Document:

exv10w20

 

Exhibit 10.20

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE-NET

AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

1. Basic provisions ( “Basic Provisions”)

     1.1
Parties : This Lease (“Lease”) dated for reference purposes
only January 16, 2001, is made by and between 1325 “J” Street L.P., a California
Limited Partnership (“Lessor”) and  Jomed Incorporated (“Lessee”), (collectively the
“Parties”, or individually a “Party”),

     1.2(a)
Premises: That certain portion of the Project (as defined below), including all
improvements therein or to be provided by Lessor under the terms of
this Lease, commonly known by the street address of 2751 Mercantile
Drive, Suite 700, located in the City of Rancho Cordova, County
of Sacramento, State of California, with zip code 95742, as outlined on Exhibit A attached
hereto (“ Premises ”) and generally described as (describe briefly the nature of the Premises):
Suite #700, a +/-12, 960 square foot portion of an +/-93,
120 square foot building. In addition to Lessee’s rights to use and occupy the Premises as hereinafter specified, Lessee
shall have non-exclusive rights to the Common Areas (as defined in Paragraph 2.7 below) as
hereinafter specified, but shall not have any rights to the roof, exterior walls or utility
raceways of the building containing the Premises (“Building”) or to any other buildings in the
Project. The Premises, the Building, the Common Areas, the land upon which they are located, along with all
other buildings and improvements thereon, are herein collectively
referred to as the “Project.”
(See also Paragraph 2)

     1.2(b)
Parking: Pro-rata share unreserved vehicle parking spaces (“Unreserved Parking
Spaces”); and no reserved vehicle parking spaces
(“Reserved Parking Spaces”), (See also
Paragraph 2.6)

     1.3

Term: 5 [ILLEGIBLE] years and [ILLEGIBLE]                     
                     
                    
months (“Original Term”) commencing April 1, 2001
(“Commencement Date ”) and ending March 31, 2006
(“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: $4,864,00 per month (“Base Rent”),
payable on the first
day of each month commencing May 1, 2001. (See also Paragraph 4)

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

     1.6
*Lessee’s Share of Common Area Operating Expenses: thirteen and 92/100’s
percent (13.92%) (“Lessee’s Share”).

          
*Lessee’s share of common area operating expenses
shall not exceed $.08 per square foot.

     1.7
Base Rent and Other Monies Paid Upon Execution:

          (a) Base 
Rent: $4,864.00 for the period April 1 - April 31, 2001.

          (b) 
Common Area Operating Expenses: $
                    
                    
for the period                                         

          (c)
 Security Deposit: $0.00 (“Security Deposit”) (See also Paragraph 5)

          (d) Other:
$                     
                    

for                         
                         
                         
                         
                    

          
(e) Total Due Upon Execution of this Lease: $     
                                                                                               

     1.8
 Agreed Use: Storage, distribution and uses related to storage and
distribution. (See also Paragraph 6)

     1.9
Insuring Party. Lessor is the “Insuring Party”. (See also Paragraph 8)

     1.10 Real Estate Brokers: (See also Paragraph 15)

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

o                                         represents Lessor exclusively (“Lessor’s Broker”);

o                                         represents Lessee exclusively (“Lessee’s Broker”); or

þ Cornish & Carey Commercial represents both Lessor and Lassee (“Dual Agency”).

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

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

     1.12
Addenda and Exhibits. Attached hereto is an Addendum or Addenda consisting of
Paragraphs 49 through 59 and Exhibits [ILLEGIBLE], 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 this Lease, or
that may have been used in calculating Rent, is an approximation which the
Parties agree is reasonable and any payments based thereon are not subject to
revision whether or not the actual size is more or less.

     2.2
Condition. Lessor shall deliver that portion of the Premises contained within
the Building (“Unit”) to Lessee broom clean and free of debris on the Commencement
Date or the Early Possession
Date, whichever first occurs (“Start Date”), and, so long as the required service
contracts described in Paragraph 7.1(b) below are obtained by Lessee and in effect
within thirty days following the Start Date, warrants that the existing electrical,
plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning
systems (“HVAC”), loading doors, if any, and all other such elements in the Unit,
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 the Unit shall be free of material defects. If a non-compliance with
such warranty exists as of the Start Date, or if one of such systems or elements
should malfunction or fail within the appropriate warranty period, Lessor shall, as
Lessor’s sole obligation with respect to such matter, except as otherwise
provided in this Lease, promptly after receipt of written notice from Lessee
setting forth with specificity the nature and extent of such non-compliance,
malfunction or failure, rectify same at Lessor’s expense. The warranty periods
shall be as follows: (i) 6 months as to the HVAC systems, and (ii) 30 days as to
the remaining systems and other elements of the Unit. If Lessee does not give
Lessor the required notice within the appropriate

	 	 	 	 	 	 
	 

	 	 	 	 
	 
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warranty
period, correction of any such non-compliance, malfunction or failure shall be the
obligation of Lessee at Lessee’s sole cost and expense (except the repairs to the fire sprinkler systems,
roof, foundations, and/or bearing walls — see Paragraph 7).

     2.3 Compliance.
Lessor warrants that the improvements on the Premises and the Common Areas
comply with the building codes that were in effect at the time that each such improvement, or portion
thereof, was constructed, and also with all applicable laws,
covenants or restrictions of
record, regulations, and ordinances in effect on the Start Date
(“Applicable Requirements”). 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 Applicable Requirements, and especially the zoning,
are appropriate for Lessee’s intended use, and acknowledges that past uses of the Premises may no
longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except as
otherwise provided promptly after receipt of written notice from
Lessee setting forth with specificity the nature and extent of such
non-compliance, rectify the same at [ILLEGIBLE] expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within 6 months following the
Start Date, correction of the non-compliance shall be the obligation of Lessee at Lessee’s sole cost and expense. If the
Applicable Requirements are hereafter changed so as to [ILLEGIBLE] during the term of this Lease the
construction of an addition to or an alteration of the Unit, Premises
and/or Building, the
remediation of any Hazardous Substance, or the reinforcement or other physical modification of the
Unit, Premises and/or Building (“Capital Expenditure”),
Lessor and Lessee shall allocate the cost of
such work as follows:

          (a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required as a result
of the specific and unique use of the Premises by
Lessee as compared with uses by tenants in general,
Lessee shall be fully responsible for the cost thereof, provided,
however that if such Capital
Expenditure is required during the last 2 years of this Lease
and the cost thereof exceeds 6 months’
Base Rent, Lessee may instead terminate the Lease unless Lessor
notifies Lessee, in writing, within 10 days after receipt of
Lessee’s termination notice that Lessor has elected to pay the
difference between the actual cost thereof and the amount equal to 6
months’ Base Rent. If Lessee elects termination, Lessee shall
immediately cease the use of the Premises
which requires such Capital Expenditure and deliver to Lessor written notice specifying a
termination date at  least 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 seismic
modifications), then Lessor and Lessee
shall allocate the obligation to pay for the portion of such costs
reasonably attributable to the
Premises pursuant to the formula set out in Paragraph 7.1(d);
provided, however, that if such
Capital Expenditure is required during the last 2 years of the Lease or if Lessor reasonably determines
that it is not economically feasible to pay its share thereof, Lessor shall have the option to
terminate this Lease upon 90 days prior written notice to Lessee unless Lessee notifies Lessor, in
writing, within 10 days after receipt of Lessor’s
termination notice that Lessee will pay for such
Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any
such Capital Expenditure, Lessee may advance such funds and deduct same, with Interest, from Rent
until Lessor’s share of such costs have been fully paid. If
Lessee is unable to finance Lessor’s share
or if the balance of the Rent due and payable for the remainder of
this Lease is not sufficient to
fully reimburse Lessee on an offset basis, Lessee shall have the
right to terminate this Lease upon
30 days written notice to Lessor.

          (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 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 the Americans with
Disabilities Act), 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 Brokers have made any oral
or written representations or warranties with respect to said matters other than as set forth
in the Lease. In addition, Lessor acknowledges that: (i) Brokers have made no representations,
promises or warranties concerning Lessee’s ability to honor the Lease or suitability to occupy the
Premises, and (ii) It is Lessor’s sole responsibility to
investigate the financial capability and/or suitability of all
proposed tenants.

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

     2.6
Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces
and Reserved Parking Spaces specified in Paragraph 1.2(b) on those portions of the Common Areas
designated from time to time by Lessor for parking. Lessee shall not use more parking space than
said number. Said parking spaces shall be used for parking by
vehicles no larger than full-size
passenger automobiles or pick-up trucks, herein called
“Permitted Size Vehicles.” Lessor may regulate
the loading and unloading of vehicles by adopting Rules and Regulations as provided in Paragraph
2.9. No vehicles other than Permitted Size Vehicles
may be parked in the Common Area without the
prior written permission of Lessor.

          (a) Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee
or Lessee’s employees, suppliers, shippers, customers, contractors or invitees to be loaded,
unloaded, or parked in areas other than those designated by Lessor for such activities.

          (b) Lessee shall not service or store any vehicles in the Common Areas.

          (c) If Lessee permits or allows any of the prohibited activities described in this Paragraph
2.6, then Lessor shall have the right without notice, in addition to such other rights and remedies
that it may have, to remove or tow away the vehicle involved and
charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.

     2.7
Common Areas — Definition. The term “Common Areas” is defined as all areas and facilities
outside the Premises and within the exterior boundary line of the Project and interior utility
raceways and installations within the Unit that are provided and designated by the Lessor from time
to time for the general non-exclusive use of Lessor, Lessee and other tenants of the Project and
their respective employees, suppliers, shippers, customers, contractors and invitees, including
parking areas, loading and unloading areas, trash areas, roadways, walkways, driveways and
landscaped areas.

     2.8 Common Areas — Lessee’s Rights. Lessor grants to Lessee, for the benefit of Lessee and
its employees, suppliers, shippers, contractors, customers and invitees, during the term of this
Lease, the non-exclusive right to use, in common with others entitled to such use, the Common Areas
as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor
under the terms hereof or under the terms of any rules and regulations or restrictions governing the
use of the Project. Under no circumstances shall the right herein granted to use the Common Areas
be deemed to include the right to store any property, temporarily or
permanently, in the Common
Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessor’s
designated agent, which consent may be revoked at any time. In the event that any unauthorized
storage shall occur then Lessor shall have the right, without notice,
in addition to such other
rights and remedies that it may have, to remove the property and
charge the cost to Lessee, which cost
shall be immediately payable upon demand by Lessor.

     2.9
Common Areas — Rules and Regulations. Lessor or such other person(s) as Lessor may
appoint shall have the exclusive control and management of the Common Areas and shall have the
right, from time to time, to establish, modify, amend and enforce reasonable rules and regulations
(“Rules and Regulations”) for the management, safety, care, and cleanliness of the grounds, the
parking and unloading of vehicles and the preservation of good order, as well as for the convenience of
other occupants or tenants of the Building and the Project and their
invitees. Lessee agrees to
abide by and conform to all such Rules and
Regulations, and to cause its employees, suppliers,
shippers, customers, contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said Rules and Regulations by other tenants of
the Project.

     2.10 Common Areas — Changes. Lessor shall have the right, in Lessor’s sole discretion, from
time to time:

             (a) To make changes to the Common Areas, including, without limitation, changes in the
location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading
and unloading areas, ingress, egress, direction of traffic, landscaped areas, walkways and utility
 raceways;

             (b) To
close temporarily any of the Common Areas for maintenance purposes so long as
reasonable access to the Premises remains available;

             (c) To
designate other land outside the boundaries of the Project to be a part of the Common
Areas;

             (d) To
add additional building and improvements to the Common Areas;

             (e) To use the Common Areas while engaged in making additional improvements, repairs or
alterations to the Project, or any portion thereof; and

             (f) To
do and perform such other acts and make such other changes in, to or with respect to the
Common Areas and Project as Lessor may, in the exercise of sound business judgment, deem to be
appropriate.

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
Lessee’s Share of Common Area Operating Expenses, 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
therefore, 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 the
Premises. If possession is not delivered within 60 days after the Commencement Date, Lessee may, at
its option, by notice in writing within 10 days after the end of such 60 day period, cancel this
Lease, in which event the Parties shall be discharged from all obligations hereunder. If such

	 	 	 	 	 	 
	 

	 	 	 	 
	 
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written
notice is not received by Lessor within [ILLEGIBLE] 10 day period, Lessee’s 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 term hereof, but minus any days
of delay caused by the acts or omissions of Lessee. If possession of the Premises is not delivered
within 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 8.5). 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
Common Area Operating Expenses. Lessee shall pay to Lessor during the term hereof, in
addition to the Base Rent, Lessee’s Share (as specified in Paragraph 1.6) of all Common Area
Operating Expenses, as hereinafter defined, during each calendar year of the term of this Lease
in accordance with the following provisions:

          (a) “Common
Area Operating Expenses” are defined, for purposes of this
Lease, as all costs
incurred by Lessor relating to the ownership and operation of the Project, including, but not
limited to, the following:

	 	(i)	 	The operation, repair and maintenance, in neat,
clean, good order and condition of the following:
	 
	 	 	 	(aa)  The Common Areas and Common Area
improvements, including parking areas, loading and unloading areas,
trash areas, roadways, parkways, walkways, driveways, landscaped areas,
bumpers, irrigation systems, Common Area lighting facilities, fences
and gates, elevators, roofs, and
roof drainage systems.
	 
	 	 	 	(bb) Exterior signs and any tenant directories.
	 
	 	 	 	(cc) Any fire detection and/or sprinkler systems.
	 
	 	(ii)	 	The cost of water, gas, electricity and telephone
to service the Common Areas and any utilities not separately metered.
	 
	 	(iii)	 	Trash disposal, pest control services, property
management, security services, and the costs of any environmental
inspections.
	 
	 	(iv)	 	Reserves set aside for maintenance and repair of
Common Areas.
	 
	 	(v)	 	Real Property Taxes (as defined in Paragraph 10).
	 
	 	(vi)	 	The cost of the premiums for the insurance maintained by Lessor
pursuant to Paragraph 8.
	 
	 	(vii)	 	Any deductible portion of an insured loss concerning the Building
or the Common Areas.
	 
	 	(viii)	 	The cost of any Capital Expenditure to the Building or the Project not covered
under the provisions of Paragraph 2.3 provided; however, that Lessor shall
allocate the cost of any such Capital Expenditure over a 12 year period and
Lessee shall not be required to pay more than Lessee’s Share of
1/144th of
the cost of such Capital Expenditure in any given month.
	 
	 	(ix)	 	Any other services to be provided by Lessor that are stated
elsewhere in this Lease to be a Common Area Operating Expense.

          (b) Any Common Area Operating Expenses and Real Property Taxes that are specifically
attributable to the Unit, the Building or to any other building in the Project or to the
operation, repair and maintenance thereof, shall be allocated entirely to such Unit,
Building, or other building. However, any Common Area Operating Expenses and Real
Property Taxes that are not specifically attributable to the Building or to any other
building or to the operation, repair and maintenance thereof, shall be
equitably allocated by Lessor to all buildings in the Project.

          (c) The inclusion of the improvements, facilities and services set forth in
Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor to either
have said improvements or facilities or to provide those services unless the Project
already has the same, Lessor already provides the services, or Lessor has agreed
elsewhere in this Lease to provide the same or some of them.

          (d) Lessee’s Share of Common Area Operating Expenses shall be payable by Lessee
within 10 days after a reasonably detailed statement of actual expenses is presented to
Lessee. At Lessor’s option, however, an amount may be estimated by Lessor from time to
time of Lessee’s Share of annual Common Area Operating Expenses and the same shall be
payable monthly or quarterly, as Lessor shall designate, during each 12 month period of
the Lease term, on the same day as the Base Rent is due hereunder. Lessor shall deliver
to Lessee within 60 days after the expiration of each calendar year a reasonably
detailed statement showing Lessee’s Share of the actual Common Area Operating Expenses
incurred during the preceding year. If Lessee’s payments under this Paragraph 4.2(d)
during the preceding year exceed Lessee’s Share as indicated on such statement, Lessor
shall credit the amount of such over-payment
against Lessee’s Share of Common Area Operating Expenses next becoming due. If
Lessee’s payments under this Paragraph 4.2(d) during the preceding year were less than
Lessee’s Share as indicated on such statement, Lessee shall pay to Lessor the amount
of the deficiency within 10 days after delivery by Lessor to Lessee of the statement.

     4.3 
Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money of
the United States, without offset or deduction (except as specifically permitted in this
Lease), on or before the day on which it is due. Rent for any period during the term hereof
which is for less than one full calendar month shall be prorated based upon the actual number
of days of said month. Payment of Rent shall be made to Lessor at its address stated herein
or to such other persons or place as Lessor may from time to time designate in writing.
Acceptance of a payment which is less than the amount then due shall not be a waiver of
Lessor’s rights to the balance of such Rent, regardless of Lessor’s endorsement of any
check so stating. In the event that any check, draft, or other instrument of
payment given by Lessee to Lessor is dishonored for any reason, Lessee agrees to
pay to Lessor the sum of $25 in addition to any late charges which may be due.

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 of compensate Lessor for any liability, expense, loss or damage which
Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of
the Security Deposit, Lessee shall within 10 days after written request therefor deposit monies
with Lessor sufficient to restore said Security Deposit to the full amount required by this
Lease. If the Base Rent increases during the term of this Lease, Lessee shall, upon written
request from Lessor, deposit additional monies with Lessor so that the total amount of the
Security Deposit shall at all times bear the same proportion to the increased Base Rent as the
initial Security Deposit bore to the initial Base Rent. Should the
Agreed Use be amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee of assignee, Lessor shall have the right to increase the Security
Deposit to the extent necessary, in Lessor’s reasonable judgment, to account for any increased
wear and tear that the Premises may suffer as a result thereof. If a change in control of
Lessee occurs during this Lease and following such change the financial condition of Lessee
is, in Lessor’s reasonable judgment, significantly reduced, Lessee shall deposit such
additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on such change in financial condition. Lessor shall not be
required to keep the Security Deposit separate from its general
accounts. Within 14 days after the expiration or termination of this Lease, if Lessor elects
to apply the Security Deposit only to unpaid Rent, and otherwise within 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 or applied by Lessor. No part of the Security Deposit
shall be considered to be held in trust, to bear interest or to be prepayment for any monies
to be paid by Lessee under this Lease.

6. 
Use.

     6.1 
Use.  Lessee shall use and occupy the Premises only for the Agreed Use, or any other legal
use which is reasonably comparable thereto and for no other purpose. Lessee shall not use or
permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance,
or that disturbs occupants of or causes damage to neighboring
premises or properties. Lessor shall
not unreasonably withhold or delay its consent to any written request for a modification of the
Agreed Use, so long as the  [ILLEGIBLE] not impair the
[ILLEGIBLE] integrity of the improvements on the Premises or
the mechanical or electrical systems therein and/or is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within 7 days after such request give
written notification of same, which notice shall include an explanation of Lessor’s objections to
the change in the Agreed Use.

     6.2 
Hazardous Substances.

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

	 	 	 	 	 
	 

	 	 	 	 
	 
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materials
reasonably required to be used in [ILLEGIBLE] course of the
Agreed Use, so
long as such [ILLEGIBLE]. in compliance with all Applicable Requirements, is not a Reportable Use,
and does not expose the Premises or neighboring property to any meaningful risk of contamination
or damage or expose Lessor to any liability therefor. In addition, Lessor may condition its consent
to any Reportable Use upon receiving such additional assurances as
Lessor reasonably deems
necessary to protect itself, the public, the Premises and/or the environment against damage,
contamination, injury and/or liability, including, but not limited
to, the installation (and
removal on or before Lease expiration or termination) of protective modifications (such as
concrete encasements) and/or increasing the Security Deposit.

          (b) Duty
to inform Lessor. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance has [ILLEGIBLE] 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 [ILLEGIBLE].

          (c) Lessee
Remediation. Lessee shall not cause or permit any Hazardous Substance to be
spilled or released in, on, under, or
[ILLEGIBLE] 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, its agents,
employees, lenders and ground lessor, if any, harmless from and against any and all loss of rents
and/or damages, liabilities, judgments, claims, expenses, penalties,
and attorneys’ and consultants’
fees arising out of or involving any Hazardous Substance brought onto the Premises by or for
Lessee, or any third party (provided, however, that Lessee shall have no
liability under this Lease with respect to underground migration of any Hazardous Substance
under the Premises from areas outside of the Project).
Lessee’s obligations shall include, but
not be limited to, the effects of any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee shall release
Lessee from its obligations under this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such agreement.

          (e) Lessor
indemnification. Lessor and its successors and assigns shall indemnify, defend,
reimburse and hold Lessee, its employees and lenders, harmless from and against any and all
environmental damages, including the cost of remediation, which existed as a result of Hazardous
Substances 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. Lessor’s obligations, as and when
required by the Applicable Requirements, shall include, but not be
limited to, the cost of
investigation, removal, remediation, restoration and/or abatement, and shall survive the
expiration or termination of this Lease.

          (f) Investigations
and Remediations. Lessor shall retain the responsibility and pay
for any investigations or remediation
measures required by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the
[ILLEGIBLE] Date, unless such remediation
measure is required as a result of Lessee’s use (including
“Alterations”, as defined in
paragraph 7.3(a) below) of the [ILLEGIBLE], 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 (see Paragraph 9.1(e))
occurs during the term of this Lease, unless Lessee is legally responsible therefor (in which
case Lessee shall make the investigation and remediation thereof required by the Applicable
Requirements and this Lease shall continue in full force and effect, but
subject to Lessor’s rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at
Lessor’s option, either (i) investigate and remediate such
Hazardous Substance Condition, if
required, as soon as reasonably possible at Lessor’s expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to remediate such condition
exceeds 12 times the then monthly [ILLEGIBLE] Rent or $100,000, whichever is greater, give
written notice to Lessee, within 30 days after receipt by Lessor of knowledge of the occurrence
[ILLEGIBLE] Hazardous Substance Condition, of Lessor’s
desire to terminate this Lease as of the
date 60 days following the date of such notice, in the event Lessor elects to give a termination
notice, Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee’s
commitment to pay the amount by which the cost of the remediation of such Hazardous Substance
Condition exceeds an amount equal to 12 times the then monthly
Base Rent or $100,000, whichever
is greater. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within
30 days following such commitment. In such event, this Lease shall continue in full force and
effect, and Lessor shall proceed to make such remediation as soon as reasonably possible after
the required funds are available. If Lessee does not give such notice and provide the required
funds or assurance thereof within the time provided, this Lease shall terminate as of the date
specified in Lessor’s notice of termination.

     6.3
Lessee’s Compliance with Applicable Requirements. Except as otherwise provided in
this Lease, Lessee shall, at Lessee [ILLEGIBLE] 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 10
days after receipt of Lessor’s written request,  provide Lessor with copies of all permits
and other documents, and other information evidencing Lsssee’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) and consultants shall have the right to
enter into
[ILLEGIBLE] 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 inspection, 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, [ILLEGIBLE]
Premises, Utility Installations (intended for Lessee’s exclusive use, no matter where located),
and Alterations in good order, condition and repair (whether or not the portion of the
Premises requiring repairs, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee’s
use, any prior use, the elements or the age of such portion of the Premises), including, but not
limited to, all equipment or facilities, such as plumbing, HVAC equipment, electrical, lighting
facilities, boilers, pressure vessels, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and skylights but excluding any items which
are the responsibility of Lessor pursuant to Paragraph 7.2.
Lessee, in keeping the Premises in
good order, condition and repair, shall exercise and perform good maintenance practices,
specifically including the procurement and maintenance of the service contracts required by
Paragraph 7.1(b) below. Lessee’s obligations shall include restorations, replacements or renewals
when necessary to keep the Premises and all improvements thereon or a part thereof in good order,
condition and state of repair.

          (b) Service
Contracts. Lessee shall, at Lessee’s sole expense, procure and maintain
contracts, with copies to Less [ILLEGIBLE] customary form and substance for, and with
contractors specializing and experienced in the maintenance of the following equipment and
improvement, if any, if and when Installed on the Premises: (i) HVAC equipment, (ii) boiler
and pressure vessels, (iii) clarifiers, and (iv) any other
equipment, if reasonably required by
Lessor. However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain any or
all of such service contracts, and if Lessor so elects, Lessee shall reimburse Lessor, upon
demand, for the cost thereof.

          (c) Failure
to Perform. If Lessee fails to perform Lessee’s obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after 10 days’ prior written notice to Lessee
(except in the case of an emergency, in which case no notice shall be required), perform such
obligations on Lessee’s behalf, and put the Premises in good order, condition and repair, and
Lessee shall promptly reimburse Lessor for the cost thereof.

          (d) Replacement. Subject to Lessee’s indemnification of Lessor as set forth in Paragraph 8.7
below, and without relieving [ILLEGIBLE] of liability resulting from Lessee’s failure to
exercise and perform good maintenance practices, if an item described in Paragraph 7.1(b)
cannot be [ILLEGIBLE] other than at a cost which is [ILLEGIBLE] 50%
of the cost of replacing such item, then such
[ILLEGIBLE] be replaced by Lessor, and the cost [ILLEGIBLE] shall be prorated
between the Parties and
Lessee shall only be obligated to pay, each month during the remainder of the term of this
Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying the
cost of such replacement by a fraction, the numerator of which is one, and the denominator of
which is 144 (ie. 1/144th of the cost per month). Lessee shall pay interest on the unamortized
balance at a rate that is commercially reasonable in the judgment of Lessor’s accountants.
Lessee may, however, prepay its obligation at any time.

     7.2
Lessor’s Obligations. Subject to the provisions of
Paragraphs 2.2 (Condition), 2.3
(Compliance), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee’s Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to
Paragraph 4.2, shall keep in good order, condition and repair the foundations, exterior walls,
structural condition of interior bearing walls, exterior roof, fire sprinkler system, Common Area
fire alarm and/or smoke detection systems, fire hydrants, parking lots, walkways, parkways,
driveways, landscaping, fences, signs and utility systems serving the Common Areas and all parts
thereof, as well as providing the services for which there is a Common Area Operating
Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the exterior or
interior surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or replace
windows, doors or plate glass of the Premises. Lessee expressly waives the benefit of any statute
now or hereafter in effect to the extent it is inconsistent with the terms of this Lease.

     7.3
Utility Installations; Trade Fixtures; Alterations.

          (a) Definitions.
The term “Utility Installations” refers to all floor and window
coverings, air lines, power panels, electricity distribution, security and fire protection systems,
communication systems, lighting fixtures, HVAC equipment, plumbing and fencing in or on the
Premises.

	 	 	 	 	 
	 

	 	 	 	 
	 
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The term
“Trade
 Fixtures” shall mean Lessee [ILLEGIBLE] machinery and
equipment that can be removed without doing material damage to the Premises. The term
“Alterations” shall
 mean any modification of the improvements, other than Utility Installations
 or Trade Fixtures, whether by addition or deletion. “Lessee Owned Alterations
 and/or Utility Installations” are defined as Alterations and/or Utility
 Installations made by Lessee that are not yet owned by Lessee pursuant to
 Paragraph 7.4(a).

          (b) Consent. Lessee shall not make any Alterations or Utility Installations
 to the Premises without Lessor’s prior written consent
 Lessee may, however, make non-structural Utility Installations
 to the Interior of the Premises (excluding the roof)
 without such consent but upon notice [ILLEGIBLE] Lessor, as long as
 they are not visible from the outside, do not involve
 puncturing, relocating or removing the roof or any existing
 walls, and the cumulative cost thereof during this Lease as
 extended does not exceed a sum equal to 3 month’s
 Base Rent in the aggregate or a sum equal to one month’s
 Base Rent in any one year. Notwithstanding the foregoing, Lessee
 shall not make or permit any roof penetrations and/or install
 anything on the roof without the [ILLEGIBLE] written approval of Lessor. Lessor may, as a precondition to
 granting such approval, require Lessee to utilize a contractor
 chosen and/or approved by Lessor Any Alterations or Utility installations
 that Lessee shall desire to make and which require the consent of
 the Lessor shall be presented to Lessor in written form with
 detailed plans. Consent shall be deemed conditioned upon
 Lessee’s: (i) acquiring all applicable governmental
 permits, (ii) furnishing Lessor with copies of both the
 permits and the plans and specifications prior to commencement
 of the work, and (iii) compliance with all conditions of
 said permits an other Applicable Requirements in a prompt and
 expeditious manner. Any Alterations or Utility Installations
 shall be performed in a workmanlike manner with good and sufficient
 materials. Lessee shall promptly upon completion furnish Lessor
 with as-built plans and specifications. For work which costs an
 amount in excess of one month’s Base Rent, Lessor may
 condition its consent upon Lessee providing a lien and
 completion bond in an amount equal to 150% of the estimated
 cost of such Alteration or Utility Installation and/or upon
 Lessee’s posting an additional Security Deposit with Lessor.

          (c) Indemnification.

Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use on the Premises,
which claims are or may be secured by any mechanic’s or materialman’s lien against the Premises or any interest therein,
Lessee shall give Lessor not less than 10 days notice prior to
the commencement of any work in, on or about the Premises, and Lessor
shall have the right to post notices of non-responsibility.
If Lessee shall contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered
thereof before the enforcement thereof. If Lessor shall require,
Lessee shall furnish a surety bond in an amount equal to 150% of the
amount of such contested lier 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 Lessee, but considered a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all
or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per paragraph 7.4(b)
hereof, all Lesser Owned Alterations and Utility Installations shall,
at the expiration or termination of this Lease, become the property
of Lessor and be surrendered by Lessee with the Premises.

          (b) Removal.
By delivery to Lessee of written notice from Lessor not earlier than 90 and not later than 30 days prior to the end of
the term of this Lease, Lessor  may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or termination of this
Lease. Lessor may require the removal at any time of all or any part
of 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 data, with all of the
improvements, parts and surfaces thereof broom clean and free of
debris, and in good operating order, condition and state of repair,
ordinary wear and tear excepted. “Ordinary wear and tear”
shall not include any damage or deterioration that would have been
prevented by good maintenance practice. Notwithstanding the
foregoing, if this Lease is for 12 months or less, then Lessee
shall surrender the Premises in the same
condition as delivered to Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair any damage occasioned by the installation, maintenance
or removal of Trade Fixtures, Lessee owned Alterations and/or Utility
installations, furnishings, and equipment as well as the removal of
any storage tank installed by or for Lessee. Lessee shall
also completely remove from the Premises any and all Hazardous Substances brought onto the Premises by or for Lessee, or any third
party (except Hazardous Substances which were deposited via underground migration from areas outside of the Project) even if such removal would require Lessee to perform or pay for work that exceeds statutory requirements. Trade Fixtures shall
remain the property of Lessee and shall be removed by Lessee.
The failure by Lessee to timely vacate the Premises pursuant to this
Paragraph 7.4(c) without the express written consent of Lessor
shall constitute a holdover under the provisions of Paragraph 26 below.

8. 
Insurance; Indemnity.

     8.1 
Payment of Premiums. The cost of the premiums for the insurance
policies required to be carried by Lessor,
pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b), shall be a Common
Area Operating Expense. Premiums for policy periods commencing prior to, or extending
beyond, the term of this Lease shall be prorated to coincide with the corresponding Start Date or Expiration Date.

     8.2 Liability Insurance.

          (a) Carried
by Lessee. Lessee shall obtain and keep in force a Commercial General Liability policy of insurance protecting
Lessee and Lessor as an additional Insured against, claims for bodily injury, personal injury and property damage based upon or arising out of the ownership,
use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing single limit
coverage in an amount not less than $1,000,000 per occurrence with an annual aggregate of not less than $2,000,000, 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
hostile fire. The policy shall not contain any intra-insured
exclusions as between insured persons or organizations, but shall include coverage for liability
assumed under this Lease as an “insured contract” for the performance of Lessee’s indemnity obligations under this Lease. The limits of said insurance
shall not, however, limit the liability of Lessee nor relieve Lessee
of any obligation hereunder. All Insurance carried by Lessee 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(a), in addition to, and not in lieu of the
insurance required to be maintained by Lessee. Lessee shall not be named as an additional insured therein.

     8.3 
Property Insurance—Building, Improvements and Rental Value.

          (a) Building
and Improvements. Lessor shall obtain and keep in force a policy
or policies of insurance in the name of Lessor,
with loss payable to Lessor, any ground-lessor, and to any Lender
insuring loss or damage to the Premises. The amount of such insurance
shall be equal to the
full replacement cost of the Premises, as the same shall exist from time to time or the amount required by any Lender, but in no event more than the commercially
reasonable and available insurable value thereof. Lessee Owned Alterations and Utility Installations, Trade Fixtures,
and Lessee’s personal property shall be insured by Lessee under
Paragraph 8.4. If the coverage is available and commercially appropriate,
such policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender), including coverage for debris removal and the enforcement of any Applicable Requirements
requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered
loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause,
waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance
coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All
Urban Consumers for the city nearest to where the Premises are
located. If such insurance coverage
has a deductible clause, the deductible amount shall not exceed $1,000 per occurrence.

          (b)
Rental Value. Lessor shall also obtain and keep in force a policy or policies in the name of Lessor with loss payable to Lessor
and any Lender, insuring the loss of the full Rent for one year with
an extended period of indemnity for an additional 180 days
(“Rental Value Insurance”).
Said 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 12 month period.

          (c) Adjacent
Premises. Lessee shall pay for any increase in the premiums for
the property insurance of the Building and for the Common Areas buildings in the Project if said increase is caused by Lessee’s acts, omissions, use or occupancy of the Premises.

          (d) 
Lessee’s
Improvements. [ILLEGIBLE] is the Insuring Party, Lessor
shall not be required to insure Lessee Owned Alterations and Utility
Installations under the terms of this lease.

     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 Fixtures, and Lessee Owned Alterations and Utility Installations.
Such insurance shall be full replacement cost coverage with a deductible of not to exceed $1,000 per occurrence.
The proceeds from any such insurance shall be used by Lessee for the replacement of personal property,
Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall provide Lessor with
written evidence that such insurance is in force.

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

          (c)
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 “Best’s Insurance
Guide”, or such other rating as may be required by a Lender. Lessee shall not do or permit
to be done anything which invalidates the required insurance
policies. Lessee shall, prior to the Start Date, deliver to Lessor
certified copies of policies of such insurance or certificates
evidencing the existence and amounts of the required insurance. No such policy shall be cancelable or subject to modification except after 30 days prior written notice to

	 	 	 	 	 
	 

	 	 	 	 
	 
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Lessor.
Lessee shall, at least 30 days prior [ILLEGIBLE]
expiration of such policies, furnish
Lessor with [ILLEGIBLE] of renewals or “insurance
binders” evidence renewal thereof, or Lessor may
order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee
to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the
remaining term of this Lease, whichever is less. If either Party shall fail 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 affecting any other rights or remedies, Lessee and Lessor each
hereby release and relieve the other and waive their entire right to recover damages against the
other, for loss of or damage to its property arising out of or
incident to the perils required to be
insured against herein. The effect of such releases and waivers is not limited by the amount of
insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have
their respective property damage insurance carriers waive any right to subrogation that such
companies may have against Lessor or Lessee, as the
case may be, so long as the insurance is not
invalidated thereby.

     8.7
Indemnity. Except for Lessor’s gross negligence or willful misconduct, Lessee shall indemnify,
protect, defend and hold harmless [ILLEGIBLE] Premises, Lessor and its agents, Lessor’s master or ground lessor, partners and Lenders, from and
against any and all claims, loss of rents and/or damage liens, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or liabilities arising
out of, involving, or in connection with, the
use and 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 [ILLEGIBLE] notice defend the same at Lessee’s expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first
paid any such claim in order to be defended or indemnified.

     8.8
Exemption of Lessor from Liability. Lessor shall not be liable for injury or damage to the
person or goods, wares, merchandise [ILLEGIBLE] other
property of Lessee, Lessee’s employees, contractors, invitees, customers, or any other person in
or about the Premises, whether, such damage or [ILLEGIBLE]
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 sprinkler, 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, or from other sources or places.
Lessor shall not
liable for any damages arising from any act or neglect
[ILLEGIBLE] any other tenant of Lessor nor from the failure of Lessor to enforce the provisions of any other
lease in the Project. Notwithstanding Lessor’s negligence
[ILLEGIBLE] breach of this Lease, Lessor shall under no
circumstances be liable for injury to Lessee’s business or for any
loss 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 Alterations and Utility installations, which can reasonably be repaired in 3 months or less
from the date of the damage or destruction, and the
[ILLEGIBLE] thereof does not exceed a sum equal to 6 month’s Base Rent. Lessor shall notify Lessee in writing
within 30 days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.

          (b)
“Premises Total Destruction” shall mean damage or
destruction to the improvements on the Premises, other than Lessee
Owned Alterations and Utility Installations and Trade Fixtures, which
cannot reasonably be repaired in 3
months or less from the date of the damage or destruction and/or the
cost thereof exceeds a sum equal to 6 month’s Base Rent. Lessor shall
notify Lessee in writing within 30 days from the date of the damage destruction as to whether or not the damage is Partial or Total.

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

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

          (e)
“Hazardous Substance Condition” shall mean the
occurrence or discovery of a condition involving
the presence of, or a contamination by, a Hazardous Substance 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 Lesson’s election, make the repair of any damage or
destruction the total cost to repair of which is $5,000 or less, and,
in such event, Lesser shall make any applicable insurance
proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds
are not sufficient to effect such repair, the insuring Party shall promptly contribute the shortage in proceeds as and when required to complete
said repairs. In the event, however, such shortage was due to the
fact that, by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lesser shall have no obligation to pay for the shortage in insurance proceeds or to
fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within 10 days
following receipt of written notice of such shortage and request
therefor. If Lessor receives said funds or adequate assurance thereof within said 10 day period,
the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such
funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10 days thereafter to: (i) make such
restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall
remain in full force and effect, or
(ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage
or destruction. Premises Partial Damage due to flood or earthquake
shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance
coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party.

     9.3
Partial Damage — Uninsured Loss. If a Premises Partial
Damage that is not an Insured Loss occurs, unless caused by a negligent or [ILLEGIBLE] 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 Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such
termination shall be effective 60 days following the date of
such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within 10
days after receipt of the termination notice to give written notice
to Lessor of Lessee’s commitment to pay for the repair of such
damage without reimbursement
from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 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 Destruction. Notwithstanding any other provision hereof, if a Premises Total Destruction occurs, this Lease shall terminate 60
days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right
to recover Lessor’s damages from Lessee, except as provided in
Paragraph 8.6.

     9.5
Damage Near End of Term. If at any time during the last
6 months of this Lease there is damage for which the cost to
repair exceeds one month’s Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective
60 days following the date of occurrence of such damage by giving a written termination notice to Lessee within 30 days after the date of occurrence of
such damage. Notwithstanding the foregoing, if Lessee at that time
has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may
preserve this Lease by, (a) exercising such option and
(b) providing Lessor with any shortage in insurance proceeds (or adequate assurance thereof) needed to
make the repairs on or before the earlier of (i) the date which is 10 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
[ILLEGIBLE]. 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 Lessee fails to exercise such option and provide such
funds or assurance during such period, then this Lease shall terminate on the date specified in the termination notice and Lessee’s option shall
be extinguished.

     9.6
Abatement of Rent; Lessee’s Remedies.

          (a) Abatement. In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance
Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required
for the repair, remediation or restoration of such damage shall be
abated in proportion [ILLEGIBLE] not to exceed the proceeds received [ILLEGIBLE]
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 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 60 days following the giving of such notice. If Lessee gives such notice and
such repair or restoration is not commenced within 30 days
thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or
restoration is commenced within such 30 days, this Lease shall
continue in full force and effect. “Commence” shall mean either the unconditional authorization
of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs.

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

     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 extent inconsistent herewith.

10. Real Property Taxes.

	 	 	 	 	 
	 

	 	 	 	 
	 
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     10.1
Definition. As used here [ILLEGIBLE] term “Real
Property Taxes” shall include any [ILLEGIBLE]
assessment; real estate [ILLEGIBLE] 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 Project, Lessor’s right to
other income therefrom, and/or
Lessor’s business of leasing, by any authority having the direct or indirect power to tax and where
the funds are generated with reference to the Project address and where the proceeds so generated
are to be applied by the city, county or other local taxing authority of a jurisdiction within which
the Project is 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 [ILLEGIBLE] not limited to, a change in the ownership of the Project or any
portion thereof or a change in the improvements thereon. in
calculating Real Property Taxes for any
calendar year, the Real Property Taxes for any real estate tax year shall be included in the
calculation of Real Property Taxes for such calendar year, based upon the number of days which such
calendar year and tax year have in common.

     10.2
Payment of Taxes. Lessor shall pay the Real Property Taxes applicable to the Project, and except as
otherwise provided in Paragraph 10.3 any such amounts shall be included in the calculation of Common Area Operating Expenses in
accordance with the provision’s of Paragraph 4.2.

     10.3 Additional Improvements.
Common Area Operating Expenses shall not include Real Property Taxes specified in the tax assessor’s records
and work sheets as being caused by additional improvements placed
upon the Project by other lessees
or by Lessor for the exclusive enjoyment [ILLEGIBLE] such other
lessees. Notwithstanding Paragraph 10.2 hereof, Lessee shall,
however, pay to Lessor at the time Common Area
Operating Expenses [ILLEGIBLE] payable under
Paragraph 4.2, the entirety of any increase in Real Property Taxes if assessed solely by reason of
Alterations, Trade Fixtures or Utility installations placed upon the Premises by Lessee or at
Lessee’s request

     10.4 Joint Assessment. If
 the Building is not separately assessed, Real Property Taxes allocated to
the Building 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 determined [ILLEGIBLE] Lessor from
the respective valuations assigned in the assessor’s work sheets or such other information as may be
reasonably available. Lessor’s reasonable determination thereof, in good faith, shall be conclusive.

     10.5 Personal Property Taxes.
Lessee shall pay prior to delinquency all taxes assessed against and
levied upon Lessee Owned Alterations and Utility installations, Trade Fixtures, furnishings,
equipment and all personal property of Lessee contained in the Premises. When possible, Lessee
shall cause its Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings,
equipment and all other personal property to be assessed and
[ILLEGIBLE] separately from the real
property of Lessor. If any of Lessee’s said property shall be assessed with Lessor’s real property,
Lessee shall pay Lessor the taxes attributable to Lessee’s property within 10 days after receipt of a
written statement setting forth the taxes applicable to Lessee’s property.

11.
Utilities. Lessee shall pay for all water, gas, heat, light,
 power, telephone, trash disposal,
and other utilities and services supplied to the Premise together with any taxes thereon.
Notwithstanding the provisions of Paragraph 4.2, if at any time in Lessor’s sole judgment, Lessor
determines that Lessee using a disproportionate amount of water, electricity or other commonly
metered utilities, or that Lessee is generating such a large volume of trash as require an
increase in the size of the dumpster and/or an increase in the number of times per month that the
dumpster is emptied, then Lessor may increase Lessee’s Base Rent by an amount equal to such
increased costs.

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.

          (b) A
change in the control of Lessee shall constitute an assignment
requiring consent. The transfer,
on a cumulative basis, [ILLEGIBLE] 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 [ILLEGIBLE] results or will
result in a reduction of the Net Worth of Lessee by an amount greater than 25% of such Net Worth as
it was represented at the time of the execution of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately
prior to said transaction [ILLEGIBLE]
transactions constituting such reduction whichever was or is greater, shall be considered an
assignment of this Lease to which Lessor may withhold [ILLEGIBLE]
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 [ILLEGIBLE] or a non curable Breach without the necessity of any notice and grace
period. If Lessor elects to treat such unapproved assignment or
subletting as non curable Breach,
Lessor may either (i) terminate this Lease or (ii)upon
30 days written notice, increase the monthly
Base Rent to 110% of the Base Rent then in effect. Further, in the event of such Breach and rental
adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to 110% of the price previously in
effect, and (ii) all fixed and
non-fixed rental adjustments scheduled during the remainder the Lease term shall be increased to
110% of the scheduled adjusted rent.

          (e) Lessee’s
remedy for any breach of Paragraph 12:1 by Lessor shall be limited to compensatory
damages and/or injunctive [ILLEGIBLE].

     12.2
Terms and Conditions Applicable to Assignment and Subletting.

          (a) 
Regardless of Lessor’s consent, no assignment or subletting
shall; (i) be effective without the
express written assumption [ILLEGIBLE] such assignee or sublessee of the obligations of Lessee under this
Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability
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 disapproval of assignment. Neither a delay in
the approval or disapproval of such assignment nor
the acceptance of Rent or performance shall [ILLEGIBLE] a waiver or
estoppel of Lessor’s right to exercise its remedies for Lessee’s Default or Breach.

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

          (d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any
Guarantors or anyone else responsible for the performance of Lessee’s obligations under this Lease,
including any assignee or sublessee, without first exhausting
Lessor’s remeditation 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 (determination as 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
10% of the-current monthly Base Rent applicable to the portion of the
Premises which is the subject of the proposed assignment or subleases,
whichever is greater, as consideration for Lessor’s considering
a 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 each and every term, covenant,
condition and obligation herein to be observed performed by Lessee
during the term of said assignment or sublease, other than such obligations as
are contrary to or inconsistent with provisions of assignment or
sublease to which Lessor has specifically consented to in writing.

          (g)
Lessor’s consent to any assignment or subletting shall not transfer to the assignee or
sublessee any Option granted to the original Lessee by this Lease
unless such transfer is specifically consented to by Lessor in writing. (See
Paragraph 39.2)

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

          (a) Lessee hereby assigns and transfers to Lessor all of Lessee’s interest in all Rent
payable on any sublease, and Lessor [ILLEGIBLE] collect such Rent and apply same toward Lessee’s
obligations under this Lease; provided, however, that until a Breach shall occur in the performance
Lessee’s obligations, Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or
any assignment of such sublease, not by reason of 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 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 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 [ILLEGIBLE] claim from Lessee to the contrary.

          (b)
[ILLEGIBLE] undertake the obligations of the sublessor
under such sublease from the time of the
exercise of said option to the expiration of such sublease; provided however, Lessor shall not be
liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for
any prior Defaults or Breaches such sublessor.

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

          (d) No sublessee shall further assign or sublet all or any part of the Premises
without Lessor’s prior written consent.

          (e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who
shall have the right to cure [ILLEGIBLE] Default of Lessee
within the grace period if any, specified in such notice. The sublessee shell
have a right of reimbursement and offset from and [ILLEGIBLE] Lessee for any
such Defaults cured 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 perform any of the terms, convents
conditions Rules and Regulations under this Lessee. A:
“Breach” is defined as the occurrence of one of more the
following Defaults, and the
failure of Lessee to [ILLEGIBLE] such Default within any applicable grace period:

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

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

          (c) The failure by Lessee to provide (i) reasonable written evidence of compliance with
Applicable Requirements, (ii) the service contracts,
(iii) the rescission of an unauthorized
assignment or subletting, (iv) an Estoppel Certificate, (v) a requested subordination, (vi)
evidence concerning any guaranty and/or Guarantor, (vii) any document requested under Paragraph 41
(easements), 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 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 2.9 hereof, other than those described in subparagraphs
13.1(a), (b) or (c), above, where such Default continues for a period of 30 days after written
notice, provided however, that if the nature of Lessee’s Default is such that more than 30 days are
reasonably required for its cure, then it shall not be deemed to be a Breach it Lessee commences such
cure within said 30 day period and thereafter diligently prosecutes such cure to completion.

          (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 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 is not restored to Lessee within 30 days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee’s assets located at the Premises or of
Lessee’s interest in this Lease, where such seizure is not
discharged within [ILLEGIBLE] days; provided,
however, in the event that any provision of this subparagraph (e) is contrary to any applicable
law, such provision shall be of no force or effect and not affect the validity of the remaining
provisions.

          (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 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, [ILLEGIBLE] Lessee’s failure, within 60 days
following written notice of any such event, to provide written alternative assurance or security,
which, when coupled with [ILLEGIBLE] then existing resources of Lessee, equals or exceeds the combined
financial resources of Lessee and the Guarantors that existed at the
time of execution this Lease.

     13.2
Remedies. If Lessee fails to perform any of its affirmative duties or obligations, within
10 days after written notice (or in case of an emergency, without notice), Lessor may, at its
option, perform such duty or obligation on Lessee’s behalf, including but not limited to the
obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or
approvals. 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 Lessor 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 Lessee 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 award of the amount by which the unpaid
rent which would have been earned after termination until the time of award exceeds the amount of
such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the
time of award of the amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee [ILLEGIBLE] could be reasonably avoided; and
(iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by
the Lessee’s failure perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, including but not limited
to the cost [ILLEGIBLE] recovering
possession of the Premises, expenses of reletting, including necessary renovation and alteration
of the Premises, reasonable attorneys’ fees, [ILLEGIBLE] that portion of any leasing commission paid by
Lessor in connection with this Lease applicable to the unexpired term of this Lease. The worth at
the time 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 [ILLEGIBLE] the Federal Reserve Bank of the
District within which the Premises are located at the time of award plus one percent. Efforts by
Lessor to mitigate damage 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 [ILLEGIBLE] recoverable therein, or Lessor may reserve the right to recover
all or any part thereof in a separate suit. If a notice and grace
period required under Paragraph
13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee
under the unlawful detainer statute shall also constitute the notice required by Paragraph 13.1. In
such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer
statute [ILLEGIBLE] run concurrently, and the failure of Lessee to cure the Default within the greater of
the two such grace periods shall constitute both an unlawful detainer and Breach of this Lease
entitling Lessor to the remedies provided for in this Lease and/or by said statute.

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

          (c) Pursue
any other remedy now or hereafter available under the laws or judicial decisions
of the state wherein the Premises [ILLEGIBLE]  located. The expiration or termination of this Lease and/or the termination of Lessee’s right to
possession shall not relieve Lessee from liability under [ILLEGIBLE] indemnity provisions of this Lease as
to matters occurring or accruing during the term hereof or by reason of Lessee’s occupancy of the
Premises.

     13.3
Inducement Recapture. Any agreement for free or abated rent or other charges, or for the
giving or paying by Lessor to or for Lessee [ILLEGIBLE] any cash or other bonus, inducement or consideration
for Lessee’s entering into this Lease, all of which concessions are hereinafter referred to [ILLEGIBLE]
“Inducement Provisions”, shall be deemed conditioned upon Lessee’s full and faithful performance of
all of the terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any
such inducement Provision shall automatically be deemed deleted from this Lease and of no further
force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated,
given or paid by Lessor under such an inducement Provision shall be immediately due and payable by
Lessee to Lessor, notwithstanding any subsequent cure of said Breach
by Lessee. The acceptance by
Lessor [ILLEGIBLE] rent or the cure of the Breach which initiated the operation of this paragraph shall not
be deemed a waiver by Lessor of the 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 costs not contemplated [ILLEGIBLE] 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
Lender. Accordingly, if any Rent shall not be received by Lessor
within 5 days after such amount shall be due, then, without any requirement for notice to Lessee,
Lessee shall pay to Lessor a one-time late charge equal to 10% of each such overdue amount or $100,
whichever is greater. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs [ILLEGIBLE] 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 [ILLEGIBLE]
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 [ILLEGIBLE]
payable hereunder, whether or not
collected, for 3 consecutive installments of Base Rent, then notwithstanding any provision of this
Lease to the [ILLEGIBLE] 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 30 days following the
date on which it was due for non-scheduled payment, shall bear interest from the date [ILLEGIBLE] due, as
to scheduled payments, or the 31st day after it was due as to non-scheduled payments. The interest
(“ Interest”) charged shall be equal to the [ILLEGIBLE] rate reported in the Wall Street Journal as
published closest prior to the date when due plus 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 fails
within a reasonable time to perform an obligation required to be performed by Lessor. For purposes
of this Paragraph, a reasonable time shall in no event be less than 30 days after receipt [ILLEGIBLE]
Lessor, and any Lender whose name and address shall have been furnished Lessee in writing for such
purpose, of written notice specifying wherein such obligation of
Lessor has not been performed provided however, [ILLEGIBLE]
Lessor’s obligation is such that more than 30 days are reasonable
required for its performance, then Lessor shall not be in breach if performance is commenced
within such 30 day period and thereafter diligently pursued [ILLEGIBLE] completion.

          (b) Performance
by Lessee on Behalf of Lessor. In the event that neither Lessor nor Lender
cures said breach within 30 days after receipt of said notice,
or if having commenced said cure
they do not diligently pursue it to completion, then Lessee may elect to cure said breach [ILLEGIBLE]
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 10% of the floor area
of the Unit, or more than 25% of
Lessee’s Reserved Parking Spaces, is taken by Condemnation, Lessee may, at Lessee’s option, to be
exercised in writing within 10 days after Lessor shall have given Lessee written notice of such
taking (or in the absence of such notice, within 10 days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease
shall remain in full force and effect as to the portion of the Premises remaining, except that the
Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by
such Condemnation. Condemnation awards and/or payments shall be the property of Lessor, whether
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in value
of the leasehold, the value of the [ILLEGIBLE], or for severance
damages: provided, however the lessee shall be entitled to any compensation 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 consider 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. 
Brokerage Fees.

     15.1
Additional Commission. In addition to the payments owed pursuant to
Paragraph 1.10 above,
and unless Lessor and the Broker otherwise agree in writing, Lessor
agrees that: (a) if Lessee
exercises any Option, (b) if Lessee acquires from Lessor any rights to the Premises or
other premises owned by Lessor and located within the Project, (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 the 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 obligation hereunder. Brokers shall be third party
beneficiaries of the provisions of Paragraphs 1.10, 15, 22 and 31. If Lessor fails to
pay to Brokers all amounts due as and for brokerage fees pertaining to this Lease when due, then
such amounts shall accrue Interest. In addition, if Lessor fails to
pay all amounts to Lessee’s
Broker when due, Lessee’s Broker may send written notice to Lessor and Lessee of such failure and
if Lessor fails to pay such amount within 10 days after said
notice, Lessee shall pay said monies
to its Broker and offset such amounts against Rent. In addition,
Lessee’s Broker shall be deemed to
be a third party beneficiary of any commission agreement entered into by and/or between Lessor and
Lessor’s Broker for the limited purpose of collecting any brokerage fee owed.

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

16. 
Estoppel Certificates.

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

          (b) If the Responding Party shall fall to execute or deliver the Estoppel Certificate
within such 10 day period, the Requesting party may execute an
Estoppel Certificate stating that:
(i) the lease is in fall 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 have 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, of 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 past
3 years. All such financial statements shall be received by
Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein
set forth.

17. 
Definition of Lessor. The term “Lessor” as used herein shall mean the owner or owners at the
time in question of the fee title to the Premises, or, if this is a sublease, of the Lessee’s
interest in the prior lease. In the event of a transfer of Lessor’s title or interest in the
Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit)
any unused Security Deposit held by Lessor. 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 Lease
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 regard to the potential duties and liabilities of
lessor pertaining to Hazardous Substances as outlined in Paragraph 6.2 above.

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 look 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 the 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 [ILLEGIBLE] the Brokers that it has made, and is relying
solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this
Lease and as to the use, nature, quality and character of the
Premises. Brokers have no responsibility with respect thereto or with
respect to any default or breach hereof by either Party. The
liability (including court costs and attorneys’ fees), of any Broker
with respect to negotiation, execution, delivery or performance by
either Lessor of 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 or applicable law
shall be in writing and may be delivered in person (by and 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
that Party’s address for delivery or mailing of notices. Either Party may by written notice to the
other specify a different address for notice, except that upon
Lessee’s taking possession of the Premises, the Premises shall constitute Lessee’s address for notice.
A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time 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 date of delivery shown on the receipt card, or if no
delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed
given 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 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 (confirmation report from fax machine is sufficient),
provided a copy is also delivered via delivery or mail. If notice is received on a Saturday, Sunday
or legal holiday, it 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 render unnecessary the
obtaining of Lessor’s consent to, or approval of, any subsequent or similar act by Lessee, or be
construed as the basis of an estoppel to enforce the provision or
provisions of this Lease
requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any Default or
Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or damages
due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection
therewith, which such statements and/or conditions shall be of no
force or effect whatever [ILLEGIBLE] before the deposit of such payment.

25. 
Disclosures Regarding The Nature of a Real Estate Agency
Relationship.

     (a) When
entering into a discussion with a real estate agent regarding a real estate
transaction, a Lessor or Lessee should from the outset understand what type of agency relationship
or representation it has with the agent or agents in the transaction. Lessor and Lessee
acknowledge being advised by the Brokers in this transaction, as follows:

          (i)
Lessor’s Agent. A Lessor’s agent under a listing agreement with the Lessor acts as
the agent for the Lessor only. A Lessor’s agent or subagent has the following affirmative
obligations: To the Lessor: A fiduciary duty of utmost care, integrity, honesty, and
loyalty in dealings with the Lessor. To the Lessee and the
Lessor: (a) Diligent exercise of
reasonable skills and care in performance of the agent’s duties. (b) A duty of honest and fair
dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting
the value or desirability of the property that are not known to, or within the diligent attention
and observation of, the Parties. An agent is not obligated to reveal to either Party any
confidential information obtained from the other Party which does not involve the affirmative
duties set forth above.

          (ii) Lessee’s Agent. An agent can agree to act as agent for the Lessee only. In these
situations, the agent is not the Lessor’s agent, even if by agreement the agent may receive
compensation for services rendered, either in full or in part from
the Lessor. An agent acting
only for a Lessee has the following affirmative obligations. To
the Lessee: A fiduciary
duty of utmost care, integrity, honesty, and loyalty in dealings with
the Lessee. To the
Lessee and the Lessor: (a) Diligent exercise of reasonable skills and care in performance of
the agent’s duties. (b) A duty of honest and fair dealing
and good faith. (c) A duty to disclose
all facts known to the agent materially affecting the value or desirability of the property that
are not known to, or within

	 	 	 	 	 
	 

	 	 	 	 
	 
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the
diligent attention and observation of, the [ILLEGIBLE]. An agent is not
obligated to reveal to either [ILLEGIBLE] confidential information obtained from the other
Party which does not involve the affirmative duties set forth above.

     (iii) Agent
Representing Both Lessor and Lessee. A real estate agent, either acting
directly or through one or more associate licenses, can legally be the agent of both the Lessor
and the Lessee in a transaction, but only with the knowledge and consent of both the Lessor and the Lessee. In a
dual agency situation, the agent has the following affirmative obligations to both the Lessor and
the Lessee: (a) A fiduciary duty of utmost [ILLEGIBLE] integrity, honesty and loyalty in the dealings with
either Lessor or the Lessee. (b) Other duties to the Lessor and
the Lessee as stated above [ILLEGIBLE] subparagraphs (i) or (ii). In representing both Lessor and Lessee, the agent may not without the
express permission of the respective Party, disclose to the other Party that the Lessor will
accept rent in an amount less than that indicated in the listing or that the Lessee is willing to
pay a higher rent than [ILLEGIBLE] offered. The above duties of the agent in a real estate transaction do
not relieve a Lessor or Lessee from the responsibility to protect their own interests Lessor and
Lessee should carefully read all agreements to assure that they
adequately express their
understanding of the transaction. A real estate agent
[ILLEGIBLE] a person qualified to advise about real
estate. If legal or tax advice is desired, consult a competent professional.

     (b) Brokers
have no responsibility with respect to any default or breach hereof by either
Party. The liability (including court costs and attorneys fees), of
any Broker with respect to any
breach of duty, error or omission relating to this Lease shall not exceed the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker’s
liability shall not be applicable to any gross negligence or [ILLEGIBLE] misconduct of such Broker.

     (c) Buyer
and Seller agree to identify to Brokers as “Confidential” any communication or
information given Brokers that is considered by such Party to be
confidential.

26. No
Right To Holdover. Lessee has no right to retain possession of the Premises or any part
thereof beyond the expiration or termination of this Lease. In the event that Lessee holds over,
then the Base Rent shall be increased to 150% of the Base Rent applicable immediately preceding
the expiration or termination. 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 equity.

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

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

30. 
Subordination; Attornment; Non-Disturbance.

     30.1
Subordination. This Lease and any Option granted hereby shall be subject and subordinate
to any ground lease, mortgage, deed of ‘trust, or other hypothecation or security device
(collectively, “Security Device”), now or hereafter placed upon the Premises, to any and all
advances made on the security thereof, and to all renewals, modifications, and extensions
thereof. Lessee agrees that the holders of any such Security Devices (in this Lease together
referred to as “Lender”) shall have no liability or obligation to perform any of the obligations
of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option granted
hereby superior to the lien of its Security Device by giving written notice thereof to Lessee,
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. In the event that Lessor transfers title to the Premises, or the Premises
are acquired by another upon the foreclosure or termination of a Security Device to which this Lease is
subordinated (i) Lessee shall, subject to the non-disturbance
provisions of Paragraph 30.3, attorn
to such new owner, and upon request, enter into a new lease, containing all of the terms and
provisions of this Lease, with such new owner for the remainder
[ILLEGIBLE] the term hereof, or, at the
election of such new owner, this Lease shall automatically become a new Lease between Lessee and
such new owner, upon all [ILLEGIBLE] the terms and conditions hereof, for the remainder of the term hereof,
and (ii) Lessor shall thereafter be relieved of any further
obligations hereunder and such new
owner shall assume all of Lessor’s obligations hereunder, except that such new owner shall not;
(a) be liable for any act or omission of any prior
[ILLEGIBLE] or with respect to events occurring
prior to acquisition of ownership; (b) be subject to any offsets
or defenses which Lessee might
have against any prior lessor, (c) be bound by prepayment of more than one month’s rent, or (d)
be liable for the return of any security deposit paid to any prior lessor.

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

     30.4 Self-Executing. The agreements contained in this Paragraph 30 shall be effective without
the execution of any further documents; provided, however, that, upon
written request from Lessor
or a Lender in connection with a sale, financing or refinancing of
the Premises, Lessee and Lessor
shall execute such further writings as may be reasonably required to
separately document any
subordination, 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
whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party
(as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to
reasonable 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 include, without limitation, a Party or Broker who substantially obtains
or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or
the abandonment by the other Party or Broker of its claim or defense.
The attorneys’ fees award
shall not be computed in accordance with any court fee schedule, but shall be such as to fully
reimburse all attorneys’ fees reasonably incurred. In addition, Lessor shall be entitled to
attorneys’ fees, costs and expenses incurred in the preparation and service of notices of Default
and consultations in connection therewith, whether or not a legal action is subsequently commenced
in connection with such Default or resulting Breach ($200 is a reasonable minimum per occurrence
for such services and consultation).

32. Lessor’s Access; Showing Premises; Repairs. Lessor and Lessor’s agents shall have the right to
enter the Premises  at any time, in the case of an emergency, and otherwise at reasonable times for
the purpose of showing the same to prospective purchasers, lenders, or tenants, and making such
alterations, repairs, improvements or additions to the Premises as
Lessor may deem necessary. 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 6 months of the
term hereof place on the Premises any ordinary “For Lease” signs. Lessee may at any time place on
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 whether to permit an auction.

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

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

36. Consents. Except as otherwise provided herein, wherever in this Lease the consent of a Party
is required to an act by or for the other Party, such consent shall not 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, [ILLEGIBLE] use of [ILLEGIBLE] 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 either Party
disagrees with any determination made by the other hereunder and reasonably requests the reasons
for such determination, the determining party shall furnish its reasons in writing and in
reasonable detail within 10 business days following such request.

37. Guarantor.

     37.1
Execution. The Guarantors, if any, shall each execute a guaranty in the form most
recently published by the 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) an Estoppel Certificate, or (d) written
confirmation that the guaranty is still in effect.

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

					
	 
	 	 	 	 
	 
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39.
Options. If Lessee is granted an [ILLEGIBLE] as
defined below, than the following provisions
[ILLEGIBLE].

     39.1 Definition. “Option” shall mean: (a) the right to extend the term of or renew this Lease
or to extend 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. Any Option granted to Lessee in
this Lease is
personal to the original Lessee, and cannot be assigned or exercised by anyone other than said
original Lessee and only while the original Lessee is in full
possession of the Premises and, if requested [ILLEGIBLE] Lessor, with
Lessee certifying that Lessee has no intention of thereafter assigning or subletting.

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

     39.4 Effect of Default on Options.

          (a) Lessee
shall have no right to exercise an Option: (i) during the period commencing with
the giving of any notice of Default [ILLEGIBLE] 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 Lesssee is in Breach of this Lease, or (iv) in the event that Lessee has been given
3 or more notices of separate Default, whether or not the Defaults [ILLEGIBLE] cured, during the 12 month
period immediately preceding the exercise of the Option.

          (b) The
period of time within which an Option may be exercised shall not be
extended or enlarged by
reason of Lessee’s inability [ILLEGIBLE] exercise an Option because of the provisions of Paragraph 39.4(a).

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

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

41.
Reservations. Lessor reserves the right: (i) to grant, without the consent or joinder of
Lessee, such easements, rights and dedications that [ILLEGIBLE] deems necessary, (ii) to cause the
recordation of parcel maps and restrictions, and (iii) to create and/or install new utility
raceways, so long as [ILLEGIBLE] easements, rights, dedications, maps, restrictions, and utility raceways
do not unreasonably interfere with the use of the Premises by Lessee.
Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate such rights.

42. Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of
money to be paid by one Party to the other under the provisions hereof, the Party against whom
the obligation to pay the money is asserted shall have the right to
make payment “under protest” and [ILLEGIBLE] 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. 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 [ILLEGIBLE] sum or so much thereof as it was not legally required to pay.

43.
Authority. If either Party hereto is a corporation, trust, limited liability company,
partnership, or similar entity, each Individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver this Lease on its
behalf. Each party shall, within [ILLEGIBLE] days after request, deliver to the other party satisfactory
evidence of such authority.

44.
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.

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

46. Amendments. This Lease may be modified only in writing, signed by the Parties in interest at
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.

47.
Multiple Parties. If more than one person or entity is named herein as either Lessor or Lessee,
such multiple Parties shall have joint and [ILLEGIBLE] responsibility to comply with the terms of this
Lease.

48. Waiver of Jury Trial. The Parties hereby waive their respective rights to trial by jury in any
action or proceeding involving the Property or [ILLEGIBLE]
out of this Agreement.

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

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED
HEREIN, AND [ILLEGIBLE] 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 [ILLEGIBLE] PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO
THE PREMISES.

 ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL
REAL ESTATE ASSOCIATION OR BY [ILLEGIBLE] 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, COMPLIANCE
WITH THE AMERICANS WITH DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE’S INTENDED
USE.

	 	 	
WARNING: IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS Of THE
LEASE MAY NEED TO [ILLEGIBLE] REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES
ARE LOCATED.

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

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Executed at:	 	 
	 	 	 	 Executed at: 	 	 

	 
	 	 	 	  

	 	 
	 	 	 	 	 	  
   
	
on:   

	 	 	 	 	 	 	 	 on:   	 	 	 	 
	 	 	 	 	 	 	 
	 
	 By LESSOR:

	 	 	 	 	 	 By LESSEE: 	 	 
	 1325
“J ” Street L.P., a California Limited Partnership

	 	 	 	 Jomed Incorporated 
	 
	 	 	 	 
	 By: DBC Builders, Inc. , a California Corp.

	 	 	 	
By:             /s/
Kim Kelderman 
	 

	 	 	 	 

	Name
Printed: 

	 	 	 	 	 	 	Kim Kelderman
	 

	 	 	 	 
	Title: its General Partner 	 	 	 	 Title: Executive VP 
	 

	 	 	 	 	 	 	 	 
	 
	 By : /s/ David J. Kassis

 

 	 	 	 	 By: 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 Name Printed: David J. Kassis 	 	 	 	 Name Printed: 
	 

	 	 	 	 	 	 	 	 	 	 

	 Title: Vice President 	 	 	 	 Title: 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 Address:

	 	 	 	 	 	 Address: 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 
	 Telephone: (                     )

	 	 	 	 	Telephone: (                     ) 	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 

					
	 
	 	 	 	 

	 
	 	 	 	KK	 DJK
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	 	 	 	Initials
	Page 11 of 12

REVISED
	 © 1999 - American Industrial Real Estate Association
	 	 
	FORM MTN-2-2/99E

 

 

	 	 	 	 	 	 	 	 	 
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	Federal ID No.

	 	 	 	 	 	Federal ID No.	 	 
	 

	 	            
                                    
            
                                    
            
                                    
         
            
                                    
                                    
                                    
                                    
                                    
            
                                    
                                    
                                    
                                    
                                    
            
                                    
                                    
                                    
                                    
                                    

	 	 	 	 	 	            
                                    
            
                                    
            
                                    
         
            
                                    
                                    
                                    
                                    
                                    
            
                                    
                                    
                                    
                                    
                                    
            
                                    
                                    
                                    
                                    
                                    

	 

	 	 	 	 	 	 	 	 

These forms are often modified to meet changing requirements of law and needs of the industry. Always write or call to make sure
you are utilizing the most current form: American Industrial Real Estate Association, 700 South Flower Street, Suite
600, Los Angeles, CA90017, (213) 687-8777.

©Copyright
1999 By American Industrial Real Estate Association.

All rights reserved.

No part of these works may be reproduced in any form without permission in writing.

 

	 	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	KK	 DJK
	 

	 	 	 	 
	Initials

	 	 	 	Initials

	 	 	 	 	 
	 	 	Page
12 of 12

	 	 
	©
1999 - American Industrial Real Estate Association

	 	REVISED	 	FORM MTN-2-2/99E

 

LEASE ADDENDUM

ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL

MULTI-TENANT LEASE-MODIFIED NET, DATED JANUARY 16, 2001 BY AND

BETWEEN 1325 J STREET L.P., A CALIFORNIA LIMITED PARTNERSHIP, AS

LESSOR

AND JOMED INCORPORATED, AS LESSEE

	49.	 	Cost of Living Adjustment:
	 
	 	 	Annual rent increases of four (4 %) percent will be assessed every two year The
monthly Base Rent shall be adjusted as follows:

	 	 	 	 	 	 	 	 	 
	Months	 	 	 	 	 	 	 	 
	01-24
	 	$4,864.00 NNN	 	 	4/1/01-3/31/03	 
	25-48
	 	$5,059.00 NNN	 	 	4/1/03-3/31/05	 
	49-60
	 	$5,261.00 NNN	 	 	4/1/05-3/31/06	 

	50.	 	Renewal Option:
	 
	 	 	Provided Lessee is not in default of the lease, Lessor shall grant Lessee two (2)
five (5)-year renewal options to extend the lease along these same terms and
conditions, with the exception of rent. Rent schedule shall be:

First Option Term:

	 	 	 	 	 
	Months:	 	 	 	 
	61-72
	 	$5,261.00 NNN
	73-96
	 	$5,471.00 NNN
	97-120
	 	$5,690.00 NNN

Second Option Term:

	 	 	 	 	 
	Months:	 	 	 	 
	121-144
	 	$5,918.00 NNN
	145-168
	 	$6,155.00 NNN
	169-180
	 	$6,401.00 NNN

	 	 	Tenant shall provide Landlord written notification within one hundred eighty
(180) days prior to expiration of original lease term to exercise said renewal option.

	51.	 	Tenant Improvements:
	 
	 	 	Lessor, at Lessor’s sole cost and expense, shall complete the following tenant
improvements prior to the lease commencement:

Building Standards:

Fully sprinklered (.32 GPM/2000 SF);

Two (2) 9’ x 10’ dock doors;

One (1) 12’x 14’ grade level doors.

Warehouse:

[ILLEGIBLE] insulation [ILLEGIBLE]

100 amp, 277/480 volt, 3 phase power;

One (1) 400 watt metal halide light per 2,000 sf

Office:

Office
area to consist of +/- 1,250 sf to include:

Three (3) private offices

One (l) conference room

Two (2) restrooms:

One (1) Men’s including one (1) stool and one (1) vanity.

 

 

One
(1) Women’s including one (1) stool and one (1) vanity.

Restroom to include:

Briggs 4738 Handicap Water Closet;

Briggs Self-Rimming China Lavatories with

Delta 523 HDWF Faucet;

ISE H770 Insta-Hot Water Heater;

Floors-Armstrong Cinyl Corlon 6’ Stock;

Walls-Wilsoonart Laminet 4’x 8’ Sheets;

Painted Walls;

Exhaust Fan.

Not Included:

The following item’s are not included in this Lease and are the

responsibility of the Lessee:

• 
Racking permits

•  Fire extinguishers

•  Fire hoses

•  Signage

	52.	 	Signage:
	 
	 	 	Lessee shall be allowed signage on the western side of the .building over its main
entrance. Said signage shall conform to all county and state sign criteria and
Industrial Center signage criteria, and shall be subject to Lessor’s prior written
approval, which shall not be unreasonably withheld.
	 
	 	 	Regulations for Tenant signage at Mercantile Trade Center are as follows:

	 	1)	 	Signs are to be made from 1” thick Gator Foam.
	 
	 	2)	 	Letters are to be a maximum of 12” and a minimum of 8”.
	 
	 	3)	 	Signs can have no more than two (2) lines of text.
	 
	 	4)	 	Signs are limited to a maximum length of 15’, which would
include lettering and logos.
	 
	 	5)	 	Signs may be of any color or font style,

	 	 	Design submittals may be mailed or delivered to 1325 J Street, L.P., 4378 Auburn
Boulevard, Suite 300, Sacramento, CA 95841. Sign design assistance may be obtained from
Steve Harlow at Signature Sign & Banner, (916) 564-3020.
	 
	53.	 	Occupancy Type:
	 
	 	 	Should any governmental authority require any additional improvement, modifications,
licenses and/or permits of any kind, including but not limited to, a conditional use
permit due to Lessee’s use and/or occupancy of the Premises, it shall be provided by
Lessee, at Lessee’s sole expense. It is Lessor’s understanding that Lessee will not be
using flammable solvents or utilizing the Premises in any way that would cause Lessee’s
occupancy to be considered anything other than, a B or S type occupant.
	 
	 	 	In the event that Lessee is classified under any other occupancy type (such as an H-2 or
H-3 type for example) which requires any additional improvements to the space (i.e.
additional fire sprinkler drops, Ventilation equipment and/or ducting, additional
sheetrock, and etc.), or by Lessee’s use of the Premises, increases the fire insurance
[illegible] responsible to pay for and/or provide the same.
	 
	54.	 	Toxics Disclosure:
	 
	 	 	“Landlord and Tenant acknowledge that they have been advised that numerous federal, state,
and/or local laws, ordinances and regulations (“Laws”) affect the existence and removal,
storage, disposal, leakage of and contamination by materials designed as hazardous or
toxic (“Toxics”). Many materials, some utilized in everyday business activities and
property maintenance, are designated, as hazardous or toxic.

 

 

	 	 	Some of the Laws require that Toxics be removed or cleaned up without regard to
whether the party required to pay for the “clean up” caused the contamination,
owned the property at the time the contamination occurred or even knew about the
contamination. Some items, such as asbestos or PCB’s, which were legal when
installed, now ate classified as Toxics, and are subject to removal
requirements. Civil lawsuits for damages resulting from Toxics may be filed by
third parties in certain circumstances.
	 
	 	 	Tower Realty Group has recommended, and hereby recommends, that each of the
parties have competent, professional environmental specialists review the Property
and make recommended tests so that a reasonably informed assessment of these
matters can be made by each of the parties. Landlord and Tenant acknowledge
that neither Tower Realty Group nor its agents or salespersons, have been retained
to investigate or to arrange for investigation by others, and have not made any
recommendations or representations with regard to the presence or absence of
Toxics on, in or beneath the Property. Landlord and Tenant agree that they will
rely only on persons who are experts in this field and will obtain such expert
advice so each of them will be as fully informed as possible with regards to
Toxics in entering into the Agreement.”
	 
	55.	 	Toxic Materials:

	 	A.	 	Lessee shall not cause of permit to be discharged into the plumbing or
sewage system of the Premises or onto the and underlying or adjacent to
it, any hazardous, toxic or radioactive materials, including, but not
limited to, those materials identified in Section 6680 or Title 22 of the
California Administrative Code, Division 4, Chapter 30, as amended from
time to time (collectively “Toxic Materials”). Lessee
shall, at its sole expense, comply with any and all rules, regulations, codes, ordinances,
statues, and other requirements of lawful governmental authority
respecting to Toxic Materials, pollution, harmful chemicals, and other
materials in connection with Lessee’s activities on or about the
Premises.
Lessee specifically agrees to comply with any such requirements relating
to the handling, use, storage, and disposal of Toxic Materials and other
materials which are considered by and such governmental authorities as
harmful, dangerous, toxic, flammable, or otherwise deserving of Special
care. Lessee shall pay the full cost of any clean-up work performed on or
about the Industrial Center as required by any governmental authority in
order to remove, neutralize of otherwise teat materials of any type
whatsoever directly, or indirectly placed on or about the Premises by
Lessee or its agents, employees, contractors, or invites.
	 
	 	B.	 	Lessee shall be solely responsible for and shall indemnify,
defend, and hold Lessor harmless from any and all claims, judgements,
demands, causes or action, proceedings or hearings (collectively “Claims”)
relating to the storage, placement or use of Toxic Materials by Lessee,
its agents or invitees on or about the Premises, including, but not
limited to, Claims resulting from the contamination of subterranean water
beneath, adjoining or in the vicinity of the Industrial Center. Lessee
agrees to defend all such Claims on behalf of Lessor with counsel
acceptable to Lessor, and to pay all fees, costs, damages, or expenses
relating to or arising out of, or in connection with, any removal,
clean-up, or restoration work which is required by any governmental agency
having jurisdiction and which arises from Lessee’s storage, use or
disposal of Toxic Materials on or about the Premises during the term of
this Lease, or Option Term, if exercised.

	56.	 	The Americans With Disabilities Act (ADA):
	 
	 	 	Please be advised that an owner or tenant of real property may be subject to the
Americans With Disabilities Act (the ADA). The Act requires owners and tenants
of “public accommodations” to remove barriers to access by disabled persons
and provide auxiliary aids and services for hearing, vision of speech impaired
persons. You are advised to consult your attorney with respect to the

 

 

	 	 	application of the Act to the Property, Tower Realty Group cannot give you legal
advice on the Act or its requirements.
	 
	57.	 	Broker Disclosure:
	 
	 	 	The parties hereby expressly acknowledge that Broker has made no independent
determination or investigation regarding, but not limited to, the following: present
or future use of the Property; environmental matters affecting the Property;
the condition of the property, including, but not limited to structural mechanical,
and soils conditions, as well as issues surrounding hazardous wastes or substances
as set out above; violations of the Occupational Safety and Health Act or any other
federal, state, county or municipal laws, ordinance, or statutes; measurements of land
and/or buildings. Lessee agrees to make its own investigation and
determination regarding such items.
	 
	58.	 	Equipment Storage Prior to Lease Commencement:
	 
	 	 	Provided that Lessee is not in default under the Lease and
has complied with Section 8 of the Lease, Lessor shall permit Lessee to store equipment in the Premise prior to
occupancy. Lessee agrees to accept all responsibility for said equipment (including
but not limited to loss or  damage) and will hold Lessor and its agents
harmless from any liability resulting from Lessee’s storage of said equipment.

	 	 	 
	ACCEPTED AND AGREED:
	 	 
	 
	 	 
	LESSOR:

	 	 LESSEE:
	 
	 	 
	1325 J Street, L.P.

	 	Jomed Incorporated.
	
a California Limited Partnership

	 	 
	
By DBC Builders, Inc.,

	 	 
	
a California Corporation, its General Partner

	 	 
	 
	 	 
	/s/
David J. Kassis                                  
2.27.01

	 	/s/ Kim Kelderman
                                    
27 feb 01
	 

	 	 
	David J. Kassis                                          Date

	 	Kim Kelderman
                                        
Date
	Vice President

	 	Managing Director, Jomed Inc.exv10w21

 

EXHIBIT
10.21

[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT CONFIDENTIAL
INFORMATION HAS BEEN OMITTED. CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL
INFORMATION. THE CONFIDENTIAL PORTIONS HAVE BEEN PROVIDED SEPARATELY TO THE SECURITIES AND
EXCHANGE COMMISSION]

SUPPLY AGREEMENT

     THIS SUPPLY AGREEMENT (the “Agreement”) is made and entered into as of July 21, 2003
(the “Effective Date”) between VOLCANO THERAPEUTICS, INC. (as defined below,
“Volcano” or “Supplier”), a Delaware corporation, and AVE GALWAY LIMITED (as
defined below, “Medtronic”), a corporation existing under the laws of the Republic of
Ireland.

RECITALS

     WHEREAS, Volcano has acquired substantially all of the assets associated with the functional
measurement and IVUS businesses of JOMED, Inc. and its affiliates (the “JOMED
Acquisition”);

     WHEREAS, Volcano and Medtronic are simultaneously entering into a License Agreement (the
“License Agreement”), an Option to Distribute Agreement and a Right of First Negotiation
and First Refusal Agreement and a financing agreement pursuant to which Medtronic will purchase
Series B Preferred Stock of Volcano; and

WHEREAS, Supplier desires to manufacture and supply Products (as defined below) to Medtronic, and
Medtronic desires to purchase Products from Supplier, all in accordance with the terms of this
Agreement;

AGREEMENTS

     NOW THEREFORE, in consideration of the representations, warranties, covenants and agreements
contained herein, and for other valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties mutually agree as follows:

ARTICLE 1

DEFINITIONS

     1.1 Specific Definitions. As used in this Agreement, the following terms shall have
the meanings set forth or as referenced below:

     “Adverse Event” means injury, toxicity or sensitivity reaction associated with the use
of the Product.

     “Affiliate” of a specified person (natural or juridical) means a person that directly,
or indirectly through one or more intermediaries, controls, or is controlled by, or is under common
control with, the person specified. “Control” shall mean ownership of more than 50% of the shares
of stock entitled to vote for the election of directors in the case of a corporation, and more than
50% of the voting power in the case of a business entity other than a corporation.

     “Agreement” means this Agreement and all Exhibits and Schedules hereto.

- 1 -

 

     “Confidential Information” means any written or tangible information of one of
the parties (the “disclosing party”) which is disclosed to the other party (the
“receiving party”) that is not generally known to the public that is marked or identified
as “Confidential,” “Proprietary” or the like, including, without limitation, trade secrets and
know-how, but excluding information which:

     (a) was already in the possession of or known by the receiving party prior to its
receipt from the disclosing party;

     (b) is or becomes part of the public domain by reason of acts not attributable to the
receiving party;

     (c) is or becomes available to receiving party from a source other than the disclosing
party which source, has rightfully obtained such information and has no obligation of
non-disclosure or confidentiality to the disclosing party with respect thereto;

     (d) has been independently developed by the receiving party without breach of this
Agreement or use of any Confidential Information of the other party; or

     (e) has been or must be publicly disclosed by reason of legal, accounting or regulatory
requirements beyond the reasonable control of the receiving party provided the receiving
party provides the disclosing party notice of the intended disclosure in order for the
disclosing party to take such action it deems appropriate to protect the confidentiality of
the information to be disclosed.

     “FDA” means the United States Food and Drug Administration.

     “Force Majeure” means any event or condition, not existing as of the date of this
Agreement, not reasonably foreseeable as of such date and not reasonably within the control of
either party, which prevents in whole or in material part the performance by one of the parties of
its obligations hereunder, such as an act of government, war or related actions, civil
insurrection, riot, sabotage, strike, epidemic, fire, flood, windstorm, and similar events.

     “GMP” means Good Manufacturing Practices as defined in 21 CFR Parts 210 through 226
and Parts 600 through 680 and any successor provisions thereof that apply to production of the
Products under this Agreement.

     “Manufacturing Cost” means Supplier’s actual cost of raw materials, parts and sub
assemblies, direct labor and all related expenses incurred in the direct support of manufacturing
including but not limited to facilities including rent, utilities and property taxes, equipment
maintenance and depreciation, manufacturing engineering support, quality and control support,
including any testing requested by Medtronic, production planning and material warehousing, and
product volume-based fees and royalties payable under the Philips Technology and product
volume-based fees and royalties related to Supplier’s Trak Back product (disposable micro motor
device). To the extent that Supplier is obligated to pay any other license fees or royalties
pursuant to licenses executed after the Effective Date in connection with the manufacture of the

- 2 -

 

Product, Supplier shall promptly notify Medtronic and the parties shall negotiate in good faith an
adjustment, if any, to the Manufacturing Cost. Such costs and expenses shall be consistently
applied and shall be determined and allocated in a manner consistent with generally accepted
accounting principles in effect in the United States from time to time. Manufacturing Cost shall
exclude any cost or expenses paid by Medtronic and expenses related to (i) research and
development, (ii) marketing and sales, and (iii) finance, legal and other general corporate
overhead.

     “Medtronic” means AVE Galway Limited and its Affiliates.

     “Medtronic Products” means any and all Medtronic products incorporating Product.

     “Philips Technology” shall have the meaning assigned to such term in the License
Agreement.

     “Product” means phased-array based transducers, transducer subassemblies and other
IVUS related accessories and components (other than consoles) currently produced by Volcano or
acquired in the JOMED Acquisition, and as improved or modified by Volcano in the future; provided,
however, that any transducer, transducer subassembly or other accessory or component that is
covered by the Philips Technology will constitute a “Product” hereunder to the extent, but only to
the extent, that (i) the license grant in Section 2.2(a) of the License Agreement becomes effective
with respect to such Philips Technology pursuant to the terms and conditions of Section 2.2(a), (c)
and (d) of the License Agreement or (ii) Medtronic has been granted a license to such Philips
Technology pursuant to the terms and condition of Section 2.2(b) of the License Agreement, as
limited by Sections 2.2(c) and (d) of the License Agreement.

     “Product Liability Damages” means any liability, claim or expense, including but not
limited to reasonable attorneys’ fees and medical expenses, arising in whole or in part out of
claims of third parties for personal injury or loss of or damage to property relating to or arising
out of the Products or Medtronic Products, whether based on strict liability in tort, negligent
manufacture of product, or any other allegation of liability arising from the design, testing,
manufacture, packaging, labeling (including instructions for use), or sale of the Products and/or
Medtronic Products.

     “Specifications” means the specifications of the Product as in effect from time to
time, as determined by Volcano in accordance with this Agreement.

     “Supplier” or “Volcano” means Volcano Therapeutics, Inc. and its Affiliates.

     1.2 Other Terms. Other terms may be defined elsewhere in the text of this Agreement
and shall have the meaning indicated throughout this Agreement.

     1.3 Definitional Provisions.

     (a) The words “hereof,” “herein,” and “hereunder” and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole and not to any particular
provisions of this Agreement.

- 3 -

 

     (b) The terms defined in the singular shall have a comparable meaning when used in the
plural, and vice versa.

     (c) References to an “Exhibit” or to a “Schedule” are, unless otherwise specified, to
one of the Exhibits or Schedules attached to or referenced in this Agreement, and references
to an “Article” or a “Section” are, unless otherwise specified, to one of the Articles or
Sections of this Agreement.

     (d) The term “person” includes any individual, partnership, joint venture, corporation,
trust, unincorporated organization or government or any department or agency thereof.

ARTICLE 2

SUPPLY

     2.1 Supply of Products. Supplier shall manufacture and supply the quantities of
Products ordered by Medtronic pursuant to Article 3 below, in accordance with the Specifications in
effect at the time of order for each Product.

     2.2 Promotion and Training. Upon the reasonable request by Medtronic, Supplier will
assist Medtronic in preparing promotional, marketing and training literature and instructions for
the Products’ functionality within the Medtronic Products, including any artwork, and will conduct
training courses and seminars to educate medical professionals and Medtronic personnel with respect
to the Products’ functionality and use with the Medtronic Products. Further, upon the reasonable
request of Medtronic, Supplier shall provide training to Medtronic personnel with respect to final
testing of the Products after such Products have been incorporated into or combined with a
Medtronic Product. Medtronic shall pay Supplier a reasonable and customary per diem rate for each
Volcano employee providing services to Medtronic pursuant to this Section 2.2, provided that such
services are not otherwise required under the License Agreement to be provided by Volcano to
Medtronic. Further, Medtronic shall reimburse Supplier for travel, direct and indirect costs, and
other out-of-pocket costs reasonably incurred by Supplier in connection with such training upon
submission by Supplier of appropriate documentation thereof.

     2.3 Packaging and Labeling. Supplier shall package and label the Products in
accordance with the Specifications and applicable regulatory requirements. Upon Medtronic’s
submission of its first Purchase Order, Medtronic shall to provide Supplier with a list of all
countries in which it anticipates marketing Medtronic Product and, in the event Medtronic adds a
country to said list, the addition of such new country shall be made at the time the next Purchase
Order is submitted. Medtronic further agrees that in each Purchase Order it shall identify the
country Medtronic anticipates to sell or market the Medtronic Product. Notwithstanding anything to
the contrary in this Section 2.3, in the event Medtronic fails to provide Supplier with such
initial list or fails to identify in any Purchase Order the country (or countries) Medtronic
Product shall be sold or marketed, Supplier shall label the Product for sale in the United States
of America.

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     2.4 Compliance With Laws and Regulations.

     (a) Supplier shall be responsible for compliance with the applicable statutes, laws,
ordinances and regulations of national, federal, state and local governments that relate to
its manufacture and sale of the Products.

     (b) Medtronic shall be responsible for compliance with the applicable statutes, laws,
ordinances and regulations of national, federal, state and local governments that relate to
its marketing, distribution and sale of the Medtronic Products, including applicable import
and export laws.

     2.5 Complaints and Adverse Events. Each party agrees to inform the other party
promptly (but in no event more than forty-eight (48) hours after becoming aware of same) of any
information concerning any complaint involving the Products or that might be applicable to the
Products, or an Adverse Event, provided that:

(a) all notifications to Medtronic shall be by facsimile and on Medtronic’s designated
adverse event forms (attached hereto as Schedule 2.5(a)); and

(b) all notifications to Supplier shall be by facsimile and on Supplier’s designated adverse
event forms (attached hereto as Schedule 2.5(b)).

     2.6 Recall.

     (a) In the event that Medtronic is required by any regulatory agency to recall
Medtronic Products or if Medtronic voluntarily initiates a recall of Medtronic Products, and
in either case such recall is due primarily as a result of a breach of any of the warranties
under Section 5.1, Supplier shall bear the direct costs of such recall, including shipping
costs related to returning recalled Medtronic Products to Medtronic and replacing Products
to Medtronic for replacement of the Products incorporated into the recalled Medtronic
Products. The cost and expense of recalls of Medtronic Products not due primarily as a
result of a breach of Supplier’s warranties under Section 5.1 shall be borne by Medtronic.

     (b) Medtronic will control all recalls of Medtronic Product and Supplier will cooperate
with and assist Medtronic in effecting any recalls due in whole or in part to Supplier’s
breach of any of the warranties under Section 5.1, including assisting Medtronic in
determining the information and instructions to be transmitted by Medtronic to purchasers of
the Medtronic Products in connection with a recall.

     2.7 Certain Responsibilities. Notwithstanding anything contained herein, Supplier
shall not be responsible for any loss or damage, including Products Liability Damages, from the use
or performance of the Products manufactured under this Agreement where (a) such loss or damage did
not arise out of or is not related to a breach of this Agreement by Supplier, including, without
limitation, Supplier’s warranties and (b) the Products complied with Specifications.

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ARTICLE 3

FORECASTS, ORDERS AND DELIVERY

     3.1 Forecasts. On the last day of each calendar month during the Term, Medtronic
shall provide Supplier with a twelve-month rolling forecast of Medtronic’s good faith estimate of
its Product requirements for the following twelve months. Except as set forth in this Section 3.1
and in Section 3.2, such forecasts are not firm commitments by Medtronic to order or purchase
Products, but are provided only as a guide to assist Supplier in scheduling production.
Notwithstanding the foregoing, such forecasts shall, in accordance with Section 3.2, become binding
and firm with respect to any given month (a “Binding Month”) 60 days prior to the beginning
of such month (the “Binding Date”). With respect to any month, such forecast may be
modified at any time prior to the Binding Date with respect to such month.

     3.2 Purchase Orders. Medtronic shall submit on or before each Binding Date a firm
purchase order (a “Purchase Order”) setting forth (i) the quantity of Product to be
purchased during the Binding Month, (ii) the delivery date of Product, which date shall not be less
than 90 days after the date of the Purchase Order, and (iii) delivery destination for the Products
and freight arrangements for Product, provided that if Medtronic does not issue
such Purchase Order on or before a Binding Date, the most recently delivered forecast for the
Binding Month (provided such forecast is delivered prior to the Binding Date) shall be deemed a
binding Purchase Order as of the respective Binding Date for the quantity amount. Each Purchase
Order shall give rise to a contract between Medtronic and Supplier for the purchase and sale of the
Products ordered and shall be subject to and governed by the terms of this Agreement. The terms
and conditions of this Agreement shall so govern and supersede any additional or contrary terms set
forth in Medtronic’s Purchase Order or any Supplier or Medtronic acceptance, confirmation, invoice
or other document unless duly signed by an authorized officer of Medtronic and of Supplier and
expressly stating and identifying which specific additional or contrary terms shall supersede the
terms and conditions of this Agreement. With respect to all Purchase Orders submitted at least
ninety (90) days in advance of the earliest scheduled delivery date set forth in such Purchase
Order, Supplier shall fill such orders in accordance with the scheduled delivery dates set forth
therein, provided that the quantity of Product ordered pursuant to such Purchase
Order is not more than 120% of the quantity forecasted for the applicable period in the most
current forecast. Any amount in excess of 120% of such forecasted quantity shall be filled by
Supplier on a commercially reasonable basis.

     3.3 Modification of Orders. No Purchase Order shall be modified or canceled except
upon the mutual agreement of the parties; provided, however, that Medtronic may cancel a Purchase
Order based upon actions of a regulatory authority and Medtronic may make changes to a Purchase
Order in quantities that do not exceed 10% more or less of such outstanding Purchase Order,
provided that Medtronic will reimburse Supplier for costs incurred on any such
cancelled orders to the extent Supplier is not able to recover its costs actually incurred in
connection therewith and provided further that Medtronic gives Supplier at least 30
days notice prior to the delivery date specified in such Purchase Order of any modification to the
Purchase Order. Mutually agreed change orders shall be subject to all provisions of this
Agreement, whether or not the change order so states. Notwithstanding the foregoing, any Purchase
Order

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may be cancelled by Medtronic, without any liability to Medtronic, as to any Product that is not
delivered within three (3) business days after the delivery date specified by Medtronic, and any
such cancellation shall not limit or affect any contract remedies available to Medtronic with
respect thereto, provided that a partial delivery of a Purchase Order that does not
deviate from the quantities ordered by more than 7.5% shall not be subject to such cancellation and
Medtronic’s sole remedy with respect to such shortage is Supplier’s delivery of the shortfall
amount within five (5) business days after the delivery date set forth in the Purchase Order and
the shipping charges for the shortfall amount shall be at Supplier’s cost. Any such cancellation
by Medtronic must be by written notice to Supplier given within ten (10) business days after such
three (3) business day period.

     3.4 Delivery Terms. Unless otherwise agreed in writing by Medtronic and Supplier,
delivery of Products will be FCA Supplier’s facility (per Incoterms 2000), and title and risk of
loss will pass from Supplier to Medtronic when Products are tendered for shipment as directed by
Medtronic. Medtronic shall be responsible for all shipping, handling, and insurance costs.

     3.5 Product Changes; Continuity of Supply; Prototypes.

     (a) Change in Specifications and Continuity of Supply. Volcano shall have the
right to modify the Specifications at anytime and from time to time; provided,
however, that Volcano will use commercially reasonable efforts so that any modified
Specifications or Product will continue to be compatible with Medtronic Products;
provided, further, that in the event Supplier determines to modify any Product,
Supplier shall provide Medtronic with prompt written notice of such proposed modification so
as to allow Medtronic the reasonable opportunity to modify the Medtronic Products, at
Medtronic’s expense. To the extent that Medtronic chooses not to modify the Medtronic
Product or is unable to modify the Medtronic Product to become compatible with the modified
Product, Volcano agrees that it will continue to supply such Product without such
modification (such unmodified Product, the “Unmodified Product”) for the remainder
of the Term of this Agreement. Medtronic shall continue to forecast and order the
Unmodified Product in accordance with Section 3.1 and 3.2 above, and Volcano shall supply
such Unmodified Products in accordance with Section 2.1 above.

     (b) Product Changes Requested by Medtronic. Upon written notice, Medtronic may
request that Supplier make commercially reasonable modifications to the Specifications, and
Volcano shall make such modifications to the Specifications, provided
however, that Supplier shall not have any obligation to make any requested changes
which are substantial or fundamental to the transducer portion of any Product unless
Supplier, in its reasonable determination, agrees to make such modifications.

     (c) Adjustment in Transfer Price. If any modification to the Specifications
made pursuant to Section 3.5(a) or (b) above results in a change in the Manufacturing Cost
as shown by documentation provided by Supplier, the parties shall agree upon an appropriate
corresponding adjustment to the Transfer Price for the Product; and if such modification
result in a delay in delivery, the parties shall negotiate a reasonable extension of the
affected lead times.

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     (d) Prototype Units. Upon the reasonable request by Medtronic, Supplier shall
meet with Medtronic to discuss the manufacture for Medtronic prototype units of a proposed
Product. Supplier agrees to manufacture such prototype unit, provided that
such prototype unit does not require any substantial or fundamental change to the transducer
portion of any Product. Supplier shall manufacture multiple copies of the prototype units
in order for Medtronic to verify design concepts. The number of prototypes that Supplier
will deliver to Medtronic shall be as reasonably requested by Medtronic and pursuant to
specifications reasonably requested by Medtronic. The cost of such prototypes shall be as
determined under the definition of “Manufacturing Cost” and pursuant to paragraph 3
of Exhibit A hereto. Once prototypes are completed and can be provided on a commercially
reasonable basis, such prototypes shall be considered “Products” hereunder, and any
modifications (including modifications to hardware, software or mechanical features
incorporated therein or associated therewith) required as a result of further testing will
be done in accordance with the terms hereof.

     (e) Supplier shall provide to Medtronic upon request all Specifications for the
Product.

ARTICLE 4

PRICES AND PAYMENTS

     4.1 Prices.

     (a) Unless and until otherwise mutually agreed by the parties in writing, the purchase
price for Product manufactured by Supplier for Medtronic under this Agreement (the
“Transfer Price”) shall be determined under the definition of “Manufacturing
Cost” and Exhibit A.

     (b) Supplier will use commercially reasonable efforts to minimize the Manufacturing
Cost of all Products.

     4.2 Payment Terms. Payments made by Medtronic for Products purchased hereunder shall
be due and payable in full within 30 days after the date of invoice by Supplier, which date of
invoice shall be no earlier than the date of delivery of such Products.

     4.3 Taxes. The Transfer Price does not include any sales, use, value added or similar
taxes, customs, duties, or tariffs imposed by any governmental authority or agency on Products or
any components thereof that are imported by Medtronic into any country, and Medtronic shall bear
all such taxes and duties (other than taxes on the net income of Supplier). Supplier shall be
required to take appropriate steps to minimize imposition of such taxes by filing sales exemption
certificates and taking similar actions where applicable to the Supplier. When Supplier has the
legal obligation to collect and/or pay such taxes, the appropriate amount shall be added to
Medtronic’s invoice and paid by Medtronic, unless Medtronic provides Supplier with a valid tax
exemption certificate authorized by the appropriate taxing authority. Notwithstanding the
foregoing, Medtronic shall not be obligated to pay or reimburse Supplier for taxes, duties or

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tariffs that are not imposed on the sale of Product to Medtronic or taxes related to the net income
of the Supplier.

ARTICLE 5

WARRANTY AND SERVICE

     5.1 Warranty. Supplier represents and warrants to Medtronic that:

     (a) All Products sold under this Agreement will have been manufactured, labeled and
packaged in accordance with all applicable laws and regulations, including (as applicable)
FDA GMP requirements and, if applicable, ISO 9001 certifications, or successor requirements,
and all other applicable manufacturing requirements, as well as the Specifications;

     (b) Supplier has or will have (through contracting with third parties) the facilities,
equipment, licenses, permits and personnel to manufacture and supply the Products in
accordance with Specifications and in compliance with applicable laws and regulations; and

     (c) The Product, at the time of delivery to Medtronic, shall: (i) meet the
Specifications and warranties set forth herein; (ii) be free from defects in materials and
workmanship; and (iii) not be adulterated or misbranded within the meaning of the U.S. Food,
Drug and Cosmetic Act and regulations thereunder or any similar law or regulation.

     (d) EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 5.1 OR AS EXPRESSLY PROVIDED ELSEWHERE
IN THIS AGREEMENT, SUPPLIER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO
THE PRODUCT, AND SUPPLIER HEREBY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.

     5.2 Intentionally Left Blank.

     5.3 Non-Conforming Product.

     (a) In the event that Medtronic determines that any of the Products shipped to it fails
to comply with the then current Specifications or fails to satisfy the representations and
warranties of Supplier herein (each such Product, a “Non-Conforming Product”),
Medtronic shall, except as in the case of any Latent Defect (as defined below), report the
same to Supplier within 30 days after delivery thereof to Medtronic and, if requested in
writing by Supplier, furnish such written evidence or other documentation as Supplier
reasonably may deem appropriate in connection therewith. Any Products not rejected by
Medtronic by written notice to Supplier within such 30-day period shall be deemed to have
been accepted by Medtronic for purposes of this Section 5.3; provided,
however, Medtronic will not be deemed to have accepted any Product whose
nonconformity

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making such Product a Non-Conforming Product is not reasonably apparent from a visual
inspection of such Product as packaged by Supplier, without performing any tests on or
measurements or other analysis of such Product (a “Latent Defect”). Medtronic shall
give written notice to Supplier of such Latent Defect within 10 days after Medtronic
actually became aware of such Latent Defect. Supplier shall promptly notify Medtronic in
writing if it has reason to believe that any Products delivered hereunder are Non-Conforming
Products.

     (b) Any dispute in connection with whether a Product is a Non-Conforming Product shall
be resolved by an independent third party laboratory selected by the parties and the
findings of such independent laboratory shall be binding on the parties, absent manifest
error. The cost of such independent third party laboratory shall be borne by the party
adversely affected by such finding; provided however, that if the parties
cannot agree on the independent third party laboratory, then said dispute shall be resolved
in accordance with Section 10.15 hereof.

     (c) All costs involved in the disposal, sale, return, storage, or replacement of
Non-Conforming Products shall be paid by Supplier. Medtronic shall handle the disposal of
such Non-Conforming Products in accordance with Supplier’s instructions, so as to minimize
to the extent reasonably practicable any such costs, and Medtronic’s reasonable
out-of-pocket handling charges shall be paid for by Supplier. Supplier will promptly
replace any such Non-Conforming Product at its own expense on the same shipping terms as
the original shipment or issue a credit note to Medtronic for such shipment including
shipping charges, customs and duties paid by Supplier. For purposes of this Section 5.3
only, the exclusive remedy of Medtronic with respect to Non-Conforming Products not yet
sold, transferred or otherwise disposed of by Medtronic will be replacement or credit, at
Medtronic’s option.

     5.4 Audits and Inspections.

     (a) Once each calendar year, Supplier shall permit Medtronic’s regulatory and quality
personnel to have reasonable access to that area of the facility that manufactures the
Product and records of Supplier relevant to the manufacture of the Product for Medtronic for
the purpose of confirming Supplier’s compliance with the terms and conditions hereunder and
applicable laws, rules and regulations, including without limitation FDA GMP.

     (b) Supplier agrees to provide Medtronic with reasonable prior written notice, to the
extent practicable, of any FDA or governmental agency inspection of that area of the
facility that manufactures the Product and records of Supplier relevant to the manufacture
of the Product for Medtronic. If such prior written notice is not feasible, then to the
extent that such FDA or other governmental inspection results in any adverse finding that
impacts Supplier’s obligations hereunder, within ten (10) business days thereafter, Supplier
shall provide Medtronic with a copy of such inspection report by the FDA or other
governmental agency.

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     (c) In the event that Supplier’s facility has been cited for violation or alleged
violation that materially impacts Supplier’s obligations hereunder, Medtronic shall have the
right, upon not less than 10 business days prior notice to the Supplier, to inspect (or have
a third party inspect) that area of Supplier’s manufacturing facilities that manufacture the
Product in order to (i) examine the manufacturing process, and (ii) inspect or audit
Supplier’s data and records directly related to the manufacture of the Products to ensure
compliance with the terms and conditions hereunder and applicable law, rule or regulation.

     (d) In the event Supplier uses a sub-contractor or third party to perform any part of
the manufacturing, Supplier shall obtain the agreement of such sub-contractor or third party
that Medtronic shall have similar inspection rights as those set forth in this Section 5.4.

ARTICLE 6

CERTAIN REPRESENTATIONS AND WARRANTIES

     6.1 Representations and Warranties.

     (a) Supplier represents and warrants to Medtronic that:

     (i) The execution and delivery by Supplier of this Agreement and the
performance by Supplier of its obligations hereunder have been duly authorized by
all requisite corporate action and will not violate any provision of law, any order
of any court or other agency of government, the Certificate of Incorporation or
Bylaws of Supplier, as amended, or any provision of any indenture, agreement or
other instrument to which Supplier or any of its properties or assets is bound, or
conflict with, result in a breach of or constitute (with due notice or lapse of time
or both) a default under any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of
Supplier; and

     (ii) This Agreement has been duly executed and delivered by Supplier and
constitutes the legal, valid and binding obligation of Supplier, enforceable in
accordance with its terms, subject, as to the enforcement of remedies, to the
discretion of the courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally.

     (b) Medtronic represents and warrants to Supplier that:

     (i) The execution and delivery by Medtronic of this Agreement and the
performance by Medtronic of its obligations hereunder have been duly authorized by
all requisite corporate action and will not violate any provision of law, any order
of any court or other agency of government, the organizational

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documents of Medtronic, as amended, or any provision of any indenture,
agreement or other instrument to which Medtronic or any of its properties or assets
is bound, or conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of Medtronic; and

     (ii) This Agreement has been duly executed and delivered by Medtronic and
constitutes the legal, valid and binding obligation of Medtronic, enforceable in
accordance with its terms, subject, as to the enforcement of remedies, to the
discretion of the courts in awarding equitable relief and to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally.

ARTICLE 7

INDEMNIFICATION

     7.1 Supplier’s Indemnification. Supplier shall indemnify, defend and hold harmless
Medtronic and its subsidiaries, and their respective officers, directors, employees, shareholders
and distributors from and against and in respect of any and all demands, claims, actions or causes
of action, assessments, losses, damages, liabilities, interest and penalties, costs and expenses
(including, without limitation, reasonable legal fees and disbursements incurred in connection
therewith and in seeking indemnification therefor, and any amounts or expenses required to be paid
or incurred in connection with any action, suit, proceeding, claim, appeal, demand, assessment or
judgment), whether or not involving a third party claim (“Indemnifiable Losses”), resulting
from, arising out of, or imposed upon or incurred by any person to be indemnified hereunder by
reason of: (i) any breach of representation, warranty or agreement on the part of Supplier under
this Agreement; (ii) Product Liability Damages to the extent attributable to the Supplier’s breach
of its representations and warranties set forth in Section 5.1; and (ii) any gross negligence or
intentional misconduct of Supplier.

     7.2 Medtronic’s Liability. Medtronic shall indemnify, defend and hold harmless
Supplier and its subsidiaries and their respective officers, directors, employees, shareholders and
suppliers from and against and in respect of any and all Indemnifiable Losses resulting from,
arising out of, or imposed upon or incurred by any person to be indemnified hereunder by reason of:
(i) any breach of representation, warranty or agreement on the part of Medtronic under this
Agreement; (ii) Product Liability Damages to the extent attributable to Medtronic Products (other
than any Product Liability Damages to the extent attributable to Supplier’s breach of its
representations and warranties set forth in Section 5.1); (iii) negligent handling by Medtronic of
the Products or changes, additions or modifications to the Products by Medtronic (other than
changes, additions or modifications made to the Products by Medtronic in connection with or related
to the incorporation of the Products into or onto, or the utilization of the Products in connection
with, a Medtronic Product), and (iv) any gross negligence or intentional misconduct of Medtronic.

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7.3 Procedure. If a claim by a third party is made and a party (the “Indemnitee”)
intends to claim indemnification under this Article 7, the Indemnitee shall promptly notify the
other party (the “Indemnitor”) in writing of any claim in respect of which the Indemnitee
or any of its subsidiaries, directors, officers, employees, shareholders, suppliers or distributors
intends to claim such indemnification. If the Indemnitor accepts liability for indemnifying
Indemnitee hereunder, Indemnitor shall have sole control of the defense and/or settlement thereof;
provided that the Indemnitee may participate in any such proceeding with counsel of its choice at
its own expense. The indemnity agreement in this Article 7 shall not apply to amounts paid in
settlement of any Indemnifiable Losses if such settlement is effected without the consent of the
Indemnitor, which consent shall not be withheld unreasonably. The failure to deliver written
notice to the Indemnitor within a reasonable time after the commencement of any such action, if
adversely prejudicial to its ability to defend such action, shall relieve such Indemnitor of any
liability to the Indemnitee under this Article 7 but the omission to so deliver written notice to
the Indemnitor shall not relieve the Indemnitor of any liability that it may otherwise have to any
Indemnitee other than under this Article 7. If the Indemnitor fails to provide defense of the
claim, and diligently defend or settle the same after receipt of notice from Indemnitee of, and a
reasonable opportunity to cure, such failure, the Indemnitee may defend or settle the claim without
prejudice to its rights to indemnification hereunder, provided that the Indemnitee does so
diligently and in good faith and further does not enter into any settlement or agree to any
stipulation that would adversely affect the rights of the Indemnitor or impose any additional
obligation on the Indemnitor without the Indemnitor’s prior written consent (which consent will not
be unreasonably withheld). The Indemnitee under this Article 7, its employees and agents, shall
cooperate fully with the Indemnitor and its legal representatives and provide full information in
the investigation of any Indemnifiable Losses covered by this indemnification.

     7.4 Insurance. During the term of this Agreement, Supplier shall maintain, at its
expense, a policy of comprehensive general liability insurance sufficient to honor the indemnity
made herein, with products liability endorsement, but in no event less than $10,000,000.00 per
occurrence and in the annual aggregate. Said policy shall name Medtronic and its Affiliates as
named insureds, it being understood that Medtronic shall have the right to seek recovery under
Supplier’s insurance policy. Within 45 days after the date of this Agreement, and upon each
anniversary of the date hereof, Supplier shall furnish Medtronic with a certificate of insurance
evidencing such coverage, which certificate shall provide for not less than thirty (30) days
advance written notice to Medtronic prior to material change in coverage or policy cancellation.
Supplier acknowledges that Medtronic is self insured with respect to its indemnity obligations
hereunder.

ARTICLE 8

TERM AND TERMINATION

     8.1 Term. This Agreement shall take effect as of the date hereof and shall continue
in force for ten (10) years (the “Term”). Nothing contained in this Agreement will be
interpreted as requiring either party to renew or extend this Agreement beyond the Term.

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     8.2 Termination. Notwithstanding the provisions of Section 8.1 above, this Agreement
may be terminated by mutual consent of the parties or in accordance with the following provisions:

          (a) Either party may terminate this Agreement by giving notice in writing to the other
party if such other party is in material breach of any representation, warranty or covenant
of this Agreement and, except as otherwise provided herein, shall have failed to cure such
breach within 60 days after receipt of written notice thereof from the party proposing to
terminate this Agreement;

          (b) Medtronic may terminate this Agreement upon 9 months prior written notice to
Volcano; or

          (c) Either party may terminate this Agreement at any time by giving notice in writing
to the other party, which notice shall be effective upon dispatch, if the other party (i) is
unable to pay its debts as they mature or admits in writing its inability to pay its debts
as they mature; (ii) makes a general assignment for the benefit of creditors; (iii) is
adjudicated involuntarily bankrupt or voluntarily files a petition for bankruptcy; (iv)
applies for the appointment of a receiver or a trustee for any of its property or assets or
permits the appointment of a receiver or trustee; or (v) has entered against it an order in
a foreclosure, execution and levy, or similar proceeding involving a substantial part of its
assets.

     8.3 Rights and Obligations on Termination. In the event of termination of this
Agreement for any reason, the parties shall have the following rights and obligations:

     (a) Termination of this Agreement shall not release either party from the obligation to
make payment of all amounts previously due and payable.

     (b) The terminating party shall have the right, at its option, to cancel any or all
purchase orders that provide for delivery after the effective date of termination.

     (c) Upon termination of this Agreement for any reason, nothing herein shall be
construed to release either party from any obligation that matured prior to the effective
date of such termination.

     (d) Upon any termination of this Agreement, the parties will return and deliver to the
other party all of such party’s Confidential Information, provided that a party may retain
one copy of such other party’s Confidential Information for legal purposes.

     (e) The parties’ obligations pursuant to Articles 5, 6, 7 and 8 and Sections 2.6 and
2.7 hereof and any and all other terms and provisions hereof intended to be observed and
performed by the parties after the termination hereof, shall survive termination of this
Agreement. All other provisions of this Agreement shall terminate upon termination of this
Agreement.

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ARTICLE 9

FORCE MAJEURE; LICENSE

     9.1 Notice of Force Majeure. Upon giving notice to the other party, a party affected
by an event of Force Majeure shall be released without any liability on its part from the
performance of its obligations under this Agreement, except for the obligation to pay any amounts
due and owing hereunder, but only to the extent and only for the period that its performance of
such obligations is prevented by the event of Force Majeure.

     9.2 Suspension of Performance. During the period that the performance by one of the
parties of its obligations under this Agreement has been suspended by reason of an event of Force
Majeure, the other party may likewise suspend the performance of all or part of its obligations
hereunder (except for the obligation to pay any amounts due and owing hereunder) to the extent that
such suspension is commercially reasonable.

ARTICLE 10

MISCELLANEOUS

     10.1 Nondisclosure. The parties agree not to disclose or use (except as permitted or
required for performance by the party receiving such Confidential Information of its rights or
duties hereunder or under other agreements between the parties or their Affiliates) any
Confidential Information of the other party obtained during the during the term of this Agreement
until the expiration of five years after the receiving party’s receipt of such Confidential
Information, but in no event prior to the termination of this Agreement. Each party further agrees
to take appropriate measures to prevent any such prohibited disclosure of Confidential Information
by its present and future employees, officers, agents, subsidiaries, or consultants during such
period.

     10.2 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and the successors or assigns of the parties hereto; provided, that
(i) the rights and obligations of Supplier herein may not be assigned except to an Affiliate of
Supplier or to any person who succeeds to substantially all of the assets and business of Supplier
to which this Agreement relates, and (ii) the rights and obligations of Medtronic herein may not be
assigned except to an Affiliate of Medtronic or to any person who succeeds to substantially all of
that portion of Medtronic’s business to which this Agreement relates.

     10.3 Complete Agreement. This Agreement and the agreements referred to herein, and
the Schedules and Exhibits hereto and thereto, constitute the entire agreement between the parties
hereto with respect to the subject matter hereof and supersede all prior agreements whether written
or oral relating hereto.

10.4 Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of California without reference to the choice of law principles thereof.
Solely for the purposes of seeking interim injunctive relief, the parties hereby irrevocably
consent to the exclusive jurisdiction and venue of any United States court or state court of

- 15 -

 

competent jurisdiction located in San Francisco, California and waive any objections either may
have at any time to such jurisdiction and venue. The parties agree to the personal jurisdiction of
such courts and agree that service of process may be made pursuant to notice sent in accordance
with Section 10.6.

     10.5 Waiver, Discharge, Amendment, Etc. The failure of any party hereto to enforce at
any time any of the provisions of this Agreement shall not, absent an express written waiver signed
by the party making such waiver specifying the provision being waived, be construed to be a waiver
of any such provision, nor in any way affect the validity of this Agreement or any part thereof or
the right of the party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to be a waiver of any other or subsequent breach. Any
amendment to this Agreement shall be in writing and signed by the parties hereto.

     10.6 Notices. All notices or other communications to a party required or permitted
hereunder shall be in writing and shall be delivered personally or by facsimile (receipt confirmed
electronically) to such party (or, in the case of an entity, to an executive officer of such party)
or shall be sent by a reputable express delivery service or by certified mail, postage prepaid with
return receipt requested, addressed as follows:

     if to Medtronic, to:

Medtronic, Inc.

710 Medtronic Parkway NE

Minneapolis, MN 55432-5604

     with separate copies thereof addressed to

			
	          Attention:	 	General Counsel

Mail Stop LC400

Telecopier No.: (763) 572-5459

and

			
	          Attention:	 	Vice President and Chief Development Officer

Mail Stop LC390

Telecopier No.: (763) 505-2542

and

Medtronic AVE

3576 Unocal Place

Santa Rosa, CA 95403

			 
	          Attention:	 	General Counsel

Telecopier No.: (707) 541-3190

     if to Supplier to:

- 16 -

 

Volcano Therapeutics, Inc.

2870 Kilgore Road

Rancho Cordova, California 95670

Telecopier No.: (916) 638-7976

Attn: Vincent J. Burgess, Vice President, Marketing and Business Development

Any party may change the above-specified recipient and/or mailing address by notice to all other
parties given in the manner herein prescribed. All notices shall be deemed given on the day when
actually delivered as provided above (if delivered personally or by facsimile) or on the day shown
on the return receipt (if delivered by mail or delivery service).

     10.7 Expenses. Except as expressly provided herein, Supplier and Medtronic shall each
pay their own expenses incident to this Agreement and the preparation for, and consummation of, the
transactions provided for herein.

     10.8 Titles and Headings; Construction. The titles and headings to the Articles and
Sections herein are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement. This Agreement shall be
construed without regard to any presumption or other rule requiring construction hereof against the
party causing this Agreement to be drafted.

     10.9 Severability. If any provision of this Agreement is held invalid, illegal or
unenforceable, such provision shall be enforced to the maximum extent permissible and the remaining
provisions shall nonetheless be enforceable according to their terms.

     10.10 Relationship. This Agreement does not make either party the employee, agent or
legal representative of the other for any purpose whatsoever. Neither party is granted any right or
authority to assume or to create any obligation or responsibility, express or implied, on behalf of
or in the name of the other party. In fulfilling its obligations pursuant to this Agreement, each
party shall be acting as an independent contractor.

     10.11 Benefit. Nothing in this Agreement, expressed or implied, is intended to confer
on any person other than the parties hereto or their respective successors or assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.

     10.12 Survival. All of the representations, warranties, and covenants made in this
Agreement, and all terms and provisions hereof intended to be observed and performed by the parties
after the termination hereof, shall survive such termination and continue thereafter in full force
and effect, subject to applicable statutes of limitations.

     10.13 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed as original and all of which together shall constitute one
instrument.

     10.14 Execution of Further Documents. Each party agrees to execute and deliver
without further consideration any further applications, licenses, assignments or other documents,

- 17 -

 

and to perform such other lawful acts as the other party may reasonably require to fully secure
and/or evidence the rights or interests herein.

     10.15 Arbitration. Except as specifically set forth in Section 5.3(b) hereof, any
dispute arising out of or relating to this Agreement, including the formation, interpretation or
alleged breach hereof, shall be settled in accordance with the Exhibit B attached hereto. The
results of such arbitration proceedings shall be binding upon the parties hereto, and judgment may
entered upon the arbitration award in any court having jurisdiction thereof. Notwithstanding the
foregoing, either party may seek interim injunctive relief from any court of competent jurisdiction
as provided in Section 10.4.

     10.16 Public Announcement. Neither party will publicly disclose or divulge any
provisions of this Agreement nor the transactions contemplated hereby without the other party’s
written consent, except as may be required by applicable law or stock exchange regulation, and
except for communications to such party’s employees or customers or investors or prospective
investors (subject to appropriate confidentiality obligations); provided that, prior to disclosure
of any provision of this Agreement that either party considers particularly sensitive or
confidential to any governmental agency or stock exchange, the parties shall cooperate to seek
confidential treatment or other applicable limitations on the public availability of such
information. In particular, prior to such disclosure, each party shall use its best efforts to
redact the payment terms specified herein and each party shall provide the other the opportunity to
redact other information and seek confidential treatment of any such disclosure.

     10.17 Medtronic Guaranty. Medtronic, Inc. hereby guaranties the performance by AVE
Galway Limited of AVE Galway Limited’s obligations under this Supply Agreement.

[signatures page to follow]

- 18 -

 

     IN WITNESS WHEREOF, each of the parties has caused this Supply Agreement to be executed in the
manner appropriate to each, as of the date first above written.

	 	 	 	 	 	 	 
	 	 	VOLCANO THERAPEUTICS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Scott Huennekens	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	Scott Huennekens	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	President and CEO	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	AVE GALWAY LIMITED	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Illegible	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	MEDTRONIC, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Arthur D. Collins, Jr.	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	Arthur D. Collins, Jr.	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	Chairman of The Board and
Chief
Executive Officer	 	 
	 

	 	 	 	 	 	 

Attachments:

          Exhibit A — Pricing

          Exhibit B — Alternative Dispute Resolution

- 19 -

 

EXHIBIT A

Pricing

     1. Supplier agrees to provide Medtronic, to the extent practicable, at least six (6) months
prior to the date of anticipated first commercial release of the Product, the initial Manufacturing
Cost accompanied by a reasonably detailed report on the computation thereof. Thereafter, Supplier
shall update the Manufacturing Cost by June 30th and December 31st of each
year during the Term, which notice shall be accompanied by a reasonably detailed report regarding
the computation thereof. Subject to Paragraph 2 below, the Manufacturing Cost as so updated shall
be effective for each six-month period commencing as of August 31st and February
28th following such update.

     2. Supplier agrees to keep accurate written records sufficient in detail to enable the
Manufacturing Cost to be determined and verified. Supplier shall retain such records for a period
of not less than three years (or such longer period of time as may be required by FDA GMP
requirements or other applicable requirements). Upon reasonable notice and during regular business
hours, Supplier shall (but no more frequently than once annually) make available such records for
audit at Medtronic’s expense by independent representatives selected by Medtronic and reasonably
acceptable to Supplier to verify the accuracy of the Manufacturing Cost reported. Such
representatives shall execute a suitable confidentiality agreement reasonably acceptable to
Supplier prior to conducting such audit. Such representatives may disclose to Medtronic only their
conclusions regarding the actual Manufacturing Cost, and shall not disclose Supplier’s information
to Medtronic without the prior written consent of Supplier. The right to audit shall extend for two
(2) years from delivery of any report of the Manufacturing Cost and thereafter any report shall be
deemed complete and accurate. No claim may be asserted by Medtronic against Supplier for any
errors unless made within two months following the close of Supplier’s fiscal year in which such
examination took place. Each Manufacturing Cost report shall be subject to only one such
examination and audit. If a discrepancy is found which is greater than 5% of Manufacturing Cost
paid in any twelve month period, then the party benefiting from such discrepancy will promptly pay
such discrepancy to the other. If a discrepancy is found which is greater than 5% of Manufacturing
Cost paid in any twelve month period and Medtronic is the benefiting party, then Supplier shall pay
all reasonable audit costs for the related audit and for the next succeeding annual audit.

     3. The per unit Transfer Price for a Product supplied hereunder for use solely for research
and development purposes shall equal the per unit Manufacturing Cost with respect to such Product,
multiplied by [CONFIDENTIAL].

     4. The per unit Transfer Price for a Product supplied hereunder for commercial sale (or to be
incorporated into another product for commercial sale) shall equal the per unit Manufacturing Cost
with respect to such Product, multiplied by [CONFIDENTIAL].

 

 

EXHIBIT B

ALTERNATIVE DISPUTE RESOLUTION

     1) Negotiations. If any dispute arises between Volcano and Medtronic with respect to
the Supply Agreement (the “Agreement”), or any alleged breach thereof, any party may, by written
notice to the other party, have such dispute referred to their respective designees listed below or
their successors for attempted resolution by good faith negotiations within 30 days after such
notice is received. Such designees are as follows:

For Volcano — the Vice President, Marketing and Business Development of Volcano or his/her
designee

For Medtronic — the President of Medtronic AVE, Inc.

Any settlement reached by the parties under this Section 1 shall not be binding until reduced to
writing and signed by the above-specified designees of Medtronic and Volcano. When reduced to
writing, such settlement agreement shall supersede all other agreements, written or oral, to the
extent such agreements specifically pertain to the matters so settled. If the designees are unable
to resolve such dispute within such 30-day period, any party may invoke the provisions of Section 2
below.

     2) Arbitration. All claims, disputes, controversies, and other matters in question
arising out of or relating to the Agreements, including claims for Indemnifiable Losses and
disputes regarding the making of the Agreements, including claims of fraud in the inducement, or to
the alleged breach hereof, shall be settled by negotiation between the parties as described in
Section 1 above or, if negotiation is unsuccessful, by binding arbitration in accordance with
procedures set forth in Section 3 and 4 below.

     3) Notice. Notice of demand for binding arbitration shall be given in writing to the
other party and shall be delivered personally or by facsimile (receipt confirmed) to an executive
officer of such party or shall be sent by a reputable express delivery service or by certified
mail, postage prepaid with return receipt requested, addressed as provided in the Agreement.

     Any party may change the above-specified recipient and/or mailing address by notice to the
other party given in the manner herein prescribed. All notices shall be deemed given on the day
when actually delivered as provided above (if delivered personally or by facsimile (upon
appropriate electronic confirmation of successful transmission)) or on the day shown on the return
receipt (if delivered by mail or delivery service). In no event may a notice of demand of any
kind be filed more than two years after the date the claim, dispute, controversy, or other matter
in question was asserted by one party against another, and if such demand is not timely filed, the
claim, dispute, controversy, or other matter in question referenced in the demand shall be deemed
released, waived, barred, and unenforceable for all time, and barred as if by statute of
limitations.

 

 

     4) Binding Arbitration. Upon filing of a notice of demand for binding arbitration by
any party hereto, arbitration shall be commenced and conducted as follows:

     (a) Arbitrators. All claims, disputes, controversies, and other matters
(collectively “matters”) in question shall be referred to and decided and settled by a
standing panel of three independent arbitrators, one selected by each of Volcano and
Medtronic’s representative and the third by the two arbitrators so selected; provided, if
the amount in controversy (including reasonably anticipated future amounts or payments under
the Agreement affected by such arbitrated matter) is under $300,000, a single arbitrator
will be used. The third (or the single arbitrator, if applicable) shall be a former judge
of one of the U.S. District Courts or one of the U.S. Court of Appeals or such other classes
of persons as the parties may agree. Selection of arbitrators shall be made within 30 days
after the date of the first notice of demand given pursuant to Section 3 and within 30 days
after any resignation, disability or other removal of such arbitrator. Following
appointment, each arbitrator shall remain a member of the standing panel, subject to removal
for just cause or resignation or disability; provided, however, an arbitrator can be removed
by the party who appointed the arbitrator, or in the case of the third arbitrator, by either
party for any reason at any time when no matter is in arbitration.

     (b) Cost of Arbitration. The cost of each arbitration proceeding, including
without limitation the arbitrators’ compensation and expenses, hearing room charges, court
reporter transcript charges etc., shall be borne by the party whom the arbitrators determine
has not prevailed in such proceeding, or borne equally by the parties if the arbitrators
determine that neither party has prevailed. The arbitrators shall also award the party that
prevails substantially in its pre-hearing position its reasonable attorneys’ fees and costs
incurred in connection with the arbitration. The arbitrators are specifically instructed to
award attorneys’ fees for instances of abuse of the discovery process.

     (c) Location of Proceedings. An arbitration proceeding shall be held in San
Francisco, California, unless the parties agree otherwise.

     (d) Pre-hearing Discovery. The parties shall have the right to conduct and
enforce pre-hearing discovery in accordance with the then current Federal Rules of Civil
Procedure, subject to these limitations: Document discovery and other discovery shall be
under the control of and enforceable by the arbitrators. The arbitrators shall permit and
facilitate such other discovery as they shall determine is appropriate under the
circumstances, taking into account the needs of the parties and the desirability of making
discovery expeditious and cost effective. The arbitrators shall decide discovery disputes.
The arbitrators are empowered:

     (i) to issue subpoenas to compel pre-hearing document or deposition discovery;

     (ii) to enforce the discovery rights and obligations of the parties; and

 

 

     (iii) to otherwise control the scheduling and conduct of the proceedings.

     Notwithstanding any contrary foregoing provisions, the arbitrators shall have the power
and authority to, and to the fullest extent practicable shall, abbreviate arbitration
discovery in a manner that is fair to all parties in order to expedite the arbitration
proceeding and render a final decision within six months after the pre-hearing conference.

     (e) Pre-hearing Conference. Within 45 days after filing of notice of demand
for binding arbitration, the arbitrators shall hold a pre-hearing conference to establish
schedules for completion of discovery, for exchange of exhibit and witness lists, for
arbitration briefs, for the hearing, and to decide procedural matters and all other
questions that may be presented.

     (f) Hearing Procedures. The hearing shall be conducted to preserve its privacy
and to allow reasonable procedural due process. Rules of evidence need not be strictly
followed, and the hearing shall be streamlined as follows:

     (i) Documents shall be self-authenticating, subject to valid objection by the
opposing party;

     (ii) Expert reports, witness biographies, depositions, and affidavits may be
utilized, subject to the opponent’s right of a live cross-examination of the witness
in person;

     (iii) Charts, graphs, and summaries shall be utilized to present voluminous
data, provided (i) that the underlying data was made available to the opposing party
30 days prior to the hearing, and (ii) that the preparer of each chart, graph, or
summary is available for explanation and live cross-examination in person;

     (iv) The hearing should be held on consecutive business days without
interruption to the maximum extent practicable; and

     (v) The arbitrators shall establish all other procedural rules for the conduct
of the arbitration in accordance with the rules of arbitration of the Center for
Public Resources.

     (g) Governing Law. This arbitration provision shall be governed by, and all
rights and obligations specifically enforceable under and pursuant to, the rules of the
Federal Arbitration Act and the laws of the State of California shall be applied, without
reference to the choice of law principles thereof, in resolving matters submitted to such
arbitration.

 

 

     (h) Consolidation. No arbitration shall include, by consolidation, joinder, or
in any other manner, any additional person not a party to this Agreement (other than
affiliates of any such party, which affiliates may be included in the arbitration), except
by written consent of the parties hereto containing a specific reference to this Agreement.

     (i) Award. The arbitrators shall be required to render their final decision
within six months after the pre-hearing conference. The arbitrators are empowered to render
an award of general compensatory damages and equitable relief (including, without
limitation, injunctive relief), but are not empowered to award punitive or presumptive
damages. The award rendered by the arbitrators (1) shall be final; (2) shall not constitute
a basis for collateral estoppel as to any issue; and (3) shall not be subject to vacation or
modification, except in the event of fraud or gross misconduct on the part of the
arbitrators.

     (j) Confidentiality. The parties hereto will maintain the substance of any
proceedings hereunder in confidence and make disclosures to others only to the extent
necessary to properly conduct the proceedings.

     (j) Entry of Judgment. The rulings of the arbitrators and allocation of fees
and expenses shall be binding, non-reviewable, and non-appealable, and may be entered as a
final judgment in any court having jurisdiction hereunder.

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