Document:

exv10w11

 

Exhibit
10.11

AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE — NET

(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)

1. Basic Provisions (“Basic Provisions”).

     1.1 Parties: This lease (“Lease”), dated for reference purposes only, October 22, 2003, is made by and between AT Cook Properties Trust
(“Lessor”) and Broncus Technologies, Inc. (“Lessor”),
(collectively the “Parties,” or Individually a “Party”).

     1.2
Premises: That certain real property, including all improvements therein or to be provided by Lessor under the terms of this Lessee, and commonly known as 1340 Space Park Way, Mountain View, located in
the County of Santa Clara, State of California, and generally described as
(describe briefly the nature of the property and, if applicable, the “Project”, if the property
is located within a Project) freestanding Office/R&D building consisting of approximately 8,400 sq. ft. (“Premises”). (See also Paragraph 2)

     1.3 Term: one (1) years and zero (0) months (“Original Term”) commencing December 1, 2003 (“Commencement Date”) and ending November 30, 2004 (“Expiration Date”). (See also Paragraph 3)

     1.4 Early Possession:                                                              
(“Early Possession Date”).
(See also Paragraphs 3.2 and 3.3)

     1.5
Base Rent: $5,880.00 (See Paragraph 50) per month (“Base
Rent”), payable on the First (1st) day of each month commencing December 1, 2003. (See also Paragraph 4).

þ
If this box is checked, there are provisions in this lease for the Base Rent to be adjusted.

     1.6
Base Rent Paid Upon Execution $5,880.00 as Base Rent for the period December 1, 2003  — December 31, 2003.

     1.7 Security Deposit: $11,760.00 (“Security Deposit”). (See also Paragraph 5)

     1.8 Agreed Use: General Office, research & development uses as approved by
the City of Mountain View (See
also Paragraph 8)

     1.9
Insuring Party: lessor is the “Insuring Party” unless otherwise stated herein. (See
also Paragraph 8)

     1.10 Real Estate Brokers: (See also Paragraph 15)

          (a) Representation: The following real estate brokers (collectively, the “Brokers”) and
brokerage relationships exist in this transaction (check applicable boxes):

þ Cornish & Carey Commercial represents Lessor executively (“Lessor’s Broker”);

þ
Cresa Partners represents Lessee exclusively (“Lessee’s Broker”); or

o                                                              represents both Lessor and Lessee
(“Dual Agency”).

          (b) Payment to Brokers: Upon execution and delivery of this Lease by both Parties.
Lessor shall pay to the Broker the fee agreed to in their separate written agreement (or if there is no such agreement, the sum of                     % of the total
Base Rent for the brokerage services rendered by said Broker).

     1.11
Guarantor. The obligations of the Lessee under this lease are to be guaranteed by                                                                                  (“Guarantor”). (See also Paragraph 37)

     1.12 Addends and Exhibits. Attached hereto is an Addendum or Addends consisting of Paragraphs 50 through 57 and Exhibits A, all of which constitute a part of this Lease.

2. Premises.

     2.1
Letting. Lessor hereby leases to Lessee, and lessee hereby leases from Lessor, the Premises, for
the term, at the rental, and upon all of the terms, covenants and conditions set forth in this
lease. Unless otherwise provided herein, any statement of size set forth in the Lease, or that
may have been used in calculating rental, is an approximation which the Parties agree is
reasonable and the rental based thereon is not subject to revision whether or not the actual
size is more or less.

     2.2
Condition. Lessor shall deliver the Premises to Lessee broom clean and free of
debris on the Commencement Date or the Early Possession Date, whichever first occurs
(“Start Date”), and, so long as the required service contracts described in Paragraph
7.1(b) below are obtained by Lessee within thirty (30) days following the Start Date,
warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating,
ventilating and air conditioning systems (“HVAC”), loading
doors, if any, and all other
such elements in the Premises, other than those constructed by Lessee, shall be in
good operating condition on said date and that the structural elements of the roof,
bearing walls and foundation of any buildings on the Premises (the “Building”) shall be
free of material defects. If a non-compliance with said warranty exists as of the Start
Date, lessor shall, as lessor’s sole obligation with respect to such matter, except as otherwise
provided in this Lease, promptly after receipt of written notice from
Lessee setting
forth with specificity the nature and extent of such non-compliance, rectify same at
Lessor’s expanse. If, after 90 days following lease commencement,
Lessee does not give Lessor written notice of any non-compliance with this warranty
within: (i) one year as to the surface of the roof and the structural portions of the
roof, foundations and bearing walls, (ii) six (6) months as to the HVAC systems,
(iii) thirty (30) days as to the remaining systems and other elements of the
Building, correction of such non-compliance shall be the obligation
of Lessee at
Lessee’s sole cost and expense.

     2.3 Compliance. Lessor warrants that the improvements on the Premises comply with all
applicable laws, covenants or restriction of record, building codes, regulations and
ordinances (“Applicable Requirements”) in effect of the Start Date. Said warranty does
not apply to the use to which Lessee will put the Premises or to any Alterations or
Utility installations (as defined in Paragraph 7.3(a)) made or
to be made by Lessee.
NOTE: Lessee is responsible for determining whether or not the zoning
is appropriate
for Lessee’s intended use, and acknowledges that past uses or the Premises may no
longer be allowed. If the Premises do not comply with said warranty, Lessor shall,
except as otherwise provided, promptly after receipt of written
notice from Lessee
setting forth with specificity the nature and extent of such non-compliance, rectify
the same at Lessor’s expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within six (6) months following the Start Date,
correction of that non-compliance shall be the obligation of Lessee
at Lessee’s sole
cost and expense. If the Applicable Requirements are hereafter changed (as opposed to
being in existence at the Start Date, which is addressed in Paragraph 6.2(e) below) so
as to require during the term of this Lease the construction of an addition to or an
alteration of the Building, the remediation of any Hazardous Substance, or the
reinforcement or other physical modification of the Building (“Capital Expenditure”),
Lessor and Lessee shall allocate the cost of such work as follows:

          (a) Subject
to Paragraph 2.3(c) below, if such Capital Expenditures are required as a result of
the specific and unique use of the Premises by Lessee as compared with uses by tenants in
general, Lessee shall be fully responsible for the cost thereof, provided, however that if
such Capital Expenditure is required any time during the Lease and
the cost thereof exceeds three (3) months’ Base Rent, Lessee may instead terminate
this

					
	 
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Industrial Real Estate Association
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Lease unless Lessor notifies Lessee, in writing, within ten (10) days after receipt of Lessee’s
termination notice that Lessor has elected to pay the difference between
the actual cost thereof and
the amount equal to six (6) months’ Base Rent, If Lessee elects termination, Lessee shall
immediately cases the use of Premises which requires such Capital Expenditure and deliver to
Lessor written notice specifying a termination date at least ninety (90) days thereafter.
Such
termination date shall, however, in no event be earlier than the last day that Lessee could
legally utilize the Premises without commencing such Capital Expenditure.

          (b) If such Capital Expenditure is not the result of the specific and unique use of the
Premises by Lessee (such as, governmentally mandated modifications), than Lessor and
Lessee shall allocate the obligation
to pay for such costs pursuant to the provisions of Paragraph 7.1.
If Lessee is unable to finance Lessor’s share, or if the
balance of the Rent due and payable for the remainder of this Lease is not sufficient to fully
reimburse Lessee on an offset basis, Lessee shall have the right to
terminate this Lease upon
thirty (30) days written notice to Lessor.

          (c) Notwithstanding
the above, the provisions concerning Capital Expenditures are intended to
apply only to non-voluntary, unexpected, and new Applicable Requirements. If the Capital
Expenditures are instead triggered by Lessee as a result of an actual or
proposed change in use, change in intensity of use, or
modification to the
Premises then, and in that event, Lessee shall be fully responsible for the cost thereof, and
Lessee shall not have any right to terminate this Lease.

     2.4
Acknowledgements. Lessee acknowledges that: (a) it has been advised by
Lessor and/or Brokers to satisfy itself with respect to the condition
of the
Premises (including but not limited to the electrical, HVAC and fire
sprinkler systems, security,
environmental aspects, and compliance with Applicable Requirements), and their suitability for
Lessee’s intended use; (b) Lessee has made such investigation as it deems necessary with
reference to such matters and assumes all responsibility therefor as the same relate to its occupancy
of the Premises; and(c) neither Lessor, Lessor’s agents, nor any Broker has made any oral or
written representations or warranties with respect to said matters other than as set forth in this
Lease. In addition, Lessor acknowledges that: (a) Broker has made no representations, premises or
warranties concerning Lessee’s ability to honor the Lease or
suitability to occupy the Premises;
and (b) It is Lessor’s sole responsibility to investigate the financial capability and/or
suitability of all proposed tenants.

     2.5
Lessee as Prior Owner/Occupant. The warranties made by Lessor in Paragraph 2 shall be of no
force or effect if immediately
prior to the Start
Date Lessee was the owner or occupant of the Premises. In such
event, Lessee shall be responsible for any necessary corrective work.

3. Term.

     3.1
Term. The Commencement Date, Expiration Date and Original Term of this Lease are as
specified in Paragraph 1.3.

     3.2 Early Possession. If Lessee totally or partially occupies the Premises prior to the
Commencement Date, the obligation to pay Base Rent shall be abated for the period of such early possession. All other terms
of this Lease (including, but not limited to, the obligations to pay Real Property Taxes and
Insurance premiums and to maintain the Premises)
shall, however, be in effect during such period. Any such early possession shall not affect the
Expiration Date.

     3.3
Delay in Possession. Lessor agrees to use its best commercially
reasonable efforts to
deliver possession of the Premises to Lessee by the Commencement Date. If, despite said efforts,
Lessor is unable to deliver possession as agreed, Lessor shall not be subject
to any liability therefor, nor shall such
failure affect the
validity of this Lease. Lessee shall not, however, be obligated to pay Rent or perform its other
obligations until it receives possession of this Premises. If possession is not delivered within
fifteen (15) ninety (90) days after the Commencement Date, Lessee may, at its option, by notice in writing
within ten (10) days after the end of such fifteen
(15) ninety (90) day period, cancel this Lease, In which
event the parties shall be discharge from all obligations here under. If such written notice is not received by Lessor within said five (5)
 ten (10) day period, Lessor right to cancel shall terminate. Except as otherwise provided, If possession
is not tendered to Lessee by the Start Date and Lessee does not terminate this Lease, as
aforesaid, any period of rent abatement that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to what Lessee would otherwise
have enjoyed under the terms hereof, but minus any days of delay caused by the acts or omissions of
Lessee. If possession of the Premises to not delivered within four (4) months after the Commencement
Date, this Lease shall terminate unless other agreements are reached between Lessor and Lessee, in
writing.

     3.4 Lessee Compliance. Lessor shall not be required to tender possession of the Premises to
Lessee until
Lessee complies with its obligation to
provide evidence of Insurance (Paragraph 6.6). Pending delivery of such evidence,
Lessee shall be required to perform all of its obligations under this Lease from and after the
Start Date, including the payment of Rent, notwithstanding
Lessor’s election to withhold possession pending receipt of such
evidence of Insurance. Further,
if Lessee is required to perform any other conditions prior to or concurrent with the Start Date,
the Start Date shall occur but Lessor may elect to withhold possession until such conditions are
satisfied.

4. Rent.

     4.1. Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease
(except for the Security Deposit) are deemed to be rent (“Rent”).

     4.2
Payment. Lessee shall cause payment of Rent to be received by Lessor in Lawful money of the
United States,
without effect or deduction (except
as specifically permitted in this Lease), on or before the day on which it is due.
Rent for any period during the term hereof which is for less than one (1) full calendar month shall
be prorated based upon the actual number of days of said month. Payment of Rent shall be made to
Lessor at its address stated herein or to such other persons or place as Lessor may from time to
time designate in writing. Acceptance of a payment which is less than the amount then due shall not
be a waiver Lessor’s rights to the balance of such Rent,
regardless of Lessor’s endorsement of any
check so stating.

5. security Deposit. Lessee shall deposit with Lessor upon execution hereof the Security
Deposit as security for Lessee’s faithful performance of its obligations under this Lease.
If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply
or retain all
or any portion of said Security Deposit for the payment of any amount due Lessor or
to reimburse or compensate Lessor for any liability, expenses, loss
or damage which Lessor may suffer or hour by reason thereof. If Lessor uses or
applies all or any portion of said Security Deposit, Lessee shall within ten (10)
days after written request therefor deposit months with Lessor sufficient to restore
said Security Deposit to the full amount required by this Lease.
If the Base Rent Increase during the term of this Lease, Leases shall, upon written request from
Lessor, deposit additional nominee with Lessor so that the total amount of the Security, Deposit
shall at all three bear the earns proposition to the increased Base
Rent as the initial
Security Deposit bore to the Initial Base Rent.
Should the Agreed
Use be amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to
increase the security deposit by a maximum of one
additional month of rent
to the extent necessary, In Lessor’s reasonable judgment,
 to account for any increased wear and tear that the Premises
may suffer as a result thereof. if a change in control of Lessee occurs during this Lease
and following such change the financial condition of Lessee is, in Lessor’s
reasonable judgement, significantly reduced, Lessee shall deposit such
additional monies with Lessor as shall be sufficient to cause the Security Deposit to
be at a commercially reasonable level based on said change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its general
accounts. Within fourteen (14) days after the expiration or termination of this
Lease, if Lessor elects to apply to Security Deposits only to unpaid
Rent, and otherwise within thirty (30) days after the Premises have been vacated pursuant to
Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit not
used applied by Lessor. No part of the Security Deposit shall be considered to be
laid in trust, to bear interest or to be prepayment for any
[ILLEGIBLE] to be paid by
Lessee under this Lease.

6. Use.

     6.1 Use. Lessee shall use and occupy the Premises only for the Agreed use, or any other legal
use which is reasonably comparable there to, and for
no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is
unlawful, creates damage, waste or a nuisance, or that disturbs owners and/or occupants of, or causes damage to
neighboring properties, Lessor shall not unreasonably withhold or
delay its consent to any written
request for a modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the
nonchemical or electrical systems therein, is not significantly more
burdensome to the
Premises. If Lessor elects to withhold consent, lessor shall within five (5) business days after
request give written notification of same which notice shall include an explanation of Lessor’s
objections to the change in use.

     6.2 Hazardous Substances.

          (a)
Reportable Uses Require Consent. The term “Hazardous Substance” as used in this Lease shall mean
any product, substance, or waste whose presence, use, manufacture, disposal, transportation, of
release, either by itself or in combination with other materials
expected to be on the Premises, is either: (i)potentially injurious
to the public health, safety or
welfare, the environment or the Premises, (ii) regulated or monitored by any governmental authority,
or (iii) a basis for potential liability of Lessor to any governmental agency or third party under
any applicable status or common law theory. Hazardous Substances shall include, but not be limited
to, hydrocarbon, petroleum, gasoline, and/or crude oil or any
products, by-products or fractions
thereof. Lessee shall not engage in any activity In or
on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior
written consent of Lessor and timely compliance (at Lessee’s expense) with all Applicable
Requirements. “Reportable Use” shall mean (i) the in allocation or use of any above or below ground
storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a
Hazardous Substance that requires a permit from, or with respect to which a report,

	 	 	 	 	 	 	 	 	 
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notice,
registration or business plan is required to be filled with, any governmental authority,
and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any
Applicable Requirements requires that a notice be given to persons entering or occupying the
Premises or neighboring properties. Notwithstanding the foregoing,
Lessee may use any ordinary and
customary materials reasonably required to be used in the normal course of the Agreed Use, so long
as such use is in compliance with all Applicable Requirements, is not a Reportable Use, and does
not expose the Premises or neighboring property to any meaningful risk of contamination or damage
or expose Lessor to any liability therefore. In addition, Lessor may condition its consent to any
Reportable Use upon receiving such additional assurance, as Lessor reasonably deems necessary to
protect itself, the public, the Premises and/or the environment against damage, contamination,
injury and/or liability, including, but not limited to, the installation (and removed on or before
Lease expiration or termination) of protective modifications (such as concrete encasements) and/or
increasing the Security Deposit.

          (b) Duty to inform Lessor. If Lessee knows, or has reasonable cause to believe, that a
Hazardous Substance has come to be located in, on, under or about the Premises, other than as
previously consented to by Lessor, Lessee shall immediately give written notice of such fact to
Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it
has concerning the presence of such Hazardous Substance.

          (c) Lessee Remediation. Lessee shall not cause or permit any Hazardous Substance to be applied
or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer
system) and shall promptly, at Lessee’s expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the cleanup of any
contamination of, and for the maintenance, security and/or monitoring of the Premises or
neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or
involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or
for Lessee, or any third party.

          (d) Lessee Indemnification. Lessee shall indemnify, defend and hold Lessor, as agents,
employees, landers and ground lessor, If any, harmless from and against any and all loss of rents
and/or damages, liabilities, judgments, claims, expenses, penalties, and attorney’s and
consultants’ fees arising out of or involving any Hazardous Substance brought onto the Premises by
or for Lessee, or any third party (provided, however, that Lessee shall have no liability under
this Lease with respect to underground migration of any Hazardous Substance under the Premises from
adjacent properties). Lessee’s obligations shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or suffered by Lessee, and
the cool of investigation, removal, remediation, restorations and/or abatement, and shall
survive the expiration or termination of this Lease. No termination, cancellation or release
agreement entered into by Lessor and Lessee shall release Lessee from the its obligations under
this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing
at the time of such agreement.

          (e) Lessor Indemnification. Lessor and its successors and assigns shall indemnity, defend,
reimburse and hold Lessee, its employees and lenders, harmless from and against any and all
environmental damages, including the cost of remediation, which existed as a result of Hazardous
Substance on the Premises prior to the Start Date or which are caused by the gross negligence or
willful misconduct of Lessor, its agents or employees. Lessors’s obligations, as and when required
by the Applicable Requirements, shall include, but not be limited to, the cost of investigation,
removal, remediation, restoration and/or abatement, and shall survive the expiration of termination
of this Lease.

          (f) Investigation and Remediation. Lessor shall retain the responsibility and pay for any
investigations or remediation measures required by governmental entities having jurisdiction with respect to the
existence of Hazardous Substances on the Premises prior to the Start Date, unless such remediation
measure is required as a result of Lessee’s use (including “Alternations”, as defined in Paragraph
7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee
shall cooperate fully in any such activities at the request of Lessor, Including allowing Lessor
and Lessor’s agents to have reasonable access to the Premises at reasonable times in order to carry
out Lessor’s investigative and remedial responsibilities.

          (g) Lessor Termination Option. If a Hazardous Substance Condition occurs during the term of
this Lease, unless Lessee is legally responsible therefor (in which case Lessee shall make the
Investigation and remediation thereof required by the Applicable Requirements and this Lease shall
continue in full force and effect, but subject to
Lessor’s rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor’s option,
either (i) investigate and remediate such Hazardous Substance Condition, If required, as soon as
reasonably possible at Lessor’s expense, in which event this Lease shall continue in full force and
effect, or (ii) If the estimated cost to remediate such condition exceeds twelve (12) times the
than monthly Base Rent or $100,000, whichever is greater, give written notice to Lessee, within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition, of Lessor’s desire to terminate this Lease as of the date sixty (60) days following
the date of such notice. In the event Lessor elects to give a termination notice, Lessee may, within
ten (10) days thereafter, give written notice to Lessor of Lessee’s commitment to pay the amount by
which the cost of the remediation of such Hazardous Substance Condition exceeds an amount equal to
twelve (12) times the then monthly Base Rent or $ 100,000, whichever is greater. Lessee shall
provide Lessor with said funds or satisfactory assurance thereof within thirty (30) days following
such commitment. In such event, this Lease shall continue in full force and effect, and Lessor shall
proceed to make such remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or assurance thereof
within the time provided, this Lease shall terminate as of the date specified in Lessor’s notice of
termination.

     6.3 Lessee’s Compliance with Applicable Requirements. Except as otherwise provided in this
Lease, Lessee shall, at Lessee’s sole expense, fully, diligently and in a timely manner, materially
comply with all Applicable Requirements, the requirements of any applicable fire insurance
underwriter or rating bureau, and the recommendations of Lessor’s engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said requirements are now in
effect or become effective after the Start Date. Lessee shall, within ten (10) days after receipt
of Lessor’s written request, provide Lessor with copies of all permits and other documents, and
other information evidencing Lessee’s compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents
involved) of any threatened or actual claim, notice, citation, warning, complaint or report
pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable
Requirements.

     6.4 Inspection: Compliance. Lessor and Lessor’s “Lender” (as defined in Paragraph 30 below) and
consultants shall have the right to enter into Premises at any time, in the case of an emergency,
and otherwise at reasonable times, for the purpose of inspecting the condition of the Premises and
for verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid
by Lessor, unless a violation of Applicable Requirements, or a contamination is found to exist or
be Imminent, or the inspection is requested or ordered by a governmental authority. In such case,
Lessee shall upon request reimburse Lessor for the cost of such inspections, so long as such
Inspection is reasonably related to the violation or contamination.

7. Maintenance; Repairs, Utility Installations; Trade Fixtures and Alterations.

     7.1 Lessee’s Obligations.

          (a) In General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3
(Lessee’s Compliance with Applicable Requirements), 7.2 (Lessor’s Obligations). 9 (Damage or
Destruction), and 14 (Condemnation), Lessee shall, at Lessee’s sole expense, keep the Premises,
Utility Installations, and attentions in good order, condition and
repair (whether or not the portion of the premises requiring repairs, or the means of repairing the same,are reasonably or readily accessible to Lessee, and whether or not the need for such repairs
occurs as result of Lessee’s use, any prior use, the elements of the age of such portion of the
Premises), including, but not limited to all equipment or facilities, such as plumbing, heating,
ventilating, air-conditioning, electrical, lighting facilities, boilers, pressure vessels, fire
protection system, fixtures, wells (Interior calling, floors, windows, doors,
plate glass, skylights, landscaping, driveways, parking lots, fences, retaining walls, signs,
sidewalks and parkways located in, on, or adjacent to the Premises. Lessee, in keeping the Premises
in good order, condition and repair, shall exercise and perform good maintenance practices,
specifically including the procurement and maintenance of the service contracts required by
Paragraph 7.1(b) below. Lessee’s obligations shall include restorations, replacements or renewals
when necessary to keep the Premises and all improvements thereon or a part thereof in good order,
condition and state of repair, Lessee shall, during the term of this Lease, keep the exterior
appearance of the Building in a first-class condition consistent with the exterior appearance of
other similar facilities of comparable age and size in the vicinity, including, subject to
paragraph #52 of the lease.

          (c) Replacement. Subject to Lessee’s Indemnification of Lessor as set forth in Paragraph 8.7
below, and without relieving Lessee of liability resulting from Lessee’s failure to exercise and
perform good maintenance practices, if the Basic Elements, described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of 50% of the cost of replacing such Basic
Elements, then such Basic Elements shall be replaced by Lessor, and the cost thereof shall be
prorated between the Parties and Lessee shall only be obligated to pay, each month during the
remainder of the farm of this Lessee, on the date on which Base Rent is due, an amount equal to the
product of multiplying the cost of such replacement by a fraction, the numerator of which is one,
 and the denominator of which is the number of months of the useful life of such replacement as
such useful life is specified pursuant to Federal Income tax regulations or guidelines for
deprecation thereof (including interest on the unamortized balance as is then commercially
reasonable in the judgment of Lessor’s accountants), with Lessee reserving the right to prepay
its obligation at any time.

					
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     7.2
Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance), 9 (Damage or Destruction) and 14 (Condemnation), It is intended by the Parties hereto
that Lessor have no obligation, in any manner whatsoever, to repair and maintain the Premises, or
the equipment therein, all of which obligations are intended to be that of the Lessee. It is the
Intention of the Parties that the terms of this Lease govern the respective obligations of the
Parties as to maintenance and repair of the Premises, and they expressly waive the benefit of any
statue now or hereafter in effect to the extent it is inconsistent
with the terms of this Lease, subject to paragraph #52 and 53.

     7.3 Utility Installations: Trade Fixtures; Alterations.

          (a) Definitions: Consent Required. The term “Utility Installations” refers to all
floor and window coverings, air lines, power panels, electrical distribution, security
and fire protection system , communication systems, lighting Fixtures, HVAC equipment,
plumbing, and fencing in or the Premises. The term “Trade
Fixtures” shall mean Lease’s
machinery and equipment that can be removed without doing material damage to the
Premises. The term “Alterations” shall mean any modification of the improvements,
other than Utility Installations or Trade Fixtures, whether by addition or deletion.
“Leases. Owned Alterations and/or Utility Installation” are defined as Alterations
and/or Utility Installations made by Leases that are not yet owned by Lessor pursuant
to Paragraph 7.4(a). Leases shall not make any Alterations or Utility Installation to
the Premises without Lessor’s prior written consent, Leases may, however, make
non-structural Utility Installation to the Interior of the Premises (excluding the
roof) without such consent but upon notice to Lessor, as long as they are not visible
from the outside, do not involve puncturing, relocating or removing the roof or any
existing wall, and the cumulative cost thereof during this Lease as extended does not
exceed $50,000 in the aggregate or $10,000 in any one year.

          (b) Consent. Any Alterations or Utility Installations that Lessee shall desire to
make and which require the consent of the Lessor shall be presented to Lessor in
written form with detailed plans. Consent shall be deemed conditioned upon Lessee’s:
(I) acquiring all applicable governmental permits, (II) furnishing Lessor with copies
of both the permits and the plans and specifications prior to commencement to the
work, and (III) compliance with all conditions of said permits and other Applicable
Requirements In a prompt and expeditious manner. Any Alterations or Utility
Installations shall be performed In a workmenlike manner with good and sufficient
materials, Lessee shall promptly upon completion furnish Lessor with as-built plane
and specifications. For work which costs an amount equal to the greater of one month’s Base
Rent, or $10,000. Lessor may condition its consent upon Lessee providing a lien and
completion bond in an amount equal to one and one-half times the estimated cost of
such Alteration or Utility Installation and /or upon Lessee’s posting an additional
Security Deposit with Lessor.

          (c) Identification. Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which chains are
or may be secured by any mechanic’s or materialmen’s lien against the Premises or any
interest therein. Lessee shall give Lessor not less than ten (10) days’ notice prior
to the commencement of any work in, on or about the Premises, and Lessor shall have
the right to post notices of non-responsibility. If Lessee shall contest
the validity or any such lien, claim or demand, then Lessee shall, at the sole expense
defend and protect itself, Lessor and the Premises against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the enforcement
thereof. It Lessor shall require, Lessee shall furnish a surety bond in an amount
equal to one and one-half times the amount of such contested lien, claim or demand,
indemnifying Lessor against liability for the same. If Lessor elects to participate
in any such action, Lessee shall pay Lessor’s attorneys’ fees and costs.

     7.4 Ownership; Removal; Surrender; and Restoration.

          (a) Ownership. Subject to Lessor’s right to require removal or elect ownership as
hereinafter provided, all Alterations and Utility Installations made by Lessee shall be
the property of Lease , but considered part of the Premises, Lessor may, at any time,
elect in writing to be the owner of all or any specified part of the Lessee Owned
Alterations an Utility installations. Unless otherwise Instructed per
Paragraph & 7.4(b)
hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration
or termination of this Lessee become the property of Lessor and be surrendered by Lessee
with the Premises.

          (b) Removal.
By delivery to Lessee of written notice from Lessor not earlier than ninety
(90) and not later than thirty (30) days prior to the and of the term of this Lease,
Lessor may require that any or all Lessee Owned Alterations or Utility installations be
removed by the expiration or termination of this Lessee. Lessor may require the removal at
any time of all or any part of any Lessee Owned Alterations or Utility installations made
without the required consent.

          (c) Surrender/Restoration. Lessee shall surrender the Premises by the Expiration Date or
any earlier termination date, with all of the Improvements, parts and surface thereof
broom clean and free of debris, and in good operating order, condition and state of
repair, ordinary wear and tear excepted. “Ordinary wear and tear” shall not include any
damage or deterioration that would have been prevented by good maintenance practice.
Lessee shall repair any damage occasioned by the installations, maintenance or
removal of Trade Fixtures, Lessee Owned Alterations and/or Utility installations,
furnishings, and equipment as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil,
material or groundwater contaminated by Lessee. Trade Fixtures shall
remain the property of Lessee an shall be removed by Lessee. The failure by Lessee to
timely vacates the Premises pursuant to this Paragraph 7.4(c)
without the express written consent of Lessor of Lessor shall constitute a holdover
under the provisions of Paragraph 26 below.

8. Insurance; Indemnity.

     8.1
Payment For Insurance. Lessee shall pay for all insurance required under Paragraph 8
except to the extent of the cost attributable to liability insurance carried by Lessor under
Paragraph 8.2(b) in excess of $2,000,000 per occurrence. Premiums for policy periods commencing
prior to or extending beyond the Lease term shall be prorated to correspond to the Lease term.
Payment shall be made by Lessee to Lessor within ten (10) days following receipt of an Invoice.

     8.2 Liability Insurance.

          (a) Carried by Lessee. Lessee shall obtain and keep in force Commercial General Liability
policy of Insurance protecting and Lessor against claim for body injury,
personal injury and property damage based upon or arising out of the ownership, use
occupancy or maintenance of the Premises and all areas appurtenant thereto. Such Insurance
shall be on an occurrence basis providing single limit coverage in an amount not less than
$2,000,000 per occurrence with an “Additional Insured-Managers or Lessors of Premises
Endorsement” and contain the “Amendment of the Pollution Exclusion Endorsement” for damage
caused by heat, smoke or fumes from a hostel fire. The Policy shall not contain any
Intre-insured exclusion as between insured person of the organization, but shall include
coverage for liability assumed under this Lessee as an ‘Insured contract’ for the
performance of Lessee’s Indemnity obligations under this Lease. The limits of said
Insurance shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All Insurance carried by Lessors shall be primary to and not
contributory with any similar Insurance carried by Lessor, whose Insurance shall be
considered excess insurance only.

          (b) Carried by Lessor, Lessor shall maintain liability insurance as described in
Paragraph 8.2(s), in addition to, and not in lieu of, the insurance required to be maintain by
lessee. Lessee shall not be named as additional Insured therein.

     8.3
Property Insurance — Building, Improvements and Rental Value.

          (a) Building and Improvements. The Insuring Party shall obtain and keep in force a policy
or policies in the name of Lessor, with loss payable to Lessor,
any groundlessor, and to any Lender(s) Insuring
loss or damage to the Premises. The amount of such Insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist
from time to time, or the amount require by any Lenders, but in no event more than the
commercially reasonable and available Insurable value thereof. If Lessor is the Insuring
Party, however, Lessee Owned Alterations and Utility Installations, Trade Fixtures, and
Lessee’s personal property shall be Insured by Lessee under Paragraph 8.4 rather than by Lessor. If
the coverage is available and commercially appropriate, such policy or policies shall
Insure against all risks of direct physical loss or damage,
including coverage for debris removal and the enforcement of any Applicable Requirements
requiring the upgrading, demolition reconstruction or replacement of any portion of the
Premises as the result of a covered loss. Sold policy or policies shall also contain an
agreed valuation provision in lieu of any coinsurance or clause, waiver of subrogation, and Inflation
guard protection casing an Increase in the annual property Insurance coverage amount by a
factor of not lessee than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located. If such
insurance has a deductible clause, the deductible amount shall not exceed $1,000 per
occurrence, and Lessee shall be liable for such deductible amount in the event of an Insured
Loss.

          (b) Rental Value. The insuring Party shall obtain and keep in force a policy or policies
in force a policy or policies in the name of lessor with loss payable to Lessor and any
Lender, Insuring the loss of the full Rent for one (1) year. Sold Insurance shall provide
that in the event the Lessee is terminated by reason of an insured loss, the period of
Indemnity for such coverage shall be extended beyond the date of the completion of repairs
or replacement of the Premises, to provide for one full year’s loss of Rent from the date
of any such loss. Sold insurance shall contain an agreed valuation provision in lieu of
any coinsurance clause, and the amount of coverage shall be adjusted annually to reflect
the projected Rent otherwise payable by Lessee, for the next twelve(12) month period.
Lessee shall be liable for any deductible amount in the event of such loss.

          (c) Adjacent Premises. If the Premises are part of a larger building, or of a group of
building owned by Lessor which are adjacent to the premises, the Lessee shall pay for any
increase in the premium for the property Insurance of such building or buildings if said
Increase is caused by Lessee’s acts, omissions, use or occupancy of the Premises.

     8.4 Lessee’s Property/Business Interruption Insurance.

          (a) Property Damage. Lessee shall obtain and maintain Insurance coverage on all of Lessee’s
personal property, Trade Features, and lessee Owned Alterations and Utility Installations. Such
Insurance shall cover all risks of direct physical damage (special part) and be full replacement
cost coverage with a deductible of not to exceed $5,000 per occurrence. The
proceeds from any such Insurance shall be used by lessee for the replacement of the personal.

					
	 	 	 	 	 
	 
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property, Trade Fixtures and Lessee Owned Alterations and Utility Installations, Lessee shall
provide Lessor with written evidence that such Insurance is in force.

          (b) Business
Interruption. Lessee shall obtain and maintain lose of Income and extra expense
insurance in amounts as well reimburse Lessee for direct or indirect loss of earnings attributable
to all parts commonly insured against by prudent lessees in the business of Lessee or attributable
to prevention of access to the Premises as a result of such parts.

          (c) No Representation of Adequate Coverage. Lessor makes no representation that the limits or
forms of coverage of Insurance specified herein are adequate to cover Lessee’s property, business
operations or obligations under this Lease.

     8.5 Insurance Policies. Insurance required herein shall be by companies duly licensed or admitted
to transact business in the state where the Premises are located, and maintaining during the policy
term a “General Policyholders Rating” of at least B+, V, as set forth in the most current issue of
“Bests Insurance Guide”, or such other rating as may
be required by a Lender. Lessee shall not do
or permit to be done anything which invalidates the required insurance policies. Lessee shall,
prior to the Start Date, deliver to Lessor certified copies of policies of such insurance or
certificates evidencing the evidence and amounts of the required Insurance. No such policy shall be
cancelable or subject to modification except after thirty
(30) days or as soon as reasonably
possible prior written notice to Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or “Insurance binders”
evidencing renewal thereof, or Lessor may order such Insurance and charge the cost thereof to
Lessee, which amount shall be payable by
Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length
of the remaining terms of this Lease, whichever is less. If either Party shall full to procure and
maintain the Insurance required to be carried by it, the other Party
may, but shall not be required
to, procure and maintain the same.

     8.6
Waiver of Subrogation. Without effecting any other rights or remedies, Lessee and Lessor each
hereby release and relieve the other, and waive their entire right to recover damages against the
other, for loss of or damage to its property arising out of or incident to the perile required to
be insured against herein. The effect of such releases and waivers is not limited by the amount of
Insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have
their respective property damage insurance carriers waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not
invalidated thereby.

     8.7
Indemnity. Except for Lessor’s gross negligence or willful misconduct, Lessee shall
Indemnity, protect, defend and hold harmless the Premises, Lessor and its agents, Lessor’s master
or ground lessor, partners and Landers, from and against any and all claims, loss or rents and/or
damages, liens, judgments, penalties, attorneys’ and
consultants’ fees, expenses and/or liabilities
arising out of, Involving, or in connection with, the use and/or occupancy of the Premises by
Lessee. If any action or proceeding is brought against Lessor by reason of any of the foregoing
matters, Lessee shall upon notice defend the same at Lessee’s expense by counsel reasonably
satisfactory to Lessor and Lessor shall cooperate with Lessee in such defence. Lessor need not have
first paid any such claim in order to be defended or indemnified.

     8.8 Exemption of Lessor from Liability, Lessor shall not be liable for injury or damage to the
person or goods, wares, merchandise or other property of Lessee, Lessee’s employees, contractors,
invitees, customers, or any other person in or about the Premises, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC
or lighting fixtures, or from any other cause, whether the said injury or damage results from
conditions arising upon the Premises or upon other portions of the Building of which the Premises
are a part, or from other sources or places, unless due to Lessor’s negligence or breach of
contract. Lessor shall not be liable for any damages arising from any act or neglect of any other
tenant of Lessor, Notwithstanding Lessor’s negligence or breach of this Lease, Lessor shall under
no circumstances be liable for injury to Lessee’s business or for any lose of income or profit
therefrom.

9. Damage or Destruction.

     9.1 Definitions.

          (a) “Premises Partial Damage” shall mean damage or destruction to the improvements on the
Premises, other than Lessee Owned Alternations and Utility Installations, which can reasonably be
repaired in six (6) months or less from the date of the damage or destruction. Lessor shall notify
Lessee in writing within thirty (30) days from the date of the damage or destruction as the whether
or not the damage is Partial or Total.

          (b) “Premises Total Destruction” shall mean damage or destruction to the Premises, other than
Lessee Owned Alterations and Utility Installations and Trade
Fixtures, which cannot reasonably be repaired in six (6)
months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing
within thirty (30) days from the date of the damage or destruction as to whether or not the damage
is Partial or Total.

          (c) “Insured Loss” shall mean damage or destruction to improvements on the Premises,
other than Lessee Owned Alterations and Utility installations and Trade Fixtures, which was
caused by an event required to be covered by the Insurance described in Paragraph 8.3(a), Irrespective of any deductible amounts or coverage limits involved.

          (d) “Replacement Cost” shall mean the cost to repair or rebuild the Improvements owned
by Lessor at the time of the occurrence to their condition existing immediately prior
thereto, including demolition, debris removal and upgrading required by the operation of Applicable
Requirements, and without deduction for depreciation.

          (e) “Hazardous Substance Conditions” shall mean the occurrence or discovery of a
condition involving the presence of, or a contamination by, a Hazardous Substance as defined in Paragraph
6.2(a), in, on, or under the Premises.

     9.2
Partial Damage – Insured Loss, if a Premises Partial Damage that is an insured Loss
occurs, then Lessor shall, at Lessor’s expense, repair such
damage (but not Lessee’s Trade Fixtures
or Lessee Owned Alterations and Utility installations) as soon as reasonably possible and this
Lease shall continue in full force and effect; provided, however,
that Lessee shall, at Lessor’s
election, make the repair of any damage or destruction the total cost to repair of which is $10,000
or less, and, in such event, Lessor shall make any applicable insurance proceeds available to
Lessee on a reasonable [ILLEGIBLE] for that purpose. Notwithstanding the foregoing, if the required insurance
was not in force or the insurance proceeds are not sufficient to effect such repair, the Insuring
Party shall promptly contribute the shortage in proceeds (except as to the deductible which is
Lessee’s responsibility) as and when required to complete said repairs. In this event, however,
such shortage was due to the fact that, by reason of the unique nature of the improvements, full
replacement cost insurance coverage was not commercially reasonable and available. Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique
aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate
assurance thereof, within ten (10) days following receipt of written notice of such shortage and
request therefore. If Lessor receives said funds or adequate assurance thereof within said ten (10)
day period, the party responsible for making the repairs shall complete them as soon as reasonably
possible and this Lease shall remain in full force and effect. If such funds or assurance are not
received, Lessor may nevertheless elect by written notice to Lessee within ten (10) days thereafter
to: (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage
in proceeds, in which case this Lease shall remain in full force and effect, or have this Lease
terminate thirty (30) days thereafter. Lessee shall not be entitled to reimbursement of any funds
contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to
flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be some
insurance coverage, but the net proceeds of any such insurance shall be made available for the
repairs if made by either Party.

     9.3
Partial Damage – Insured Loss. If a Premises Partial Damage that is not an Insured Loss
occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make
the repairs at Lessee’s expense), Lessor may either: (I) repair such damage as soon as reasonably
possible at Lessor’s expense, in which event this Lease shall continue in full force and effect, or
(II) terminate this Lease by giving written notice to Leases within thirty (30) days after receipt
by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective sixty
(60) days following the date of such notice. In the event Lessor
elects to terminate this Lease,
Lessee shall have the right within ten (10) days after receipt of the termination notice to give
written notice to Lessor of Lessee’s commitment to pay for the repair of such damage without
reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance
thereof within thirty (30) days after making such commitment. In such event this Lease shall
continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are
available. If Lessee does not make the required commitment, this Lease shall terminate as of the
date specified in the termination notice.

     9.4
Total Destructions. Notwithstanding any other provision hereof, if Premises Total
Destruction occurs, this Lease shall terminate sixty (60) days following such Destruction. If the
damage or destruction was caused by the gross negligence or willful
misconduct of Lessee, Lessor
shall have the right to recover Lessor’s damages from Lessor, except as provided in Paragraph 6.6.

     9.5 Damage Near End of Term: If at any time during the last six (6) months of this Lease there
is damage for which the cost to repair exceeds one (1) months Base Rent, whether or not an insured
Loss, Lessor may terminate this Lease effective sixty (60) days following the date of occurrence of
such damage by giving a written termination notice to Lessee within thirty (30) days after the date
of occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time has an
exercisable option to extend this Lease or to purchase this Premises,
than Lessee may preserve this
Lease by, (a) exercising such option and (b) providing Lessor with any shortage in insurance
proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (I)
the date which is ten days after Lessee’s receipt of Lessor’s written notice purporting to
terminate this Lease, or (II) the day prior to the date upon
which such option expires. If Lessee
duly exercises such option during such period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor’s commercially
reasonable expense, repair such damage as soon as reasonably possible
and this Lease shall continue
in full force and effect. If

					
	 
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Lessee falls to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the
termination notice and Lessee’s option shall be extinguished.

     9.6
Abatement of Rent; Lessee’s Remedies.

          (a) Abatement. In the event of Premises Partial Damage or
Premises Total Destruction or a Hazardous Substance Condition for which Lessee
is not responsible under this Lease, the Rent payable by Lessee for the
period required for the repair, remediation or restoration of such damage
shall be abated in proportion to the degree to which Lessee’s use of the
Premises is impaired, but not to exceed the proceeds received from the Rental
Value Insurance. All other obligations of Lessee hereunder shall be performed
by Lessee, and Lessor shall have no liability for any such damage,
destruction, remediation, repair or restoration except as provided herein.

          (b) Remedies. If Lessor shall be obligated to repair or restore
the Premises and does not commence, in a substantial and meaningful way, such
repair or restoration within ninety (90) days after such obligation shall
accrue, Lessee may, at any time prior to the commencement of such repair or
restoration, give written notice to Lessor and to any Lenders of which Lessee
has actual notice, of Lessee’s election to terminate this Lease on a date not
less than sixty (60) days following the giving of such notice. If Lessee gives
such notice and such repair or restoration is not commenced within thirty (30)
days thereafter, this Lease shall terminate as of the date specified in said
notice. If the repair or restoration is commenced within said thirty (30)
days, this Lease shall continue in full force and effect. “Commence” shall
mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first
occurs.

     9.7
Termination - Advance Payments. Upon termination of this Lease pursuant to Paragraph 6.2(g)
Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent and any other
advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of
Lessee’s Security Deposit as has not been, or is not then required to be, used by Lessor.

     9.8
Waive Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the effect
of any damage to or destruction of the Premises with respect to the
termination of this Lease and
hereby waive the provisions of any present or future statute to the [ILLEGIBLE] inconsistent
herewith.

10. Real Property Taxes.

     10.1 Definition of “Real Property Taxes.” As used herein, the term “Real Property Taxes” shall
include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental
levy or tax (other than inheritance, personal income or estate taxes); Improvement bond;
and/or license fee Imposed upon or levied against any legal or equitable interest of Lessor in the
Premises, Lessor’s right to other income therefrom, and/or
Lessor’s business of leasing, by any
authority having the direct or indirect power to tax and where the funds are generated with
reference to the Building address and where the proceeds so generated are to be applied by the
city, county or other local trading authority of a jurisdiction within which the Premises are
located. The term “Real Property Taxes” shall also include any tax, fee, levy, assessment or
charge, or any increase therein, imposed by reason of events occurring during the term of this
Lease, including but not limited to, a change in the ownership of the Premises.

     10.2

          (a) Payments
of Taxes. Lessee shall pay the Real Property Taxes applicable to the
Premises during the term of this Lease. Subject to Paragraph 10.2(b), all such payments
shall be made at least ten (10) days prior to any delinquency
date. Lessee shall promptly
furnish Lessor with satisfactory evidence that such taxes have been paid. If any such
taxes shall cover any period of time prior to or after the expiration
or termination of
this Lease, Lessee’s share of such taxes shall be prorated to cover only that portion of
the tax bill applicable to the period that this Lease is in effect, and Lessor shall
reimburse Lessee for any overpayment. If Lessee shall fail to pay any
required Real
Property Taxes, Lessor shall have the right to pay the same, and Lessee shall reimburse
Lessor therefor upon demand.

          (b) Advance
Payment. In the event Lessee incurs a late charge on any Rent payment, Lessor
may, at Lessor’s option, estimate the current Real Property Taxes, and require that such
taxes be paid in advance to Lessor by Lessee, either; (i) in a lump sum amount equal to
the installment due, at least twenty (20) days prior to the applicable delinquency date, or
(ii) monthly in advance with the payment of the Base Rent. If Lessor elects to require
payment monthly in advance, the monthly payment shall be an amount equal to the amount of
this estimated installment of taxes divided by the number of months remaining before the
month in which said installment becomes delinquent. When the actual amount of the
applicable tax bill is known, the amount of such equal monthly advance payments shall be
adjusted as required to provide the funds needed to pay the applicable taxes. If the
amount collected by Lessor is insufficient to pay such Real Property Taxes when due,
Lessee shall pay Lessor, upon demand, such additional sums as are necessary to pay such
obligations. All monies paid to Lessor under this Paragraph may be intermingled with other
monies of Lessor and shall not bear interest. In the event of a Breach by Lessee in the
performance of its obligations under this Lease, then any balance of funds paid to Lessor
under the provisions of this Paragraph may, at the option of Lessor, be treated as an
additional Security Deposit.

     10.3
Joint Assessment. If the Premises are not separately assessed, Lessee’s liability shall be an
equitable proportion of the Real Property Taxes for all of the land and Improvements included
within the tax parcel assessed, such proportion to be conclusively determined by Lessor from the
respective valuations assigned in the assessor’s work sheets or such other information as may be
reasonably available.

     10.4 Personal Property Taxes. Lessee shall pay, prior to delinquency, all taxes assessed against
and levied upon Lessee Owned Alterations, Utility installations, Trade Fixtures, furnishings,
equipment and all personal property of Lessee. When possible, Lessee shall causes such property to
be assessed and billed separately from the real property of Lessor. If any of Lessee’s said
personal property shall be assessed with Lessor’s real property, Lessee shall pay Lessor the taxes
attributable to Lessee’s property within ten (10) days after receipt of a written statement.

11.
Utilities. Lessee shall pay for all waiver, gas, heat, light, power, telephone, trash disposal
and other utilities and services supplied to the Premises, together with any taxes thereon. If any
such services are not separately metered to Lessee, Lessee shall pay a reasonable proportion to be
determined by Lessor, of all charges jointly metered.

12. Assignment and Subletting.

     12.1 Lessor’s Consent Required.

          (a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or
encumber (collectively, “assign or assignment”) or sublet all or any part of Lessee’s
Interest in this Lease or in the Premises without Lessor’s prior written consent which
consent shall not be unreasonably withhold.

          (b) A change in the control of Lessee shall constitute an assignment requiring consent.
The transfer, on a cumulative basis, of twenty-five percent (25%) or more of the
voting control of Lessee shall constitute a change in control for this purpose.

          (c) The
involvement of Lessee or its assets in any transaction, or series of transactions
(by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or
otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee’s
assets occurs, which results or will result in a reduction of the Net Worth of Lessee by an
amount greater than twenty-five percent (25%) of such Net Worth as it was represented at
the time of the execution of this Lease or at the time of the most recent assignment to
which Lessor has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, whichever was or is greater, shall be considered
an assignment of this Lease to which Lessor may withhold its consent, “Net Worth of
Lessee” shall mean the net worth of Lessee (excluding any guarantors) established under
generally accepted accounting principles.

          (d) An assignment or subletting without consent shall, at Lessor’s option, be a Default
curable after notice per Paragraph 13.1(c), or a noncurable Breach without the necessity
of any notice and grace period. If lessor elects to treat such unapproved assignment or
subletting as a noncurable Breach, Lessor may either; (i) terminate this Lease, or
(ii) upon thirty (30) days written notice, Increase the monthly Base Rent to one hundred
Ten percent (110%) of the Base Rent than in effect. Further, in the event of such Breach
and rental adjustment, (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to one hundred ten percent (110%) of the
price previously in effect, and (ii) all fixed and non-fixed rental adjustments scheduled
during the remainder of the Lease term shall be increased to One Hundred Ten Percent
(110%) of the scheduled adjusted rent.

          (e) Lessee’s
remedy for any breach of Paragraph 12.1 by Lessor shall be limited to
compensatory damages and/or injunctive relief.

     12.2 Terms and Conditions Applicable to Assignment and Subletting.

          (a) Regardless of Lessor’s consent, any assignment or subletting shall not: (i) be
effective without the express written assumption by such assignee or sublessee of the
obligation of Lessee Under this Lease; (ii) release Lessee of any obligations hereunder;
or (iii) after the primary liability of Lessee for the payment of Rent or for the
performance of any other obligations to be performed by Lessee.

          (b) Lessor may accept Rent or performance of Lessee’s obligations from any person other
than Lessee pending approval or disapproval of an assignment. Neither a delay in the
approval or disapproval of such assignment nor the acceptance of Rent or performance shall
constitute a waiver or estoppel of Lessor’s right to exercise the remedies for Lessee’s
Default or Breach.

          (c) Lessor’s consent to any assignment or subletting shall not constitute a consent to any
subsequent assignment or subletting.

          (d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against
Lessee, any Guarantors or anyone else responsible for the performance of Lessee’s
obligations under this Lease, including any assignee or sublessee, without first
exhausting Lessor’s remedies against any other person or entity responsible therefore to
Lessor, or any security held by Lessor.

          (e) Each request for consent to an assignment or subletting shall be in writing,
accompanied by information relevant to Lessor’s determination as

					
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to the financial and operational responsibility and appropriateness of the proposed assignee or
sublessee, including but not limited to the intended use and/or required modification of the
Premises, if any, together with a fee of $1,000 or ten percent (10%) of the current monthly Base
Rent applicable to the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as consideration for Lessor’s considering and processing said
request. Lessee agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested.

          (f) Any
assignee of, or sublessee under, this Lease shall, by reason of accepting such
assignment or entering into such sublease, be deemed to have assumed and agreed to conform
and comply with such and every term, covenant, condition and obligation herein to be
observed or performed by Lessee during the term of said assignment or
sublease, other than
such obligations as are contrary to or inconsistent with provisions of an assignment or
sublease to which Lessor has specifically consented to in writing.

     12.3 Additional Terms and Conditions Applicable to Subletting. The following terms and
conditions shall apply to any subletting by lessee of all or any part of the Premises and shall be
deemed included in all sublessee under this Lease whether or not expressly incorporated therein:

          (a) Lessee
hereby assigns and transfers to Lessor all of Lessee’s
interest in all Rent payable on any sublease, and Lessor may collect such
Rent and apply same toward Lessee’s obligations under this Lease;
provided,
however, that until a Breach shall occur in the performance of Lessee’s
obligations, Lessee may collect said Rent. Lessor shall not, by reason of the
foregoing or any assignment of such sublease, nor by reason of the collection
of Rent, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee’s obligations to such
sublessee. Lessee
hereby Irrevocably authorizes and directs any such sublessee, upon receipt of a
written notice from Lessor stating that a Breach exists in the performance of
Lessee’s obligations under this Lease, to pay to Lessor all Rent due and to
become due under the sublease. Sublessee shall rely upon any such notice from
Lessor and shall pay all Rents to Lessor without any obligation or right to
inquire as to whether such Breach exists, notwithstanding any claim
from Lessee to the
contrary.

          (b) In
the event of a Breach by Lessee, Lessor may, at its
option, require sublessee to attorn to Lessor, in which event Lessor shall
undertake the obligations of the sublessee under such sublessee from the time
of the exercise of said option to the expiration of such sublease; provided
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to such sublessee or for any prior Defaults or Breaches of such
sublessor.

          (c) Any
matter requiring the consent of the sublesser under a
sublesse shall also require the consent of Lessor.

          (d) No sublessee shall further assign or sublet all or any part
of the Premises without Lessor’s prior written consent, which shall not be
unreasonably withhold.

          (e) Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to ours
the Default of Lessee within the grace period, if any, specified in such
notice. The sublessee shall have a right of reimbursement and offset from and against Lessee
for any such Defaults oured by the sublessee.

13.
Default; Breach; Remedies.

     13.1 Default ; Breach A “ Default” is defined as a failure by the Lessee to comply with or
performs any of the terms, covenants, conditions or rules under this Lease. A “Breach” is defined
as the occurrence of one or more of the following Defaults, and the failure of Lessee to ours such
Default within any applicable grace period;

          (a) The abandonment of the Premises; or the vacating of the Premises without
providing a commercially reasonably level of security, or where the coverage of the
property insurance described in Paragraph 8.3 is jeopardized as a result thereof, or
without providing reasonable assurances to minimize potential vandalism.

          (b) The failure of Lessee to make any payment of Rent or any Security Deposit
required to be made by Lessee hereunder, whether to Lessor or to a third party, when
due, to provide reasonable evidence of insurance or surely bond, or to fulfill any
obligation under this Lease which endangers or threatens life or property, where such
failure continues for a period of three (3) business days following written notice to
Lessee.

          (c) The
failure by Lessee to provide(i) reasonable written evidence of compliance
with Applicable Requirements, (ii) the service contracts, (iii) the
recission of an
unauthorized assignment or subletting, (iv) a Tenancy Statement, (v) a requested
subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any
document requested under Paragraph 42 (casements), or (viii) any other documentation
or information which Lessor may reasonably require of Lessee under the terms of this
Lease, where any such failure continues for a period of ten(10) days following written
notice to Lessee.

          (d) A Default by Lessee as to the terms, covenants, conditions or provisions of
this Lease, or of the rules adopted under Paragraph 40 hereof other then those
described in subparagraphs 13.1(a), (b) or (c), above, where such Default continues for
a period of thirty(30) days after written notice; provided, however, that if the
nature of Lessee’s Default is such that more than thirty (30) days are reasonably
required for its ours, then it shall not be deemed to be a Breach if Lessee
commences such ours within said thirty (30) day period and thereafter diligently
prosecutes such cure to composition.

          (e) The occurrence of any of the following events: (i) the making of any general
arrangement or assignment for the benefit of creditors; (ii) becoming a “debtor” as
defined in 11 U.S.C. $ 101 or any successor statute thereto (unless, in the case of a
petition filed against Lessee, the same is dismissed within sixty (60) days); (iii)
the appointment of a trustee or receiver to take possession of substantially all of
Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where
possession in not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial nature of substantially all of Lessee’s assets located at
the Premises or of Lessee’s interest in this Lease, where such seizure
is not discharged within thirty (30) days; provided, however, in the event that any
provision of this subparagraph 13.1 (e) is contrary to any applicable law, such
provision shall be of no force or effect, and not affect the validity of the remaining
provisions.

          (f) The discovery that any financial statement of Lessee or of any Guarantor
given to Lessor was materially false.

          (g) If the performance of Lessee’s obligations under this Lease is guaranteed:
(i) the death of a Guarantor ; (ii) the termination of a Guarantor’s liability with
respect to this Lease other than in accordance with the terms of such guaranty; (iii) a Guarantor’s becoming insolvent or the subject of a bankruptcy filing (iv) a
Guarantor’s refusal to honor the guaranty; or (v) a Guarantor’s breach of its guaranty
obligation on an anticipatory basis, and Lessee’s failure, within fifty (50) days
following written notice of any such event, to provide written alternative assurance
or security, which, when coupled with the then existing resources of Lessee, equals
or exceeds the combined financial resources of Lessee and the Guarantors that existed
at the time of execution of this Lease.

     13.2 Remedies. If Lessee fails to perform any of its affirmative duties or obligations,
within ten (10) days after written notice (or in case of an emergency, without notice),
Lessor may, at its option, perform such duly or obligation on Lessee’s behalf, including
but not limited to the obtaining of reasonably required bonds, insurance policies, or
governmental licenses, permits or approvals. The costs and expenses of any such
performance by Lessor shall be due and payable by Lessee upon receipt of invoice therefor.
If any check given to Lessor by Lessee shall not be honored by the bank upon which it is
drawn, Lessor, at its option, may require all future payments to be
made by Lessor to be
by cashier’s check. In the event of a Breach, Lessor may, with or without further notice or
demand, and without limiting Lessor in the exercise of any right or
remedy which Lessor may
have by reason of such Breach:

          (a)Terminate
Lessee’s right to Possession of the Premises by any lawful
means, in
which case this Lease shall terminate and Lessee shall immediately surrender possession to
Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent
which had been earned at the time of termination; (ii) the worth at the time of sward of
the amount by which the unpaid rent which would have been earned
after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have been
reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid
rent for the balance of the term after the time of award exceeds the
amount of such rental
loss that the Lessee proves could be reasonably avoided; and (iv) any other amount
necessary to compensate Lessor for all the detriment proximately caused by the Lessee’s
failure to perform its obligations under this Lessee or which in the ordinary course of
things would be likely to result there from, including but not limited to the cost of
recovering possession of the Premises, expenses of reletting, including necessary
renovation and alternation of the Premises, reasonable attorneys’ fees, and that portion of
any leasing commission paid by Lessor in connection with this Lease applicable to the
unexpired term of the Lease. The worth at the time of award of the amount referred to in
provision (iii) of the immediately preceding sentence shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of the
District within which the Premises are located at the time of award plus one percent(1%).
Efforts by Lessor to mitigate damages caused by Lessee’s Breach of this Lease shall not
waive Lessor’s right to recover damages under Paragraph 12. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or
Lessor may reserve the right to recover all or any part thereof in a separate suit. If a
notice and grace period required under Paragraph 13.1 was not previously given, a notice
to pay rent or quit, or to perform or quit given to Lease under the unlawful detainer state
shall also constitute the notice required by Paragraph 13.1. In such case, the applicable
grace period required by Paragraph 13.1 and the unlawful detainer statute shall run
concurrently, and the failure of Lessee is ours the Default within the greater of the two
such grace periods shall constitute both an unlawful detainer and a Breach of this Lessee
entitling Lessor to the remedies provided for in this Lease and/or by said statute.

          (b) Continue the Lease and Lessee’s right to possession and recover the Rent as it becomes
due, in which event Lessee may sublet or assign subject only to reasonable limitations.
Acts of maintenance, efforts to relit, and/or the appointment of a receiver to protect the
Lessor’s interests, shall not constitute a termination of the Lessee’s right to possessions.

          (c)Pursue any other remedy now or hereafter available under the laws or judicial decisions
of the state wherein the Premises are located. The expiration or termination of this Lease
and/or the termination of Lessee’s right to procession shall not relieve Lessee from
liability under any indemnity provisions of

					
	 
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this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee’s
occupancy of the Premises.

     13.3 Inducement Recapture. Any agreement for free or abated rent or other charges, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus, Inducement or
consideration for Lessee’s entering into this Lease, all of which concessions are hereinafter
referred to as “Inducement Provisions,” shall be deemed conditioned upon Lessee’s full and faithful
performance of all of the terms, covenants and conditions of this
Lease. Upon Breach of this Lease
by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or affect, and any rent, other charge, bonus, inducement or consideration
there to fore abated, given or paid by Lessor under such an Inducement Provision shall be Immediately
due and payable by Lessee to Lessor, notwithstanding any subsequent
cure of said Breach by Lessee.
The acceptance by Lessor of Rent or the cure of the Breach which
initiated the operation of this
paragraph shall not be deemed a waiver by Lessor of this provisions of this paragraph unless
specifically so stated in writing by Lessor at the time of such acceptance.

     13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will cause
Lessor to incur cost is not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to,
processing and accounting
charges, and late charges which may be imposed upon Lessor by any Lander. Accordingly, if any Rent
shall not be received by Lessor within five (5) days after such amount shall be due, then, without
any requirement for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to ten
percent (10%) of each such overdue amount. The Parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will
incur by reason of such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee’s
Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the other
rights and remedies granted hereunder. In the event that a late
charge is payable hereunder,
whether or not collected, for three (3) consecutive installments of Base Rent, then notwithstanding
any provision of this Lease to the contrary, Base Rent shall, at
Lessor’s option, become due and
payable quarterly in advance.

     13.5 Interest. Any monetary payment due Lessor hereunder, other than late charges,
not received by Lessor, when due as to scheduled payments (such as Base Rent) or
within thirty (30) days following the date on which it was due for non-scheduled
payment, shall bear Interest from the date when due, as to scheduled payments, or the
thirty-first (31st) day after it was due as to non-scheduled payments. The
interest (“Interest”) charged shall be equal to the prime rate reported in the Wall
Street Journal as published closest prior to the date when due plus four percent (4%),
but shall not exceed the maximum rate allowed by law. Interest is payable in addition to
the potential late charge provided for in Paragraph 13.4.

     13.6
Breach by Lessor.

          (a) Notice of Breach. Lessor shall not be deemed in breach of
this Lease unless Lessor falls within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a
reasonable time shall in no event be less than thirty (30) days after
receipt by Lessor, and any Lander whose name and address shall have been
furnished Lessee in writing for such purpose, of written notice specifying
wherein such obligation of Lessor has not been performed; provided, however,
that if the nature of Lessor’s obligation is such that more than thirty (30)
days are reasonably required for its performance, than Lessor shall not be in
breach if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.

          (b) Performance by Lessee on Behalf of Lessor. In the event that
neither Lessor nor Lender cures said breach within thirty (30) days after
receipt of said notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at
Lessee’s expense and offset from Rent an amount equal to the
greater of one
month’s Base Rent or the Security Deposit, and to pay an excess of such
expense under protest, reserving Lessee’s right to reimbursement
from Lessor.
Lessee shall document the cost of said cure and supply said documentation to
Lessor.

14. Condemnation. If the Premises or any
portion thereof are taken under the power of eminent domain or sold
under the threat of the exercise of said power (collectively
“Condemnation”), this Lease shall terminate as to the part taken as
of the date the condemning authority takes title or possession,
whichever first occurs. If more than ten percent (10%) of any
building portion of the Premises, or more than twenty-five percent
(25%) of the land area portion of the Premises not occupied by any
building, is taken by Condemnation, Lessee may, at Lessee’s option,
to be exercised in writing within ten (10) days after Lessor shall
have given Lessee written notice of such laking (or in the absence
of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the
condemning authority takes such possession. If Lessee does not
terminate this Lease in accordance with the foregoing, this Lease
shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in
proportion to the reduction in utility of the Premises caused by such
Condemnation. Condemnation awards and/or payments shall be the
property of Lessor, whether such award shall be made as compensation
for diminution in value of the leasehold, the value of the part
taken, or for severance damages; provided, however, that Lessee shall
be entitled to any compensation for Lessee’s relocation expenses, loss
of business goodwill and/or Trade Fixtures, without regard to
whether or not this
Lease is terminated pursuant to the provisions of this Paragraph.
All Alterations and Utility Installations made to the Premises by
Lessee, for purposes of Condemnation only, shall be considered the
property of the Lessee and Lessee shall be entitled to any and all
compensation which is payable therefor. In the event that this
Lease is not terminated by reason of the Condemnation, Lessor
shall repair any damage to the Premises caused by such
Condemnation.

15. Brokers’ Fee.

     15.1 Additional Commission. In addition to the payments owed pursuant to Paragraph 1.10 above,
and unless Lessor and the Brokers otherwise agree in writing, Lessor agrees that: (a) If
Lessee exercises any option, (b) If Lessee acquires any rights to the Premises or other
premises owned by Lessor and located within the same Project, if any, within which the
Premises is located, (c) If Lessee remains in possession of the Premises, with the consent
of Lessor, after the expiration of this Lease, or (d) If Base Rent is increased, whether by
agreement or operation of an escalation clause herein, then, Lessor shall pay Brokers a fee
in accordance with the schedule of said Brokers in effect at the time of the execution of
this Lease.

     15.2
Assumption of Obligations. Any buyer or transferee of Lessor’s
interest in this Lease
shall be deemed to have assumed Lessor’s obligation hereunder. Each Broker shall be a third
party beneficiary of the provisions of Paragraphs 1.10, 15, 22 and 31. If Lessor talks to
pay to a Broker any amounts due as and for commissions pertaining to this Lease when due,
then such amounts shall accrue interest. In addition, if Lessor fails to pay any amounts to
Lessee’s Broker when due, Lessee’s Broker may send written
notice to Lessor and Lessee of such failure
and if Lessor falls to pay such amounts within ten (10) days after said notice, Lessee shall
pay said monies to its Broker and offset such amounts against Rent. In addition,
Lessee’s Broker shall be deemed to be a third party beneficiary of any commission agreement
entered into by and/or between Lessor and Lessor’s Broker.

     15.3 Representations and Indemnities of Broker Relationships, Lessee and Lessor each represent
and warrant to the other that it has had no dealings with any person,
firm, broker or finder
(other than the Brokers, if any) in connection with this Lessee, and that no one other then
said named Broker is entitled to any commission or finder’s fee in connection herewith.
Lessee and Lessor’s do each hereby agree to indemnify, protect, defend and hold the other harmless
from and against liability for compensation or changes which may be claimed by any such
unnamed broker, finder or other similar party by reason of any dealing or actions of the
indemnifying Party, including any costs, expenses, and/or attorneys’ fees reasonably
incurred with respect therein.

16. Estoppel Certificates.

          (a) Each Party (as “Responding Party”) shall within ten (10) days after written
notice from the other Party (the “Requesting Party”) executes, acknowledge and deliver to the
Requesting Party a statement in writing in form similar to the then most current
“Estoppel Certificates” form published by the American
industrial Real Estate Association, plus such additional information, confirmation
and/or statements as may be reasonably requested by the Requisition Party.

          (b) If the Responding Party shall fall to execute or deliver the Esloppel Certificate
within such ten day period, the Requesting Party may execute an Estoppel Certificate
stating that: (I) the Lessee is in full force and effect without modification except as
may be represented by the Requesting Party, (II) there are no uncured defaults in the
Requesting Party’s performance, and (III) if Lessor is the Requesting Party, not more
than one month’s Rent has been paid in advance, Prospective purchasers and encumbrances
may rely upon the Requesting Party’s Estoppel Certificate, and the Responding Party
shall be estopped from denying the truth of the facts contained in said Certificate.

          (c) If Lessor desires to finance, refinance, or sell the Premises, or any part
thereof, Lessee and all Guarantors shall deliver to any potential
lender or purchaser
designated by Lessor such financial statements as may be reasonably required by such
lender or purchaser, including, but not limited to, Lessee’s financial statements for
the pest three (3) years. All such financial statements shall be received by Lessor and
such lender or purchaser and shall be used only for the purposes herein set forth.

17. Definition of Lessor. The term “Lessor” as used herein shall mean the owner or owners at the
time in questions of the Premises, or, if this is a sublessee, of the Lessor’s Interest in the prior
lessee. In the event of a transfer of Lessor’s title or interest in the Premises or this Lessee,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security
Deposit held by Lessor. Except as provided in Paragraph 15, upon such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability
with respect to the obligations and/or covenants under this Lessee thereafter to be performed by
the Lessor. Subject to the foregoing, the obligations and/or
covenants in this Lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove defined.
Notwithstanding the above, and subject to the provisions of Paragraph 20 below, the original Lessor
under this Lease, and all subsequent holders of the Lessor’s interest in this Lease shall remain
liable and responsible with to the potential duties and liabilities of Lessor pertaining to
Hazardous Substances as outlined in Paragraph 6 above.

					
	 
	 
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18. Severability. The invalidity of any provision of this Lease, as determined by a court of
competent jurisdiction, shall in no way affect the validity of any other provision hereof.

19. Days. Unless otherwise specifically indicated to the contrary, the word “days” as used in this
Lease shall mean and refer to calendar days.

20. Limitation on Liability. Subject
to the provisions of Paragraph 17 above, the obligations of
Lessor under this Lease shall not constitute personal obligations of Lessor, the individual
partners of Lessor or its or their individual partners, directors, officers or shareholders,
and Lessee shall lock to the Premises, and to no other assets of Lessor, for the satisfaction
of any liability of Lessor with respect to this Lease, and shall not seek recourse against the
individual partners of Lessor, or its or their individual partners, directors, officers or
shareholders, or any of their personal assets for such satisfaction.

21. Time of Essence. Time is of the essence with respect to the performance of all obligations
to be performed or observed by the Parties under this Lease.

22. No Prior or Other Agreements;
Broker Disclaimer. This Lease contains all agreements between
the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous
agreement or understanding shall be effective. Lessor and lessee each represents and warrants
to the Brokers that it has made, and is relying solely upon, its own investigation as to the
nature, quality, character and financial responsibility of the other Party to this Lease and
as to the nature, quality and character of the Premises. Brokers have no responsibility with
respect thereto or with respect to any default or breach hereof by either Party. The liability
(including court costs and Attorney’s fees), of any Broker with respect to
negotiation, execution, delivery or performance by either Lessor or Lessee under this Lease or
any amendment or modification hereto shall be limited to an amount up to the fee received by
such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each
Broker’s liability shall not be applicable to any gross negligence or willful misconduct of
such Broker.

23. Notices.

     23.1
Notice Requirements: All notices required or permitted by this Lease shall be in
writing and may be delivered in person (by hand or by courier) or may be sent by regular,
certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or
by facsimile transmission, and shall be deemed sufficiently given if served in a manner
specified in this Paragraph 23. The addresses noted adjacent to a Party’s signature on
this Lease shall be the Party’s address for delivery or mailing of notices. Either Party
by written notice to the other specify a different address for notice, accept that upon
Lessee’s taking possession of the Premises, the premises shall constitute Lessee’s address for notice. A
copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate in writing.

     23.2 Date of Notice. Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the data of delivery shown on the receipt card, or if
no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall
be deemed given forty-eight (48) hours after the same is addressed as required herein and
mailed with postage prepaid. Notices delivered by United States Express Mail or overnight
courier that guarantee next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the Postal Service or courier. Notices transmitted by facsimile
transmission or similar means shall be deemed delivered upon telephone confirmation of
receipt, provided a copy is also delivered via delivery or mail. If notice is received on
a Saturday, Sunday or legal holiday, if shall be deemed received on the next business day.

24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant or condition
hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or
of any subsequent Default or Breach by Lessee of the same or of any other term, covenant or condition
hereof. Lessor’s consent to, or approval of, any act shall not be deemed to rendar unnecessary
the obtaining of Lessor’s consent to, or approval of, any subsequent or similar act by Lessee,
or be construed as the basis of an estoppel to enforce the provision or provisions of this
Lease requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any
Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of
monies or damages due Lessor, notwithstanding any qualifying statements or conditions made by
Lessee in connection therewith, which such statements and/or conditions shall be of so force
or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time
of deposit of such payment.

25. Recording. Either Lessor or Lessee shall, upon request of the other accounts, acknowledge and
deliver to the other a short form memorandum of this Lease for recording purposes. The Party
requesting recordation shall be responsible for payment of any fees applicable thereto.

26. No Right To Holdover. Lessee has no right to retain possession of the Premises or any part
thereof beyond the expiration or termination of this Lease. In the event that Lessee holds
over, than the Base Rent shall by Increased to one hundred fifty percent (150%) of the Base
Rent applicable during the month Immediately preceding the expiration or termination. Nothing
contained herein shall be construed as consent by Lessor to any holding over by Lessee.

27. Cumulative Remedies. No remedy, or election hereunder shall be deemed exclusive but shall,
wherever possible be cumulative with all other remedies at law or in equally.

28. Covenants and Conditions; Construction of Agreement. All provisions of this Lease to be
observed or performed by Lessee are both covenants and conditions. In construing this Lease,
all headings and these are for the convenience of the Parties only and shall not be considered
a part of this Lease. Whenever required by the contend, the singular shall include the plural
and vice versa. This Lease shall not be construed as if prepared by one of the Parties, but
rather according to its fair meaning as a whole, as If both parties had prepared it.

29. Binding Effect; Choice of Law. This Lease shall be binding upon the parties, their personal
representatives, successors and assigns and be governed by the laws of the Stats In which the
premises are located. Any litigation between the Parties hereto concerning this Lease shall be
initiated in the county in which the Premise are located.

30. Subordination; Attornment; Non-Disturbance.

     
30.1 Subordination. This Lease and any Option granted hereby shall be subject and
subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or
security device (collectively, “Security Device”), now or hereafter placed upon the
premises, to any and all advances made on the security thereof, and to all renewals,
modifications, and extensions thereof, Lessee agree that the holders of any such Security
Devices (In this Lease together referred to as “Lessor’s Lender”) shall have no liability
or obligation to perform any of the obligations of Lessor under this Lease. Any Lender may
elect to have this Lease and/or any Option granted hereby superior to the lien of its
security Device by giving written notice thereof to Lessee, Whereupon this Lease and such
Options shall be deemed prior to such Security Device, notwithstanding the relative dates
of the documentation or recordation thereof.

     30.2 Attornment. Subject to the non-disturbance provisions of Paragraph 30.3, Lessee
agrees to attorn to a Lender or any other party who acquires ownership of the Premises by
reason of a foreclosure of a Security Device, and that in the event of such foreclosure,
such new owner shall not: (I) be liable for any act or omission of any prior lessor or
with respect to events occurring prior to acquisition of ownership; (II) be subject to any
offsets or defenses which Lessee might have against any prior lessor, or (III) be bound by
prepayment of more than one (1) month’s rent.

     30.3
Non-Disturbance. With respect to Security Devices entered into by Lessor after the
execution of this Lease, Lessee’s subordination of this Lease shall be subject to
receiving a commercially reasonable non-disturbance agreement (a “Non-Disturbance
Agreement”) From the Lender which Non-Disturbance Agreement provides that Lessee’s
possession of the premise, and this Lease, Including any options to extend the term
hereof, will not be disturbed so long as Lessee is not in Breach
hereof and [illegible] to the
record owner of the Premises. Further, within sixty (60) days after the execution of this
Lease, Lessor shall uses its commercially reasonable efforts to obtain a Non-Disturbance
Agreement form the holder of any pre-existing Security Device which is secured by the
Premises. It the event that Lessor is unable to provide the Non-Disturbance Agreement
within said sixty (60) days, then Lessee may, at Lessee’s option,
directly control Lessor’s lender and attempt to negotiate for the execution and delivery
of a Non-Disturbance Agreement.

     
30.4 Self-executing. The agreements contained in this Paragraph 30 shall be effective
without the execution of any further documents; provided, however, that, upon written
request from Lessor or a Lender in connection with a sale, financing or refinancing of the
Premises, Lessee and Lessor shall executes such further writings as may be reasonably
required to separately document any subordination, attornment and/or Non-Disturbance
Agreement provided for herein.

31. Attorneys’ Fees. If any Party or Broker brings an action or proceeding involving the Premises
to enforce the terms hereof or to declare rights hereunder, the Prevailing Party (as hereafter
defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable
attorneys’ fees. Such fees may be awarded In the same suit or recovered in a separate suit,
whether or not such action or proceeding is pursued to decision or judgment. The term,
“Prevailing Party” shall includes, without limitation, a Party or Broker who substantially
obtains or defeats the relief sought, as the case may be, whether by compromise, settlement,
judgment, or the abandonment by the other Party or Broker of Its claim or defense. The
attorney’s fees award shall not be computed in accordance with any court fee schedules, but
shall be such as to fully reimburse all attorneys’ fees reasonably incurred. In addition,
Lessor shall be entitled to attorneys’ fees, costs and expenses incurred in the preparation
and advice of notices of Default and consultations in connection therewith, whether or not a
legal action is subsequently commenced in connection with such Default or resulting Breach.

32. Lessor’s Access; Showing Premises; Repairs, Lessor and Lessor’s agents shall have the right
to enter the Premises at any time, in the case of an emergency, and other wise at reasonable
times for the purpose of showing the same to prospective purchasers, lenders, or Lessees, and
making such alterations, repairs, improvements or additions to the Premises as Lessor may deem
necessary. All such activities shall be without abatement of rent or liability to Lessee.
Lessor may at any time place on the premises any ordinary “For Sale” signs and Lessor may
during the last six (6) months of the term hereof place on the Premises any ordinary “For
Lease” signs. Lessee may at any time place on or about the Premises any ordinary “For
Sublease” sign.

33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises
without Lessor’s prior written consent. Lessor shall not be obligated to exercise any standard
of reasonableness in determining wither to permit an auction.

 

					
					
	
©1997 – American Industrial Real estate Association
	 	Page 9 of 12

REVISED
	 	 

 

34. Signs.
Except “for ordinary For Sublease” signs,, Lessee shall not place any sign upon
the Premises without Lessor’s prior written consent. All signs must comply with all
Applicable Requirements.

35. Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the
voluntary or other surrender of this Lease by Lessee, the mutual termination or
cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall
automatically terminate  any sublessee or lesser estate in the Premises; provided, however,
that Lessor may elect to continue any one or all existing subtenancies. Lessor’s
failure within ten(10) days following any such event to elect to the contrary by written
notice to the holder of any such lesser interest, shall constitute Lessor’s election to
have such event constitute the termination of such interest.

36.
Consents. Except as otherwise provided herein, wherever in this Lease the consent of
a Party is required to an act by or for the other Party, such consent shall not be
unreasonably withheld or delayed. Lessor’s actual reasonable costs and expenses
(including, but not limited to, architects’,
attorneys’, engineers’ and other consultants’ fees)
incurred in the consideration of, or response to, a request by Lessee for any Lessor
consent, including, but not limited to, consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an
invoice and supporting documentation therefor, Lessor’s consent to any act, assignment or
subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of
this Lease exists, nor shall such consent be deemed a waiver of any then existing Default
or Breach, except as may be otherwise specifically stated in writing by Lessor at the
time of such consent. The failure to specify herein any particular condition to Lessor’s
consent shall not preclude the imposition by Lessor at the time of consent of such further
or other conditions as are then reasonable with reference to the particular matter for
which consent is being given. In the event that other party disagrees with any
determination made by the other hereunder and reasonably requests the reasons for such
determination, the determining party shall furnish the reasons in writing and in
reasonable detail within ten(10) business days following such request.

37. Guarantor.

     37.1 Execution. The Guarantors, If any, shall each execute a guaranty in the form most
recently published by the American industrial Real Estate Association, and each such
Guarantor shall have the same obligations as Lessee under this Lease.

     37.2 Default. It shall constitute a Default of the Lessee if any Guarantor falls or
refuses, upon request to provide: (a) evidence of the execution of the guaranty, including
the authority of the party signing on Guarantor’s behalf to obligate Guarantor, and in
the case of a corporate Guarantor, a certified copy of a resolution of its board of
directors authorizing the making of such guaranty, (b) current financial statements, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in effect.

38. Quiet Possession. Subject to payment by Lessee of the Rent and performance of all of
the covenants, conditions and provisions on Lessee’s part to be observed and performed
under this lease, Lessee shall have quiet possession and quiet enjoyment of the Premises
during the term hereof.

39. Options.

     39.1
Definitions. “Option” shall mean; (a) the right to
extend the term of or renew this
Lease or to and end or renew any lease that Lessee has on other property of Lessor: (b) the right of first refusal or first
offer to lease either the Premises or other property of Lessor; (c) the right to purchase or the right of first refusal to purchase the Premises or other property of Lessor.

     39.2 Options Personal To Original Lessee. Each Option granted to Lessee in this Lesse is
personal to the original Lessee, and cannot be assigned or exercised by anyone other than
said original Lease and only while the original Lessee is in full possession of the
premises and, if requested by Lessor, with Lessee certifying that Lessee has no intention
of thereafter assigning or subletting.

     39.3 Multiple Options. In the event that Lessee has any multiple Options to extend or
renew this lease, a better Option cannot be exercised unless the prior Options have been
validly exercised.

     39.4 Effect of Default on Options.

          (a) Lessee shall have no right to exercise an Option: (i) during the period commencing
with the giving of any notice of Default and continuing until said Default is cured, (ii)
during the period of time any Rent is unpaid (without regard to whether notice thereof is
given Lessee), (iii) during the time Lessee is in Branch of this lease, or (iv) in the
event that lessee has been given three (3) or more notices of separate Default, whether or
not the Defaults are cured, during the twelve (12) month period immediately preceding the
exercise of the Option.

          (b) The period of time within which an Option may be exercised shall not be extended or
enlarged by reason of Lessor’s inability to exercise an Option because of the provision of
Paragraph 39.4(a).

          (c) An Option shall terminate and be of no further force or effect, notwithstanding
Lessee’s due and timely exercise of the Option, if, after such exercise and prior to the
commencement of the extended term. (i) Lessee falls to pay Rent for a period of thirty
(30) days after such Rent becomes due (without any necessity of Lessor to give notice
thereof), (ii) Lessor gives to Lessee three (3) or more notices of separate Default during
any twelve (12) month period, whether or not the Defaults are cured, or (iii) If Lessee
commits a Breach of this lease.

40. Multiple Buildings. If the Premises are a part of a group of buildings controlled by
Lessor, Lessee agrees that it will observe all reasonable rules and regulations which
Lessor may make from time to time for the management, safety, and care of said properties,
including the care and cleanliness of the grounds and including the parking, loading and
unloading of vehicles, and that Lessee will pay its fair share of common expenses incurred
in connection therewith.

41. Security Measures. Lessee hereby acknowledges that the rental payable to Lessor
hereunder does not include the cost of guard service or other
security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, the agents and invitees and their property from the acts of third parties.

42. Reservations. Lessor reserves to itself the right, from time to time, to grant,
without the consent or joinder of Lessee, such assessments, rights and dedications that
Lessor deems necessary, and to cause the recordation of parcel maps and restrictions, so
long as such assessment, rights, dedications, maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents
reasonably requested by Lessor to effectuate any such assessment rights, dedication, map
or, restrictions.

43. Performance Under Protest. If at any time a disputes shall arise as to any amount or
sum of money to be paid by one Party to the other under the provisions hereof, the Party
against whom the obligation to pay the money is asserted shall have the right to make
payment “under protest” and such payment shall not be regarded as a voluntary payment and
there shall survive the right on the part of said Party to Institute suit for recovery of
such sum. If it shall be adjudged that there was no legal obligation on the part of said
Party to pay such sum or any part thereof, said Party
shall be entitled to recover such sum or so much thereof as it was not legally required
to pay.

44. Authority. If either Party hereto in a corporation, trust, limited liability company,
partnership, or similar entity, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and deliver
this Lesse on it behalf. Each party shall, within thirty (30) days after request, deliver
to the other party satisfactory evidence of such authority.

45.
Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.

46. Offer,
Preparation of this Lease by other Party of their agent and submission of same
to the other Party shall not be deemed an offer to lease to the other Party. This Lease is
not intended to be binding until executed and delivered by all Parties hereto.

47.
Amendments. This Lease may be modified only in writing, signed by the Parties in
interest at the time of the modification. As long as they do not materially change
Lessee’s obligations hereunder, Lessee agrees to make such reasonable non-monetary
modifications to this lease as may be reasonably required by a Lender in connection with
the obtaining of normal financing or refinancing of the Premises.

48. Multiple Parties. If more than one person or entity is named herein as either Lessor
or Lessee, such multiple Parties shall have joint and several responsibility to comply
with the terms of this Lease.

49. Mediation and Arbitration of Disputes. An Addendum requiring the Mediation and/or the
Arbitration of all disputes between the Parties and/or Brokers arising out of this
Leaseo is þ is not attached to this Lease.

50. Rent Schedule.

	 	 	 	 	 	 	 	 	 
	Date	 	Rate/Sq. Ft./Mo./NNN	 	Amount
	12/01/03-11/30/04

	 	$	0.07	 	 	$	5,880.00	 
	*12/01/04-11/30/05

	 	$	0.70	 	 	$	5,880,00	 

 

			
	*	 	Option period. If exercised

      

					
	©1997 — American Industrial Real Estate Association
	 	Page 10 of 12

REVISED
	 	 

 

51. Security Deposit. Lessee shall provide to Lessor a security deposit in the form of cash in
the amount of $11,760.00 payable to Lessor upon execution of a lease document. If Lessee is not in
default of the lease, such amount shall be returned to Lessee following expiration of the lease per
paragraph 5 of Lease.

52. Operating Expense. Lessee shall be responsible to reimburse Lessor for the building operating
expenses, including but not limited to; taxes, building insurance, landscaping, heating ventilation,
air conditioning maintenance & repair, roof maintenance and property management; Property
management fee shall be one and one-half percent (11/2) of the monthly net not rent.

Notwithstanding anything to the contrary contained herein:

Payment Obligations of Lessee and Lesson.

	 	 	 	 	 
	A. Maintenance of building foundations, exterior walls, roof and roofing and painting of exterior walls
	 	Lessor
	B. All other building interior maintenance
	 	Lessee
	C. All other building exterior maintenance
	 	Lessee
	D. Gardening and landscaping
	 	Lessee
	E. Real Estate taxes and assessments
	 	Lessee
	F. Lessee’s Public liability and personal property damage insurance
	 	Lessee
	G. Lessor’s Public Liability, Fire Casualty & Earthquake Insurance
	 	Lessee
	H. Telephone service
	 	Lessee
	I. Water
	 	Lessee
	J. Gas and electricity
	 	Lessee
	K. Garbage
	 	Lessee
	L. Property Management Fees (11/2% of NNN rent)
	 	Lessee

53. Condition of Premises. Lessor shall deliver the Premises broom clean and free of debris on the
Occupancy Date, with the existing electrical, plumbing, fire sprinkler, lighting, heating,
ventilating and air conditioning systems (HVAC), and all other such elements of the building, in good
operating condition on said date. Lessor shall further warrant that for the first ninety (90) days
of the Lease term that all such building systems shall be in good operating condition. Furthermore,
the surface and structural elements of the roof, bearing walls and foundation of the Premises shall
be free of material defects.

Prior to lease commencement, the Lessor shall complete, at its sole cost and expense, the following
tenant improvements to the Premises.

Lessee shall be granted use of all of the existing furniture and writing for the duration of the term
at no charge. This furniture shall include the cubicles, private office furniture and conference room
furniture. It is understood that the existing chairs may be removed by the current Lessee.
Additionally, Lessor shall professionally clean the premises and deliver the building in good clean
condition. Notwithstanding anything to the contrary contained herein. Lessee may, at Lessee’s sole
cost and expense, Install a roll-up door and replace the existing carpet with tile in selected
areas. Lessor shall not withhold approval for these improvements, nor shall these improvements be
subject to any restoration clause in the lease. Lessor shall grant prior approval of a sublease
consisting of approximately 1/3 of the Premises to Clthara Endoscopy, Inc., or other entities
founded by Michael A. Laufer, M.D. (Founder of Broncus). At some point during the term of the
lease, Broncus will spin-off a portion of their business into a new
company, Asthmatx, and wish to
assign this lease to Asthmatx. At the time of the transaction, Broncus will seek prior approval of
Lessor for this assignment, for which approval shall be at the sole discretion of the Lessor. If
approval is not granted, Lessor agrees that Asthmatx can sublease the facility from Broncus for the
reminder of the lease term.

54. Rights
to Assign or Lease. Provided that the not worth of the succeeding entity is equal to
or greater than the Lessee at the time of execution hereunder, Lessee shall have the right without
Lessor’s consent to assign all or any portion of its interest under this Lease or sublet all or
any portion of the Premises to any parent, subsidiary or affiliate of Lessee; or any party which
results from any merger or consolidation of Lessee, and/or any party which acquires all or
substantially all the assets or stock of Lessee. Lessee shall obtain approval from Lessor for any
sublease or assignment to any other third party tenant, which approval shall not be unreasonably
withheld.

55. Signase. Lessee to have the right to Install both building and monument signage, conditional
upon Lessor’s reasonable approval and the approval of the City of Mountain View.

56. Parking. Lessee shall have exclusive access to thirty-one (31) on-site parking spaces plus
common use of one (1) handicap space at no charge to Lessee. See Exhibit A attached.

57. Option to Extend. Lessor shall grant to Lessee a one-time one year option to extend the Lease
provided Lessee is not in default of the lease. Lessee must exercise in writing to Lessor its
intent to exercise such option by no later than five (5) months prior to the expiration of the
original term. All terms and conditions of the Lease including base rent shall remain in place and
unchanged.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED
HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE
PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE
COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO
THE PREMISES.

©1997 – American Industrial Read Estate Association

Page 11
of 12

REVISED

 

ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL
ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES, THE PARTIES ARE URGED TO:

	1.	 	SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
	2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE
PREMISES, SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE
OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE
CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR
LESSEE’S INTENDED USE.

WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE
LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES IS LOCATED.

The parties hereto have executed this Lease at the place and on the dates specified above their
respective signatures.

	 	 	 	 	 	 	 	 	 	 	 
	Executed at: Mountain View CA	 	 	 	Executed at:	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	on: October 27, 2003	 	 	 	on:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	By LESSOR:	 	 	 	By LESSEE:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	AT Cook Properties Trust	 	 	 	Broncus Technologies, Inc.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:  /s/ Gary C. Cook

	 	 
	 	 	 	By:  /s/ Glen E. French
	 	 	 	 
	 

	 	 	 	 

	 	 
	Name Printed: Gary Cook	 	 	 	Name Printed: Glen E. French	 	 
	Title: Manager	 	 	 	Title: President & CEO	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	Name Printed:
	 	 	 	 	 	Name Printed:	 	 	 	 
	 
	 	 	 	 
	 	 
	Title:

	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 
	Address:

	 	 	 	 	 	Address:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Telephone: (___)	 	 	 	 	 	Telephone: (650)-428-1608	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Facsimile: (___)	 	 	 	 	 	Facsimile: (650) 428-1542	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Federal ID No.	 	 	 	 	 	Federal ID No. 94-3260903	 	 
	 

	 	 	 	 	 	 	 	 	 	 

		
	NOTE: 	These forms are often modified to meet the changing requirements of law and industry needs.
Always write or call to make sure you are utilizing the most current form: AMERICAN INDUSTRIAL REAL
ESTATE ASSOCIATION, 700 So. Flower Street, Suite 600, Los Angeles, California 90017. (213) 687-8777. Fax No. (213) 687-8616

					
	 
	 
	 	 	 	GEF GCC
	ã 1997 – American Industrial Real Estates Association	 	 	 	FORM STN-6-2/97E
	 
	 	 	Page 12 of 12	 	 
	 	 	REVISED	 	 

 

 

     

     

 

 

 

 

	 	 	 	 	 	 	 
	

	 	Broncus Technologies, Inc.

1400 N. Shoreline Blvd.

Building A, Suite 8

Mountain View, CA 94043

www.broncus.com
	 	[650] 428-1600

[650] 428-1542 fax
	 	 

March 11, 2004

Gary Cook

AT Cook Properties Trust

2570 W. El Camino Real, Suite 500

Mountain View, CA 94040

			
	RE:	 	Request for Consent to Assign and Modify the lease for 1340 Space Park Way

Dear Gary:

As Gary Kaplan has discussed with you, Broncus Technologies Inc. wishes to assign the
lease for 1340 Space Park Way, Mountain View, CA (“Lease”) to Asthmatx, Inc. and is
now seeking the consent of AT Cook Properties Trust (“Lessor”) so that Broncus may
proceed in assigning the lease. The attached wire transfer receipt should suffice as
proof that the current net worth of Asthmatx exceeds that of Broncus as of the date of
Lease execution (as required by Section 54 of the Lease).

In addition, because Broncus and Asthmatx are now wholly separate legal entities, upon
assignment of the Lease, Broncus intends that Asthmatx shall assume any and all
liabilities and/or obligations under the Lease. Accordingly, please indicate your
additional acceptance and consent that: i) upon the assignment of the Lease, Broncus
shall have no liability or obligations under the Lease and Asthmatx shall assume any
and all liabilities and/or obligations under the Lease; and ii) these terms will be
controlling in the event of any inconsistency or discrepancy with any existing terms
of the Lease.

	 	 	 
	Very truly yours,
	 	 
	 
	/s/ Cary Cole
	 	 
	 

Cary Cole

	 	 
	President and COO
	 	 
	Broncus Technologies, Inc.
	 	 

Please
indicate your acceptance of these terms by signing below and returning a copy to us.

	 	 	 	 	 
	/s/ Gary C. Cook

	 	3/22/04
	 	 
	 
AT Cook Properties Trust

	 	 
Date
	 	 

 

 

Cornish & Carey Commercial

Oncor International

FIRST AMENDMENT TO LEASE

THIS FIRST AMENDMENT to Lease is made as of September 26, 2005, and is a part of that Lease dated
October 22, 2003, by and between Cook Income Properties, LLC (“Lessor”), and Asthmatx, Inc.
(formerly Broncus Technologies) (“Lessee”), and is made with reference to the following facts;

	A.	 	The premises originally leased by Lessee pursuant to the Lease consists of premises in
one building
located at 1340 Space Park Way, in the City of Mountain View, California.
	 
	B.	 	The Lease Term for said leased premises currently expires on November
30,2005.

Now, therefore, Lessor and Lessee hereby agree that the Lease is amended as
follows:

	 	1.	 	Scheduled Lease Extension Commencement:
	 
	 	 	 	December 1, 2005
	 
	 	2.	 	Term:
	 
	 	 	 	The initial Lease Term shall be for a period of 24 months commencing December 1, 2005.
	 
	 	3.	 	Option to Renew:
	 
	 	 	 	Landlord shall grant Tenant one (1) one-year option to renew the lease following the
expiration of the initial term. The rental rate for the option period shall be
$0.95/Sq. Ft./Mo./NNN. Tenant must notify Landlord in writing of such intent to
exercise the option no less than six (6) months prior to the expiration of the Lease
term.
	 
	 	4.	 	Monthly Base Rent:

	 	 	 	 	 	 	 	 	 
	Months	 	Square Footage	 	Rate/Sq. Ft./Mo./NNN
	01 – 02
	 	 	8,400	 	 	Free Base Rent
	03–12
	 	 	8,400	 	 	$	0.825	 
	13–24
	 	 	8,400	 	 	$	0.875	 
	*25 – 36
	 	 	8,400	 	 	$	0.95	 

 

			
	* Option period.

	 	5.	 	Tenant Improvement Allowance:
	 
	 	 	 	The modifications requested by Tenant shall be approved by Landlord and shall not be
subject to any Tenant restoration obligations contained in the current lease.
Additionally, Landlord shall allow Tenant to dispose of the excess cubicle furniture.
Landlord shall lease the Premises in an otherwise “as is” condition.

 

 

Cornish & Carey Commercial

Oncor International

FIRST AMENDMENT TO LEASE

	 	6.	 	Security Deposit:
	 
	 	 	 	Landlord shall retain the current security deposit of $11,760.00 subject to the terms of
the current lease.
	 
	 	7.	 	Broker’s Commission:
	 
	 	 	 	CRESA Partners is the broker of record representing the Tenant and shall be so
designated in the lease. Landlord shall pay CRESA Partners a leasing commission equal to
3% of the base rent paid over the term of the initial lease. Landlord shall also pay
Cornish & Carey Commercial a leasing fee of 3%.
	 
	 	8.	 	Except as expressly set forth in this Amendment, all terms and
conditions of
the Lease remain in full force and effect.

IN WITNESS WHEREOF, Lessor and Lessee have executed this First Amendment to be effective as of the
date first set forth above.

	 	 	 	 	 	 	 	 	 
	LESSOR:

	 	COOK INCOME PROPERTIES, LLC
	 	 	 	LESSEE:
	 	ASTHMATX, INC.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Gary C. Cook
	 	 	 	By:
	 	/s/ Glendon French
	 

	 	 	 	 	 	 	 	 
	 

	 	Gary Cook, Managing Partner	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Date:

	 	9/26/05
	 	 	 	Date:
	 	9/30/05

 

 

9/22/05

Tenant
Improvement Summary 

Asthmatx -1340 Space Park Way, Mountain View, CA 94043

Reference attached floor plans:

	 	A.	 	1340 Space Park Way–Existing 9/22/05
	 
	 	B.	 	1340 Space Park Way–Future

Tenant Improvements:

	 	1.	 	Relocate cubicle partitions to locations as specified in floor plan B.
	 
	 	2.	 	Relocate voice/data/power drops and add various electrical outlets to accommodate
cubicle
partition relocation.
	 
	 	3.	 	Remove all excess cubicle parts and furniture from building
as designated by tenant.
	 
	 	4.	 	Relocate door AA to location BB.
	 
	 	5.	 	Add new drywall partition CC.
	 
	 	6.	 	Add new door DD.
	 
	 	7.	 	Demo carpet and install new VCT floor EE.
	 
	 	8.	 	Install floor-to-ceiling built-in shelving FF.

 

 

	fLOOR pLAN a. — 1340 SPACE PARK WAY — EXISTING 9/22/05

 

 

	fLOOR pLAN B. — 1340 SPACE PARK WAY — FUTUREexv10w16

 

Exhibit 10.16

CONFIDENTIAL

Contract Manufacturing Agreement

This
Contract Manufacturing Agreement (the “Agreement”) is made as of October 18, 2005, (the
“Effective Date”) by and between Life Science Outsourcing, its principal offices being located at
830 Challenger Street, Brea, CA 92821 (“LSO”) and Asthmatx, its principal offices being located at
1340 Space Park Way, Mountain View, CA 94043 (“Buyer”).

AGREEMENT

In consideration of the mutual covenants, promises, and conditions set forth below, the
parties, intending to be bound, agree as follows:

	 	1.	 	Definitions. The following capitalized terms when used in this Agreement shall
have the respective meanings set forth below.

	 	a.	 	“Bill of Material” shall mean any materials and
components lists and related instructions and information provided by Buyer
to LSO and concerning components required or preferred for the manufacture of
a Product by LSO pursuant to this Agreement.
	 
	 	b.	 	“Credit Exposure” shall mean the total of outstanding accounts
receivables, non cancelable purchase commitments, on hand raw component inventory,
work in process and finished goods inventory.
	 
	 	c.	 	“Disclosing Party” shall have the meaning stated in Section 14 hereof.
	 
	 	d.	 	“Effective Date” shall have the meaning stated in the
preamble of this Agreement.
	 
	 	e.	 	“Improvements” shall mean all improvements to Buyer Patents or
Know-How hereafter created or acquired during the term of this Agreement by LSO or
jointly by one or more employees of Buyer and LSO, including without limitation
advances, developments, modifications, enhancements, variations, revisions,
adaptations, extensions or any element thereof, utilizing or incorporating, or
based on, the Know-How or Patents, whether able to be patented or not.
	 
	 	f.	 	“Intellectual Property” shall mean trade secrets, ideas,
inventions, designs, developments, devices, methods or processes (whether patented
or able to be patented and whether or not reduced to practice) and all patents and
patent applications related thereto; copyrightable works and mask works (whether or
not registered); trademarks, service marks and trade dress; and all registrations
and applications for registration related thereto; and all other intellectual or
industrial property rights, to the extent in or related to the Products.
	 
	 	g.	 	“Know-How” shall mean the know-how, technical information and confidential

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CONFIDENTIAL

	 	 	 	technical data, together with all trade secrets, non-patented technical knowledge
and inventions, confidential manufacturing procedures and methods, that are related
to the Products.
	 
	 	h.	 	“Losses” shall mean any and all damages, liabilities, costs and
expenses (including reasonable attorneys’ fees and expenses), and amounts
paid in settlement.
	 
	 	i.	 	“Patents” shall mean those patents and patent applications that
are now or hereafter owned or acquired by Buyer and relate to the Products.
	 
	 	j.	 	“Products” shall mean components, manufacturing materials, in
process, finished, and returned devices as defined by 21CFR Part 820, and
identified in Exhibit A hereto, which shall be described in detail in the
Specifications.
	 
	 	k.	 	“Proprietary Information” shall have the meaning stated in Section
14(b). 
	 
	 	l.	 	“Recipient” shall have the meaning stated in Section 14(a).
	 
	 	m.	 	“Safety Stock” shall have the meaning of inventory above
current forecasted requirements which both parties agree LSO can have on hand and
or on order to meet any additional upside flexibility Buyer may require for its
Products.
	 
	 	n.	 	“Specifications” shall mean any requirement with which a
product, process, service, or other activity must conform, and may include
drawings, prints, instructions and similar materials provided by Buyer to LSO and
relating to a Product to be manufactured by LSO pursuant to this Agreement.

	 	2.	 	Supply Obligations. During the Term of this Agreement, LSO shall manufacture
Products for the Buyer per the Buyer’s requirements for the Products, subject to and in
accordance with the terms and conditions set forth in this Agreement, including without
limitation the Specifications. LSO will not deviate from Buyer’s approved procedures or
instructions without prior written consent from Buyer. If LSO finds that an unapproved
deviation has been made, LSO will notify buyer within one (1) business day of discovery of
the deviation and will, at Buyer’s sole discretion, either scrap affected product at LSO’s
expense or rework affected product at LSO’s expense. Work in process which is more than 50%
complete in terms of time or material content will be paid or credited at full unit cost.

	 	a.	 	Resources and Staffing. LSO will provide and maintain adequate
resources and staffing in order to meet the terms of this Agreement. LSO will
maintain the competencies of LSO personnel that have been trained by the Buyer to
manufacture Products per Specifications, and will make best efforts to minimize the
impact of potential LSO personnel turnover. LSO will notify Buyer if personnel are
to be added to or removed from the Buyer’s production line at LSO. LSO will notify
Buyer if the Buyer’s production line is to be moved within the LSO facility or to
another LSO facility.

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CONFIDENTIAL

	 	3.	 	Quality Assurance. Quality System, and Regulatory Assurance Requirements.
As specified in Contract Manufacturing Quality Agreement
	 
	 	4.	 	Tools and Fixtures. Buyer shall be responsible for purchasing all custom
tooling and custom fixtures that are required for manufacturing of the Products (including
any tooling and fixtures required due to a change to the Specifications), which LSO does
not otherwise own as of the Effective Date. All tooling and fixtures purchased by Buyer
shall be held by LSO in trust for Buyer’s exclusive use in accordance with manufacturing
and testing procedures established for the Products. Such tooting and fixtures shall be
owned by Buyer and identified to LSO’s lenders, creditors, shareholders and other third
parties as Buyer assets in the possession of LSO. Except for normal production maintenance,
which will be the responsibility of LSO, Buyer shall be exclusively responsible for the
costs to repair, calibrate, or replace such tooling and fixtures so long as such repair and
replacement costs are incurred as a result of ordinary wear and tear.
LSO and Buyer shall cooperate to obtain the best available pricing for all such tooling
and fixtures. LSO agrees to execute and deliver on a quarterly basis a form UCC-1 or such
other documents identifying all capital assets owned by Buyer.
	 
	 	5.	 	Cost Reductions and Manufacturing Support Activities. LSO and Buyer agree to
seek ways to reduce the cost of manufacturing Products by methods such as obtaining
alternate sources of materials and improved assembly or test methods. LSO and Buyer agree
to meet periodically, but no less frequently than every six (6) months to identify cost
reduction opportunities. The benefits of any cost reduction initiative proposed
independently and implemented largely by LSO will be shared between LSO and Buyer on terms
to be agreed and the benefits of any cost reduction initiative proposed independently by
Buyer will be realized 100% by Buyer. The typical sharing structure for LSO proposed and
implemented benefits will be 100% to LSO for the first full Quarter after implementation,
thereafter moving 100% to Buyer. LSO will provide updated pricing as specified in Section
10(b).
	 
	 	 	 	LSO will be responsible for a reasonable level of manufacturing engineering support to solve
production problems, or to assist in resolving supplier or sterilization problems. If an
excessive amount of support is required to deal with particular problems or issues, LSO will
negotiate in good faith with the Buyer to determine how the excessive support activities
will be paid for.
	 
	 	6.	 	Forecasts. Buyer shall provide to LSO upon request a six (6) month non
binding-rolling forecast of Buyer’s reasonably anticipated manufacturing requirements for
each Product. All such forecasts provided by Buyer shall be confidential information,
whether so marked or not, and shall be treated in accordance with Section 14 hereof.
	 
	 	7.	 	Orders: Changes, Cancellation, and Inventory Implications.

	 	a.	 	Purchase Orders. LSO shall initiate manufacturing of Product
within one (1) business day of receipt of a written purchase
order (“Order”) from
Buyer. LSO will acknowledge receipt of each Order (does not include delivery date)
within one (1) business day of receipt. Orders shall specify a delivery date, or a
date by which all manufacturing and test requirements have been completed such that

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CONFIDENTIAL

	 	 	 	products are ready to be transferred into the Buyer’s finished goods at LSO
(“Lot Release Date”), not less than thirty (30) days from the date the Order is
received at LSO, unless otherwise agreed in writing by LSO. Notwithstanding the
foregoing, LSO shall use its commercially reasonable efforts to satisfy any Order
that exceeds its obligations and in doing so shall make satisfaction of Buyer’s
Order(s) a priority.
	 
	 	b.	 	Order Changes. The quantity or shipment date for any Order may
be adjusted by mutual written agreement of the parties. LSO shall use its best
efforts to accommodate any changes requested by Buyer. If Buyer requests changes in
delivery dates delaying Orders for greater than 30 days from the originally
scheduled delivery dates, Buyer agrees to Carrying Charges as outlined in 7(e).
	 
	 	c.	 	Order Cancellation. Buyer may cancel any Order; provided that
in such event, LSO shall finish any work-in-process and Buyer shall purchase from
LSO all finished goods inventory for which title has not passed to Buyer. LSO will
not start manufacturing any additional unauthorized Product upon receiving
cancellation.
	 
	 	d.	 	Materials Inventory. LSO shall be authorized to purchase and
maintain raw materials, consumables, and component inventory necessary to build
product to the forecast referenced in Section 6. The timing and quantities of the
orders will be discussed in advance with the Buyer and shall generally be based on
material lead-times, pre-defined inventory on-hand stocking levels, minimum
purchase quantities imposed by suppliers, volume price breaks offered by suppliers,
and the Product forecast referenced in Section 6. LSO will request from Buyer
written authorization to purchase long lead or high cost inventory to be held as
safety stock. Upon termination or cancellation of this Agreement, or upon planned
obsolescence of specific materials or components by the Buyer, Buyer shall purchase
from LSO, at LSO’s cost plus agreed upon mark up, any unused inventory and any
inventory held as safety stock as long as it was purchased, stored, and used in
accordance with this agreement. LSO will provide Buyer with inventory levels at the
completion of all scheduled production builds. LSO will not deviate from the
Buyer’s approved supplier list without prior written agreement from Buyer. LSO will
store and use materials in a First-In-First-Out (FIFO) manner to ensure the oldest
materials are consumed first.
	 
	 	 	 	In order to insure the continuing availability of the Buyer’s components and raw
materials, LSO shall use its commercially reasonable best efforts to implement and
utilize a material planning system and process that meets generally accepted
industry standards. For any materials LSO purchases, LSO agrees to notify Buyer
within one (1) business day from the time it is suspected that a material
shortage may occur in tire future.
	 
	 	 	 	If LSO procures materials for the Buyer, the cost (i.e. mark up) for this service
will be 15% of the purchased material cost. This markup covers planning activities
related to procurement, actual procurement activities, receipt of materials,
incoming inspection of materials and off-the-shelf components requiring

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CONFIDENTEAL

	 	 	 	documentation (e.g. COC) review, and general materials handling activities such
as counting, labeling, and transferring of the materials to the appropriate storage
area. All procured material requiring additional receiving inspection such as simple
visual inspections, simple dimensional measurements, intensive visual or dimensional
inspections, or testing will be marked up as stated above, and will carry an
additional charge equal to the number of hours necessary to perform the inspection
and testing multiplied by the rate specified in the most current version of LSO’s
Proposal for Services.
	 
	 	 	 	Prior to LSO taking on the purchasing of materials for the Buyer, the Buyer agrees
to negotiate in good faith with LSO to determine a payment plan by which LSO will
pay back the Buyer over several months for the cost of taking on ownership of the
Buyer’s initial raw material inventory (including the incremental inventory that
must be purchased in order to bring the initial inventory up to a suitable safety
stock level).
	 
	 	 	 	The Buyer understands that a small amount of material may be scrapped during the
production process. LSO will invoice the Buyer for these scrapped materials on a
monthly basis. LSO understands that the Buyer wilt review these invoices and that
the Buyer may choose to debate excessive material scrap charges. In these instances,
LSO and the Buyer will negotiate in good faith to determine how costs are allocated.
	 
	 	 	 	Shipping costs for procured material will be paid for by the Buyer if the most
economical shipping method is utilized or if the Buyer specifically requests that
express shipping be utilized. If express shipping is utilized to compensate for
inadequate material planning at LSO, then LSO will cover the appropriate incremental
costs. Excess shipping costs due to supplier delays will be paid by the Buyer.
	 
	 	e.	 	Carrying Charges. Provided that LSO observes the requirements
of Section 7(a) hereof, and Buyer has requested to delay manufacturing arid receipt
of Orders and, as a result, LSO’s materials inventory has become stagnant, Buyer
shall pay LSO a carrying charge of 1.5% per month calculated on the stagnant
portion of such materials inventory. Notwithstanding the foregoing, Buyer may at
any time purchase from LSO, at LSO’s cost plus mark up, or remit a deposit for the
equivalent amount of, any stagnant inventory in order to avoid being charged
inventory carrying charges.
	 
	 	f.	 	Obsolete Inventory. Buyer agrees to purchase from LSO, at cost
plus mark up, any inventory purchased by LSO in reliance on Buyer’s Orders, which
inventory is rendered obsolete due to a change to the Specifications. LSO shall,
however, first use reasonable efforts to return any such inventory, and Buyer
agrees to pay for the restocking charges, shipping and similar out-of-pocket costs
to LSO as applicable.
	 
	 	g.	 	Supply Accuracy. The quantity of Product delivered by LSO to
the Buyer or transferred into the Buyer’s finished goods by LSO will deviate from
the quantity

Page 5 of 16

 

 

CONFIDENTIAL

	 	 	 	specified in each Buyer Order by no more than +5% or - 2%. The date by which LSO
will deliver Product to the Buyer or transfer Product into the Buyer’s finished
goods will deviate from the delivery date or Lot Release Date specified in each
Buyer Order by no more than +2 or - 4 days. In the event that design or process
problems arise, and LSO and the Buyer agree that the problem is not attributable to
LSO, then the Buyer agrees that LSO may deviate from these quantity and delivery
accuracy goals if necessary. LSO will deliver all records required by the Buyer no
later than 3 business days after the date of Order shipment or the Lot Release Date.

	 	8.	 	Packaging, Shipping and Delivery. LSO shall ship the Buyer’s Products in
accordance with packaging and shipping instructions provided by Buyer. Unless otherwise
specified in writing in a particular Order, all Product deliveries shall be shipped F.O.B.
destination.
	 
	 	9.	 	Spares and Refurbishment. Buyer may require LSO to provide component and
subassembly inventory (spares) to support the Products in the field. Buyer agrees to pay
LSO the actual costs of such spares or any components consumed in the refurbishment
process. Buyer also agrees to pay LSO an agreed upon rate for refurbishment in addition to
the components. LSO will establish quotations to provide refurbishment services in lieu of
Labor Time plus Material plus mark up model.
	 
	 	10.	 	Payment.

	 	a.	 	Invoice. LSO will invoice at the time of shipment of Products or at the
time such Products are available for fulfillment pursuant to Buyer’s instructions
as contemplated by Section 11 hereof. Buyer shall pay such invoices within 30 days
of invoice receipt.
	 
	 	b.	 	Pricing. LSO’s invoices shall reflect charges for the Products
as specified in Exhibit B. Such charges are exclusive of taxes, shipping and
insurance. Charges for taxes, shipping and insurance (to the extent applicable)
shall be separately stated on LSO’s invoice.
	 
	 	 	 	If the Buyer and LSO update Exhibit B such that Product pricing is calculated on a
per unit basis (e.g. transfer price):

	 	•	 	LSO will provide updated Product pricing no less frequently
than once every three (3) months to incorporate Buyer’s share of all cost
reduction initiatives and to reflect reductions in applicable labor or
component purchasing costs.
	 
	 	•	 	Material purchasing costs changes by 10% or greater during a
one month period will be integrated into the Product pricing before the
following month’s invoice is generated.
	 
	 	•	 	LSO will provide the Buyer unrestricted access to audit LSO
material purchasing cost data if necessary to verify these costs, and the Buyer
will conduct and pay for these audits.

	 	c.	 	Security and Deposits. Buyer understands LSO will grant a
Credit Exposure for Buyer as defined in Exhibit B. Buyer agrees to provide LSO
security in the form of a credit or cash deposit for any exposure created by
Buyer’s requirements

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CONFIDENTIAL

	 	 	 	greater than the Credit Exposure approved by LSO.
	 
	 	d.	 	Minimum Purchase Quantity. Buyer and LSO agree that no minimum
purchase requirement for Products is established by this Agreement.

	 	11.	 	Fulfillment. Upon Buyer request, LSO agrees to provide fulfillment services to
Buyer for the Products as quoted and defined in Exhibit B pursuant to Buyer’s periodic
Orders. LSO will invoice separately at the end of each month for such fulfillment services.
Buyer shall pay such invoices within 30 days of receipt.
	 
	 	12.	 	Warranty

	 	a.	 	Refer to Exhibit C for LSO standard warranty.

	 	13.	 	Intellectual Property.

	 	a.	 	Ownership. As between Buyer and LSO, Buyer shall own all right,
title and interest in and to Products and the Know-How, Improvements and Patents
related thereto. No implied rights or licenses are granted by this Agreement. Buyer
shall have the right to apply, in its own name and at its own expense, for patent,
copyright or other Intellectual Property rights in such Know-How and Improvements
and, if requested, LSO shall cooperate with Buyer in any reasonable manner in
obtaining such protection. LSO agrees that all such Know-How and Improvements
shall be owned solely by Buyer, even though developed as a result of this
Agreement, and regardless of whether conceived, created or developed by Buyer or
LSO.
	 
	 	b.	 	License. During the Term of this Agreement and limited to the
scope and purposes hereunder, Buyer grants to LSO a non-exclusive, royalty-free
right and license under the Patents, Know-How and Improvements to make the Products
solely for delivery to Buyer or Buyer’s designee.

	 	14.	 	Confidentiality.

	 	a.	 	General Obligation. All information provided by one party (the
“Disclosing Party”) to the other party (the “Recipient”) shall be governed by this
Section 14.
	 
	 	b.	 	Proprietary Information. As used in this Agreement, the term
“Proprietary Information” shall mean all trade secrets or confidential or
proprietary information designated as such in writing by the Disclosing Party,
whether by letter or by the use of an appropriate proprietary stamp or legend,
prior to or at the time any such trade secret or confidential or proprietary
information is disclosed by the Disclosing Party to the Recipient. Notwithstanding
the foregoing, information which is orally or visually disclosed to the Recipient
by the Disclosing Party, or is disclosed in writing without an appropriate letter,
proprietary stamp or legend, shall constitute Proprietary Information if the
Disclosing Party, within thirty (30) days after such disclosure, delivers to the
Recipient a written document or documents describing such Proprietary Information
and referencing the place

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CONFIDENTIAL

	 	 	 	and date of such oral, visual or written disclosure and the names of the
employees or officers of the Recipient to whom such disclosure was made.
	 
	 	c.	 	Disclosure. The Recipient shall hold in confidence, and shall
not disclose to any person outside its organization, any Proprietary Information,
regardless of the termination of the Term of this Agreement. The Recipient shall
use such Proprietary Information only for the purpose of developing the Product
with the Disclosing Party or fulfilling its future contractual requirements with
the Disclosing Party and shall not use or exploit such Proprietary information for
any other purpose or for its own benefit or the benefit of another without the
prior written consent of the Disclosing Party. The Recipient shall disclose
Proprietary Information received by it under this Agreement only to persons within
its organization who have a need to know such Proprietary Information in the course
of the performance of their duties and who are bound to protect the confidentiality
of such Proprietary Information.
	 
	 	d.	 	Limitation on Obligations. The obligations of the Recipient
specified in this Section 14 above shall not apply, and the Recipient shall have no
further obligations, with respect to any Proprietary Information to the extent that
such Proprietary Information: (i) is generally known to the public at the time of
disclosure or becomes generally known through no wrongful act on the part of the
Recipient; (ii) is in the Recipient’s possession at the time of disclosure
otherwise than as a result of Recipient’s breach of any legal obligation; (iii)
becomes known to the Recipient through disclosure by sources other than the
Disclosing Party having the legal right to disclose such Proprietary Information;
(iv) is independently developed by the Recipient without reference to or reliance
upon the Proprietary Information; or (v) is required to be disclosed by the
Recipient to comply with applicable laws or governmental regulations, provided that
the Recipient provides prior written notice of such disclosure to the Disclosing
Party and takes reasonable and lawful actions to avoid and/or minimize the extent
of such disclosure.
	 
	 	e.	 	Ownership of Proprietary Information. Subject to Section 13(a),
the Recipient agrees that the Disclosing Party is and shall remain the exclusive
owner of Proprietary Information and all Intellectual Property rights embodied
therein.
	 
	 	f.	 	Return of Documents. The Recipient shall, upon the request of
the Disclosing Party, return to the Disclosing Party all drawings, documents and
other tangible manifestations of Proprietary Information received by the Recipient
pursuant to this Agreement (and all copies and reproductions thereof) provided that
the Recipient may keep one archival copy of the same.

	 	15.	 	Indemnification. Buyer shall indemnify, defend and hold harmless LSO from and
against any Losses arising out of or relating to a claim brought by a third party against
LSO only to the extent that such claim and corresponding Losses are attributed to (i) a
defect in the design of the Buyer’s Products (including a defect in the design of any
materials specified to LSO by the Buyer), (ii) any breach of the terms of this Agreement by
Buyer, or (iii) the manufacture, sale or use of any Product in accordance with the
Specifications

Page 8 of 16

 

 

CONFIDENTIAL

	 	 	 	and operating instructions provided by Buyer, which results in infringement of any patent or
copyright, or misappropriation of any trade secret or other proprietary right of a third
party.
	 
	 	 	 	Indemnification Procedure. A party claiming indemnification under this Section 15
(an “Indemnified Party”) shall provide prompt written notice to the other party (the
“Indemnifying Party”) of any and all notices, claims, demands, pleadings, and other
facts or circumstances that may, in the Indemnified Party’s reasonable judgment, be likely
to result in a claim for indemnification. The Indemnified Party’s failure to provide such
prompt written notice shall reduce the indemnification obligation of the Indemnifying Party
to the extent that such failure resulted in demonstrable prejudice to the Indemnifying
Party. The Indemnified Party shall promptly tender defense of any litigation or other formal
dispute to the Indemnifying Party, and the Indemnifying Party shall select counsel of its
choice, reasonably acceptable to the Indemnified Party for such litigation or dispute. The
Indemnified Party shall cooperate completely with the Indemnifying Party, including without
limitation providing timely responses to all discovery requests and providing expert and
factual witnesses as necessary or desirable. The Indemnifying Party shall have the sole
authority to negotiate and settle such claims to the extent of the applicable
indemnification obligation.

	 	a.	 	Insurance. Each party shall maintain general liability
insurance in an amount not less than $1,000,000. Buyer shall maintain product
liability insurance in an amount not less than $2,000,000. Any amounts paid under
such insurance policies by the either party’s insurer shall reduce the
indemnification obligation of the Indemnified Party with respect to a particular
claim.

	 	16.	 	Limitation of Liability. Neither party shall be liable to the other party for
any consequential, incidental or punitive damages, including, but not limited to, damage to
property, for loss of use, loss of time, or loss of profits or income.
	 
	 	17.	 	Integration. This Agreement, the attached Exhibits A through C, and the
Contract Manufacturing Quality Agreement (or its most currently approved version),
constitute the complete and exclusive statement of the terms of the agreement between LSO
and Buyer and supersedes all prior and contemporaneous agreements including purchase orders
and undertakings of LSO and Buyer with respect to the subject matter hereof.
	 
	 	18.	 	Second Sourcing. Buyer shall notify LSO in the event mat it utilizes any
source of contract manufacturing for the Products identified by this agreement.
	 
	 	19.	 	Term and Termination.

	 	a.	 	Initial Term and Renewal Term. Unless sooner terminated in
accordance with Section 19(c), the initial term of this Agreement shall be one (1)
year and thereafter this Agreement may be renewed for successive one year periods
upon the written consent of both parties (such initial term and renewal terms
collectively referred to herein as the “Term”).
	 
	 	b.	 	Termination For Convenience. Buyer may terminate this Agreement at any time

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CONFIDENTIAL

	 	 	 	by providing written notice of not less than one-hundred eighty (180) days to LSO.
LSO may terminate this Agreement at any time by providing written notice of not less
than one-hundred eighty (180) days to Buyer in accordance with section 19(e).
	 
	 	c.	 	Termination For Cause. The Term of this Agreement shall
terminate: (i) automatically, if one of the parties fails to perform any material
obligations hereunder, and such material obligations remain uncured sixty (60) days
following the date that the other party delivers to the defaulting party written
notice describing such performance failures; (unless breach is for non payment for
Product in which case the cure period is 10 business days plus interest at 18%
annualized) or (ii) immediately upon notice by either party if the other party
shall file for liquidation, bankruptcy, reorganization, compulsory composition,
dissolution, or if the other party has entered into liquidation, bankruptcy,
reorganization, compulsory composition or dissolution, or if the other party is
generally not paying its debts as they become due (unless such debts are the
subject of a bona fide dispute).
	 
	 	d.	 	Effect of Termination/Survival. Upon expiration of the Term of
this Agreement or termination hereof, neither party shall have any obligations to
the other, except that the provisions set forth in Sections 1,12 (until warranty
expires), 13 through 18, 20, 24 and 26 through 27 shall survive indefinitely.
	 
	 	 	 	Additionally, the Buyer will continue to have access to LSO records as specified
in the Contract Manufacturing Quality Agreement for a period of time consistent
with FDA, EU MDD, and other applicable regulatory requirements.
	 
	 	e.	 	Transition. Upon expiration of the Term of this Agreement or
termination hereof, and for a period of six (6) months thereafter, LSO shall
provide reasonable cooperation and assistance (including without limitation
knowledge transfer, materials sourcing, transfer of unused materials and unfinished
inventory, and removal and shipping of Buyer-owned tooling and fixtures) to
transition production of the Products to a third party designated by Buyer. LSO may
invoice Buyer for actual charges incurred by LSO in such rendering such transition
services, including consulting service fees billed on an hourly basis at LSO’s
standard rates.

	 	20.	 	Compliance with Laws. Each party shall obtain all domestic and foreign
governmental licenses, permits and approvals required for such party’s performance under
this Agreement. Without limiting the generality of the foregoing: (i) Buyer shall be
responsible for complying with all applicable foreign and U.S. federal, state and local
laws, rules, regulations and orders and for obtaining all applicable U.S. FDA and other
governmental agency clearance and/or approval for sale of the Product; and (ii) LSO shall
be responsible for complying with all applicable foreign and U.S. federal, state and local
laws, rules, regulations and orders applicable to the manufacturing processes and
procedures.
	 
	 	21.	 	Assignment and Delegation. This Agreement cannot be assigned nor is the

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CONFIDENTIAL

	 	 	 	performance of the duties delegable by either party without the written consent of the
other party; provided, however, that this Agreement may be assigned by either party to a
purchaser of substantially all of such party’s assets relating to the Products, or to a
successor in interest by merger or corporate reorganization. LSO agrees to inform Buyer of
any serious discussions that take place between LSO and an acquiring or merger party as
early as practically possible.
	 
	 	22.	 	Governing Law. This Agreement shall be construed to be between merchants and
shall be governed by the laws of the State of California.
	 
	 	23.	 	Relationship of Parties. The relationship of Buyer and LSO is that of Buyer and
seller/manufacturer, respectively, of goods. Nothing in this Agreement is intended to, or
shall be deemed to, constitute a partnership, joint venture, agency, or a transfer of any
intellectual property of either party, and neither party hereto shall be authorized to act
in the name of the other or enter into any contract or other agreement which binds the
other.
	 
	 	24.	 	Enforceability. If any of the provisions of this Agreement, or portions
thereof, are found to be invalid by any court of competent jurisdiction the remainder of
this Agreement shall nevertheless remain in full force and effect.
	 
	 	25.	 	Force Majeure. LSO shall use its commercially reasonable best efforts to notify
Buyer at least thirty (30) days in advance of any planned holidays or shutdowns,
substantial vacations for key personnel, physical inventories, reorganizations, internal
and external facility moves, but neither Buyer nor LSO shall be liable for any failure to
perform obligations under this Agreement if prevented so by a cause beyond their control
and without the fault or negligence of the defaulting party. Without limiting the
generality of the foregoing, such causes include acts of God, fires, floods, storms,
epidemics, earthquakes, riots, civil disobedience, wars or war operations, or restraint of
government.
	 
	 	26.	 	Amendment. This Agreement may not be amended except in a written amendment
signed by each of the parties. Additional or different terms contained in purchase Orders
or Order acknowledgments or similar forms shall not be effective unless signed by both
parties with reference to this Agreement.
	 
	 	27.	 	Dispute Resolution, Consent to Arbitration and Venue. LSO and Buyer agree that
upon the written demand of either party, whether made before or after the institution of
any legal proceedings, but prior to the rendering of any judgment in that proceeding, all
disputes, claims, and controversies between them (but excluding disputes, claims and
controversies in which a third party is a necessary party), arising from this Agreement,
including without limitation contract disputes and tort claims, shall be arbitrated in the
Los Angeles, California metropolitan area, pursuant to the Commercial Rules of the American
Arbitration Association by a panel of three arbitrators. All expenses of such arbitration
shall be borne equally by the parties. Any arbitration decision shall be final and not
subject to appeal unless the parties mutually agree otherwise in writing before a final
decision by the panel of arbitrators. Any arbitration order or award may be enforceable in
an appropriate court as provided herein. Each party shall select one

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	 	 	 	arbitrator and those two arbitrators shall select the third arbitrator
to form the panel. Each party reserves the right, notwithstanding the
foregoing, to seek equitable relief in a court of competent jurisdiction in
any appropriate state or federal court. The prevailing party in any
arbitration or court proceeding is entitled to be reimbursed for any
and all
reasonable attorney’s fees, expert fees, and costs of suit from the losing
party.

IN WITNESS WHEREOF, the authorized representatives signing below have entered into
this Contract Manufacturing Agreement on behalf of the parties as of the Effective
Date.

	 	 	 
	Life Science Outsourcing, Inc.

	 	Asthmatx, Inc.
	 
	 	 
	By:
/s/ [ILLEGIBLE SIGNATURE]

	 	By: /s/ Gary Kaplan
	 
	 	 
	 
	 	 
	Title: PRESIDENT & CEO

	 	Title: SVP, TECHNOLOGY &
OPERATIONS
	 
	 	 
	Date:
01-21-06

	 	Date: 1/11/06

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Exhibit A

Design and Specifications

As provided by the Buyer and released in LSO’s Quality System.

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Exhibit B

Pricing

LSO
Product pricing is specified in LSO’s latest Proposal for Services.

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Exhibit C

WARRANTY

	 	1.	 	Scope Of Warranty Life Science Outsourcing,
Inc. (LSO) services are generally
limited to the assembly, packaging, and sterilization of medical devices. If other services
are provided by LSO, the warranty, if any, for such services will be as separately
negotiated and agreed to in writing by LSO and the Customer.
	 
	 	2.	 	Limited Warranty

	 	A.	 	Assembly and Packaging. LSO warrants that its assembly and packaging
services shall be free from defects in material and workmanship to the level
specified by the customer. Any claim relating to this assembly and packaging
warranty must be submitted to LSO in writing, accompanied by representative
samples, within ten (10) days after receipt of the assembled or packaged product
from LSO.
	 
	 	B.	 	Sterilization. LSO warrants that its sterilization services shall be
conducted by
certified facilities to meet or exceed industry sterilization standards. Any
claim relating to the sterilization warranty must be submitted to LSO in writing,
accompanied by representative samples, within ten (10) days after receipt of the
sterilized product from LSO.
	 
	 	C.	 	Procedure. The written claim, together with representative
samples, shall be sent to the facility:

Life Science Outsourcing, Inc.

830 Challenger Street

Brea, CA 92821

Attn: Barry Kazemi

	 	 	 	Upon confirmation by LSO of a warranty breach, LSO will authorize the return of the
defective products. Products claimed to be defective are not to be returned without
such prior LSO written approval. The remedy for defective product shall be as
provided below.

	 	3.	 	Exclusive Remedy For defective product, the exclusive remedy shall be for LSO
to, at its option, repair the defective product, replace the defective product or issue
credit for the defective product.
	 
	 	4.	 	Disclaimer Except as expressly provided herein, LSO makes no warranty of any
kind, express or implied, including, but not limited to, the implied warranties of
merchantability and fitness for a particular purpose. The above warranties are in lieu of
all other warranties, and no person (including any agent, dealer or representative of LSO)
is authorized to make any representation or warranty concerning the LSO services except to
refer the Customer to this warranty. LSO shall not be responsible for the cost of labor or
other charges of any kind incurred outside its facilities. LSO

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	 	 	 	shall under no circumstances be liable for special, incidental, consequential or
exemplary damages of any nature whatsoever, however occasioned (whether by negligence or
otherwise), including, but not limited to, commercial loss from any cause, business
interruption of any nature, loss of profits or personal injury, even if LSO shall have
been advised of the possibility of such damages.

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