Document:

Real Estate Leasing Contract

 Exhibit 10.1 
  

							
		  	CREDIT SUISSE	  		 	
		  	Leasing	  		 	
		  	Avenue d’Ouchy 52	  	Téléphone	 	021 340 14 00
		  	Case postale 5722	  	Téléfax	 	021 340 14 39
		  	1002 Lausanne	  	TVA N°	 	231’051

 REAL ESTATE LEASING CONTRACT 
 No. 709’341 
  

					
	1.	  	Kyphon Sàrl	  	The Lessee
		  	Rue du Puits-Godet 12/12a	  	
		  	2000 Neuchâtel	  	
			
		  	VAT No: 639’496	  	
		
	And	  	
			
	2.	  	CREDIT SUISSE	  	The Leasing Company
		  	Paradeplatz 8	  	
		  	8001 Zurich	  	
			
		  	Mailing address:	  	
			
		  	CREDIT SUISSE	  	
		  	Leasing	  	
		  	Case postale 5722	  	
		  	1002 Lausanne	  	
			
		  	VAT No.: 231’051	  	

 Contents 
  

									
	 I
	  	PRELIMINARY PROVISIONS	  	4
				
		  	1.	  	PURPOSE OF THE CONTRACT	  	4
		  	2.	  	CONTRACTUAL ELEMENTS	  	4
		  	3.	  	INVESTMENT COSTS	  	4
		  		  	3.1	  	Definition	  	4
		  		  	3.2	  	Residual Value	  	4
		  		  	3.3	  	Residual Value at a given time - 3.4 Provisions concerning the period of construction	  	5
		  	4.	  	ACQUISITION OF THE OBJECT OF THE LEASE	  	7
		  		  	4.1	  	Description of the object of the lease	  	7
		  		  	4.2	  	Provisions of the sale contract and investment costs	  	8
		  		  	4.3	  	Transfer of title	  	8
		  		  	4.4	  	Failure of the sale contract	  	8
		  	5.	  	ACCEPTANCE OF THE OBJECT OF THE LEASE	  	8
		  		  	5.1	  	Date	  	8
		  		  	5.2	  	Statement of the condition of the premises on acceptance of the new building after its completion	  	8
			
	 II
	  	UTILISATION PHASE	  	9
				
		  	6.	  	DURATION OF UTILISATION	  	9
		  	7.	  	PROCESSING COSTS	  	9
		  	8.	  	LEASING PAYMENTS	  	9
		  		  	8.1	  	Definition	  	9
		  		  	8.2	  	Calculation, determination	  	9
		  		  	8.3	  	Interest period and due date	  	10
		  		  	8.4	  	Leasing payments at the beginning of the duration of utilisation	  	10
		  	9.	  	VALUE ADDED TAX	  	10
		  		  	9.1	  	Liability	  	10
		  		  	9.2	  	Security interests	  	11
		  	10.	  	SECURITY INTERESTS / REQUIREMENTS	  	11
		  		  	10.1	  	Guarantees	  	11
		  		  	10.2	  	Change of owner	  	12
			
	 III
	  	RIGHTS AND OBLIGATIONS	  	12  
				
		  	11.	  	LESSEE’S RIGHT TO ENJOYMENT	  	12
		  		  	11.1	  	Scope	  	12
		  		  	11.2	  	Obligation of diligence, maintenance and third party rights	  	12
		  		  	11.3	  	Modifications to the object of the lease	  	13
		  		  	11.4	  	Legal mortgages of artisans and construction firms	  	13
		  		  	11.5	  	Pollution	  	13
		  	12.	  	GUARANTEE AGAINST DEFECTS	  	13
		  		  	12.1	  	Guarantee against material and legal defects	  	14
		  		  	12.2	  	Charges encumbering the object of the lease	  	14
		  	13.	  	RISK AND LIABILITY	  	14
		  		  	13.1	  	Principle	  	14
		  		  	13.2	  	Insurance taken out by the leasing company	  	15
		  		  	13.3	  	Insurance taken out by the lessee	  	15
		  		  	13.4	  	Accidents	  	15
		  		  	13.5	  	Value Added Tax	  	16
		  	14.	  	ACCESSORY COSTS AND PUBLIC CONTRIBUTIONS	  	16
			
	 IV
	  	TERMINATION OF THE CONTRACT	  	16
				
		  	15.	  	NORMAL TERMINATION OF THE CONTRACT	  	16
		  		  	15.1	  	Option of the Lessee	  	16
		  		  	15.2	  	Extension of the leasing contract	  	17
		  		  	15.3	  	Purchase by the lessee	  	17
		  		  	15.4	  	Return of the object of the lease	  	17
		  	16.	  	FAILURE TO PAY AND OTHER BREACHES OF THE
CONTRACT BY THE LESSEE	  	17
		  		  	16.1	  	Interest on arrears	  	17

									
		  		 	16.2	  	Option of the leasing company	  	18
		  		 	16.3	  	Consequences of failure to pay	  	18
		  		 	16.4	  	Early termination of the leasing contract due to serious circumstances	  	19
		  	17.	 	EARLY TERMINATION OF THE CONTRACT BY THE LESSEE	  	20
		  	17 A)	 	EARLY TERMINATION BY THE LEASING COMPANY DUE TO
THE CASES LISTED IN CLAUSES 10.2 (CHANGE OF
OWNER) AND 13.4 (ACCIDENTS)	  	20
			
	 V
	  	FINAL PROVISIONS	  	21  
				
		  	18.	 	PROHIBITION OF OFFSETTING	  	21
		  	19.	 	COSTS OF THE CONTRACT	  	21
		  	20.	 	RIGHT TO BE INFORMED AND TO VISIT	  	21
		  	21.	 		  	DECLARATION IN COMPLIANCE WITH THE LFAIE	  	21
		  	22.	 		  	FORM	  	21
		  	23.	 		  	VALIDITY CLAUSE	  	22
		  	24.	 		  	APPLICABLE LAW AND FORUM	  	22
			
	 VI
	  	SIGNATURES	  	22

	I	Preliminary Provisions 

  

	1.	Purpose of the Contract 

 The leasing company shall
acquire the object of the lease described under Clause 4.1 in accordance with the requirements notified to it by the lessee, in order to construct on it the buildings requested by the lessee and to then grant it the use and enjoyment of them for an
agreed term. In consideration thereof, the lessee shall pay the leasing company a periodical indemnity and bear the costs and risks in connection with the use and enjoyment of the object. 
  

	2.	Contractual Elements 

 The leasing contract consists
of this document and its subsequent amendments and related agreements signed by both parties. A schedule of up-to-date monthly payments shall be attached as an appendix to the present leasing contract and to the subsequent amendments. 
 The building permit (to be provided) and the contracts which the leasing company shall enter into with third parties for constructing buildings, also form
part of the present contract. 
 The present leasing contract is being entered into subject to the express condition precedent that all the
documents concerning the guarantee referred to under 10.1 hereof are duly signed and in the leasing company’s possession (original documents with authenticated signature). 
  

	3.	Investment Costs 

  

	3.1	Definition 

 At the time of signature of the
leasing contract, the parties agreed to a maximum price of 
 CHF 23,000,000.00 (before tax) 
 This is the maximum amount available to fund the acquisition of the object described under 4.1 and the erection of the building. If the overall cost of
the acquisition and the construction of the building exceeds this amount, the lessee shall reimburse the leasing company for the surplus. 
 VAT is not included in the calculation of the investment costs, since the leasing company has made a prior application for tax deduction to the Federal Tax Office (“Administration Fédérale des Contributions”).
However, if this deduction is not granted or is granted only partially, the lessee undertakes to indemnify the leasing company in consequence (Clause 9). 
 Each quarter, during the construction work period, interim interest shall be calculated on the basis of the balance of advances and will be invoiced separately to the lessee (plus VAT). The definitive amount of
investment costs will be determined in an amendment (appendix) to the present contract on presentation of the final breakdown. The lease payments due by the lessee will be calculated on the basis of this amount. 
  

	3.2	Residual Value 

 Independently of the
definitive amount of the investment costs and any investment which the lessee may make in accordance with 11.3, the residual value of the object of the lease on expiry of the term of contractual use (Clause 6) is set, by mutual agreement, at

 CHF 7,500,000.00 
  

 4 

 The parties consider that in view of usual amortizations, this amount corresponds to the fair market
value of the object on expiry of the lease contract. 
 VAT due will be added to the fair market value, since the present lease contract
(Clause 9) and the subsequent sale of the object to the lessee are subject to VAT. 
 In this respect, the leasing company must provide the
lessee with an invoice authorising the prior deduction of the abovementioned tax. 
  

	3.3	Residual Value at a given time 

 The residual
value at a given time is notably used as the basis for calculating the lease payment (Clause 8.2) during the duration of the contract. The parties understand this to mean the residual value at a given time, depending on the amortisation already
carried out. Amortisation is calculated on a monthly basis, according to the fixed depreciation method. 
  

	3.4	Provisions concerning the period of construction 

  

	 	a)	Planning 

 Construction work can only begin once the
following formalities have been carried out: 
  

	 	•	 	An authenticated contract for sale has been drawn up relating to the acquisition of the plot by the leasing company; 

  

	 	•	 	The property presently standing on the plot has been demolished and adapted; 

  

	 	•	 	All the required statutory authorisations for the erection of the object of the lease (notably a construction permit) have been procured; 

  

	 	•	 	A detailed estimate of the cost, a work schedule and building plan on a scale of 1:50 / 1:20 are presented; 

  

	 	•	 	A general planning contract with Mühlemann + Partner, Architekten + Planer GmbH, Grenchen has been signed; 

  

	 	•	 	A detailed list of project managers has been provided; 

  

	 	•	 	Contracts with the main project managers have been entered into; 

  

	 	•	 	The insurances policies referred to in clause 3.4 (e) have been taken out; 

  

	 	•	 	The Federal Tax Office (“Administration Fédérale des Contributions”) has approved of the leasing company’s application with respect to voluntary
taxation of the income from the leasing contract (subjection to VAT). 

 The following deadlines are envisaged: 
  

	 	•	 	Beginning of construction work: 01.07.2006; 

  

	 	•	 	Acceptance of the works: September 2007; 

  

	 	•	 	Delivery of the building: 01.01.2008 

  

	 	•	 	Presentation of the definitive breakdown of costs of the works: 31.03.2008 

 The leasing company excludes all liability for compliance with these deadlines, except if it has caused the delay intentionally or has committed a serious fault. The obligations of the lessee under the lease contract
shall remain in force even in the event of delay. It must notably pay interim interest for which it will be invoiced separately. 
  

 5 

	 	b)	Performance of the contract 

 As project manager,
the leasing company shall, with the prior approval of the lessee, enter into the contracts required for the construction of the object of the lease with the general planner, Mühlemann + Partner GmbH and third parties, and will fully substitute
the lessee as such for contracts into which the lessee has already entered. SIA 118 and SIA 102 standards shall apply. 
 Insofar as the
lessee has already made payments under existing contracts, the leasing company must reimburse it for these and they must be debited from the investment account. 
 The leasing company, together with the lessee, should periodically verify the breakdown of construction costs provided by the general planner. This is to avoid the possible registration of legal mortgages by the
craftsmen and construction firms. The general planner should draw up and provide the parties with a detailed list of construction managers. 
 During construction work, should the leasing company not be able to reach the lessee, or in an emergency if the building is in danger, the leasing company may, insofar as these modifications do not penalise the lessee with respect to price,
quality and deadlines, agree to amendments with the general planner or appointed third parties concerning the work and contractual terms so as to protect its interests. In any other case, the leasing company can only agree to amendments with the
general planner or appointed third parties on the basis of mutual agreement between the leasing company and the lessee. 
 The lessee can,
with the leasing company’s approval, take its place in supervising the site and construction work and give instructions. It is not, however, authorised to sign reports by the construction firms and/or other appointed third parties concerning
the work carried out, to accept credit, or, without the approval of the leasing company and in divergence from the estimate of contracts with third parties, to request substantial modifications to the construction project or major additional works.
If it nonetheless does this, it will be liable for the resulting extra cost (Clause 3.4 (d)) 
  

	 	c)	Methods of payment  

 During the construction phase,
the leasing company shall record all payments made for the acquisition and construction of the object of the lease in an investment account, without VAT. Interim interest shall be calculated quarterly and invoiced separately (plus VAT). The terms of
Credit Suisse for construction loans, in accordance with those of the market, shall apply to the remuneration of advances. Presently, and until further notice, the annual interest rate is 2.75%, plus quarterly commission of  1/4 % on the maximum amount used. This interest rate may also be modified during the construction works insofar
as it is modified by the bank, until consolidation. The investment account is closed after payment of all signed final invoices. The balance makes it possible to define the investment costs of the present lease contract. 
 During the construction works, the costs incurred under individual contracts are invoiced according to the payment plan, supervised by the general planner
Mühlemann + Partner GmbH as project manager. Invoices issued by firms must be made out to the leasing company but initially submitted to the lessee for approval and signature (legally valid). The lessee shall then submit them to the leasing
company which, as owner of the building, shall pay the amount. The address for all invoices, which should enable prior deduction of tax, is as follows: 
 CREDIT SUISSE 
 Leasing 
 Case postale 5722 
 1002 Lausanne 
  

 6 

 If craftsmen or construction firms’ legal mortgages encumbering the building are registered, the
lessee is liable to the leasing company and shall bear the cost of ensuring that such registration (provisional or definitive) of legal mortgages is removed. 
 The payment of the price of the plot on transfer of title, in accordance with the contract for sale to be signed, constitutes the first advance. 
  

	 	d)	Exceeding Investment Costs 

 If the leasing company
sees that the investment cost of CHF 23,000,000.00 (before tax) has been exceeded, it should contact the lessee with respect to covering the extra costs. If the parties cannot reach agreement, the lessee shall bear the extra costs and shall not have
any action against the leasing company. 
 If extra costs were paid by the leasing company from the investment account, the lessee must pay it
the corresponding amount plus interim interest and VAT, as a lump sum within 30 days of the closure of the investment account (clause 3.4 (c)). 
  

	 	e)	Insurance 

 All insurance policies in respect of the
construction, such as property owner’s civil liability insurance, construction work insurance and progressive building insurance, are taken out by the leasing company. 
 The lessee and the general planner must verify that the architects, engineers, construction firms, building artisans, suppliers etc., involved in the
construction works have sufficient insurance cover under an exploitation or professional civil liability policy. Insofar as the insurance taken out by the leasing company and/or the exploitation or professional civil liability policies taken out by
third parties do not cover, or only partially cover, the risks incurred by the building owner or the land owner, the lessee and the general planner bear the cost of any resulting loss suffered by the leasing company. 
  

	4.	Acquisition of the object of the lease 

  

	4.1	Description of the object of the lease 

 The leasing
company is acquiring the following plot, under a property sale contract: 
 In the town of Neuchâtel, property No. 14541, folio
plan No. 263 (1,827 m2) and DDP No. D 14576, folio plan No. 263, (5,541 m2). The latter will be annulled after alterations are carried out to property No. 14,542, folio plan No. 263, which it is presently part of and will then be
included in property No. 14,541 as altered. 
 Owner and seller: Town of Neuchâtel, Neuchâtel 
 Detailed description, annotations, easements, real estate charges and security interests in accordance with the land registry records and with the
contract of sale to be signed. 
 As project manager, the leasing company is having the building erected in accordance with the construction
permit (application filed on 28 April 2006), the general planner’s project, the estimate of costs and the following plans of 28 April 2006: 
 Location plan No. 06/297/001 
 Construction law compliance plan No. 06/297/005 
 Basement plan No.06/297/011 
  

 7 

 Ground floor plan No. 06/297/012 
 1st Floor plan No. 06/297/013 
 2nd Floor
plan No. 06/297/014 
 Elevation plan No. 06/297/016 
 Facade plan No. 06/297/017 
 Exterior fittings plan No. 06/297/321 
 Pipe work location plan No. 06/297/004 
 and the forms and appendices to the planning application of 28 April 2006. 
  

	4.2	Provisions of the sale contract and investment costs 

 The lessee is aware of the terms of the sale contract and it accepts them insofar as they relate to it. 
 Costs resulting from the
change of owner such as taxes and fees form part of the investment costs. 
 The maximum amount of the investment costs are CHF 23,000,000.00
(before tax) 
  

	4.3	Transfer of title 

 Title shall be transferred after
an authenticated contract of sale has been drawn up between the seller and the leasing company, envisaged for May 2006. 
  

	4.4	Failure of the sale contract 

 The lease contract
shall be annulled if the contract for sale has not been entered into with the seller or if it is subsequently annulled, or if title has not been definitely transferred. The lessee shall reimburse the leasing company for amounts already paid to the
seller, except where it is proved that the leasing company is liable for failure to reimburse. 
 If the sale contract or the transfer of
title fails 
  

	 	a)	due to the lessee or the seller, the lessee is liable for loss suffered. The costs of processing CHF 100,000.00 (plus 7.6 % VAT, clause 7) must nonetheless be paid to the
leasing company to cover its expenses. 

  

	 	b)	due to leasing company, and if it is possible to prove this, the leasing company must reimburse the loss suffered by the lessee. 

  

	5.	Acceptance of the object of the lease 

  

	5.1	Date 

 The lessee shall accept the object of the
lessee after construction, i.e. 01.01.08, in favour of the leasing company (clause 4.3). 
  

	5.2	Statement of the condition of the premises on acceptance of the new building after its completion 

 On acceptance of the new building, the lessee and the leasing company draw up a written statement of the condition of the premises that are the object of
the leasing contract, completed by photographs if necessary. In this way, any defects may be notified immediately to the construction contractual partners, in accordance with standard SIA 118. 
  

 8 

 Prior to expiry of the guarantee period of two years, the lessee and the leasing company should together
draw up a list of apparent defects by virtue of standard SIA 118. 
 If the lessee discovers hidden defects, it should immediately notify them
to the leasing company in writing so that the deadlines under standard SIA 118 may be complied with. 
 The lessee is fully aware of the
provisions of standard SIA 118 with respect to deadlines. 
  

	II	UTILISATION PHASE 

  

	6.	Duration of Utilisation 

 The duration of
utilisation begins on the first day of the month following acceptance of the erected buildings, envisaged on 01.01.08. A fixed term of use of 15 years therefore begins on 01.01.2008 and ends on 31.12.2022, subject to early termination of the
contract under Clauses 16 and 17. If, for any reason whatever, the date of the start of utilisation of the new building is postponed, the parties must agree to new deadlines in an amendment to the present contract. The lessee is in no event
authorised to terminate the leasing contract as a result of delay with respect to this schedule. 
  

	7.	Processing Costs 

 The lessee must pay processing
costs of CHF 100,000.00 (plus 7.6 % in VAT) to the leasing company. This amount is due within 10 days of the signature of the present leasing contract. 
  

	8.	Leasing payments 

  

	8.1	Definition 

 Leasing payments mean the
remuneration of all the services due by leasing company. In particular, it also covers the depreciation of the object of the leasing (amortisation required for exploitation), but does not include any indemnity for its maintenance, its repair or
alteration work. It therefore still remains due if for any reason whatsoever the object of the leasing cannot be used or can only be partly used. 
  

	8.2	Calculation, determination 

 The leasing payments
consist partly of amortisation and partly of the costs of capital. The amortisation part results from the difference between the costs of investment and the theoretical residual value of the object at the end of the term of the leasing. The leasing
company should draw up a table of monthly payments to this effect. The capital costs part is calculated on the basis of the interest rate of the leasing, as a percentage of the costs of the investment. 
 The interest rate of the leasing is based on the capital market rate (presently the SWAP rate) for loans superior to one year, plus a margin for the
leasing company of 1.85 % p.a. It will be determined definitively 2 business days prior to the start of utilisation (Clause 6), and then each time, 2 business days prior to the new interest period, on the basis of the conditions in force on the
capital market (interest rate corresponding the duration chosen). The definitive investment costs and leasing payments due for the first interest period and subsequent periods shall always be determined in an amendment (appendix) to the present
contract. 
 The leasing company’s margin shall be modified in the following cases: 
  

 9 

	 	a)	Each year, the leasing company shall calculate the lessee’s rating, in accordance with recognised methods (Credit Suisse custom), on the basis of the annual report which it
submits to it (Clause 20). When this rating changes, the leasing company shall adapt its margin accordingly. 

  

	 	b)	If the lessee’s interest reports (shareholders’ interest) changes significantly and its solvency is modified as a result, on the basis of the rating usually given to a
firm of this kind by the leasing company (Clause 10), the leasing company shall adapt its margin accordingly. 

  

	 	c)	If the shareholders’ equity cover requirements presently in force were to be increased further to measures imposed by the authorities or by law, the leasing company reserves
the right to transfer the resulting increase in costs of the leasing to the lessee. 

 Any modification of the interest rate of
the leasing must be contained in an amendment (appendix) to the present contract. The leasing company should also attach an up to date table of monthly payments to this appendix. 
  

	8.3	Interest period and due date 

 The leasing payments
shall be modified in proportion to the evolution of the capital market. The lessee may select the duration of the initial interest period of between 2 and 15 years, up until 2 business days prior to the beginning of the utilisation phase, at the
latest (Clause 6). The lessee shall also set the duration of the following periods with a minimum of 2 years. The total duration must not, however, exceed the end of the duration of utilisation provided in Clause 6, and the residual duration between
the end of the penultimate period and the end of utilisation must be at least 2 years. The lessee must inform the leasing company of its choice 5 days at the latest prior the end of the current period. 
 The leasing payment is divided into 180 monthly payments during the contractual term of 15 years. These amounts are payable in advance on the
1st (first) of each month. 
  

	8.4	Leasing payments at the beginning of the duration of utilisation 

 The first leasing payment shall be due at the start of the duration of utilisation (Clause 6) on the basis of the investment costs calculated (Clause 3.1). 
 If, for any reason whatsoever, the date of the start of utilisation is postponed, the parties must agree to new deadlines in an appendix to the present
contract. 
 After the closure of the investment account and the definition of the definitive investment costs, the leasing payments shall be
modified retroactively on 01.01.2008 and shall be the object of a new amortisation table in an appendix to the present leasing contract. Any difference between the leasing payments due and payments made by the lessee must be set off immediately
without interest being calculated. 
  

	9.	Value Added Tax 

  

	9.1	Liability 

 The leasing company undertakes to submit
an application to the Federal Tax Office (“Administration Fédérale des Contributions”) for voluntary taxation of the income generated from the leasing contract, insofar as this is possible by law. The income generated
by the leasing contract includes all payments made by the lessee to the leasing company on the basis of the leasing contract: leasing payments, the leasing company’s processing costs, costs of the notary and the Land Registry paid by the
leasing company and charged back, surface area duty, 

  

 10 

 
insurance premiums, uninsured costs of reconstituting the object of the leasing, taxes such as VAT non-deductible by the leasing company, transfer duty, tax
on the services to self or capital gains tax where the object of the lease is sold to the lessee, and the other accessory costs and public taxes provided under Clause 14. 
 Once liability to tax has been approved, the leasing company is authorised to invoice all the Value Added Tax and any tax due on services to self, on to lessee at the VAT rate in force, upon the condition that the
obligation to carry out a service to self is not due to a situation created by the leasing company. The leasing company must also provide the lessee with invoices authorising the prior deduction of the tax. 
 Insofar as the prior tax relief is possible, the leasing company must claim and credit the corresponding amount to the lessee. It must also, if possible,
request prior deduction of the tax and deduct the corresponding amount from the amount of investment. 
 If, further to total or partial
refusal or subsequent total or partial withdrawal of liability to tax for any reason whatsoever, the leasing company must pay a tax on the services to self (in particular further to a modification of the utilisation or categorisation of the leasing
contract as a credit operation) or if the prior deduction of the tax is not granted or only partially granted, the lessee undertakes to indemnify the leasing company as a result, insofar as the refusal of liability to tax or the loss of the right to
deduction is not due to the leasing company. If, within 3 months of the termination of the contract, the leasing company has not been able to add a new utilisation to the object of the leasing in the context of the existing liability to tax, it is
authorised to impose services to self and invoice the corresponding amount to the lessee. The leasing company undertakes to apply reasonable means during the aforementioned three-month period to add a new utilisation of the object of the leasing in
the context of the existing liability to tax. 
 The lessee is aware of the risk of the services to self being subsequently liable to tax.

  

	9.2	Security interests 

 At the time of liability to
tax, the leasing company may request collateral from the lessee as security for the tax on the services to self. 
  

	10.	Security interests / Requirements 

  

	10.1	Guarantees 

 As the lessee has been recently
incorporated, Kyphon Inc., the parent company of the lessee, the registered office of which is located at 1221 Crossman Avenue, Sunnyvale, CA 94089, United States (Registered agent: Corporation Service Company (CSC), 2711 Centerville Rd, Suite 400
Wilmington, DE 19808, United States), provides an irrevocable guarantee of payment according to the following separate documents: 
  

	 	1.	Guarantee (unsecured) of CHF 11,000,000.00 (see appendix 1a) 

	 	2.	Standby Letter of Credit of CHF 4,500,000.00, issued by a leading bank 

 The Guarantee (unsecured) must be accompanied by the following documents: 
  

	 	•	 	Form of Board Resolutions (see appendix 1b) 

  

	 	•	 	Legal Opinion (see appendix 1c) 

  

	 	•	 	Specimen signatures of the company (see appendix 1d) 

  

	 	•	 	Certificate of Good Standing mainly issued by the Secretary of State 

  

 11 

 If the total amount of investment is less than CHF 23,000,000.00, the amount of the guarantees will be
amended in the final breakdown as follows: 
  

	 	•	 	Up to an investment amount of CHF 20,000,000.00: 

  

	 	•	 	Guaranty (unsecured) CHF 9,500,000.00 

  

	 	•	 	Standby Letter of Credit CHF 3,000,000.00 

  

	 	•	 	Half of the investment amount in excess of CHF 20,000,000.00 would be covered by the Guaranty (unsecured) and the other half by a Standby Letter of Credit 

Once the lessee has established a profitable business, the guarantee of Kyphon Inc. may be reduced or restored as decided by the leasing company.

  

	10.2	Change of owner  

 If the lessee’s interest
reports changes significantly and if its solvency is greatly diminished as a result on the basis of the rating usually given to a firm of this kind by the leasing company (for example, demotion), the leasing company may unilaterally request, with a
reasonable time period, for further security to make up for the diminished solvency, or terminate the present leasing contract early, in compliance with the termination period of three months and with the legal consequences set out under Clause 17
a). 
  

	III	RIGHTS AND OBLIGATIONS 

  

	11.	Lessee’s right to enjoyment 

  

	11.1	Scope 

 The leasing company assigns the use and
enjoyment of the object in accordance with its purpose, to the lessee. The lessee must procure the prior written approval of the leasing company in order to lease all or part of the object of the leasing and grant enjoyment rights to third parties.
The leasing company cannot withhold its approval without valid reason. Additionally, by virtue of the present leasing contract, the leasing company agrees to a rental lease between the lessee and Swissgenetics to lease part of the object of the
leasing until 31 December 2007 at the latest. The lessee undertakes, vis-à-vis the leasing company, to ensure that these third parties do not acquire rights that are greater than its own. 
  

	11.2	Obligation of diligence, maintenance and third party rights 

 The lessee undertakes to use the object of the leasing and maintain it with appropriate care. It is liable to the leasing company for excessive wear and tear or deterioration due to improper use or use contrary to its purpose. 

The lessee is responsible for the general maintenance of the object of the leasing. It must carry out without delay, and on its own behalf, any
restoration, renovation or repair work which becomes necessary, failing which the leasing company shall order it in writing to proceed with these works within 30 days. On the expiry of this deadline, the leasing company may carry out the works
itself and invoice back the corresponding costs to the lessee. The lessee will ensure that any present and future administrative obligations in relation to the existence and exploitation of the object of the leasing are satisfied. Additionally, it
must satisfy, and discharge the leasing company in this respect from, any third party claims and rights arising from agreement relating to the surface area rights, easements and real estate charges or any other contract in relation to the object of
the leasing. 
  

 12 

 The lessee must have appropriate concern for third parties such as may be expected from the holder or
manager of a building such as the object of the lease. 
  

	11.3	Modifications to the object of the lease  

 The
lessee can only transform the object of the leasing or change its use with the written approval of the leasing company. The leasing company cannot withhold its approval without valid reason. Administrative requirements and obligations remain
reserved (notably the supervision of buildings and protection of the environment). If these modifications increase the value of the property or are closely connected with the building, the leasing company shall acquire title to them by the normal or
early expiry of the contract. The lessee therefore has no right to claim the reimbursement of its expenses from the leasing company. In consideration of this, the leasing company waives its right to require collateral with respect to these
modifications. 
 For any construction work and installation that are purely connected with exploitation and carried out by the lessee at its
own cost, title must be clearly specified in writing. 
 In the absence of written authorisation from the leasing company for these
modifications, it may in any event require the return of the object of the lease in its original state at the normal or early deadline of the contract. 
  

	11.4	Legal mortgages of artisans and construction firms 

 If legal mortgages of craftsmen or construction firms encumbering the object of the leasing are registered as security for the amounts due by the lessee (maintenance and restoration costs within the meaning of Clause 11.2, or alterations
made to the object of the leasing within the meaning of Clause 11.3), the lessee must immediately ensure their removal at its own cost. 
  

	11.5	Pollution 

 The lessee guarantees the leasing
company, in the sense of an independent guarantee under Article 111 of the Swiss Code of Obligations (hereafter, “CO”), that no third party, neighbour or authority shall make any claims against or demands from the leasing company relating
to the investigation, supervision, confinement, clearance or removal of waste of substances which are harmful to the environment and/or claims for indemnification as a result of such of waste or unidentified substances which are harmful to the
environment. 
 If claims are made against the leasing company due to unidentified pollution, the lessee undertakes to discharge the leasing
company, its representatives and employees from the aforesaid claims, without limit, irrevocable and at first demand. The lessee waives the right to claim time bar or raise any other objection or defence whatsoever. The lessee additionally
undertakes to intervene in any proceedings instigated against the leasing company due to such claims and to carry them through at its own cost. 
 In addition, the leasing company is liable for any pollution of contamination of the object of the leasing by substances that are harmful for the environment or waste (for example in the ground, subsoil and in the building) which may result
from the erection, exploitation or demolition of installations and buildings of the object of the lease. 
  

 13 

 The lessee undertakes to carry out a prior investigation of the site within the meaning of Article 7
Osites at the expiry of the present contract by a specialised firm recognised by the ASR at its own cost. The report of this investigation should be delivered to the leasing company three months prior to the expiry of the lease. The leasing company
should be consulted as to its choice of expert and may propose its own expert. If the preliminary investigation indicates the presence of pollution linked to substances that are harmful to the environment, or waste caused by the lessee, the lessee
must immediately and without delay, take any necessary measures at its own cost to restore the site to a condition that is legally compliant entirely clear the site of any substances that are dangerous for the environment or waste (decontamination;
Articles 6 paragraph 2 (b) and 16 (a) Osites). 
  

	12.	Guarantee against defects 

  

	12.1	Guarantee against material and legal defects 

 The
leasing company shall satisfy the claims of the lessee insofar as it has similar claims towards third parties and where these can be exercised. Any other warranty is excluded. 
 The lessee is aware of the condition and nature of the object of the leasing, both from a legal and material perspective. 
 The lessee shall carefully verify that the object of the lease is free from defects, not only on acceptance of the works but also subsequently. It shall
make any claims for defects within the required timeframe and in due form to the persons bound by the guarantee, on the account of the leasing company and shall notify it of this. The expenses and risks shall be borne by the lessee. The leasing
company may ask the lessee to instigate proceedings to enforce the guarantee on behalf of the leasing company and at its cost. It shall define together with the lessee, the scope of its appointment as agent to instigate the proceedings. 

Guarantee enforcement proceedings instigated by the lessee do not in any event affect its obligations under the present contract. In particular, it
remains liable to pay the leasing payments on time on their due date during the period in which the object of the leasing cannot be used or can only be partly used. It cannot demand either the suspension or a reduction of the payments under the
lease. 
  

	12.2	Charges encumbering the object of the lease 

 The
leasing company can only encumber the object of the leasing with security interests for the purpose of funding the entire amount of the investments according to the present contract. Moreover, it requires the prior written approval of the lessee to
encumber the object of the lease with either contractual rights or limited proprietary rights in favour of third parties. 
  

	13.	Risk and Liability 

  

	13.1	Principle 

 As soon as title is transferred to the
leasing company, the risk of damage, destruction or any other depreciation of the object of the lease, as well as the ensuing loss, passes to the lessee, irrespective of the cause, insofar as they have not been caused by the leasing company
intentionally or consequent to a serious fault. The lessee must satisfy all its obligations towards the leasing company inherent to the present contract and notably must pay the agreed leasing payments. 
  

 14 

 The lessee discharges the leasing company of any liability to third parties, which the owner of the
building or the owner or manager of the object of the leasing incur by law and under the contract, and in particular building owner’s liability (Article 58 CO) and real estate owner’s liability (Article 679 CC). The leasing company shall,
however, be liable for loss which it has caused intentionally or further to serious fault. 
  

	13.2	Insurance taken out by the leasing company 

 The
leasing company shall, at the lessee’s cost, take out any insurance necessary to cover the risks arising from the existence of the object of the leasing (property insurance with respect to the building and civil liability property insurance).
The premiums shall be invoiced to the lessee. If the lessee can demonstrate that it is able to procure lower premiums from other insurance companies, the leasing company may, as an exceptional measure, authorise it to take out, at its own cost, all
the policies required to cover the risks arising from the operation of the object of the lease. The cover provided must be at least equivalent to the cover offered by the leasing company. In this case, copies of the corresponding policies must be
provided to the leasing company. The lessee shall assign its claims under the insurance policies to the leasing company. The leasing company may (but is not obliged to) notify the assignment to the insurance company. 
 In the case of damage, the leasing company shall provide the services under the building insurance in order to restore it. Loss which is not or only
partly covered shall be borne by the lessee. Any excess shall also be borne by the lessee. Similarly, it shall bear any uninsurable and uncovered risks, and discharge the leasing company of this. See Clause 3.4 (e) for insurance policies
relating to the construction. 
  

	13.3	Insurance taken out by the lessee  

 The lessee must
take out, at its cost, industrial third party insurance. The lessee is advised to also take out insurance against operational risks, such business interruption insurance, and in any event, against the loss of rental income further to damage to the
building. 
  

	13.4	Accidents 

 In the case of an accident, the lessee
must immediately inform the leasing company and take all measures to limit the damage as far as possible. Any excess shall be borne by the lessee. Similarly, it shall bear any uninsurable and uncovered risks, and discharge the leasing company of
this. 
 If the object of the leasing is entirely or partly destroyed, the leasing company shall be bound to restore it for the amount paid
out by the insurance companies. The lessee shall pay the leasing company in a specific lump sum payment, the extra costs of restoration, irrespective of the causes of the accident, insofar as it was not caused by the leasing company intentionally or
further to serious fault. If the lessee refuses or is not able to do this, either party may terminate the contract in compliance with the termination period of three months and with the legal consequences set out under Clause 17 (a). 
  

 15 

	13.5	Value Added Tax 

 If the income generated by the
present leasing contract is subject to VAT, the leasing company may charge back to the lessee the VAT on the insurance premiums which it has paid out and invoiced and on the uninsured costs of restoration of the object of the leasing (Clause 9). In
this respect, the leasing company must provide the lessee with an invoice authorising the prior deduction of the tax. 
  

	14.	Accessory costs and public contributions 

 The
leasing company shall pay the ordinary federal, cantonal and communal taxes (income and capital gains tax) for which it is liable as the owner of the object of the leasing. 
 The real estate taxes (such as real estate tax) as well as any other public contributions and the accessory costs of the property shall be borne by the
lessee, in particular: 
  

	 	a)	Taxes and public contributions (property insurance premiums, waste disposal tax, water consumption tax, road maintenance and clearance tax, etc.); 

  

	 	b)	electricity costs; 

  

	 	c)	the costs of maintenance and exploitation of heating (oil, electricity, maintenance contracts, etc.); 

  

	 	d)	The maintenance of water treatment installations; 

  

	 	e)	Any kind of environment tax; 

  

	 	f)	Any insurance premiums listed in Clause 13; 

  

	 	g)	Mandatory payments or contributions under private law contracts which constitute easements (contributions to neighbour funds for access routes to the buildings, etc.)

  

	 	h)	Value Added Tax, if applicable, to the leasing payments and to the other payments inherent to this leasing contract. 

  

	IV	TERMINATION OF THE CONTRACT 

  

	15.	Normal Termination of the Contract 

  

	15.1	Option of the Lessee 

 At the end of the period of
the utilisation and if the lessee has duly satisfied its obligations under the present contract, the lessee may elect one of the following: 
  

	 	a)	The extension of the leasing contract; 

  

	 	b)	The purchase of the object of the lease; 

  

	 	c)	The return of the object of the lease 

 The lessee will
notify its choice to the leasing company in writing 12 months in advance with effect from the end of the utilisation period. 
 If it fails to
do this or it is late, the present leasing contract will be automatically renewed for one year. The interest rate of the leasing for the calculation of the payments shall be determined two business days prior to the start of the extension, on the
basis of valid capital market conditions. The leasing company’s margin shall be adapted in accordance of the lessee’s rating. 
  

 16 

	15.2	Extension of the leasing contract 

 The lessee may
request the leasing contract to be extended once for another term (relay contract). In this case, the terms shall be redefined. The amount of the investments of the relay contract corresponds to the theoretical value of the object according to
Clause 3.2. The leasing company can refuse to extend the contract if the lessee’s financial means are insufficient. 
  

	15.3	Purchase by the lessee 

 The leasing company grants
the lessee a non transferable purchase option on the object of the leasing which may be exercised at the end of the utilisation period. The purchase price corresponds to the theoretical residual value of the object of the leasing in accordance with
Clause 3.2. As the present leasing contract is subject to VAT in accordance with Clause 9, the leasing company shall also subject the sale of the object to the lessee to this tax and will increase its sale price as a result. The lessee shall bear
the risk of the total or partial refusal of liability to this tax and shall indemnify the leasing company for any costs related to the tax on the services to self. The lessee shall bear all the costs resulting from the change of ownership, such as
taxes (in the present case, transfer rights and any capital gains tax, except where these gains are the result of excess amortisation by the leasing company), taxes and fees, including VAT and, as the case may be, tax on services to self in the case
of total or partial refusal of liability. 
 Any investments which may be made by the lessee in the context of Clause 11.3 shall not be
reimbursed by the leasing company. 
 If the lessee expresses its interest in purchasing the object of the leasing within the required time
period, it should also present a draft notarised contract of sale and evidence of funding 6 months prior the expiry of the present leasing contract at the latest, failing which the leasing company shall be free again to sell the object of the
leasing to a third party. Up to the expiry of this time period, the lessee may select another option referred to in Clause 15.1. 
 At the
lessee’s request, the purchase option is contained in a separate authenticated contract, which the lessee can therefore register at its own cost at the Land Registry. 
 The lessee expressly declares that the leasing company has informed it of the tax risk of transaction chains that it will incur by enabling a third party to benefit from the purchase option. 
  

	15.4	Return of the object of the lease 

 At the end of
the utilisation period, the lessee shall return the object of the lease to the leasing company, fully vacated, cleaned out and duly restored, with all the keys. It will be liable for excessive wear and tear. If the lessee has leased the premises to
third parties, the rental leases must be terminated and the premises vacated at this date. The parties may agree otherwise in writing. 
  

	16.	Failure to pay and other breaches of the contract by the lessee 

  

	16.1	Interest on arrears 

 If the lessee is late in its
payments, the leasing company will charge it interest on the arrears, without prior notice, for the entire period of delay. This interest corresponds to the interest rate of the lease is used to set the lease payments for the current period of use,
according to Clause 8, increased by 2%. 
  

 17 

	16.2	Option of the leasing company 

 If the lessee does
not satisfy its contractual obligations, in particular if it is late in paying a leasing payment, the leasing company shall grant it an initial extension of 30 days to satisfy to the above obligations. If the contractual obligation has not been
satisfied by the expiry of this first extension, the leasing company shall grant it a second extension of the same duration. If the obligation has still not been satisfied at the expiry of the second time period, the leasing company may demand the
immediate provision of appropriate collateral for all the payments due and the performance of all the contractual obligations. The lessee must present the collateral within one month of the request. 
 If this period expires with no effect, or if the lessee cannot provide the required collateral, the leasing company may, by virtue of its option under
Article 107 CO: 
  

	 	a)	Terminate the leasing contract and claim indemnification of the loss resulting from the non-performance of the contract, of up to the amount of the negative contractual interest; or

  

	 	b)	While continuing the leasing contract, waive its performance by the lessee and claim damages for non-performance, of up to the amount of the positive contractual interest.

  

	16.3	Consequences of failure to pay 

  

	 	a)	If the leasing company exercises its right within the meaning of Clause 16.2 (a), it shall terminate this leasing contract for the end of the calendar month with at least 30
days’ notice. The lessee must in that case vacate and return the object of the leasing within this time period, in accordance with the provisions of the present contract relating to the return. 

 The leasing company may claim damages of up the amount of the negative contractual interest as follows: 
  

	 	•	 	All the leasing payments due which are still outstanding at the time of termination of the contract, plus moratorium interest; 

  

	 	•	 	Plus other payments which may be due by the lessee under the present leasing contract (e.g. the reimbursement of insurance costs, etc.); 

  

	 	•	 	Plus all the costs related to the restoration and construction of the object of the leasing; 

  

	 	•	 	Plus an indemnity for all the expenses of the leasing company in relation liability for VAT on the income generated by the present leasing contract, e.g. tax on the services to self
if the use of the object of leasing is changed. 

  

	 	b)	If, while continuing the leasing contract, the leasing company waives performance of the contract by the lessee within the meaning of Clause 16.2 (b), it will grant the lessee at
least 30 days from the end of the current calendar month, in which the lessee should vacate and return the object of the leasing in accordance with the provisions of the present contract concerning the return. 

 The leasing company may claim damages of up the amount of the positive contractual interest according to the theory of the difference, as follows:

  

	 	•	 	All the leasing payments due up to the expiry of the duration of use and which are still outstanding at the expiry of the supplementary extension; 

  

	 	•	 	Plus the theoretical residual value of the object of the leasing at the expiry of the ordinary duration of utilisation; 

  

	 	•	 	Plus all the costs related to the restoration and construction of the object of the leasing; 

  

 18 

	 	•	 	Plus an indemnity for all the expenses of the leasing company in relation to liability for VAT on the income generated by the present leasing contract (e.g. tax on the services to
self if the use of the object of leasing is changed); 

  

	 	•	 	Plus other payments which may be due by the lessee under the present contract (e.g. the reimbursement of insurance costs); 

  

	 	•	 	Less a discount at the market rate on future leasing payments which shall apply as soon as the leasing company notifies its option until the expiry of the period of ordinary use;

  

	 	•	 	Less (at the leasing company’s discretion) the fair market value at the time of notification of the option, or less the net income of the construction of the object of the
leasing. 

 The indemnification of any other duly evidenced loss is reserved. 
  

	16.4	Early termination of the leasing contract due to serious circumstances 

 The leasing company may terminate the leasing contract early, with immediate effect, on proper grounds, notably if the lessee had breached a fundamental contractual obligation, if the object of the leasing is
confiscated, if a craftsman’s or construction firms’ legal mortgage is registered (on a provisional or definitive basis), or if the economic situation of the lessee or the guarantor, i.e. Kyphon Inc. has changed in such a way as to
threaten the leasing company’s contractual rights, notably if it becomes insolvent, requests the suspension of payments, drafts an authenticated protest against bills of exchange, is seized or wound up. In these cases, the leasing company may
proceed as in Clause 16.2 of this contract. 
 If the leasing contract is terminated on proper grounds, the lessee must vacate the object of
the leasing and return it to the leasing company in accordance with the provisions of the present contract concerning the return. The leasing company may, at its discretion, claim damages of up to the amount of the positive or negative interest,
analogous to Clause 16.3 (a) and (b). 
  

 19 

	17.	Early termination of the contract by the lessee 

 Provided that it has fully satisfied its contractual obligations towards the leasing company, the lessee may terminate the present contract early, on the expiry of an initial term of 10 years, with 12 months’ notice, by purchasing the
object of the leasing. 
 The purchase price corresponds to the theoretical residual value of the object of the leasing at the termination of
the contract, in accordance with Clause 3.2, plus a termination commission of 4 % of this value. As the present leasing contract is subject to VAT, the leasing company shall also subject the sale of the object to the lessee to this tax and will
increase its sale price as a result. The lessee shall bear the risk of the total or partial refusal of liability to this tax and shall indemnify the leasing company for any costs related to the tax on services to self insofar as they are not the
result of fault or negligence by the leasing company. If the termination period does not coincide with the end of an interest period, the lessee shall pay the leasing company the indemnity for early repayment which it may have paid in the case of
early termination of funding. The lessee shall be liable for all the costs arising from the change of owner, such as taxes and fees, including VAT and, if relevant, the tax on services to self, in the case of total or partial refusal of liability
insofar as the refusal of liability is not due to the leasing company. Any investments which may be made by the lessee in the context of Clause 11.3 shall not be reimbursed by the leasing company. 
 The lessee’s purchase request must be made in writing. A draft notarised sale contract and evidence of funding must be provided 6 months at the
latest prior to the expiry of the termination period. If these documents have not been provided within the required time, the purchase request shall be considered null and void. 
 At the lessee’s request, the purchase option is contained in a separate authenticated contract, which the lessee can therefore register at its own
cost at the Land Registry. 
  

	17 a)    	Early termination by the leasing company due to the cases listed in Clauses 10.2 (change of owner) and 13.4 (accidents) 

 Should the leasing company terminate the present contract following a change of owner (Clause 10.2) or in the case of an accident (Clause 13.4), the
lessee – provided it has fully satisfied all its contractual obligations towards the leasing company – has an option to purchase the object of the leasing. 
 The purchase price corresponds to the theoretical residual value of the object of the leasing at the termination of the contract, in accordance with Clause 3.2, plus a termination commission of 4 % of this value.
As the present leasing contract is subject to VAT, the leasing company shall also subject the sale of the object to the lessee to this tax and will increase its sale price as a result. The lessee shall bear the risk of the total or partial refusal
of liability to this tax and shall indemnify the leasing company for any costs related to the tax on services to self provided they are not the result of fault or negligence by the leasing company. If the termination period does not coincide with
the end of an interest period, the lessee shall pay the leasing company the indemnity for early repayment which it may have paid in the case of early termination of funding. The lessee shall be liable for all the costs arising from the change of
owner, such as taxes and fees, including VAT and, if relevant, the tax on services to self, in the case of total or partial refusal of liability provided that the refusal of liability is not due to the leasing company. Any investments which may be
made by the lessee in the context of Clause 11.3 shall not be reimbursed by the leasing company. 
  

 20 

 The lessee’s purchase request must be made in writing. A draft notarised sale contract and evidence
of funding must be provided within two months of the leasing company’s termination instrument. If these documents are not provided within the required time, the purchase request shall be considered to be null and void and the lessee shall have
to return the object of the leasing according to Clause 15.4 of the present contract at the expiry of the termination period of three months. 
 At the lessee’s request, the purchase option is contained in a separate authenticated contract, which the lessee can therefore register at its own cost at the Land Registry. 
  

	V	FINAL PROVISIONS 

  

	18.	Prohibition of offsetting 

 The lessee may not
offset any debts which may be due to the leasing company against debts owed by it to the leasing company under the present contract. 
  

	19.	Costs of the contract 

 The lessee is liable for any
costs in relation to the conclusion, amendment and performance of the present contract and contracts entered with third parties under the present contract, notably notary and Land Registry costs, any transfer duty and capital gains tax in relation
to the acquisition of the object by the leasing company, and in relation to purchase, if relevant, by the lessee. 
  

	20.	Right to be informed and to visit 

 During the term
of the present contract, the lessee is bound to spontaneously provide the leasing company each year with a copy of its annual report (Article 662 CO) together with the report of the verification body (with the consolidated figures for the group)
within 6 months of annual closure. 
 Moreover, the leasing company is authorised to visit the object of the leasing at any time with
reasonable notice. 
  

	21.	Declaration in compliance with the LFAIE 

 By
signing this contract, the parties expressly confirm that the object of the leasing shall be used as a stable establishment within the meaning of Article 2, paragraph 2 (a) of the Federal Law on the Acquisition of Property by Persons Abroad
(LFAIE / Lex Koller / “Loi Fédérale sur l’Acquisition d’Immeubles par des Personnes à l’Etranger”), that the reserve area to be used for extension of the enterprise does not exceed one third of
the total area that the reserve area will not be used for residential flats. The signature and performance of the present contract are therefore not subject to authorisation within the meaning of the LFAIE. 
  

	22.	Form 

 In order to be valid, the present contract
and accessory agreements, additions and amendments must be made in writing and bear the handwritten signature of both parties within the meaning of Articles 13 to 15 CO. 
 By the present contract, the parties expressly waive the presumption that verbal or implied agreements are also valid. 
 The parties are not bound until this contractually agreed formality has been carried out (Article 16 paragraph 1 CO). 
  

 21 

	23.	Validity clause 

 If one or more provisions of the
present contract are or become partly or wholly unreceivable, null and void or unenforceable, the validity of the present contract shall not be otherwise affected. 
 The parties undertake to cooperate in good faith to replace such provision by another which corresponds as closely as possible to the originally intended economic purpose. 
  

	24.	Applicable law and forum 

 The present Contract is
entirely and exclusively governed by Swiss law. 
 The parties agree to bring any proceedings relating to the present contract before the
ordinary courts of the registered office of the leasing company. The leasing company may, however, instigate proceedings against the lessee at its domicile or at the place where the object of the leasing is located. 
  

	VI	SIGNATURES 

  

					
	Brussels, May 24, 2006	 		 	
		 		 	Lausanne, May 18, 2006
			
	KYPHON SÀRL	 		 	CREDIT SUISSE
			
	 /s/ Robert A. Vandervelde
	 		 	 /s/ Serge Bornick

	Director, Kyphon Sàrl	 		 	Director, Credit Suisse

 Appendix: Table of monthly payments of 18.05.2006 
  

 22Guaranty, by and between Kyphon Inc. and Credit Suisse

 Exhibit 10.2 
 Annexe 1a 
 Guaranty (unsecured) 
 Guaranty, in favor of 
 CREDIT SUISSE, a Swiss banking corporation 
 (together with its successors and
assigns, hereinafter the “Bank”), made by the undersigned1 
 Kyphon Inc., a corporation organized under the laws of the State of Delaware, U.S.A., having its principal business office at Sunnyvale, California, U.S.A.

 (hereinafter “Guarantor”) in respect of2 
 Kyphon Sàrl, rue
du Puits-Godet 12/12a, 2000 Neuchâtel, Switzerland 
 (hereinafter “Borrower”). 
 1. Guaranty. (a) For valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Guarantor (if more than one, jointly and severally)
hereby unconditionally guarantees to the Bank the punctual payment when due (whether at scheduled maturity or by acceleration, prepayment, demand or otherwise) of any and all Obligations (as hereafter defined) of the Borrower to the Bank, together
with interest, discount, commissions, charges, expenses, attorneys’ fees and disbursements and all other expenses and costs incurred by the Bank in connection therewith or in connection with enforcing this Guaranty or any agreement, covenant or
condition in any instrument, writing or contract relating to any Obligations, including any extension, modification, substitution or renewal of the same, or in collecting any Obligations in any bankruptcy, insolvency or other proceeding and in any
judicial or non-judicial foreclosure action (whether or not any lawsuit is filed), or in connection with any payment hereunder being challenged as a preference (collectively, “Interest, Costs and Expenses”). Guarantor acknowledges that it
owns a substantial percentage of the shares of the Borrower, that it will receive substantial direct and/or indirect benefits from the Obligations and that its undertakings and waivers hereunder are knowingly made in contemplation of such benefits.
All of the Obligations to which this Guaranty applies or might apply in the future shall be conclusively presumed to have been created, contracted or incurred in reliance hereon. 
 (b) The word “Obligations” includes any and all (i) extensions or issuance by the Bank of loans, advances or other credits or accommodations (including any letter of credit) to, or for the account of,
the Borrower, (ii) discounts by the Bank for, or purchase by the Bank from, the Borrower of notes, bonds, debentures, bills, drafts, checks, or other negotiable instruments, (iii) extensions by the Bank to the Borrower of overdrafts, or
the continuance of existing overdrafts, (iv) exchange contracts or precious metal contracts entered into by the Bank with or for the account of the Borrower, (v) obligations of the Borrower vis-à-vis the Bank based on leasing
agreements, and (vi) payments by the Bank of or on account of any obligation of the Borrower to another person or entity; in each case whether now or hereafter existing and whether or not the claim is reduced to judgment, liquidated,
unliquidated, fixed, matured, disputed, legal, equitable, secured or unsecured. 
 2. Maximum Aggregate Liability of Guarantor; Payments. Anything
herein to the contrary notwithstanding, the maximum aggregate liability of Guarantor to the Bank at any time hereunder shall not exceed the total of (i) the principal sum of Swiss Francs (CHF) 11’000’000.00 (eleven millions), plus
(ii) all Interest, Costs and Expenses. Notwithstanding the same, the Obligations of the Borrower to the Bank may exceed at any time and from time to time the maximum aggregate amount of liability of Guarantor hereunder without impairing this
Guaranty. Guarantor agrees to make all payments hereunder at the Branch of the Bank at Zürich, Switzerland, in Swiss Francs (or, in case payment is made or judgment entered in any other currency, at the then-current rate of exchange, as
determined by the Bank). Guarantor agrees that, whenever at any time it shall make any payment to the Bank on account of its obligations hereunder, it will notify the Bank in writing that such payment is made under this Guaranty for such purpose,
and that any other payments received by the Bank, whether from the Borrower or from the proceeds of any collateral for the Obligations or otherwise, may be applied by the Bank upon any amounts owed to the Bank in such order and manner as the Bank
may determine in its sole discretion. Any and all payments by Guarantor shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liability with
respect thereto, excluding taxes incurred by the Bank as a result of income earned on the Obligations. 
 3. Nature of Guaranty; Waivers of Defenses.
The obligations of Guarantor hereunder shall be irrevocable, absolute and unconditional, absolute and continuing (and shall be discharged only by way of payment), and shall be in addition to and independent of any existing or future guarantees.
Guarantor hereby irrevocably waives any defenses relating to: (i) the 

	1	If an individual, insert name and address. If a partnership, insert name and add "a partnership having its principal business office at
..................". If a corporation, insert name and add "a corporation organized under the laws of the State of ....... having its principal business office at ......................"

	2	Specify name, address, form of legal entity and place of registered office of Borrower. 

 
genuineness, validity, regularity or enforceability of the Obligations or any instrument evidencing any Obligations, (ii) the existence, validity,
enforceability, perfection or extent of any collateral therefor or by any other events, occurrences or circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor or surety (except for defenses of
payment), (iii) any present or future law or order of any government or agency thereof purporting to vary the terms hereof or affect any obligations under the Obligations, (iv) any action taken by the Bank in the exercise of any right,
power or remedy or any failure or omission on the part of the Bank to enforce any right, power or remedy, including any action (or failure to act) to protect, secure, perfect or insure any security interest or any property subject hereto or to
exhaust or elect any remedy or right of set-off or counterclaim against or in respect of the obligations of Guarantor hereunder, (v) failure of consideration or fraudulent inducement, (vi) any defenses the Borrower may now or hereafter
have to payment of the Obligations, and (vii) any other circumstance whatsoever (with or without notice to or knowledge by Guarantor and including, without limitation, any statute of limitations or the existence of or reliance on any
representation or warranty by the Bank) which may in any manner vary the risks or affect the liability of Guarantor hereunder or otherwise constitute a defense available to, or legal or equitable discharge of, a surety or guarantor. Guarantor agrees
that the Bank may resort to Guarantor for payment of any Obligations after any default by the Borrower that has incurred the Obligations, whether or not the Bank shall have resorted to any collateral security, or shall have proceeded against any
other obligor principally or secondarily obligated with respect to any Obligations. This Guaranty constitutes a guarantee of payment when the same shall become due and payable and not of collection. In the event that any payment of the Borrower in
respect of any of the Obligations is rescinded or must otherwise be returned for any reason whatsoever, Guarantor shall remain liable hereunder with respect to such Obligations upon such return as if such payment had not been made. 
 4. Duration of Guaranty. This Guaranty is a continuing guaranty and shall remain in full force and effect and be binding on and enforceable against Guarantor as
well as Guarantor’s legal representatives, heirs, successors and permitted assigns, if any, notwithstanding (if the undersigned is an individual) the death of Guarantor until all Obligations have been repaid and all liabilities of the
undersigned hereunder have been fulfilled, and the Bank may continue to act in reliance hereon; provided, however, that Guarantor may revoke the Guaranty with respect to future Obligations at any time prior to the extension of such Obligations by
notice of revocation of Guarantor to the Bank, effective three Swiss banking business days after receipt of such notice by the Bank at its office in Zürich, Switzerland or upon such later date as may be specified in such notice. Upon
revocation, the Guaranty shall remain in force as to the Obligations incurred prior to the revocation date notwithstanding: (i) that the term of such Obligations may extend beyond the revocation date; (ii) that the Obligations may be
modified, renewed, compromised or discharged prior to the revocation date; (iii) the invalidity of an Obligation for any reason other than as a result of non-payment and non-performance or any other action or non-action on the part of the Bank;
and (iv) to the fullest extent permitted by law, any other circumstances whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor or surety other than as a result of non-performance and any other
action or non-action on the part of the Bank. 
 5. Consents, Renewals, Additional Waivers. Guarantor authorizes the Bank, at any time and from time
to time, either before or after the maturity of the Obligations, without notice to, demand or further consent of Guarantor, to extend the time of payment of the Obligations, and may make agreement with the Borrower with regard to any Obligations for
the extension, renewal, payment, compromise, discharge or release thereof, in whole or in part, or for any modification of the terms thereof, without in any way impairing or affecting this Guaranty. Guarantor waives (i) notice of the acceptance
of this Guaranty and the granting of any Obligations, (ii) any requirement of diligence, promptness, presentment, demand of payment, protest, (iii) any notice of nonpayment, protest, acceleration, dishonor or sale of collateral security,
(iv) any and all other notices and demands whatsoever, (v) any requirement that the Bank exhaust any right, power or remedy or proceed or take any action against the Borrower or any other person under any credit arrangement or any other
guarantee of, or security for, any of the Obligations, (vi) any obligation on the part of the Bank to inspect, preserve or maintain any collateral or other security that the Bank may now have or hereafter acquire in connection with the
Obligations, (vii) any requirement that the Bank protect, secure, perfect or insure any lien or security interest or any property subject thereto, (viii) any obligation on the part of the Bank to monitor, control or see to the use of any
monies advanced to the Borrower, and (ix) any and all right to receive reports or other information the Bank may have relating to the Borrower. 
 6.
No Waiver; Cumulative Rights. No failure on the part of the Bank to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Bank of any
right, remedy or power hereunder preclude any other or future exercise by the Bank of any right, remedy or power. Each and every right, remedy and power hereby granted to the Bank or allowed it by law or other agreement shall be cumulative and not
exclusive of any other, and may be exercised by the Bank from time to time. 
 7. General Lien and Right of Set-Off. Guarantor hereby grants to the
Bank a general lien upon, and right of set-off against, all monies, securities, instruments and other property or rights of Guarantor now or hereafter in the possession of or under the control of or on deposit with the Bank or any office, agency or
affiliate of the Bank, whether held in a general or special account, or for safekeeping, custody or otherwise; and every such lien and right of set-off may be exercised without demand upon, or notice to, Guarantor until the obligations of Guarantor
hereunder are paid in full. 
 8. Representations and Warranties. Each Guarantor that is a corporation represents as of the date hereof that:
(i) it is duly organized and validly existing under the law of the jurisdiction of its incorporation and has full power and legal right to execute and deliver this Guaranty and to perform the provisions of this Guaranty on its part to be
performed; (ii) its execution, 

 
delivery and performance of this Guaranty have been and remain duly authorized by all necessary corporate action and do not conflict with or result in a
breach of, or constitute a default under, any of the terms, conditions or provisions of any agreement or instrument to which it is a party or by which it is bound; and (iii) this Guaranty has been duly executed and delivered on behalf of
Guarantor and constitutes the valid and binding obligation of Guarantor enforceable against Guarantor in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, and other laws of general applicability
relating to or affecting creditors’ rights. Each Guarantor who is a married individual represents that recourse may be had against his/her separate property as well as all community property for all of his/her obligations under this Guaranty.

 9. Entire Agreement; Assignment; Severability. This Guaranty is intended as the final expression of the agreement between the parties and the
complete and exclusive statement of the terms of the Guaranty. No oral representations or agreement by the Bank, and no parol evidence of any nature may be used to supplement or modify its terms. Guarantor may not assign this instrument or any
rights of powers hereunder or delegate any liabilities or obligations hereunder without the prior written consent of the Bank. The Bank may assign this instrument or any rights or powers hereunder, with any and all of the underlying Obligations. If
any part or parts of this Guaranty shall at any time be held to be invalid or unenforceable by a court of competent jurisdiction, the remaining part or parts of the Guaranty shall be and remain in full force and effect. 
 10. Governing Law; Non-Exclusive Jurisdiction; Waiver of Jury Trial. This Guaranty and all rights, obligations and liabilities hereunder shall be governed by and
construed in accordance with the laws of, and Guarantor expressly submits to the non-exclusive jurisdiction of, the State of Delaware, U.S.A. Both Guarantor and the Bank waive trial by jury in any action, proceeding, claim or counterclaim brought by
either party in connection with any matter arising out of or related to this Guaranty or the relationship of the Bank and Guarantor hereunder. 
 11. Use
of Singular; Notices to Guarantor. If more than one person shall execute this Guaranty, the singular shall include the plural and the terms “undersigned” and “Guarantor” shall mean all persons signing this Guaranty, and each
of them shall be jointly and severally obligated hereunder. All communications from the Bank are deemed to be legally valid if they are sent to the last address notified by Guarantor in writing to the Bank. 
 IN WITNESS WHEREOF, Guarantor has executed and delivered, or caused its duly authorized officer to execute and deliver, this instrument (signed and sealed, in the case
of a corporation) as of the date below. 
  

							
		 	 Sunnyvale, California, U.S.A. 26 May 2006
 Place, date

			
	KYPHON INC.	 	By:	 	 /s/ Arthur T. Taylor

		 		 	Authorized Signatory
				
		 		 	Name:	 	Arthur T. Taylor
				
		 		 	Title:	 	Chief Operating Officer, Chief Financial Officer & Treasurer
			
		 	By:	 	 /s/ David M. Shaw

		 		 	Authorized Signatory
				
		 		 	Name:	 	David M. Shaw
				
		 		 	Title:	 	V.P. Legal Affairs, General Counsel & Secretary

 (Corporate Seal) 
 Attest: 
 /s/ Kristin A. Stokan 
 Kristin A. Stokan, Director Treasury & Tax

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00104-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00104-of-00352.parquet"}]]