and
has failed to do so, or (iii) the proposed assignee or subtenant is subject to a criminal
investigation or enforcement order or proceeding by any government authority in connection with the
use, generation, discharge, transport, disposal or storage of any Hazardous Material.

     29.4. List of Hazardous Materials. Upon request of Landlord, Tenant shall provide
Landlord with a list of Hazardous Materials (and the quantities thereof) which

ADDENDUM — 4

 

 

Tenant uses or stores (or intends to use or store) on the Premises, which list shall be
attached to this Lease as Exhibit F.

          (a) Prior to Tenant using, handling, transporting or storing any Hazardous Material at or
about the Premises, Tenant shall submit to Landlord a Hazardous Materials Management Plan (“HMMP”)
for Landlord’s review and approval, which approval shall not be unreasonably withheld. The HMMP
shall describe: (aa) the quantities of each material to be used, (bb) the purpose for which each
material is to be used, (cc) the method of storage of each material, (dd) the method of
transporting each material to and from the Premises and within the Premises (ee) the methods Tenant
will employ to monitor the use of the material and to detect any leaks or potential hazards, and
(ff) any other information any department of any governmental entity (city, state or federal)
requires prior to the issuance of any required permit for the Premises or during Tenant’s occupancy
of the Premises. Landlord may, but shall have no obligation to review and approve the foregoing
information and HMMP, and such review and approval or failure to review and approve shall not act
as an estoppel or otherwise waive Landlord’s rights under this Lease or relieve Tenant of its
obligations under this Lease. If Landlord determines in good faith by inspection of the Premises
or review of the HMMP that the methods in use or described by Tenant are not adequate in Landlord’s
good faith judgment to prevent or eliminate the existence of environmental hazards, then Tenant
shall not use, handle, transport, or store such Hazardous Materials at or about the Premises unless
and until such methods are approved by Landlord in good faith and added to an approved HMMP. Once
approved by Landlord, Tenant shall strictly comply with the HMMP and shall not change its use,
operations or procedures with respect to Hazardous Materials without submitting an amended HMMP for
Landlord’s review and approval as provided above.

          (b) Tenant shall pay to Landlord when Tenant submits an HMMP (or amended HMMP) the amount
reasonably determined by Landlord to cover all Landlord’s costs and expenses reasonably incurred in
connection with Landlord’s review of the HMMP which costs and expenses shall include, among other
things, all reasonable out-of-pocket fees of attorneys, architects, or other consultants incurred
by Landlord in connection with Landlord’s review of the HMMP. Landlord shall have no obligation to
consider a request for consent to a proposed HMMP unless and until Tenant has paid all such costs
and expenses to Landlord irrespective of whether Landlord consent to such proposed HMMP. Tenant
shall pay to Landlord on demand the excess, if any, of such costs and expenses actually incurred by
Landlord over the amount of such costs and expenses actually paid by Tenant over the amount such
costs and expenses actually incurred by Landlord. Tenant shall immediately notify Landlord of any
inquiry, test, investigation, enforcement proceeding by or against Tenant or the Premises
concerning any Hazardous Material. Any remediation plan prepared by or on behalf of Tenant must be
submitted to Landlord prior to conducting any work pursuant to such plan and prior to submittal to
any applicable government authority and shall be subject to Landlord’s consent. Tenant
acknowledges that Landlord, as the owner of the Property, at its election, shall have the sole
right to negotiate, defend, approve and appeal any action taken or order issued with regard to any
Hazardous Material by any applicable governmental authority. Landlord shall have the right to
appoint a consultant to conduct

ADDENDUM — 5

 

 

an investigation to determine whether any Hazardous Material is being used, generated,
discharged, transported to or from, stored or disposed of in, on, over, through, or about the
Premises, in an appropriate and lawful manner and in compliance with the requirements of this
Lease. Tenant, at its expense, shall comply with all reasonable recommendations of the consultant
required to conform Tenant’s use, storage or disposal of Hazardous Materials to the requirements of
applicable Law or to fulfill the obligations of Tenant hereunder.

     29.5. Landlord’s Indemnity. Landlord shall be liable to Tenant for and indemnify and
hold Tenant harmless against all damages (including investigation and remedial costs), liabilities
and claims arising out of Landlord’s and Landlord’s agents’ activities associated with Hazardous
Materials, and arising out of any Hazardous Materials existing on or under the Building as of the
Commencement Date, including all costs and expenses incurred by Tenant in remediating, cleaning up,
investigating or responding to any governmental or third party claims, demands, orders or
enforcement actions.

     29.6. Provisions Survive Termination. Upon the expiration or earlier termination of
the Lease, Tenant, at its sole cost, shall remove all Hazardous Materials from the Premises that
Tenant or its Agents introduced to the Premises. The provisions of this Section 29 shall survive
the expiration or termination of this Lease.

30.     CONDITIONAL ABATEMENT OF BASE RENT. As consideration for Tenant’s performance of all
obligations to be performed by Tenant under this Lease, Landlord shall forbear from demanding
payment of the first thirty (30) days of Base Rent (the “Suspended Rent”), provided that and so
long as Tenant timely and fully performs all obligations of Tenant under this Lease. Should Tenant
at any time be in default under the Lease (beyond any applicable grace or cure period), then the
Suspended Rent so conditionally excused shall be immediately due and payable by Tenant to Landlord.
If at the date of expiration of the term of this Lease, Tenant is not in default under this Lease,
then Landlord shall unconditionally waive any payment by Tenant to Landlord of the Suspended Rent.

ADDENDUM — 6

 

 

EXHIBIT A

LEASE

Definitions

     Building means the building in which the Premises are located, identified as 1129
North McDowell Blvd., Petaluma, California. The total Rentable Area of the Building is 58,558
square feet.

     Business days means Monday through Friday, except holidays; “holidays” means those
holidays specified by the laws of the United States or State of California, and all holidays to
which maintenance employees of the Building are entitled from time to time under their union
contract or other agreement.

     CC&Rs means all matters of public record affecting title to the Building or the use
thereof, including without limitation that certain Covenants, Conditions and Restrictions recorded
October 1, 1979 in Book 3630 of official records, Page 901, Sonoma County Records, as amended to
date.

     Common Areas means all areas within the Building and surrounding areas of the property
which are not designated for the exclusive use of Tenant, Landlord or any other tenant, including
but not limited to parking areas, loading and unloading areas and docks, platforms, trash areas,
roadways, sidewalks, landscaping, ramps, driveways, recreations areas, greenbelts, common
entrances, lobbies, restrooms, elevators, stairways and accessways, and the common pipes, conduits,
wires and appurtenant equipment serving the Premises, and similar areas and facilities appurtenant
to the Building and the property.

     Guarantor means any guarantor of any of Tenant’s obligations under this Lease.

     Law or Laws means governmental laws, rules, regulations, orders, decrees, ordinances
and directives as are applicable to the conduct or condition referenced in this Lease.

     Lease Years means successive periods of twelve (12) full calendar months, beginning on
the Commencement Date. If the Commencement Date is not the first day of a month, then the first
Lease Year also includes the partial month in which the Commencement Date occurs.

     Mortgage means any mortgage or Deed of Trust, blanket or otherwise, covering any part
of the Building.

     Mortgagee means the holder of a Mortgage.

     Operating Expenses means any and all costs, expenses and disbursements of every kind
and character which Landlord incurs, pays or becomes obligated to pay at any time during the Term
in connection with its ownership interest in the Building and Common Areas and associated land and
parking, or the operation, maintenance, management, repair, replacement, and security thereof;
plus, with respect to such costs, expenses, and disbursements for the Building which do not
exclusively pertain to a single building, the portion which Landlord reasonably allocates
to the Building. Operating costs include, without limitation, any and all

EXHIBIT A

Page A-1

 

 

assessments Landlord must pay pursuant to the CC&Rs and any other covenants, conditions or
restrictions, reciprocal easement agreements, tenancy-in-common agreements or similar restrictions
and agreements affecting the Building or Common Areas; rent taxes, gross receipt taxes (whether
assessed against Landlord or assessed against Tenant and paid by Landlord, or both); water and
sewer charges, accounting, legal and other consulting fees; the net cost and expense of insurance,
including loss of rents coverage, for which Landlord is responsible hereunder or which Landlord or
any Mortgagee reasonably deems necessary or desirable (including losses borne by Landlord as a
result of deductibles carried by Landlord under any insurance policy or self insurance by
Landlord); utilities not paid directly by Tenant; security; labor, utilities surcharges, or any
other costs levied, assessed or imposed by, or at the direction of, or resulting from statutes or
regulations or interpretations thereof, promulgated by any federal, state, regional, municipal or
local government authority in connection with the use or occupancy of the Building or the Common
Areas; the cost (amortized over such reasonable period as Landlord shall determine together with
interest at the Prime Rate on the unamortized balance) of any equipment used in connection with the
operation of the Building, and of any capital improvements which can be reasonably be expected to
reduce Operating Expenses that would otherwise be incurred or which are made or installed in order
to comply with any statutes, rules, regulations or directives hereafter promulgated by any
governmental authority, including but not limited to the Americans with Disabilities Act; costs
incurred in the management of the Building (including supplies, wages and salaries of employees
used in the management, operation, repair and maintenance of the Building, and payroll taxes and
similar governmental charges with respect thereto, Building management office rental, a management
fee and, if Landlord is directly participating in the administration of the Building, Landlord’s
expenses of such administration, not to exceed three percent (3%) of the annual rent (Base Rent and
Additional Rent excluding therefrom such fee); air conditioning; waste disposal; heating,
ventilating; elevator maintenance and supplies; materials; equipment tools; repair and maintenance
of the Building, including the structural portion of the Building, and the plumbing, heating,
ventilating, air conditioning, electrical and building management systems installed or furnished by
Landlord; maintenance costs, including utilities and payroll expenses, rental of personal property
used in maintenance, gardening and landscaping, repaving and all other upkeep of all Common Areas;
maintenance of signs (other than Tenant’s signs); personal property taxes levied on or attributable
to personal property used in connection with the entire Building or Common Areas, including the
Common Areas; reasonable audit or verification fees; costs and expenses of repairs, resurfacing,
repairing, maintenance, painting, lighting, cleaning, refuse removal, security and similar items,
including appropriate reserves; and costs reasonably incurred to reduce or contest Real Property
Taxes and other Operating Expenses. Operating Expenses shall not include depreciation on the
Building or equipment therein, Landlord’s executive salaries, real estate brokers’ commissions,
interest and amortization on mortgages or ground lease payments, or (except as explicitly included
above) costs required to be capitalized. Operating Expenses paid or incurred by Landlord during
any calendar year of the Lease term during which the occupancy rate in the Building is less than

ninety-five percent (95%) shall be adjusted upward to reflect (i) a ninety-five percent (95%)
occupancy rate for the Building, and (ii) assuming a tax appraisal of the Building as though it
were completed and fully-occupied.

EXHIBIT A

Page A-2

 

 

     Notwithstanding the above, Operating Expenses shall not include the following:

          (i) Interest, principal, depreciation, and other lender costs and closing costs on any
mortgage or mortgages, or other debt instrument encumbering the Building;

          (ii) Any bad debt loss, rent loss, or reserves for bad debt or rent loss;

          (iii) Costs associated with operation of the business of the ownership of the Building or
entity that constitutes Landlord or Landlord’s property manager, as distinguished from the cost of
Building operations, including the costs of partnership or corporate accounting and legal matters,
selling or syndicating any of Landlord’s interest in the Building, and disputes between Landlord
and Landlord’s property manager;

          (iv) Landlord’s general corporate or partnership overhead and general administrative expenses,
including the salaries of management personnel who are not directly related to the Building and
primarily engaged in the operation, maintenance, and repair of the Building;

          (v) Advertising and promotional expenditures primarily directed toward leasing tenant space in
the Building;

          (vi) Leasing commissions, space-planning costs, attorney fees and costs, disbursements, and
other expenses all incurred in connection with leasing, other negotiations, or disputes with
tenants, occupants, prospective tenants, or other prospective occupants of the Building, or
associated with the enforcement of any leases;

          (vii) Costs incurred (including permit, license, and inspection fees but excluding utilities)
or cash consideration paid in renovating or otherwise improving, decorating, painting, or
redecorating space for tenants, prospective tenants, or other occupants or in renovating or
redecorating vacant space available for those tenants, prospective tenants, or other occupants.
This exclusion does not apply to remove from Operating Expenses the costs of maintenance and repair
provided to the tenants of the Building in general or of the Common Areas;

          (viii) Charitable or political contributions;

          (ix) Costs for which Landlord is reimbursed;

          (x) Damage or loss results from any casualty which Landlord has covenanted to insure against,
except to the extent of deductibles contemplated herein;

          (xi) Any costs or expenses that are incurred directly or indirectly with respect to Landlord’s
indemnity obligations under this Lease; and

          (xii) Fees paid to any affiliate or party related to Landlord to the extent such fees exceed
the charges for comparable services rendered by unaffiliated thirty parties of comparable skill,
stature and reputation in the same market.

EXHIBIT A

Page A-3

 

 

     Premises means the approximate area shown on Exhibit B. Landlord hereby reserves for
its sole and exclusive use, the roof, any and all mechanical, electrical, telephone and similar
rooms, janitor closets, elevator, pipe and other vertical shafts and ducts, flues, stairwells; the
area above the acoustical ceiling; facilities serving parts of the Building or other than the
Premises; and any other area not shown on Exhibit B as being part of the Premises.

     Prime Rate means the rate of interest published in the “Money Rates” column of Wall
Street Journal as the Prime Rate, as such rate may change from time to time (or, if such rate is no
longer published in the Wall Street Journal, such reasonable substitute as Landlord may select).

     Real Property Taxes means any form of general or special assessment, license fee,
license tax, business license fee, any form of real estate tax or assessment, general, special,
ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond, levy or
tax (other than inheritance, personal income or estate taxes) imposed on the Building, the Common
Areas or any portion thereof by any authority having the direct or indirect power to tax, including
any city, county, state or federal government, or any school, sanitary, fire, street, drainage or
other improvement district, or any other governmental entity or public corporation, as against (a)
any legal or equitable interest of Landlord in the Building, Common Areas or any portion thereof,
(b) Landlord’s right to rent or other income therefrom, (c) the square footage thereof, (d) the act
of entering into any lease, (e) the occupancy of tenant or tenants generally, or (f) Landlord’s
business of leasing the Building, Common Areas or any portion thereof. The term “real property
taxes” shall also include any tax, fee, levy, assessment or charge including, without limitation,
any so-called value added tax, (i) which is in the nature of, in substitution for or in addition to
any tax, fee, levy, assessment or charge hereinbefore included within the definition of “real
property taxes,” (ii) which is imposed for a service or right not charged for prior to June 1,
1978, or if previously charged for, which has been increased since June 1, 1978, (iii) which is
imposed or added to any tax or charge hereinbefore included within the definition of real property
taxes as a result of a “change in ownership” of the Building, Common Areas or any portion thereof,
as defined by applicable statutes and regulations, for property tax purposes, or (iv) which is
imposed by reason of this transaction, any modification or change hereto or any transfer hereof.

     Tenant’s Share means the percentage of the cost of Operating Expenses for which Tenant
is obligated to reimburse Landlord pursuant to this Lease. Landlord shall determine Tenant’s Share
of the cost of Operating Expenses using the following methods: (a) by multiplying the cost of all
Operating Expenses by a fraction, the numerator of which is the number of square feet of Rentable
Area in the Premises and the denominator of which is the number of square feet of Rentable Area in
the entire Building, or (b) by allocating an Operating Expense in any other reasonable manner, as
determined by Landlord.

EXHIBIT A

Page A-4

 

 

EXHIBIT B - PREMISES

DIAGRAM GOES HERE

1129 North McDowell Boulevard

Petaluma, California

EXHIBIT B

Page B-1

 

 

EXHIBIT C

SAMPLE FORM OF

OPENING/CLOSING CERTIFICATE

			
	Re:	 	                    

			
		 	                    , CA

			
	     This is to certify that	 	
 

TENANT NAME

			
	          has opened/closed on	 	
 

DATE

BILLING ADDRESS

			
	TENANT NAME	 	
 

			
	ADDRESS	 	
 

			
	CITY, STATE, ZIP	 	
 

      

 

			
	ATTN:	 	
 

          

          

          

          

          

			
	By:	 	
 

AUTHORIZED
AGENT FOR TENANT

			
	RENTABLE AREA	 	
 

	 
	TENANT’S
SHARE	 	________________________
percent (  %)

			
	LEASE COMMENCEMENT DATE	 	
 

			
	LEASE EXPIRATION DATE	 	
 

RENTAL PAYMENT COMMENCEMENT

			
	DATE	 	
 

			
	PREPAID RENT RECEIVED	 	
 

			
	FINAL TENANT CONSTRUCTION
OVERAGE	 	
 

PAYMENT DUE

INSURANCE CERTIFICATE SUBMITTED

			
	(Y/N)	 	
 

			
	SECURITY DEPOSIT RECEIVED	 	
 

			
	PARKING SPACES	 	
 

			
	By:	 	
 

AUTHORIZED AGENT FOR LANDLORD

EXHIBIT 6

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EXHIBIT D

SAMPLE FORM OF

TENANT ESTOPPEL CERTIFICATE

      
                
             
                
                
   (“Tenant”) herby certifies to      
        
                
                
                
                
                     
                
            as follows:

     1. Attached hereto is a true, correct and complete copy of a lease dated                     , 19_,
between RNM Lakeville, L.P. (“Landlord”) and Tenant (the “Lease”), which demised premises located
at                     , California (the “Property’). The Lease is now in full force and
effect and has been amended, modified, supplemented, extended, renewed or assigned by and only by
the following described agreements, copies of which are attached hereto (if none, so indicate), all
of which (together with the Lease) are hereby ratified:

            
                  
                  
                 
                 
                 
                 
                 
                 
                 
                 
                 
          

            
                  
                  
                 
                 
                 
                 
                 
                 
                 
                 
                 
          

     2. The term of this Lease commenced on                     , 19___and will expire on                     , 19_.

     3. Tenant has accepted and is now in possession of said premises.

     4. Tenant and Landlord acknowledge that the Lease will be assigned to                      and that no
modification, adjustment, revision or cancellation of the Lease or amendments thereto shall be
effective unless written consent of                      is obtained, and that until
further notice, payments under the Lease may continue as heretofore.

     5. The amount of fixed monthly rent is $                    . Tenant is paying in full lease rental which
has been paid in full as of the date hereof. No rent under the Lease has been paid for more than
thirty (30) days in advance of its due date.

     6. The amount of security deposits (if any) is $                    . No other security deposits have
been made.

     7. All work required to be performed by Landlord or Tenant under the Lease has been performed,
except for the following (if none, so indicate)                                                             
                                                                                     
;                                   

     8. There are
no defaults on the part of the Landlord or Tenant under the Lease, except for the
following (if none, so indicate)             
                  
                  
            
                 
                 
                 
                 
                 
;                 
                  

     9. Tenant has no defense as to its obligations under the Lease and claims no setoff or
counterclaim against Landlord, except for the following (if none, so indicate)
                                                                                     
;                                   

EXHIBIT D

Page D-1

 

 

     10. Tenant has no right to any concession (rental or otherwise) or similar compensation in
connection with renting the space it occupies except as provided in the Lease, except for the
following (if none, so indicate)
                                                                                  
                                      

     The foregoing certification is made with the knowledge that                                                             

is about
to (fund a loan to) (purchase the Property from) Landlord and that said party is relying upon the
representations herein made in (funding such loan) (making such purchase).

Dated: ___, 19_.

	 	 	 	 	 
	 	TENANT:

 	 
	 	 	 	 
	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	By:  	 	 

	 	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 
	 	Its:  	 	 
	 	 	 	 
	 	 	 	 
	 

EXHIBIT D

Page D-2

 

 

EXHIBIT E

RULES AND REGULATIONS

	1.	 	The sidewalks, plazas, halls, passages, exits, entrances and lobbies of the Building and the
other Common Areas shall not be obstructed by Tenant or used by it for any purpose other than
for ingress to and egress from the Premises. Landlord retains the right to control and
prevent access to the Common Areas of all persons whose presence in the judgment of the
Landlord would be prejudicial to the safety, character, reputation and interests of the
Building and its tenants, or who it believes are engaged in illegal or objectionable
activities.
	 
	2.	 	With the exception of typical catering and food warming activities, no cooking shall be done
or permitted by Tenant on the Premises, except that use by Tenant of Underwriters’ Laboratory
approved portable equipment for brewing coffee, tea, hot chocolate and similar beverages shall
be permitted, as shall the use of similarly-approved microwave ovens for personal use by
Tenant’s employees, provided that such use is in accordance with all applicable federal,
state, and local laws, codes, ordinances, rules and regulations. Tenant’s employees may
prepare food items solely for their own personal consumption and for guests, and shall not
prepare or sell, or permit to be prepared or sold, any consumable items whatsoever in the
Premises or in the Building. In the event pest control is required within the Premises as a
result of food preparation or other activities by Tenant, Tenant shall contract and pay for
such services.
	 
	3.	 	No person or persons other than those approved by Landlord shall be permitted to enter the
Building for the purpose of cleaning same. Tenant shall not cause any unnecessary labor by
reason of Tenant’s carelessness or indifference in the preservation of good order and
cleanliness.
	 
	4.	 	Landlord will initially furnish to Tenant, free of charge, two keys per lockset to the
Premises, and Landlord may make a reasonable charge for additional keys. No additional
locking devices shall be installed in the Premises by Tenant nor shall any locking device be
changed or altered in any respect without the prior written consent of Landlord. Landlord may
make reasonable charge for any additional lock or any bolt (including labor) installed on any
door of the Premises. All locks installed in the Premises shall be identified in writing to
Landlord and shall be keyed to the Building master key system, with the exception of locks
leading to vaults, safes or other secured areas as previously identified in writing to
Landlord. The installation of such vaults, safes or other secured areas by Tenant will be
subject to Landlord’s prior written approval, which shall not be unreasonably withheld.
Tenant, upon the termination of its tenancy, shall deliver to Landlord all keys to doors in
the Premises and all access cards and I.D. cards, if any, to the Building.
	 
	5.	 	Landlord and Tenant shall mutually agree to a reasonable time for Tenant’s initial move to
the Premises. Tenant shall reimburse Landlord upon demand for any additional security or
other charges incurred by Landlord as a consequence of a major move. Any third parties
employed by Tenant to move equipment or other items in or out of the

EXHIBIT E

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	 	 	Building must be approved in advance by Landlord. The floors, comers and walls of corridors
used for the moving of equipment or other items into or out of the Building must be
adequately covered, padded and protected, and Landlord may elect to provide such padding and
protection, at Tenant’s expense, if Landlord determines that such measures undertaken by
Tenant or Tenant’s movers are inadequate. Landlord shall have the right to prescribe the
maximum weight, size and position of all equipment, materials, supplies, furniture or other
property bought into the Building, but this right shall apply only if the weight, size or
position of same could reasonably be expected to exceed the load capacity of the floors and
structure of the Building, or if in Landlord’s reasonable estimation the position of such
items creates a hazard or interferes with operation of the building systems. Heavy objects
shall, if considered necessary by Landlord, be placed on a platform of such thickness as is
necessary to properly distribute the weight of such objects. Landlord shall not be
responsible for loss of or damage to the Building resulting from moving or maintaining
Tenant’s property and shall be repaired at the expense of Tenant.
	 
	6.	 	Tenant agrees to cooperate in any delivery scheduling programs for the Common Areas,
including restriction of deliveries or pickups to reasonable periods as may be determined by
Landlord. In its use of the loading and unloading areas of the Building, Tenant shall not
obstruct or permit the obstruction of the Common Areas, and at no time shall Tenant store
materials, furniture, or equipment, or park vehicles therein.
	 
	7.	 	Landlord reserves the right to exclude from the Building at all times other than the usual
business hours of the Building, as established by Landlord, all persons who do not have proper
evidence of Tenant’s prior authorization to enter the Premises after hours. Landlord may
establish at its discretion what shall constitute proper evidence, which may include LID.
cards, special passes or other forms or methods. Tenant shall be responsible to Landlord for
all persons for whom it requests such access, and shall be liable to Landlord for any and all
acts of such persons. Landlord shall in no case be liable for damages for any error with
regard to the admission to or exclusion from the Building of any person. In the case of
invasion, mob, not, public excitement or other circumstances rendering such action advisable
in Landlord’s sole opinion, Landlord reserves the right to prevent access to the Building
during the continuance of same by such action as Landlord may deem appropriate, including
closing and securing any doors in the Building.
	 
	8.	 	No curtains, draperies, blinds, shutters, shades, screens or other coverings, hangings or
decorations shall be attracted to or placed in, or used in connection with, any window of the
Building without the prior written consent of the Landlord, other than standard window
coverings.
	 
	9.	 	Tenant shall use reasonable procedures to see that the doors of the Premises are closed and
locked and that all water faucets, water apparatus, light switches, cooking facilities and
office equipment (excluding office equipment required to be operative at all times) are shut
off before Tenant or Tenant’s employees leave the Premises, so as to prevent waste or damage.
Tenant shall at all times comply with any rules or orders of the fire department or any other
government agency with respect to ingress and egress.

EXHIBIT E

Page E-2

 

 

	10.	 	The toilets, urinals, wash bowls and other restroom facilities shall not be used for any
purpose other than that for which they are constructed, no foreign substance of any kind
whatsoever shall be placed therein, and the expense of repairing any breakage, stoppage or
damage resulting from the violation of this rule shall be borne by the tenant whose employees
or invitees shall have caused it.
	 
	11.	 	Tenant shall not install any radio or television antenna, loudspeaker, or other device on or
about the Common Areas or the roof or exterior walls of the Building. No television, radio or
other audio or visual apparatus shall be used in the Premises in such a manner as to cause a
nuisance to any other Building tenant or to interfere with any frequencies used in connection
with Building operations.
	 
	12.	 	Tenant shall at all times maintain the Premises in a neat, professional and first-class
manner, and shall show the same standard of care with regard to the Common Areas, Tenant shall
store all its trash and garbage within the Premises until removal of same to such location in
the Common Areas as may be designated from time to time by Landlord, and at no time shall
Tenant store any trash or garbage in any of the hallways, stairways, elevator or stairway
lobbies, loading areas, entrances or exits for the Building. No fluid or material shall be
placed with Tenant’s trash and garbage or be placed in the Building trash boxes or receptacles
if such fluid or material is of such nature that it may not be disposed of in the ordinary and
customary manner of removing and disposing of trash and garbage in the City of Petaluma
without being in violation of any law or ordinance governing such disposal. Tenant shall pay
reasonable extra charges as determined by Landlord for any unusual trash disposal.
	 
	13.	 	Canvassing, soliciting, peddling, or distribution by Tenant to other Building tenants or
visitors of handbills or any other written material in the Building is prohibited, and Tenant
shall not permit such activities by its employees or invitees. Tenant shall cooperate in
reporting to Landlord any such activities of solicitors in the Building.
	 
	14.	 	Tenant shall immediately, upon written request from Landlord (which request need not be in
writing), reduce its lighting in the Premises for temporary periods designated by Landlord,
when required in a temporary emergency situation caused by earthquake or other force majeure
event to prevent overloading of the mechanical or electrical systems of the Building.
	 
	15.	 	Tenant shall not place any load on the floors of the Premises or the Building exceeding the
live load capacity thereof as determined by Landlord. Tenant shall not use electricity for
lighting, machines or equipment in excess of the consumption load of the Premises as
determined by Landlord. Except as permitted in accordance with the Lease, Tenant shall not
alter any of the Building systems, including but not limited to heating, air conditioning, and
other mechanical or electrical systems, without the prior written consent of Landlord.
	 
	16.	 	Landlord reserves the right to exclude or expel from the Building any person who is, in the
judgment of Landlord, intoxicated or under the influence of alcohol or other drug, or

EXHIBIT E

Page E-3

 

 

	 	 	acting in a violent or disruptive manner, or who shall in any manner do any act in violation
of any of the Rules and Regulations of the Building.
	 
	17.	 	No animals of any kind shall be permitted at any time in the Premises or the Building, with
the exception of guide animals for the handicapped employees or invitees of Tenant and
Tenant’s laboratory specimens.
	 
	18.	 	Any charges which Tenant is obligated by these Rules to pay shall be deemed additional rent
under the Lease, and should Tenant fail to pay the same within ten (10) days after written
demand, such failure shall be treated as a default by Tenant to pay rent as due under the
Lease.
	 
	19.	 	Landlord may waive any one or more of these Rules and Regulations for the benefit of any
particular tenant or tenants, but no such waiver by Landlord shall be construed as a waiver of
these Rules and Regulations in favor of any other tenant or tenants, nor prevent Landlord from
thereafter enforcing any such Rules and Regulations against any or all of the tenants of the
Building. All waivers shall be one time waivers only unless in writing and specifically
providing to the contrary.
	 
	20.	 	These Rules and Regulations are in addition to, and shall not be construed in any way to
modify, alter or amend, in whole or part, the terms, covenants, agreements and conditions of
Tenant’s Lease or any other lease of premises in the Building. In the event of any conflict
between the terms of these Rules and Regulations and the terms of any lease in the Building,
the terms of the lease shall prevail.
	 
	21.	 	Landlord reserves the right to make such other reasonable rules and regulations, or to amend
or repeal these Rules and Regulations, as in its judgment may from time to time be needed for
the safety, care and cleanliness of the Building and for the preservation of good order
therein.
	 
	22.	 	Tenant shall be responsible for the observance of all of the foregoing rules and regulations
by Tenant’s employees, agents, contractors, clients, customers, invitees and guests. Tenant
shall cooperate with Landlord’s educational programs for Landlord’s policies and procedures
with regard to fire and life safety, earthquakes and any other emergency or evacuation
procedures of which Landlord shall notify Tenant from time to time.
	 
	23.	 	Tenant shall at all times require communication, telephone, computer and all other similar
types of vendors installing cables, lines; and the like in the ceiling plenum, to support
their work independently of the ducts and ceiling grids.

EXHIBIT E

Page E-4

 

 

EXHIBIT F

LIST OF HAZARDOUS MATERIALS

EXHIBIT F

Page F-1

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